President's Page

In my January’s President’s Page I raised the need for unity and solidarity as we assert our proper position with other stakeholders at the table impacting healthcare reform, needing to know who has been at the helm and steering our industry into precarious waters. While this review is not comprehensive, understanding the business of healthcare is prerequisite for physicians to positively impact the system in which we not only dedicate our professional careers, but where we and our loved ones must also navigate as patients. The extreme complexity of our healthcare delivery system easily overwhelms not only a layperson, but also the most sapient amongst our ranks, rendering us infirm of purpose to effectively impact the healthcare reform debate at hand. Putting our collective heads in the sand by capitulating the destiny of our industry to others through passivity and complacency, we have not prevented unwarranted regulations, profiteering resulting in an escalation of costs, or exasperated patients and physicians.

“It’s a tapeworm in America, one that cuts competitiveness far more than taxes do”. - Warren Buffet, regarding healthcare costs (Time Magazine; Jan. 23, 2012)

During my indoctrination into the profession of medicine, a recurring dictum was proclaimed proudly from sage professors and esteemed practicing physicians: “medicine is not a business”. This pervasive position taught us that the only virtuous pursuit of a career in medicine was to be devoid an understanding of, and participation in, the business of our healthcare system. For example, our colleagues who have left the practice to participate in other areas of our healthcare delivery system, such as medical directors of health plans, are uniformly thrown from our club for joining the “dark side”. While these statements about “business being a bad word” made me feel that my career choice was more noble to that of my friends who studied finance and political science, I recognized the need to see the whole forest from the trees by better understanding the business of medicine and pursued additional education in Health Systems Management at the Tulane School of Public Health and Tropical Medicine. The established code discouraging involvement in the business of medicine sidelines our ability to positively impact the final outcome, including the pressing issues of our patients’ access to care and escalation of costs.

In last month’s Round-up, I asserted that “physicians have been and always will be the keystone of healthcare delivery,” suggesting that our role in the healthcare system is the central cohesive source of support and stability.⁽¹⁾ This opinion is not shared by those who are shaping the future of healthcare; beginning to treat our profession as a commodity, interchangeable with other healthcare providers in the healthcare environment. In fulfillment of our professional responsibilities, physicians continue to place as the top priority our venerable commitment to our patients as caregivers and advocates, properly placing our patient’s needs above our own personal gain. As the party responsible for the majority of healthcare decisions and resultant expenditures, until recently physicians and physician organizations have been mostly silent about our additional responsibility to use common sense, incorporating efficacy, safety and costs, when advising our patients about healthcare choices.⁽²⁾ Given the absence of formal education during medical school and residency training about the business sector that we were otherwise readied to work within, and the extreme complexity of our $3 trillion a year industry, it is understandable that we have been paralyzed to respond effectively while others have profiteered, driving U.S. healthcare costs to a level that has been deemed as unsustainable, approaching 18% of GDP this year (Graph 1). Given the lack of successful industry self-correction, this fomenter has led to congressional action with the Balanced Budget Act of 1997, and most recently in 2010 with the Patient Protection and Affordable Care Act (ACA), as expected without meaningful physician input as witnessed by the lack of repeal of the unfair SGR issues or any tort reform. Nonetheless as healthcare pundits, business owners and patients are in agreement with Congress that major healthcare reform is necessary, the imperativeness of our need to be unified at the table of discussion is paramount.

Graph 1. Escalation of healthcare costs as a percentage of GDP⁽³⁾

The Era of Industrialization

“In the councils of government, we must guard against the acquisition of unwarranted influence, whether sought or unsought, by the military-industrial complex. The potential for the disastrous rise of misplaced power exists and will persist. We must never let the weight of this combination endanger our liberties or democratic processes. We should take nothing for granted. Only an alert and knowledgeable citizenry can compel the proper meshing of the huge industrial and military machinery of defense with our peaceful methods and goals, so that security and liberty may prosper together.” - Dwight D. Eisenhower, Farewell Address (1/17/1961)

The concept of the medical-industrial complex, introduced first by Barbara Ehrenreich in her 1971 book, “The American Health Empire: Power, Profits and Politics (Health-PAC)”⁽⁴⁾, refers to the health industry as collections of multibillion-dollar businesses with dozens of components: doctors, nurses, hospitals, specialty centers, nursing homes, insurance companies, managed care companies, device manufactures, drug manufacturers, suppliers, consultants and banks. As President Eisenhower warned about the threats of undue influence of industry on government in the military-industrial complex, parallel concerns have been raised about the industrialization of healthcare over the last 40 years, where providing major opportunities for investment and profit has become the driving force as healthcare has fully ‘‘come into the age of capitalist production’’⁽⁵⁾. This focus has manifested itself through rapid growth and consolidation of the industry into larger organizations, development of multi-organizational systems through horizontal integration, vertical integration amongst various parties, and significant movement from government to private (non-profit and for-profit) organizations.

The Payers

Payment in the U.S. healthcare system is through direct payments (out-of-pocket), taxation (federal and state programs), donations (charitable care) and health insurance. Health insurance did not exist in the United States until the 1930’s when Baylor Hospital in Dallas developed a plan to cover patients during the Depression - later to become Blue Cross Blue Shield. With factory expansion in the 1940’s after WWII, a worker shortage enabled the labor unions to negotiate with employers to include health insurance benefits, resulting in employer-paid health insurance becoming commonplace. In contrast, European nations decimated after WWII instead introduced models of national health insurance. In the 1960‘s, the costs associated with advancements in diagnostic and treatment options rose beyond the ability of many Americans without employer-based insurance to afford, especially retired Americans resulting in the passage Medicare and Medicaid in 1965. The market for risk-stratified 3rd party for-profit health insurance blossomed as costs continued to soar. Variations of these traditional insurance plans developed the 80’s and 90’s, including managed care (HMO), PPO, and others in an attempt to keep escalation of costs in line with the consumer price index (CPI). Today, as employers and consumers want to lower their costs, insurance companies are adding wellness discounts, health savings accounts, and self-funded plans. Along with Medicare and Medicaid, government plans including active duty (8.7 million) and retired military (9.2 million) account for 47% of healthcare expenses each year, making our government the largest single payer into the healthcare system with legislative capacity to regulate our industry from the Beltway. While healthcare insurance coverage is available for a majority of Americans, and medical care is available through philanthropic organizations supported by donations and volunteers (such as our St. Vincent de Paul Medical and Dental Clinics), it is estimated that we leave as many as 16% of Americans (45 million) without access to any healthcare, a statistic that most Americans would like to see fixed.

The Payees

Where does all the money go? It seems that nearly every day we hear about waste and fraud in the system from our politicians, with threats from the CMS Office of the Inspector General of imminent prosecution, while those profiteering in the medical-industrial complex who have been asked to shape healthcare industry reform - such as pharmaceutical companies, and medical device companies - successfully lobby Congress to keep them in the shadows. Ineffectively organized without a single unified voice, physicians, accounting for about 20% of the healthcare expenditures, are portrayed as overpaid, being only motivated by volume in the current payment system. Hospitals account for the largest single category of expenses. (Graph 2)

Graph 2. Distribution of healthcare expenditures in the United States, 2008⁽⁶⁾
Source: Centers for Medicare & Medicaid Services, Office of the Actuary, National Health Statistics Group.

While much faith has been placed on the impact of ACO development (capitation in new clothes), and there is much to be gained through integrating our health records to avoid duplication of services and shared best practices, the CBO determined that the majority of escalation of healthcare costs are due to advances in technology⁽⁷⁾. The increase in obesity - with no end in sight - has been tagged with about 12% of increase in costs. Chronic health conditions accounts for 75% of the total healthcare costs.

“You must be the change you want to see in the world.”
- Mahatma Gandhi, Indian political and spiritual leader (1869 - 1948)

In summary, as the critical component of healthcare delivery in the United States, physicians must interface and engage in a meaningful way other parties in our industry, understanding the business of medicine, demonstrating to our legislators our commitment to provide salient and clear input in the debate of our lifetimes, impacting not only our profession’s future while also advocating for our patients needs, but the entire structure of the healthcare system. The comfort from our complacency by washing our hands of responsibility has passed. Now is the time for action.

I look forward to hearing your comments, mmills@mcmsonline.com

Sincerely,
Michael R. Mills, MD, MPH
President



References:
(1) Mills, M., Round-up, “MCMS Stands Unified in Solidarity to Su­pport Our Profession”, January 2012.
(2) American College of Physicians, American College of Physicians Ethics Manual, Sixth Edition; Lois Snyder, JD for the American College of Physicians Ethics, Professionalism, and Human Rights Committee. January 3, 2012; vol. 156 no. 1 Part 2 73-104.
(3) en.wikipedia.org/wiki/File:Health_care_cost_rise.svg; (OECD Health Data 2009) www.irdes.fr/EcoSante/DownLoad/OECDHealthData_FrequentlyRequestedData.xls. Health care cost rise based on total expenditure on health as % of GDP. Countries are USA, Germany, Austria, Switzerland, United Kingdom and Canada); March 24, 2010.
(4) Ehrenreich, B., “The American Health Empire: Power, Profits and Politics (Health-PAC)”. 1971 Vintage books.
(5) Estes, Carroll, Charlene Harrington, and David N. Pellow. 2000. “The Medical- Industrial Complex.” Pp. 1818-1832 in Edward Borgatta and Rhonda Montgomery, Eds., Encyclopedia of Sociology. Farmington Hills, MI: The Gale Group. Reprinted in: Charlene Harrington and Carroll Estes (eds.), 2001. Health Policy: Crisis and Reform in the U.S. Health Care Delivery System. Third Edition. Sudbury, MA: Jones and Bartlett.
(6) National Health Expenditures 2008; Graph: www.kaiseredu.org/Issue-Modules/US-Health-Care-Costs/Background-Brief.aspx Source: Centers for Medicare and Medicaid Services, Office of the Actuary, National Health Statistics Group; www.cms.gov/NationalHealthExpendData
(7) A CBO Paper, “Technological Change and the Growth of Health Care Spending”, January 2008. The Congress of the United States - Congressional Budget Office; www.cbo.gov/ftpdocs/89xx/doc8947/01-31-TechHealth.pdf