John Wennberg, MD: The Influential Doctor Who Blames Physicians and Fee-For-Service Medicine for the High Cost of Health Care

According to John Wennberg, MD, a Dartmouth professor and researcher, the fundamental cause of high health care costs is fee-for-service medicine. Eliminate fee-for-service and costs will come down. Wennberg’s theories have influenced elitist Washington policy makers and the framers of Obama Care.

Primarily because of Wennberg’s theories payments to doctors and hospitals will be made through bundled payments to Accountable Care Organizations (ACOS). There will be shared savings. Doctors and hospitals will no longer be paid on volume. Their payments will be based on quality or “evidence-based medicine.” The care of patients is to be integrated and coordinated. The piecemeal cottage industry of doctors practicing fee-for-service medicine in private offices will become a relic of the past. Under Wennberg’s utopian scheme health care costs will finally be brought under control.

Wennberg was an obscure clinical investigator when he began his research at Dartmouth Medical School In the late 1960s. At that time he discovered that children (including his own) living in Waterbury Center Vermont had a 20% rate of having their tonsils removed. In the adjacent town of Stowe the tonsillectomy rate was 60%. This threefold geographical difference in surgical procedures had a major impact on Wennberg, and formed the basis for his subsequent research over the next forty-plus years.

Weinberg later found that tonsillectomy rates varied as much as eleven-fold; hemorrhoidectomy rates five-fold; hysterectomy, and transurethral resection of the prostate (TURP) varied three-fold from the highest to the lowest areas. Wennberg published the results of his studies in his 2010 book, Tracking Medicine.¹

Wennberg says that he does not place the entire blame for these practice variations solely on physician greed or as he puts it “physicians cynically rubbing their hands together every time a patient walks in the door.” He does cite other lesser factors including professional guidelines. He has criticized prominent teaching hospitals including Massachusetts General and Cedars Sinai in Los Angeles for overuse of resources.

Wennberg also places great emphasis on personal choice and shared decision-making as an important means of decreasing unnecessary procedures and tests. In fact he named the foundation supporting his research “The Foundation for Informed Decision-Making.” Shared decision-making between doctors and patients is now routine and has been for decades. This is due to changes in our culture. Patients rightly want to be more autonomous and better informed. Doctors are far less paternalistic. Surgeons discuss with patients the risks and benefits of every procedure and informed consent is mandatory.

Fee-for-service small businesses have survived and flourished because they work and are trusted by consumers.

In the 1990s Medicare, in an effort to cut costs and unnecessary surgery, developed a pilot program requiring second opinions for cataract surgery, carotid endarterectomies, and other surgeries. The second opinion program found that less than 1% of surgeries were not indicated. The program was ultimately abandoned because it cost more money than it saved.² The program showed that the overwhelming majority of doctors were doing the right thing for their patients. They weren’t doing unnecessary surgery or performing unnecessary procedures,

Wennberg should have known about this government program. Maybe he did. Either way he ignored its conclusions and he still believes that patients are getting too many tests and too much unnecessary surgery. In order to test Wennberg’s hypothesis it would have been far simpler and less costly to require second opinions before any invasive procedure than to undertake the radical restructuring of the entire health care system and the destruction of fee-for-service medicine. But for Wennberg less is more. While most experts think there will be a shortage of doctors in the future Wennberg thinks that there are already too many doctors.

In 2010 the Wennberg group published the Dartmouth Atlas which shows geographical areas of high and low medical resource utilization for Medicare patients.³ For example he contrasts low cost “good” medical practice in the upper Midwest at for example the Mayo Clinic with high cost utilization areas in the South. He recommends that other areas of the U.S. should emulate the best practices of the upper Midwest.

In 2014 researchers at the renowned Brookings Foundation published a report highly critical of Wennberg’s research and the Dartmouth Atlas.⁴ The Brookings study found that variations in the costs of health care in different geographical areas and in different hospitals were not due to over utilization. Instead they were due to variations in socioeconomic factors and the general health of the patient population being treated. In sum the high cost areas doctors and hospitals treated sicker patients than in the low cost areas and therefore utilized more medical resources.

But the damage had already been done. The economist Peter Orszag, Obama’s chief health care adviser and the main architect of Obama Care was a great admirer of Wennberg’s work. Orszag is the consummate Washington insider who moves seamlessly between academia, Washington and Wall Street. He was a leading member of the political caste of unelected elitist “experts” who wield enormous top down power formulating health care policies that affect all Americans including doctors.

One author wrote: “By the time Orszag became head of the Congressional Budget Office in 2007 he was carrying the Dartmouth charts to Congressional meetings preaching to anyone who would listen about elimination of fee-for-service and advocated evidence-based medicine as cures for rising medical costs.”⁵ Shortly thereafter Obama appointed Orszag to be head of the Office of Management and Budget where he could then implement Wennberg’s theories. Orszag became a forceful member of Obama’s advisers and was obsessed with the Wennberg’s thesis of comparative effectiveness as a means of reducing costs. The Dartmouth team had projected that correcting for practice variation across the country could lead to savings approaching $700 billion or up to 30% per year of all Medicare spending!⁶

This arbitrary figure was the clincher which sold Obama and his other advisers on Wennberg’s proposals. Orszag argued that America’s health care system needed nothing less than a complete overhaul. After selling his plan to Obama and his team Orszag left government and took a job with a Wall Street firm where he made close to $4 million per year (presumably paid on a fee-for-service basis).⁷

Orszag’s projected $700 billion dollar savings was always a pipe dream, and Obama and his other elitist advisers should have known this. Obama himself later admitted that while the Affordable Care Act increases coverage it does not address costs.⁸ Future generations will have to address this problem.

In the epilogue of his book Tracking Medicine Wennberg effusively praises all of the Affordable Care Act’s provisions that he helped inspire: Accountable care organizations, bundled payments, shared savings, comparative effectiveness research, constraints on fee-for-service medicine, integrated and coordinated care, and shared decision-making.

Recent studies have already shown that, contrary to Wennberg’s thesis, at least two of the changes - coordination of care: the formation of hospital networks and, integration of care: the ownership of physician practices - not only do not reduce costs but actually increase costs.^{9 10}

Despite the lack of evidence that the radical changes championed by Wennberg cut costs, hospital administrators, insurance company executives, doctors, nurses, and the entire Medical Industrial Complex are complying with the changes without objection.

Wennberg’s theories have also spawned some very profitable Wall Street companies. Health care is the country’s largest and most profitable industry. Wall Street has been positioning itself to take a big role in health care and has been looking for lucrative investments. Wennberg’s theories gave one venture capital fund the opportunity to earn huge profits.

When the foundation that supports Wennberg’s research teetered on the brink of bankruptcy a venture capital company stepped in and formed Health Dialog to be run on a for profit basis by Wennberg’s son David. The health insurance industry led by Blue Cross was one of the first investors in Health Diolog. The American Hospital Association soon followed suit. Both organizations have already made millions of dollars in profit from their investments. Health Dialog is a consulting firm that applies Wennberg’s theories “by giving insight and coaching in high quality and cost effective care.” It has become one of the fastest growing health services firm in America. Health Dialog has been sold and resold with significant profitability to investment companies.¹¹ It is currently owned by the Rite Pointe Corporation.

Health Dialogue donated $110 million and gives royalties to Wennberg’s research foundation. These financial ties to industry have enriched Wennberg, his son, and his foundation. They also constitute a blatant conflict of interest that taints and undermine the conclusions of his research. These conflicts of interest are especially noteworthy because the fundamental goal of Wennberg’s research has been to expose conflicts of interests in others, viz., doctors.

It is overly simplistic to say that high health care costs are due to fee-for-service. They are caused by multiple factors including massive inefficiencies and waste in hospitals, high administrative costs of insurance companies and outrageous uncontrolled drug pricing by the pharmaceutical industry. Also the introduction of new technologies and breakthrough treatments for cancer, heart disease, hepatitis, and other maladies which have prolonged lives in ways that were unimaginable in the past come at a steep price.

Obama himself has stated that small businesses are the backbone of the economy.¹² The vast majority of businesses in this country are small businesses. They are the bedrock of our capitalistic, American free enterprise system and of its freedom-loving citizens. When a person calls a plumber or electrician or takes his car in for repairs there are always potential and real conflicts of interest. Consumers are well aware of these conflicts of interest. They can never be completely eliminated. Yet fee-forservice small businesses have survived and flourished because they work and are trusted by consumers.

Practicing medicine is intensive work like the above mentioned trades. Eliminating fee-for-service and private practice, and placing doctors on assembly lines where they are employees of vast corporate entities won’t lower costs. It will just siphon money to large corporations and their investors, lower the quality of care delivered to patients, and make physicians more frustrated, burned out, and depressed.

Biography

Arthur H. Gale, MD, MSMA member since 1976, is a Missouri Medicine Contributing Editor. He practices Internal Medicine in St. Louis.

Contact: agalemd@yahoo.com