The "Cost Conundrum" Revisited
Has Atul Gawande failed upward?
In my last post, I mentioned Atul Gawande’s influential 2009 New Yorker essay “The Cost Conundrum.” It stood out among dozens of essays Gawande has written for the New Yorker since 1998, becoming required reading for medical students across the country and a vital element in what would become Obamacare (the 2010 Affordable Care Act, or ACA).
Like much of Gawande’s work, the “Cost Conundrum” is a Potemkin village: it looks good but can be swiftly dismantled. Gawande’s research was shockingly poor, as even he admitted in 2015. He had fundamentally failed to make his case against physician-owned hospitals and in favor of a certain kind of large academic-adjacent health system as a cost-saving mechanism.
By the time he acknowledged his mistake, however, Gawande’s sweeping and erroneous conclusions had been baked into law via Obamacare. Before going into detail as to why the article was so flawed, let us consider how Gawande became so profoundly influential, and what his authority reveals.
Let’s begin near the end. After decades of working on health policy for top Democratic leaders and writing for America’s most prestigious publications—from the New Yorker to the Atlantic to the Washington Post and many others—Gawande was offered a job that should have been a career capstone.
In 2018, Amazon partnered with Berkshire Hathaway and J.P. Morgan Chase to create a nonprofit “health venture,” Haven, aimed at providing low-cost and high-quality healthcare for their employees. J.P. Morgan's Jamie Dimon said at the time that the three “companies have extraordinary resources, and our goal is to create solutions that benefit our U.S. employees, their families and, potentially, all Americans.” In June 2018, Gawande was named CEO.
The episode was reminiscent of Plato being invited to Syracuse to advise the tyrant Dionysius I; the philosopher was at long last given a chance to test his theories. That ended poorly for Plato, who apparently barely escaped assassination. But Plato could only advise Dionysius, whereas Gawande was handed actual executive power by some of America’s top business leaders. In less than two years, Gawande had stepped down as CEO and assumed a new role as chairman of the board. In February 2021, Haven shut down.
Many wondered how, with the vast financial and intellectual resources at Haven’s disposal, the failure could have been so swift and thoroughgoing. A message from Gawande on Haven’s website states that “this work will take time, and we’ll need the help of others, but we will tackle problems step-by-step and make sure that patients remain our top priority.” He goes on to say that they “will be relentless,” and that they “are committed to doing this work for the long-term.”
Some, like Erin Brodwin of Stat News, attributed the closure to a lack of clear vision. It seemed like a lost opportunity to create a health system that might have been a model for the nation. To close readers of Gawande’s work, though, this should not have been surprising.
Gawande is impeccably credentialed: after earning a bachelor’s in biology and political science from Stanford, he went on to earn an Oxford master’s degree in philosophy, politics and economics (PPE), an MD from Harvard Medical School, and an MPH from the Harvard T.H. Chan School of Public Health. He completed his general surgical residency training at Harvard too, at the Brigham and Women’s teaching hospital. He is a talented writer whose books include a #1 New York Times bestseller.
In both its prestige and its blend of hard sciences, humanities, and policy studies, Gawande’s resume seems ideal for America’s premier health-care policy leader. But his credentials and obvious gifts obscure the fact that his thinking lacks rigor, granularity, and the kind of epistemological humility that ought to guide scientific endeavor.
Depending on your point of view, Gawande is an idealist or an ideologue. Over and over again in his essays, he pieces together anecdotes and scattered facts to arrive at ill-founded conclusions. He rarely appears to question his own assumptions, and too often presents them unflinchingly as fact.
As I noted last time, Gawande visited the town of McAllen, Texas, after discovering that it had the dubious distinction of having the second-highest per-capita Medicare spending rate in the country. He gleaned this from data gathered by a group of researchers at Dartmouth, led by the internist Dr. Elliott Fisher. Gawande approached McAllen’s doctors with suspicion, which from his point of view was borne out. He describes a conversation with a for-profit hospital administrator, who blamed a “culture of money” for McAllen’s high Medicare costs:
He knew of doctors who owned strip malls, orange groves, apartment complexes—or imaging centers, surgery centers, or another part of the hospital they directed patients to. They had “entrepreneurial spirit,” he said. They were innovative and aggressive in finding ways to increase revenues from patient care. “There’s no lack of work ethic,” he said. But he had often seen financial considerations drive the decisions doctors made for patients—the tests they ordered, the doctors and hospitals they recommended—and it bothered him. Several doctors who were unhappy about the direction medicine had taken in McAllen told me the same thing. “It’s a machine, my friend,” one surgeon explained.
Gawande goes on to note that “no one teaches you to think about money in medical school or residency,” though doing so becomes imperative “from the moment you start practicing.” Many good doctors think about money as little as possible, he asserts, or consider money “as a means of improving what they do.” But then “there are the physicians who see their practice primarily as a revenue stream.” This type of doctor, he suggests, dots the landscape of McAllen, and is especially prevalent in one particular physician-owned hospital.
Gawande goes on to sing the praises of the Mayo Clinic in Rochester, Minnesota. Doctors worked as salaried employees, Medicare spending was low, and patient outcomes were famously stellar. He also extolled the town of Grand Junction, Colorado, which he describes as “one of the lowest-cost markets in the country.” This turned out to be flatly wrong. Gawande depicts Grand Junction’s system as follows:
Years ago the doctors agreed among themselves to a system that paid them a similar fee whether they saw Medicare, Medicaid, or private-insurance patients, so that there would be little incentive to cherry-pick patients.
They also agreed, at the behest of the main health plan in town, an H.M.O., to meet regularly on small peer-review committees to go over their patient charts together. They focussed on rooting out problems like poor prevention practices, unnecessary back operations, and unusual hospital-complication rates. Problems went down. Quality went up. Then, in 2004, the doctors’ group and the local H.M.O. jointly created a regional information network—a community-wide electronic-record system that shared office notes, test results, and hospital data for patients across the area. Again, problems went down. Quality went up. And costs ended up lower than just about anywhere else in the United States.
Gawande goes on:
Grand Junction’s medical community was not following anyone else’s recipe. But,like Mayo, it created what Elliott Fisher, of Dartmouth, calls an accountable-care organization. The leading doctors and the hospital system adopted measures to blunt harmful financial incentives, and they took collective responsibility for improving the sum total of patient care.
Shortly after Gawande’s essay was published in 2009, then-President Barack Obama visited Grand Junction’s Central High School as part of his push for the ACA. “You’re getting better results while wasting less money,” he announced. But a 2015 study led by researchers at Yale, Carnegie Mellon, and the London School of Economics showed otherwise.
The headline of a New York Times report on the paper read “The Experts Were Wrong About the Best Places for Better and Cheaper Health Care.” As report showed, it was true that Grand Junction’s Medicare spending was low. But it ranked 42nd out of 306 places for private insurance spending.
The cardiologist Dr Anish. Koka writes in a devastating 2017 critique that “Gawande and his adoring readers (that would include me) had been hoodwinked. The secret sauce for this high value care being provided to patients by the very best in the field wasn’t in the Medicare data that Elliott Fisher’s group in Dartmouth had put out. The drunk looking for keys under the lamp post doesn’t find his keys for a reason. The keys in this case were hidden where no one was looking – payments from private insurers.”
It turned out, as NYT reporters Kevin Quealy and Margot Sanger-Katz noted, that “larger, integrated hospital systems—like those in Grand Junction—can often spend less money in Medicare, by avoiding duplicative treatments. But those systems also tend to set higher prices in private markets, because they face relatively little local competition.”
They went on to suggest that the findings were “likely to force a rethinking of some conventional wisdom about health care. In particular, they cast doubt on the wisdom of encouraging mergers among hospitals, as parts of the 2010 health care law did.”
The consolidation of hospitals has only accelerated since then, of course. And as the 2015 paper pointed out, “In places with a hospital monopoly, prices were 15 percent higher than in places with four or more hospitals.” Other health-care costs have similarly risen since the ACA’s passage; according to a 2023 report from KFF (formerly the Kaiser Family Foundation), “The average family premium has increased 22% since 2018 and 47% since 2013.”
There have been many other consequences of the ACA and related Obama-era laws, many of which can be traced to Gawande: the pressure on private practices to close or merge with major hospital systems, the top-down imposition of electronic health record systems that detract from meaningful medical note-taking, the rose of insurance companies as authorities over medical decision making.
There is no reason to doubt that Gawande sincerely wishes to improve health outcomes and lower costs. But he is the product of a big academic system: Harvard’s Brigham and Women’s hospital, where he continues to practice. He has perhaps naturally but erroneously concluded that big, salaried medicine always works better. Despite his own entrepreneurial endeavors and considerable wealth (Haven is just one capitalist venture in which he has been involved) he disdains the entrepreneurship of other doctors who pursue private practice or hospital ownership–the latter of which is banned in the ACA. Fifteen years after Gawande’s words almost literally became law via the ACA, his errors and omissions are increasingly evident but his ideas remain in force.