Correction Appended: Oct. 19, 2009
It’s hard to feel sorry for America’s family doctors. Any job that averages $179,000 per year and lets you be your own boss is a job most folks wouldn’t turn down. With the effort to rein in health-care costs increasingly framed as an unhappy trade-off in which insurers either slash benefits or raise premiums, some in Washington are beginning to ask a question long considered off-limits: Do we simply pay doctors too much?
The truth is, we pay them all wrong.
Doctors themselves could tell you that — particularly primary-care providers (PCPs), the foot soldiers of the U.S. medical system. New doctors graduate from medical school lugging up to $200,000 in student loans. Paying that off takes a big bite out of even a low-six-figure salary. Add to that the high costs, long days and billing headaches involved in running a practice, and it’s no wonder so many family docs are trading up to specialties like orthopedics, where the pay can be three times as great and the hours a whole lot shorter. Only 3 out of 10 doctors in the U.S. now are PCPs, compared with 5 out of 10 elsewhere in the world. Those family physicians who remain find themselves in a constant money chase, meeting their monthly nut with the help of the revenue they make by prescribing tests — X-rays, CT scans, EKGs — that may or may not be strictly necessary but generate a lot of separate billing.
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This so-called fee-for-service tradition has contributed to the dysfunction of the U.S. health-care system. Americans buy health care the same way they buy furniture, clothes and food: one item at a time. Physicians bill by the visit; radiologists bill by the X-ray; hospitals bill by the day. That drunken spending has led to the familiar horror-story numbers: a health-care system that gobbles up 16% of gross domestic product, compared with 9% in other industrialized countries, yet leaves the U.S. trailing those countries in such critical metrics as life expectancy and infant mortality.
Bad as that is for consumers and the national debt, it’s also turned doctors into fee chasers. More and more of them invest in labs or radiology clinics so they generate revenue not just from the procedures they do themselves but also from the ones they farm out. Others buy state-of-the-art diagnostic hardware and charge state-of-the-art fees to use it. “Focus on your bottom line,” urges a brochure for in-office CT-scan machines from one manufacturer. And as long as insurers pay the bills, patients don’t ask what things cost. “A colonoscopy used to take 45 minutes to perform,” says Ted Epperly, board chairman of the American Academy of Family Physicians. “Now it takes 15, but the cost hasn’t come down.”
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Indeed, across the board, costs are going up. And between the millstones of fee-for-service and pressure from insurers to curb all the extra billing, family doctors are being ground into paste. “We’ve made it systematically as unpleasant to be a PCP as it is to be a primary-school teacher,” says Gene Lindsey, president of Atrius Health, a nonprofit alliance of medical providers in Massachusetts. “We’re real adept at that.”
But there are ways to fix what ails the docs — and repair the health-care system in the process. In the rolling hills of central Pennsylvania, the Geisinger Health System is trying something different. The 726 physicians and 257 residents and fellows who work there don’t do piecework. They are paid a salary — benchmarked against the national average — plus potential bonuses based on how well their patients do under their care. One result is that Geisinger is able to hang on to its PCPs while other hospitals are losing theirs. Another is that Geisinger makes money, and, oh yes, the patients get well.
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In his Sept. 9 speech to Congress, President Obama singled out Geisinger and Utah’s Intermountain Healthcare as examples of organizations that are learning to do things right. He could have cited others too: the Cleveland Clinic, the Mayo Clinic, Kaiser Permanente. What these providers have in common are the creative ways they’re doing away with fee-for-service and replacing it with an imaginative mix of systems that cost less, keep patients healthier and make doctors happier. “We need a transition to rewarding the actual value of care,” says Dr. Elliott Fisher, director of population health and policy at the Dartmouth Institute. “For now, our payment system is getting in the way.”
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Less Is Much More
In the years since the reviled health-maintenance organizations (HMOs) were at their peak, all manner of fixes have been proposed to the health-care system, from small tweaks to wholesale overhauls. There’s pay-for-performance: compensation depending on doctors’ success in keeping costs down and getting patients well. There’s episode care: a fixed price for a procedure like a heart bypass that covers everything from pre-op to surgery to full recuperation. Most broadly, there’s global care, which provides access to a diverse team of caregivers who cover all of a patient’s needs for a single premium over the length of a policy — essentially episode care writ large.
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Geisinger uses a little of all three strategies. Founded in 1915 as a 70-bed hospital in a small, underserved rural community, the operation now spans a 43-county region, with a total of 67 sites — stretching from one-doctor offices and in-store clinics to a sprawling main campus in Danville, Pa. Like Kaiser, the 13,000-employee Geisinger is both a care provider and an insurer. About 30% of its 783,000 patients have the in-house coverage; the remaining 70% are covered by other private insurers or Medicare.
Geisinger’s brand of care can take some getting used to — at least for the doctors. Come to work for Geisinger and the first thing you notice is that your days as a medical free agent are over. You are now an employee, an idea that may seem like a very bad thing — until you get used to it and realize that it can be a very good thing.
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Family physicians in the Geisinger system, like family physicians everywhere, make less money than specialists — at first. To narrow the gap, the specialists subsidize the PCPs, keeping the family practitioners happy without taking too big a bite from the orthopedists and cardiologists. “I couldn’t recruit if I didn’t do that,” says Dr. Glenn Steele, Geisinger’s CEO. “We don’t want our family doctors setting up their own radiology clinics.”
A doctor’s pay is not fixed in advance. Salaries are pegged so that they stay within 80% of the national average, but up to 20% of income is based on teams’ achieving performance goals. If the cardiac group keeps its complication and readmission rates below a certain level, paychecks get fatter because costs decrease. Ditto for the pediatric orthopedic team, which must successfully treat kids for, say, spinal curvature without being too quick with the knife for those who don’t need surgery or too slow for those who do. “We keep cash compensation flexible and incentivized,” Steele says. “That takes away some of the insane piecework.”
It’s in the operating room that the new way of doing things is most graphically illustrated. Surgery in the U.S. is billed the same à la carte way primary care is: separate charges for the hospital, the anesthesiologist, the lead surgeon, the post-op checkups, and on and on. Care itself can be similarly fragmented, with patients finding themselves in the hands of whoever happens to be on duty at any point in the day and a doctor on the night shift knowing little about a patient whose surgeon worked the day shift. Dr. Alfred Casale, Geisinger’s chief of cardiothoracic surgery, tells stories of surgeons who don’t even conform to the same rules for color-coding wires in a heart device, making it awfully hard for an intensive-care technician to do repairs if something goes wrong. “When there’s a complication at 2 in the morning,” he says, “too often nurses can’t ask, ‘What’s his problem?’ until they ask, ‘Whose is he?'”
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In 2004, Steele decided to fix this, switching Geisinger over to a prix fixe, episode-care model for surgery, starting with the heart bypass. Under the new system, a closely coordinated team of caregivers would be responsible for every stage of a bypass patient’s treatment and recovery. The hospital would submit a single bill for all work and include a 90-day warranty. If a patient checked back in with a complication like a postsurgical infection, that work would be on Geisinger’s dime. “We’ll do it right, or we won’t send a bill” was how Steele put it to his staff.
Casale was charged with implementing the new plan. The first thing he and his team did was take 20 general steps all surgeons follow throughout a bypass episode and try to sharpen them in a way that would remove as much chance and variability as possible, going so far as to spell out the specific drugs and dosages doctors would use. The result was an expanded 40-step list that some surgeons balked at initially, deriding what they called “cookbook medicine.” Once doctors began following the expanded checklist, however, they grew to like it. After the first 200 operations — a total of 8,000 steps — there had been just four steps not followed precisely, for a 99.95% compliance rate. A total of 320 bypasses have now been performed under the new rules. “There are fewer complications. Patients are going home sooner. There’s less post-op bleeding and less intubation in the operating room,” says Casale. What’s more, the reduced complication rate has cut the per-patient cost by about $2,000.
Geisinger docs have since put together similar checklists for hip-replacement, bariatric and cataract surgeries and another for patients taking lifesaving kidney drugs. The kidney results have been especially striking: by better determining the proper dosage for individual patients and training them to self-administer their meds, the hospital has saved $3,800 per patient per year while more than doubling the number who score within the parameters of good kidney health.
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Technology has also helped Geisinger hold down costs while making doctors’ lives easier. Geisinger began installing electronic health-records systems in 1996 and since then has invested about $120 million in wiring its sites. On a recent morning, Dr. Nancy Grauso-Eby, a pediatrician working on the Danville campus, opened the record of a 4-year-old boy coming in because of an earache, and his entire history, from birth, popped up on her screen. So did a yellow alert that recommended the boy participate in a study called Garden Gang, a pilot program designed to teach kids how to eat better. When Grauso-Eby scrolled down, it was clear why the computer flagged this kid: the preschooler weighed 80 lb. (36 kg) — off the digital chart that tracks his growth curve.
While you might not need a computer to tell you that an 80-lb. 4-year-old needs to lose weight, it helps when the same system also warns about a food or drug allergy or a missed measles vaccination. When a child Grauso-Eby treats goes to see a specialist, that doctor will see the same chart, and an alert will flash if the two doctors are prescribing drugs that adversely interact. The chart will track the kid throughout life — for the orthopedist or cardiologist or obstetrician he or she sees in later years.
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Running the Numbers
For doctors, lawmakers and anyone else embroiled in the health-care-reform debate, the question is, Can a system like Geisinger’s go national? The short answer: in some ways it has. Pay-for-performance, episode care and global coverage have been seeping into health plans for a while.
According to a study by the AARP, 30% of primary-care physicians already have some kind of pay-for-performance incentive written into their plan contracts, and 28% of group practices include performance benchmarks. Since 2007, Massachusetts has required all its citizens to have health insurance, about 20% of which involves some kind of global coverage — handling all of a patient’s health-care needs for the duration of the policy. In July, the state announced plans to go further, eliminating fee-for-service entirely within five years and mandating global care statewide. Similar plans are ramping up in Minnesota and Wisconsin. “We’re going to do this incrementally,” says JudyAnn Bigby, Massachusetts’ secretary of health and human services. “We want to increase pay-for-performance first and episode payments next.” Is five years enough to make the transition entirely? Bigby concedes she doesn’t know. “No one’s ever done this,” she admits.
All the health-care bills making their fitful way through Congress include whacks at fee-for-service too, mostly in the form of programs that introduce episode payments or set up what are known as accountable care organizations, community-based teams of doctors who collaborate on care. The programs would be tested first among Medicare patients, but what happens in Medicare — with its 45 million recipients — ultimately drives the industry.
Still, significant unforeseens remain, as history shows. Massachusetts’ highly touted experiment with universal coverage has taken hits for failing to lower health-care costs. Bigby attributes this partly to high housing and labor costs and the fact that the state is home to so many pricey academic medical centers. That may be true, but you can bet that Massachusetts’ remaining one of the priciest health-care providers in the U.S. was not among the selling points when advocates of universal coverage were stumping for the plan. Similarly, global care may correct the problem — or harbor bear traps of its own.
Geisinger’s financials are undeniably rock-solid: the system pulls in about $1.5 billion per year from its premiums and from other insurers, and it has a AA credit rating. But part of that is due to the similar solidity of its patient base — a homogeneous population with a predictable range of ills. The financial team prefers things this way and has resisted any calls for expansion. “We’ve purposely stuck to our knitting in central Pennsylvania,” says Dr. Duane Davis, chief medical officer of Geisinger Health Plans. But larger plans trying to serve more-diverse communities don’t have the same luxury. What’s more, while Geisinger’s electronic health records may be an impressive showpiece, not every provider has a loose $120 million to plow into such a system.
Finally, there’s the matter of the doctors themselves. Physicians may want to get off the fee-for-service carousel, but salary-plus-incentives means that sometimes you won’t meet your targets and your paycheck will dwindle. And some docs may chafe at being hitched to a team. One sweetener Dartmouth’s Fisher recommends is forgiving some medical-school debts — an idea Obama endorsed at an Oct. 5 photo op with doctors, though in his plan, the break would be limited to those who agree to work in underserved or rural markets.
Overhauling fee-for-service may well make medicine less lucrative for some practitioners. But it would give others a new opportunity to practice medicine in an almost forgotten way: getting to know their patients and keeping them healthy so they can avoid a surgeon or a hospital. “It’s a chance for a primary-care doctor to be a hero again,” says Dr. Thomas Graf, chairman of Geisinger’s community-practice team. That’s not the stuff of AA bond ratings or billion-dollar revenue streams, but it just might be worth more than both.
The original version of this article misstated that neurologists can earn three times as much as family physicians. In fact neurologists on average earn $220,000 a year, compared to $179,000 that the typical family doctor earns.
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Write to Jeffrey Kluger at jeffrey.kluger@time.com