The Journal of the American Medical Association (JAMA) reported June 24, 2010 that Medicare’s program requiring hospitals to reach certain numeric goals that measure the Surgical Care Improvement Process (SCIP) in care of surgery patients do not result in better outcomes:
“Despite this evidence, hospital-level performance on individual SCIP measures is publicly reported "to assist patients in selecting centers of excellence" for receipt of their surgical care. This publicized use implies that reported adherence on these measures is directly related to improved outcomes. Our findings are unable to support this assertion.”
This is a significant blow to Medicare’s “Value-Based Purchasing.” This initiative is part of a trend that the tax-supported payor program for seniors started more than a decade ago to mimic the free market. The method that has been selected attempts to derive numeric scores in three quality domains: process of care, patient satisfaction and outcomes. From these scores, Medicare will apply a payment formula that will redistribute a pool of funds created by a 2% withholding of hospital Medicare payments. This is designed to provide the necessary financial incentives for hospitals to comply with the program. Hospitals with scores in the top quartile will receive 100% of their contributions into the pool. Hospitals in the bottom quartile will not receive any of their contributions back, and the middle 50% will be paid according to a formula that goes from 100% to 0%. These payment formulas will be phased-in from 2013 to 2017. In an era in which Moody’s “A” rated hospitals have operating margins of 2.2% and Medicare represents over half of that margin, giving up 2% of Medicare payments is the difference between keeping the hospital open or closing it.
The study from JAMA looked at a subset of measures for the process of care in surgery known as Surgical Care Improvement Project (SCIP). This project was started by Centers for Medicare and Medicaid Services in 2002 to decrease complications and mortality associated with postoperative care in hospitals. Measures include antibiotics given one hour before incision, clipping rather than shaving hair on the surgical site, keeping blood sugar controlled between certain limits, treatment to prevent blood clots, etc., but there are other non-surgical process measures such as pneumonia patients receiving pneumococcal vaccination. Satisfaction measures include doctors and nurses always communicate well, rooms were always kept clean and quiet at night, etc. Outcome measures include mortality and re-admission rates. Hospitals started reporting in 2004 on 10 measures. Currently they must report on 46 measures. This number is scheduled to grow to 55 in October 2010 and to 90 by 2012.
Medicare’s hypothesis for Value Based Purchasing seems straight forward: if hospitals attain these goals in process, satisfaction, and outcomes, the quality of patient care will improve, and costly interventions to correct negative medical outcomes, such as additional surgeries, antibiotics, vascular procedures, additional days in the hospital, etc., will be avoided. Moreover, if hospital performance in reaching these goals is reported to the public, consumers will chose hospitals with better scores (and lower costs), hence overall healthcare costs for the program will drop.
Using the Misesian critique of socialist calculation we have argued in prior articles (The Health Czar Can’t Calculate” and “Why Obamacare Can’t Work”) that it is impossible for Medicare to give any coordinating content to its mandates, that it is also impossible for healthcare agents to rationally allocate their scarce labor and capital resources under Medicare’s cost-based payment methods and that therefore, at best, Medicare will not be able to reign-in healthcare costs.
The empirical results of this JAMA study point out that even if the socialist calculation problem did not exist, Medicare cannot know with certainty which hospitals offer high quality care and which don’t. First, in reviewing other studies, the authors of the JAMA article found weak or no statistical significance between adherence to individual process of care measures and improvements in patient outcomes. Second, they argue that without better cause and effect relationships between process and outcomes, it is difficult to justify the massive investment in time and resources needed to track all these measures. Third, complications stemming from hospital care are influenced by a myriad of factors that are independent from the process of care measures. Fourth, public reporting of performance in process of care measures which compare hospitals do not infer quality differences between hospitals. And finally, that implementing financial incentives do not improve hospital quality.
These empirical findings by JAMA are fully supported by the Misesian critique of the use of the method proper to the natural sciences to the social sciences. One could make the argument that medicine can use the method of the natural sciences effectively. However, medicine is as much science as it is art. Writing a progress note in a medical record, for example, one that successfully communicates to other clinicians the unique medical history, symptoms, diagnosis and treatment for a patient cannot be fully encapsulated in a statistical function derived from the reaction of the same types of patients in clinical trials or in the experience of the physician. But even granting such a concession, when the method of the natural sciences is applied beyond the narrow confines of very specific predictions about patients and their care to the world of hospital management in which social relationships between thousands of human beings such as patients, care-givers, support staff, management, bond-holders, philanthropists, employers, third party payors, suppliers and competitors influence a myriad of cause and effect relationships that directly and indirectly affect nature of the care given, then the natural sciences method cannot make statistically significant predictions about that care. This is because complex relationships between individuals with their own uniqueness and freedom influence the outcomes that are being measured, and, more importantly, the actions of these individuals many times provoke the very events that Medicare is trying to prevent.
If the cause and effect relationship between Medicare’s proposed goals for hospitals and overall quality is statistically weak or non-existent, then their connection to cost reduction is also weak or non-existent. Medicare’s Value-Based Purchasing initiatives will not cause a reduction in costs. This, in conjunction with the socialist calculation problem, will continue to confuse Medicare’s central planners as they attempt to encourage patients and healthcare providers to simulate the results of competition.
