Quality Competition

Most providers don’t compete for patients either on price or on quality. Since out-of-pocket payments by patients are well below the true cost of their care, demand exceeds supply and services are rationed by waiting — just like in Canada. In such an environment, quality improvements do not increase provider income and quality degradation does not decrease it. That’s why so much of the health care system resembles the Department of Motor Vehicles.

In some specialized markets, however, providers actively seek more customers, often advertising directly to patients — on TV, in magazines, etc., sometimes in other cities and sometimes nationwide. For example, New York’s Mount Sinai Medical and Memorial Sloan-Kettering and Massachusetts General in Boston are all aggressive advertisers on cancer care. In these markets, third-party payment significantly exceeds the marginal cost of care, and supply often exceeds demand.

Providers in these markets typically compete for patients based on quality. They need patient-pleasing services in order to attract their clientele in the first place and to retain them as ongoing customers. And their activities raise an obvious question: Why can’t we have quality competition system-wide?

Here’s a personal experience: Standing in the foyer, I see the head of the hospital hugging a patient. Hugging? Yes, hugging. It happened more than once on my visit there; and it gave me new insight into a little-understood phenomenon in health economics.

I am visiting a Cancer Treatment Centers of America (CTCA) facility in Tulsa, Oklahoma, and from the moment I enter the foyer it is clear this is not an ordinary hospital. It’s different. And it has to be. The average patient travels some distance to get to one of these facilities and has already been treated at two other hospitals before coming to CTCA. (Full disclosure: CTCA is a modest contributor to the NCPA.)

So who are the customers? They are mainly Stage III or Stage IV cancer patients. They are in a life-and-death struggle with a deadly disease. One thing they get at CTCA is first-rate traditional care. In fact, the facility in Tulsa claims to have every piece of equipment you would find at the Mayo Clinic. And CTCA boasts that it has significantly better survival rates than the national experience. But I’m not sure this is the main reason why patients come to CTCA.

Most cancer centers operate like ordinary hospitals. They get patients by referrals from doctors. What they do for patients is influenced by their third-party insurance. For these facilities, the patient is not really the customer. The real customers are doctors and insurance companies. But CTCA patients have to get on a plane and travel an average of 500 miles to get there. Then CTCA has to motivate them to return for future treatments. Clearly, this requires a different business model.

Under a system now being introduced at the Tulsa facility, every patient who comes to CTCA sees an oncologist, a nutritionist, a naturopath and a care manager. Nutritionist? Naturopath? Yes. And more. Patients at CTCA routinely get acupuncture, chiropractic services and mind/body counseling.

Do naturopathy, chiropractic care and spiritual counseling cure cancer? Probably not. But these services meet other patient needs. And in doing so, they may indirectly help cancer survival.

As it turns out, cancer therapy patients have to cope with nausea, sleeping disorders, fatigue and pain — just to name some of the more obvious problems. Two-thirds of patients are malnourished when they arrive at CTCA. Some are more likely to die of starvation before they die of cancer. These are issues that traditional medicine, focused only on tumors, too often ignores.

Nutrition, vitamin supplements and even acupuncture help patients deal with the side effects of cancer. In fact, it is estimated that, nationwide, from 80% to 85% of cancer patients seek out naturopathic therapies — usually on their own.

Without any prompting from the Department of Health and Human Services (HHS), CTCA has electronic medical records and what seems to be state-of-the-art coordinated care. And these features are not reflecting the latest fad. They are part of the company’s business model.

CTCA gets very few referrals from doctors. Insurers won’t pay for some of the therapies they provide. The company finds patients by advertising and word-of-mouth, patient-to-patient referrals. It attracts patients and retains them by meeting needs that other facilities do not meet. It provides us with a small glimpse of what the market for medical care might look like were it not dominated by impersonal, third-party payer bureaucracies.

[An interesting sidebar here concerns restrictions on the flow of information in the medical marketplace. Basically, a hospital can say almost anything (boast of higher cure rates, etc.), constrained only by the common law strictures against fraud. By contrast a drug maker, regulated by the Food and Drug Administration (FDA) cannot make any claim unless it is backed up by a mountain of evidence and cannot promote “off-label” uses, no matter how much evidence there is. Whereas a hospital can trot out patients for testimonials at the drop of a hat, testimonials by clients of weight loss clinics are regulated by the Federal Trade Commission (FTC). Here is Natasha Singer on these issues in The New York Times and here is a critical study of hospital advertising.]

I’ve saved for last the issue that is surely at the back of everyone’s mind. Don’t we all agree that our health care system spends too much money on people who are terminally ill? Aren’t CTCA facilities examples of wasting resources that at most add a few more months to peoples’ lives?

As it turns out, we don’t all agree on that. A fascinating new paper by Nobel Laureate Gary Becker and his colleagues at the University of Chicago makes a strong case that the traditional economic approach undervalues terminal care. Based on the century-old principle of diminishing marginal utility, the Chicago economists argue that a year or a month of life becomes more valuable for all of us, the less time we have left. Also, there is the “hope value” of survival. During the interim, new discoveries can be made that extend life even longer (as was the case with AIDs).

Space does not permit me to do justice to the full richness of this paper. So I invite readers to read it on their own.

Comments (23)

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  1. Joe S. says:

    Very good. This is the first piece I have read explaining the economics of quality competition in health care. Everyone else seems to divorce the issue of quality from economic incentives. John, you make it seem obvious that they are related.

  2. Bret says:

    Good point about comparing the US and Canada. Had not thought about it before, but we do mainly ration health care the same way.

  3. Virginia says:

    I think you’ve hit on the solution to the health care “dilemma.” If there are places like CTCA where patients get the service they need for a competitive price, adminstered by caring providers, then market-driven health care is a slam dunk.

    If the free market works, then these treatment centers will become more common, and we’ll have proof that specialization and good business principles really are the solution. (Especially as people begin shouldering larger deductibles and copayments.)

    Nathanial Branden in Ayn Rand’s book, Capitalism: The Unknown Ideal: “The free market is its own protector.”

  4. Devon Herrick says:

    Most hospitals don’t compete for patients in the traditional sense. I’ve even heard an executive from a hospital trade association remark that hospitals are not in the retail business (rather they more closely resemble wholesale operations).
    How do most hospitals work? Insurers and doctors are often viewed as a hospital’s primary customers. Hospitals generally want as many physicians as possible on the medical staff because doctors are the gatekeepers to inpatient care. Hospital business processes are designed with insurance reimbursements in mind. Patient admissions are simply an input. Medical care provided to patients is basically a production process, while the number of patients discharged is a measure of output. Unsubstantiated claims of a hospital’s quality are often little more than a marketing ploy.

    By contrast, Cancer Treatment Centers of America is an example of the patient-pleasing amenities that innovative health care providers would offer if patients controlled more of their own health care dollars and providers competed for those dollars.

  5. Ken says:

    The most interesting thing about this piece is what is implied, but not discussed. That is: all the providers and facilities who do not complete on quality and what it would take to get them to do so.

  6. Karen Yancura says:

    Thanks again for putting a light on so many of our health care issues. I wish Congress would sign up for these extremely significant — and important –newsletters. Keep up the fight for us!!

  7. artk says:

    I’ve seen the CTCA ads on cable too many times. The theme is always the same, a patient is given up by their local doc, and then CTCA comes up with a magic treatment that they imply is unique to them. My first reaction was to google “CTCA quack cure”, it’s just too strong a sell. Having lost a parent to cancer, I considered myself lucky to have her treated at Johns Hopkins. I’m sure that she would have gotten the same quality of care at any major teaching hospital.

    The real issue is survival rates, and that applies to pretty much every major ailment. If you want hospitals and doctors to compete on quality of care, make them keep and publish risk adjusted survival rates. It’s a well established technique. In fact, I know those statistics are published in the UK (yeah, socialized medicine) for bypass, try to find the same statistics in the US.

    I have a pretty simple attitude about these things. I’m not impressed by an ad that tell me how supportive the doctor was or how pretty the surroundings or how much useless quack chiropractic manipulation I’m given. All I care about who gives the best treatment. I want to know the hard numbers. For my taste, If you have to travel 500 miles, travel to a major teaching/research hospital.

  8. Dr. Bob Kramer says:


    Only when quality, honesty and integrity are the major driving factors in the delivery of health care will we see improvement and significant cost savings. The very best care is the least expensive in the long run. We must stop looking at cost savings as the salvation of our system. Let us look at the parameters of education, training, knowledge, experience, dedication, commitment, sensitivity, and compassion as the driving force that rewards the physician. Kramer’s rule of seven needs to be invoked: Do the right thing, to the right patient, at the right time, for the right reason, in the right place, by the right person, for the right price. If we can eliminate greed from the equation, which includes physicians, hospitals, insurance companies and the pharmaceutical industry, then we can decrease costs to a reasonable level, and physicians can be rewarded for all the right reasons.

  9. Larry C. says:

    I agree with Joe. I’ve never seen an analysis like this before.

  10. Tom H. says:

    John, I think you have explained an important concept in another context: providers usually don’t compete on quality unless they also compete on price (some exceptions are listed in you Health Alert).

    So the lesson should be: let providers compete for patients on the basis of price. Then they will compete on quality as well.

  11. Howard Mintz, M.D. says:

    Mr. Goodman, I hate to tell you, but your ideas sometimes do not meet the criteria needed to assess the quality and quantity of health care. I have no first hand knowledge of the survival rates for CTCA, but the services you mentioned are fluff. They are provided because they fall outside of the norm for treatment and are billed directly to the patient. Physicians are taught to treated based upon double blind studies and this is how we validate the use of treatment. Centers such as this simply have add on services, because they go directly to the bottom line. I think you should restrict yourself to economic issues and not feel good treatments of unproven value. In Europe, some governments have paid for spa therapy and mineral baths, great idea but I do not think that they have been shown to help in any controlled studies.

  12. Kenneth A. Fisher, M.D. says:

    Regarding end of life care, to me the major issue is, will continued attemps at curative therapy do more harm than good? Will the patient receive better care in a hospice setting? Thus the issue is, what is best for the patient? Pratice thoughtful, beneficial medicine, appropriate care is worthy of any cost, inappropriate care is harmful and costly.

  13. Richard says:

    CTCA are “for profit” cancer businesses – process this with that understanding, as well as with the understanding that the Founder/owner of CTCA has been on the same committees with Mr. Goodman and (as disclosed) CTCA reps have donated to Mr. Goodman’s organization along with others he supports.

    If you do not have insurance or you are on Medciare, do not bother calling CTCA – as they likely will not accept you – unless you have the cash to cover expensive cancer treatment.

    Buyer beware.

  14. John Goodman says:

    Lots of wrong information here. CTCA does accept Medicare, but they cannot accept all Medicare — otherwise, they could not cover their costs.

    Patients are generally not billed for the extra services. These are nonbilled extras (what I think of as part of quality competition).

    Nobody said, and I don’t think CTCA claims, that acupuncture, natureopathy and spritual counseling prolong life. So there is no need for a double blind test. They do seem to increase patient comfort, however — something that traditional medicine (all too often?) ignores.

    Just because a service does not prolong life does not mean it should not be part of the patient’s regimen of care.

  15. John Goodman says:

    One more thing. In Europe there are more of these kinds of “feel good” treatments. In principle, I don’t object to that (unless my tax dollars are footing the bill). What would be bad is if the feel good therapies were substituting for the latest cancer drugs. That is not happening at CTCA.

  16. Phil Williams, MD says:

    Always enjoy your writings, but please don’t fall in the trap of the demeaning term “provider.” I went to Tulane medical school not Tulane health care provider school. I am a doctor, not a provider. Cheers.

  17. artk says:

    John: Why don’t you publish the CTCA risk adjusted survival rates and compare them to the risk adjusted survival rates at the teaching/research hospitals, which exist in many more locations then CTCA.

  18. Jackie Malena says:

    John Thank you for your blog and including CTCA. I have read the comments posted and felt strongly to post a comment. It seems I am the only cancer patient posting and also a patient of CTCA. I am 9 year surviving Hepatocellular Carcinoma( HCC) patient. I am a 35 year old, married, caucasian,mother of 2 small children, with no hepatitis, never a drinker. I have always felt that even those statistics aren’t on my side I would survive. I researched hospitals that had dealt with HCC and then became a patient at KUMED, MD Anderson, Stanford Cancer Center, and Siteman Cancer Center. I was amazed at how cattle like treatment was in most of those centers. Some of these centers were renowned as the “best”. In one of the “best” teaching/research hospitals I was referred to my face by the doctor as my patient number and not my name. After surgeries and some chemos all of the facilities didn’t have anything left for me. They sent me home to make my arrangements to die but instead I went home researched more on how to live. I saw the CTCA commercial researched them and called all my past oncologists for thier feelings and all of them said not to go. Even though they had nothing for me nor any stories of patients of why CTCA wouldn’t work. I am driven to survive so I went to CTCA anyway and so happy I did. Because of them I am still alive. At the rate my disease was growing I wouldn’t be alive if it weren’t for CTCA. Everyone from the owner of CTCA, the president of the hospital to the housekeepers are there for the patient and are passionate about healing patients however they can.
    For one of the commenters to say the non-traditional treatments are fluff couldn’t be farther from the truth. I have had a liver resection, A thorocotamy thru my back to remove a wedge from lung by taking out and replacing some of my ribs, a thorocatmy thru my chest where they sawed open my sternum and wired me shut and over time 2 ports. I have had 50 rounds of radiation and 13 combinations of chemotherapy. My body has been thru a lot. I do accupuncture,chiropractic services and reflexology at CTCA, at no charge, my body is helping itself heal and only take a little nasuea medicine and only a little pain medicine rarely as needed. Non-Traditional treatments have been around longer than traiditional treatments, I believe they know what they are doing.
    For the doctor that said he is only a doctor and not a provider, that is the typical type of care most patients get. It saddens me. What you don’t understand is that cancer patients are looking for you to not only provide good news or bad, but to provide hope, to provide strength. What most doctors don’t remember is they are locked into a patients life story when they deliver the bad news. You always remember the instructor who gave you your college diploma at graduation, you remember the person who married you, you remember the doctor who delivered your kids and you always remember the doctor who told you you have cancer and may die. That is a big responsibility and I would hope being a provider of humanity could play into your role as a doctor. So much happens to a patient in the 30 days between most Oncologist 10 minute visits. In 30 days a cancer patient changes physically, mentally,spiritually, financially. I am so grateful that CTCA has all those services to support me in between visits. My team of Oncologist, Radiation Oncologist, Nutritionist, and Naturopathic Doctor and Care Manager are in weekly contact about my care. I travel 500 miles round trip every other week for this great service. When I am home my care manager checks on me weekly to make sure I am ok physically, mentally, emotionally and financially. No other facility has ever showed me “care” unless I was in the building. CTCA has the latest equipment, and traditional medicine. I stay very informed on my disease and what is available to me. My Oncologist here has always been open to discussing what is new in my disease and helped me researched more if it is something I wanted to consider. It has never been about her ego or what she says it the only way. She realized my survival makes me part of my team.
    The last thing I want to point out is some of the commenters are more worried about the statistics than what John was trying to convey. Speaking as someone who fits no statistical knowledge of HCC you may need to visit one of the CTCA facilities and see the walking talking amazing stories of survival instead of relying on statistics. As one of the doctors said in above comment he had no first hand knowledge of CTCA but sure has a lot to say about it. I would like to challenge any doctor that is telling there patient not to come to CTCA, visit for a day. There are facilities in different parts of the country, visit any of them. Do your patients a favor. You wouldn’t want people saying not to come to you as a doctor even though they had no reason why. CTCA is great with helping Stage 3 and Stage 4 patients in having a better quality of life and/or survival. Most facilities and doctors forget that live or die the quality of your life after your diagnosis has a lot to do with your outcome. Thank you John for writing about CTCA and thank the readers for thier time. Jackie

  19. Richard says:

    Yes, let’s stick with the FACTS…apparently CTCA does accept Medicaid – as evidenced by the fact that they over-billed and had to refund almost $300K to Medicaid, see link:


    CTCA was also fined over $500K for Medicare fraud:


  20. Richard says:

    Additionally, CTCA most certainly does bill patients for non-covered and ‘extra’ services – this recent article in Chicago Tribune states CTCA billed the patient’s wife $160K (for “failed cancer treatment”)


  21. Essential Feeling says:

    I think this is fantastic, in the UK charities often fund this care & its a constant battle for funding – although you don’t then get billed for extras such as reflexology treatments that can really help with pain reduction

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