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Why Health Systems Employ Doctors: Money and Control

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By KEN TERRY

(This is the third in a series of excerpts from Terry’s new book, Physician-Led Healthcare Reform: a New Approach to Medicare for All, published by the American Association for Physician Leadership.)

The American Medical Association (AMA) last year announced that, for the first time, more physicians were employed than were independent. While many of these doctors were employed by private practices, the AMA said, about 35% of them worked directly for a hospital or for a hospital-owned practice.25

This estimate was lower than that of other surveys. According to research conducted by the Physicians Advocacy Institute (PAI) and Avalere Health, a consulting firm, 44% of physicians were employed by hospitals in January 2018, compared to 25% in July 2012. More than half of U.S. physicians now work for or contract with fewer than 700 healthcare systems across the country, according to a new study in Health Affairs.

Many of the physicians employed by hospitals and health systems formerly were in private practice. They sold their practices to hospitals because of increasing overhead, dwindling reimbursement, and the rising administrative burdens of ownership, according to Jackson Healthcare, a physician recruiting firm.

The many negative factors affecting primary care also have impelled a growing number of primary care physicians to seek employment in recent years. In 2018, 47% of general internists, 57% of family physicians and 56% of pediatricians were employed. There is evidence that this trend may be exacerbating the primary care shortage because employed doctors see fewer patients per day, on average, than do those in private practice.

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Charting The Economic History of US Health Reform

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By MIKE MAGEE, MD

Adam Gaffney’s recent Boston Review article, “What the Health Care Debate Still Gets Wrong”, a landmark piece that deserves careful reading by all, reaches near perfection in diagnosing our health system malady.

Dr. Gaffney is president of Physicians for a National Health Program, and a co-chair of the Working Group on Single-Payer Program Design, which developed the “Physicians’ Proposal for Single-Payer Health Care Reform.”

A seasoned health policy expert, his article cross-references the opinions and work of a range of health commentators including Atul Gawande, Steven Brill, Sarah Kliff, Elizabeth Rosenthal, Zack Cooper, and Canadian health economist Robert Evans. But his major companion is Princeton health economist, Uwe Reinhardt, whose posthumous book, Priced Out: The Economic and Ethical Costs of American Health Care, was recently published by Princeton University Press.

Gaffney’s affection for Reinhardt is evident as he recounts his desperate upbringing in post-war Germany, challenged by poor living conditions, but made whole by access to health care.  Quoting a 1992 JAMA interview, Reinhardt states, “When we needed medical care, we got it at the local hospital, no questions asked. When you were sick, society was there for you.”

That acknowledgment is not only personal but historically significant, as I outline in my recent book, Code Blue: Inside the Medical Industrial Complex. The services Reinhardt received were part of a new national health care system funded fully by American taxpayers as part of the Marshall Plan. At the very same time, American citizens were denied a national health plan of their own as Truman was effectively branded a supporter of “socialized medicine” by the AMA and a cabal of corporate partners.

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BetterCare for All

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By ROBERT M. HERZOG

The Cure for healthcare isn’t Medicare for All, it’s establishing organizations with complete responsibility for the total care, costs, quality and outcomes for a person.

Discussions of Medicare for All substitute structure for substance. They engender a debate about the trappings of care delivery, administration, and cost, but don’t address the fundamental issue, which is how to provide genuinely better care for people of all ages and economic circumstances.

The premise of Medicare for All is that a single payer will provide better and more cost effective care. But what is really needed is single entity accountability. Whether there are one or many, whether they are public or private, is not as important as that one organization and its people become responsible for the total health and care of an individual and the costs associated with that care. With incentives for doing it well, and penalties for doing it poorly. And an ease of transition for people to move from an entity that doesn’t serve them well to one that does, to maintain the benefits of competition and varied approaches based on differing conditions.

Focusing on Medicare for All promulgate a systemic flaw baked into our health insurance and provider systems. High costs and lower quality can’t just be fixed by a single payer negotiating lower drug prices, nor would providing fewer services mean better care at lower costs. The core problem is exemplified by the invidious arbitrary split in public health insurance between Medicaid and Medicare, with each providing different services spread out among many providers, none of whom have sole responsibility for the complete health of the person.

BetterCare for All need not be a win-lose proposition, of Medicare for All or nothing. The feasibility near term of a one payer system is low, whereas the feasibility of building on existing systems and frameworks to create single system accountability is much higher.

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Improving the Affordable Care Act Markets (Part 1)

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By JONATHAN HALVORSON, PhD

With each passing year, the Affordable Care Act becomes further entrenched in the American health care system. There are dreams on both the far left and far right to repeal and replace it with something they see as better, but the reality is that the ACA is a remarkable achievement which will likely outlast the political lifetimes of those opposing it. Future improvements are more likely to tweak the ACA than to start over from scratch.

A critical part of making the ACA work is for it to support healthy, competitive and fair health insurance markets, since it relies on them to provide health care benefits and improve access to care. This is particularly true for insurance purchased by individuals and small employers, where the ACA’s mandates on benefits, premiums and market structure have the most impact. One policy affecting this dynamic that deserves closer attention is risk adjustment, which made real improvements in the fairness of these markets, but has come in for accusations that it has undermined competition.

Risk adjustment in the ACA works by compensating plans with sicker than average members using payments from plans with healthier members. The goal is to remove an insurer’s ability to gain an unfair advantage by simply enrolling healthier people (who cost less). Risk adjustment leads insurers to focus on managing their members’ health and appropriate services, rather than on avoiding the unhealthy. The program has succeeded enormously in bringing insurers to embrace enrolling and retaining those with serious health conditions.

This is something to celebrate, and we should not go back to the old days in which individuals or small groups would be turned down for health insurance or charged much higher prices because they had a history of health issues. However, the program has also had an undesired effect in many states: it further tilted the playing field in favor of market dominant incumbents.

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How are hospitals supposed to reduce readmissions? Part III

By KIP SULLIVAN, JD

The Medicare Payment Advisory Commission (MedPAC) and other proponents of the Hospital Readmissions Reduction Program (HRRP) justified their support for the HRRP with the claim that research had already demonstrated how hospitals could reduce readmissions for all Medicare fee-for-service patients, not just for groups of carefully selected patients. In this three-part series, I am reviewing the evidence for that claim.

We saw in Part I and Part II that the research MedPAC cited in its 2007 report to Congress (the report Congress relied on in authorizing the HRRP) contained no studies supporting that claim. We saw that the few studies MedPAC relied on that claimed to examine a successful intervention studied interventions administered to carefully selected patient populations. These populations were severely limited by two methods: The patients had to be discharged with one of a handful of diagnoses (heart failure, for example); and the patients had to have characteristics that raised the probability the intervention would work (for example, patients had to agree to a home visit, not be admitted from a nursing home, and be able to consent to the intervention).

In this final installment, I review the research cited by the Yale New Haven Health Services Corporation (hereafter the “Yale group”) in their 2011 report to CMS in which they recommended that CMS apply readmission penalties to all Medicare patients regardless of diagnosis and regardless of the patient’s interest in or ability to respond to the intervention. MedPAC at least limited its recommendation (a) to patients discharged with one of seven conditions/procedures and (b) to patients readmitted with diagnoses “related to” the index admission. The Yale group threw even those modest restrictions out the window.

The Yale group recommended what they called a “hospital-wide (all-condition) readmission measure.” Under this measure, penalties would apply to all patients regardless of the condition for which they were admitted and regardless of whether the readmission was related to the index admission (with the exception of planned admissions). “Any readmission is eligible to be counted as an outcome except those that are considered planned,” they stated. (p. 10) [1] The National Quality Forum (NQF) adopted the Yale group’s recommendation almost verbatim shortly after the Yale group presented their recommendation to CMS.

In their 2007 report, MedPAC offered these examples of related and unrelated readmissions: “Admission for angina following discharge for PTCA [angioplasty]” would be an example of a related readmission, whereas “[a]dmission for appendectomy following discharge for pneumonia” would not. (p. 109) Congress also endorsed the “related” requirement (see Section 3025 of the Affordable Care Act, the section that authorized CMS to establish the HRRP). But the Yale group dispensed with the “related” requirement with an astonishing excuse: They said they just couldn’t find a way to measure “relatedness.” “[T]here is no reliable way to determine whether a readmission is related to the previous hospitalization …,” they declared. (p. 17) Rather than conclude their “hospital-wide” readmission measure was a bad idea, they plowed ahead on the basis of this rationalization: “Our guiding principle for defining the eligible population was that the measure should capture as many unplanned readmissions as possible across a maximum number of acute care hospitals.” (p. 17) Thus, to take one of MedPAC’s examples of an unrelated admission, the Yale group decided hospitals should be punished for an admission for an appendectomy within 30 days after discharge for pneumonia. [2]

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The Opportunity in Disruption, Part 3: The Shape of Things to Come

By JOE FLOWER

Picture, if you will, a healthcare sector that costs less, whose share of the national economy is more like it is in other advanced economies—let’s imagine 9% or 10% rather than 18% or 19%.

A big part of this drop is a vast reduction in overtreatment because non-fee-for-service payment systems are far less likely to pay for things that don’t help the patient. Another part of this drop is the greater efficiency of every procedure and process as providers get better at knowing their true costs and cutting out waste. The third major factor is that new payment systems and business models actually drive toward true value for the buyers and healthcare consumers. This includes giving a return on the investment for prevention, population health management, and building healthier communities. This incentive would reduce the large percentage of healthcare costs due to preventable and manageable diseases, trauma, and addictions.

Picture, if you will, a healthcare sector in which prices are real, known, and reliable. Price outliers that today may be two, three, five times the industry median have rapidly disappeared. Prices for comparable procedures have normalized in a narrower range well below today’s median prices. Most prices are bundled, a single price for an entire procedure or process, in ways that can be compared across the entire industry. Prices are guaranteed. There are no circumstances under which a healthcare provider can decide after the fact how much to charge, or a health insurer can decide after the fact that the procedure was not covered, or that the unconscious heart attack victim should have been taken to a different emergency department farther away.

Picture a well-informed, savvy healthcare consumer, with active support and incentives from their employers and payors, who is far more willing and eager to find out what their choices are and exercise that choice. They want the same level of service, quality, and financial choices they get from almost every other industry. And as their financial burden increases, so do their demands.

Picture a reversing of consolidation, ending a providers’ ability to demand full-network contracting with opaque price agreements—and encouraging new market entrants capable of facilitating a yeasty market for competition. Picture growing disintermediation and decentralization of healthcare, with buyers increasingly able to act like real customers, picking and choosing particular services based on price and quality.

Picture an industry whose processes are as revolutionized by new technologies as the news industry has been, or gaming, or energy. Picture a healthcare industry in which you simply cannot compete using yesterday’s technologies—not just clinical technologies but data, communications, and transaction technologies.

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The Opportunity in Disruption, Part 2: The Shape of Today’s System

By JOE FLOWER

The system is unstable. We are already seeing the precursor waves of massive and multiple disturbances to come. Disruption at key leverage points, new entrants, shifting public awareness and serious political competition cast omens and signs of a highly changed future.

So what’s the frequency? What are the smart bets for a strategic chief financial officer at a payer or provider facing such a bumpy ride? They are radically different from today’s dominant consensus strategies. In this five-part series, Joe Flower lays out the argument, the nature of the instability, and the best-bet strategies.

Healthcare CFOs must look at the environment in which their system lives: Since 2007 the actual costs for the average middle-class family for many of the basics of life have decreased in real terms, while their actual costs for healthcare have risen 25%, or even more counting co-pays, deductibles, and out-of-pocket expenses. This long, continuing rise in the costs along with the continuing and increasing unreliability of the healthcare system (“Will it actually be there for me when I need it? Will it bankrupt me?”) create unyielding disruption.

Instability: Omens

I am no fortune teller, but here are some things we can see right now that give us a sense of what’s coming.

  • Political shift: Public opinion has shifted. When polled about actual policies, healthcare has been cited repeatedly as the top concern of voters across the country. Voters’ top concerns are cost, the risk to patient protections in the ACA, and threats to “reform” Medicare by weakening it. The popularity of “single payer” proposals is a direct result of the cost and uncertainty of healthcare, a simple cry to “Do something!” Under this pressure we are more likely to see drastic solutions proposed and passed at the federal and state level or embodied in regulatory changes and lawsuits against industry practices.
  • Degradation of American life: With the opioid epidemic, the rise in suicides, the actual regression in life expectancy, and the increasing income and wealth divide, people increasingly feel that the healthcare industry is just not helping. They feel it is in fact part of the problem. The feeling that there is no one there to help us adds to the desperation of many parts of American society and heightens the political cost of the healthcare issue.
  • Public awareness: Healthcare is intensely personal, visceral. It’s crazy-making. Surprise bills, balance bills, other bills slipped through loopholes in the fine print or even in unwritten industry practices—what the industry considers standard operating procedure, the customers view as shocking, aggressive, and financially crushing.
  • The rebellion of the buyers: The percentage of buyers—such as employers, unions, and pension plans—telling various polls that healthcare costs represent a major problem for their business has more than doubled in the last five years and is now a majority. Buyers are pushing for choices to control costs and manage quality. They are beginning in greater numbers to demand reference pricing tied to Medicare rates, direct access to competitive bundled prices, and price transparency through centers of excellence, high performance networks and accountable care organizations. Some 65% of employers plan on implementing direct primary care in onsite or near-site clinics by 2020. Buyers are increasingly willing to take their beneficiaries elsewhere if your business can’t meet their demands.
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The Efficiency Mandate: To Achieve Coverage, the U.S. Must Address Cost

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By MIKE MAGEE, MD

It is now well established that Americans, in large majorities, favor universal health coverage. As witnessed in the first two Democratic debates, how we get there (Single Payer vs. extension of Obamacare) is another matter altogether.

295 million Americans have some form of health coverage (though increasing numbers are under-insured and vulnerable to the crushing effects of medical debt). That leaves 28 million uninsured, an issue easily resolved, according to former Obama staffer, Ezekiel Emanuel MD, through auto-enrollment, that is changing some existing policies to “enable the government agencies, hospitals, insurers and other organizations to enroll people in health insurance automatically when they show up for care or other benefits like food stamps.”

If one accepts it’s as easy as that, does that really bring to heel a Medical-Industrial Complex that has systematically focused on profitability over planning, and cures over care, while expending twice as much as all other developed nations? In other words, can America successfully expand health care as a right to all of its citizens without focusing on cost efficiency? 

The simple answer is “no”, for two reasons. First, excess profitability = greed = waste = inequity = unacceptable variability and poor outcomes. Second, equitable expansion of universal, high quality access to care requires capturing and carefully reapplying existing resources.

 It is estimated that concrete policy changes could capture between $100 billion and $200 billion in waste in the short term primarily through three sources.

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The Rebellion of the Buyers

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By JOE FLOWER

Did you catch that headline a few weeks back?

An official of a health system in North Carolina sent an email to the entire board of the North Carolina State Health Plan calling them a bunch of “sorry SOBs” who would “burn in hell” after they “bankrupt every hospital in the state.”

Wow. He sounds rather upset. He sounds angry and afraid. He sounds surprised, gobsmacked, face-palming.

Bless his heart. I get it, I really do. Well, I get the fear and pain. Here’s what I don’t get: the surprise, the tone of, “This came out of nowhere! Why didn’t anyone tell us this was coming?”

Brother, we did. We have been. As loudly as we can. For years.

Two things to notice here:

  1. What is he so upset about? Under State Treasurer Dale Folwell’s leadership, the State Health Plan has pegged its payments to hospitals and other medical providers in the state to a range of roughly 200% of Medicare payments (with special help for rural hospitals and other exceptions). In an industry that routinely says that Medicare covers 90% of their costs, this actually sounds rather generous.
  2. What is the State Health Plan? It’s not a payer, that is, an insurer. It’s a buyer. Buyers play under a different set of rules and incentives than an insurer.
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Health Reform Job One: Stop the Gouging! | Part 1

By BOB HERTZ

We Need Legal Assaults On The Greediest Providers!

When a patient is hospitalized, or diagnosed with a deadly disease, they often have no choice about the cost of their treatment.

They are legally helpless, and vulnerable to price gouging.

Medicare offers decent protection — i.e. limits on balance billing, and no patient liability if a claim is denied.

But under age 65, it is a Wild West — especially for emergency care, and drugs and devices. The more they charge, the more they make. Even good health insurance does not offer complete financial insulation.

We need more legal protection of patients. In some cases we need price controls.

‘Charging what the market will bear’ is inadequate, even childish, when ‘the market’ consists of desperate patients. Where contracts are impossible and there is no chance for informed financial consent, government can and should step in.

This series describes the new laws that we need. Very little is required in tax dollars….but we do require a strong will to protect.

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