(Excerpted from Time March 4, 2013 – Bitter Pill – How Outrageous pricing and egregious profits are destroying our health care by Steven Brill)
A 47 year old man developed non-Hodgkins lymphoma. Self employed, they were unable to buy comprehensive health insurance so bought a plan for $479/month (20% of their income) that covered only $2000/day of hospital costs. At MD Anderson Cancer Center in Houston, they were told that their discount insurance wasn’t accepted and that the 6 days required so a treatment plan could be devised, would cost $48,900 due in advance. They borrowed the money but $35,000 was required the next week to start the urgent treatment. The check for this had not cleared so $7,500 had to be advanced from their credit card just to see the doctor. $83,900 was the additional cost of the treatment plan and initial doses of chemotherapy. The 344 line bill included a generic Tylenol $at1.50 that could be bought for $1.49 for 100 pills, a chest x-ray at $283 that Medicare (the government health care program for the 65 and older in the US – Medicare pays approximately what the service provides plus overhead, equipment and salaries) pays $20.44 for, and blood tests at $15,000 that Medicare would pay a few hundred dollars for. He was charged $13,702 for his one injection of his initial chemotherapy when the average price paid by all hospitals for the drug is $4,000 and MD Anderson pays $3,500 because of a volume discount. This drug costs the manufacturer $300 to make, test, package and ship. This drug is available for free on a charity access program offered by the maker but the patient was not advised about this by MD Anderson. $7 was charged for an alcohol prep pad when 200 can be bought for $1.91. The hospital day charge was $1,791. The patient was made to pay every penny of the bill up front because their insurance was deemed inadequate. The is that the happy news is that the patient eventually went into remission. MD Anderson, a unit of the University of Texas, is officially nonprofit but had an operating profit of $531 million in 2010, a 26% profit on revenue of $2.05 billion, an astounding amount. The president of MD Anderson was paid last year $1,845,000 plus money recieved from 3 pharmaceutical companies, triple the $674,350 salary of the president of the entire university. MD Anderson is the leading brand name of Texas Medical Center located on a 1,300 acre complex of medical facilities with 280 buildings. Of Houstons top ten employers, five are hospitals and three are oil companies.
A 64 year old woman with chest pain paid $995 for her 4 mile ambulance ride, $3,000 for a doctor, and $17,000 for three hours in the hospital (including tests) in what turned out to be heartburn. Some of the tests included a troponin blood test used to detect heart attacks that was done three times and charged at $199.50 when Medicare would have paid $13.94, and a complete blood count at $157.61 (Medicare $11.02). This hospital billed $293.2 million for total lab work expenses in 2012 that actually cost it $27.5 million, that is 11x it’s costs. Expensive technology was a bigger factor in her bill than the lab tests. She had a stress test using a radioactive dye tracked by a CT scan that was billed at $7,997.54 (Medicare pays $554). An additional $872.44 just for the dye used for the test was included in the bill . The regular stress test where an ECG is used to monitor, would have billed at $1,200 (Medicare $96). Most would start with this test first and resort to the nuclear teat only if there seems to be problems. The incentive for ordering the more expensive test are clear – using a CT has a high profit margin. The cardiologist was paid $600 for reading the test results on top of the $342 he charged for examining her.
Another 62 year old woman slipped and fell on her face sustaining a heavy nose bleed. At the local emergency room, she received 3 CT scans – of her face, head and chest costing $6,538 (Medicare charge $825) and the doctor charged $261 to read the scans. Her only injury was a hairline nasal fracture. She also had a troponin test billed at $239. Also on the bill were items that neither Medicare nor any insurance company would pay for: basic instruments, bandages, and even the IV tubing. These are supposed to be part of the hospitals facility charge, which in this case was $908 for the emergency room. Her total bill was $9,418. Her insurance insured mostly low wage earners. She is one of millions of Americans categorized as having health insurance but don’t really have anything approaching meaningful coverage. Covered for just $2,500 per hospital visit, she was on the book for about $7.000 of her bill. Her $1,800 salary disqualified her for Medicaid assistance. The hospital sued her and would not negotiate the bill down and a judge put her on a $20/week for six year payment schedule.
When medical care becomes a matter of life and death, the money demanded reaches a whole different order of magnitude. A man diagnosed with incurable lung cancer in 2011, wanted every last minute of life he could get, no matter what. He lived for an additional 11 months but had by then collected bills totalling $902,452. The first bill of $348,000 included diabetes test strips at $18 (cost 50 for $27.85), and niaccin pills at $24 each (cost 5 cents), None of these were included in the hospitals facility charge for the intensive care unit at $7,315 a day plus one day in a standard room, all totaling $120,116 over 15 days. There was also $20,886 for CT scans and $24,251 for lab work. Their health insurance payout limit was $50,000, but was worth about $80,000 as charges were subject to a discount her carrier had negotiated with the hospital. The hospital eventually wrote off $297,000 of the $348,000 when the patient scraped together $3,000. Along with the $50,000 insurance payment, this amounted to a 85% discount. The family was able to sign up to a special California state high risk insurance pool, but the premium was $1,000 a month, and had an annual payout of $75,000, but they blew through that in 2 months. Through months of negotiations, write offs, and manipulations of Medicaid in California, the final bill still came to $172,000.
A man in his 50’s developed pneumonia and required a 32 day hospitalization. Their insurance policy had an annual payout of $100,000 and they had already used about $17,000 of that. On check out, the 161 page bill was $474,064 and they owed $402,055. The top billing categories were $73,376 for his room ($2,294 per day), respiratory services for $94,799 (oxygen, testing his breathing) and multiple charges per day of $134 for supervising oxygen therapy – Medicare would have paid $17.94, and $108,662 for special drugs which included his IV solution ($84-134 per litre with an actual cost of $5.16). Then there was the $132,303 for lab tests, most for which Medicare pays nothing or much less. A negotiator had the total bill reduced to $313,000 as $113,000 were for items that should not have been billed for at all as they are part of the rooms and services charge. Some items were triple billed. The hospital eventually settled for $200,000 if paid immediately or else the total bill spread out over 24 monthly installments. They thought they were set for their retirement but this left them on the edge.
There is no rational reason for these costs incurred in a marketplace they enter through no choice of their own. What is so different about medical technology advances that drive up bills instead of down? This is the ultimate sellers market that is uniquely American. Tax exempt “non profit” hospitals are many cities most porfitable businesses and largest employers often presided over by their most richly compensated executives. New York City’s Memorial Sloan-Kettering Cancer Center’s has 14 administrators paid over $500,000/year and 6 paid over $1 million.
America spends almost 20% of GDP on health care compared to less than half that in most developed countries with results that often worse than those countries. More is spent on health care than the 10 biggest spenders combined (Japan, Germany, France, China, UK, Italy, Canada, Brazil, Spain and Australia). The $60 billion cost of cleaning up Hurricane Sandy was spent last week on health care. More is spent on artificial hips and knees than Hollywood collects at the box office. Of New York City’s 18 biggest emplyers, 8 are hopitals and 4 are banks in the world’s financial services capital. The drag on the US economy is unsustainable. The health care industry spent $5.36 billion since 1998 on lobbying in Washington, 5x what is spent by each of the defense and aerospace and oil and gas industries. Of the $2.8 trillion spent this year on health care, $800 billion is spent on Medicare and Medicaid (which pays for the poor). This is what is driving the federal deficit and increasingly burdening businesses that pay their employees health insurance.
Every hospital has what is called a chargemaster – this is every hospitals internal pricelist. There appears to be no process or rational behind this core document that is the basis for every health care bill. It is a radically inflated number quite different from what Medicare pays. Medicare collects troves of data on what every type of treatment, test, and other service costs hospitals to deliver and should actually be nonprofit after their calculation. Direct costs are factored in along with allocated expenses such as overhead, capital expenses, executive salaries, insurance, differences in regional costs of living, and even the education of medical students. These rates are supervised by Congress that is heavily lobbied by the American Hospital Association which spent $1,859,041 on lobbyists in 2012. Like Medicare patients, the large portion of hospital patients who have private health insurance also get discounts (usually 30-50% above Medicare rates) off the listed chargemaster figures. These discounts are not as steep as the Medicare markdowns and thus fuel profits at these officially nonprofit hospitals. These profits are further boosted by payments from the tens of millions of patients who have no insurance or whose bills exceed their insurance coverage limits. All these patients pay the chargemaster list prices. That is those least able to pay are the ones singled out to pay the highest rates. Welcome to the confusing American medical marketplace.
Hospitals chargemaster rates are not consistent from hospital to hospital, and do not seem to be based on anything objective – like cost. Insurers are increasingly losing leverage as hospitals are consolidating by buying doctors’ practices and even rival hospitals. Discounts work down from chargemaster prices rather than up from Medicare rates, but they are still no bargain. The argument that chargemaster rates get paid by (wealthy) uninsured people from overseas in order to serve the poor, does not bear out in practice. It is not a Saudi sheik but the almost poor – those that don’t qualify for Medicaid and don’t have insurance – who most often pay these exorbitant prices. The huge difference between list price and actual hospital cost still produce huge profits after all the discounts. Most hospitals end up receiving about 35% of what it bills. Thousands of nonprofit hospitals have morphed into high-profit businesses. Chargemaster rates are viewed as totally fair by the hospitals as everyone gets the same bill, even Medicare.
A CT scanner costs about $250,000 and typically pays for itself in one year if it carries out just 10-15 procedures a day. That is a terrific return on capital that has an expected life span of 7-10 years. It costs little to operate, so the more it can be used and billed, the quicker the hospital begins profiting form its purchase. Plus an extra fee for the reading of the scans – 71% more than in Germany. Medicare reimbuses hospitals four times as much as Germany does for CT scans. The more CT and MRI scanners out there, the more doctors use them. In 1997 there were fewer than 3,000 machines completing an average of 3,800 scans per year. By 2006, there were more than 10,000 in use doing an average of 6,100 per year. The use of CT scans in American emergency rooms has more than quadrupled.
The advance of technology has made medical care more expensive, not less. It encourages more procedures and treatment by making them easier and more convenient. There is little patient pushback against higher costs as it seems to result in safer, better care and the customer is either not going to pay for it or not going to know the price until after the fact. The legal defense is that doing the higher-tech test is safer – what they do to avoid being sued (it could actually be an excuse for hiking profits). Malpractice reform proposals would not limit awards for victims but would allow doctors to use a safe-harbour defense. This argues that the care provided was within the bounds of what peers have established as reasonable under the circumstances. Doing more, like a nuclear imaging test, would then be less likely to prevail. Unfortunatelly, no safe-harbour provision nor any any other malpractice-tort reform was included in Obamacare (blocked by the Democrats under lawyer pressure).
As with public utilities, customers must have the product and can’t go anywhere else to buy it. Unlike the electric company, no regulator caps hospitals profits. They have become low risk must have public utilities that pay their operators as if they were high risk entrepreneurs. In small towns and cities across the US, the local nonprofit hospital may be the communitys strongest business typically making tens of millions of dollars a year and paying its nondoctor administrators six or seven figures. As nonprofits, charitable gifts raise just over 1% of its revenue. It is those blood tests and CT scans that really count. Nonprofit hospitals average profit margins in the 12% range, which would be the envy of shareholders of businesses across other sectors in the community. Hospital income often dwarfs the citys total taxes and fees. The 2,900 nonprofit hospitals, exempt from income taxes, actually end up averaging higher profit margins than the 1000 for-profit hospitals. The argument that this profit funds care for the poor is unjustified as charity care costs less than !% of US hospitals annual revenue.
Nonprofits are not prohibited from taking in more money than they spend. They just can’t distribute the overage to shareholders – because they don’t have any shareholders. The money is used to improve and expand facilities (despite the fact that the US has more hospital beds than it can fill), buy more equipment, hire more people, offer more services, buy rival hospitals, and then raise executive salaries because their operations have gotten so much larger. This upward spiral is easy to sustain as there is little price transparency and far less competition. As the communities largest employers, there is unlikely to be much local complaining about its burgeoning economic fortunes.
Unable to pay hospital bills, patients often resort to medical billing advocates. They help people read and understand their bills and try to reduce them. The hospitals all know the bills are fiction so are are often willing to negotiate. But these advocates only deal with a tiny fraction (possibly only 5000 patients a year) of the tens of millions of Americans facing bills. This explains why 60% of personal bankruptcy filings each year are related to medical bills. Hospitals and doctors often reduce their bill by at least half but ambulance companies never negotiate. There still remains a large profit because of the exorbitant chargemaster rates. Some hospitals refuse to compromise at all on its chargemaster prices.
Getting a patient in and out of the hospital the same day seems like a logical way to cut costs. Outpatients don’t take up hospital rooms or require the expensive 24/7 observation and care that come with them. Incentives were introduced to not admit patients and procedures like laparoscopic surgery helped speed the shift to outpatient care. By 2010, average hopitial days per patient declined significantly and outpatient services had increased even more dramatically. However, the result was not the savings envisioned, but just the opposite. Outpatient services are now packed with so much hidden profit that emergency room care averages a profit margin of 15% and other outpatient care averages 35% (inpatient care has a margin of just 2%).
A man in his 30’s with back pain was advised to have a neurostimulator implanted in his back as an outpatient. With $45,181 remaining in his $60,000 annual payout limit his union sponsored health insurance plan imposed, he was not concerned about the cost. Some of his charges included a skin marking pen at $3, OR restraining strip at $31, a reusable blanket warmer at $32 (ebay cost $13), and a doctors OR gown at $39 (cost $6), All these were supposed to come with the facility fee paid to the hospital, which in this case was $6,289. On top of that was a pharmacy bill for $1,837. However the big ticket item was the stimulator billed at $49,237. The wholesale price paid by the hospital was $19,000 (the hospital likely paid 5-15% less if it is part of a large hospital chain), giving a profit margin of more than 150%. With a total bill $86,951, he still owed $40,000 not counting the doctor’s bills. When the author of this article wanted to discuss the bill with the hospital, they refused hiding behind a privacy statute. The stimulator maker realized a $14,500 profit before expenses for over head on the device. The bill was negotiated down but the patient was still left with a $10,000 bill.
Medicaid, the federal insurance program for the poor, is a federal-state program. When Medicaid’s subsidiary program called Children’s Health Insurance or CHIP is counted, Medicaid actually covers more people: 56.2 million compared with 50.2 million for Medicare. As its constituents are poor, Medicaid is more vulnerable to cuts and conditions that limit coverage. Medicares rules are generally uniform across state lines, but not so for Medicaid as states finance a big portion of the claims. For example in California, $3,000 a month of medical bills must be paid before Medicaid (Medi-Cal) would kick in.
People, especially relatively wealthy people, always think they have good insurance until a castastrophic event happens. Some companies sell health insurance to small businesses that pays only limited coverage or to individuals who cannot get insurance through employers and are not eligilble for Medicare or Medicaid. The policies clearly spell out the limits but these details are usually not understood. Even the common limits of $500,000 or $750,000 can be quickly consumed. For that reason, Obamacare phases out all limits by 2014 but this will make everyone’s premiums dramatically higher. But Obamacare does nothing to address the most surprising sinkhole – the seemingly routine lab tests. Their tests become a routine, daily cash generator even though it is estimated that 60% are not necessary. For hospitals, they are vital profit centers. Labs are increasingly owned by doctors, who obviously have a conflict of interest. The economics of having your own lab are alluring. Some hopitals are buying physicians practices outright; 54% of physician practices were owned by hospitals in 2012, up from 22% a decade earlier. This is primarilly a move to increase the hospitals leverage in negotiating with insurers, but an expensive by-product is that it brings testing into the hospitals’ high-profit labs.
We have seen what happens when private parties get the bills. When the taxpayer picks up the tab, the dynamics of the marketplace shift dramatically. In 2011, an 88 year old man collapsed from a massive heart attack. He survived and spent 2 weeks in an intensive care unit and 3 weeks in a convalescent care center. Medicare made quick work of the $268,227 in bills, paying just $43,320. The patient payed nothing as 100% of inpatient care is covered by Medicare. The convalescent care center did not have to accept Medicare patients and their discounted rates, but it does and indeed welcomes them. Health care providers may grouse about Medicare’s fee schedules, but Medicare’s payments must be producing profits.
About a decade ago, a 78 year old man was diagnosed with non-Hodgkins lymphoma. Offered little hope, he was given a new chemotherapy regimen and it worked. He is still in remission and every six weeks he is rechecked and gets a dose of Fibrogamma which bucks up his immune system. His bill for each visit is $7,346 including $340 for the doctor making an annual bill of $57,408, of which he pays $50 for each visit. A man of modest means, he has received great care otherwise reserved for the rich. He also has supplemental insurance that pays 90% of the 20% of costs for doctors and outpatient care not covered by Medicare. The two basic hospital charges are $414 per hour for five hours of nurse time for administering the drug plus the cost of the Fibrogamma. The nurse generally handles 3-4 patients at a time, meaning that the hospital bills more than $1,200 an hour for that nurse. Some of that is overhead and Medicare gets a discount but the nurse’s time is still valued at $800 an hour assuming three patients are looked after at the same time. Medicare actually pays $241, his supplemental insurance pays $54, and the patient $6.
Even with big discounts, the chargemaster prices are a leading cause of the $750 billion Americans overspend each year on health care, Drug pricing is a major contributor to that overpayment. By law, Medicare must pay 6% above which the drugmaker sells the drugs to hospitals. But it has no control over what drugmakers charge and they are free to set their own prices. For Fibrogamma, it is complicated, but the hospital pays $1,400 for the dose and is paid $2,123 by Medicare, so even Medicare contributes significantly to hospital profit. Fibrogamma is produced in Spain at a cost of no more than $300 per dose. In the rest of the developed world, profit margins are much lower than in the US, where it can charge much higher prices. There is a significant difference in the regulatory environment in the US compared to abroad resulting in a 50% higher overall prescription drug price in the US.
More than $280 billion will be spent in 2013 on prescription drugs in the US. If the US paid what other countries do for the same products, it would be $94 billion less. The pharmaceutical industry’s explanation for the price difference is that the US profits subsidizes the research and development of drugs marketed around the world but their math does not add up. Federal law restricts the single biggest buyer – Medicare – from even negotiating drug prices. Medicare simply has to determine the average sales price and add 6% to it. Nor can Medicare get involved in deciding if a drug may be a waste of money. If, after exhaustive research, cancer drug A costing $300 per dose is found to be just as or even more effective than cancer drug B costing $3,000 a dose, Medicare cannot decide that it will pay for drug A but not drug B. Medicare spending on cancer drugs ballooned from $3 billion in 1997 to $11 billion in 2004 and probably $20 billion today. Efforts to establish comparative effectiveness research for drugs and also for procedures like CT scans were excluded from Obamacare. Charges that mandates for practice guidlines or coverage restrictions would create “death panels” were leveled by critics. An example is a colorectal cancer drug called Zeltrap, which costs $11,603 a month. Another drug called Avastin, which costs $5,000 a month is just as effective. Two other new cancer drugs cost more than $35,000 each per month! The burden of this cost is borne increasingly by patients themselves with devastating effects.
Medicare may look like a government program run amok. When Medicare was introduced in 1965, it was estimated to cost $12 billion, but its actual cost was $110 billion and is nearly $600 billion this year. That’s due to an aging population, an expansion to cover more services, the skyrocketing costs of medical services, and because Medicare cannot negotiatate the prices for drugs and medical equipment. Medicare is staffed by 8,500 private contractors and only 700 government employees. Everything Medicare pays for is complexly coded depending on if for a doctor payment, a hospital service, lab and diagnostic test, ambulance service, or drug. Three million bills are received daily and $1.5 billion is paid out daily. It costs 84 cents to process each claim, usually done by private contractors, in what is the largest accounting ledger in the world. Each claim takes an average of 3 days to process and only about 10% of claims are denied, of which 20% are appealed and half of these, or 1% of the total, are reversed.
Because of supplemental insurance reducing patient copayments to negligible amounts, there is no financial incentive to limit doctor visits. Most members of the middle class and above could afford larger co-pays to encourage less casual use of doctors. Because doctors are paid on a fee-for-service basis, there is a financial incentive to see patients as often as possible. Overdoctoring would be reduced by paying salaries and giving incentives based on patient outcomes. Penalties are imposed in Obamacare for bad outcomes in hospitals and this will drive costs down. Medicare should be allowed to negotiate drug costs and to make purchasing decisions on the basis of comparative effectiveness. Competitive bidding for purchases of durable equipment should be allowed. Introducing a single payer system would reduce the huge bureauracracy required to file dozens of different kinds of bills to dozens of insurance companies. But this isn’t likely to happen.
Obamacare does some good work around the edges of the core problem. It restricts abusive hospital bill collecting. It forces insurers to provide explanations of their policies in plain English. It requires a more rigorous appeal process conducted by independent entities when insurance coverage is denied. Its three best provisions are: the prohibition on exclusions for pre-existing conditions, the restrictions on co-pays for preventative care, and the end of annual or lifetime payout caps. But Obamacare has not done much to change the prices paid for medical care. There is little that affects the paydays of those thriving in that marketplace. In fact, by bringing in so many new customers into that market by mandating that everyone must buy health insurance, and then providing taxpayer support to pay their insurance premiums, Obamacare enriches them. That of course is why the bill was able to get through Congress.
There are many things that could be introduced into the American mecical system that would make it more cost effective. Most have been alluded to in the above. The core problem is lopsided pricing and outsize profits in a market that doesn’t work.
1. Medicare, the world’s largest buyer of prescription drugs, should be allowed to negotiate the prices it pays for them and to make purchasing decisions based on comparative effectiveness.
2. Medicare can decrease the price of any durable medical equipment through competitive bidding. This includes everything from CT and MRI scanners, mail order diabetic supplies, wheelchairs, home medical beds, personal oxygen supplies, to canes that Medicare spends $15 billion annually for. It is estimated that 40%, or 6 billion could be saved annually.
3. Rather than increase the eligible age of Medicare from 65 to 67, reduce it to include more people. This would allow much greater access to the discounts Medicare gets from health insurance companies. Obamacare will require people less than 65 to get private insurance coverage and will subsidize those that can’t afford it. But the cost of that private insurance, and therefore those subsidies, will be much higher than if the same people were enrolled in Medicare at an earlier age. Premiums could be based on their incomes. Also those who can afford it might be required to pay a higher proportion of their bills rather than the 20% they now pay for outpatient care. The overall cost per beneficiary will be lowered as younger members are likelier to be healthier. This would not work if these younger people started using health care services they don’t need. This logic would apply even more readily to 40 and even 18 year olds. This is the single payer system used by most developed countries.
4. Introducing a single payer system would significantly reduce medical cost in the US. A huge bureaucracy is involved in billing in the current system. Claims processors, working under goverment supervision, handle claims for 84 cents each. Medicare’s total management, administrative and processing expenses are about 2/3’s of one percent of the amount of the claims or less than $3.80 per claim. An estimate of private costs to do the same is about $30 per claim. Unless protected by Medicare, the health care market is not a market at all. People fare differently according to the circumstances they can neither control nor predict. They may have no insurance. They may have insurance but it may have a payout limit or not cover a drug or treatment they need. They may not be old enough to qualify for Medicare or because of the different standards of the 50 states, be poor enough to be on Medicaid. Their is little visibility into pricing, let alone contorl of it. There is no choice of hospitals or the services they are billed for. They have no idea what the bills mean. How much they end up paying may depend on the generosity of the hospital or whether they get the help of a billing advocate. They are powerless buyers in a seller’s market where the only sure thing is the profit of the sellers. Indeed the only player in the system with any control is Medicare. It would give whoever pays a fair chance in a fair market. When health care deals in a life-or-death product, it cannot be left to its own devices. This is about facing the reality that the largest consumer product by far, 1/5th of the US economy, does not operate in a free market.
5. Antitrust laws should be tightened to prevent hospitals dominating a local market so that prices cannot be negotiated. Their consolidation of both lab work and doctor’s practices accentuates this problem.
6. Hospital profits should be taxed at 75% as the nonprofit system does not work. They are now simply plowing their profits into more buildings and equipment that is not needed in a system already with too many beds and services. This would save on tests that would not be performed now only to increase profit.
7. Cap all nondoctor salaries or charge a tax surcharge on these salaries that exceed, say, $750,000. The present remuneration system for administrators is out of control.
8. The chargemaster should be outlawed. They should be rewritten to reflect actual and thoroughly transparent costs. Hospitals are supposed to be government sanctioned institutions accountable to the public. The chargemaster is the essence of a broken market, the poison coursing through the health care system.
9. Patent laws for drugs should be amended to limit how drug companies exploit the monopoly the patent laws give them. Or simply set price limits or profit margin caps on these drugs. This would save $90 billion per year.
10. Control the costs of CT and MRI tests and lab tests, both a huge contributor to the massive overspending on outpatient costs.
11. Medical malpractice tort reform need to be instituted to provide safe harbout defenses for doctors. Eliminating the rationale or excuse for all the extra doctor exams, lab tests, and CT and MRI scans could cut tens of billions of dollars per year while drastically reducing what hospitals and doctors spend on malpractice insurance.