post by Bill Gardner
Thanks to Don Taylor for pointing me to an important essay in the NEJM by Stephen Rauh and his colleagues on "The Savings Illusion — Why Clinical Quality Improvement Fails to Deliver Bottom-Line Results." Rauh et al. argue that, contrary to widespread hopes,
true bottom-line savings from improved clinical quality rarely materialize, and costs continue to climb. Manufacturing and service companies around the world have demonstrated the cost benefits of improving product quality and production efficiency. So why haven't nearly two decades of work on improving health care quality had a measurable effect on health care costs?
The reason, they argue, is that the cost of delivering health care is mostly fixed. Doing one less MRI (the image above is a magnetic resonance angiograph) saves you some electricity and billing costs. However, you still need to pay for the machine and the specialists who can read the images. This means that in the short run not running the machine doesn't save much. Worse, from the point of view of a hospital, it leaves money on the table (as it were), because the marginal cost of imaging one more patient is significantly less than what the hospital can charge for it. You may feel that the hospital should leave those dollars on the table. But it won't.
So how do we improve quality and reduce cost? Perhaps, as Reihan Salam argues, competition between integrated health care systems -- where the insurer and the provider are the same entity -- could create incentives for providers to forego unnecessary MRIs. I hope so, and I am working with my Ohio hospital as it seeks to transform itself into an integrated provider. But instead of hope, I would rather have data indicating this will work.
Rauh et al. assert that
The most meaningful way to achieve savings is to focus on overall reductions in utilization rates for health care services and to eliminate the associated unnecessary capacity.
They don't, however, say how this is to be accomplished.
This can be done if you have a single payer. It is not fun. Here in Nova Scotia, the NDP government -- the socialists, mind you -- are reducing our hospital's budget by 3% this year. Because we cannot reduce our labor costs or physical plant -- at least not in the short run -- this will result in (at least) a 3% reduction in imaging. No hope required. But we do need to hope that this will be a reduction in unnecessary MRIs, rather than ones that women and children really need.