The Biggest Factor Driving Health Care Costs Up Is… New Doctors

Whatever one thinks of one of the big issues in this past U.S. Presidential election – “Obamacare” – there is no denying that the cost of health care in America is shocking. Americans spend an estimated 2.6 trillion dollars each year on health costs. This figure represents a higher percentage of both the country’s Gross Domestic Product (over 18%) and a higher expenditure per person than any other country in the world. America spends almost twice as much on heath care than the country in second place.

As a result, managing health care costs and trying to bring them down is as major a concern to economists and policy-makers as it is to health care providers. And although some of the outrageously high costs of American health care are caused by pharmaceutical companies and health care organizations that charge more for their products and services than anywhere else in the world, a great deal of that cost is directly influenced at a lower level – individual doctors.

Doctors – both general practitioners and the specialists they refer their patients to – have a direct impact on the overall cost of health care because of the number and types of tests, procedures, and treatments they recommend. Are they recommending the most proven and cost-effective diagnostic and treatment options, or merely the newest and most expensive ones? Until recently, little research had been done to address that question.

Research from a noted ‘thinktank’ says that the problem is new doctors

The nonprofit RAND Corporation recently released a report that states that the biggest predictor of a doctor’s overall cost to the health care system – and that includes both insurers and patients – is the length of time he or she has been practicing medicine. Ateev Mehrotra, associate professor at the University of Pittsburg School of Medicine and a RAND Corporation researcher, says, “It is possible that one driver of health care costs is that newly trained physicians practice a more costly style of medicine.”

RAND’s findings indicated that doctors and specialists who have been practicing less than ten years have a 13% higher cost to insurers and patients than doctors who have been practicing 40 years. In the study, which was published in the journal Health Affairs, this trend held true even when other possible factors such as the gender of the physician, the size of their practice, their credentials (are they board-certified in one or more specialties), and presence of or absence of malpractice suits.

The RAND researchers arrived at these conclusions by studying insurance claims filed in the state of Massachusetts between 2004 and 2005. These claims represented 12,116 doctors, providing care to over 1.13 million patients. The researchers were able to define over 600 “episodes of care,” in which similar diseases of similar severity (all controlled by the age, gender, and comorbidities of the patients) were treated by different physicians. These categories gave them the ability to compare similar “episodes” to measure how the costs they incurred varied among doctors with the same medical specialty. This is a procedure similar to the one that health insurers use to evaluate costs. The results were revealing – doctors with fewer than 10 years experience incurred average per-patient costs of $14,906, whereas doctors with 40+ years of experience incurred per-patient costs of $10,104. Worse, the higher costs did not necessarily result in better care or better patient outcomes.

Why do “new doctors” cause higher overall costs?

The researchers theorized that one possible reason for this is that the newer doctors, just out of medical school, were more familiar with and more inclined to use the newer tests and treatments they had just learned about in school. Unfortunately, these more “cutting edge” treatments are more expensive, and not necessarily more effective. The study authors also suggested that newer physicians might be overcompensating for their lack of experience by pursuing more aggressive (and thus more expensive) care.

In terms of what can be done to remedy this situation, Mehrotra says that the findings “underscore the need to better understand physician practice patterns and what influences that behavior.” The RAND researchers recommend training programs for newer doctors “to educate physicians on their responsibility to be good stewards of health care resources.”

This is important because both private health insurers and organizations such as Medicare are also looking for ways to reduce costs. Medicare, for example, is investigating ways of paying for services based on how well the services worked, and whether they were the best choice in each given situation. In the world of diagnostic tests and treatment methodologies, newer does not necessarily mean better, although it does almost always mean more expensive. Hopefully research such as this can help the entire health care industry to not only reduce costs, but provide better care at the same time.

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