The story of McAllen, TX by Atul Gawande is not new. In fact, it is a classic from almost a decade ago now (2009), but it is worth revisiting to get a better understanding of why healthcare costs are so high in the US, often without gains in health outcomes. It also highlights many of the painful changes that CMS and healthcare institutions are trying to implement and the emergence of ACOs.

Dr. Gawande set out to investigate why healthcare cost more in one of the most expensive towns (McAllen, TX) in the most expensive county (Hidalgo) compared to other cities and counties, like El Paso, TX – which has very similar demographics and health statistics. This was an explosive article at the time, especially since it highlighted that the people who were involved in making healthcare decisions were not aware of the differences and had no real idea what could be driving them. I will try to quickly summarize the reasons investigated and the evidence found to support or refute those claims, but it is very much worth going back to the source to read the full analysis by Dr. Gawande.

Reasons given for the higher cost of healthcare

Sicker patients or demographics – DEBUNKED

The first answer to the higher cost was always that McAllen has sicker patients. Although a comparison did find a population mired with obesity and alcoholism, many other factors (e.g., HIV) were lower than the national average. So Dr. Gawande compared the Medicare expenditures in McAllen to El Paso, TX just a little ways up from McAllen, with essentially the same demographics and healthcare profile, and found that the cost per patient was essentially half that of McAllen.

Higher quality care provided – DEBUNKED

Although the equipment observed by Dr. Gawande was all brand new, according to capabilities and physician rates, McAllen and El Paso were similar. When it came to quality of care measures, Hidalgo county performed worse on average on 23 out of 25 quality metrics than El Paso.

Malpractice lawsuits are driving costs up – DEBUNKED

Some practitioners claimed that the reason for the higher cost of care in McAllen was malpractice lawsuits. However, Texas has capped pain-and-suffering awards for malpractice lawsuits at two hundred and fifty thousand dollars, which has drastically reduced the number of malpractice lawsuits in the state.

Overutilization – BINGO, but not the end of the story

With the help of experts, Dr. Gawande was able to analyze utilization rates and McAllen definitely had much higher utilization rates of everything (diagnostic tests, treatments, surgeries, home care) compared to both the nationwide average and El Paso.

Isn’t more care better?

The simple answer is no. Despite the higher utilization rates of McAllen, the quality outcomes were actually not better. In fact, looking at utilization rates and costs, there seems to be often an inverse correlation between the two. The reason for this is that no medical intervention is without risk. If medical care is doled out without the appropriate evaluation of the risk-benefit, it can actually do more harm (in addition to costing people money, pain, suffering and lost productivity).

What drives overutilization?

First, medicine is an art, not a science. Overutilization rarely occurs in areas where the science provides clear guidelines. It happens more where the science is unclear.

Second, much of the historical incentives within healthcare are aimed at individual physician work. They are rewarded by volume of care delivered and therefore the more care they provide, the more revenues they can take home. In McAllen, this has led to almost every physician starting strip mall operations for ancillary services and asking for paid medical director positioned for referring patients to medical centers. This individualized profit motive pushes physicians to give more if the science is unclear and competition across providers also incentivizes a lack of collaboration.

Third, historically there has been an expectation built up in medicine in the US to do immediate quick fixes, without much attention for patient education and prevention. The example given by Dr. Gawande in a follow-up article highlights how a patient with uncontrolled diabetes may be managed. Traditionally, due to lack of immediate primary care appointments, they would have been sent to the ER, where they would have been admitted until the patient is stable and then discharged. The patient, without the proper understanding of how to control their diabetes, would deteriorate again and be back soon, costing the system thousands and leaving the patient just as sick in the long term.

Can it be done better?

Yes. Dr. Gawande walks through several examples, including the Mayo clinic, where physicians are on salaries, not paid for volume of care delivered. This resulted in one of the best outcomes in the country and happens to also have one of the lowest utilization rates and costs. It is also not unique to Mayo’s specific demographics. They have repeated the Mayo recipe in Florida and Arizona, proving that even in very high-cost states like Florida, quality can be improved while curbing spending.

In a second example, a program called WellMed is highlighted that focuses on giving geriatric patients more primary care to keep them healthy. For the example of the patient with the uncontrolled diabetes, what this may mean is an immediate appointment to see a primary care physician and a specially trained diabetes nurse to help educate the patient and do frequent follow-ups to ensure they are taking their medications and managing their diabetes adequately. This in turns helps keep the patient healthy and saves significant costs over the longer term.