News & Events

Waste in health care? For some, it’s profit

By Joanna Weiss, Globe Columnist  |  May 18, 2010

ONE AXIOM of our Medicare system: It’s hard to understand how maddening it is until something happens to your family.

Another axiom: Eventually, something will happen to your family.

Take, for example, my own elderly relative, who recently spent time in the hospital. Everyone wanted him to recover at home, but we knew that would require nursing care. And his care coordinator in the hospital had strange, bad news: If he went to a residential nursing home, Medicare would foot the bill. But if he wanted an at-home nurse, at substantially less cost, Medicare would only cover a few hours of care, a few days a week.

To anyone with a smidge of common sense, that sounds absurd. But when I relayed the story to Dr. Brent James, he wasn’t surprised. As chief quality officer at Intermountain Healthcare, a network of hospitals and providers in Utah, he’s an expert in Medicare’s one-size-fits-all solutions and perverse incentives. More than a decade ago, his hospitals put a reform in place, involving the timing of antibiotics, that helped patients recover more quickly and completely. But the hospitals were losing millions of dollars, and the billing records solved the mystery. If a patient got pneumonia and went on a ventilator, the reimbursement from Medicare was $800 more than the treatment itself. If that same patient didn’t get pneumonia, the billing codes changed, and the payment for his briefer, simpler hospital stay was $800 less than the cost.

As Congress turns to the must-do task of cutting Medicare costs — and considers Cambridge-based health care innovator Donald Berwick to lead the effort — it’s worth reminding ourselves what Berwick surely knows. It’s not just that many of Medicare’s problems are well-known. So are many of the solutions.

James has already implemented many of them at Intermountain, which is known as a national model for sensible management. Among them are “global payments,’’ which opponents have managed to demonize as rationing of care. As James explained it to me, it’s a far-less-nefarious way to create the right incentives in a system that now often has the wrong ones.

In the case of my elderly relative, Medicare would give his hospital a set amount of money to coordinate and spend. Any money left over would be profit. If the payment fell short of the cost of his care, the hospital would eat the loss.

In theory, that could give doctors and nurses a reason to provide him with less care. Careful monitoring of quality would have to go hand in hand with global payments. But this change could also encourage steps known to reduce the length and cost of illnesses. Washing hands more often to reduce the spread of infection. Coordinating better among hospital divisions. Offering better access to the home-based nursing care that would cost a lot less.

“Over 50 percent of expenditures on a patient on health care are technically waste,’’ James told me. But “one person’s waste is another person’s income is a major political contribution.’’

In other words, he says, the probable downside isn’t so much that patients would get less care, but that some providers would get less autonomy, and oftentimes, less money. That’s the heart of the resistance to some other reforms, such as competitive pricing for Medicare, which would provide payments based on bids instead of uniform rates. Insurers would bid for Medicare business by promising to hold care costs within limits.

According to some health care and economics experts — including Roger Feldman and Bryan Dowd at the University of Minnesota and Bob Coulam at Simmons College, who wrote a recent paper on the subject — competitive pricing would shave 8 percent off the annual Medicare budget. That amounts to $50 billion to $60 billion every year. And yet, every time that reform has been proposed, providers have revolted, and Congress has blocked it in a very bipartisan way.

Now we have a looming crisis, a foreseeable future when the Medicare Part A trust fund will go bankrupt, or when Medicare costs will start to overwhelm the federal budget. There will come a point when ignoring the problem won’t be feasible anymore. Maybe it will happen too late to help some of my own relatives. But when it does happen, there’s some small comfort in knowing that solutions are out there — just waiting for action, a little bit of courage, and a will to change.

Joanna Weiss can be reached at