Efficient Health Care: How to Make it Happen

Washington declared war on waste in American medicine during the Nixon years.  Despite subsequent decades of bipartisan, largely clandestine attacks, waste seems to be winning.

The current debate is the latest chapter in that effort.

It again centers on how to make the system more efficient – and seems to echo many of the initial arguments about the need to manage care.  Perhaps it’ll actually work this time.  Maybe we can enhance the odds by talking candidly about precisely what it is and why it hasn’t worked yet.

Basically the experts agree that the public is getting a lot of care that it simply doesn’t need.  And while the public is sympathetic to efforts to cut paperwork and eliminate duplicative tests, it isn’t convinced that many of the tests and procedures done today aren’t improving our health.

Perhaps being a bit more transparent about the goal could enlist the American public in helping achieve it, or at least discourage backlash that’s previously undermined progress.

The quest began in the early 1970s, when the cost problem surfaced, partly because the new and very popular Medicare program was significantly more expensive than anticipated. Then there was a realization that integrated health maintenance organizations like the Kaiser plans could deliver quality care more efficiently than other providers.  In short, they did less without compromising the health of their patients.

There were a number of reasons why.  One was that they had different economic incentives because they were both insurers and care providers.  That distinguished them from other providers who could earn more by doing more.  HMOs could prosper by doing less – and doing the right thing at the right time. 

They had an economic incentive to do so.  They received a single, flat fee regardless of what they did, so they would actually lose money if they routinely did too much. 

Coordination was a real possibility since nearly everyone providing care had the same employer, which created rules or protocols in an effort to optimize care.  That meant the treatment for any given problem would be the same, regardless of what doctor was seen.  These protocols were worked out by the doctors and reflected their experience about what worked best.

The Nixon Administration came up with a plan to expand HMOs, but it wasn’t possible to simply replicate Kaiser, where most doctors were salaried employees.  Most physicians didn’t want to become employees and insurers were understandably reluctant about spending the capital required to become healthcare providers.

The challenge lay in finding a new way to deliver HMO-like care without taking the time and money to replicate organizations like Kaiser.

The result was a new invention called a preferred provider organization where insurers contracted with hospitals and doctors who they had reason to believe would do a job cheaply, well – or both. 

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