Healthcare Business Models: Mayo Model Losing to McAllen?

An article in the New Yorker asks: Why does the border town of McAllen, Texas, spend more er person—an average Medicare enrollee there costs $15,000 per year—on health care than any U.S. city besides Miami? The author blames "across-the-board overuse of medicine," which stems from the fact that our health care system "pay[s] doctors for quantity, not quality." This overuse isn't just expensive—it's less effective. "In an odd way, this news is reassuring," the author notes: Providing better health care will also save money. 

This is a disturbing and perhaps surprising diagnosis. Americans like to believe that, with most things, more is better. But research suggests that where medicine is concerned it may actually be worse. For example, Rochester, Minnesota, where the Mayo Clinic dominates the scene, has fantastically high levels of technological capability and quality, but its Medicare spending is in the lowest fifteen per cent of the country—$6,688 per enrollee in 2006, which is eight thousand dollars less than the figure for McAllen. Two economists working at Dartmouth, Katherine Baicker and Amitabh Chandra, found that the more money Medicare spent per person in a given state the lower that state’s quality ranking tended to be. In fact, the four states with the highest levels of spending—Louisiana, Texas, California, and Florida—were near the bottom of the national rankings on the quality of patient care.