Medical Middlemen’s Hands Are Out

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A pair of adjacent stories on health care costs in today’s New York
Times illustrate the big potholes in privatizing health reform. They also point to some better paths. One article was on "huge variations" in end-of-life medical costs. More on that later. The other, by Reed Abelson, scrutinized a seemingly failed Medicare experiment in
reducing diabetes treatment costs through intense case management. So
far, it’s been a wash at best. But the figure that struck me was the
"as much as $2,000 a year" per patient that Medicare paid to private
contractors to manage the cases.

A nurse for one of the "disease
management" contractors, Healthways, told the Times that she "makes 25
to 30 telephone calls a day, trying to ensure that each
patient receives a call every few weeks"  to monitor medication, help
get the right treatment and coordinate doctor care.

Let’s do some back of the envelope calculating, based on logical inferences about these figures.


  • Each nurse averages 27 patients called a day, five days a week.
    Assuming that at least an hour of the 8-hour workday is spent taking
    breaks and record-keeping, and several minutes are wasted on no-answer
    calls or setting up a new patient, that still gives each patient 12 to
    15 minutes of nurse time including help reaching a specialist, and so
    forth. It’s longer than most doctor appointments. 
  • Each patient is called every four weeks, the probable midpoint of "every few weeks."
  • The caseload total per nurse is thus 27 unique patients per day X 5 days X 4
    weeks, which comes to 540 patients per nurse. Deduct from that a
    generous average of three nurse-days off per month for
    holidays/vacation/sick days (assuming the nurses get any of these
    perks). Revised total caseload: 486 patients.
  • If $2,000 is the highest charge, we’ll assume the average yearly
    charge per patient is $1,500 (It’s probably higher, but we’re
    continuing to be generous). 
  • Total revenue produced by each nurse: $729,000. If the nurses are paid $80,000 a year, that’s a whopping overhead and profit from the rest.

Even if my assumptions are somehow half-wrong, and each nurse
generates only $365,000 per year, that still seems like Iraq-war levels
of overhead.

It also seems exceedingly wasteful to build the
system on a fresh layer of bureaucracy in which every "case manager"
has to get to know the patients from scratch. That’s another problem
with private contracting. It resists building on resources that are in place,
like the nurses already in a doctor’s offices.

In fact, that’s much of what an alternative idea would do. As the story put it:

[S]ome health care experts say Medicare should move on to seek
other ways of managing the care of the chronically ill, if alternatives
seem to hold greater potential to deliver both cost savings and better

"Medicare is doing exactly what we should want Medicare
to do – to test different life forms of disease management and see what
works best," said Dr. Arnold Milstein, the chief physician for Mercer
Health and Benefits, a consulting firm. But, he said, "This particular
form of disease management is not looking promising."

is already exploring other ideas, like the development of so-called
"medical homes," where a doctor with a team of other professionals
oversees a patient’s care. A few doctors’ groups involved in a separate
Medicare experiment have reported some success in saving the government
money by more actively managing their [own] patients’ care.

The other story,
by Robert Pear, reports on a study showing that at five top-level
academic medical centers, there were "huge, unexplained variations" in
the costs billed to Medicare in the last two years of patients’s lives. 

Most expensive: UCLA Medical Center in Los Angeles, at $93,842.

Least expensive: A near tie between the Cleveland Clinic Foundation ($55,333) and Minnesota’s Mayo Clinic ($53,432).

It’s a story that should renew calls for better studies of such
care, which can include costly, invasive and painful treatment even for
a clearly dying patient. Families that watch in discomfort, if not
horror, rarely pursue objections because of medical power and authority.

Most notable variation: Doctors at the Cleveland Clinic and Mayo
Clinic are on salary and working in atmospheres of collaboration. More
treatment does not make them richer. Yet unlike at the big HMO Kaiser,
where the staff doctors are a separate for-profit arm, restricting or
delaying treatment also does not increase their profitability.

Give credit to Medicare, as a giant public provider of health care,
for doing such research and making it fully public, naming names. Too
bad it only covers those over 65.

Consumer Watchdog
Consumer Watchdog
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