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Getting Real about Health Care Costs — A Broader Approach to Cost Stewardship in Medical Education

Article · March 27, 2017

In recent years, a growing number of medical schools have begun to provide training in cost stewardship, as part of efforts to improve the value of health care. Yet everyday patient encounters provide sober reminders of the unintended consequences of myopic physician education about costs.

Consider the case of an 88-year-old woman hospitalized for a heart-failure exacerbation. After being restabilized, she needs an echocardiogram to assess for systolic dysfunction. Her house-staff team discusses whether she should stay another night for the test. The attending physician decides to discharge her and obtain the echocardiogram at a follow-up appointment. His rationale: “It will cost less in an outpatient setting.”

But he’s viewing cost stewardship from the perspective of payers and institutions rather than that of patients. Similarly, many insurers and health systems use quality metrics and reimbursement policies to provide incentives for health care providers to reduce the duration and intensity of inpatient care in order to reduce costs. This view, however, ignores the consequences that shifting care to the outpatient setting may have for patients, including transportation costs, higher copayments for ambulatory care appointments, and time spent mitigating coordination failures between inpatient and outpatient providers.

Preventing hospital admissions does reduce costs for both patients and health systems, and patients’ preferences and potential risks should factor into decisions about whether and where to perform certain tests. But if the elderly patient described above were enrolled in traditional fee-for-service Medicare, once she reached her deductible for inpatient care she would probably pay less out of pocket to stay in the hospital an extra day than to undergo echocardiography as an outpatient. Thus, clinical decisions often have opposing economic implications for health care facilities and patients — a divergence that clouds the effects on overall costs. We believe that to promote high-value care, physicians should be taught to consider costs for everyone affected by their decisions — especially patients.

The Affordable Care Act and subsequent legislation have made physician-payment reform a national priority. At the same time, licensing bodies and policymakers have realized that medical school and residency are opportune times to promote cost consciousness. The Association of American Medical Colleges Teaching for Quality program trains clinical faculty to teach cost sensitivity in medical school. In 2014–2015, the Liaison Committee on Medical Education Annual Medical School Questionnaire found that 139 of 141 responding schools required coursework on the cost of care.1 These courses usually focus on general concepts of health economics and insurance design. Ten years ago, less than 70% of medical schools mandated such training.2

Residents confront more practical cost considerations than do medical students. For example, a resident may not be able to order a patient’s outpatient medication because it’s excluded from the hospital’s formulary because of its expense or perceived cost-effectiveness. Residents can’t order high-cost imaging and medications without approval from specialists. Many electronic medical record systems now show dollar signs next to medicines or tests, informing clinicians of their cost range, prompting physicians to factor costs into routine decisions.

Medical schools and residency programs have also attempted to refine curricula addressing health costs. Traditional courses on health economics and policy have sometimes seemed out of place when physicians-to-be are learning about diseases and choosing a specialty. To make cost consciousness more relevant, the Center for Healthcare Value at the University of California, San Francisco, has launched an initiative to define standardized, practical competencies for health care value.3 A systematic review of randomized trials highlights educational initiatives that have helped young physicians deliver high-value, cost-conscious care.4 These efforts address the need for rigorous training in health policy and economics as applied to real-life clinical decisions. In the same vein, the advocacy group Costs of Care hosts an annual essay competition for medical students and residents to share vignettes about cost awareness in patient care. We believe that premedical and medical educators should expand these efforts to shed light on patients’ health care costs.

In their current education on health costs, students and residents learn to answer the question “How much?” but fail to ask “For whom?” Costs are different for different stakeholders — patients, hospitals, payers, and society at large. The costs that many trainees and educators believe apply to patients often actually apply to health care facilities. For example, the dollar signs next to a medication in an electronic medical record generally refer to what the hospital pays for it. Such figures can be misleading, since patients can incur substantial copayments when they’re discharged with a medication that the hospital deems inexpensive.

Tomorrow’s physicians will find it difficult to serve their patients and the public without understanding the economic effects of their decisions on all stakeholders. Taking a narrow view of costs may lead to clinical decisions that cut costs for hospitals or health systems but shift them to patients. If part of the purpose of cost education is to improve patients’ ability to afford health care, then the current approach to training still misses the boat.

We propose four changes to give future physicians a more comprehensive perspective on health costs. First, policymakers and payers could encourage reforms in payment and health insurance design that align the economic interests of patients, providers, and other stakeholders. For example, global payment approaches base providers’ reimbursements on the estimated costs of a patient’s care and thus may more closely align cost incentives for all stakeholders. Payers could also offer tools to help patients consider out-of-pocket costs when making medical decisions. As more insurance experiments, like the Blue Cross Blue Shield of Massachusetts Alternative Quality Contract, strive to improve care coordination, there may be fewer disparities between inpatient and outpatient copayments and reimbursements.

Second, educators could provide opportunities for trainees to see the realities of patients’ lives, to help them grasp the true economic effects of their recommendations. Home visits and patient shadowing allow trainees to witness the costs associated with traveling to appointments, filling prescriptions, and choosing healthy foods at the supermarket, making them more informed when they counsel patients. The Patient and Family Centered Care Innovation Center at the University of Pittsburgh Medical Center has published materials for educators on using patient shadowing to promote value improvement.5

Third, educators should avoid narrowly framing health care costs as the short-term costs associated with individual clinical decisions. Such decisions have different economic consequences for patients with and without insurance, for payers, and for other stakeholders. Comprehensive decision aids that integrate the concerns of each of those groups would help inform trainees, educators, and utilization-review teams. Perhaps more important, each clinical decision — even the decision not to perform a test or procedure — leads to downstream spending. Machine-learning techniques applied to comprehensive insurance databases can forecast with greater certainty the effects of individual decisions on patients. Educators could use such resources to train future physicians to interpret the costs of their decisions in terms of anticipated effects on future spending, not just current costs.

Finally, training in cost containment could be integrated into traditional premedical and medical curricula. The University of Texas at Austin Dell Medical School, for example, has named an Assistant Dean of Health Care Value whose role is to create curricula and faculty-development resources focused on promoting high-value clinical care and reducing health care costs for the community. Just as standardized tests and simulated patient encounters are used to evaluate students’ clinical reasoning, medical schools and residency programs could devise assessments that measure trainees’ ability to reduce costs for all stakeholders.

We believe that in the next era of cost-stewardship education, future and current physicians will have to be taught to reduce spending across the care continuum, especially for patients who are subject to substantial cost sharing. Otherwise, the entire cost-containment movement may be irrelevant to the people who need it most.


From Brigham and Women’s Hospital, Boston (R.B.P.); and Stanford University, Stanford (A.M., S.H.J.), and CareMore Health System, Cerritos (S.H.J.) — both in California.

1. Association of American Medical Colleges. Number of medical schools including topic in required courses and elective courses: costs of care (
2. Riegelman R. Commentary: health systems and health policy: a curriculum for all medical students. Acad Med 2006; 81: 391-2.
3. Moriates C, Dohan D, Spetz J, Sawaya GF. Defining competencies for education in health care value: recommendations from the University of California, San Francisco Center for Healthcare Value Training Initiative. Acad Med 2015; 90: 421-4.
4. Stammen LA, Stalmeijer RE, Paternotte E, et al. Training physicians to provide high-value, cost-conscious care: a systematic review. JAMA 2015; 314: 2384-400.
5. DiGioia AM III, Greenhouse PK. Creating value with the patient- and family-centered care methodology and practice: what trainees need to know, why, and strategies for medical education. AMA J Ethics 2016; 18: 33-9.

This Perspective article originally appeared in The New England Journal of Medicine.

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