Medicine

Integrating health systems must be to improve quality, not increase cost

The February 13, 2014 article in the New York Times by Elisabeth Rosenthal, “Apprehensive, many doctors shift to jobs with salaries”, more or less just presents the facts. It notes that the medical placement firm, Merritt Hawkins, says that 64% of jobs this year are salaried as opposed to 11% in 2004, and that it expects it to go up to 75% in the next two years. She cites AMA figures that “…about 60 percent of family doctors and pediatricians, 50 percent of surgeons and 25 percent of surgical subspecialists — such as ophthalmologists and ear, nose and throat surgeons — are employees rather than independent.” In some places it is more dramatic; in Kansas City, there are no longer any cardiologists (a type of internal medicine subspecialist) who are not employed by hospital systems, and oncologists (cancer specialists) are not far behind.

So, is this a good thing? The article suggests yes, but maybe not entirely. It states that “Health economists are nearly unanimous that the United States should move away from fee-for-service payments to doctors, the traditional system where private physicians are paid for each procedure and test,” and I agree, and that “When hospitals gather the right mix of salaried front-line doctors and specialists under one roof, it can yield cost-efficient and coordinated patient care. The Kaiser system in California and Intermountain Healthcare in Utah are considered models for how this can work,” with which I also agree. However, not all health systems are Kaiser or Intermountain Healthcare. The article continues: “But many of the new salaried arrangements have evolved from hospitals looking for new revenues, and could have the opposite effect. For example, when doctors’ practices are bought by a hospital, a colonoscopy or stress test performed in the office can suddenly cost far more because a hospital ‘facility fee’ is tacked on.”

Rosenthal has written about facility fees before, as has Alan Bavley of the Kansas City Star in his “Doctors, Inc.” series (“’Facility fees’ add billions to medical bills”, Dec 29, 2013), and I have commented on it in Changing the structure of health care delivery systems: to benefit the patient, the providers, or the insurers?, January 14, 2014. The new arrangements promise more money, or at least stable incomes, to physicians, and continue to pay the currently-most-highly-paid specialists the most money, with primary care doctors getting less. This is not because hospital systems have anything against primary care, but rather that they are following the money, and these acquisitions have occurred precisely while we are still under fee-for-service reimbursement in most locations. If cardiology or orthopedic or radiologic or neurosurgical procedures bring in great amounts of money to the hospital (“technical fees”) the hospitals like this, and are willing to share some of that money with the doctors to ensure that they keep their patients in their hospital or health system. Primary care does not generate such largesse. Relatively intelligent systems recognize that they need a locked-in “primary care base” to create referrals to their subspecialists, but will pay as little as they can, and demand “high productivity” (which could be seen as “patient churning”), and it is not just primary care: “many doctors on salary are offered bonuses tied to how much billing they generate, which could encourage physicians to order more X-rays and tests.”

Bloomberg News has a more direct take on this phenomenon, stating firmly in an article by Shannon Brownlee and Vikas Saini that “Bigger hospitals mean higher prices, not better care”, February 18, 2014. They cite data from sources such as the Dartmouth Atlas of Health Care, a recent article in Health Affairs[1] which demonstrated that “On average, higher-priced hospitals are bigger, but offer no better quality of care,” and a variety of lawsuits by public agencies (such as the Massachusetts Attorney General) to demonstrate that hospital acquisitions are about market share and control of practices and, ultimately, about money, not quality. “If you think of value as some combination of needed services delivered for the right price, large hospitals are no better than small hospitals on both counts.” As I have written about before, doctors control a lot of costs in the health system, by choosing the tests that they order, deciding whether to admit to the hospital or not, and where they refer. By employing the physicians, hospitals can not only control the latter, but can set criteria requiring physicians to abide by hospital policies on the others. The doctors then become, in the words of this article, “…another cog in the corporate machine, and many physicians have told us they feel they must skew their medical judgment to keep their jobs.”

This is the nonsense that occurs when things are done piecemeal. Intermountain Health Care and Kaiser are not perfect, but they have used their status as integrated health systems to control costs and increase efficiencies. To the extent that they are also the insurer, it is in their interest to do so. Efforts by the federal government to have others emulate these models through the creation of Accountable Care Organizations (ACOs), without changing the manner of reimbursement, are bound to fail. As Paul Baladian is credited with saying “every system is perfectly designed to get the results that it gets.” If we are getting a system in which hospitals are buying up physician practices so that they can charge insurers, from Medicare to Blue Cross, more; if we are getting a system in which medical decisions are being made in the best financial interests of hospitals rather than the best health interests of patients; if we are getting a system in which we continue to favor some patient over others based upon their income, insurance status, or their type of disease (middle-aged well-insured person who needs a single joint replacement = “good”, older person with multiple chronic medical conditions and “just” Medicare or worse yet uninsured because they are under 65 or undocumented = “bad”), it is because we have perfectly designed it to be so.

Brownlee and Saini offer some suggestions for solutions. They suggest that Medicare expand its “Advance Payment Model,” a program that provides capital to small or rural physician groups, and also particularly about forming multispecialty Accountable Care Organizations driven by primary care.

“Until we give primary-care groups control over what happens to patients, large hospital systems and specialist-dominated groups -- those with greatest access to capital -- will be able to keep raising prices, even as they issue press releases about their plans to control costs and improve care.”

Sounds like a good idea to me. Combine that with a single-payer system that covers everyone, “everybody in, nobody out!” and we may be able to reverse the trend toward higher profit at the expense of lower quality.

[1]White C, Rechovsky JD, Bond AM, “Understanding Differences Between High- And Low-Price Hospitals: Implications For Efforts To Rein In Costs”, Health Affairs, January 2014 10.1377/hlthaff.2013.0747.

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