I wish I could write as well as Atul Gawande as he looks at how cost curves are bending in a tour de force article in the New Yorker. He revisits McAllen, Texas after he highlighted how this city was the most expensive city in America for Medicare and he reports on the change. There is a little bit of everything going on that has resulted in a bent cost curve. Below is McAllen baseline situation:
McAllen’s doctors were ordering more of almost everything—diagnostic testing, hospital admissions, procedures. Medicare patients in McAllen received forty per cent more surgery, almost twice as many bladder scopes and heart studies, and two to three times as many pacemakers, cardiac bypass operations, carotid endarterectomies, and coronary stents. Per-capita spending on home-health services was five times higher
In 2009/2010, if you sneezed in McAllen, you were admitted to the hospital for a full work-up. If you sneezed in El Paso, someone handed you a tissue. That has changed. This is now:
the cost of a Medicare patient has flattened across the country, El Paso included. U.S. health-care inflation is the lowest it has been in more than fifty years. Most startling of all, McAllen has been changing its ways. Between 2009 and 2012, its costs dropped almost three thousand dollars per Medicare recipient. Skinner projects the total savings to taxpayers to have reached almost half a billion dollars by the end of 2014.
Half a billion dollars in reduced costs from McAllen is more than the total reduction in costs from the Pioneer ACO pilot projects that are beginning to be brought to national scale. It is a big Biden Deal. How did this happen?
- “Several federal prosecutions cracked down on outright fraud….”
- Costs were never a consideration — “We didn’t know that home health was a thousand dollars a month” for each patient, Peña said. People in the medical community had never paid attention to how much of it they were ordering or how little of it was really needed”
- Preventative care became profitable: “WellMed had contracted with Medicare H.M.O. plans to control their costs. Its pitch to clinicians was that, if a doctor improved the quality of care, this would save on costs, and WellMed would share those savings with the doctor in the form of bonuses.
- Accountable Care Organizations were formed and successful: ” two McAllen accountable-care organizations together managed to save Medicare a total of twenty-six million dollars.”
McAllen is an outlier as it was the most expensive market in the country for medical care. It should be the easiest case to see change because its baseline was so out of whack with typical baselines. It is a massive success story as each little bit of the healthcare reform puzzle took a whack at a segment of misutilization and inefficient utilization of services. Outcomes are improving despite the government spending $3,000 per Medicare beneficiary less per year. That is an amazing win. It is a win that won’t be replicated on a national scale as the typical county in the US has far less low hanging fruit, but we don’t need everyone to move to best in practice status, we need to move the worst performers to thoroughly mediocre performers or better for us to seriously bend the cost curve. McAllen is moving significantly out of the horrendous and past mediocre.
I have a few other questions on the economics of medical care in McAllen. The most important one is Dr. Gawande is only talking about the quantity of services being ordered and used. Those have gone down massively. Total cost is the number of units used times the average price. Has the average price of services in McAllen decreased? The article indicated that some of the home health care service companies had closed, so a typical market response would be for these companies to start cutting their prices. If we are seeing that as well as a reduction in total services, then the medical market is actually acting like a market. And that would be shocking.