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February 27, 2020
David Burda
Economics Outcomes Policy System Dynamics

How Fee-for-Service Makes Doctors Choose Poorly

It’s not complicated. If you want doctors to stop performing or ordering low-value procedures and tests, stop paying for them. 

The reminder that providers respond to financial incentives as much if not more than medical research and continuing education comes from a new study in JAMA Internal Medicine

Researchers from the University of Michigan, University of Toronto and the U.S. Department of Veterans Affairs looked at how the use of two low-value laboratory tests for hypothyroidism changed over time in response to different incentives—clinical recommendations and payment policies. (I know you know the answer already, but humor me.) 

Low-value procedures, interventions and diagnostic tests are those that experts agree offer little or no therapeutic value to patients and, in fact, may actually harm them. In this case, the two low-value tests were screening for a vitamin D deficiency and a trilodothyonine test, which measures how much of a specific hormone your thyroid gland is producing. 

The study pool was nearly 364 million primary-care visits from Jan. 1, 2010, through June 30, 2015, by almost 51 million patients covered by either: the provincial health system in Ontario, Canada; the U.S. Department of Veterans Affairs; and commercial health plans in the U.S. The unit of measure was the number of tests ordered each month for every 100 visits over the study period.

Essentially, the test rates for the patient populations covered by each of the three financing mechanism were about the same in 2010. By 2015, the test rates either were flat or lower than expected following recommendations by the Choosing Wisely initiative that doctors stop ordering the two low-value tests. But the test rate for vitamin D screenings in Ontario dropped to virtually nothing after the provincial health system there stopped paying for those screenings at the end of 2010. That rate dropped to 0.61 per 100 monthly visits from 2.17 per 100 monthly visits.

“These findings suggest that recommendations alone may be insufficient to significantly reduce use of low-value services and that pairing recommendations with policy changes may be more effective,” the researchers said.

What’s “ya think!” in Canadian? 

As long a fee-for-service reimbursement lives, unnecessary medical procedures and testing will live. It’s that simple if you accept that healthcare is a business like any other business and responds to economic incentives the same way other businesses respond to economic incentives. 

If you want to fix healthcare, go right to the money. Don’t waste your time with anything else.

To learn more on this topic, please read “Desperately Seeking Market-Based Patient Safety Solutions and “Shining a Light on the High Risks of Low-Value Care both on 4sighthealth.com. 

Thanks for reading.

About the Author

David Burda

Dave Burda began covering healthcare in 1983 and hasn’t stopped since. Dave writes this monthly column “Burda on Healthcare,” contributes weekly blog posts, manages our weekly newsletter 4sight Friday, and hosts our weekly Roundup podcast. Dave believes that healthcare is a business like any other business, and customers — patients — are king. If you do what’s right for patients, good business results will follow.

Dave’s personal experiences with the healthcare system both as a patient and family caregiver have shaped his point of view. It’s also been shaped by covering the industry for 35 years as a reporter and editor. He worked at Modern Healthcare for 25 years, the last 11 as editor.

Prior to Modern Healthcare, he did stints at the American Medical Record Association (now AHIMA) and the American Hospital Association. After Modern Healthcare, he wrote a monthly column for Twin Cities Business explaining healthcare trends to a business audience, and he developed and executed content marketing plans for leading healthcare corporations as the editorial director for healthcare strategies at MSP Communications.

When he’s not reading and writing about healthcare, Dave spends his time riding the trails of DuPage County, IL, on his bike, tending his vegetable garden and daydreaming about being a lobster fisherman in Maine. He lives in Wheaton, IL, with his lovely wife of 35 years and his three children, none of whom want to be journalists or lobster fishermen.


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