Health care markets don’t function within classic laissez faire economic principles. In classic markets, the power is in the hands of the consumer. Even when manipulated by advertising or the hope that a new wardrobe will attract a love interest, people evaluate the cost and perceived value of a purchase. Then they buy, continue to shop around or walk away altogether.
Health care isn’t like that. Instead, it is a vulnerable purchase in which power is in the hands of providers, usually physicians, whose decisions account for 80% of health care spending. Unlike other “sellers” of goods and products, physicians can create demand for their “product,” health care.
This is called supplier-induced demand and is responsible for wide variation in the use of health services. This variation is notable because people with the exact same condition, risks, and symptoms will receive dramatically different care in different regions of the country, differences that cannot be explained except by differences in physician availability and treatment patterns. These differences, called small area variation, were first described by physician Jack Wennberg when working in Vermont. He noted that the rate of tonsillectomy was three times higher in one town than its neighbor, even though the children were remarkably similar. What was different, however, was the number of surgeons who performed tonsillectomy.
Supplier-induced demand and small area variation represent a simple, yet dangerous, phenomenon. For example, the more cardiovascular surgeons, the more cardiovascular surgery even if there are other equally good or even better options for you. Here is another way to understand it. What if the number of medications you take is not due to your health status, but the number of CVS and Rite Aid pharmacies in your neighborhood? It is easy to see that this would lead to too much for many and too little for others. Indeed, the U.S health system has long been recognized as a “paradox of excess and deprivation.”
Wennberg has been called the Copernicus of health care because his idea that more health care isn’t always better was heretical at the time. Although gaining more acceptance, it is still not fully acknowledged, especially by those who benefit from overtreatment, that is, the providers who give the advice, do the surgery, and reap the financial rewards. Wennberg, along with likeminded others, launched a whole new field of study called evaluation science. Evaluation science strives to better understand the real value and risks of health care. This work can help you receive the most cost effective high value care and help you avoid harmful or unnecessary care.
What can you do? Always ask your health care provider what options are available to you. Are there any benefits to watchful waiting? What is the worst possible outcome associated with treatment or testing? What is the worst possible outcome associated if you do not pursue testing or treating? How likely is that outcome?
Organizations also increasingly need to publicly share quality and outcome data and the government has taken a lead role in this. For example, the U.S Centers for Medicare and Medicaid Services has developed a five-star rating program to help you evaluate nursing homes. Other tools measure hospitals and physicians. Is it working? How do you determine the quality and value of services or choose your health care provider?
References
A June 2019 US Senate proposal Luthi, S. (2019, June 6) Employers, hospitals and insurers butt heads over transparency proposals. Modern Healthcare. Retrieved from https://www.modernhealthcare.com/politics-policy/employers-hospitals-and-insurers-butt-heads-over-transparency-proposals?utm_source=modern-healthcare-am-friday&utm_medium=email&utm_campaign=20190607&utm_content=article1-readmore
a “paradox of excess and deprivation.” Enthoven, A. & Kronic, R. (1989) A consumer-choide health plan for the 1990s. New England Journal of Medicine, 320, 29-37.
On Jack Wennberg
From Pariah to Pioneer. Dartmouth Medical Retrieved from https://dartmed.dartmouth.edu/fall13/html/from_pariah_to_pioneer/ and
Mullen, F. (2004). Wresting with variation: An interview with Jack Wennberg. Health Affairs, doi 10.1377⁄HLTHAFF.VAR.
….the U.S Centers for Medicare and Medicaid Services has developed a five-star rating program to help you evaluate nursing homes. Retrieved from https://www.cms.gov/Medicare/Provider-Enrollment-and-Certification/CertificationandComplianc/FSQRS.html