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TERRY GROSS, host:

This is FRESH AIR. I'm Terry Gross. President Obama recently convened a meeting of aides in the Oval Office to discuss a piece in the New Yorker magazine about the high cost of health care in the border town of McAllen, Texas. Obama later cited the piece in a meeting with senators and referred to its findings when he spoke to the American Medical Association Monday.

The New Yorker piece was written by our guest, Dr. Atul Gawande, and it offers both disturbing and encouraging news as the nation begins to grapple with health-care reform. The troubling news is that in places like McAllen, doctors are driving costs higher by ordering far more tests and treatments than their counterparts elsewhere, with no apparent benefit to patients.

The encouraging news is that it might be possible to dramatically cut costs without reducing the quality of care. Those savings, Gawande writes, will be needed to achieve universal health coverage.

Atul Gawande is a staff writer for the New Yorker, and he's a practicing surgeon at Brigham and Women's Hospital in Boston and an associate professor at the Harvard School of Public Health. His most recent book is called "Better: A Surgeon's Notes on Performance." He spoke with FRESH AIR contributor Dave Davies.

DAVE DAVIES, host:

Well Atul Gawande, welcome back to FRESH AIR. In this piece in the New Yorker, you focus on McAllen, Texas. It's a city right down by the Mexico border, right? What drew your attention to McAllen?

Dr. ATUL GAWANDE (Staff Writer, New Yorker; Surgeon, Brigham and Women's Hospital; Associate Professor, Harvard School of Public Health): I was interested in understanding what to do about our health-care cost problems, and this happened to be the place that was one of the most expensive places in the country for health care. Medicare spends about $15,000 per person per year on Medicare there, and it allowed me to also compare it to another place that's up the border, El Paso, which has a very similar set of demographics.

They're both relatively poor. McAllen's one of the poorest counties in the country. They have similar levels of unhealthy behaviors and conditions like diabetes and obesity, and the other thing they had was a marked difference in their cost.

While McAllen cost $15,000 per person per year on Medicare, it was $7,500 in El Paso.

DAVIES: Before we talk about why the costs seem so high in McAllen, let's get one other thing on the table, and that is: Do they get better care? Are medical outcomes better for all this spending?

Dr. GAWANDE: One of the things that I tried to figure out is what is the quality there? And one thing, you walk around in McAllen to the hospitals, and you find really fabulous capability and that ranges from high-tech MRI and CT-scanning and PET-scanning facilities to the full range of surgical capabilities that anybody would want, whether they're at Harvard or Mayo Clinic or in Southern Texas, and so I didn't think there was a lack of capabilities, or nor did I find, though, that there was greater capabilities than other places you find.

They had doctors of great skills, good training. They had the technologies, and then the striking thing was that when you looked at the quality indicators, for example Medicare publishes a whole range of quality statistics, the hospitals in McAllen were actually lower quality than in El Paso. They certainly were not higher quality than places all around the country that cost less, and so what they were getting for all of the extra spending didn't seem to be extremely high quality. It didn't seem to be better care.

DAVIES: Now one of the fascinating parts of your article is when you go to dinner with a group of six McAllen doctors, very experienced people, private doctors, and talked to them about this. First of all, were these doctors aware that medical spending overall was much higher in McAllen than in comparable places like El Paso?

Dr. GAWANDE: It didn't surprise them to learn, when I started talking through what the Medicare experience had been on spending. It didn't surprise them to learn that they were expensive. They were surprised to hear they were one of the two most expensive in the country. Miami is the only other city that's more expensive, and when you take into account labor and living costs, McAllen could be regarded as the most expensive city in the country for health care.

DAVIES: And when you get right down to it, what was the reason why costs were so high there?

Dr. GAWANDE: Well, given that it was no less healthy than El Paso, and they weren't getting higher quality for what they were spending, what you saw was a pattern of simply more services being used there: the volume of specialist visits, the volume of testing, imaging studies, surgery, home nursing visits.

All of these were markedly higher than El Paso or in the rest of the country, and by markedly higher, I mean they do two to three times as many pacemaker insertions, cardiac operations. They have almost double as many ultrasounds that are done. They have more specialist visits. They have five times as many home nursing visits as in El Paso. They actually spend $3,500 per person per year on Medicare just on home nursing visits, which is half of what some cities spend on their entire health-care budget.

DAVIES: So in other words, a patient who comes to a physician in McAllen, who presents with a certain history and a certain set of symptoms is much more likely to get an expensive test or expensive treatment than that same patient in a whole lot of other places, including El Paso.

Dr. GAWANDE: Yeah, and when I started to the doctors about that and asking, why does this happen? Is it just that you think this is good medicine, and this is the way it should be done? The answers were interesting because they came back saying no, we don't. We think there is over-testing. There is over-utilization here, as the technical term is called. There is a drive to have more than may be necessary, and so the really hard questions that we then started digging into at that dinner and while I was there in McAllen with other folks was why.

DAVIES: Why do they order more stuff?

Dr. GAWANDE: Right.

DAVIES: And what did they tell you?

Dr. GAWANDE: Well, so the first argument would be maybe this is just better, and it's what everybody else should be doing, but as I went through the numbers, and they saw what was happening, then the second argument was well, maybe it's malpractice.

DAVIES: Meaning not that they were committing malpractice but that the threat of malpractice lawsuits was driving this.

Dr. GAWANDE: That's right. You know, I give an example. A 40-year-old woman comes in after a fight with her husband, and she has some chest pain after this. It goes away. You do an EKG, and it's normal. Her heart looks normal on the EKG. So now what do you do?

And the answer 10 or 15 years ago, when McAllen was actually at the norm - they became more expensive about 10 years ago - so about 15 years ago they said that you would get a stress test and leave it at that, and even a stress test might be overkill, but that today, it's highly likely that she'd get a stress test, a cardiac ultrasound, a monitor to check the rhythm of her heart and possibly even a cardiac catheterization. And they sort of laughed ruefully about it, but there was a sense that there could be fear of malpractice playing into this, and yet they admitted and pointed out that since the caps came in in Texas - Texas is a state that passed very strict caps that limit lawsuits.

DAVIES: Caps on jury awards you mean, yeah.

Dr. GAWANDE: Caps on jury awards, exactly. Since that passed six years ago, they hadn't seen any reduction. If anything, the pattern of doing more had accelerated, and second of all, El Paso has the same conditions and doesn't have this rate of ordering services, and when one of the other folks there, a surgeon, finally piped and said this is just overuse, and we just have to admit it.

And what he was talking about was a tendency to see the revenues behind this, behind what they did, as one of the factors that could drive a tendency to order these kinds of tests.

DAVIES: All right, now before we talk about why doctors in McAllen seem to use their medical practice to maximize revenue in a way that others don't, I wanted to probe just a little bit more about this paradox of heavy, heavy spending, more tests, more procedures, more treatment and the same or even worse medical outcomes. Why would that be?

I mean, if you were being over-cautious and ordering more tests and more catheterizations and more stress tests, wouldn't get at least the same or better care?

Dr. GAWANDE: Yeah, it seems completely counter-intuitive, doesn't it? The general sense is what would be wrong with having - as an example, you have a heartburn, and you come in. And there have been good studies showing that if you're in a low-cost part of the country, they'll prescribe an antacid for you and make sure you don't have this one kind of bacteria that can cause ulcers. But in the high-cost areas, you are much more likely to also, for just - for typical heartburn, to be sent to get an endoscopy, a scope that's put down your throat, down to your stomach, and other kinds of invasive tests like that.

And yes, that would help make sure that rare chance of there being a cancer causing the ulcer was addressed, but the one thing we often forget to take into account is if you do a lot of these things, you have two things happen.

Number one, every procedure, every hospital stay, everything we do in medicine has risks, and if the value is marginal, the risks can begin to outweigh the benefits. We do, for example, now more than 60-million operations per year on Americans, one for every five Americans. And our complication rates are high enough that we have more than 100,000 die from complications of surgery. At this point, it's exceeded the number of deaths in car accidents. And if we don't take that into account, we have what you begin to see, which is that over treatment produces real harm.

The second thing you see is that the less costly and sometimes less profitable services are the ones that we often are not good at making sure patients get. They can be as simple as making sure we wash our hands, but they're also as simple as making sure patients get good preventive remedies like mammography consistently for them, or a statin for patients at risk of heart disease, and also access to primary care.

Those kinds of services actually tend to be worse in high-cost areas and better in the lower-cost, high-quality parts of the country.

DAVIES: So if you're really focused on stuff that generates revenue, then you're going to pay less attention to the basic preventive stuff.

Dr. GAWANDE: Yeah, the difficulty comes in the conflict between when medicine is a business versus when it's a profession. In a grey-zone case, whether a patient should get that endoscopy for heartburn, whether you send them to have a particular operation like a carpal-tunnel release for carpal tunnel syndrome, we make more money, and there is a temptation and a strong incentive to do more rather than less.

At the same time, if we've crossed the border to the point where over treatment is actually producing harm, we now have to think about how to rein in that part of what we do, even though it can sometimes mean losing money.

DAVIES: You went and met with some hospital administrators in McAllen. Were they aware that medical spending was so much higher there than in other comparable places?

Dr. GAWANDE: They did seem to be. I, for example, spoke to the chief operating officer of McAllen Heart Hospital, a specialty, for-profit heart hospital there - and she was surprised to learn that McAllen was such an outlier and specifically such an outlier in ordering and in doing a lot more cardiac surgery, pacemakers and so on. And so when we tried to understand what it was, what it revealed to me - and I thought was really interesting - was that as the head of a hospital, the executives don't really know what their impact is on the overall cost for a whole community.

They know whether their hospital is making revenue, whether they're meeting their profit targets. If they're not, then they try to think of ways to drive up the use of their hospital and the number of services they're providing, and they genuinely believe they're not in the business of having physicians do anything except surgery that they're supposed to be doing.

At the same time, there are not very many incentives to reduce overuse of the facilities or, in borderline cases, tending to overdo the interventions, and so although the individual players, whether it's the hospitals or individual specialists, just think we're doing a good job. They're not aware that the net effect they're having is that the whole system is producing extremely high costs and, in many cases, missing out on preventive opportunities and way overdoing testing, surgery and many high-risk parts of care.

DAVIES: Our guest is Atul Gawande. He's a surgeon practicing in Boston, also a staff writer for the New Yorker. We'll talk more after a break. This is FRESH AIR.

(Soundbite of music)

DAVIES: If you're just joining us, we're speaking with Atul Gawande. He is practicing surgeon in Boston. He is also a staff writer for the New Yorker who's recently written a widely quoted piece about medical costs.

We were talking about medical utilization in McAllen and how it appears there that doctors are ordering far more tests and treatment for the same set of symptoms than their counterparts elsewhere, and as a result, medical spending is so much higher.

You said that some years back, 10 or 15 years ago, that wasn't the case and that costs in McAllen were closer to the national averages. What has changed?

Dr. GAWANDE: This was a question that I sat down and asked the physicians in the area about over dinner. And the answer was that they thought that the culture had changed there. It had shifted from a place that had been focused primarily on what is it that patients need first and foremost to now having this competing value of also what generates revenues. And that's where we found the concerning things that bothered them, the patterns that bothered them and worried me.

I spoke to a hospital executive for one of the for-profit hospitals there, and he described to me the concerns that even he as a for-profit executive had, having worked in different parts of Texas, at other hospitals. And he found that in McAllen there had been a shift where he was finding physicians who were owning parts of imaging centers, owning surgical suites, owning parts of a hospital in town and then having some of those revenue considerations, keeping up the income for those centers start to drive decision-making.

DAVIES: I have to say that just seems like such an obviously glaring conflict of interest. Are there any rules which limit a physician's ability to take a financial interest in labs or other medical services that they order?

Dr. GAWANDE: Yes, there is a series of laws called the Stark laws to try to restrain your ability to refer to facilities you're making a profit from rather than choosing simply the one that you want to send patients to that gets the best possible quality and results, but there seem to be loopholes. I don't understand all of them, it's a very convoluted area of the law, but more and more, you find consulting firms and others that help doctors find their ways around those laws. And you see, not just in McAllen, but all across the country a tendency to be able to buy your way into these.

I heard from, recently, a physician in Chicago who bought a part of - a stake in ownership in an imaging center. They found they were beginning to lose money, and they had a meeting about what to do about it, and the recognition was that their only way to close the gap was to order more X-rays and CT scans and other forms of imaging for their patients, and that was the plan. And when he came out of that meeting, he felt sick to his stomach because this is what he'd got himself into.

The only way out of it was to lose a ton of money and to give up his stake in the operation, and that's what he did. I think that's the exact sort of conflict of interest we don't want our doctors to find themselves in.

DAVIES: You know, you said that it appeared that the culture among physicians in McAllen, Texas had changed. And I wonder if we have a situation here where a certain number of the doctors actually have an arguably corrupt financial interest in ordering extra tests and procedures, but then that spreads even to doctors, maybe, who don't have the same business relationships, it simply becomes the practice to maximize your revenue, to do an office visit when a simple follow-up phone call might suffice and to just rack up the dollars as you engage in medical practice.

Dr. GAWANDE: Well, I think that there are different ways that doctors think about money in every community. One is simply that many of us are just oblivious to the financial implications of our decisions, and as long as we see our patients and make our recommendations and send out our bills, and the numbers then come out all right at the end of each month, we try to put that money out of our minds.

There's a second way that people think about the money, and that's that they see it as a resource for actually improving the services they have, and they will think of how to use that insurance money to install electronic health records will colleagues or to get easier phone and email access for patients or to hire a nurse to monitor the diabetic patients more closely.

But then there's another strain, and we see this in many parts of the country, which is physicians who begin to see their practice as a business. It's a revenue stream. They will instruct their secretary to have patients who call with follow-up questions schedule an appointment because the insurers don't pay for phone calls.

They may decide to open up a service in their office to do Botox injections for cash, or they may buy an ultrasound machine and take a course and start doing the scans themselves rather than let the insurance payments go to a hospital, where they might be doing it at higher quality.

That goal is then to increase your high-margin work, decrease your low-margin and say well, this is a business after all, and I'm just being realistic. And what the people who are describing to me there was a sense that, you know, you'll have a mix of these views in every community, but in any given community, one or another of you tends to predominate, and McAllen had seemed to emerge as one community at that extreme.

One disturbing example, for instance, is that that for-profit executive I had told you about who helped run a hospital there, when he came and started doing work in McAllen, he was approached by several other physicians who told him that we'll send you patients to your hospital instead of the other hospitals in town if you pay us for it.

They asked for money that ranged from $100,000 to $500,000 per year. And he really emphasized to me this was just a handful of physicians in a town with a couple thousand physicians, but in his career, he'd never been asked for a kickback before.

He said no, as he said, I have to sleep at night. But it felt to him like it signified a culture where, if that's the extreme, you had others who don't go quite that far, but it was a world where there were more physicians who were concerned about the revenue stream than even he as a for-profit executive was comfortable with.

GROSS: We'll hear more from Atul Gawande in the second half of the show. He's a staff writer for the New Yorker, a surgeon and an associate professor at the Harvard School of Public Health. He spoke to FRESH AIR contributor, Dave Davies, who's a senior writer for the Philadelphia Daily News. I'm Terry Gross, and this is FRESH AIR.

(Soundbite of music)

GROSS: This is FRESH AIR. I'm Terry Gross. Let's get back to our interview with Dr. Atul Gawande. His recent story in The New Yorker examined health care in McAllen, Texas, where doctors are driving cost higher by ordering far more tests and treatments than their counterparts elsewhere, with no apparent benefit to patients. President Obama has referred to this piece in his discussions on health care reform. Atul Gawande is a staff writer for The New Yorker and a practicing surgeon at Brigham and Women's Hospital in Boston. He spoke with FRESH AIR contributor, Dave Davies.

DAVIES: You found some models of medical practice that are much more encouraging, that keep costs down and deliver more effective health care. Give us some good news. What did you see out there that's working?

Dr. ATUL GAWANDE (Surgeon, staff writer for The New Yorker): I think this is really important because the striking thing to me about McAllen is that it was an outlier. In the rest of the country people hadn't all gone this way. And the interesting thing to me is that if the economic incentives are for us to put the revenues first, then why hadn't we done it all across the country? Why was McAllen distinct? And the answer was that you have on the opposite end of the spectrum places that are extraordinarily low cost. Cost, you know, below half of what it is in McAllen and have much higher quality. Places like the Mayo Clinic, which is in the bottom 15th percentile for cost, but has quality scores that are the envy of most places in the country.

They are not short of technological capabilities. They have cutting-edge care in Rochester, Minnesota. And yet, they're doing it at costs that if we could bring the rest of the country to be at that level we would not just have enough money for health reform, we would save the entire federal government budget and the economy here. The answer is not that Mayo itself is the only place with the answer. There are many, many communities. I talked about another one, Grand Junction, Colorado, which is one of the least expensive places in the country, where they nonetheless have some of the highest quality results that are measured. And the answers that they have in places like that is, first of all they tend to blunt the financial incentives.

Mayo puts their doctors on salary. In Grand Junction, the medical group pools the income together and then has an adjustment at the end of the year. So people who see more uninsured or Medicaid patients, which is the Welfare Program, aren't penalized for seeing the charity. And then the second thing they do is they create physician-run collaboratives where they actually look at, are we doing too much over treatment? Are we doing too much under treatment, and how do we remedy that?

In Grand Junction, Colorado the - which is in a county of only a hundred thousand, they found a way to install a community-wide electronic health system for records to travel between doctors so stuff doesn't fall between the cracks. They actually had the back surgeons get together and review who's doing too much back surgery. And in one case, the hospital removed the privileges from a doctor who they thought was doing too much back surgery because they thought it was to the point of being harmful to patients.

DAVIES: You know I was really struck by what you wrote about Grand Junction, Colorado, and how, that actually when physicians talk to each other about patients, not only did they order fewer unnecessary tests and procedures, but they really did treat people more effectively because of the kind of collaborative meshing of their various specialties. What brought Grand Junction, Colorado, to embrace something like that?

Dr. GAWANDE: You know what's funny is they don't know and I'm not sure. To some extent it was simply the culture that was present there. I've been really fascinated by this researcher at Stanford named Woody Powell, who has researched why cities developed their particular economic cultures. And often it's what he calls anchor institutions. Specific institutions, they aren't necessarily the dominate one, but they set the norms for a town. They have leaders who encourage ideals that are not just to meet your revenue goals, and you have to meet your revenue goals.

You know, a place will collapse if they don't have money. But they have the larger mission in mind as well. And in health care what you saw in a place like Grand Junction was that starting some 30 years ago, a few leaders started trying to ask, what could we do in this town to make sure that we are as a group of doctors, and not just as individual people, ensuring that we are reducing over treatment, reducing under treatment, and are able to make service here better for patients from one year to the next, even in the areas where it doesn't necessarily make them as much money, like prevention?

DAVIES: Well we're now engaged in a national effort to reform health care and battle lines are forming and ideas are contending. And in your piece you say that to some extent this whole debate about whether we have a government-run plan or a combination of government and private-run plans misses an important point. You say it isn't so much a matter of who writes the check to the doctor, but who is accountable for care. How do we build the right incentives and the right accountability into health reform?

Dr. GAWANDE: The way we do this has a lot to do with who we want to be the winners in our system. If we want the winners to be the folks who are getting the cost lower and making the quality higher then we can't make them lose. And in the current system they lose. The folks in Grand Junction, Colorado, when they discovered that they are among the lowest cost people in the country, immediately had some people challenging in their medical community saying, why are we leaving money on the table here? And the leaders who want to drive this to be a process that's about quality and not the quantity of care and to band physicians together to work as teams for patients, and not just physicians, get nurses and other critical health care professionals working collaboratively, those folks are penalized. And our mission, I think is, as we head into reform is going to be to make it so that organizations of local physicians, their medical system, is rewarded for improving the quality and controlling the cost.

One way of doing that, for example, is to allow communities to keep half of the savings they generate by banding together, meeting quality goals, and trying to collaborate together more effectively. A second approach could be to reserve some of the benefits that are offered to physicians and other clinicians. Like, extra money for your health care information technology to be reserved for those that work together collaboratively between the hospitals and the doctors.

And the second thing that's very important here is to understand this is an experiment. Now that we've recognized the problem, you know, we look across the spectrum of health care costs in the country and it varies by almost 300 percent difference between communities. What we want to understand is, what is going on in those lost cost high quality communities? What are they doing differently? If it's the way they pay their physicians locally as organizations, if the way they have peer review to make sure they're not overdoing things? Is it there electronic systems? We want to learn those, research those, and then add them in. And that is going to be a process that takes 10, 15 years to be effective.

DAVIES: You know, we haven't talked much about a piece that you wrote in January of this year about health care reform. And one of the points you made is that as we begin with, you know, a fair amount of consensus on the need for reform and great resolve among many parties to accomplish it, that the debate will get complicated and confusing and interested parties will advance cynical arguments. And given our general distrust of government at many levels, there will be a tendency to get distracted and confused and maybe even give up. Do you have any particular advice for those us who are following this debate, things we should be wary of?

Dr. GAWANDE: I think our core understanding here that we just have to keep reminding ourselves is the road we're on is unsustainable. We have the most expensive health care system in the world. We have a system that is destroying our competitiveness of businesses. It is devouring our government. And it's leaving 45 million-plus people without coverage. We're bankrupting a million people a year and many of them already have health insurance. The sense that we have a great deal to fear from any change can completely paralyze us. But if we let it we will be dooming ourselves as individual people who need to rely on the health care system and we'll doom ourselves as a country.

So what I come into this trying to understand is just, where are the opportunities for a better health system? It is not going to get to perfection in the next two to three years or even in the next five or 10 years, but it should be on a path to getting better over time. And I see in many of the options being considered by the Congress, real hope that we are on our path to something that would have universal coverage for people and have a better, less costly system.

DAVIES: In a piece in The New York Times we learned that your article had become required reading in the White House. I believe the president has quoted from it. How did that feel?

Dr. GAWANDE: Completely shocking.

(Soundbite of laughter)

Dr. GAWANDE: Look, this is the dream you have, that anything you write is absorbed by the people who affect your life. And right now, the folks in Washington are deeply important to us as patients and as clinicians. And so it felt like a victory. And, at the same time, I also knew that the brickbats would come and I had better suit up.

DAVIES: Well, Atul Gawande thanks so much for spending some time with us.

Dr. GAWANDE: Thank you.

GROSS: Atul Gawande's article on health care costs was published in the June 1st addition of The New Yorker. He's a staff writer for the magazine. He spoke with FRESH AIR contributor Dave Davies, a senior writer for the Philadelphia Daily News.

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