The high cost of medical technology: who's to blame?

Business & Health, Nov, 1989 by Faith Lyman Ham

Marshall V. Rozzi, vice president in charge of medical delivery for U.S. Healthcare Inc., in Blue Bell, Pa., agrees. "Benefits managers couldn't make head nor tail of most of these reports," he says. "Even if they could, most would be afraid of making a wrong decision [in the event] they'd misinterpreted the findings."

Until purchasers know in laymen's terms what works and what doesn't, they'll be at the mercy of the medical profession.

"We have to change the way we measure results," says Ellwood, a proponent of a national data base that would measure medical services by so-called quality-of-life outcomes, as well as technical results. (See Business & Health, May 1989, pp. 18-25.)

"As long as there's some physiological parameter within which success is measured, no benefits manager is ever going to be able to understand medical decisions. If you have some measure--how the patient feels after surgery, how quickly they return to work--then the benefits manager is in a position to challenge. We have to hold doctors more accountable for the quality of the life of the patient after he's been treated."

Measuring cost effectiveness

Technology outcomes aren't the only area under scrutiny. Payers and physicians alike are beginning to examine new drugs and devices according to a criterion once considered taboo in the clinical decision process: cost effectiveness.

"Effectiveness analysis bears watching since it will have an impact on the dispersion of technology," says Henry Alder from the AHA.

An indispensable tool for any corporate planner, cost effectiveness analysis has escaped the medical industry in part because providers have never been asked to provide such data. But purchasers are starting to ask for the information.

As Stephen Pauker from Tufts sees it, physicians can continue to practice in a haphazard manner, or they can "make choices in an analytic way."

Despite all the signs to the contrary, Pauker says a degree of order has begun to penetrate the science of medicine. Researchers find they can now separate costs from charges and measure them against what's known about outcomes.

Capabilities improving

"Our technological ability to conduct these analyses has improved," he says.

In theory, the cost effectiveness analysis could prove a boon to the medical industry, since physicians would have a quick formula for measuring how to get the biggest bang for someone else's buck.

Medical schools such as Tufts are beginning to teach their students to assess costs in making a clinical decision. Noted physician and professor David Eddy, M.D., of Duke University, has devoted a lengthy chapter to the role of cost in medical decisions in a manual for designing practice policies. And the Health Care Financing Administration in January proposed regulations that would make cost effectiveness a criterion in Medicare coverage decisions.

As Tufts' Schwartz sees it, purchasers have to start measuring the costs of, and benefits derived from, each new medical technology. Every medical service, he says, is defined by a benefits curve. Some procedures help a vast number of people at a relatively low cost. Others carry high cost but benefit only a limited number of patients.