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By John W. Schoen Senior producer
msnbc.com
updated 8/14/2009 2:04:03 PM ET 2009-08-14T18:04:03

Among the dozens of moving parts and hundreds of players, one corner of the health care debate is focused on an intriguing finding. The cost of caring for a patient in one part of the country can be triple what it costs for the same care, apparently with the same quality, in another. 

Why? That's the $1 trillion question at the heart of the Obama administration’s goal of expanding health care to the almost 50 million Americans without health insurance.

By applying “low-cost” practices to “high-cost” areas, the White House is hoping to slow the ruinous rise in medical costs and save the hundreds of billions needed to pay for expanded coverage — without sacrificing the quality or availability of health care.

The idea has already won support from some major health care providers.

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“He’s really hit on something critical,” said Michael McCallister, CEO of Humana, one of the nation’s largest health insurers. “If you look around the nation, the cost of treating people varies dramatically, depending where you are. There’s really no rhyme or reason for that or rationale for it. It’s a big opportunity for getting dollars out of this system to be reapplied in another fashion.”

It’s a bold gamble, too. If health care coverage is expanded — at an estimated price tag of $1 trillion — without savings, the new system will simply add more patients and accelerate the rise in costs. That's something the nation can ill afford as it runs up multitrillion-dollar deficits to pay for programs aimed at reviving the economy, saving banks and rescuing automakers.

On the other hand, trying to simply cut spending without achieving efficiency gains could force cuts in services, rationing of access and lower quality care.

That’s why the White House is paying close attention to recent research into widespread variations in health care costs between regions. Most of the research is coming from the Dartmouth Atlas Project, which has mapped health care spending patterns from 1996 through 2006 in 306 regions of the country, based on Medicare reimbursements. (See map at top of story.)

The results have challenged the widely held belief that more medical care is better care. The “evidence suggests that the quality of care and health outcomes are better in low-spending regions, and there have been no greater gains in survival in regions with greater spending growth,” according to a February article on the study in the New England Journal of Medicine.

Dr. Elliot Fisher, one of the principal investigators of the study, says part of the problem is that illnesses that involve the greatest variation in discretionary care — how many tests to order, how aggressively to treat — create some of the biggest variations in cost. By developing better scientific evidence on the effectiveness of specific tests and treatments, Fisher argues, doctors can reduce the overuse of medical care without sacrificing the quality of care.

“We need to strengthen evidence (on effectiveness), but we also need to create systems that will provide us feedback on how we practice medicine,” he said.

Fisher said the advance of specialized medicine also has created the potential for duplication of care if specialists don’t operate as a team when caring for a patient.

“The answer really does lie in encouraging physicians to work as members of groups, using integrated systems, which can be accountable to the overall cost of care to their patient,” he said. “Where we have good evidence how best to manage a patient, such systems can do a remarkably good job at improving outcomes and lowering costs.”

The Dartmouth researchers also identified incentives in the current fee-for-service payment system that can create big differences in cost with little difference in outcomes. For example, a hospital that buys the latest imaging technology has to look for ways to keep the machine busy to pay for it. If the hospital does not buy the machine, it risks losing business to a neighboring hospital.

Given the numbers involved, a small change in growth could produce big savings. Fisher and his colleagues figure that cutting per capita Medicare spending from the average, national annual growth rate of 3.5 percent to the 2.4 percent rate achieved in a low-cost region like San Francisco could produce cumulative savings of $1.4 trillion over 10 years.

But like much of the ambiguous debate over health care reform, it isn't certain whether research-based proposals will translate into real savings for hospitals and doctors’ offices. There may be limits, for example, to how far practices and procedures can be standardized.

“It’s easier said than done,” said Greg Lintjer, president of Elkhart General Hospital in Indiana. “One doctor will take longer to do a particular procedure than another just because of the way he or she was trained. It doesn’t make it right or wrong. But that’s, in part, what adds to the cost structure of what we do.”

Some critics of the idea have suggested the underlying research is flawed. Dr. Richard Cooper, a professor of medicine at the University of Pennsylvania, argues that the Dartmouth study is incomplete because it looks only at Medicare spending. Cooper, who testified to a congressional committee on health care reform last month, maintains that in some areas where Medicare spending is higher than average, spending from private sources is lower.

That may suggest that in high-cost areas, Medicare is shouldering the burden of treating costlier illnesses in older patients that have gone untreated by private insurance when they were younger.

“As long as you believe the problem is the overuse of the system driven by doctors providing too much care with bad outcomes, you’ll never fix it, because you’ve made the wrong diagnosis," he said.

No one is suggesting that practices followed in low-cost areas be mandated in high-cost regions. Fisher suggests that any health care overhaul should include incentives for doctors, hospitals and other providers for finding ways to contain costs. He argues that by reimbursing providers for the effectiveness of treatment — and not just the volume of tests and office visits — costs can be controlled without cutting the quality or availability of care.

That balance may become even more critical as the aging baby boom generation enters the highest-cost phase of their lives as health care consumers. Proponents of outcome-based decision making, for example, say doctors treating patients with terminal illnesses should be encouraged to discuss palliative care options when more aggressive treatments have not been proved effective.

“We can’t afford to be paying for heroic measures no matter what your age is merely because technology and procedures are there,” said David Walker, CEO of the Peterson Foundation, a think tank that focuses on fiscal responsibility.

Even if the Obama administration succeeds in shepherding a health care overhaul through Congress, implementation of any plan is still years away. That could turn out to be one of the thornier political obstacles in the upcoming debate over how the overhaul will pay for itself.

Once implemented, any changes in the system designed to produce improved health outcomes at lower costs could take a decade or longer to produce big savings. But with deficits already swollen, Congress is in no mood for a big upfront investment with only the hope of future savings.

“There is a sense that the payoff may come beyond 10 years,” said Robert Hawkins, a health care industry analyst at Stifel Nicolaus. “And the Washington budget and policy and bill making focus is 10 years. If you can’t show it in 10 years, it looks like its deficit spending.  That’s the policy box they’re in.”

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