Health Care Anew

Competition is frequently mentioned as a means of controlling the cost of health care but seldom, if ever, with any explanation of how it is supposed to do so. 

A late example is a story in the March 13 issue of The Boston Globe reporting an announcement by Kathleen Sebelius, Secretary of the US Department of Health and Human Services, that guidelines had been issued for the development of the “new state-based health insurance markets that will offer consumers one-stop shopping, along the lines of Amazon.com.”  These are the markets required under the Affordable Care Act, popularly known as ObamaCare. 

In her announcement, Secretary Sibilius said that “More competition will drive down costs….” but made no mention of how it would do so. 

           The Secretary presumably was referring to competition among insurance companies and a reduction in the cost of health insurance premiums. 

            Health insurance premiums cover three main items:  administrative costs, profit and the cost of the services covered by the insurance policies.  Insurance companies already have an incentive to keep administrative costs as low as they can since doing so increases profits.  Competition no doubt keeps profits in check, but at their highest they comprise only a few percentage points of the cost of insurance.  Profit as a percentage of premiums is not rising remarkably and is already restrained by existing competition among insurance companies. 

            The big item making up the cost of premiums is the cost of paying hospitals, doctors and other providers for the health services used by subscribers.  Unless the competition has some impact on that, its effects on the cost of health care won’t amount to much. 

            If competition is to be effective in controlling the cost of health care, it has to be competition among providers.  The market has to steer patients to providers who provide the best combination of cost, quality, and patient satisfaction.  The providers who don’t compete successfully in those areas will be forced out of business. 

            That may not sound very pleasant, but that’s the way it is.

           

The current state of the art of managing physicians is illustrated by the March 6 issue of The Boston Globe, which carried a story about how the 360 salaried primary care physicians at Partners HealthCare (the parent company of the Massachusetts General and the Brigham and Women’s Hospitals) are being offered bonuses of about ten per cent of their salaries (now roughly $200,000 per year) if they agree to accept more new patients. 

It seems that Partners is concerned about the inability of new patients to get appointments with its physicians and is trying to expand capacity by offering this inducement. 

In most organizations, if management felt that staff members should be producing more, it would find some direct way to make that known and expect a response.  But apparently that has not been done at Partners or, if it has, the response has been inadequate and management has not felt able to do anything about it.  Thus the alternative of offering the “carrot” of more money and hoping it works. 

Another implication of the story is that individual primary care physicians at Partners are making their own decisions about whether to accept new patients or not.   In other words, each physician is determining his or her workload independently of management.  It would be hard to find salaried staff with that level of freedom anywhere else. 

The story mentioned that Leahy Clinic, also located in the Boston area, had adopted the policy of guaranteeing a new patient an appointment within 48 hours.  There was no mention of any financial inducements associated with that.  Leahy is a long-standing group practice with a great deal of experience in the employment and management of physicians and apparently has a better handle on things.

The clear direction of development in the health care delivery system is the combination of physicians and hospitals into single entities that can be held accountable for the cost and quality of care.  The only way that will work is if all elements of care, including physicians, are effectively managed.  It seems that there is a lot yet to be learned about how to do that.

A Cultural Hang-Up (CHU for short) happens when a value or an idea or a practice becomes so firmly engraved in our cultural subconscious that it keeps us from doing something that is both sensible and beneficial. 

ACOs are a case in point.  ACO is short for Accountable Care Organization, a concept that has been bandied about in the health care literature for some time and found its way into the Patient Protection and Affordable Care Act, known popularly as ObamaCare.  As its name implies, an ACO is an organization that can be held accountable for both the cost and quality of care.  It is a response to the historical fragmentation of the health care delivery system, of which the hospital and its largely independent, self-governing medical staff is perhaps the most significant example.   

The federal government is jumping through all kinds of hoops trying to define what will qualify as an ACO, apparently based on the premise that health care will typically be provided under that traditional pattern.  How much simpler it would be if the authorities would just say that the prototype ACO will be a hospital that employs its medical staff, thereby unifying the major components of care and acquiring the ability to be held accountable.   

There are already institutions like that.  Most University-owned teaching hospitals are medically staffed by employed physicians, as are hospitals operated by large group practices like Mayo, Cleveland Clinic, Geisinger and Leahy.  Such hospitals are very difficult and expensive to create, however, and there are not likely to be more of them. 

Among the private hospitals that quality, The Henry Ford Hospital in Detroit is perhaps the best known.  The Myrtue Medical Center in my home town of Harlan, Iowa is another.  Undoubtedly there are more.   

Replicating these examples would be the easiest thing to do.  Hospitals are already hiring physicians at a rapid rate and the trend could be accelerated by adopting measures such as grant programs that covered part of the cost, and tax incentives that encouraged physicians to accept employed status.   

But I have yet to hear anyone suggest anything along those lines.  Most likely that is because the institution of private practice is so deeply entrenched in our culture that any suggestion that it be replaced is not socially acceptable, even though it is in steep decline. 

CHUs can impede progress.

Unrestricted choice of physician is a fetish we have to get over. 

The February 24 issue of the New York Times has a story about the growing number of PACE programs, under which Medicare pays providers a lump sum per month to take care of frail seniors.  The focus of the story was how PACE programs keep these seniors in their homes as long as possible – something preferred by many patients and believed to be less expensive than nursing home care. 

It was mentioned in the middle of the story that some patients “spurn” the program because they refuse to change physicians.  Care under PACE is provided by a tightly organized, pre-selected, carefully managed team that includes doctors, nurses, social workers, therapists, etc.  That means that in order to participate, a patient has to change doctors, unless his or her doctor happens already to be member of a PACE team.  

As a culture, we cling to the idea that free choice of physician is something to be highly valued – almost a right.  When AARP advertises its Medicare supplement health insurance policy, it emphasizes that subscribers choose their own physicians.  

At the same time, we are increasingly alarmed about the high and rising cost of care, not recognizing that the two things are related. 

One obvious way to control the cost of care is to manage it and the PACE program is an attempt to do just that.  But in order to manage any activity you have to organize it and do it systematically.  In the case of health care, that becomes impossible if each patient has the right independently to pick his or her physician – arguably the most important person in the care team. 

In practice, physician choice is actually not as big a deal as we make it out to be.  People move from one town to another.  Physicians retire or die.  In both cases, patients have to change doctors.  Patients who go to the emergency room get their care from whatever physician happens to be on duty at the time.  With increasing frequency, a hospital inpatient is treated by the hospitalist physician who happens to be assigned to the case.  Nobody complains in these cases.  However, if the insurance company wants us to change physician, we act as though our persons have been violated. 

We need to be weaned off that.  One approach we are likely to see is the health care insurance policy that offers the option of a lower premium if you use a physician who is a member of the insurance company’s network or panel.   Wife Marilyn and I have a primary care physician we love dearly, but if we could each save $50 a month by changing, we’d think about it.