Global Conference 2009

Global Conference 2009

What Are the Real Economics of Quality Health Care?

Monday, April 27, 2009 / 2:30 pm - 3:45 pm

Health-care reform will require society to make hard choices about what it values, according to this panel of experts. David Schmidt of SCAN Health Plan explained that society is not willing to confront issues that drive health-care costs, and doctors are not willing to have conversations about what procedures are worth doing.

Marc Hoffing of Desert Oasis Healthcare put it even more bluntly: "Supply and demand is completely upside down in health care."

In locales with lower supply, Schmidt observed, patients are more satisfied with access because physicians are more willing to have discussions about values. Juan Davila of Blue Shield of California pointed out that facilities don't always have your best interests at heart; there is a lack of interest and a lack of communication. The moderator, Richard Merkin of Heritage Provider Network, added that many patients are hospitalized who don't need to be.

Washington has a key role to play in this debate, but Hoffing claimed there is little discussion of incentives or rationing there. Schmidt pointed out, though, that the American Recovery and Reinvestment Act (ARRA) has allocated $1.1 billion for comparative effectiveness research, which is in effect rationing.

Many of the panelists pointed to health care labor as part of the problem. According to Merkin, 60 percent of hospital expenses are labor, with the majority of that being nursing expenses. Paul McBride of Wellpoint Inc. said that in some countries with comparable or better outcomes, health-care labor costs are lower than in the United States.

Hoffing further argued that nurses and physicians are being used incorrectly. Physicians are incentivized to order more tests, leading to higher costs. This means better-qualified doctors get paid less, Merkin explained, and an integrated model with revised payment incentives could help ameliorate this problem. Physicians must also be incentivized to become primary-care providers; the noted the average age of primary care providers in California is 57.

McBride stated that patient incentives are also skewed. Patients are uninvolved in their own care because the marketplace is designed around the delivery system, not the consumer. This lack of responsibility leads to overutilization and higher spending, Davila agreed. These costs will continue to grow as baby boomers age and qualify for Medicare and as obese youth acquire adult-onset diabetes. Nevertheless, many patients have financial barriers to even accessing the health-care system; others have the means but choose not to get insurance, raising costs for everyone else.

Davila summed it up by noting that the U.S. health-care system is extraordinarily complicated, and multiple pieces need to be re-conceptualized.


Richard Merkin

CEO and Founder, Heritage Provider Network; FasterCures Board Member


Juan Davila

Senior Vice President, Network Management, Blue Shield of California

Marc Hoffing

Medical Director, Desert Medical Group and Oasis IPA

Paul McBride

Vice President, Health Care Management and Services, Wellpoint Inc./Anthem Blue Cross & Blue Shield

David Schmidt

CEO, SCAN Health Plan

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