One Complaint per Customer, Please; J. M. Orient

284 One Complaint per Customer, Please by Jane M. Orient P aying for what you get, in the hospital at least, is becoming outmoded. Medicare now pays hospitals on the basis of their patients' diagnoses, and patients receive what ever care their doctors think is appropriate. In other words, Medicare payments are deter mined before costs are incurred, as opposed to traditional fee-for-service payments, which are made after services have been performed. Medicare payments have been modeled after "diagnosis related groups" (DRGs), which were originally used·at Yale to classify patients so that the costs of caring for them could be studied more easily. DRGs suddenly emerged from the obscurity of the laboratory when the government required hospitals to start using them in 1984 for all Medicare patients. The central planners sent out a directive, and hos pitals everywhere hastened to install com puters, software, and specially trained per sonnel in order to comply. Few academicians have ever seen their schemes so rapidly imple mented, bypassing the normal stages of testing and marketing, despite the most caustic criti cism from the people who actually have to "make the system work." Some private in surers also adopted the method because they feared that otherwise they would be burdened with more "cost-shifting" from Medicare pa tients onto the bills of privately insured pa tients.

The DRG method of prospective payment in contrast to fee for service-is based on averages. The hospital receives the average amount that it cost, in past years, to take care of patients with a certain condition. Of course, each patient is different, so the hospital's pay ment may be substantially more or less than the Jane Orient, M.D., is in the private practice of medicine in Tucson, Arizona. She is also an associate in internal medi cine at the University of Arizona College of Medicine. patient's care actually cost. A few adjustments are made: for age over seventy, and/or for the presence of one or more complicating condi tions. However, if the patient has more than one diagnosis, the hospital is paid only for the one that is considered to be the main reason for admission. The idea of DRGs is to force hospitals to be come more "efficient." However, the term ,'efficiency" has taken on a new meaning that can best be explained by an example.

Suppose that a patient with an inflamed gall bladder also has a skin cancer on his face. I had a patient like that. I asked the surgeon to re move the skin cancer as soon as he finished with the gall bladder. That way, he'd just have to scrub once. "Sure. No problem," he said. The patient also thought it was a good idea only one trip to the operating room, and since he'd be asleep anyway, there would be no need to stick needles into his face to give a local an esthetic. The typist added a paragraph to the operative report. The cleaning crew only had to clean the room once. The scheduling clerk put just one procedure on the schedule, allowing five minutes extra. The messenger made one trip to take both the gall bladder and the skin cancer to the pathologist. Pretty efficient, don't you think? Not according to the new Medicare defini tion. A doctor from New Jersey recently ex plained how his hospital managed such a case under DRGs. If the skin cancer had been re moved during the gall bladder operation, the hospital wouldn't have been paid for the extra operating room time, or the sutures, or the biopsy. Therefore, they just took out the gall bladder, and scheduled the patient to come back to out-patient surgery at a later time for his skin cancer. Being "efficient" means to concentrate on the main diagnosis. The New Jersey hospital was rewarded for its "effi ciency" by being paid for two separate proce dures, instead of just one (or one plus a little more, as our hospital was paid before DRGs).

This concept of efficiency would be even easier to understand if it were applied to other familiar situations. Imagine that your car needed a new battery, and also had a leaky ra diator. If the mechanic could be paid for only one job at a time, he might say that he couldn't fix both problems at one visit. He might fix the important problem-the battery-and advise you to bring the car back in a month (not too soon, because of the committee for auditing early returns). Meanwhile, he might suggest that you keep a jug of water in the trunk, and one eye on the temperature gauge. A plumber working under DRGs might have to say "Sorry, a dripping faucet is not a com plication of a malfunctioning water heater. I'll put you on the list for another visit. " Or worse, he might tell you that your Brand X water heater requires parts that are more expensive than average, and he can't afford to fix it. If it were only five years older, it would fit into a different category that paid better, but as it is, he can't help you.

"Winners" and "Losers" That brings up another problem with DRGs. Sometimes the hospital bill is higher than average, not because of inefficiency, but be cause the patient is sicker than average. Under DRGs, hospitals make a profit on some pa tients: those who recover quickly and unevent fully from a relatively simple problem or those who belong to a high-paying DRG. Hospitals lose money on patients who develop complica tions, or recover slowly, or undergo a proce dure that isn't in the computer yet. (Lens im plants were in that category in New Jersey when the system was first tried.) What must the efficient hospital do, in order to assure enough income to pay the nurses and the laundry and the mortgage? Administrators are advised to "manage the case mix." That means to bring in more patients with profitable diagnoses (so the hospital will get paid for not doing things) and reduce the number of patients with multiple or complex diagnoses (so that 285 fewer things will have to be done without pay ment).

For help in this management problem, the hospitals seek the cooperation of the doctors. They distribute lists of the various DRGs (with the amount of payment for each) and encourage doctors to make more "accurate" diagnoses. There is now a new kind of continuing medical education conference, called "economic grand rounds, " that concerns how to save money on patients with "losing" DRGs by reducing the number of tests or by ordering less expensive treatments. The utilization review committee has become increasingly vigilant about patients who exceed the "length of stay" criteria. Pa tients are being sent home earlier. Doctors are being encouragedto thinklike mem bers of a large team, rather than like individu als. They must keep the welfare of the hospital in mind. If the hospitals do well, then doctors will do well. To help them become better team players, they receive computer print outs of their cost profiles, which can be com pared with those of their colleagues. Those who are costing the hospital too much money may soon face loss of their admitting privileges.

The Next Step Not surprisingly, DRGs for hospitals have not solved the problem of the Medicare deficit. As usual, the government prescription is "more of the same." Some have advocated including the doctor's fee under the DRG, starting with three specialists who are thought to be espe cially overpaid: radiologists, anesthesiologists, and pathologists. A fourth type of hospital based physician, emergency medicine spe cialists, might be added next. But the real goal of the federal government is to eliminate the bother of dealing with patients as individuals. DRGs may be just a stopgap measure on the way to capitation: payment by the head, rather than by the diagnosis. Medicare patients are no longer just indi vidual social security numbers. When admitted to the hospital, they become a member of one of 467 groups. Some of them are "winners," and others "losers." Soon, they may just be a capitated unit in an undifferentiated mass.

In that event, all of us will be losers. D 286 Free-Market Mail Is on the Horizon by Melvin D. Barger W riting in The Freeman in October 1962, I discussed a proposal that seemed hopelessly quixotic to friends and neighbors. This tilt at the windmills was a plea for private operation of postal ser vices. 1 It seemed so radical that the mere sug gestion .evoked laughter. Post office services had been a government monopoly so long that any alternative seemed ridiculous. It is pleasing to report, 25 years later, that the battle for private mailing services is all but won. People who would have scoffed at the idea in the 1960s now admit that private mail delivery makes good sense. Sooner or later, this will gain enough public acceptance to win private mail a fair trial. Why is this coming about? There are several reasons. One is that a few libertarians managed to keep the idea of free market mail alive. Early champions of the con cept included Frank Chodorov and Leonard E.