1.
Health
Care:
Corporate
Culture
and
the
Three-­‐Legged
Stool
By
Lillian
Rosenthal
&
Nishant
Saboo
Medicare
Background:
“No
longer
will
older
Americans
be
denied
the
healing
miracle
of
modern
medicine.
No
longer
will
illness
crush
and
destroy
the
savings
that
they
have
so
carefully
put
away
over
a
lifetime”.
These
were
the
words
spoken
by
President
Lyndon
Johnson
on
July
30th
1965
at
the
Medicare
signing
ceremony
in
Independence,
Missouri1
.
In
some
respects
President
Johnson
accomplished
the
original
aims
of
Medicare,
but
this
achievement
carried
with
it
unanticipated
financial
consequences
which
today
are
at
the
crux
of
America’s
financial
woes.
Medical
expenses
in
this
country
have
created
enormous
strain
on
the
American
economy,
“spending
on
doctors,
hospitals,
drugs,
and
the
like
now
consumes
more
than
one
of
every
six
dollars
we
earn.
The
financial
burden
has
damaged
the
global
competitiveness
of
American
businesses
and
bankrupted
millions
of
families,
even
those
with
insurance.”2
Not
surprisingly,
Medicare
spending
continues
to
grow
every
year.
In
2002,
already
a
dozen
years
ago,
Medicare
spending
accounted
for
17%
of
all
US
health
expenditures
at
the
indulgent
cost
of
$260
billion
per
year.
It
also
represented
2%
of
the
GDP
and
one-­‐eighth
of
the
federal
budget3
.
Medicare
was
intended
to
provide
health
insurance
for
individuals
over
the
age
of
65
who
might
otherwise
be
deemed
uninsurable
or
for
whom
the
costs
of
attaining
health
insurance
were
prohibitive4
.
However,
the
economic
climate
in
which
Medicare
was
passed
into
law
was
a
very
different
one
than
it
is
in
2014.
One
of
the
primary
concerns
in
1965
was
that
an
elderly
uninsured
individual
would
suffer
enormous
economic
losses
if
they
had
to
go
to
the
hospital
1
Melichar,
Lori.
"The
Effect
of
Reimbursement
on
Medical
Decision
Making:
Do
Physicians
Alter
Treatment
in
Response
to
a
Managed
Care
Incentive?"
Journal
of
Health
Economics
28.4
(2009):
902-­‐07.
Web.
2
Gawande,
Atul.
"The
Cost
Conundrum
(what
a
Texas
Town
Can
Teach
Us
about
Health
Care)."
New
Yorker
1
June
2009.
Web.
3
Melichar,
Lori.
"The
Effect
of
Reimbursement
on
Medical
Decision
Making:
Do
Physicians
Alter
Treatment
in
Response
to
a
Managed
Care
Incentive?"
Journal
of
Health
Economics
28.4
(2009):
902-­‐07.
Web.
4
Finklestein,
Amy,
and
Robin
McKnight.
"What
Did
Medicare
Do?
The
Initial
Impact
of
Medicine
on
Mortality
and
Out
of
Pocket
Medical
Spending."
Journal
of
Public
Economics
(2008):
1644-­‐668.
Web.

2.
suddenly
and
the
stay
incurred
large
costs.
Expenditures
on
prescription
drugs
and
medical
tests
were
at
that
time
not
a
formidable
concern5
.
In
2014
advances
in
medicine
and
improved
access
to
care,
(partially
attributable
to
Medicare),
has
created
a
scenario
wherein
a
larger
proportion
of
the
population
is
living
well
beyond
age
65.
This
“greying”
of
America
means
that
individuals
are
staying
in
the
Medicare
system
much
longer
than
was
initially
anticipated.
Additionally,
the
costs
of
medical
care
have
continued
to
rise
because
of
increasingly
sophisticated,
(and
expensive),
medical
technology
and
increased
entitlement
programs
such
as
pharmaceutical
coverage.
Imaginations
do
not
have
to
be
stretched
far
to
see
how
this
has
created
a
financial
burden
on
the
system.
The
Centers
for
Medicare
&
Medicare
Services
(CMS)
is
the
government
agency
which
is
responsible
for
managing
the
Medicare
program.
In
April
2014
CMS,
for
the
very
first
time,
published
the
amounts
that
they
paid
to
individual
physicians.
The
data
released
describes
a
number
of
different
features
about
each
physician.
This
paper
will
focus
on
the
following
pieces
of
data:
1) Physician
location
2) Physician
type
3) Total
amount
billed
under
Medicare
This
paper
will
explore
whether
or
not
health
care
providers
respond
to
financial
incentives
and,
if
they
do,
what
the
outcome
is.
The
newly
released
data
will
provide
empirical
evidence
of
our
analysis.
One
of
the
often
repeated
sentiments
about
health
care
providers
in
this
country
is
that
“ethical
obligations
associated
with
providing
healthcare
make
physicians
less
likely
than
other
service
providers
to
respond
to
financial
incentives
by
deviating
from
a
practice
pattern
that
maximizes
a
patient
health
status”6
.
However,
when
medical
provider
behavior
is
analyzed
using
the
corporate
3-­‐legged
stool
framework
and
Medicare
data,
the
observations
suggest
a
contrary
interpretation.
Billing
in
Medicare:
Customer
costs
in
the
health
care
world
are
unlike
costs
in
any
other
consumer
segment.
As
a
general
principle,
economists
argue
that
there
is
no
good
in
which
demand
for
that
good
is
perfectly
inelastic.
For
example,
when
the
price
of
a
car
goes
up,
fewer
consumers
5
Ibid.
6
Melichar,
Lori.
"The
Effect
of
Reimbursement
on
Medical
Decision
Making:
Do
Physicians
Alter
Treatment
in
Response
to
a
Managed
Care
Incentive?"
Journal
of
Health
Economics
28.4
(2009):
902-­‐07.
Web.

3.
will
buy
the
car.
When
the
prices
of
houses
in
a
specific
market
go
down,
more
or
less,
the
number
of
potential
buyers
will
increase
(for
the
purpose
of
this
example,
let’s
ignore
more
complicated
external
factors
such
as
crime
rates
in
the
area
and
quality
of
public
education
and
the
health
of
the
overall
economy).
Even
basic
necessities
such
as
food
are
subject
to
the
laws
of
economics.
For
example,
if
overfishing
has
caused
the
price
of
swordfish
to
go
up,
consumers
can
avoid
the
price
increase
by
choosing
to
purchase
a
substitute
good
such
as
red
snapper.
Although
food
is
a
necessity
of
life,
the
availability
of
substitute
goods
means
that
even
food
is
not
a
perfectly
inelastic
good.
However,
health
care
services
are
nearly
perfectly
inelastic
goods
due
to
three
factors:
the
consumers’
willingness
to
pay
for
their
own
survival,
the
difficulty
of
distinguishing
between
vital
and
non-­‐vital
treatments
and
services
and
the
fact
that
Medicare
has
removed
most,
(but
not
all),
of
the
financial
disincentives.
For
example,
let’s
consider
an
example
wherein
two
treatments
are
available,
(let’s
call
them
treatments
A
and
B),
for
a
life
threatening
illness.
Treatment
A
is
three
times
more
expensive
than
treatment
B,
but
B
confers
a
smaller
marginal
benefit.
Although
the
benefit
a
consumer
receives
from
his
own
survival
is
infinite,
in
reality
expensive
treatments
do
not
usually
mean
an
absolute
difference
between
life
and
death,
but
rather
an
improved
probability
of
recovery
or
survival.
In
some
cases,
the
benefit
may
be
minimal
or
unproven,
but
the
consumer
is
unlikely
to
forgo
the
expensive
treatment
as
long
as
there
is
a
perceived
benefit
and
the
cost
is
experienced
by
someone
else.
This
translates
into
increased
Medicare
costs
as
consumer
demand
is
met
by
willing
providers
who
see
the
possibility
of
financial
gain
at
the
expense
of
a
remote
and
impersonal
entity
(”the
government”).
It
is
also
exacerbated
by
billing
procedures
under
the
Medicare
program
which
are
complicated
to
execute,
hard
for
the
patient
to
follow
and
are
onerous
to
process
for
all
parties,
including
the
government.
Billing
relies
upon
a
series
of
codes.
When
an
eligible
Medicare
patient
sees
a
doctor
for
a
particular
condition,
the
treatment
and/or
procedure
that
is
provided
will
be
assigned
one
or
more
associated
codes
from
a
coding
manual
known
as
Current
Procedural
Terminology
(CPT).
CPT
codes
are
attached
to
a
fee
schedule,
and
although
the
system
is
national,
the
amount
of
reimbursement
is
subject
to
some
regional
variation
based
upon
the
cost
of
living.
Some
procedures
and
treatments
will
have
higher
levels
of
reimbursement
attached
to
them
than
others.
All
codes
are
submitted
to
the
CMS
for
processing
and
the
doctor
will
be
subsequently
reimbursed
by
the
government
program.
If
there
is
a
portion
of
the
allowed
payment
which
is
not
covered
by
the
government
then
the
medical
provider
may
attempt
to
recover
the
remainder
of
the
allowable
amount
from
the
patient
directly.
Note
that
this
system
is
almost
completely
independent
of
the
concept
of
“charge”.
This
unusual
process
has
created
numerous
problems
that
are
unique
to
the
health
services
industry.

4.
Corporate
Structures
of
a
Traditional
Business:
One
of
the
many
peculiarities
of
healthcare
is
that
the
yardsticks
that
are
usually
used
to
measure
business
performance
do
not
apply
very
comfortably
in
this
industry.
Analysis
of
the
recently
released
CMS
data
will
enable
us
to
observe
an
oddity
of
this
system.
If
physician
practices
are
viewed
as
though
they
were
companies,
very
high
levels
of
payment
would
be
cause
for
rejoicing
and
investors
would
rush
to
buy
stock.
However,
in
reality,
these
high
levels
are
viewed
with
suspicion,
and
we
think
that
is
because
there
is
no
consensus
on
whose
performance
should
be
optimized.
For
the
purposes
of
comparison
we
will
consider
the
more
traditional
business
model
of
real
estate.
We
have
selected
real
estate
as
the
point
of
comparison
because
like
the
health
care
model
this
model
is
decentralized.
In
this
example,
like
the
health
care
model,
there
are
three
entities:
1) Seller
or
Real
estate
company
(principle)
2) Realtor
(agent)
3) Prospective
buyer
(customer)
The
interactions
between
these
three
entities
are
best
explored
through
the
lens
of
the
three-­‐
legged
stool
framework.
The
three
legs
of
the
stool
are:
1) Incentives
2) Decision
Rights
3) Performance
Measurement
Incentives:
In
this
example
the
prospective
buyer
pays
a
given
price
for
his
home
to
the
seller.
A
percentage
of
this
payment
is
awarded
to
the
agent
for
their
work
on
selling
the
house.
In
this
fairly
common
business
model
the
more
expensive
the
house
that
the
agent
sells
to
the
buyer,
the
more
the
realtor
earns
in
commission.
The
realtor
is,
therefore,
incentivized
to
sell
the
house
at
the
maximum
price
since
his
or
her
own
rewards
are
directly
tied
to
the
sale
of
the
house.
The
incentives
of
the
realtor
are
also
aligned
with
the
goals
of
the
seller
which
would
also
like
the
relator
to
sell
the
house
at
a
maximum
price.
Decision
Rights:
In
the
case
of
the
realtor
and
the
company
for
whom
the
realtor
works,
the
realtor
is
awarded
decision
rights
as
a
byproduct
of
the
relator’s
specific
knowledge.
The
realtor
has
knowledge
about
the
housing
market
in
the
area
in
which
they
are
selling
and
so
they
are
given
the
power
to
negotiate
the
final
selling
price
between
the
buyer’s
agent
and
their
own
client.

5.
Performance
Measurement:
Top
performers
in
this
model
can
be
readily
identified
based
on
several
statistics.
One
can
perceive
who
the
top
earner
is
which
will
provide
insights
as
to
who
makes
the
most
money
for
the
company.
Another
way
to
identify
and
measure
performance
would
be
to
track
the
number
of
houses
a
realtor
sold
(the
top
earner
and
the
top
closer
in
this
model
may
or
may
not
be
the
same
individual).
In
the
case
of
the
real
estate
model
incentives,
decision
rights
and
performance
measures
all
work
in
tandem
with
one
another.
Each
helps
to
bolster
the
impact
of
the
other
two
legs
of
the
stool.
However,
next
we
will
examine
how
and
why
this
framework
breaks
down
when
applied
to
the
health
services
industry.
Corporate
Structure
of
the
Medicare
Program:
“Rich
towns
get
the
new
school
buildings,
fire
trucks
and
roads,
not
to
mention
the
better
teachers
and
policy
officers
and
civil
engineers.
Poor
towns
don’t.
But
that
rule
doesn’t
hold
for
health
care.”7
When
analyzed
from
the
perspective
of
the
three-­‐legged
stool
one
can
observe
just
how
deeply
flawed
the
Medicare
structure
is.
Before
the
analysis
of
this
economic
framework
can
be
undertaken
it
is
important
to
first
establish
an
understanding
of
how
the
health
services
industry
is
set
up
under
the
Medicare
program.
A
professional
services
corporation
is
akin
to
the
seller
or
realty
company.
They
are
both
the
principles
and
have
the
right
to
hire
and
can
fire
its
employees.
However,
the
similarity
between
the
two
structures
immediately
begins
to
breakdown.
For
instance,
physicians
may
practice
medicine
individually,
or
in
groups
but
a
corporation
cannot
practice
medicine.
Payments
are
made
to
individual
physicians,
even
if
they
are
part
of
a
group.
The
payment
amounts
can
result
from
a
fee
schedule,
(as
in
the
case
of
Medicare),
or
negotiated,
(as
oft
happens
with
private
insurance
companies).
In
the
case
of
a
group
of
physicians,
revenues
can
be
pooled
and
paid
out
to
individuals
as
salary,
or
simply
paid
to
the
individual
who
was
responsible
for
the
bill.
As
was
the
case
in
the
real
estate
model,
the
health
care
model
can
be
viewed
as
though
the
payer
is
the
employer
and
the
fees
paid
are
the
incentives.
In
the
case
of
the
real
estate
model
the
fees
paid
were
the
commissions
received.
The
commissions
received
by
the
realtors
are
a
percentage
of
the
overall
price
of
the
house
bought
or
sold.
Similarly,
for
a
physician
the
reimbursement
fees
received
result
from
billings
to
Medicare,
other
payers,
or
sometimes
directly
to
patients.
The
fees
that
the
physician
receives
from
the
Medicare
program
7
Gawande,
Atul.
"The
Cost
Conundrum
(what
a
Texas
Town
Can
Teach
Us
about
Health
Care)."
New
Yorker
1
June
2009.
Web.

6.
are
dependent
upon
the
type
of
procedure
or
treatment
which
the
physician
has
undertaken
as
identified
by
the
CPT
code(s).
Within
the
realtor
model
the
agent
is
likely
to
make
more
money
in
areas
where
the
average
income
and
cost
of
living
of
a
region
is
high.
The
higher
the
average
income
and
cost
of
living
of
a
given
region
the
nicer
and
more
expensive
the
houses
will
probably
be.
This
is
not
the
case
with
the
health
services
industry
(see
Exhibit
1).
To
explore
this
statement
in
greater
detail
4
cities
were
selected
to
be
analyzed
from
the
CMS
data.
We
looked
at
the
cost
of
home
values
as
a
proxy
for
the
cost
of
living.
If
the
median
is
below
170
it
is
low
and
above
200
it
is
high.
We
looked
at
the
costs
of
health
care
across
various
types
of
services
comparing
areas
of
low
and
high
median
home
values.
These
cities
are
listed
below
along
with
a
brief
description
of
the
locations
(according
to
Zillow.com
the
median
home
value
in
the
United
States
is
$170,200)8
:
1) McAllen
Texas:
Zillow
Home
Value
Index:
2014
the
median
home
value
in
McAllen
is
$113,500
2) South
bend
Indiana:
Zillow
Home
Value
Index:
2014
the
median
home
value
in
South
Bend
is
$66,200
3) Boston
Massachusetts:
Zillow
Home
Value
Index:
2014
the
median
home
value
in
Boston
is
$425,200
4) Miami
Florida:
Zillow
Home
Value
Index:
2014
The
median
home
value
in
Miami
is
$271,20
8
"Zillow:
Real
Estate,
Apartments,
Mortgage
&
Home
Values
in
the
US."
Zillow.
Yahoo!-­‐Zillow
Real
Estate
Network.
Web.
27
May
2014.

7.
The
graph
below
was
culled
together
by
identifying
the
maximum
Medicare
reimbursement
(per
patient)
in
the
four
cities
in
a
particular
specialty
and
subtracting
the
minimum
cost
in
the
same
specialty.
The
difference
between
the
highest
reimbursement
and
the
lowest
is
what
is
pictorially
displayed
below.
The
top
5
areas
of
practice
with
the
largest
differences
between
maximum
and
minimum
billings
are
Radiation
Oncology
($14,347
per
patient),
Interventional
Pain
Management
($7,189
per
patient),
Preventive
Medicine
($6,992
per
patient),
Hematology/Oncology
($5,104
per
patient)
and
Cardiac
Surgery
($3,142
per
patient).
Compare
this
with
the
average
differences
between
top
and
lowest
billings
across
all
specialties
($1,139)
and
one
can
see
that
the
graph
below
suggests
that
there
are
a
small
number
of
specialties
which
account
for
a
large
percentage
of
the
difference
between
high
cost
and
low
cost
areas
of
living.
One
argument
which
could
be
made
to
help
to
explain
the
striking
differences
shown
above
is
related
to
differences
in
decision-­‐making.
According
to
research
done
by
Atul
Gawande
in
situations
“where
the
right
thing
to
do
was
well
established—for
example,
whether
to
recommend
a
mammogram
for
a
fifty-­‐year-­‐old
woman
(the
answer
is
yes)
–
physicians
in
high-­‐
and-­‐low-­‐cost
cities
made
the
same
decisions.
But,
in
cases
in
which
the
science
was
unclear,
some
physicians
pursued
the
maximum
possible
amount
of
testing
and
procedures;
some
pursued
the
minimum.
And
which
kind
of
doctor
they
were
depended
on
where
they
came
from9
”.
A
similar
ideology
could
be
applied
with
respect
to
areas
of
service.
It
is
possible
that
some
areas
of
practice
are
more
susceptible
to
decisions
wherein
the
right
and
wrong
answers
are
not
clear.
In
addition
to
similar
patterns
of
decision-­‐making
it
is
also
possible
that
this
graph
depicts
the
effects
of
the
anchor-­‐tenant
theory
of
economic
development.
This
theory
states
9
Gawande,
Atul.
"The
Cost
Conundrum
(what
a
Texas
Town
Can
Teach
Us
about
Health
Care)."
New
Yorker
1
June
2009.
Web.
0
2000
4000
6000
8000
10000
12000
14000
16000
Radiaqon
Oncology
Cardiac
Surgery
Physical
Therapist
Colorectal
Surgery
Occupaqonal
Physical
Medicine
Family
Pracqce
Pathology
Otolaryngology
Nurse
Pracqqoner
Psychiatry
Pediatric
Medicine
Obstetrics/
Vascular
Surgery
Criqcal
Care
Geriatric
Psychiatry
Hematology
Unknown
Supplier/
Discrepancy
between
Highest
&
Lowest
Billings
by
Region
Discrepancy
between
Highest
&
Lowest
Billings
by
Region

8.
that
“as
an
anchor
store
will
define
the
character
of
a
mall,
anchor
tenants
in
biotechnology,
whether
it’s
a
company
like
Genentech,
in
South
San
Francisco,
or
a
University
like
M.I.T.,
in
Cambridge,
define
the
character
of
an
economic
community.
They
set
the
norms.
The
anchor
tenants
that
set
norms
encouraging
the
free
flow
of
ideas
and
collaboration,
even
with
competitors,
produced
enduringly
successful
communities,
while
those
that
mainly
sought
to
dominate
did
not.10
”
One
possible
interpretation
of
the
graph
and
ensuing
application
of
the
anchor-­‐tenant
theory
is
that
the
medical
leaders
in
the
top
billing
categories
have
set
a
precedence
of
behavior
which
has
defined
the
corporate
cultures
within
the
category
specialties.
In
other
words
the
leaders
of
Radiation
Oncology
in
this
country
may
have
enabled
a
culture
of
revenue
maximization
and
gaming
of
the
billing
under
Medicare.
What
else
accounts
for
such
an
unusual
distributions
of
payments?
To
gain
a
greater
understanding
of
this
issue
we
will
apply
the
3-­‐legged
stool
framework
to
the
Medicare
system.
Medicare
and
the
Three
Legged
Stool:
Decision
Rights:
What
decisions
can
be
made
by
the
physicians?
Extensive
decision
rights
are
accorded
to
physicians.
Several
decisions
which
are
pertinent
to
the
discussion
of
atypical
payment
distribution
are:
1) During
consultation
with
the
prospective
patient,
a
physician
can
prescribe
the
type
of
procedure
and/or
treatment
to
be
performed.
2) If
the
patient
accepts
the
suggested
treatment
from
the
physician,
the
physician
may
also
choose
to
perform
the
procedure
himself
or
refer
it
to
someone
else.
3) The
details
of
the
treatment
or
procedure
to
be
performed
are
also
up
to
the
discretion
of
the
physician.
This
can
increase
or
decrease
the
cost
to
the
physician
of
offering
the
treatment.
4) How
a
physician
chooses
to
classify
the
procedure
or
treatment
to
the
payer,
(in
the
case
of
Medicare
this
would
be
the
government),
is
also
up
to
the
physician.
For
example,
a
doctor
may
choose
to
present
“deviated
septum”
as
a
reason
for
a
nose
job
rather
than
“cosmetic”.
This
can
increase
or
decrease
the
probability
that
Medicare
will
pay.
5) The
physician
also
must
decide
whether
or
not
to
offer
night
and/or
emergency
services.
This
can
also
increase
or
decrease
the
cost
to
the
physician
of
offering
the
treatment.
The
physician
has
specialized
knowledge
of
the
medical
field
in
which
they
work
in
and
are
given
decision
rights
accordingly.
Given
the
highly
specialized
nature
of
the
medical
field
it
makes
sense
to
afford
some
decision
rights
to
the
physician.
However,
there
are
several
issues
that
arise
as
a
result
of
the
expansive
decision
rights
given.
10
Ibid.

9.
Physician
Incentives:
One
major
problem
from
an
economic
standpoint
is
born
out
of
the
asymmetry
of
information.
The
medical
world
is
so
specialized
that
the
consumer,
unlike
the
consumer
for
a
house,
is
reliant
upon
the
agent
to
be
both
a
provider
of
services
as
well
as
a
consultant.
Imagine
this
scenario
in
the
context
of
the
real
estate
market.
What
would
happen
if
a
consumer
did
not
have
a
foundation
of
information
on
how
to
asses
a
house,
and
did
not
have
access
to
a
home
inspector,
but
was
obliged
to
rely
solely
on
the
advice
of
the
realtor?
Bear
in
mind
our
earlier
discussion
about
realtor
incentives.
In
the
case
of
the
medical
world,
“asymmetric
information
between
physicians,
patients
and
insurance
companies
about
appropriate
medical
treatment
provides
[sic]
physicians
with
the
opportunity
to
boost
their
incomes
by
providing
a
higher
or
lower
level
of
care
than
a
fully
informed
or
financially
liable
patient
would
have
accepted11
”.
In
the
real
estate
world,
the
agent
is
acting
on
behalf
of
the
seller
who
pays
his
fees.
The
more
he
gets
for
the
house,
the
higher
his
fee
and
the
happier
his
employer,
(the
principle),
is
likely
to
be.
However,
in
the
Medicare
scenario,
the
government
is
both
the
seller
of
services
(through
its
physician
“agents”)
and
the
buyer.
In
McAllen
“Medicare
paid
for
five
times
as
many
home
nurse
visits12
”
than
a
neighboring
town
with
higher
costs
of
living
and
“the
primary
cause
of
McAllen’s
extreme
costs
was,
very
simply,
the
across-­‐the-­‐board
overuse
of
medicine13
”.
As
a
result
of
the
misaligned
incentives,
patients
are
getting
“more
of
the
stuff
that
cost
more,
but
not
more
of
what
they
needed14
”.
In
addition
to
issues
with
misalignment
of
incentives,
item
4
listed
under
decision
rights
above
provides
an
opportunity
for
profit-­‐
maximizing
savvy
physicians
to
game
the
system.
Performance
Measures
Misalignment
of
incentives
isn’t
necessarily
the
only
reason
that
Medicare
costs
are
ballooning,
but
it
certainly
proves
to
be
a
critical
factor.
Decentralized
decision
rights
support
a
culture
of
empowerment
and
an
entrepreneurial
spirit,
which
is
in
keeping
with
basic
organizational
strategy
frameworks.
The
final
leg
of
the
stool,
performance
measurement,
is
so
poorly
developed
that
it
is
almost
altogether
missing.
Medicare
ranks
hospitals
on
25
metrics
of
care.
Nearly
all
of
the
measurements
which
are
used
to
asses
a
doctor’s
performance
are
process-­‐oriented
and
do
not
relate
directly
to
the
11
Melichar,
Lori.
"The
Effect
of
Reimbursement
on
Medical
Decision
Making:
Do
Physicians
Alter
Treatment
in
Response
to
a
Managed
Care
Incentive?"
Journal
of
Health
Economics
28.4
(2009):
902-­‐07.
Web.
12
Gawande,
Atul.
"The
Cost
Conundrum
(what
a
Texas
Town
Can
Teach
Us
about
Health
Care)."
New
Yorker
1
June
2009.
Web.
13
Ibid
14
Ibid

10.
quality
of
care
provided
to
the
patient.
In
fact
it
isn’t
even
clear
what
“quality”
as
it
relates
to
a
physician
truly
means.
Below
is
a
sample
of
the
broader
categories
which
are
used
to
asses
a
physician’s
performance
(they
are
a
mixture
of
input
and
output-­‐based
performance
measures):
1) General
Information
(includes
operational
items
such
as
ability
to
track
clinical
results
between
patient
visits)
2) Survey
of
Patients’
Experiences
(includes
items
such
as
level
of
communication
with
doctors,
how
well
did
the
doctor
communicate
with
the
patient)
3) Timely
and
Effective
Care
(includes
measurements
such
as
timing
of
antibiotics
–
did
the
outpatients
having
surgery
receive
the
proper
antibiotics
at
the
right
moments)
4) Medicare
Volume
(number
of
Medicare
patients
treated
for
selected
procedures)
As
one
can
see
from
this
cross
section
of
metrics,
there
is
no
objective
yardstick
of
the
appropriate
“amount”
of
care
delivered.
In
fact
the
existence
of
so
many
metrics
of
care
(and
only
some
of
them
relate
to
the
physician,
many
are
measurements
of
hospital
performance)
dilutes
the
importance
of
the
metric
system
as
a
whole.
Implications
of
Fractured
Corporate
Cultures
and
an
Unbalanced
Stool
The
health
services
industry
is
incredibly
complicated.
It
is
unarguable
that
Medicare
expenses
are
enormous,
continuing
to
rise
and
represent
a
fiscal
threat
to
the
United
States.
There
is
no
direct
link
between
expenditures
and
the
quality
of
care
given
to
the
patient.
It
is
not
a
surprise
that
costs
of
Medicare
continue
to
rise
when
one
examines
the
corporate
culture
created
under
the
Medicare
program
as
well
as
the
interplay
of
the
three
legs
of
the
stool.
As
preciously
depicted,
the
differences
in
billing
per
patient
vary
greatly
across
specialties.
Using
the
anchor-­‐tenant
theory
of
economics,
it
can
be
argued
that
the
decentralized
nature
of
the
medicinal
world
enabled
distinctive
corporate
cultures
to
arise
across
different
specialties.
The
categorical
corporate
cultures
could
either
set
a
tone
of
business
driven
by
ethical
obligation
or
business
practices
driven
by
revenue
generation.
A
culture
of
revenue
generation
most
likely
originated
as
a
result
of
the
imbalanced
nature
of
the
legs
of
the
economic
framework
stool.
In
the
incentive
leg
the
principle
(the
government)
has
designed
an
incentive
system
which
it
hopes
the
agents
(the
physicians)
do
not
take
advantage
of.
The
government
would
rather
not
pay
out
fees
under
the
Medicare
program
and
it
would
certainly
rather
avoid
paying
out
fees
for
tests
and
procedures
that
are
unnecessary.
However,
it
offers
financial
incentives,
for
doctors
to
over
prescribe
and
over
utilize
health
services
as
a
means
to
maximize
their
own
revenue.
The
actions
resulting
from
these
incentives
are
costly,
and
may
not
be
in
the
best
interest
of
the
consumers
(patients).
However,
due
to
asymmetry
of
information
the
consumers
have
no
way
of
making
informed
choices
based
on
the
recommendation
provided
to
them
by
the
physicians.
Ultimately,
nobody
is
accountable
in
part
because
the
leg
of
the
stool
which

11.
measures
performance
is
essentially
missing.
This
has
created
a
scenario
whereby
the
cost
of
care
is
not
linked
to
the
quality
of
care.
It
seems
that
at
least
in
some
cases,
the
doctors’
sense
of
ethical
duty
is
no
match
for
the
financial
incentives.
The
following
is
an
apt
description
of
the
situation
in
which
we
find
ourselves
as
a
result
of
the
poorly
balanced
stool,
“somewhere
in
the
United
States
at
this
moment,
a
patient
with
chest
pain,
or
a
tumor,
or
a
cough
is
seeing
a
doctor.
And
the
damning
question
we
have
to
ask
is
whether
the
doctor
is
set
up
to
meet
the
needs
of
the
patient,
first
and
foremost,
or
to
maximize
revenue.
There
is
no
insurance
system
that
will
make
the
two
aims
match
perfectly.
But
having
a
system
that
does
so
much
to
misalign
them
has
proved
disastrous”15
.
15
Ibid