In 2009 McAllen, Texas, was the poster child of everything wrong with American style healthcare. For proponents of the Affordable Care Act, that medium-sized city on the Texas/Mexico border crystalized the need for change.
Atul Gawande, M.D., made McAllen the focus for national change in his seminal article “The Cost Conundrum: What a Texas town can teach us about health care” which appeared in the June 1, 2009 edition of The New Yorker Magazine. Gawande characterized McAllen’s healthcare system as bloated, wasteful and notoriously ineffective. As Gawande wrote in 2009, McAllen “is one of the most expensive healthcare markets in the country. Only Miami—which has much higher labor and living costs—spends more per person on healthcare.”
In 2006 Medicare spent an average of $15, 000 per McAllen enrollee—double the national average and higher (by $3, 000) than the average per capita annual income in McAllen.
One county over from McAllen, El Paso County, had essentially the same demographics and rates of chronic disease, obesity and heart disease as McAllen but half the Medicare per enrollee expenditures.
“Pig Trough”
Why was McAllen so expensive? Said one general surgeon in Gawande’s article: “There is overutilization here, pure and simple.” Doctors, Gawande quoted him as saying, were charging for extra tests, services and procedures.
One of McAllen’s physicians was particularly outspoken. Lester Dyke, a cardiac surgeon, said “McAllen has become a pig trough here. We took a wrong turn when doctors stopped being doctors and became businessmen.”
Here are some of the examples from Gawande’s 2009 article:
“Between 2001 and 2005, critically ill Medicare patients received almost fifty per cent more specialist visits in McAllen than in El Paso, and were two-thirds more likely to see ten or more specialists in a six-month period. In 2005 and 2006, patients in McAllen received twenty per cent more abdominal ultrasounds, thirty per cent more bone-density studies, sixty per cent more stress tests with echocardiography, two hundred per cent more nerve-conduction studies to diagnose carpal-tunnel syndrome, and five hundred and fifty per cent more urine-flow studies to diagnose prostate troubles. They received one-fifth to two-thirds more gallbladder operations, knee replacements, breast biopsies, and bladder scopes. They also received two to three times as many pacemakers, implantable defibrillators, cardiac-bypass operations, carotid endarterectomies, and coronary-artery stents. And Medicare paid for five times as many home-nurse visits. The primary cause of McAllen’s extreme costs was, very simply, the across-the-board overuse of medicine.”
At the end of his 2009 article, Gawande—who is also a general and endocrine surgeon at Brigham and Women’s Hospital, professor in both the Department of Health Policy and Management at the Harvard School of Public Health and the Department of Surgery at Harvard Medical School—said:
“As America struggles to extend health-care coverage while curbing health-care costs, we face a decision that is more important than whether we have a public-insurance option, more important than whether we will have a single-payer system in the long run or a mixture of public and private insurance, as we do now. If we don’t, McAllen won’t be an outlier. It will be our future.” (emphasis added)
Revisiting McAllen, Texas
McAllen did become the future. But not the way Gawande envisioned.
The Affordable Care Act (aka: Obamacare) was passed a year after Gawande’s 2009 article. Since then insurers and individual healthcare providers began to work the system—sometimes with blunt force (e.g. Blue Cross Blue Shield of North Carolina’s ridiculous policies regarding spine fusions) and sometimes thoughtfully, with data and with innovation.
When Gawande returned to McAllen, he revisited doctors interviewed for his 2009 article. One in particular, Dr. Dyke, had a poignant story to tell.
Dr. Dyke’s Vindication
Lester Dyke, M.D., who’s been a cardiac surgeon for 35 years, had characterized medicine in McAllen as a “pig trough” in the 2009 article. After his comment was published, the media picked up on it and, as Dyke told Gawande, “The reaction here was fierce, just a tremendous amount of finger-pointing and yelling and screaming. I became persona non grata overnight.”
His referral network dried up. He lost his practice at Doctor’s Hospital at Renaissance, the for-profit hospital. He became an outcast in the medical community of McAllen and, for a while, thought he’d have to retire.
But he didn’t. And time passed.
During this period, McAllen’s healthcare community was in a state of upheaval. As Gawande describes in his New Yorker article:
“Several federal prosecutions cracked down on outright fraud [in McAllen]. Seven doctors agreed to a twenty-eight-million-dollar settlement for taking illegal kickbacks when they referred their patients to specialty medical services. An ambulance company owner was indicted for reporting six hundred and twenty-one ambulance rides that allegedly never happened. Four clinic operators were sent to jail for billing more than thirteen thousand visits and procedures under the name of a physician with dementia.”
The message sunk in in McAllen’s medical community. The system had to change. Accountability was rule #1. Any physician or hospital who maximized revenue at the expense of the patient could expect withering scrutiny.
Dyke’s colleagues came back to him. Today he has privileges at McAllen Heart Hospital, McAllen Medical Center, Edinburg Regional Medical Center, Rio Grande Regional Hospital and manages an annual case load of 300 open heart operations. On a personal level, two of his children went into medicine.
But the changes in McAllen went deeper and manifested in ways that neither Gawande (nor anyone) could have anticipated.
One example, in particular, illustrates this.
Doctor’s Hospital at Renaissance
In the 2009 article, Doctor’s Hospital at Renaissance was characterized as “…the newest hospital in the area. It is physician-owned. And it has a reputation (which it disclaims) for aggressively recruiting high-volume physicians to become investors and send patients there. Physicians who do so receive not only their fee for whatever service they provide but also a percentage of the hospital’s profits from the tests, surgery, or other care patients are given. (In 2007, its profits totaled thirty-four million dollars.).”
The implication being that Doctor’s Hospital created, as Gawande characterized it, “an unholy temptation to over order.”
As Gawande toured Doctor’s Hospital at Renaissance, he described their “yacht-length” boardroom table, the sprawling hospital campus separated by “golfing-green lawns, ” the sixteen operating rooms with laparoscopy suites, flat-screen video monitors, hybrid operating rooms with built-in imaging equipment and surgical robots.
The imagery of excess was obvious.
“We hated you”, said Joe Pena, internist and board member at Doctor’s Hospital at Renaissance, when he talked to Gawande five years later.
But Doctor’s Hospital did its own review of its costs and, not surprisingly, came to the same conclusion as Gawande had in his 2009 article. Doctor’s Hospital had, in fact, been over treating, over testing and over charging.
Cost Data Revelations
Dr. Pena began to incorporate cost data into his monthly staff meetings. For example, said Pena to Gawande, “We didn’t know that home health was a thousand dollars a month” for each patient. The message went out from Pena to more than four hundred local physicians. That, in turn, translated into tens of thousands of individual decisions to measure cost versus benefit.
As Gawande chronicled when he revisited McAllen, “E.R. visits, hospital admissions, tests and procedures all fell from the Texas stratosphere. And, years after the attention and embarrassment had passed, the costs continued to fall.”
$800, 000 per Doctor in Bonuses
But the story doesn’t end there.
Under the Affordable Care Act, any group of physicians with 5, 000 or more Medicare patients can contract directly with Medicare as an accountable-care organization and receive bonuses for any savings they produce.
Pena and Doctor’s Hospital at Renaissance set up an accountable-care organization.
Again, quoting from Gawande’s revisit to McAllen:
“Two years later, Medicare reported that Pena’s team had markedly improved control of its patient’s diabetes; patients also had dramatically lower emergency room visits and hospital admissions. And two McAllen accountable care organization together managed to save Medicare a total of twenty-six million dollars. About sixty percent of that went back to the groups.”
And how much were those bonuses? After expenses doctors in one of the groups took home $800, 000 each. For one year.
Lessons From the Changes at McAllen, Texas
In retrospect, there are three basic lessons from the McAllen experience:
- The healthcare providers in McAllen did not know the data. As the Doctor’s Hospital at Renaissance illustrates, they did not know the cost implications of their decisions. There was no effective feedback mechanism so physician and organizational behavior was disconnected from economics and, as it turns out, even the long term welfare of their patients. Unnecessary tests, procedures, prescriptions and home health care is unhealthy for both the wallet and the patient.
- The system has the capability to self-correct. When the data is available and the direction is clear (better care for less) then individuals within the system will make thousands of small decisions which add up to dramatic and unexpectedly fast change. Indeed, the speed with which McAllen’s medical community reacted—first with anger and denial, then with a commitment to change—is astonishing and shows that individual actors are more powerful than any government mandate.
- Bundling and other innovations are taking hold. In addition to the accountable care organization example, McAllen is also experiencing the effects of bundling healthcare services. On a national basis, companies like Walmart, Home Depot and others are working with hospitals that bundle care into a single price and guarantee outcomes. In the Twin Cities, for example, Twin City Orthopedics offers knee replacement surgery for $21, 000 all in, guaranteed. In McAllen, San Antonio-based WellMed has created an innovative healthcare delivery system for Medicare patients which not only improved care but also allowed general practitioners to spend more time with patients, see fewer patients and lower overall costs. Innovation is driving value by improving care and lowering costs.
To read Gawande’s 2009 article for yourself go to: http://www.newyorker.com/magazine/2009/06/01/the-cost-conundrum
To read his update on McAllen and his broader meditation on the state of healthcare delivery now, buy the May 11 copy of The New Yorker Magazine.
