It’s Time for Physicians to Address the Cost of Care


We’ve now set a record that should be a source of chagrin for all clinicians. We’ve exceeded spending over $10,000 per capita per year in the U.S. on healthcare. With this amount of annual spending, any reasonable observer would believe that the United States must have the best healthcare on the planet. But the facts are just way too obvious to those of us who practice medicine – this is not the case.

Our closest neighbor to the north spent something around $6,300 per person in 2016 (11.1% of its Gross Domestic Product). By comparison, we spend about 18% of our GDP on healthcare. 

As President Trump has said, “Nobody knew medicine could be so complicated.” Duh! Why can’t we figure this out? Somehow many of us assume that capitalism, if just left to its normal course, will solve the problem. But the rules of capitalism don’t seem to apply to the provision of healthcare in the United States – at least not fee-for-service healthcare (the majority of patients). Normally in capitalism, the more providers of a service there are, the lower the prices go (supply and demand). So how is it that in Miami (where there are oodles of doctors) the cost to provide care for a Medicare patient is about $13,000 a year, while in Minneapolis it costs only about $8,000 a year to take care of the same problems?


The difference between Minneapolis and Miami might have something to do with our current payment system of fee-for-service healthcare. (In 2016, 69% of Medicare patients were in fee-for-service programs.) In this system, the more clinicians do, the more tests that are ordered, the more revisits that are scheduled, the more referrals that are made, the more money doctors make. In this system, there are no incentives for doctors to do less (except, perhaps, ethical reasons). Fee-for-service payers just keep on paying the same amount for office visits, colonoscopies, cataract surgery, CT scans, etc. Volume has no effect on the cost-per-service. Lots of services, lots of payments – no supply vs. demand at all.

There is another system in which the opposite incentives apply – the HMO system. Like fee-for-service payment systems, HMOs can also be nasty. In their worst iteration, the less clinicians do, the more they make (or actually the company who owns the HMO makes). As of January, 2016, about 92 million Americans belonged to HMO plans. Some of these plans are exceptionally good – the Kaiser and Mayo Clinic systems come to mind. But let’s face the brutal reality, if there was going to be an approach to dealing with the cost of our healthcare, it would seem that the HMO system would be much more likely to be successful than the fee-for-service system. 

Seems we need to break our addiction to the fee-for-service payment model. This is not to say that the Kaiser and Mayo Clinic systems are not capitalism – they sure are. But the incentives are much more likely to result in lower costs (our biggest problem right now). Surely if we used the universal coverage model of all of the other advanced Westernized countries and spent the $3.2 trillion we are currently spending, we could provide terrific health care for everyone in our country – but we would have to pay less to providers than we do now per unit of service and we would have to expect more services to be performed. 


Bottom line – one of the major problems with the U.S. healthcare system is that it is just not affordable.

There’s also a lack of access for all citizens, a focus on sickness versus wellness and excessive variability in quality. Consider the marked variation that exists in the admission rates for pneumonia, which I’ve written about in this column in the past. Although numerous studies point to huge variability in the ordering of tests and the diagnostic approach to various ED patient complaints, there probably is no costlier variation than that related to hospitalizations. 

But variation in care certainly doesn’t stop at the ED.  What happens once a patient is admitted? In the May, 2017, issue of JAMA Internal Medicine, Y. Tsugawa, et al, looked at spending and outcomes in non-electively admitted fee-for-service Medicare patients. Of 485,016 admissions treated by 21,963 hospitalists at 2,837 hospitals there was a 40% difference in average hospital spending between the highest ($1,055) and lowest ($743) quartiles of physicians while there was no statistically significant difference in 30-day readmissions and 30-day mortality rates. And, compound this variation with that of the sheer variability in Medicare admissions. In a nationwide study of Medicare admission rates (Caines, K., et al, Ann Emerg Med, October, 2016) it was found that the admission rate in the lowest quintile of U.S. counties was 19.3% versus 40.3% in the highest quintile of county admissions – a 50% difference in admission rates. 

So there is a lot more work to do than fix the payment and access issues in our country. Physicians need to tackle the “3rd rail of medical leadership.” They have to accurately and fairly measure physician practice and compare it with an agreed upon, evidence-based reasonable standard. Physician variability in care is something we need to tackle. Will it be a popular endeavor? No way. I can hear the whining now. “My patients were sicker than hers.” “This is the way I was taught to practice in residency.” “I order lots of tests to avoid being sued.” “I don’t want to practice ‘cookbook medicine’.” And on and on. But it has to happen. If physicians don’t do it, CEOs and/or payers will (and it will be even less pleasant if they do so). Now that EMRs are ubiquitous the finest details of clinician variability are easily scrutinized. We need to own up to this problem and fix it – our patients deserve it and our healthcare system needs it badly.



Dr. Bukata is the Editor of Emergency Medical Abstracts.


  1. I’ve said it time and time again. Physicians can fix the our current systemic healthcare problems, but we have to be given the platform to do so. As an Emergency Physician, I can generally look at a physical complaint for any given age and determine the likelihood of hospitalization. I believe any EM, residency trained physician can do the same. The problem is that we make this decision based on the likelihood of this patient having a negative outcome that would be perceived by family, or worse, by attorneys as potentially negligent care if they were sent home. If the system doesn’t address TORT reform, there will be no physician by in to eliminate perceived benefits of admissions and testing. We are all inclined to protect out own ass.

    Now, if we want to save more money, eliminate insurance companies. There is a middle man in the system siphoning money that could be spent on care. All those employed by insurance companies have to get paid and the CEOs need a bonus. Instead, turn hospitals into country clubs. You join the club. You get all your care there. If you have children you join the children’s hospital. You can join locally or the hospital in the town next door. Hospitals can form referral networks. Hospitals can acquire or network with pharmacies and employ pharmacist. The bottom line, the money paid by patients for care stays in the healthcare system.

    Bottom line, getting rid of lawsuits will eventually rid physician of fear and actually allow them to practice evidence based medicine reducing hospitalizations and over utilization of tests. Eliminate insurance companies, create and join hospital networks and keep the money in the healthcare system.

    Obviously, there are many other things that need to be addressed in our healthcare system, but let us all agree that there are problems that are clearly being ignored and solutions that can clearly have a positive impact! Walking around blindly blaming physicians for protecting themselves from a broken system won’t fix anything.

  2. Victor R. Fuchs on

    My compliments to Dr. Bakuta for a fine blog, It’s Time for Physicians to Address the Cost of Care.” I agree with all your points except your expectation that CEO’s will join the fight to lower costs and improve health care. As you can from almost all meaningful reform will involve a somewhat role for government, and most CEOs are dead set against any expansion of government. Also, the high income executives in large firms have a good deal with top of the line policies heavily subsidized by the IRS. They will not give that up willingly.

  3. Daniel Levy, MD on

    Have enjoyed reading Rick’s post and listening to his sage advice for years. Thank you! That said, while I strongly agree that physicians should lead the charge to improve health care access and quality, I have qualms with several points he’s made. First, stating that Medicare pays based on a fee-for-service concept is misleading. I was recently hospitalized for 1 day for a small acute stroke for which I’ve fortunately fully recovered. The massive workup by my EM colleague was billed at $760, included CT, CTA, MR, emergent neuro consult, etc.) He was paid $140 by Medicare. My post-hospitalization FU visit with my family physician included a full exam, review of all recent labs and scans, a thorough review of meds, etc. He billed $140 for my 30-minute visit. Medicare deigned to pay $40. The hospital charged $12K for 1 inpatient day and was paid in full without question. Physicians need to skimp more on billing? I’ll posit that the feds are trying to shrink payments to individual providers because they don’t care if they have to shutter their practices. They don’t short hospitals because it looks bad to the public for a big institution to close its doors. Kaiser is a role-model for where we need to go with healthcare? I’ll be the first to admit, they have a lot of excellent physicians who overall do a competent job with simple acute problems. However if you have something big, like a cancer or other illness that might require expensive evaluations and treatments, they seem to move VERY slowly. One of my most memorable cases was a 50 YO female in septic shock who’d been diagnosed with acute leukemia 6 months before. “What’s your cell type?” “Don’t know, they’re still discussing care.” No bone marrow 6 months in. I additionally saw a 65 YO female who was also septic with a 36K WBC. She’d been seen the day before in a Kaiser outpatient clinic with fever and a WBC of 24K. They sent her home to “see what happens.” I’ll never forget the reveal in national papers ~10 years ago that Kaiser was giving bonuses to their employee physicians at years end base on how little they spent on the diagnoses of their patients. This is NOT a model we should be emulating. Rather, I think we should be leaders in encouraging 3 things: 1) Pricing transparency — how much does a clinic or ED charge for a particular WU? Make it available online to enhance competition. 2) Reward healthy lifestyles with very low cost insurance (weight control, no smoking or drugs, limited alcohol, and the use of seat belts as a start), and charge those who can’t /won’t comply costly riders for coverage, based upon objective data of projected costs. Those who chose to go without coverage would receive limited comfort care for their end-stage diabetes, heart disease, stroke or severe trauma. 3) Insist upon fair payments for physician services based upon reasonable guidelines of community payment standards for professionals. FYI, I paid my plumber $120/hr on his last visit. My family physician deserves significantly more than that.

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