Provider Incentives – Are They the Key?

Last night, I spent the night looking at my wife sitting on the living room floor in front of a whiteboard that lists out dozens of genes and their mutations.  She has a med school exam on Friday, and to me, this feels a little bit like that movie A Beautiful Mind.  I’m scared.


What Medical School Does to People

But it makes me ask a deeper question: why in the hell would anyone go through this? The sheer volume of materials they give you in medical school, not to mention the bi-weekly tests and massive student debt, seem completely overwhelming.  It’s no wonder that nearly 80% of medical students say they are burned out.

Last time, I wrote about how healthcare revolves around a “proxy paying service”, which can make it really hard to understand why providers, insurers, or health vendors do the things they do.  The money flows in such a convoluted path that the players in the market often cannot even agree on how much money was actually spent.  This market structure (read: chaos) causes odd behaviors and perverse incentives.

Doctors by and large do not want to think about these organizational structures.  Doctors want to sit at a whiteboard studying oncogenes so that they can go save people’s lives.  For them, it is truly a calling.  Which is why I find it so intriguing that The Keckley Report this week focused on tracking outcomes and spending based on hospital ownership.  If the hospital is a for-profit entity that is maximizing its own self-interest and profits, are outcomes and expenditures better or worse than not-for-profit systems? As with everything in healthcare, the answer was: it depends.  Keckley notes that “analyses of publicly reported quality measures have not shown causal relationship between a hospital’s ownership and its outcomes”.  In addition, he cites a Health Affairs survey that found that 7 of the 10 most profitable health systems in the U.S. are not-for-profits.  The data tells an unclear story.

So why do the for-profit health systems focus doctor compensation so heavily on incentives? Keckley’s report notes that providers at for-profit health systems more often have some financial metric included in their annual performance reviews that at not-for-profit health systems.  Given that I went to the University of Chicago, I am generally a big fan of using these kind of free-market monetary incentives to drive desired outcomes.  But I am also wary of shoehorning aspiring doctors like my wife into forced measures, especially when doing so does not change outcomes or costs!

It is admirable in many ways that for-profit healthcare systems are trying to make structural changes to push the needle in American healthcare.  But if our country’s health system leans heavily on monetary incentives, it seems to me like we are all presupposing that providers are too lazy or, at the very least, apathetic enough to not want to get the best quality outcomes for their patients and continue learning the latest procedures.  Believe me, spend one day with a young group of budding medical school students or newly matched residents and you will see just how much these folks care about their chosen line of work.

So how can we undo the need for massive medical paydays and get back to adding quality to the system?  Some quick thoughts include:

  1. Make Medical School Tuition-Free.  A lot has been written about NYU Langone’s recent decision to cover tuition for all current and incoming medical students.  The focus has been on the fact that this will increase the diversity of individuals able to go into the medical system and encourage primary care.  However, more broadly the point is that free tuition will reduce the need for doctors to focus on compensation when choosing a health system to work at[1].  Instead, perhaps these doctors will focus on the “best” workplaces, which in my opinion will skew towards “best” meaning “best outcomes”.
  2. Stop Incentivizing Doctors on Volume or Profits. While these have long been touted as ways to improve the efficiency of hospital operations or cut costs[2], they crowd out the moral thinking and care focus that made doctors want to be doctors in the first place[3].  Beyond that, the Keckley Report dispels any notion that these are silver bullets.  By and large, I think these should be jettisoned.
  3. Encourage Standardization and Teamwork.  Currently, I am reading “Unaccountable” by Martin Makary and have been recommended Atul Gawande’s “Checklist Manifesto”.  Both of these offer incredible statistical insight into how standardization and teamwork can drastically improve patient health outcomes, regardless of incentive structure or a doctor’s natural genius.  As we move toward a more consumer-driven healthcare system based on greater transparency, health systems that implement these proven processes will see better outcomes and much better public relations/unearned media exposure.

[1] For those who support nationalized medicine like the NHS in the UK, this has also been proposed as a way of keeping provider cost down.  Stephen Bergman (author of “House of God”), spoke at my cousin’s graduation from UConn medical school about 10 years ago where he brought up this very topic.

[2] Value-based care is, incidentally, just a way to incentivize on profits with fixed revenue.  Although it seems better than fee-for-service, it only “bends the cost curve” so long as the capitation rate increase is strictly managed every year.  This is difficult to see happening in a highly captured regulatory environment like healthcare.

[3] There is a lot of psychological research into moral crowding and mixed motivations.  A study we learned about at Booth highlighted that charity call center workers actually made more phone calls when they were volunteers than when they were paid a small amount.  There is a lot of debate about the magnitudes of this effect, but the directional results are highly replicable.

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