A Real Life Example of Irrational Healthcare Spending

This week at work, I had a patient in the hospital who had been through a pretty challenging illness, and he was going to have to be discharged to a skilled nursing facility (SNF) to rehab for a few weeks. Sadly, SNFs in my area don’t currently allow any visitors due to the pandemic. The patient is very close with his daughter, who lives out of state, and she was flying in the next day to visit him and lend support in his challenging time.

Unfortunately, he was ready for discharge to the SNF now, and upon hearing my plans for discharge, the family requested we keep him in the hospital until he could see his daughter. Because she would be arriving late afternoon the next day, it would be too late to send him to the SNF that day, so he would be stuck in the hospital an extra two days just so he could see his daughter for a few hours.

It’s a perfectly reasonable request, right? But what am I to do when I get a request like that? What’s the socially responsible thing to do? If I assume that every day spent in my hospital costs at least $2,000, I am left judging whether $4,000 of society’s money is worth spending on this brief visit from the patient’s daughter.

As all these things were going through my mind, I gave them my response: “Sure.”

Maybe that’s an irrational use of society’s resources, but it’s a rational response to the situation. I, as a physician, am often asked the be the incidental steward of society’s resources.

And I face experiences like this every week at work. Actually, I would contend that there are thousands of these illogical spending decisions happening every single day across the healthcare system.

The issue at play here is this: The people making decisions about healthcare purchases are not the people directly paying for it.

But what if Medicare patients were required to pay even just a portion of the $2,000/day cost of staying in a hospital? Of course, not all patients could afford it, so there would have to be a policy to account for that, but let’s focus on the people who could afford it. Suddenly, the conversation with that family changes quite a bit.

“Can you keep him in the hospital two extra days so he can see his daughter for a few hours?”

“Sure, I’m happy to do that. Medicare requires patients to pay 50% of the cost of each hospital day though, which means it’s costing him $1,000/day to keep him here, so you need to decide if it’s worth paying $2,000 extra for him to see her for a few hours.”

Then the people making the purchase are directly bearing a portion of the cost of that purchase, and the utilization of resources becomes more rational.

In my Healthcare Incentives Framework, I focus so much on removing the barriers to people bearing at least part of the cost of their healthcare purchases for this very reason. And the way to get there starts with changing insurance plan designs and enabling patients to obtain price information up front.