MEDICAL REPORT THE HOT SPOTTERS Can we lower medical costs by giving the neediest patients better care?

by Atul Gawande JANUARY 24, 2011

In Camden, NJ, 1% of patients account for 1/3 of the citys medical costs.

If Camden, New Jersey, becomes the first American community to lower its medical costs, it will have a murder to thank. At nine-fifty on a February night in 2001, a twenty-two-year-old black man was shot while driving his Ford Taurus station wagon through a neighborhood on the edge of the Rutgers University campus. The victim lay motionless in the street beside the open door on the drivers side, as if the car had ejected him. A neighborhood couple, a physical therapist and a volunteer firefighter, approached to see if they could help, but police waved them back. Hes not going to make it, an officer reportedly told the physical therapist. Hes pretty much dead. She called a physician, Jeffrey Brenner, who lived a few doors up the street, and he ran to the scene with a stethoscope and a pocket ventilation mask. After some discussion, the police let him enter the crime scene and attend to the victim. Witnesses told the local newspaper that he was the first person to lay hands on the man. He was slightly overweight, turned on his side, Brenner recalls. There was glass everywhere. Although the victim had been shot several times and many minutes had passed, his body felt warm. Brenner checked his neck for a carotid pulse. The man was alive. Brenner began the chest compressions and rescue breathing that should have been started long before. But the young man, who turned out to be a Rutgers student, died soon afterward. The incident became a local scandal. The students injuries may not have been survivable, but the police couldnt have known that. After the ambulance came, Brenner confronted one of the officers to ask why they hadnt tried to rescue him. We didnt want to dislodge the bullet, he recalls the policeman saying. It was a ridiculous answer, a brushoff, and Brenner couldnt let it go. He was thirty-one years old at the time, a skinny, thick-bearded, soft-spoken family physician who had grown up in a bedroom suburb of Philadelphia. As a medical student at Robert Wood Johnson Medical School, in Piscataway, he had planned to become a neuroscientist. But he volunteered once a week in a free primary-care clinic for poor immigrants, and he found the work there more challenging than anything he was doing in the laboratory. The guy studying neuronal stem cells soon became the guy studying Spanish and training to become one of the few family physicians in his class. Once he completed his residency, in 1998, he joined the staff of a family-medicine practice in Camden. It was in a cheaply constructed, boxlike, one-story building on a desolate street of bars, car-repair shops, and empty lots. But he was young and eager to recapture the sense of purpose hed felt volunteering at the clinic during medical school. Few people shared his sense of possibility. Camden was in civic free fall, on its way to becoming one of the poorest, most crime-ridden cities in the nation. The local school system had gone into receivership. Corruption and mismanagement soon prompted a state takeover of the entire city. Just getting the sewage system to work could be a problem. The neglect of this anonymous shooting victim on Brenners street was another instance of a city that had given up, and Brenner was tired of wondering why it had to be that way. Around that time, a police reform commission was created, and Brenner was asked to serve as one of its two citizen members. He agreed and, to his surprise, became completely absorbed. The experts they called in explained the basic principles of effective community policing. He learned about George Kelling and James Q. Wilsons broken-windows theory, which argued that minor, visible neighborhood

disorder breeds major crime. He learned about the former New York City police commissioner William Bratton and the Compstat approach to policing that he had championed in the nineties, which centered on mapping crime and focussing resources on the hot spots. The reform panel pushed the Camden Police Department to create computerized crime maps, and to change police beats and shifts to focus on the worst areas and times. When the police wouldnt make the crime maps, Brenner made his own. He persuaded Camdens three main hospitals to let him have access to their medical billing records. He transferred the reams of data files onto a desktop computer, spent weeks figuring out how to pull the chaos of information into a searchable database, and then started tabulating the emergency-room visits of victims of serious assault. He created maps showing where the crime victims lived. He pushed for policies that would let the Camden police chief assign shifts based on the crime statisticsonly to find himself in a showdown with the police unions. He has no clue, the president of the city police superiors union said to the Philadelphia Inquirer. I just think that his comments about what kind of schedule we should be on, how we should be deployed, are laughable. The unions kept the provisions out of the contract. The reform commission disbanded; Brenner withdrew from the cause, beaten. But he continued to dig into the database on his computer, now mostly out of idle interest. Besides looking at assault patterns, he began studying patterns in the way patients flowed into and out of Camdens hospitals. Id just sit there and play with the data for hours, he says, and the more he played the more he found. For instance, he ran the data on the locations where ambulances picked up patients with fall injuries, and discovered that a single building in central Camden sent more people to the hospital with serious fallsfifty-seven elderly in two yearsthan any other in the city, resulting in almost three million dollars in health-care bills. It was just this amazing window into the health-care delivery system, he says. So he took what he learned from police reform and tried a Compstat approach to the citys health-care performancea Healthstat, so to speak. He made block-by-block maps of the city, color-coded by the hospital costs of its residents, and looked for the hot spots. The two most expensive city blocks were in north Camden, one that had a large nursing home called Abigail House and one that had a low-income housing tower called Northgate II. He found that between January of 2002 and June of 2008 some nine hundred people in the two buildings accounted for more than four thousand hospital visits and about two hundred million dollars in health-care bills. One patient had three hundred and twenty-four admissions in five years. The most expensive patient cost insurers $3.5 million. Brenner wasnt all that interested in costs; he was more interested in helping people who received bad health care. But in his experience the people with the highest medical coststhe people cycling in and out of the hospitalwere usually the people receiving the worst care. Emergency-room visits and hospital admissions should be considered failures of the health-care system until proven otherwise, he told mefailures of prevention and of timely, effective care. If he could find the people whose use of medical care was highest, he figured, he could do something to help them. If he helped them, he would also be lowering their health-care costs. And, if the stats approach to crime was right, targeting those with the highest health-care costs would help lower the entire citys health-care costs. His calculations revealed that just one per cent of the hundred thousand people who made use of Camdens medical facilities accounted for thirty per cent of its costs. Thats only a thousand peopleabout half the size of a typical family physicians panel of patients. Things, of course, got complicated. It would have taken months to get the approvals needed to pull names out of the data and approach people, and he was impatient to get started. So, in the spring of 2007, he held a meeting with a few social workers and emergency-room doctors from hospitals around the city. He showed them the cost statistics and use patterns of the most expensive one per cent. These are the people I want to help you with, he said. He asked for assistance reaching them. Introduce me to your worst-of-the-worst patients, he said.

They did. Then he got permission to look up the patients data to confirm where they were on his cost map. For all the stupid, expensive, predictive-modelling software that the big venders sell, he says, you just ask the doctors, Who are your most difficult patients?, and they can identify them. The first person they found for him was a man in his mid-forties whom Ill call Frank Hendricks. Hendricks had severe congestive heart failure, chronic asthma, uncontrolled diabetes, hypothyroidism, gout, and a history of smoking and alcohol abuse. He weighed five hundred and sixty pounds. In the previous three years, he had spent as much time in hospitals as out. When Brenner met him, he was in intensive care with a tracheotomy and a feeding tube, having developed septic shock from a gallbladder infection. Brenner visited him daily. I just basically sat in his room like I was a third-year med student, hanging out with him for an hour, hour and a half every day, trying to figure out what makes the guy tick, he recalled. He learned that Hendricks used to be an auto detailer and a cook. He had a longtime girlfriend and two children, now grown. A toxic combination of poor health, Johnnie Walker Red, and, it emerged, cocaine addiction had left him unreliably employed, uninsured, and living in a welfare motel. He had no consistent set of doctors, and almost no prospects for turning his situation around. After several months, he had recovered enough to be discharged. But, out in the world, his life was simply another hospitalization waiting to happen. By then, however, Brenner had figured out a few things he could do to help. Some of it was simple doctor stuff. He made sure he followed Hendricks closely enough to recognize when serious problems were emerging. He double-checked that the plans and prescriptions the specialists had made for Hendrickss many problems actually fit togetherand, when they didnt, he got on the phone to sort things out. He teamed up with a nurse practitioner who could make home visits to check blood-sugar levels and blood pressure, teach Hendricks about what he could do to stay healthy, and make sure he was getting his medications. A lot of what Brenner had to do, though, went beyond the usual doctor stuff. Brenner got a social worker to help Hendricks apply for disability insurance, so that he could leave the chaos of welfare motels, and have access to a consistent set of physicians. The team also pushed him to find sources of stability and value in his life. They got him to return to Alcoholics Anonymous, and, when Brenner found out that he was a devout Christian, he urged him to return to church. He told Hendricks that he needed to cook his own food once in a while, so he could get back in the habit of doing it. The main thing he was up against was Hendrickss hopelessness. Hed given up. Can you imagine being in the hospital that long, what that does to you? Brenner asked. I spoke to Hendricks recently. He has gone without alcohol for a year, cocaine for two years, and smoking for three years. He lives with his girlfriend in a safer neighborhood, goes to church, and weathers family crises. He cooks his own meals now. His diabetes and congestive heart failure are under much better control. Hes lost two hundred and twenty pounds, which means, among other things, that if he falls he can pick himself up, rather than having to call for an ambulance. The fun thing about this work is that you can be there when the light switch goes on for a patient, Brenner told me. It doesnt happen at the pace we want. But you can see it happen. With Hendricks, there was no miraculous turnaround. Working with him didnt feel any different from working with any patient on smoking, bad diet, not exercisingworking on any particular rut someone has gotten into, Brenner said. People are people, and they get into situations they dont necessarily plan on. My philosophy about primary care is that the only person who has changed anyones life is their mother. The reason is that she cares about them, and she says the same simple thing over and over and over. So he tries to care, and to say a few simple things over and over and over. I asked Hendricks what he made of Brenner when they first met. He struck me as odd, Hendricks said. His appearance was not what I expected of a young, cleancut doctor. There was that beard. There was his manner, too. His whole premise was Im here for you. Im not here to be a part of the medical system. Im here to get you back on your feet. An ordinary cold can still be a major setback for Hendricks. He told me that hed been in the hospital four times this past summer. But the stays were a few days at most, and hes had no more cataclysmic, weeks-long I.C.U. stays.

Was this kind of success replicable? As word went out about Brenners interest in patients like Hendricks, he received more referrals. Camden doctors were delighted to have someone help with their worst of the worst. He took on half a dozen patients, then two dozen, then more. It became increasingly difficult to do this work alongside his regular medical practice. The clinic was already under financial strain, and received nothing for assisting these patients. If it were up to him, hed recruit a whole staff of primary-care doctors and nurses and social workers, based right in the neighborhoods where the costliest patients lived. With the tens of millions of dollars in hospital bills they could save, hed pay the staff double to serve as Camdens lite medical force and to rescue the citys health-care system. But thats not how the health-insurance system is built. So he applied for small grants from philanthropies like the Robert Wood Johnson Foundation and the Merck Foundation. The money allowed him to ramp up his data system and hire a few people, like the nurse practitioner and the social worker who had helped him with Hendricks. He had some desk space at Cooper Hospital, and he turned it over to what he named the Camden Coalition of Healthcare Providers. He spoke to people who had been doing similar work, studied medical home programs for the chronically ill in Seattle, San Francisco, and Pennsylvania, and adopted some of their lessons. By late 2010, his team had provided care for more than three hundred people on his super-utilizer map. I spent a day with Kathy Jackson, the nurse practitioner, and Jessica Cordero, a medical assistant, to see what they did. The Camden Coalition doesnt have enough money for a clinic where they can see patients. They rely exclusively on home visits and phone calls. Over the phone, they inquire about emerging health issues, check for insurance or housing problems, ask about unfilled prescriptions. All the patients get the teams urgent-call number, which is covered by someone who can help them through a health crisis. Usually, the issue can be resolved on the spotits a headache or a cough or the likebut sometimes it requires an unplanned home visit, to perform an examination, order some tests, provide a prescription. Only occasionally does it require an emergency room. Patients wouldnt make the call in the first place if the person picking up werent someone like Jackson or Brennersomeone they already knew and trusted. Even so, patients can disappear for days or weeks at a time. High-utilizer work is about building relationships with people who are in crisis, Brenner said. The ones you build a relationship with, you can change behavior. Half we can build a relationship with. Half we cant. One patient I spent time with illustrated the challenges. If you were a doctor meeting him in your office, you would quickly figure out that his major problems were moderate developmental deficits and out-of-control hypertension and diabetes. His blood pressure and blood sugars were so high that, at the age of thirty-nine, he was already developing blindness and advanced kidney disease. Unless something changed, he was perhaps six months away from complete kidney failure. You might decide to increase his insulin dose and change his blood-pressure medicine. But you wouldnt grasp what the real problem was until you walked up the cracked concrete steps of the two-story brownstone where he lives with his mother, waited for him to shove aside the old newspapers and unopened mail blocking the door, noticed Corderos shake of the head warning you not to take the rumpled seat hes offering because of the ant trail running across it, and took in the stack of dead computer monitors, the barking mutt chained to an inner doorway, and the rotten fruit on a newspapercovered tabletop. According to a state evaluation, he was capable of handling his medications, and, besides, he lived with his mother, who could help. But one look made it clear that they were both incapable. Jackson asked him whether he was taking his blood-pressure pills each day. Yes, he said. Could he show her the pill bottles? As it turned out, he hadnt taken any pills since shed last visited, the week before. His finger-stick blood sugar was twice the normal level. He needed a better living situation. The state had turned him down for placement in supervised housing, pointing to his test scores. But after months of paperworkduring which he steadily worsened, passing in and out of hospitalsthe team was finally able to get him into housing where his medications could be dispensed on a schedule. He had made an overnight visit the previous weekend to test the place out.

I liked it, he said. He moved in the next week. And, with that, he got a chance to avert dialysis and its tens of thousands of dollars in annual costsat least for a while. Not everyone lets the team members into his or her life. One of their patients is a young woman of no fixed address, with asthma and a crack-cocaine habit. The crack causes severe asthma attacks and puts her in the hospital over and over again. The team members have managed occasionally to track her down in emergency rooms or recognize her on street corners. All they can do is give her their number, and offer their help if she ever wanted it. She hasnt. Work like this has proved all-consuming. In May, 2009, Brenner closed his regular medical practice to focus on the program full time. It remains unclear how the program will make ends meet. But he and his team appear to be having a major impact. The Camden Coalition has been able to measure its longterm effect on its first thirty-six super-utilizers. They averaged sixty-two hospital and E.R. visits per month before joining the program and thirty-seven visits aftera forty-per-cent reduction. Their hospital bills averaged $1.2 million per month before and just over half a million aftera fifty-six-per-cent reduction. These results dont take into account Brenners personnel costs, or the costs of the medications the patients are now taking as prescribed, or the fact that some of the patients might have improved on their own (or died, reducing their costs permanently). The net savings are undoubtedly lower, but they remain, almost certainly, revolutionary. Brenner and his team are out there on the boulevards of Camden demonstrating the possibilities of a strange new approach to health care: to look for the most expensive patients in the system and then direct resources and brainpower toward helping them. Jeff Brenner has not been the only one to recognize the possibilities in focussing on the hot spots of medicine. One Friday afternoon, I drove to an industrial park on the outskirts of Boston, where a rapidly growing data-analysis company called Verisk Health occupies a floor of a nondescript office complex. It supplies medical intelligence to organizations that pay for health benefitsself-insured businesses, many public employers, even the government of Abu Dhabi. Privacy laws prevent U.S. employers from looking at the details of their employees medical spending. So they hand their health-care payment data over to companies that analyze the patterns and tell them how to reduce their health-insurance spending. Mostly, these companies give financial advice on changing benefitstelling them, say, to increase employee co-payments for brand-name drugs or emergency-room visits. But even employers who cut benefits find that their costs continue to outpace their earnings. Verisk, whose clients pay health-care bills for fifteen million patients, is among the data companies that are trying a more sophisticated approach. Besides the usual statisticians and economists, Verisk recruited doctors to dive into the data. I met one of them, Nathan Gunn, who was thirty-six years old, had completed his medical training at the University of California, San Francisco, and was practicing as an internist part time. The rest of his time he worked as Verisks head of research. Mostly, he was in meetings or at his desk poring through data runs from clients. He insisted that it was every bit as absorbing as seeing sick patientssometimes more so. Every data run tells a different human story, he said. At his computer, he pulled up a data set for me, scrubbed of identifying information, from a client that manages health-care benefits for some two hundred and fifty employersschool districts, a large church association, a bus company, and the like. They had a hundred thousand covered lives in all. Payouts for those people rose eight per cent a year, at least three times as fast as the employers earnings. This wasnt good, but the numbers seemed pretty dry and abstract so far. Then he narrowed the list to the top five per cent of spendersjust five thousand people accounted for almost sixty per cent of the spendingand he began parsing further. Take two ten-year-old boys with asthma, he said. From a disease standpoint, theyre exactly the same cost, right? Wrong. Imagine one of those kids never fills his inhalers and has been in urgent care with asthma attacks three times over the last year, probably because Mom and Dad arent really on top of it. Thats the sort of patient Gunn uses his companys medical-intelligence software program to zero in ona patient who is sick and getting inadequate care. Thats really the sweet spot for preventive care, Gunn said.

He pulled up patients with known coronary-artery disease. There were nine hundred and twenty-one, he said, reading off the screen. He clicked a few more times and raised his eyebrows. One in seven of them had not had a full office visit with a physician in more than a year. You can do something about that, he said. Lets do the E.R.-visit game, he went on. This is a fun one. He sorted the patients by number of visits, much as Jeff Brenner had done for Camden. In this employed population, the No. 1 patient was a twenty-five-year-old woman. In the past ten months, shed had twenty-nine E.R. visits, fifty-one doctors office visits, and a hospital admission. I can actually drill into these claims, he said, squinting at the screen. All these claims here are migraine, migraine, migraine, migraine, headache, headache, headache. For a twenty-five-year-old with her profile, he said, medical payments for the previous ten months would be expected to total twentyeight hundred dollars. Her actual payments came to more than fifty-two thousand dollarsfor headaches. Was she a drug seeker? He pulled up her prescription profile, looking for narcotic prescriptions. Instead, he found prescriptions for insulin (she was apparently diabetic) and imipramine, an anti-migraine treatment. Gunn was struck by how faithfully she filled her prescriptions. She hadnt missed a single renewalwhich is actually interesting, he said. Thats not what you usually find at the extreme of the cost curve. The story now became clear to him. She suffered from terrible migraines. She took her medicine, but it wasnt working. When the headaches got bad, shed go to the emergency room or to urgent care. The doctors would do CT and MRI scans, satisfy themselves that she didnt have a brain tumor or an aneurysm, give her a narcotic injection to stop the headache temporarily, maybe renew her imipramine prescription, and send her home, only to have her return a couple of weeks later and see whoever the next doctor on duty was. She wasnt getting what she needed for adequate migraine carea primary physician taking her in hand, trying different medications in a systematic way, and figuring out how to better keep her headaches at bay. As he sorts through such stories, Gunn usually finds larger patterns, too. He told me about an analysis he had recently done for a big information-technology company on the East Coast. It provided health benefits to seven thousand employees and family members, and had forty million dollars in spend. The firm had already raised the employees insurance co-payments considerably, hoping to give employees a reason to think twice about unnecessary medical visits, tests, and proceduresmake them have some skin in the game, as they say. Indeed, almost every category of costly medical care went down: doctor visits, emergency-room and hospital visits, drug prescriptions. Yet employee health costs continued to riseclimbing almost ten per cent each year. The company was baffled. Gunns team took a look at the hot spots. The outliers, it turned out, were predominantly early retirees. Most had multiple chronic conditionsin particular, coronary-artery disease, asthma, and complex mental illness. One had badly worsening heart disease and diabetes, and medical bills over two years in excess of eighty thousand dollars. The man, dealing with higher co-payments on a fixed income, had cut back to filling only half his medication prescriptions for his high cholesterol and diabetes. He made few doctor visits. He avoided the E.R.until a heart attack necessitated emergency surgery and left him disabled with chronic heart failure. The higher co-payments had backfired, Gunn said. While medical costs for most employees flattened out, those for early retirees jumped seventeen per cent. The sickest patients became much more expensive because they put off care and prevention until it was too late. The critical flaw in our health-care system that people like Gunn and Brenner are finding is that it was never designed for the kind of patients who incur the highest costs. Medicines primary mechanism of service is the doctor visit and the E.R. visit. (Americans make more than a billion such visits each year, according to the Centers for Disease Control.) For a thirty-year-old with a fever, a twenty-minute visit to the doctors office may be just the thing. For a pedestrian hit by a minivan, theres nowhere better than an emergency room. But these institutions are vastly inadequate for people with complex problems: the forty-year-old with drug and alcohol addiction; the eighty-four-year-old with advanced Alzheimers

disease and a pneumonia; the sixty-year-old with heart failure, obesity, gout, a bad memory for his eleven medications, and half a dozen specialists recommending different tests and procedures. Its like arriving at a major construction project with nothing but a screwdriver and a crane. Outsiders tend to be the first to recognize the inadequacies of our social institutions. But, precisely because they are outsiders, they are usually in a poor position to fix them. Gunn, though a doctor, mostly works for people who do not run health systemsemployers and insurers. So he counsels them about ways to tinker with the existing system. He tells them how to change co-payments and deductibles so they at least arent making their cost problems worse. He identifies doctors and hospitals that seem to be providing particularly ineffective care for high-needs patients, and encourages clients to shift contracts. And he often suggests that clients hire case-management companiesa fast-growing industry with telephone banks of nurses offering high-cost patients advice in the hope of making up for the deficiencies of the system. The strategy works, sort of. Verisk reports that most of its clients can slow the rate at which their health costs rise, at least to some extent. But few have seen decreases, and its not obvious that the improvements can be sustained. Brenner, by contrast, is reinventing medicine from the inside. But he does not run a health-care system, and had to give up his practice to sustain his work. He is an outsider on the inside. So you might wonder whether medical hot-spotting can really succeed on a scale that would help large populations. Yet there are signs that it can. A recent Medicare demonstration program, given substantial additional resources under the new health-care-reform law, offers medical institutions an extra monthly payment to finance the cordination of care for their most chronically expensive beneficiaries. If total costs fall more than five per cent compared with those of a matched set of control patients, the program allows institutions to keep part of the savings. If costs fail to decline, the institutions have to return the monthly payments. Several hospitals took the deal when the program was offered, in 2006. One was the Massachusetts General Hospital, in Boston. It asked a general internist named Tim Ferris to design the effort. The hospital had twenty-six hundred chronically high-cost patients, who together accounted for sixty million dollars in annual Medicare spending. They were in nineteen primary-care practices, and Ferris and his team made sure that each had a nurse whose sole job was to improve the cordination of care for these patients. The doctors saw the patients as usual. In between, the nurses saw them for longer visits, made surveillance phone calls, and, in consultation with the doctors, tried to recognize and address problems before they resulted in a hospital visit. Three years later, hospital stays and trips to the emergency room have dropped more than fifteen per cent. The hospital hit its five-per-cent cost-reduction target. And the team is just getting the hang of what it can do. Recently, I visited an even more radically redesigned physician practice, in Atlantic City. Cross the bridge into town (Atlantic City is on an island, I learned), ignore the Trump Plaza and Caesars casinos looming ahead of you, drive a few blocks along the Monopoly-board streets (the game took its street names from here), turn onto Tennessee Avenue, and enter the doctors office building thats across the street from the ninety-nine-cent store and the citys long-shuttered supermarket. On the second floor, just past the occupational-health clinic, you will find the Special Care Center. The reception area, with its rustic taupe upholstery and tasteful lighting, looks like any other doctors office. But it houses an experiment started in 2007 by the health-benefit programs of the casino workers union and of a hospital, AtlantiCare Medical Center, the citys two largest pools of employees. Both are self-insuredthey are large enough to pay for their workers health care directlyand both have been hammered by the exploding costs. Yes, even hospitals are having a hard time paying their employees medical bills. As for the union, its contracts are frequently for workers total compensation wages plus benefits. It gets a fixed pot. Year after year, the low-wage busboys, hotel cleaners, and kitchen staff voted against sacrificing their health benefits. As a result, they have gone without a wage increase for years. Out of desperation, the unions health fund and the hospital decided to try something new. They got a young Harvard internist named Rushika Fernandopulle to run a clinic exclusively for workers with exceptionally high medical expenses.

Fernandopulle, who was born in Sri Lanka and raised in Baltimore, doesnt seem like a radical when you meet him. Hes short and round-faced, smiles a lot, and displays two cute rabbit teeth as he tells you how ridiculous the health-care system is and how he plans to change it all. Jeff Brenner was on his advisory board, along with others who have pioneered the concept of intensive outpatient care for complex high-needs patients. The hospital provided the floor space. Fernandopulle created a point system to identify employees likely to have high recurrent costs, and they were offered the chance to join the new clinic. The Special Care Center reinvented the idea of a primary-care clinic in almost every way. The unions and the hospitals health funds agreed to switch from paying the doctors for every individual office visit and treatment to paying a flat monthly fee for each patient. That cut the huge expense that most clinics incur from billing paperwork. The patients were given unlimited access to the clinic without chargesno co-payments, no insurance bills. This, Fernandopulle explained, would force doctors on staff to focus on service, in order to retain their patients and the fees they would bring. The payment scheme also allowed him to design the clinic around the things that sick, expensive patients most need and value, rather than the ones that pay the best. He adopted an open-access scheduling system to guarantee same-day appointments for the acutely ill. He customized an electronic information system that tracks whether patients are meeting their goals. And he staffed the clinic with people who would help them do it. One nurse practitioner, for instance, was responsible for trying to get every smoker to quit. I got a glimpse of how unusual the clinic is when I sat in on the staff meeting it holds each morning to review the medical issues of the patients on the appointment books. There was, for starters, the very existence of the meeting. I had never seen this kind of daily huddle at a doctors office, with clinicians popping open their laptops and pulling up their patient lists together. Then there was the particular mixture of people who squeezed around the conference table. As in many primary-care offices, the staff had two physicians and two nurse practitioners. But a full-time social worker and the front-desk receptionist joined in for the patient review, too. And, outnumbering them all, there were eight full-time health coaches. Fernandopulle created the position. Each health coach works with patientsin person, by phone, by e-mailto help them manage their health. Fernandopulle got the idea from the promotoras, community health workers, whom he had seen on a medical mission in the Dominican Republic. The coaches work with the doctors but see their patients far more frequently than the doctors do, at least once every two weeks. Their most important attribute, Fernandopulle explained, is a knack for connecting with sick people, and understanding their difficulties. Most of the coaches come from their patients communities and speak their languages. Many have experience with chronic illness in their own families. (One was himself a patient in the clinic.) Few had clinical experience. I asked each of the coaches what he or she had done before working in the Special Care Center. One worked the register at a Dunkin Donuts. Another was a Sears retail manager. A third was an administrative assistant at a casino. We recruit for attitude and train for skill, Fernandopulle said. We dont recruit from health care. This kind of care requires a very different mind-set from usual care. For example, what is the answer for a patient who walks up to the front desk with a question? The answer is Yes. Can I see a doctor? Yes. Can I get help making my ultrasound appointment? Yes. Health care trains people to say no to patients. He told me that hed had to replace half of the clinics initial hiresincluding a doctor because they didnt grasp the focus on patient service. In forty-five minutes, the staff did a rapid run-through of everyones patients. They reviewed the requests that patients had made by e-mail or telephone, the plans for the ones who had appointments that day. Staff members made sure that all patients who made a sick visit the day before got a follow-up call within twenty-four hours, that every test ordered was reviewed, that every unexpected problem was addressed. Most patients required no more than a ten-second mention. Mr. Green didnt turn up for his cardiac testing or return calls about it. I know where his wife works. Ill track her down, the receptionist said. Ms. Blue is pregnant and on a high-blood-pressure medication thats unsafe in pregnancy. Ill change her

prescription right now, her doctor said, and keyed it in. A handful of patients required longer discussion. One forty-five-year-old heart-disease patient had just had blood tests that showed worsening kidney failure. The team decided to repeat the blood tests that morning, organize a kidney ultrasound in the afternoon if the tests confirmed the finding, and have him seen in the office at the end of the day. A staff member read out the hospital census. Of the clinics twelve hundred chronically ill patients, just one was in the hospital, and she was being discharged. The clinics patients had gone four days without a single E.R. visit. On hearing this news, staffers cheered and broke into applause. Afterward, I met a patient, Vibha Gandhi. She was fifty-seven years old and had joined the clinic after suffering a third heart attack. She and her husband, Bharat, are Indian immigrants. He cleans casino bathrooms for thirteen dollars an hour on the night shift. Vibha has long had poor health, with diabetes, obesity, and congestive heart failure, but things got much worse in the summer of 2009. A heart attack landed her in intensive care, and her coronary-artery disease proved so advanced as to be inoperable. She arrived in a wheelchair for her first clinic visit. She could not walk more than a few steps without losing her breath and getting a viselike chest pain. The next step for such patients is often a heart transplant. A year and a half later, she is out of her wheelchair. She attends the clinics Tuesday yoga classes. With the help of a walker, she can go a quarter mile without stopping. Although her condition is still fragileshe takes a purseful of medications, and a bout of the flu would send her back to an intensivecare unither daily life is far better than she once imagined. I didnt think I would live this long, Vibha said through Bharat, who translated her Gujarati for me. I didnt want to live. I asked her what had made her better. The couple credited exercise, dietary changes, medication adjustments, and strict monitoring of her diabetes. But surely she had been encouraged to do these things after her first two heart attacks. What made the difference this time? Jayshree, Vibha said, naming the health coach from Dunkin Donuts, who also speaks Gujarati. Jayshree pushes her, and she listens to her only and not to me, Bharat said. Why do you listen to Jayshree? I asked Vibha. Because she talks like my mother, she said. Fernandopulle carefully tracks the statistics of those twelve hundred patients. After twelve months in the program, he found, their emergency-room visits and hospital admissions were reduced by more than forty per cent. Surgical procedures were down by a quarter. The patients were also markedly healthier. Among five hundred and three patients with high blood pressure, only two were in poor control. Patients with high cholesterol had, on average, a fifty-point drop in their levels. A stunning sixty-three per cent of smokers with heart and lung disease quit smoking. In surveys, service and quality ratings were high. But was the program saving money? The team, after all, was more expensive than typical primary care. And certain costs shot up. Because patients took their medications more consistently, drug costs were higher. The doctors ordered more mammograms and diagnostic tests, and caught and treated more cancers and other conditions. Theres also the statistical phenomenon known as regression to the mean: the super-high-cost patients may have been on their way to getting better (and less costly) on their own. So the unions health fund enlisted an independent economist to evaluate the clinics one-year results. According to the data, these workers made up a third of the local unions costliest ten per cent of members. To determine if the clinic was really making a difference, the economist compared their costs over twelve months with those of a similar group of Las Vegas casino workers. The results, he cautioned, are still preliminary. The sample was small. One patient requiring a heart transplant could wipe away any savings overnight. Nonetheless, compared with the Las Vegas workers, the Atlantic City workers in Fernandopulles program experienced a twenty-five-per-cent drop in costs. And this was just the start. The program, Fernandopulle told me, is still discovering new tricks. His team just recently figured out, for instance, that one reason some patients call 911 for problems the clinic would handle better is that they dont have the clinics twenty-four-hour call number at hand when they need it. The health coaches told the patients to program it into their cell-phone speed dial, but many didnt

know how to do that. So the health coaches began doing it for them, and the number of 911 calls fell. High-cost habits are sticky; staff members are still learning the subtleties of unsticking them. Their most difficult obstacle, however, has been the waywardness not of patients but of doctorsthe doctors whom the patients see outside the clinic. Jeff Brenners Camden patients are usually uninsured or on welfare; their doctors were happy to have someone else deal with them. The Atlantic City casino workers and hospital staff, on the other hand, had the best-paying insurance in town. Some doctors werent about to let that business slip away. Fernandopulle told me about a woman who had seen a cardiologist for chest pain two decades ago, when she was in her twenties. It was the result of a temporary, inflammatory condition, but he continued to have her see him for an examination and an electrocardiogram every three months, and a cardiac ultrasound every year. The results were always normal. After the clinic doctors advised her to stop, the cardiologist called her at home to say that her health was at risk if she didnt keep seeing him. She went back. The clinic encountered similar troubles with some of the doctors who saw its hospitalized patients. One group of hospital-based internists was excellent, and cordinated its care plans with the clinic. But the others refused, resulting in longer stays and higher costs (and a fee for every visit, while the better group happened to be the only salaried one). When Fernandopulle arranged to direct the patients to the preferred doctors, the others retaliated, trolling the emergency department and persuading the patients to choose them instead. Rogues, we call them, Fernandopulle said. He and his colleagues tried warning the patients about the rogue doctors and contacting the E.R. staff to make sure they knew which doctors were preferred. One time, we literally pinned a note to a patient, like he was Paddington Bear, he said. Theyve ended up going to the hospital, and changing the doctors themselves when they have to. As the saying goes, one mans cost is another mans income. The AtlantiCare hospital system is in a curious position in all this. Can it really make sense for a hospital to invest in a program, like the Special Care Center, that aims at reducing hospitalizations, even if its employees are included? I asked David Tilton, the president and C.E.O. of the system, why he was doing it. He had several answers. Some were of the its-the-right-thing-to-do variety. But I was interested in the hard-nosed reasons. The Atlantic City economy, he said, could not sustain his health systems perpetually rising costs. His hospital either fought the pressure to control costs and went down with the local economy or learned how to benefit from cost control. And there are ways to benefit. At a minimum, a successful hospital could attract patients from competitors, cushioning it against a future in which people need hospitals less. Two decades ago, for instance, Denmark had more than a hundred and fifty hospitals for its five million people. The country then made changes to strengthen the quality and availability of outpatient primary-care services (including payments to encourage physicians to provide e-mail access, off-hours consultation, and nurse managers for complex care). Today, the number of hospitals has shrunk to seventy-one. Within five years, fewer than forty are expected to be required. A smart hospital might position itself to be one of the last ones standing. Could anything that dramatic happen here? An important idea is getting its test run in America: the creation of intensive outpatient care to target hot spots, and thereby reduce over-all health-care costs. But, if it works, hospitals will lose revenue and some will have to close. Medical companies and specialists profiting from the excess of scans and procedures will get squeezed. This will provoke retaliation, counter-campaigns, intense lobbying for Washington to obstruct reform. The stats-and-stethoscope upstarts are nonetheless making their dash. Rushika Fernandopulle has set up a version of his Special Care program in Seattle, for Boeing workers, and is developing one in Las Vegas, for casino workers. Nathan Gunn and Verisk Health have landed new contracts during the past year with companies providing health benefits to more than four million employees and family members. Tim Ferris has obtained federal approval to spread his program for Medicare patients to two other hospitals in the Partners Healthcare System, in Boston (including my own). Jeff Brenner, meanwhile, is seeking to lower health-care costs for all of Camden, by getting its primary-care physicians to extend the

hot-spot strategy citywide. Weve been looking to Washington to find out how health-care reform will happen. But people like these are its real leaders. During my visit to Camden, I attended a meeting that Brenner and several community groups had organized with residents of Northgate II, the building with the highest hospital billing in the city. He wanted to run an idea by them. The meeting took place in the buildings ground-floor lounge. There was juice in Styrofoam cups and potato chips on little red plastic plates. A pastor with the Camden Bible Tabernacle started things off with a prayer. Brenner let one of the other coalition members do the talking. How much money, he asked, did the residents think had been spent on emergency-room and hospital visits in the past five years for the people in this one building? They had no idea. He wrote out the numbers on an easel pad, but they were imponderable abstractions. The residents eyes widened only when he said that the payments, even accounting for unpaid bills, added up to almost sixty thousand dollars per person. He asked how many of them believed that they had received sixty thousand dollars worth of health care. That was when the stories came out: the doctors who wouldnt give anyone on Medicaid an office appointment; the ten-hour emergency-room waits for ten minutes with an intern. Brenner was proposing to open a doctors office right in their building, which would reduce their need for hospital visits. If it delivered better care and saved money, the doctors office would receive part of the money that it saved Medicare and Medicaid, and would be able to add servicesservices that the residents could help choose. With enough savings, they could have same-day doctor visits, nurse practitioners at night, a social worker, a psychologist. When Brenners scenario was described, residents murmured approval, but the mention of a social worker brought questions. Is she going to be all up in my business? a woman asked. I dont know if I like that. Im not sure I want a social worker hanging around here. This doctors office, people were slowly realizing, would be involved in their livesa medical professional would be after them about their smoking, drinking, diet, medications. That was O.K. if the person were Dr. Brenner. They knew him. They believed that he cared about them. Acceptance, however, would clearly depend upon execution; it wasnt guaranteed. There was similar ambivalence in the neighborhoods that Compstat strategists targeted for additionaland potentially intrusivepolicing. Yet the stakes in health-care hot-spotting are enormous, and go far beyond health care. A recent report on more than a decade of education-reform spending in Massachusetts detailed a story found in every state. Massachusetts sent nearly a billion dollars to school districts to finance smaller class sizes and better teachers pay, yet every dollar ended up being diverted to covering rising health-care costs. For each dollar added to school budgets, the costs of maintaining teacher health benefits took a dollar and forty cents. Every country in the world is battling the rising cost of health care. No community anywhere has demonstrably lowered its health-care costs (not just slowed their rate of increase) by improving medical services. Theyve lowered costs only by cutting or rationing them. To many people, the problem of health-care costs is best encapsulated in a basic third-grade lesson: you cant have it all. You want higher wages, lower taxes, less debt? Then cut health-care services. People like Jeff Brenner are saying that we can have it allteachers and health care. To be sure, uncertainties remain. Their small, localized successes have not yet been replicated in large populations. Up to a fourth of their patients face problems of a kind they have avoided tackling so far: catastrophic conditions. These are the patients who are in the top one per cent of costs because they were in a car crash that resulted in a hundred thousand dollars in surgery and intensive-care expenses, or had a cancer requiring seven thousand dollars a week for chemo and radiation. Theres nothing much to be done for those patients, youd think. Yet they are also victims of poor and disjointed service. Improving the value of the servicesrewarding better results per dollar spentcould lead to dramatic innovations in catastrophic care, too. The new health-reform lawObamacareis betting big on the Brenners of the world. It says that we can afford to subsidize insurance for millions, remove the ability of private and public insurers to cut high-cost patients from their rolls, and improve the quality of care. The law authorizes new forms of Medicare and Medicaid payment to encourage the development of medical homes and accountable

care organizationsdoctors offices and medical systems that get financial benefits for being more accessible to patients, better organized, and accountable for reducing the over-all costs of care. Backers believe that, given this support, innovators like Brenner will transform health care everywhere. Critics say that its a pipe dreammore money down the health-care sinkhole. They could turn out to be right, Brenner told me; a well-organized opposition could scuttle efforts like his. In the next few years, were going to have absolutely irrefutable evidence that there are ways to reduce health-care costs, and they are high touch and they are at the level of care, he said. We are going to know that, hands down, this is possible. From that point onward, he said, its a political problem. The struggle will be to survive the obstruction of lobbies, and the partisan tendency to view success as victory for the other side. Already, these forces of resistance have become Brenners prime concern. He needs state legislative approval to bring his program to Medicaid patients at Northgate II and across Camden. He needs federal approval to qualify as an accountable care organization for the citys Medicare patients. In Camden, he has built support across a range of groups, from the state Chamber of Commerce to local hospitals to activist organizations. But for monthseven as rising health costs and shrinking state aid have forced the city to contemplate further school cuts and the layoff of almost half of its policehe has been stalled. With divided branches at both the state and the federal level, government just gets paralyzed, he says. In the meantime, though, hes forging ahead. In December, he introduced an expanded computer database that lets Camden doctors view laboratory results, radiology reports, emergency-room visits, and discharge summaries for their patients from all the hospitals in townand could show cost patterns, too. The absence of this sort of information is a daily impediment to the care of patients in Boston, where I practice. Right now, were nowhere close to having such data. But this, Im sure, will change. For in places like Camden, New Jersey, one of the poorest cities in America, there are people showing the way.

ANNALS OF PUBLIC POLICY GETTING THERE FROM HERE How should Obama reform health care? by Atul Gawande JANUARY 26, 2009
Our jerry-rigged health-care system contains many models that reformers can build on.

In every industrialized nation, the movement to reform health care has begun with stories about cruelty. The Canadians had stories like the 1946 Toronto Globe and Mail report of a woman in labor who was refused help by three successive physicians, apparently because of her inability to pay. In Australia, a 1954 letter published in the Sydney Morning Herald sought help for a young woman who had lung disease. She couldnt afford to refill her oxygen tank, and had been forced to ration her intake to a point where she is on the borderline of death. In Britain, George Bernard Shaw was at a London hospital visiting an eminent physician when an assistant came in to report that a sick man had arrived requesting treatment. Is he worth it? the physician asked. It was the normality of the question that shocked Shaw and prompted his scathing and influential 1906 play, The Doctors Dilemma. The British health system, he charged, was a conspiracy to exploit popular credulity and human suffering. In the United States, our stories are like the one that appeared in the Times before Christmas. Starla Darling, pregnant and due for delivery, had just taken maternity leave from her factory job at Archway & Mothers Cookie Company, in Ashland, Ohio, when she received a letter informing her that the company was going out of business. In three days, the letter said, she and almost three hundred co-workers would be laid off, and would lose their health-insurance coverage. The company was self-insured, so the employees didnt have the option of paying for the insurance themselvestheir insurance plan was being terminated. When I heard that I was losing my insurance, I was scared, Darling told the Times. Her husband had been laid off from his job, too. I remember that the bill for my sons delivery in 2005 was about $9,000, and I knew I would never be able to pay that by myself. So she prevailed on her midwife to induce labor while she still had insurance coverage. During labor, Darling began bleeding profusely, and needed a Cesarean section. Mother and baby pulled through. But the insurer denied Darlings claim for coverage. The couple ended up owing more than seventeen thousand dollars. The stories become unconscionable in any society that purports to serve the needs of ordinary people, and, at some alchemical point, they combine with opportunity and leadership to produce change. Britain reached this point and enacted universal health-care coverage in 1945, Canada in 1966, Australia in 1974. The United States may finally be there now. In 2007, fifty-seven million Americans had difficulty paying their medical bills, up fourteen million from 2003. On average, they had two thousand dollars in medical debt and had been contacted by a collection agency at least once. Because, in part, of underpayment, half of American hospitals operated at a loss in 2007. Today, large numbers of employers are limiting or dropping insurance coverage in order to stay afloat, or simply going undereven hospitals themselves. Yet wherever the prospect of universal health insurance has been considered, it has been widely attacked as a Bolshevik fantasya coercive system to be imposed upon people by benighted socialist master planners. People fear the unintended consequences of drastic change, the blunt force of government. However terrible the system may seem, we all know that it could be worseespecially for those who already have dependable coverage and access to good doctors and hospitals. Many would-be reformers hold that true reform must simply override those fears. They believe that a new system will be far better for most people, and that those who would hang on to the old do so out of either lack of imagination or narrow self-interest. On the left, then, single-payer enthusiasts argue that the only coherent solution is to end private health insurance and replace it with a national insurance program. And, on the right, the free marketeers argue that the only coherent solution is to end public insurance and

employer-controlled health benefits so that we can all buy our own coverage and put market forces to work. Neither side can stand the other. But both reserve special contempt for the pragmatists, who would build around the mess we have. The country has this one chance, the idealist maintains, to sweep away our inhumane, wasteful patchwork system and replace it with something new and more rational. So we should prepare for a bold overhaul, just as every other Western democracy has. True reform requires transformation at a stroke. But is this really the way it has occurred in other countries? The answer is no. And the reality of how health reform has come about elsewhere is both surprising and instructive. No example is more striking than that of Great Britain, which has the most socialized health system in the industrialized world. Established on July 5, 1948, the National Health Service owns the vast majority of the countrys hospitals, blood banks, and ambulance operations, employs most specialist physicians as salaried government workers, and has made medical care available to every resident for free. The system is so thoroughly government-controlled that, across the Atlantic, we imagine it had to have been imposed by fiat, by the coercion of ideological planners bending the system to their will. But look at the news report in the Times of London on July 6, 1948, headlined FIRST DAY OF HEALTH SERVICE. You might expect descriptions of bureaucratic shock troops walking into hospitals, insurance-company executives and doctors protesting in the streets, patients standing outside chemist shops worrying about whether they can get their prescriptions filled. Instead, there was only a four-paragraph notice between an item on the King and Queens return from a holiday in Scotland and one on currency problems in Germany. The beginning of the new national health service was taking place smoothly, the report said. No major problems were noted by the 2,751 hospitals involved or by patients arriving to see their family doctors. Ninety per cent of the British Medical Associations members signed up with the program voluntarilyand found that they had a larger and steadier income by doing so. The greatest difficulty, it turned out, was the unexpected pent-up demand for everything from basic dental care to pediatric visits for hundreds of thousands of people who had been going without. The program proved successful and lasting, historians say, precisely because it was not the result of an ideologues master plan. Instead, the N.H.S. was a pragmatic outgrowth of circumstances peculiar to Britain immediately after the Second World War. The single most important moment that determined what Britains health-care system would look like was not any policymakers meeting in 1945 but the countrys declaration of war on Germany, on September 3, 1939. As tensions between the two countries mounted, Britains ministers realized that they would have to prepare not only for land and sea combat but also for air attacks on cities on an unprecedented scale. And so, in the days before war was declared, the British government oversaw an immense evacuation; three and a half million people moved out of the cities and into the countryside. The government had to arrange transport and lodging for those in need, along with supervision, food, and schooling for hundreds of thousands of children whose parents had stayed behind to join in the war effort. It also had to insure that medical services were in placeboth in the receiving regions, whose populations had exploded, and in the cities, where up to two million war-injured civilians and returning servicemen were anticipated. As a matter of wartime necessity, the government began a national Emergency Medical Service to supplement the local services. Within a period of months, sometimes weeks, it built or expanded hundreds of hospitals. It conducted a survey of the existing hospitals and discovered that essential services were either missing or severely inadequatelaboratories, X-ray facilities, ambulances, care for fractures and burns and head injuries. The Ministry of Health was forced to upgrade and, ultimately, to operate these services itself. The war compelled the government to provide free hospital treatment for civilian casualties, as well as for combatants. In London and other cities, the government asked local hospitals to transfer some of the sick to private hospitals in the outer suburbs in order to make room for victims of the war. As a result, the government wound up paying for a large fraction of the private hospitals costs. Likewise, doctors received government salaries for the portion of their time that was devoted to the new wartime medical service. When the Blitz came, in September, 1940, vast numbers of private hospitals and clinics were

destroyed, further increasing the governments share of medical costs. The private hospitals and doctors whose doors were still open had far fewer paying patients and were close to financial ruin. Churchills government intended the program to be temporary. But the war destroyed the status quo for patients, doctors, and hospitals alike. Moreover, the new system proved better than the old. Despite the ravages of war, the health of the population had improved. The medical and social services had reduced infant and adult mortality rates. Even the dental care was better. By the end of 1944, when the wartime medical service began to demobilize, the countrys citizens did not want to see it go. The private hospitals didnt, either; they had come to depend on those government payments. By 1945, when the National Health Service was proposed, it had become evident that a national system of health coverage was not only necessary but also largely already in placewith nationally run hospitals, salaried doctors, and free care for everyone. So, while the ideal of universal coverage was spurred by those horror stories, the particular system that emerged in Britain was not the product of socialist ideology or a deliberate policy process in which all the theoretical options were weighed. It was, instead, an almost conservative creation: a program that built on a tested, practical means of providing adequate health care for everyone, while protecting the existing services that people depended upon every day. No other major country has adopted the British systemnot because it didnt work but because other countries came to universalize health care under entirely different circumstances. In France, in the winter of 1945, President de Gaulle was likewise weighing how to insure that his nations population had decent health care after the devastation of war. But the system that he inherited upon liberation had no significant public insurance or hospital sector. Seventy-five per cent of the population paid cash for private medical care, and many people had become too destitute to afford heat, let alone medications or hospital visits. Long before the war, large manufacturers and unions had organized collective insurance funds for their employees, financed through a self-imposed payroll tax, rather than a set premium. This was virtually the only insurance system in place, and it became the scaffolding for French health care. With an almost impossible range of crises on its handsfood shortages, destroyed power plants, a quarter of the population living as refugeesthe de Gaulle government had neither the time nor the capacity to create an entirely new health-care system. So it built on what it had, expanding the existing payroll-tax-funded, private insurance system to cover all wage earners, their families, and retirees. The self-employed were added in the nineteen-sixties. And the remainder of uninsured residents were finally included in 2000. Today, Scurit Sociale provides payroll-tax-financed insurance to all French residents, primarily through a hundred and forty-four independent, not-for-profit, local insurance funds. The French healthcare system has among the highest public-satisfaction levels of any major Western country; and, compared with Americans, the French have a higher life expectancy, lower infant mortality, more physicians, and lower costs. In 2000, the World Health Organization ranked it the best health-care system in the world. (The United States was ranked thirty-seventh.) Switzerland, because of its wartime neutrality, escaped the damage that drove health-care reform elsewhere. Instead, most of its citizens came to rely on private commercial health-insurance coverage. When problems with coverage gaps and inconsistencies finally led the nation to pass its universalcoverage law, in 1994, it had no experience with public insurance. So the countryyou get the picture nowbuilt on what it already had. It required every resident to purchase private health insurance and provided subsidies to limit the cost to no more than about ten per cent of an individuals income. Every industrialized nation in the world except the United States has a national system that guarantees affordable health care for all its citizens. Nearly all have been popular and successful. But each has taken a drastically different form, and the reason has rarely been ideology. Rather, each country has built on its own history, however imperfect, unusual, and untidy. Social scientists have a name for this pattern of evolution based on past experience. They call it pathdependence. In the battles between Betamax and VHS video recorders, Mac and P.C. computers, the QWERTY typewriter keyboard and alternative designs, they found that small, early events played a far more critical role in the market outcome than did the question of which design was better. Paul Krugman received a Nobel Prize in Economics in part for showing that trade patterns and the geographic

location of industrial production are also path-dependent. The first firms to get established in a given industry, he pointed out, attract suppliers, skilled labor, specialized financing, and physical infrastructure. This entrenches local advantages that lead other firms producing similar goods to set up business in the same areaeven if prices, taxes, and competition are stiffer. The long shadow cast by history over location is apparent at all scales, from the smallest to the largestfrom the cluster of costume jewelry firms in Providence to the concentration of 60 million people in the Northeast Corridor, Krugman wrote in 1991. With path-dependent processes, the outcome is unpredictable at the start. Small, often random events early in the process are remembered, continuing to have influence later. And, as you go along, the range of future possibilities gets narrower. It becomes more and more unlikely that you can simply shift from one path to another, even if you are locked in on a path that has a lower payoff than an alternate one. The political scientist Paul Pierson observed that this sounds a lot like politics, and not just economics. When a social policy entails major setup costs and large numbers of people who must devote time and resources to developing expertise, early choices become difficult to reverse. And if the choices involve what economists call increasing returns where the benefits of a policy increase as more people organize their activities around it those early decisions become selfreinforcing. America s transportation system developed this way. The century-old decision to base it on gasoline-powered automobiles led to a gigantic manufacturing capacity, along with roads, repair facilities, and fuelling stations that now make it exceedingly difficult to do things differently. Theres a similar explanation for our employment-based health-care system. Like Switzerland, America made it through the war without damage to its domestic infrastructure. Unlike Switzerland, we sent much of our workforce abroad to fight. This led the Roosevelt Administration to impose national wage controls to prevent inflationary increases in labor costs. Employers who wanted to compete for workers could, however, offer commercial health insurance. That spurred our distinctive reliance on private insurance obtained through ones place of employmenta source of troubles (for employers and the unemployed alike) that weve struggled with for six decades. Some people regard the path-dependence of our policies as evidence of weak leadership; we have, they charge, allowed our choices to be constrained by history and by vested interests. But thats too simple. The reality is that leaders are held responsible for the hazards of change as well as for the benefits. And the history of master-planned transformation isnt exactly inspiring. The familiar horror story is Maos Great Leap Forward, where the collectivization of farming caused some thirty million deaths from famine. But, to take an example from our own era, consider Defense Secretary Donald Rumsfelds disastrous reinvention of modern military operations for the 2003 invasion of Iraq, in which he insisted on deploying far fewer ground troops than were needed. Or consider a health-care example: the 2003 prescription-drug program for Americas elderly. This legislation aimed to expand the Medicare insurance program in order to provide drug coverage for some ten million elderly Americans who lacked it, averaging fifteen hundred dollars per person annually. The White House, congressional Republicans, and the pharmaceutical industry opposed providing this coverage through the existing Medicare public-insurance program. Instead, they created an entirely new, market-oriented program that offered the elderly an online choice of competing, partially subsidized commercial drug-insurance plans. It was, in theory, a reasonable approach. But it meant that twenty-five million Americans got new drug plans, and that all sixty thousand retail pharmacies in the United States had to establish contracts and billing systems for those plans. On January 1, 2006, the program went into effect nationwide. The result was chaos. There had been little realistic consideration of how millions of elderly people with cognitive difficulties, chronic illness, or limited English would manage to select the right plan for themselves. Even the savviest struggled to figure out how to navigate the choices: insurance companies offered 1,429 prescription-drug plans across the country. People arrived at their pharmacy only to discover that they needed an insurance card that hadnt come, or that they hadnt received pre-authorization for their drugs, or had switched to a plan that didnt cover the drugs they took. Tens of thousands were unable to get their prescriptions filled, many for

essential drugs like insulin, inhalers, and blood-pressure medications. The result was a public-health crisis in thirty-seven states, which had to provide emergency pharmacy payments for the frail. We will never know how many were harmed, but it is likely that the program killed people. This is the trouble with the lure of the ideal. Over and over in the health-reform debate, one hears serious policy analysts say that the only genuine solution is to replace our health-care system (with a single-payer system, a free-market system, or whatever); anything else is a missed opportunity. But this is a siren song. Yes, American health care is an appallingly patched-together ship, with rotting timbers, water leaking in, mercenaries on board, and fifteen per cent of the passengers thrown over the rails just to keep it afloat. But hundreds of millions of people depend on it. The system provides more than thirty-five million hospital stays a year, sixty-four million surgical procedures, nine hundred million office visits, three and a half billion prescriptions. It represents a sixth of our economy. There is no dry-docking health care for a few months, or even for an afternoon, while we rebuild it. Grand plans admit no possibility of mistakes or failures, or the chance to learn from them. If we get things wrong, people will die. This doesnt mean that ambitious reform is beyond us. But we have to start with what we have. That kind of constraint isnt unique to the health-care system. A century ago, the modern phone system was built on a structure that came to be called the P.S.T.N., the Public Switched Telephone Network. This automated system connects our phone calls twenty-four hours a day, and over time it has had to be upgraded. But you cant turn off the phone system and do a reboot. Its too critical to too many. So engineers have had to add on one patch after another. The P.S.T.N. is probably the shaggiest, most convoluted system around; it contains tens of millions of lines of software code. Given a chance for a do-over, no self-respecting engineer would create anything remotely like it. Yet this jerry-rigged system has provided us with 911 emergency service, voice mail, instant global connectivity, mobile-phone lines, and the transformation from analog to digital communication. It has also been fantastically reliable, designed to have as little as two hours of total downtime every forty years. As a system that cant be turned off, the P.S.T.N. may be the ultimate in path-dependence. But that hasnt prevented dramatic change. The structure may not have undergone revolution; the way it functions has. The P.S.T.N. has made the twenty-first century possible. So accepting the path-dependent nature of our health-care systemrecognizing that we had better build on what weve gotdoesnt mean that we have to curtail our ambitions. The overarching goal of health-care reform is to establish a system that has three basic attributes. It should leave no one uncoveredmedical debt must disappear as a cause of personal bankruptcy in America. It should no longer be an economic catastrophe for employers. And it should hold doctors, nurses, hospitals, drug and device companies, and insurers collectively responsible for making care better, safer, and less costly. We cannot swap out our old system for a new one that will accomplish all this. But we can build a new system on the old one. On the start date for our new health-care systemon, say, January 1, 2011 there need be no noticeable change for the vast majority of Americans who have dependable coverage and decent health care. But we can construct a kind of lifeboat alongside it for those who have been left out or dumped out, a rescue program for people like Starla Darling. In designing this program, well inevitably want to build on the institutions we already have. That precept sounds as if it would severely limit our choices. But our health-care system has been a hodgepodge for so long that we actually have experience with all kinds of systems. The truth is that American health care has been more flotilla than ship. Our veterans health-care system is a program of twelve hundred government-run hospitals and other medical facilities all across the country (just like Britains). We could open it up to other people. We could give people a chance to join Medicare, our government insurance program (much like Canadas). Or we could provide people with coverage through the benefits program that federal workers already have, a system of private-insurance choices (like Switzerlands). These are all established programs, each with advantages and disadvantages. The veterans system has low costs, one of the nations best information-technology systems for health care, and quality of care that (despite what youve heard) has, in recent years, come to exceed the private sectors on numerous

measures. But it has a tightly limited choice of cliniciansyou cant go to see any doctor you want, and the nearest facility may be far away from where you live. Medicare allows you to go to almost any private doctor or hospital you like, and has been enormously popular among its beneficiaries, but it costs about a third more per person and has had a hard time getting doctors and hospitals to improve the quality and safety of their care. Federal workers are entitled to a range of subsidized private-insurance choices, but insurance companies have done even less than Medicare to contain costs and most have done little to improve health care (although there are some striking exceptions). Any of the programs could allow us to offer a starting group of Americansthe uninsured under twenty-five years of age, saythe chance to join within weeks. With time and experience, the programs could be made available to everyone who lacks coverage. The current discussion between the Obama Administration and congressional leaders seems to center on opening up the federal workers insurance options and Medicare (or the equivalent) this way, with subsidized premiums for those with low incomes. The costs have to be dealt with. The leading proposals would try to hold down health-care spending in various ways (by, for example, requiring better management of patients with expensive chronic diseases); employers would have to pay some additional amount in taxes if they didnt provide health insurance for their employees. Theres nothing easy about any of this. But, if we accept it, well all have a lifeboat when we need one. It wont necessarily be clear what the final system will look like. Maybe employers will continue to slough off benefits, and that lifeboat will grow to become the entire system. Or maybe employers will decide to strengthen their benefits programs to attract employees, and American health care will emerge as a mixture of the new and the old. We could have Medicare for retirees, the V.A. for veterans, employer-organized insurance for some workers, federally organized insurance for others. The system will undoubtedly be messier than anything an idealist would devise. But the results would almost certainly be better. Massachusetts, where I live and work, recently became the first state to adopt a system of universal health coverage for its residents. It didnt organize a government takeover of the states hospitals or insurance companies, or force people into a new system of state-run clinics. It built on what existed. On July 1, 2007, the state began offering an online choice of four private insurance plans for people without health coverage. The cost is zero for the poor; for the rest, it is limited to no more than about eight per cent of income. The vast majority of families, who had insurance through work, didnt notice a thing when the program was launched. But those who had no coverage had to enroll in a plan or incur a tax penalty. The results have been remarkable. After a year, 97.4 per cent of Massachusetts residents had coverage, and the remaining gap continues to close. Despite the requirement that individuals buy insurance and that employers either provide coverage or pay a tax, the program has remained extremely popular. Repeated surveys have found that at least two-thirds of the states residents support the reform. The Massachusetts plan didnt do anything about medical costs, however, and, with layoffs accelerating, more people require subsidized care than the state predicted. Insurance premiums continue to rise here, just as they do elsewhere in the country. Many residents also complain that eight per cent of their income is too much to pay for health insurance, even though, on average, premiums amount to twice that much. The experience has shown national policymakers that they will have to be serious about reducing costs. For all that, the majority of state residents would not go back to the old system. Im among them. For years, about one in ten of my patientsI specialize in cancer surgeryhad no insurance. Even though Id waive my fee, they struggled to pay for their tests, medications, and hospital stay. I once took care of a nineteen-year-old college student who had maxed out her insurance coverage. She had a treatable but metastatic cancer. But neither she nor her parents could afford the radiation therapy that she required. I made calls to find state programs, charitiesanything that could help herto no avail. She put off the treatment for almost a year because she didnt want to force her parents to take out a second mortgage on their home. But eventually they had to choose between their daughter and their lifes savings.

For the past year, I havent had a single Massachusetts patient who has had to ask how much the necessary tests will cost; not one who has told me he needed to put off his cancer operation until he found a job that provided insurance coverage. And thats a remarkable change: a glimpse of American health care without the routine cruelty. It will be no utopia. People will still face co-payments and premiums. There may still be agonizing disputes over coverage for non-standard treatments. Whatever the systems contours, we will still find it exasperating, even disappointing. Were not going to get perfection. But we can have transformation which is to say, a health-care system that works. And there are ways to get there that start from where we are.

ANNALS OF MEDICINE THE COST CONUNDRUM What a Texas town can teach us about health care. by Atul GawandeJUNE 1, 2009
Costlier care is often worse care.

It is spring in McAllen, Texas. The morning sun is warm. The streets are lined with palm trees and pickup trucks. McAllen is in Hidalgo County, which has the lowest household income in the country, but its a border town, and a thriving foreign-trade zone has kept the unemployment rate below ten per cent. McAllen calls itself the Square Dance Capital of the World. Lonesome Dove was set around here. McAllen has another distinction, too: it is one of the most expensive health-care markets in the country. Only Miamiwhich has much higher labor and living costsspends more per person on health care. In 2006, Medicare spent fifteen thousand dollars per enrollee here, almost twice the national average. The income per capita is twelve thousand dollars. In other words, Medicare spends three thousand dollars more per person here than the average person earns. The explosive trend in American medical costs seems to have occurred here in an especially intense form. Our countrys health care is by far the most expensive in the world. In Washington, the aim of health-care reform is not just to extend medical coverage to everybody but also to bring costs under control. Spending on doctors, hospitals, drugs, and the like now consumes more than one of every six dollars we earn. The financial burden has damaged the global competitiveness of American businesses and bankrupted millions of families, even those with insurance. Its also devouring our government. The greatest threat to Americas fiscal health is not Social Security, President Barack Obama said in a March speech at the White House. Its not the investments that weve made to rescue our economy during this crisis. By a wide margin, the biggest threat to our nations balance sheet is the skyrocketing cost of health care. Its not even close. The question were now frantically grappling with is how this came to be, and what can be done about it. McAllen, Texas, the most expensive town in the most expensive country for health care in the world, seemed a good place to look for some answers. From the moment I arrived, I asked almost everyone I encountered about McAllens health costsa businessman I met at the five-gate McAllen-Miller International Airport, the desk clerks at the Embassy Suites Hotel, a police-academy cadet at McDonalds. Most werent surprised to hear that McAllen was an outlier. Just look around, the cadet said. People are not healthy here. McAllen, with its high poverty rate, has an incidence of heavy drinking sixty per cent higher than the national average. And the Tex-Mex diet has contributed to a thirty-eight-per-cent obesity rate. One day, I went on rounds with Lester Dyke, a weather-beaten, ranch-owning fifty-three-year-old cardiac surgeon who grew up in Austin, did his surgical training with the Army all over the country, and settled into practice in Hidalgo County. He has not lacked for business: in the past twenty years, he has done some eight thousand heart operations, which exhausts me just thinking about it. I walked around with him as he checked in on ten or so of his patients who were recuperating at the three hospitals where he operates. It was easy to see what had landed them under his knife. They were nearly all obese or diabetic or both. Many had a family history of heart disease. Few were taking preventive measures, such as cholesterol-lowering drugs, which, studies indicate, would have obviated surgery for up to half of them. Yet public-health statistics show that cardiovascular-disease rates in the county are actually lower than average, probably because its smoking rates are quite low. Rates of asthma, H.I.V., infant mortality, cancer, and injury are lower, too. El Paso County, eight hundred miles up the border, has essentially the same demographics. Both counties have a population of roughly seven hundred thousand, similar publichealth statistics, and similar percentages of non-English speakers, illegal immigrants, and the

unemployed. Yet in 2006 Medicare expenditures (our best approximation of over-all spending patterns) in El Paso were $7,504 per enrolleehalf as much as in McAllen. An unhealthy population couldnt possibly be the reason that McAllens health-care costs are so high. (Or the reason that Americas are. We may be more obese than any other industrialized nation, but we have among the lowest rates of smoking and alcoholism, and we are in the middle of the range for cardiovascular disease and diabetes.) Was the explanation, then, that McAllen was providing unusually good health care? I took a walk through Doctors Hospital at Renaissance, in Edinburg, one of the towns in the McAllen metropolitan area, with Robert Alleyn, a Houston-trained general surgeon who had grown up here and returned home to practice. The hospital campus sprawled across two city blocks, with a series of three- and four-story stucco buildings separated by golfing-green lawns and black asphalt parking lots. He pointed out the sightsthe cancer center is over here, the heart center is over there, now were coming to the imaging center. We went inside the surgery building. It was sleek and modern, with recessed lighting, classical music piped into the waiting areas, and nurses moving from patient to patient behind rolling black computer pods. We changed into scrubs and Alleyn took me through the sixteen operating rooms to show me the laparoscopy suite, with its flat-screen video monitors, the hybrid operating room with built-in imaging equipment, the surgical robot for minimally invasive robotic surgery. I was impressed. The place had virtually all the technology that youd find at Harvard and Stanford and the Mayo Clinic, and, as I walked through that hospital on a dusty road in South Texas, this struck me as a remarkable thing. Rich towns get the new school buildings, fire trucks, and roads, not to mention the better teachers and police officers and civil engineers. Poor towns dont. But that rule doesnt hold for health care. At McAllen Medical Center, I saw an orthopedic surgeon work under an operating microscope to remove a tumor that had wrapped around the spinal cord of a fourteen-year-old. At a home-health agency, I spoke to a nurse who could provide intravenous-drug therapy for patients with congestive heart failure. At McAllen Heart Hospital, I watched Dyke and a team of six do a coronary-artery bypass using technologies that didnt exist a few years ago. At Renaissance, I talked with a neonatologist who trained at my hospital, in Boston, and brought McAllen new skills and technologies for premature babies. Ive had nurses come up to me and say, I never knew these babies could survive, he said. And yet theres no evidence that the treatments and technologies available at McAllen are better than those found elsewhere in the country. The annual reports that hospitals file with Medicare show that those in McAllen and El Paso offer comparable technologiesneonatal intensive-care units, advanced cardiac services, PET scans, and so on. Public statistics show no difference in the supply of doctors. Hidalgo County actually has fewer specialists than the national average. Nor does the care given in McAllen stand out for its quality. Medicare ranks hospitals on twenty-five metrics of care. On all but two of these, McAllens five largest hospitals performed worse, on average, than El Pasos. McAllen costs Medicare seven thousand dollars more per person each year than does the average city in America. But not, so far as one can tell, because its delivering better health care. One night, I went to dinner with six McAllen doctors. All were what you would call bread-and-butter physicians: busy, full-time, private-practice doctors who work from seven in the morning to seven at night and sometimes later, their waiting rooms teeming and their desks stacked with medical charts to review. Some were dubious when I told them that McAllen was the countrys most expensive place for health care. I gave them the spending data from Medicare. In 1992, in the McAllen market, the average cost per Medicare enrollee was $4,891, almost exactly the national average. But since then, year after year, McAllens health costs have grown faster than any other market in the country, ultimately soaring by more than ten thousand dollars per person. Maybe the service is better here, the cardiologist suggested. People can be seen faster and get their tests more readily, he said. Others were skeptical. I dont think that explains the costs hes talking about, the general surgeon said. Its malpractice, a family physician who had practiced here for thirty-three years said.

McAllen is legal hell, the cardiologist agreed. Doctors order unnecessary tests just to protect themselves, he said. Everyone thought the lawyers here were worse than elsewhere. That explanation puzzled me. Several years ago, Texas passed a tough malpractice law that capped pain-and-suffering awards at two hundred and fifty thousand dollars. Didnt lawsuits go down? Practically to zero, the cardiologist admitted. Come on, the general surgeon finally said. We all know these arguments are bullshit. There is overutilization here, pure and simple. Doctors, he said, were racking up charges with extra tests, services, and procedures. The surgeon came to McAllen in the mid-nineties, and since then, he said, the way to practice medicine has changed completely. Before, it was about how to do a good job. Now it is about How much will you benefit? Everyone agreed that something fundamental had changed since the days when health-care costs in McAllen were the same as those in El Paso and elsewhere. Yes, they had more technology. But young doctors dont think anymore, the family physician said. The surgeon gave me an example. General surgeons are often asked to see patients with pain from gallstones. If there arent any complicationsand there usually arentthe pain goes away on its own or with pain medication. With instruction on eating a lower-fat diet, most patients experience no further difficulties. But some have recurrent episodes, and need surgery to remove their gallbladder. Seeing a patient who has had uncomplicated, first-time gallstone pain requires some judgment. A surgeon has to provide reassurance (people are often scared and want to go straight to surgery), some education about gallstone disease and diet, perhaps a prescription for pain; in a few weeks, the surgeon might follow up. But increasingly, I was told, McAllen surgeons simply operate. The patient wasnt going to moderate her diet, they tell themselves. The pain was just going to come back. And by operating they happen to make an extra seven hundred dollars. I gave the doctors around the table a scenario. A forty-year-old woman comes in with chest pain after a fight with her husband. An EKG is normal. The chest pain goes away. She has no family history of heart disease. What did McAllen doctors do fifteen years ago? Send her home, they said. Maybe get a stress test to confirm that theres no issue, but even that might be overkill. And today? Today, the cardiologist said, she would get a stress test, an echocardiogram, a mobile Holter monitor, and maybe even a cardiac catheterization. Oh, shes definitely getting a cath, the internist said, laughing grimly. To determine whether overuse of medical care was really the problem in McAllen, I turned to Jonathan Skinner, an economist at Dartmouths Institute for Health Policy and Clinical Practice, which has three decades of expertise in examining regional patterns in Medicare payment data. I also turned to two private firmsD2Hawkeye, an independent company, and Ingenix, UnitedHealthcares data-analysis companyto analyze commercial insurance data for McAllen. The answer was yes. Compared with patients in El Paso and nationwide, patients in McAllen got more of pretty much everythingmore diagnostic testing, more hospital treatment, more surgery, more home care. The Medicare payment data provided the most detail. Between 2001 and 2005, critically ill Medicare patients received almost fifty per cent more specialist visits in McAllen than in El Paso, and were twothirds more likely to see ten or more specialists in a six-month period. In 2005 and 2006, patients in McAllen received twenty per cent more abdominal ultrasounds, thirty per cent more bone-density studies, sixty per cent more stress tests with echocardiography, two hundred per cent more nerve-conduction studies to diagnose carpal-tunnel syndrome, and five hundred and fifty per cent more urine-flow studies to diagnose prostate troubles. They received one-fifth to two-thirds more gallbladder operations, knee replacements, breast biopsies, and bladder scopes. They also received two to three times as many pacemakers, implantable defibrillators, cardiac-bypass operations, carotid endarterectomies, and coronary-artery stents. And Medicare paid for five times as many home-nurse visits. The primary cause of McAllens extreme costs was, very simply, the across-the-board overuse of medicine.

This is a disturbing and perhaps surprising diagnosis. Americans like to believe that, with most things, more is better. But research suggests that where medicine is concerned it may actually be worse. For example, Rochester, Minnesota, where the Mayo Clinic dominates the scene, has fantastically high levels of technological capability and quality, but its Medicare spending is in the lowest fifteen per cent of the country$6,688 per enrollee in 2006, which is eight thousand dollars less than the figure for McAllen. Two economists working at Dartmouth, Katherine Baicker and Amitabh Chandra, found that the more money Medicare spent per person in a given state the lower that states quality ranking tended to be. In fact, the four states with the highest levels of spendingLouisiana, Texas, California, and Floridawere near the bottom of the national rankings on the quality of patient care. In a 2003 study, another Dartmouth team, led by the internist Elliott Fisher, examined the treatment received by a million elderly Americans diagnosed with colon or rectal cancer, a hip fracture, or a heart attack. They found that patients in higher-spending regions received sixty per cent more care than elsewhere. They got more frequent tests and procedures, more visits with specialists, and more frequent admission to hospitals. Yet they did no better than other patients, whether this was measured in terms of survival, their ability to function, or satisfaction with the care they received. If anything, they seemed to do worse. Thats because nothing in medicine is without risks. Complications can arise from hospital stays, medications, procedures, and tests, and when these things are of marginal value the harm can be greater than the benefits. In recent years, we doctors have markedly increased the number of operations we do, for instance. In 2006, doctors performed at least sixty million surgical procedures, one for every five Americans. No other country does anything like as many operations on its citizens. Are we better off for it? No one knows for sure, but it seems highly unlikely. After all, some hundred thousand people die each year from complications of surgeryfar more than die in car crashes. To make matters worse, Fisher found that patients in high-cost areas were actually less likely to receive low-cost preventive services, such as flu and pneumonia vaccines, faced longer waits at doctor and emergency-room visits, and were less likely to have a primary-care physician. They got more of the stuff that cost more, but not more of what they needed. In an odd way, this news is reassuring. Universal coverage wont be feasible unless we can control costs. Policymakers have worried that doing so would require rationing, which the public would never go along with. So the idea that theres plenty of fat in the system is proving deeply attractive. Nearly thirty per cent of Medicares costs could be saved without negatively affecting health outcomes if spending in high- and medium-cost areas could be reduced to the level in low-cost areas, Peter Orszag, the Presidents budget director, has stated. Most Americans would be delighted to have the quality of care found in places like Rochester, Minnesota, or Seattle, Washington, or Durham, North Carolinaall of which have world-class hospitals and costs that fall below the national average. If we brought the cost curve in the expensive places down to their level, Medicares problems (indeed, almost all the federal governments budget problems for the next fifty years) would be solved. The difficulty is how to go about it. Physicians in places like McAllen behave differently from others. The $2.4-trillion question is why. Unless we figure it out, health reform will fail. I had what I considered to be a reasonable plan for finding out what was going on in McAllen. I would call on the heads of its hospitals, in their swanky, decorator-designed, churrigueresco offices, and Id ask them. The first hospital I visited, McAllen Heart Hospital, is owned by Universal Health Services, a forprofit hospital chain with headquarters in King of Prussia, Pennsylvania, and revenues of five billion dollars last year. I went to see the hospitals chief operating officer, Gilda Romero. Truth be told, her office seemed less churrigueresco than Office Depot. She had straight brown hair, sympathetic eyes, and looked more like a young school teacher than like a corporate officer with nineteen years of experience. And when I inquired, What is going on in this place? she looked surprised. Is McAllen really that expensive? she asked.

I described the data, including the numbers indicating that heart operations and catheter procedures and pacemakers were being performed in McAllen at double the usual rate. That is interesting, she said, by which she did not mean, Uh-oh, youve caught us but, rather, That is actually interesting. The problem of McAllens outlandish costs was new to her. She puzzled over the numbers. She was certain that her doctors performed surgery only when it was necessary. It had to be one of the other hospitals. And she had one in mindDoctors Hospital at Renaissance, the hospital in Edinburg that I had toured. She wasnt the only person to mention Renaissance. It is the newest hospital in the area. It is physician-owned. And it has a reputation (which it disclaims) for aggressively recruiting high-volume physicians to become investors and send patients there. Physicians who do so receive not only their fee for whatever service they provide but also a percentage of the hospitals profits from the tests, surgery, or other care patients are given. (In 2007, its profits totalled thirty-four million dollars.) Romero and others argued that this gives physicians an unholy temptation to overorder. Such an arrangement can make physician investors rich. But it cant be the whole explanation. The hospital gets barely a sixth of the patients in the region; its margins are no bigger than the other hospitalswhether for profit or not for profitand it didnt have much of a presence until 2004 at the earliest, a full decade after the cost explosion in McAllen began. Those are good points, Romero said. She couldnt explain what was going on. The following afternoon, I visited the top managers of Doctors Hospital at Renaissance. We sat in their boardroom around one end of a yacht-length table. The chairman of the board offered me a soda. The chief of staff smiled at me. The chief financial officer shook my hand as if I were an old friend. The C.E.O., however, was having a hard time pretending that he was happy to see me. Lawrence Gelman was a fifty-seven-year-old anesthesiologist with a Bill Clinton shock of white hair and a weekly local radio show tag-lined Opinions from an Unrelenting Conservative Spirit. He had helped found the hospital. He barely greeted me, and while the others were trying for a how-can-I-help-you-today attitude, his body language was more lets-get-this-over-with. So I asked him why McAllens health-care costs were so high. What he gave me was a disquisition on the theory and history of American health-care financing going back to Lyndon Johnson and the creation of Medicare, the upshot of which was: (1) Government is the problem in health care. The people in charge of the purse strings dont know what theyre doing. (2) If anything, government insurance programs like Medicare dont pay enough. I, as an anesthesiologist, know that they pay me ten per cent of what a private insurer pays. (3) Government programs are full of waste. Every person in this room could easily go through the expenditures of Medicare and Medicaid and see all kinds of waste. (4) But not in McAllen. The clinicians here, at least at Doctors Hospital at Renaissance, are providing necessary, essential health care, Gelman said. We dont invent patients. Then why do hospitals in McAllen order so much more surgery and scans and tests than hospitals in El Paso and elsewhere? In the end, the only explanation he and his colleagues could offer was this: The other doctors and hospitals in McAllen may be overspending, but, to the extent that his hospital provides costlier treatment than other places in the country, it is making people better in ways that data on quality and outcomes do not measure. Do we provide better health care than El Paso? Gelman asked. I would bet you two to one that we do. It was a depressing conversationnot because I thought the executives were being evasive but because they werent being evasive. The data on McAllens costs were clearly new to them. They were defending McAllen reflexively. But they really didnt know the big picture of what was happening. And, I realized, few people in their position do. Local executives for hospitals and clinics and homehealth agencies understand their growth rate and their market share; they know whether they are losing money or making money. They know that if their doctors bring in enough businesssurgery, imaging, home-nursing referralsthey make money; and if they get the doctors to bring in more, they make more. But they have only the vaguest notion of whether the doctors are making their communities as healthy as

they can, or whether they are more or less efficient than their counterparts elsewhere. A doctor sees a patient in clinic, and has her check into a McAllen hospital for a CT scan, an ultrasound, three rounds of blood tests, another ultrasound, and then surgery to have her gallbladder removed. How is Lawrence Gelman or Gilda Romero to know whether all that is essential, let alone the best possible treatment for the patient? It isnt what they are responsible or accountable for. Health-care costs ultimately arise from the accumulation of individual decisions doctors make about which services and treatments to write an order for. The most expensive piece of medical equipment, as the saying goes, is a doctors pen. And, as a rule, hospital executives dont own the pen caps. Doctors do. If doctors wield the pen, why do they do it so differently from one place to another? Brenda Sirovich, another Dartmouth researcher, published a study last year that provided an important clue. She and her team surveyed some eight hundred primary-care physicians from high-cost cities (such as Las Vegas and New York), low-cost cities (such as Sacramento and Boise), and others in between. The researchers asked the physicians specifically how they would handle a variety of patient cases. It turned out that differences in decision-making emerged in only some kinds of cases. In situations in which the right thing to do was well establishedfor example, whether to recommend a mammogram for a fifty-year-old woman (the answer is yes)physicians in high- and low-cost cities made the same decisions. But, in cases in which the science was unclear, some physicians pursued the maximum possible amount of testing and procedures; some pursued the minimum. And which kind of doctor they were depended on where they came from. Sirovich asked doctors how they would treat a seventy-five-year-old woman with typical heartburn symptoms and adequate health insurance to cover tests and medications. Physicians in high- and lowcost cities were equally likely to prescribe antacid therapy and to check for H. pylori, an ulcer-causing bacteriumsteps strongly recommended by national guidelines. But when it came to measures of less certain valueand higher costthe differences were considerable. More than seventy per cent of physicians in high-cost cities referred the patient to a gastroenterologist, ordered an upper endoscopy, or both, while half as many in low-cost cities did. Physicians from high-cost cities typically recommended that patients with well-controlled hypertension see them in the office every one to three months, while those from low-cost cities recommended visits twice yearly. In case after uncertain case, more was not necessarily better. But physicians from the most expensive cities did the most expensive things. Why? Some of it could reflect differences in training. I remember when my wife brought our infant son Walker to visit his grandparents in Virginia, and he took a terrifying fall down a set of stairs. They drove him to the local community hospital in Alexandria. A CT scan showed that he had a tiny subdural hematomaa small area of bleeding in the brain. During ten hours of observation, though, he was fine eating, drinking, completely alert. I was a surgery resident then and had seen many cases like his. We observed each child in intensive care for at least twenty-four hours and got a repeat CT scan. That was how Id been trained. But the doctor in Alexandria was going to send Walker home. That was how hed been trained. Suppose things change for the worse? I asked him. Its extremely unlikely, he said, and if anything changed Walker could always be brought back. I bullied the doctor into admitting him anyway. The next day, the scan and the patient were fine. And, looking in the textbooks, I learned that the doctor was right. Walker could have been managed safely either way. There was no sign, however, that McAllens doctors as a group were trained any differently from El Pasos. One morning, I met with a hospital administrator who had extensive experience managing forprofit hospitals along the border. He offered a different possible explanation: the culture of money. In El Paso, if you took a random doctor and looked at his tax returns eighty-five per cent of his income would come from the usual practice of medicine, he said. But in McAllen, the administrator thought, that percentage would be a lot less. He knew of doctors who owned strip malls, orange groves, apartment complexesor imaging centers, surgery centers, or another part of the hospital they directed patients to. They had entrepreneurial spirit, he said. They were innovative and aggressive in finding ways to increase revenues from patient care. Theres no lack of work ethic, he said. But he had often seen financial considerations drive the decisions doctors made for patientsthe tests they ordered, the doctors and

hospitals they recommendedand it bothered him. Several doctors who were unhappy about the direction medicine had taken in McAllen told me the same thing. Its a machine, my friend, one surgeon explained. No one teaches you how to think about money in medical school or residency. Yet, from the moment you start practicing, you must think about it. You must consider what is covered for a patient and what is not. You must pay attention to insurance rejections and government-reimbursement rules. You must think about having enough money for the secretary and the nurse and the rent and the malpractice insurance. Beyond the basics, however, many physicians are remarkably oblivious to the financial implications of their decisions. They see their patients. They make their recommendations. They send out the bills. And, as long as the numbers come out all right at the end of each month, they put the money out of their minds. Others think of the money as a means of improving what they do. They think about how to use the insurance money to maybe install electronic health records with colleagues, or provide easier phone and e-mail access, or offer expanded hours. They hire an extra nurse to monitor diabetic patients more closely, and to make sure that patients dont miss their mammograms and pap smears and colonoscopies. Then there are the physicians who see their practice primarily as a revenue stream. They instruct their secretary to have patients who call with follow-up questions schedule an appointment, because insurers dont pay for phone calls, only office visits. They consider providing Botox injections for cash. They take a Doppler ultrasound course, buy a machine, and start doing their patients scans themselves, so that the insurance payments go to them rather than to the hospital. They figure out ways to increase their highmargin work and decrease their low-margin work. This is a business, after all. In every community, youll find a mixture of these views among physicians, but one or another tends to predominate. McAllen seems simply to be the community at one extreme. In a few cases, the hospital executive told me, hed seen the behavior cross over into what seemed like outright fraud. Ive had doctors here come up to me and say, You want me to admit patients to your hospital, youre going to have to pay me. How much? I asked. The amountsall of them were over a hundred thousand dollars per year, he said. The doctors were specific. The most he was asked for was five hundred thousand dollars per year. He didnt pay any of them, he said: I mean, I gotta sleep at night. And he emphasized that these were just a handful of doctors. But he had never been asked for a kickback before coming to McAllen. Woody Powell is a Stanford sociologist who studies the economic culture of cities. Recently, he and his research team studied why certain regionsBoston, San Francisco, San Diegobecame leaders in biotechnology while others with a similar concentration of scientific and corporate talentLos Angeles, Philadelphia, New Yorkdid not. The answer they found was what Powell describes as the anchor-tenant theory of economic development. Just as an anchor store will define the character of a mall, anchor tenants in biotechnology, whether its a company like Genentech, in South San Francisco, or a university like M.I.T., in Cambridge, define the character of an economic community. They set the norms. The anchor tenants that set norms encouraging the free flow of ideas and collaboration, even with competitors, produced enduringly successful communities, while those that mainly sought to dominate did not. Powell suspects that anchor tenants play a similarly powerful community role in other areas of economics, too, and health care may be no exception. I spoke to a marketing rep for a McAllen homehealth agency who told me of a process uncannily similar to what Powell found in biotech. Her job is to persuade doctors to use her agency rather than others. The competition is fierce. I opened the phone book and found seventeen pages of listings for home-health agenciestwo hundred and sixty in all. A patient typically brings in between twelve hundred and fifteen hundred dollars, and double that amount for specialized care. She described how, a decade or so ago, a few early agencies began rewarding doctors who ordered home visits with more than trinkets: they provided tickets to professional sporting events, jewelry, and other gifts. That set the tone. Other agencies jumped in. Some began paying doctors a supplemental salary, as medical directors, for steering business in their direction. Doctors came to expect a share of the revenue stream.

Agencies that want to compete on quality struggle to remain in business, the rep said. Doctors have asked her for a medical-director salary of four or five thousand dollars a month in return for sending her business. One asked a colleague of hers for private-school tuition for his child; another wanted sex. I explained the rules and regulations and the anti-kickback law, and told them no, she said of her dealings with such doctors. Does it hurt my business? She paused. Im O.K. working only with ethical physicians, she finally said. About fifteen years ago, it seems, something began to change in McAllen. A few leaders of local institutions took profit growth to be a legitimate ethic in the practice of medicine. Not all the doctors accepted this. But they failed to discourage those who did. So here, along the banks of the Rio Grande, in the Square Dance Capital of the World, a medical community came to treat patients the way subprimemortgage lenders treated home buyers: as profit centers. The real puzzle of American health care, I realized on the airplane home, is not why McAllen is different from El Paso. Its why El Paso isnt like McAllen. Every incentive in the system is an invitation to go the way McAllen has gone. Yet, across the country, large numbers of communities have managed to control their health costs rather than ratchet them up. I talked to Denis Cortese, the C.E.O. of the Mayo Clinic, which is among the highest-quality, lowestcost health-care systems in the country. A couple of years ago, I spent several days there as a visiting surgeon. Among the things that stand out from that visit was how much time the doctors spent with patients. There was no churnno shuttling patients in and out of rooms while the doctor bounces from one to the other. I accompanied a colleague while he saw patients. Most of the patients, like those in my clinic, required about twenty minutes. But one patient had colon cancer and a number of other complex issues, including heart disease. The physician spent an hour with her, sorting things out. He phoned a cardiologist with a question. Ill be there, the cardiologist said. Fifteen minutes later, he was. They mulled over everything together. The cardiologist adjusted a medication, and said that no further testing was needed. He cleared the patient for surgery, and the operating room gave her a slot the next day. The whole interaction was astonishing to me. Just having the cardiologist pop down to see the patient with the surgeon would be unimaginable at my hospital. The time required wouldnt pay. The time required just to organize the system wouldnt pay. The core tenet of the Mayo Clinic is The needs of the patient come firstnot the convenience of the doctors, not their revenues. The doctors and nurses, and even the janitors, sat in meetings almost weekly, working on ideas to make the service and the care better, not to get more money out of patients. I asked Cortese how the Mayo Clinic made this possible. Its not easy, he said. But decades ago Mayo recognized that the first thing it needed to do was eliminate the financial barriers. It pooled all the money the doctors and the hospital system received and began paying everyone a salary, so that the doctors goal in patient care couldnt be increasing their income. Mayo promoted leaders who focussed first on what was best for patients, and then on how to make this financially possible. No one there actually intends to do fewer expensive scans and procedures than is done elsewhere in the country. The aim is to raise quality and to help doctors and other staff members work as a team. But, almost by happenstance, the result has been lower costs. When doctors put their heads together in a room, when they share expertise, you get more thinking and less testing, Cortese told me. Skeptics saw the Mayo model as a local phenomenon that wouldnt carry beyond the hay fields of northern Minnesota. But in 1986 the Mayo Clinic opened a campus in Florida, one of our most expensive states for health care, and, in 1987, another one in Arizona. It was difficult to recruit staff members who would accept a salary and the Mayos collaborative way of practicing. Leaders were working against the dominant medical culture and incentives. The expansion sites took at least a decade to get properly established. But eventually they achieved the same high-quality, low-cost results as Rochester. Indeed, Cortese says that the Florida site has become, in some respects, the most efficient one in the system.

The Mayo Clinic is not an aberration. One of the lowest-cost markets in the country is Grand Junction, Colorado, a community of a hundred and twenty thousand that nonetheless has achieved some of Medicares highest quality-of-care scores. Michael Pramenko is a family physician and a local medical leader there. Unlike doctors at the Mayo Clinic, he told me, those in Grand Junction get piecework fees from insurers. But years ago the doctors agreed among themselves to a system that paid them a similar fee whether they saw Medicare, Medicaid, or private-insurance patients, so that there would be little incentive to cherry-pick patients. They also agreed, at the behest of the main health plan in town, an H.M.O., to meet regularly on small peer-review committees to go over their patient charts together. They focussed on rooting out problems like poor prevention practices, unnecessary back operations, and unusual hospitalcomplication rates. Problems went down. Quality went up. Then, in 2004, the doctors group and the local H.M.O. jointly created a regional information networka community-wide electronic-record system that shared office notes, test results, and hospital data for patients across the area. Again, problems went down. Quality went up. And costs ended up lower than just about anywhere else in the United States. Grand Junctions medical community was not following anyone elses recipe. But, like Mayo, it created what Elliott Fisher, of Dartmouth, calls an accountable-care organization. The leading doctors and the hospital system adopted measures to blunt harmful financial incentives, and they took collective responsibility for improving the sum total of patient care. This approach has been adopted in other places, too: the Geisinger Health System, in Danville, Pennsylvania; the Marshfield Clinic, in Marshfield, Wisconsin; Intermountain Healthcare, in Salt Lake City; Kaiser Permanente, in Northern California. All of them function on similar principles. All are notfor-profit institutions. And all have produced enviably higher quality and lower costs than the average American town enjoys. When you look across the spectrum from Grand Junction to McAllenand the almost threefold difference in the costs of careyou come to realize that we are witnessing a battle for the soul of American medicine. Somewhere in the United States at this moment, a patient with chest pain, or a tumor, or a cough is seeing a doctor. And the damning question we have to ask is whether the doctor is set up to meet the needs of the patient, first and foremost, or to maximize revenue. There is no insurance system that will make the two aims match perfectly. But having a system that does so much to misalign them has proved disastrous. As economists have often pointed out, we pay doctors for quantity, not quality. As they point out less often, we also pay them as individuals, rather than as members of a team working together for their patients. Both practices have made for serious problems. Providing health care is like building a house. The task requires experts, expensive equipment and materials, and a huge amount of cordination. Imagine that, instead of paying a contractor to pull a team together and keep them on track, you paid an electrician for every outlet he recommends, a plumber for every faucet, and a carpenter for every cabinet. Would you be surprised if you got a house with a thousand outlets, faucets, and cabinets, at three times the cost you expected, and the whole thing fell apart a couple of years later? Getting the countrys best electrician on the job (he trained at Harvard, somebody tells you) isnt going to solve this problem. Nor will changing the person who writes him the check. This last point is vital. Activists and policymakers spend an inordinate amount of time arguing about whether the solution to high medical costs is to have government or private insurance companies write the checks. Heres how this whole debate goes. Advocates of a public option say government financing would save the most money by having leaner administrative costs and forcing doctors and hospitals to take lower payments than they get from private insurance. Opponents say doctors would skimp, quit, or game the system, and make us wait in line for our care; they maintain that private insurers are better at policing doctors. No, the skeptics say: all insurance companies do is reject applicants who need health care and stall on paying their bills. Then we have the economists who say that the people who should pay the doctors are the ones who use them. Have consumers pay with their own dollars, make sure that they have some skin in the game, and then theyll get the care they deserve. These arguments miss the main issue. When it comes to making care better and cheaper, changing who pays the doctor will make no more difference than changing who pays the electrician. The lesson of the high-quality, low-cost communities

is that someone has to be accountable for the totality of care. Otherwise, you get a system that has no brakes. You get McAllen. One afternoon in McAllen, I rode down McColl Road with Lester Dyke, the cardiac surgeon, and we passed a series of office plazas that seemed to be nothing but home-health agencies, imaging centers, and medical-equipment stores. Medicine has become a pig trough here, he muttered. Dyke is among the few vocal critics of whats happened in McAllen. We took a wrong turn when doctors stopped being doctors and became businessmen, he said. We began talking about the various proposals being touted in Washington to fix the cost problem. I asked him whether expanding public-insurance programs like Medicare and shrinking the role of insurance companies would do the trick in McAllen. I dont have a problem with it, he said. But it wont make a difference. In McAllen, government payers already predominatenot many people have jobs with private insurance. How about doing the opposite and increasing the role of big insurance companies? What good would that do? Dyke asked. The third class of health-cost proposals, I explained, would push people to use medical savings accounts and hold high-deductible insurance policies: Theyd have more of their own money on the line, and thatd drive them to bargain with you and other surgeons, right? He gave me a quizzical look. We tried to imagine the scenario. A cardiologist tells an elderly woman that she needs bypass surgery and has Dr. Dyke see her. They discuss the blockages in her heart, the operation, the risks. And now theyre supposed to haggle over the price as if he were selling a rug in a souk? Ill do three vessels for thirty thousand, but if you take four Ill throw in an extra night in the I.C.U.that sort of thing? Dyke shook his head. Who comes up with this stuff? he asked. Any plan that relies on the sheep to negotiate with the wolves is doomed to failure. Instead, McAllen and other cities like it have to be weaned away from their untenably fragmented, quantity-driven systems of health care, step by step. And that will mean rewarding doctors and hospitals if they band together to form Grand Junction-like accountable-care organizations, in which doctors collaborate to increase prevention and the quality of care, while discouraging overtreatment, undertreatment, and sheer profiteering. Under one approach, insurerswhether public or privatewould allow clinicians who formed such organizations and met quality goals to keep half the savings they generate. Government could also shift regulatory burdens, and even malpractice liability, from the doctors to the organization. Other, sterner, approaches would penalize those who dont form these organizations. This will by necessity be an experiment. We will need to do in-depth research on what makes the best systems successfulthe peer-review committees? recruiting more primary-care doctors and nurses? putting doctors on salary?and disseminate what we learn. Congress has provided vital funding for research that compares the effectiveness of different treatments, and this should help reduce uncertainty about which treatments are best. But we also need to fund research that compares the effectiveness of different systems of careto reduce our uncertainty about which systems work best for communities. These are empirical, not ideological, questions. And we would do well to form a national institute for health-care delivery, bringing together clinicians, hospitals, insurers, employers, and citizens to assess, regularly, the quality and the cost of our care, review the strategies that produce good results, and make clear recommendations for local systems. Dramatic improvements and savings will take at least a decade. But a choice must be made. Whom do we want in charge of managing the full complexity of medical care? We can turn to insurers (whether public or private), which have proved repeatedly that they cant do it. Or we can turn to the local medical communities, which have proved that they can. But we have to choose someonebecause, in much of the country, no one is in charge. And the result is the most wasteful and the least sustainable health-care system in the world. Something even more worrisome is going on as well. In the war over the culture of medicinethe war over whether our countrys anchor model will be Mayo or McAllenthe Mayo model is losing. In the sharpest economic downturn that our health system has faced in half a century, many people in medicine

dont see why they should do the hard work of organizing themselves in ways that reduce waste and improve quality if it means sacrificing revenue. In El Paso, the for-profit health-care executive told me, a few leading physicians recently followed McAllens lead and opened their own centers for surgery and imaging. When I was in Tulsa a few months ago, a fellow-surgeon explained how he had made up for lost revenue by shifting his operations for wellinsured patients to a specialty hospital that he partially owned while keeping his poor and uninsured patients at a nonprofit hospital in town. Even in Grand Junction, Michael Pramenko told me, some of the doctors are beginning to complain about leaving money on the table. As America struggles to extend health-care coverage while curbing health-care costs, we face a decision that is more important than whether we have a public-insurance option, more important than whether we will have a single-payer system in the long run or a mixture of public and private insurance, as we do now. The decision is whether we are going to reward the leaders who are trying to build a new generation of Mayos and Grand Junctions. If we dont, McAllen wont be an outlier. It will be our future.