“One man’s coffee…”

Part I of Evaluation and Management in heathcare  

Most of us have heard the phrase “one man’s coffee is another man’s tea” uttered, often in bewilderment, to explain a choice made by a friend or colleague that is radically different from what we would have chosen under similar circumstances. A similar phrase with a different meaning helps to explain one of the key issues in healthcare reform. Most people agree that one of the principal challenges in the development of a sustainable healthcare system is cost control. Furthermore, almost everyone from health economists to physician specialists agree that as many of thirty percent of our healthcare dollars are spent on tests, procedures, and evaluations that are unnecessary. For example, as an emergency physician, I have seen patients subjected to a second CT scan because the images from a previous scan were unavailable. If we all know that costs must be reigned in to prevent all of us from simply working to support healthcare and we know that there is significant room to improve efficiency by eliminating waste, why don’t we do anything about it? Well, there are several reasons.

1. “One man’s waste is another man’s profit (or margin)” – The current system of payment for healthcare coupled with competition between healthcare organizations increases the performance of unnecessary tests and procedures.

We are paid in a piecemeal fashion for the care we provide. It basically works this way: care is broken down into so called “Evaluation and Management” – “E and M” for short and procedural billing. E and M billing is basically used to describe the non-procedural aspects of care (e.g. getting your annual physical examination) and it is broken down into levels of complexity based upon 1) the completeness of the history and examination performed by the clinician and 2) so called “Medical Decision-making” – how much the clinician had to think about the case at hand. This latter component is the lynch pin of payment. No matter how complete the clinician’s history and physical examination, a simple case is still a simple case and will be paid as such. On the other hand, failure to perform a complete history and physical examination in the face of “complex” medical decision making can reduce the payment received for that service. Obviously, the spirit of this payment scheme is to pay clinicians appropriately for the care rendered. A very simple and straightforward complaint does not require a comprehensive history and physical examination nor does the clinician have to assimilate a lot of data in order to create a treatment plan. So, the clinician should expect to be paid less for this kind of case than for one requiring a comprehensive history, a complete examination, and a review of multiple test results. This system has several implications. First, and perhaps most obvious is the seeming temptation to increase the complexity of an individual visit to increase the potential reimbursement. After all, the addition of a couple of lab tests and an imaging study add to the complexity of medical decision-making and can raise a visit from a “level 2 or 3″ (average complexity) to a “level 4 or 5″ (somewhat or very complex). The difference in the payment received for a straightforward case and a complicated one can be on the order of several hundred dollars. So, there is at least some temptation for providers to find reasons to increase the complexity of care by adding additional tests. Of course, in most cases these additional tests can be justified, even if they probably are not needed. But, there is another factor, as well. If the payment for the next highest E&M code (e.g. a 4 instead of a 3) is 30 percent more but it takes the physician twice as long to see the patient to achieve this higher level of coding, then he or she might also be tempted to skip tests, indicated or not, so as to complete the visit more quickly. In financial terms, seeing more, less complicated patients can more than compensate for seeing fewer more complex ones.

The problem is magnified when it comes to procedures. Physicians who perform procedures are paid more handsomely that those who do not and again, there is at least some temptation to perform a procedure, even when a more conservative approach might be warranted. Of course, the decision to perform a procedure or to watch and wait is not always black and white. As we will discuss in part II, there are both physician and patient factors that increase this complexity. And, most importantly, most physicians try to do the right thing for the patient. But, there are outliers who do what is profitable rather than what is necessary.

For healthcare facilities the problem is even more complicated. First, because they are often competing with other facilities for patients, they need to offer, or at least believe they need to offer a large array of technologically advanced tests and procedures. These are often large, expensive machines staffed by highly trained and well-paid people. After making a 1.5 million dollar investment in new technology and another two hundred thousand dollars a year in salaries, the leaders of the facility naturally want to recoup their costs and, if possible, add to their “bottom line”. These things won’t happen if the machine sits idle. So, if the provider wants to do a test, they aren’t going to argue. This system almost insures that there will be an abundant supply (and in many cities, an over-supply) of advanced medical technology and that this technology will be used liberally, whether or not this use is indicated. Piecemeal payments for healthcare enable the survival of this dysfunctional system, at least for those who can pay for their care. Those who cannot pay for their care often have the opposite problem; they can’t get necessary care.