Arnold Kling  

Premium Medicine, Illustrated

What Incentives Does Statistic... Consensus on Roosevelt Fast Ap...

The Wall Street Journal reports,

As doctors studied the course of treatment of dozens of patients at Virginia Mason's spine clinic, it was clear no standard procedures were being followed. Though Virginia Mason physicians are salaried and have no direct financial incentive to run excess tests, many had gotten into the habit of ordering an MRI, though uncomplicated back pain rarely warrants one. Many patients had to wait a month for appointments and often were bounced from specialist to specialist. Eventually some patients were directed to physical therapy, and often only then began to feel relief...

Now, patients follow a more standardized path: They have an initial consultation with a physical therapist and then a doctor. Unless red flags suggest another course, the physician often prescribes some physical therapy first. The streamlining means wait times for appointments have fallen to a day. Within a year, the percentage of people receiving MRIs dropped by a third, to 10% from 15.4%. Only 6% of patients lost time from work.

...With the new approach, the spine clinic's income fell from a profit of about $100 per case to a loss of about $200, the medical center said.

Josh Hendrickson flagged the story, kindly adding that it "seems to fit with Arnold Kling’s premium medicine hypothesis."

By the way, in case you have not been following, Cato Unbound has some reaction essays to my piece on insulation vs. insurance.

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COMMENTS (2 to date)
Ajay writes:

How is this an example of premium medicine? This is clearly an example of incompetence and greed. I want to know how the Wall Street Journal gets away with saying the doctors "have no direct financial incentive to run excess tests" but "the spine clinic's income fell from a profit of about $100 per case to a loss of about $200" when a standard process was installed. It is clear what the scam is here. The more tests the doctors run you through, the more money they make through repeat consultations, as they generate more and more redundant information to look through. As the article notes, it is clear there are no standardized, consensus procedures being followed. The doctors just bounce the patients around while extracting as much money as they can. It is very clear that doctors are following the profit motive, even if they have to trade on the suffering of their patients to do so (in fact, doctors are some of the most avaricious people you will ever meet). I have had a lingering foot injury for the last couple of years and can verify that this is exactly what goes on. Obviously, this is more prone to happen in the case of medical problems like back pain where there is little understanding of what is going on. If you have a clearly understood injury and they did this, you could probably sue for malpractice. However, there is much about the human body that modern medicine doesn't understand and the doctors take financial advantage of this. If you're in a grey area, they can keep bouncing you around while extracting the maximum amount of money from you in the process. Nobody will tell you that you are in a grey area, they will just start leeching away. This isn't premium medicine, this is an inhuman scam.

Further, I blame the current socialized medicine system put in place by medicare and the insurance industry for this mess. They have created an incentive system where the doctors are given standardized amounts of money regardless of how useful their work is. There is no incentive for doctors to innovate and do a better job because there is no system in place to figure out who is actually doing a better job. Therefore, they all get paid the same and they all do the minimum possible. If you think medicine in this country is horrible, look no further than your own government.

An additional horrible irony is that there are idiots like Krugman who want to further broaden government control of health care. Thank god he is so stupid that he constantly lies and cherrypicks statistics in his arguments so that he is easy to slap away. On the other hand, he does manage to fool plenty of similarly stupid people, especially if they're inclined to believe whatever he says because they're of the same political persuasion (as Arnold has written about recently).

Ajay writes:

For those who want to read the actual article, I found it reprinted here. Note that for "each MRI that Aetna and the employers avoided at around $850, Virginia Mason lost about $450 in profit." What other business makes more than a 100% profit margin on a routine procedure like an MRI? Why did it take outsiders to come in and suggest doing physical therapy more often for back pain? Or that MRIs were overprescribed 10 times too much for migraines ("reducing tests ordered for migraines from 50 percent to 5 percent of cases")? Instead of raising funds for the migraine clinic, what about cutting costs by getting rid of unnecessary staff or equipment? Obviously once the government institutes a socialized system of payment, the hospitals respond by sucking in as much money as they can and being inflexible to change and the actual needs of their patients.

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