Wednesday, March 18, 2015

Market Forces in Health Care

What role should market forces play in health care?

As a general rule, we Americans believe that market forces are very useful.  People having to make choices based on what things cost assures a certain level of economic discipline, directing resources to uses considered most valuable and giving producers an incentive to innovate and be more efficient.

But we have been ambivalent about applying those forces when it comes to providing and obtaining health care services.  We tend to think of health care as a ministry that should be shielded from commercial considerations.

At the same time, if by driving an extra five miles a patient needing an MRI could receive one for half the price, that seems to be a reasonable thing to expect.  But if the MRI is covered by health insurance, the incentive to do so becomes very weak because the savings go to the insurance company, not the patient.

Many have addressed that problem and suggested the need for a system of financing that gives the patient some “skin in the game.”  The February 16 issue of Modern Healthcare included an interview with Mark Ganz, CEO of Cambia Health Systems, a health plan conglomerate operating in the northwest states.  Ganz is quoted as saying “Imagine if healthcare were priced to consumers.”  He cites drugs as an example and argues that involving the patient’s pocketbook more heavily in the purchase would reduce the cost of health care.

He may be right, but I am also impressed by the argument that sick people are not good shoppers for health services because their attention is focused primarily on their illness.

My own view is that a better approach is for health plans to assemble panels of providers with which they have negotiated prices.  They then offer separate health insurance policies, each covering services provided by a specific panel at a stated premium price.  Customers choose from among the competing panels and prices when they are well and able to give careful consideration to the choices.

It is an issue that we ought to be debating. 

Monday, March 09, 2015

Reinventing Health Care

The February 23 issue of The Boston Globe carried an article headlined “To reinvent health care is goal of 22 fellows.  The lead sentence read as follows:

“Harvard Medical School’s Center for Primary Care has launched InciteHealth Fellowship, a new program that brings together 22 talented individuals eager to transform the delivery of health care in the United States.”

I wish them luck, but caution them to be modest in their expectations.

It is easy for us to ignore the depth to which our system of health care is rooted in our culture.  Our feelings about the importance of health are intense.  Our attitudes towards the caring professions and our relationships with them are strongly held.  Those feelings and attitudes change over time, but very slowly.

As is often the case with the print media, the content of the Globe article didn’t quite live up to its headline.  The project as explained seems more oriented to the use of technology to improve care than to a total redesign of the health care system.

Useful gadgets and computer applications are always welcome but reinventing health care requires tinkering with the organ located between our ears.


Friday, March 06, 2015

Professional Licensure and the Cost of Care

Last February 18, the US Supreme Court in a 6-3 decision ruled that the Federal Trade Commission was allowed to charge the North Carolina State Board of Dental Examiners with “anticompetitive and unfair actions.”  It seems that spas and salons in the state had been offering teeth whitening services, a service that had been shut down by the Board as constituting the practice of dentistry without a license.  The Board is dominated by dentists and Justice Kennedy opined that “Active market participants cannot be allowed to regulate their own markets free from antitrust accountability.”

Professional licensure is among the major barriers to cost reduction in health care.  Adopted for the purpose of protecting the public from charlatans and unqualified providers, they now effectively prevent provider organizations from experimenting with different, more efficient ways of organizing and staffing the delivery of health care services. 

A case in point is the use of nurse practitioners and physician’s assistants to provide primary care.  There is reason to argue that it ought to become standard practice and some of it is happening but the change is proceeding at snail’s pace.

The North Carolina decision does not address that issue, but it reminds us that professional licensure can have consequences other than those initially intended.


Tuesday, February 10, 2015

Still No Portrait in the Lobby

Anyone who knows me well will be aware of my fondness of aphorisms, one of which is that no hospital administrator ever got his portrait in the lobby for saving money.

As a follow-on to the publicity about the judicial rejection of Partners’ expansion plans and the appointment of its new CEO, The Boston Globe in its February 6 edition ran another front page article under the byline of Robert Weisman, this time headlined Partners looks to mend ties, tame costs.

The article pointed out that “Fears of higher health care costs were at the root of opposition to Partners’ recently rebuffed [expansion] plans” and that “A state judge cited rising health costs when she rejected a settlement in late January that would have allowed the [expansion.}”

Later in the article, the new CEO (Dr. David Torchiana) is quoted as saying “In Massachusetts, there is an almost overwhelmingly singular focus on cost because access has already been addressed” through the state’s 2006 universal health care law.

That same Globe edition carried an article reporting that health insurance companies in Massachusetts are projecting a 7% increase in costs for 2015.  That is almost twice the goal of 3.6% set by the state in 2012.   

Dolores Hamilton, a human resources director for the Town of Framingham, responded to the announced increase by saying "It's a budget-buster" and the article speculated that many employers would be passing the increase along to employees through higher copays and deductibles.  No mention of the need for providers to find less costly ways of providing care.

So we may not yet be ready to live with the pain of serious cost control.  There are signs that we are on the road to getting there but hospital executives who hope to see their portraits in the lobby will for the time being have to get it some other way.


Sunday, February 08, 2015

No One in Charge

In my professionally active days, I liked to tell young administrators that a hospital was an institution with nobody in charge and that success came to those who learned to be productive in that circumstance.

With all the changes that have been taking place in recent times, I came to think that perhaps that advice was out of date, but apparently not so.

Partners HealthCare, the Boston health care behemoth, has just appointed a new CEO, one Dr. David Torchiana.  Since 2003, Dr. Torchiana has been chief executive of the Massachusetts General Physicians Organization, consisting of some 2,000 physicians on the medical staff of the Massachusetts General Hospital.

The appointment was announced in a front page, above the fold article in the February 5 issue of The Boston Globe under the byline of Pryanka Dayal McCluskey and Robert Weisman.  Part way into the article, the reporters, referring to Dr. Torchiana, state that ”In the medical world, the doctor group he heads, consisting of some of the top doctors in the nation, is considered as influential as the hospital itself.”

So it seems that my old observation still applies at the Massachusetts General Hospital.  It is an arrangement that can be made to work as long as nobody cares about cost.  But that is no longer the case.  The Globe article also mentioned the recent denial of the Partners expansion plan by Suffolk Superior Court Judge Janet L. Sanders, who, according to the reporters, “was concerned that a bigger Partners would mean higher health care costs for consumers.  Partners is the state’s highest cost health system.”

The reporters did not connect the reference to influence with the cost issue, but Dr. Torchiana will have to.

Friday, February 06, 2015

The End of Single Payer?

The dream of single payer health insurance for the U.S. may have just met its end in Vermont.

For true liberals, national health insurance, aka single payer, has long been a holy grail – a dream plan for financing health care to be continually pursued.  Every time health care reform has come up – going all the way back to Franklin Roosevelt – the single payer people have thought their time had come, only to be disappointed.  During the process of legislating Obamacare, they plumped for something called the public option – a governmental health insurance program that would compete with the private sector – only to see President Obama abandon their cause by declining to support it.

Not to be discouraged, the government of the liberal state of Vermont then proceeded during the following year (2011) to adopt legislation authorizing a single payer program of its own to be called Green Mountain Care.  The law specified that the Governor (Peter Shumlin) was to develop a detailed financial plan by 2013.  He missed that deadline but in December of 2014 issued a report saying that he would not seek funding for the law, saying that “In my judgment, now is not the time to ask our Legislature to take the step of passing a financing plan for Green Mountain Care.”

Governor Schumlin’s action was reported in an article appearing in the January 25 edition of The Boston Globe (Dream meets reality) under the byline of Jay Fitzgerald.  According to that article, “Governor Peter Shumlin released a financial report that showed the cost of the program would nearly double the size of the state’s budget in the first year alone and require large tax increases for residents and businesses.”  The article also said that the decision “signaled that the dream of universal, government-funded health care in the United States may be near its end.”

I have for many years been pointing out that national health insurance is a remedy for inadequate financing, that the problem in the U.S. was excessive financing and that we therefore would never have single payer.

I rest my case.



Thursday, February 05, 2015

Partners Decision Reach

The rejection of Partners Health Care’s plan to acquire additional hospitals and doctors in the Boston area may have widespread implications.

My earlier posting suggested that it marked a decline in the veneration of big, prestigious teaching hospitals.

An article in the January 31 issue of The Boston Globe (Partners decision could reach far) suggests that another consequence may be an increase in the scrutiny given to the growth ambitions of major hospital systems.

That could well be the case, partly because of Partners’ prominence as a provider of health care, but also because of growing general concern about the relationship between the high cost of health care and the monopoly power of hospitals, which have been rapidly consolidating into large, regional systems.

Laws prohibiting monopolies have always covered hospitals, but there hasn’t been much public concern about the issue and the laws have been rather casually applied.

Underlying all that is the question of whether we want market competition in health care at all.  If we would rather depend on regulation to control cost and quality, then monopoly status doesn’t make much difference.   But if we are to rely on market forces, then monopolies are to be avoided.

The ruling in the Partners case was somewhat ambivalent on that issue.  On the one hand, it took the position that the control methods provided in the agreement were inadequate.  But it also expressed reservations about the ability of Partners to demand higher prices, using the market power it would gain if allowed to expand further.

Perhaps the Partners episode will serve to move us along towards resolution of the matter.


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