The U’s medical system, University of Utah Health Care, has been drawing national attention in recent months for introducing what is considered a central tenet of business into medicine — that is, knowing the costs of its products. Employing a variety of monitoring methods and a tailor-made software, the U’s healthcare administration has successfully accounted for the costs of nearly every test and procedure performed by every doctor in its hospitals.
The move, which brought about an unprecedented drop in the center’s costs, signals a departure from the traditional practice in medicine, where prices are set, quite arbitrarily, by private insurance companies, and doctors often assume insurers will cover everything prescribed. While the current scheme is not without its shortfalls, most notably the lack of community and patient input, Utah’s shift constitutes a move in the right direction toward efficiency and openness in the face of changing economic realities. Hospitals and clinics across the country ought to adopt similar measures, but in the meantime, take into consideration the expectations of their respective communities and individual patients.
Although the departure from old practice has been decades in the making — insurers have gradually been placing financial burdens on consumers in the forms of co-payments and deductibles— what set Utah’s radical transformation in motion was the Affordable Care Act of 2010. The legislation established a system in which healthcare providers are paid based on the value received by patients — in other words, the desired treatment or cure of a condition, rather than individual procedures (as in the case of private insurers). Hospitals would therefore bear the additional cost of any non-standard treatment. In business, the most reasonable moves when confronted with such a challenge would be to determine the costs and limit unnecessary expenses. The medical care industry, as high-minded as its missions are, needs a clean balance sheet to continue its service to the community, and thus should be no exception to this basic rule of doing business.
The U’s healthcare system, led by Vivian Lee, a Harvard-educated physician-turned-CEO, took on the challenge by closely scrutinizing all aspects of care, as well as the outcome they produce, which is measured by a patient’s length of stay in the hospital, a known indicator of future health. The program’s success is in large part due to its return to healthy capitalism (pun intended). In Utah’s system, care providers are able to set the price appropriately, instead of relying on insurance companies’ opaque algorithms. Hospitals, in turn, may effectively reduce their costs, find better uses for their excess resources and compete with other providers directly. This is a win-win situation for both healthcare providers and patients, since competition produces excellence in care and price information gives the hospital the power to fully utilize its resources.
The transparency in price may also translate into better healthcare decisions by consumers, as information is the cornerstone of sound decisions in a capitalistic society. Indeed, recent studies have found skyrocketing costs of marginally effective treatments to be a main contributing factor in the decrease in quality of life in cancer patients. Had the price-setting power been transferred back to care providers and cost-benefit analyses been made available to the patients, many of those instances of poor quality care could potentially been avoided.
Further, by freeing up valuable medical resources, the U’s program benefits patients who require more extensive care, as well as future patients of the hospital. The idea, though evocative of rationing, is supported by physician groups and community organizations alike. The American Medical Association and the American College of Physicians, two of the largest physician groups on the continent, issued new guidelines in 2012 that called attention to the costs, both individual and societal, of excessive care. Religious groups, such as the Catholic Church, also issued statements urging its followers to be reasonable in making medical choices and to avoid burdening the community with expensive, unnecessary medical tests and procedures.
Still, in a culture that champions individualism and puts a premium on treatment at all costs, the U’s program faces some resistance from patients and physicians. Patients worry their doctors will forgo the best available care and opt for the more cost-effective, low-risk procedures so they can increase their patient turnover rate and appear more “efficient” on paper. They see the U’s parsimonious effort as an insult to priceless individual lives. They believe judgements about the values of care, and of life, should be reserved to the person. Some doctors are concerned that the hospital’s close scrutiny intervenes in their professional decisions, which they maintain are always in the patients’ best interests.
While these are legitimate questions concerning the ethics of Utah’s current program, they are by no means grounds for its termination. The old system, one in which the insurance company has all the keys to profiteering, is certainly no more noble than the U’s. The monetary incentives provided by insurance companies, like ordering unnecessary tests, for example, put patients at risk and place hospitals under additional financial pressure. In addition, the dominance of insurers also allows them to skew prices in favor of the most profitable procedures, from their point of view, regardless of the procedures’ efficacy. The list of corruption and collusion goes on and on.
What the Utah health care system needs is continued improvements to better reflect the nuanced dynamics of a public company in our capitalist economy. Information on the price of procedures, outcome of a medical team, source and use of the hospital’s profits and perhaps the philosophies of doctors should be accessible to patients, who in turn should work out their individual treatment goals and needs with their chosen physicians. Patients may choose to consult with billing experts in the hospital to decide on their best options, taking finance into consideration, before returning to their physicians for a final decision. Doctors, then, would not need to be overly concerned about the financial aspect of their work, while patients would be guaranteed to receive the care they expect. Finally, we must change the way executives at hospitals view physicians, possibly through legislation. Instead of money-generating employees, doctors should be treated as an individual department in a company, with diverse clienteles, missions and, resultantly, profit margins. This way, doctors won’t be discriminated against for performing more expensive procedures when they see fit, and hospitals can profit by providing care to a diverse pool of patients whose ideas of the most appropriate care aligns with certain doctors’. Hopefully, this approach will help society finally rid its healthcare system of the corrupt influence of insurance companies.