Doctors and hospitals share responsibility with insurers for the price and access problems in the health care and health coverage markets.

Len Nichols, director of the health policy program at the New American Foundation, Washington, made that argument Thursday during a hearing on health market competition organized by the Senate Committee on Commerce, Science and Transportation.

Today, “it is not unreasonable to argue that we pay roughly 2.4 times more than we should for health care,” Nichols testified, according to a written version of his testimony posted on the committee’s Website.

The overpayments are due mainly to low quality of care, provider inefficiency and non-competitive pricing, Nichols said, according to the written version of his remarks.

Many studies show that hospital efficiency varies widely, and one data set shows that inefficient hospitals that lose money on Medicare tend to make up for the difference by having private payers pay more, Nichols said.

The most efficient hospitals usually have the best patient outcomes, but patient satisfaction levels are about the same for efficient and inefficient hospitals, Nichols said.

“Therefore,” Nichols said, “people on average do not know (or care) about true quality differentials.”

Meanwhile, primary care physicians get too little compensation for care coordination, evaluation, and management services, and physicians have too much incentive to get patients to use their in-office testing facilities, Nichols said.

Nichols said the government can help by simplifying the billing and payment process, by doing something about the fact that there are now 8,000 Current Procedural Terminology codes and 745 diagnosis-related groups.

Medicare and other government health programs also should shift toward “bundled payment structures,” which provide incentives for many different providers to work together to treat patients, Nichols said.

The government should create antitrust “safe harbor” rules to encourage doctors, hospitals and other providers to share the information necessary to make the bundled payment structures work, Nichols added.

Nichols would also like to see the government give physicians an incentive to abandon their imaging equipment.

“These currently overus

Doctors and hospitals share responsibility with insurers for the price and access problems in the health care and health coverage markets.

Len Nichols, director of the health policy program at the New American Foundation, Washington, made that argument today in a hearing on health market competition organized by the Senate Committee on Commerce, Science and Transportation.

Today, “it is not unreasonable to argue that we pay roughly 2.4 times more than we should for health care,” Nichols testified, according to a written version of his testimony posted on the committee’s Website.

The overpayments are due mainly to low quality of care, provider inefficiency and non-competitive pricing, Nichols said, according to the written version of his remarks.

Many studies show that hospital efficiency varies widely, and one data set shows that inefficient hospitals that lose money on Medicare tend to make up for the difference by having private payers pay more, Nichols said.

The most efficient hospitals usually have the best patient outcomes, but patient satisfaction levels are about the same for efficient and inefficient hospitals, Nichols said.

“Therefore,” Nichols said, “people on average do not know (or care) about true quality differentials.”

Meanwhile, primary care physicians get too little compensation for care coordination, evaluation, and management services, and physicians have too much incentive to get patients to use their in-office testing facilities, Nichols said.

Nichols said the government can help by simplifying the billing and payment process, by doing something about the fact that there are now 8,000 Current Procedural Terminology codes and 745 diagnosis-related groups.

Medicare and other government health programs also should shift toward “bundled payment structures,” which provide incentives for many different providers to work together to treat patients, Nichols said.

The government should create antitrust “safe harbor” rules to encourage doctors, hospitals and other providers to share the information necessary to make the bundled payment structures work, Nichols added.

Nichols would also like to see the government give physicians an incentive to abandon their imaging equipment.

“These currently overused machines are kind of like toxic assets,” Nichols said. “We must get rid of them – or move them to more productive locations – before we can achieve the efficiencies we need.”

Nichols said insurers must work on reducing health administration costs, which appear to account for about $90 billion of the United States’ estimated $650 billion in 2006 excess health care spending.

“There are more than 1,100 insurers in the United States,” Nichols said. “The complexity of so many insurers requiring slightly different forms and information is considerable and results in very large costs for providers and patients.”

Links to Nichols’ written testimony and other hearing documents are available here.