Complaining about how doctors are paid is the bread and butter of health care wonks; everyone agrees that payment systems create perverse incentives that drive up the cost of care. The picture may be more complicated, however, than the received wisdom suggests. Oncology doctors, for example, receive a certain percentage of the total cost of the medications they administer, which creates an incentive to prescribe more expensive medicine. A new study tested whether paying the doctors a lump sum for a course of treatment, rather than individual fees based on the price of each medicine, would lower overall costs.Researchers expected that it would, but were surprised by the results. The WSJ reports:
The results of the five study groups were compared with projected costs based on a registry of other UnitedHealthcare cancer patients. The groups’ overall spending amounted to $64,760,116, about a third less than the predicted $98,121,388. But the cost of chemotherapy drugs among the study groups was $20,979,504, more than double the expected $7,519,504.Lee N. Newcomer, a UnitedHealthcare senior vice president and the study’s lead author, said he was “very surprised by the size of the increase of the drug spend,” which wasn’t the expected result.Researchers who weren’t involved in the study said its meaning was unclear, particularly the increased drug spending. “It’s counterintuitive, to say the least,” said Peter Bach, director of the Center for Health Policy and Outcomes at Memorial Sloan Kettering Cancer Center. “We really don’t know what happened.”
In short, the experiment did reduce the cost of care, but not by reducing the cost of drugs—which was the only area of the whole care delivery process targeted by the changes to the payment system. The unexpected results suggest that the experts who study our system and recommend reforms still don’t understand how all the parts of it interact. Instead of looking to academics to locate the key pressure points in a opaque and labyrinthine system, would-be reformers should shape policies that make it more like all other commodity markets. In a competitive market, functioning within certain legal frameworks that are fairly enforced, providers would have all the incentive they need to lower costs: capturing customers.