Why Is There a Quality Chasm?

Joseph P. Newhouse

Health Affairs. 2002;21(4)

Shrinking The Chasm

The barriers to improvement described above suggest that medical care quality chasm will always be with us. Nonetheless, the chasm does not have to be as large as it is now. Greater use of information technology can help; if patient's medical history and all available test and medication data were available online at the time physician was making diagnostic or treatment decision, quality would surely improve. Greater use of computerized decision support systems also would improve quality.

Health services research can also help. Most of the evidence of inefficiency I cited came from health services research. When the scope of the problem is not known, better performance is improbable. In some cases, simply disseminating the findings can improve matters through the goodwill, altruism, or professionalism of health care providers. And research on financial incentives could play an important role. Physicians want to practice good medicine. But there are costs to keeping up, and in many cases the rewards for using the best technique are weak or even negative. The design of better incentives thus should be high priority.

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Acknowledgments

The author thanks the Alfred P. Sloan Foundation and the Hans Sigrist Stiftung for support and David Cutler, Victor Fuchs, Tom McGuire, Don Metz, and two referees for comments on a preliminary draft.

Cite this: Why Is There a Quality Chasm? - Medscape - Jul 01, 2002.

Abstract and Introduction
Inefficiency in Translating Medical Care Services into Health
Why The Poor Performance?
Shrinking The Chasm
Notes

Table 1. Variation In Process Measures Of Quality Care Across States, U.S. Medicare Population, 1997-1999
Quality indicator	10th percentile	Median	90th percentile
Beta-blocker after AMI discharge	53%	64%	76%
Aspirin within 24 hours of AMI admission	78	84	88
ACE inhibitor at discharge if congestive heart failure and ejection fraction < 40%	59	71	81
Warfarin at discharge for atrial fibrillation	46	55	61
Hemoglobin A1c every year if diabetic	58	71	82

SOURCE: S.F. Jencks et al., "Quality of Care Delivered to Medicare Beneficiaries: A Profile at State and National Levels," Journal of the American Medical Association 284, no. 13 (2000): 1670-1676.

NOTES: AMI is acute myocardial infarction. ACE is angiotensin converting enzyme.

Notes

Agency problems between shareholders and management may lead management to spend potential profits as perquisites. M. Jensen and W. Meckling, "The Theory of the Firm: Managerial Incentives, Agency Costs, and Ownership Structure," Journal of Financial Economics 3, no. 4 (1976): 305-360.
Recently effort has gone into understanding productivity differences at the firm level. M. Baily and R. Solow, "International Productivity Comparisons Built from the Firm Level," Journal of Economic Perspectives 15, no. 3 (2001): 151-172. Economists also look at efficiencies in the context of an antitrust case involving merger, where claimed efficiencies are often the rationale.
Institute of Medicine, Crossing the Quality Chasm: A New Health System for the Twenty-first Century (Washington: National Academy Press, 2001).
Ibid., and L.T. Kohn, J.M. Corrigan, and M.S. Donaldson, eds., To Err Is Human: Building a Safer Health System (Washington: National Academy Press, 2000).
For skeptical comments on the applicability of this approach to assessing variation in efficiency cross health care providers, see J. Newhouse, "Frontier Estimation: How Useful Tool for Health Economics?" Journal of Health Economics 13, no. 3 (1994): 317-322.
Center for Evaluative Clinical Sciences, Dartmouth Medical School, The Quality of Medical Care in the United States: A Report on the Medicare Program, The Dartmouth Atlas of Health Care 1999 (Chicago: AHA Press, 1999).
See K. McPherson et al., "Small-Area Variations in the Use of Common Surgical Services: An International Comparison of New England, England," and Norway, New England Journal of Medicine 307, no. 21 (1982): 1310-1314.
For example, controlling for clinical characteristics, there was much higher rate of coronary angiographies and revascularizations following heart attack in Texas than in New York. E. Guadagnoli et al., "Variation in the Use of Cardiac Procedures after Acute Myocardial Infarction," New England Journal of Medicine 333, no. 9 (1995): 573-578.
M. Chassin et al., "Does Inappropriate Use Explain Geographic Variation in the Use of Health Care Services? A Study of Three Procedures," Journal of the American Medical Association 258, no. 18 (1987): 2533-2537.
R. Brook, "Maintaining Hospital Quality: The Need for International Cooperation," Journal of the American Medical Association 270, no. 8 (1993): 985-987. That the problems are worldwide suggests that for-profit and not-for-profit status is not major cause of the problem.
M. Chassin et al., "Benefits and Hazards of Reporting Medical Information Publicly," New England Journal of Medicine 334, no. 8 (1996): 394-398; E. Schneider and A. Epstein, "Influence of Cardiac-Surgery Performance Reports on Referral Practices and Access to Care," New England Journal of Medicine 335, no. 4 (1996): 251-256; and E. Schneider and A. Epstein, "Use of Public Performance Reports: A Survey" of Patients Undergoing Cardiac Surgery, Journal of the American Medical Association 279, no. 20 (1998): 1638-1642. Lack of response may have stemmed from patients' being mostly unaware of the information.
A. Localio et al., "Relation between Malpractice Claims and Adverse Events Due to Negligence: Results of the Harvard Medical Practice Study, III," New England Journal of Medicine 325, no. 8 (1991): 245-251.
This group had more at stake because damages are related to lost earnings, which would generally be larger for those under age seventy. In these cases, it is unlikely that transaction costs (for example, attorney and expert witness fees) were large enough to make claim uneconomic.
M. Marquis, "Cost Sharing and Provider Choice," Journal of Health Economics 4, no. 2 (1985): 137-157.
K. Arrow, "Uncertainty and the Welfare Economics of Medical Care," American Economic Review 53, no. 5 (1963): 941-973. Interestingly, Arrow pointed out link between consumers' ignorance and physicians' desire to deliver high-quality care. Because of the need to trust the physician as agent, the physician's "safest course" is to give "the socially prescribed 'best' treatment of the day. Compromise in quality, even for the purpose of saving the patient money, is to risk an imputation of failure to live up to the social bond" (p. 966).
TECH Research Network, "Technological Change around the World: Evidence from Heart Attack Care," Health Affairs (May/June 2001): 25-42.
U.S. Food and Drug Administration, Center for Drug Evaluation and Research, "RDMT Reports," www.fda.gov/cder/rdmt/CY00NDAAP.htm (27 August 2001). New molecular entities are active substances not previously approved in the United States.
Minutes of the National Cancer Policy Board of the Institute of Medicine, 11 12 October 2001.
This is undoubtedly the principal explanation of the much greater increase in the rate of various procedures among those over age eighty-five than among those ages sixty-five to sixty-nine between 1987 and 1995. See V. Fuchs, "Health Care for the Elderly: How Much? Who Will Pay for It?" Health Affairs (Jan/Feb 1999): 11-21.
National Institutes of Health, "The NIH Almanac -- Appropriations," www.nih.gov/bout/almanac/appropriations/part2.htm (10 October 2001). Figures for 1990 were put into year 2000 dollars using the U.S. gross domestic product (GDP) deflator. Spending on trials went up faster than the total NIH budget, which increased from $9.6 billion in 1990 to $17.8 billion in 2000.
D. Davis et al., "Changing Physician Performance," Journal of the American Medical Association 274, no. 9 (1995): 700 705. See also P. Cantillon and R. Jones, "Does Continuing Medical Education in General Practice Make Difference?" British Medical Journal 318, no. 7193 (1999): 1276-1279.
B. McNeil, "Shattuck Lecture -- Hidden Barriers to Improvement in the Quality of Care," New England Journal of Medicine 345, no. 22 (2001): 1612-1620.
E. Guadagnoli et al., "Appropriateness of Coronary Angiography after Acute Myocardial Infarction among Medicare Beneficiaries: Managed Care versus Fee-for-Service," New England Journal of Medicine 343, no. 20 (2000): 1640-1646. Among the 9 percent of beneficiaries in managed care (as of 1995), the rate for Class I indications was 37 percent, below the rate for traditional Medicare, whereas the rate for Class III indications was the same.
E. Guadagnoli et al., "Impact of Underuse, Overuse, and Discretionary Use on Geographic Variation in the Use of Coronary Angiography after Acute Myocardial Infarction," Medical Care 39, no. 5 (2001): 446-458. More specifically, the raw difference in rates between the fifth and ninety-fifth percentiles cross the ninety-five regions was 33 percent. If there had been no variation cross the regions in the "appropriate but not necessary" or in the "uncertain" categories, the difference in rates would have been 11 percent.
It may be difficult to find enough patients with various comorbidity combinations or for diseases where multiple drug therapy is optimal, as in the case of AIDS, but proper combinations and dosing are not known.
D. Jorgenson, "Information Technology and the U.S. Economy," American Economic Review 91, no. 1 (2001): 1-32. Moore's Law holds that chip capacity will double every eighteen to twenty-four months. This prediction, made in 1965, has held true for the subsequent thirty-five years.
The GDP deflator rose 4.6 percent per year over that period.
The measurement of medical care prices adjusted for quality is in its infancy. One example, which finds price declines for the treatment of cute myocardial infarction (AMI), although nowhere near the magnitude of the chip or computer industries, is D. Cutler et al., "Are Medical Prices Declining?" Quarterly Journal of Economics 113, no. 4 (1998): 991-1024.
Baily and Solow, "International Productivity Comparisons."
The issue is not moral hazard because of subsidized consumers. Although an insurance policy that subsidized my computer purchases would lead me to order new machine each time capabilities improved, those computers should still be produced at least cost. In other words, moral hazard cannot explain "quality chasm."
See J.P. Newhouse, Pricing the Priceless: A Health Care Conundrum (Cambridge, Mass.: MIT Press, 2002).
To be more exact, price should equal marginal cost at the desired quantity of services, assuming that paying marginal cost will cover fixed costs. Although this assumption does not necessarily hold in health care, to pursue matters would add length without changing the main conclusions. For further discussion, see Newhouse, Pricing the Priceless.
P. Held and M. Pauly, "Competition and Efficiency in the End Stage Renal Disease Program," Journal of Health Economics 2, no. 2 (1983): 95-118.
T. Hofer et al., "The Unreliability of Individual Physician 'Report Cards' for Assessing the Cost and Quality of Care of Chronic Disease," Journal of the American Medical Association 281, no. 24 (1999): 2098-2105.
R. Miller and H. Luft, "Managed Care Plan Performance since 1980," Journal of the American Medical Association 271, no. 19 (1994): 1512-1519, and R. Miller and H. Luft, "Does Managed Care Lead to Better or Worse Quality of Care?" Health Affairs (Sep/Oct 1997): 7 25.
Group-and staff-model HMOs may have small market share because consumers fear that the very incentives that reward them for minimizing cost for given quality also reward them for underservice. From societal point of view, such arrangements also offer the greatest incentives for adverse selection.
M. Rosenthal and J. Newhouse, "Managed Care and Efficient Rationing," Journal of Health Care Finance (forthcoming).
U.E. Reinhardt, "Health Manpower Forecasting: The Case of Physician Supply," in Health Services Research, ed. E. Ginzberg (Cambridge, Mass.: Harvard University Press, 1991.

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