How does spending affect actual patient care? If you haven’t seen the words “health care” in news headlines lately, you must be living under a rock. Health care reform, health care spending, Medicare spending, Obamacare; the list goes on and on. What I find most controversial among the latest research and news is an obviously flawed payment scale that undervalues primary care and overvalues specialty care. There is evidence suggesting that publicly funded health care spending (i.e., Medicare) has not based on primary health care needs. Rather, Medicare spending relies on a resource-based relative value scale (RBRVS) which promotes higher spending without evidence of better patient outcomes.

A milestone study was published recently in the Journal of American Medical Association by a group of authors associated with the Dartmouth Atlas Health Care Project. For over 20 years, the Dartmouth Atlas Project has had one objective: understanding the efficiency and effectiveness of the US health care system. This study aimed to determine if higher spending on health care led to better patient outcomes; specifically, the study compared mortality rates following hospitalization of patients in high-spending and low-spending facilities located in Ontario, Canada.

The study concluded: “Among Ontario hospitals, higher spending intensity was associated with lower mortality, readmission, and cardiac event rates.” Good news for Ontario!

Whatever Canada is doing to manage their health care spending seems to be translating into better patient outcomes, at least for cardiac conditions, colon cancer and hip fractures. High-spending facilities were generally characterized as large teaching institutions with plenty of high-tech equipment, specialty physicians, and nurses available. The study was not designed to tie spending and patient outcomes together in a cause-and-effect relationship, but the results clearly support a link between higher spending and better outcomes for patients under Ontario’s health care funding structure.

The same group of researchers conducted a similar study of the US health care system about 10 years ago, and the findings were quite the opposite of the 2012 Ontario-based study. Health care in the US costs more than Ontario, yet there is no evidence suggesting that the higher spending in the US translates into better patient outcomes in this country. This comparison suggests that better patient outcomes may be more related to where money is spent rather than how much.

Does the amount we are spending on specialty medical procedures make sense? Since the study was published, the controversy involving Medicare spending, underpaid primary care physicians, and overpaid specialty physicians has received more attention; an arguably positive and unintended result of the study. Regardless, the public should know the truth about how their tax dollars are spent, why Medicare needs a complete overhaul, and how spending cuts are affecting the long-term primary health of the US population. Some explanations may be surprising.

With any basic business sense, you understand that a business can charge more for specialty services than general services. In the health care field, it is reasonable to expect specialty health care services like high-tech diagnostics to cost more than a basic diagnostic procedure, such as an x-ray or blood screening. The typical reasons being the extra time involved, advanced training or knowledge required, and specialized equipment. All of these factors raise the cost of specialty services and products for physicians, and these costs are ultimately passed on to the patient in the form of higher co-pays.

What doesn’t make good business sense is to continue offering services that cost more to provide than what you are being paid. Increased fiscal pressure on the Medicare system has reduced the fee paid to physicians for providing services to Medicare patients. The wise business strategy would be to increase revenue by focusing on the most profitable services. Many primary and specialty care physicians are doing exactly that, while some may begin refusing new Medicare patients simply because it is not profitable. Young doctors are avoiding primary care practices because there is more room for profitable innovation in a specialty practice. And who can blame them?

Most experts will agree that the Medicare system will be flawed until the reimbursement and payment structure is changed. The RBRVS is updated by a committee of predominantly specialty physicians associated with the American Medical Association (AMA) known as the RUC. With this committee and pay structure in place, it is likely that primary care services will continue to be undervalued and specialty services will be overvalued. And, in the US, higher spending will not lead to better patient outcomes reliably.

Association of Hospital Spending Intensity With Mortality and Readmission Rates in Ontario Hospitals

Costlier hospitals appear to give better care

Big Variations Found in Health Care Quality, Community to Community