How Perverse Incentives Drive Up Health Care Costs

Medical treatment in the emergency room is expensive, but there's a perverse incentive at work which encourages EMS workers to send more people there. Medicare reimburses for 911 calls only if the patient is transported to the ER. A pilot program at Mt. Sinai Hospital in New York City tries to keep patients from coming back to the ER.

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Emergency medical technicians - EMTs - are trained to save your life, and aim to get you to a hospital as quickly as possible when needed. One thing they are usually not asked to do is to find ways to save money.

NPR's Zoe Chace explores one experiment in New York City that is trying to cut emergency care costs, and cut return trips to the E.R.

ZOE CHACE, BYLINE: I'm in an ambulance, and we're on our way to the emergency room.

PETER DERMODY: How long have you been feeling like this, Michael?

MICHAEL: Like, two days.

DERMODY: For two days? Is there anything that hurts?

CHACE: Michael's diabetic, hasn't eaten in two days; sweaty, pale. Closest emergency room on a Friday afternoon, it is packed.

UNIDENTIFIED HOSPITAL WORKER #1: Excuse me. Excuse me. No. No. No. No.

UNIDENTIFIED HOSPITAL WORKER #2: You can't go in that way.

CHACE: Peter Dermody, the EMT - he can't even get his patient through the double doors. There are so many stretchers and police officers and firefighters and paramedics and doctors. He grabs the first nurse he sees, trying to get his patient to the front of the line.

DERMODY: He's been feeling sick for two days now.

UNIDENTIFIED NURSE: All right, OK. I'm not taking a report on you.

DERMODY: Oh, I'm sorry. I thought...

UNIDENTIFIED NURSE: I'm just trying to get a stretcher.

DERMODY: I'm sorry. I thought you...

UNIDENTIFIED NURSE: But you're in line for triage.

CHACE: This whole thing happening around me is very expensive: the ambulance ride, minimum $350; median emergency room stay, varies a lot, but is regularly over $1,000. But the way this system is set up, the EMT has few choices about this expensive decision because of who picks up the bill.

For instance, if someone calls 911, Medicare will only pay for the ambulance and the treatment if the patient takes that ambulance to the emergency room. So that sets up this incentive for the way emergency service works. There is really only one destination, because...

DR. KEVIN MUNJAL: You only get paid if you bring that patient to the emergency department.

CHACE: This is Dr. Kevin Munjal. He's in charge of EMS at Mount Sinai, a big hospital in New York. And he's totally obsessed with this perverse incentive that drives up the cost of health care.

MUNJAL: The way we practice is so often affected by the incentives that are created in the system. And the incentives are often about what gets reimbursed, and what doesn't get reimbursed.

CHACE: The incentives are the same for the hospital Dr. Munjal works at. Still, he is trying to change this system. He can't stop people from getting sick, from calling 911. But he thinks that maybe he can do something about people who use ambulances over and over again - the frequent fliers.

Dr. Munjal says that 22 percent of the patients released from his ER come back within 30 days. I heard about this phenomenon from David Konig, the guy who runs the ambulance company. He says he sees it all the time.

DAVID KONIG: I've done plenty of calls where I walk in at 3 o'clock in the morning 'cause someone's fallen, and they literally still have the hospital wristband on their wrist from eight hours before, when they got dropped off.

CHACE: Dr. Munjal's thinks maybe these guys - the EMTs - maybe if they do their jobs a little differently, this is a place where he could start to fix the problem.

(SOUNDBITE OF DOORS SLAMMING SHUT)

CHACE: Back in the ambulance, this time the EMTs are doing something different. They're bringing a patient home from the hospital, who'd been sick with pneumonia.

UNIDENTIFIED EMT: She has a nebulizer. You check her pressure...

JOSENIA REESE: Yeah.

UNIDENTIFIED EMT: And she's also got a glucometer for the diabetes.

REESE: OK.

CHACE: This is the kind of patient who could easily end up back in the emergency room. She's elderly, she's weak; she could trip and fall, and come right back. So part of the new protocol designed by Dr. Munjal is for EMTs - like Josenia Reese - to talk with the patient in the ambulance, find out if their home is as safe as it can be.

REESE: So as far as like in your house, you have nightlights and stuff? OK. What about the bathroom, does it have like, the grab bars and the heat adjuster?

UNIDENTIFIED PATIENT: Yes. That's there, too.

REESE: OK.

CHACE: And once the EMTs arrive in someone's home, they're being asked to check the apartments for wires and rugs that someone could trip over.

LISANDRO ROSARIO: We got up there, and there's rugs everywhere. I mean, there's rugs on top of rugs. Everything was blocking the way - like, we had to move furniture to get into the room.

CHACE: Lisandro Rosario basically redecorated this elderly woman's house. You have to lose the rugs, he told her.

ROSARIO: She was a little hesitant, at first. She was like, no, my apartment's been like this for years, I've never fallen. And I'm like well, yeah, I'm trying to prevent that from happening.

CHACE: It's a different way of looking at emergency care, but one that the EMTs seem ready for. Dave Konig, the guy who runs the ambulance company, he used to be an EMT himself.

KONIG: I mean traditionally, we - as the emergency medical services - have been focused on the acute: something happens, get you to the hospital; definitive care and so on. So now, we're moving away from that and more towards sort of preventive care - preventive maintenance.

CHACE: Back at Mount Sinai, Dr. Munjal is tracking this experiment, to see if any of this advice has an effect on the number of people who end up back in the emergency room. Eventually, he hopes EMTs and ambulances can make more decisions - bring the patient to the most efficient place, like their primary care doctor or the dialysis center - rather than de facto, one of the most expensive ones.

Zoe Chace, NPR News.

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