George R. Fisher, III, M.D.

Obituary

George R. Fisher, III, M.D.

Age: 97 of Philadelphia, formerly of Haddonfield Dr George Fisher III

Dr. George Ross Fisher of Philadelphia died on March 9, 2023, surrounded by his loving family.

Born in 1925 in Erie, Pennsylvania, to two teachers, George and Margaret Fisher, he grew up in Pittsburgh, later attending The Lawrenceville School and Yale University (graduating early because of the war). He was very proud of the fact that he was the only person who ever graduated from Yale with a Bachelor of Science in English Literature. He attended Columbia University’s College of Physicians and Surgeons where he met the love of his life, fellow medical student, and future renowned Philadelphia radiologist Mary Stuart Blakely. While dating, they entertained themselves by dressing up in evening attire and crashing fancy Manhattan weddings. They married in 1950 and were each other’s true loves, mutual admirers, and life partners until Mary Stuart passed away in 2006. A Columbia faculty member wrote of him, “This young man’s personality is way off the beaten track, and cannot be evaluated by the customary methods.”

After training at the Pennsylvania Hospital in Philadelphia where he was Chief Resident in Medicine, and spending a year at the NIH, he opened a practice in Endocrinology on Spruce Street where he practiced for sixty years. He also consulted regularly for the employees of Strawbridge and Clothier as well as the Hospital for the Mentally Retarded at Stockley, Delaware. He was beloved by his patients, his guiding philosophy being the adage, “Listen to your patient – he’s telling you his diagnosis.” His patients also told him their stories which gave him an education in all things Philadelphia, the city he passionately loved and which he went on to chronicle in this online blog. Many of these blogs were adapted into a history-oriented tour book, Philadelphia Revelations: Twenty Tours of the Delaware Valley.

He was a true Renaissance Man, interested in everything and everyone, remembering everything he read or heard in complete detail, and endowed with a penetrating intellect which cut to the heart of whatever was being discussed, whether it be medicine, history, literature, economics, investments, politics, science or even lawn care for his home in Haddonfield, NJ where he and his wife raised their four children. He was an “early adopter.” Memories of his children from the 1960s include being taken to visit his colleagues working on the UNIVAC computer at Penn; the air-mail version of the London Economist on the dining room table; and his work on developing a proprietary medical office software using Fortran. His dedication to patients and to his profession extended to his many years representing Pennsylvania to the American Medical Association.

After retiring from his practice in 2003, he started his pioneering “just-in-time” Ross & Perry publishing company, which printed more than 300 new and reprint titles, ranging from Flight Manual for the SR-71 Blackbird Spy Plane (his best seller!) to Terse Verse, a collection of a hundred mostly humorous haikus. He authored four books. In 2013 at age 88, he ran as a Republican for New Jersey Assemblyman for the 6th district (he lost).

A gregarious extrovert, he loved meeting his fellow Philadelphians well into his nineties at the Shakespeare Society, the Global Interdependence Center, the College of Physicians, the Right Angle Club, the Union League, the Haddonfield 65 Club, and the Franklin Inn. He faithfully attended Quaker Meeting in Haddonfield NJ for over 60 years. Later in life he was fortunate to be joined in his life, travels, and adventures by his dear friend Dr. Janice Gordon.

He passed away peacefully, held in the Light and surrounded by his family as they sang to him and read aloud the love letters that he and his wife penned throughout their courtship. In addition to his children – George, Miriam, Margaret, and Stuart – he leaves his three children-in-law, eight grandchildren, three great-grandchildren, and his younger brother, John.

A memorial service, followed by a reception, will be held at the Friends Meeting in Haddonfield New Jersey on April 1 at one in the afternoon. Memorial contributions may be sent to Haddonfield Friends Meeting, 47 Friends Avenue, Haddonfield, NJ 08033.

Friends Lifecare at Home

Over thirty Quaker retirement villages scatter through America, more than twenty in the suburbs of Philadelphia -- "under the care of the Yearly Meeting", as their expression has it. But for some people, community living seems unattractive. It does not speak to their condition.

For one thing, it may not be affordable.

Friends Lifecare

Or the style of may seem too fancy, or too plain, for some tastes regardless of cost. The increasing emotional rigidity of growing older is a factor; by the time people get to be seventy-five, they had better make this decision or forget it. Plenty of people are hale and hearty at ninety, but they establish pretty firm ideas about the sort of person they want for neighbors while they are still in the workforce. Quite often it's just a habit, people have lived in their home for several generations and cannot imagine another neighborhood, lifestyle, or environment. This is home, and they intend to die there.

So, to address this need, or market, a group of Quakers conceived of a retirement village without walls. Live in your own home and someone will come to oversee things, will know what to do if there is an emergency, and may eventually make the decision for you that you absolutely must go somewhere else. All of this is wrapped within an insurance vehicle, to recognize the fixed incomes of retired people, the inevitability of terminal illnesses, and the occasional risk of monumental medical expenses. At present, about 1600 people in Philadelphia are enrolled in the unique plan of Friends Lifecare at Home, making it one of the largest retirement communities in the country. The organization receives universal praise for its imaginative responses, as well as the dependability and high quality of the people it sends out to the homes of subscribers. Friends Lifecare is a pioneer, and it is gradually weeding out the ideas that didn't work and adding new features that were not originally contemplated. One of its greatest challenges is the need to adapt to unexpected and uncontrollable changes in the Medicare program. Slashes in the Medicare program could bankrupt Friends Lifecare, and even sudden windfalls like the Medicare Drug Benefit create management problems. There can be no doubt that one element of trust exists for which there is no substitute; Philadelphians know that the invisible support of the community and its Quaker core is behind them. If anyone can possibly preserve a moral commitment to the elderly, it will be the Quakers.

Ultimately, the commitment is not so much to 1600 subscribers as to the notion of finding out what works. Life expectancy has extended by three additional years, during the past ten; that's a joy, but it's a problem to finance. The optimum size of the organization is also an unsettled question. Although this program is relatively large by comparison with individual retirement villages, it may not be large enough to have spare capacity to cope with influenza epidemics or record-breaking spells of bad weather. Since it's the only one of its kind, it is vexed by the popularity in ever-widening geographic areas. It must grow to some reasonable size in one area before it can spread its resources to another. By the same reasoning, it must have a reasonable number of prosperous subscribers if it is to accept even a limited number of poor ones.

The idea of creating a seamless partnership with the residential-type retirement villages is certainly attractive, but Friends Lifecare must be careful to avoid becoming too much of a life raft for other people's problems. When the resale price of residential housing rises in a housing bubble, people wish to cling to a rising investment. During the same economic period, the entry and rental price of residential villages also rise. With a great many uncertainties that are specific to this pioneering effort, it is hard to know what policies to develop to insulate the lifecare environment from speculation in the mortgage and housing markets. Or, right now, high-rise apartment development. All of this creates a need for clear minds in the governance, determined to see and acknowledge difficult reality. If anyone can do it, Quakers can.

The Pharmacy Example.

Pharmacy

The Pharmacy Example. It would seem, a natural place to introduce computing to medical care delivery would be the drug store. Almost everyone is familiar with the process of the doctor writing out a prescription and giving it it the patient. And it's likewise familiar how a patient takes the prescription to the store, gets the bottle of pills, and pays for it. The drugstore seems to be a single link in the chain between doctor and patient, with only the prescription adding input, only the bottle of pills generated as output. So let's begin there, watching an example of how simple things rapidly become complicated. The pills are standard, the inventory is already digitized, insurance can be made to enforce a standard number of pills in a refill, the pharmacist can then be replaced by a high school girl. You give the patient 30 pills, and 30 days later he needs another 30, right? Well, not exactly.

The computers are in the drugstore all right; usually five or six of them. What's missing is the professional latitude of the former owner-pharmacist, replaced by an automated assembly line. Druggists, as we knew them, began to disappear around 1970, and computers probably had a lot to do with that first step of moving from corner drugstore toward pharmaceutical ATMs. Prior to World War II, most pharmacists could even compound capsules from powders, and mix various-colored liquids in a bottle. That is to emphasize, the corner drugstore and its friendly owner-operator were well on the way to disappearance, quite a while before outpatient prescribing was overwhelmed by health insurance. It must not be imagined that disentangling insurance from outpatient prescribing would automatically take us back to a system which allows more professional latitude between ancient professions. That might well be desirable, but opportunity is fading fast.

The drug stores by 1970 had already automated most of their process to a point where insurance designers could easily imagine substituting insurance billing for patient billing; and linking that combined payment system to a pill fulfillment system. If only a way could be found to substitute bottles of pills for twenty-dollar bills, the drugstore would already be on its way to becoming a cash-dispenser, or at the very least, a candy-dispensing machine. Technology had only been waiting for someone to pass a law.

Shortages. Very probably the concepts of centralized control began with the Pharmacopeia. Originally, this term referred to a list of drugs the store kept in stock; an inventory list. When supplies got low, they were re-ordered in an amount judged sufficient until the next delivery. Certain drugs and certain supply houses were preferred, so once a decision has been made, the stores and the suppliers kept themselves ready for business. Hospitals maintained a more elaborate Pharmacopeia, usually with a committee appointed to oversee the list. Until the Second World War, most of the patients were in the indigent wards, so custom evolved into the idea that private patients could have anything the doctor ordered, often ordered from the pharmacy across the street. The Pharmacopeia was for indigent patients, taking the view that the committee was to decide matters of quality, and the hospital pharmacist had the latitude to order the cheapest generic version available. This didn't always suit the doctors with private patients, so there was a tendency to extend it to all drugs, quickly jerked back into line by the private physician giving a prescription to the patient's family, to be filled in the drug store across the street from the hospital. When insurance came along, this sort of thing lost its point, so peace was restored by converting everybody's drugs to the more expensive variety, essentially disbanding the committee. It was an important turning point: the conflict between quality and cost was almost instantly resolved by letting insurance just pay for the best. When the pharmaceutical companies saw what was happening, inclusion on the favored list began to revert to the quiet preferences arranged between the companies and the hospitals. In time, drug prices began to go up, insurance companies noticed, and the committees had to be restored in order to assure that quality was preserved. Around 2012, shortages of vital drugs began to appear; up to that point, shortages were unheard-of. But Philadelphia was somewhat quicker to recognize what was happening because it had all happened in Philadelphia in 1778. Price inflation invariably provokes rationing, and rationing provokes shortages. And shortages soon lead to rioting, when it is discovered that shortages have appeared, in spite of hoarded abundance. American pharmaceutical firms found that generic drugs were unprofitable compared with drugs under patent, so they stopped making generics. Third-world countries continued to make generics, but only when it was profitable and free of probing inspectors. Shortages are a likely sign of government intrusion; shortages in the midst of abundance are a certain sign of it.

Regimentation. Once hospital nursing systems got around to individually recording drug use, it was only a matter of time before someone got the idea of devising a set of "best practices", matching them with what had actually been prescribed, and identifying which doctors complied best with the best practices. That's where reality sets in.

The designers of pharmacy systems have assumed that directing the computer to record what ought to be done, is the same as describing what has actually been done. Unfortunately, in an outpatient environment, the patient is generally acting as his own nurse and is almost always somewhat sick. He is also paying at least a portion of his bill. When the cost of a cheap generic is a penny a pill, slack can be created in the system by throwing in a few extra pills. However, when an expensive brand name drug, say one costing ten dollars a tablet, is authorized by the insurance, great care is taken to dispense precisely 30 tablets every 30 days, regardless of Christmas or Sunday, Hell or high water. When a pill accidentally goes down the drain, or gets forgotten, or wasn't in the bottle to begin with, the situation is exaggerated that the patient is short of the expensive pill, but has a surplus of cheap ones. He tends to wait until they match up, but the computer clock is running and usually won't allow the slack to catch up with itself. At this point, often a relative -- let's say the daughter flew in from California -- discovers that the patient hasn't been taking pills which are fearfully expensive, and therefore vital to survival. It is very likely a fact that the expensive pill being skipped is indeed the one most likely to be critical to his condition. The dilemma almost always reaches crisis proportions at a time when there is no one available to over-ride the computer. The rest of this little scene is best left to the imagination.

Epilogue: Where Does All This Money Come From?

Although this book promised, and I hope delivered, a detailed discussion of how Health Savings Accounts might work if Congress unleashed them, the original question remains. Where does so much money come from? Well, in one sense, it comes from saving $350 per year, starting at age 25 and ending at 65, earning 8% compound interest. That's if longevity remains at 83. We assume the average person has medical expenses, but we don't know how to estimate them, so we put $350 a year in escrow, and average person has to contibute more cash for medical expenses at 80 cents on the dollar (the tax exemption) until experience shows he has five or ten years pre-paid, or until he reaches an estimated cash limit. Somewhere around that point, he can stop contributing, both to the escrow fund and to incidental medical costs, until the fund catches up with him. In plain language, he gives himself a loan if his expenses are too high. These figures are based on current average costs, so the money is calculated to be present in the fund but poorly distributed. After experience accumulates, these numbers can be readjusted from present over-estimates..

The prudent way to manage future uncertainties is to over-fund them and transfer any surplus to a retirement fund. {bottom quote}

Planning For The Future.

Curiously, if longevity goes to 93, it would seemingly only require $150 per year in escrow instead of $350. Longevity could only add ten years if we had some medical discoveries in the meantime, so let's say both the added longevity and the added cost of it, appear fifty years from now. Our hypothetical average person born today contributes $150 per year from age 25 to age 50, when he discovers increased longevity requires him to contribute $ yearly until he is 65. After that, he is all paid up until he dies at age 93. Yes, he has Medicare to account for, but his payroll withholding has already paid a quarter of Medicare cost, and if he pays Medicare premiums he will have paid another quarter of Medicare. His lifetime Health Savings Account escrow contribution would contribute $ per year, which is the present deficit of Medicare, currently being subsidized.

The amount of contribution to the escrow fund could be reduced to actual costs over time, but the prudent way to manage uncertainties is to over-fund them, planning to roll any surplus over to a retirement account. Three-hundred-fifty million Americans, times $350,000 apiece in lifetime medical costs, results in a number so large it requires a dictionary to pronounce it correctly. Cutting it in half still suggests a financial dislocation of major proportions, so out of whose pocket would it come? Even if it's a win-win game, dumping that much money into the economy sounds destabilizing. These are not legitimate reasons to avoid it, but it seems hardly credible it could happen without someone noticing a big difference. What does it do to the monetary system?

If it is assumed funds generated by this system are ultimately used to pay off accumulated debts, the result should be some degree of deflation. The Federal Reserve has already purchased several trillion dollars worth of bad debt so debt repayment would not seem to pose a threat. By contrast, inflation could become a threat if corporate taxes are reduced too rapidly, but presumably, we have learned the lesson of lowering Irish corporate taxes too rapidly. Because of international ramifications, we have to assume this threat would be recognized. Because of the nature of compound interest, it has the least effect in its early stages, and there would be sufficient warning of inflation to mobilize action. Interest rates would probably rise, but there is a cushion of several years of subnormal rates, and most people would feel the elderly have suffered enough from low rates to justify some relief.

A certain amount of trouble resulted from using the "pay as you go" model, in which current premiums pay for current expenses. That is, the money from young healthy subscribers pays the bills of old, unhealthy, ones. By that reasoning, the original subscribers in 1965 got a free ride from Medicare and never paid for it. The debt has been carried forward among later subscribers, and although it is a debt which still remains to be paid, it seems very likely no one would ever collect it. Each generation makes it a little bigger by adding subscribers and running up hidden debt charges, but at least it is accounted for. In a way, there is enough guilt feeling about this matter, that it would probably be politically safe to create a balancing fund, to be used in case there are monetary issues with this unpaid indebtedness.

Let's remember that a major part of the health financing problem can be traced to the unequal taxation exemption of big business, which traces back more than seventy years to World War II. No one welcomes reducing net income in half by any means, but reducing corporate income taxes might just be one of the few ways it could be an inducement. No taxes, no tax exemption; it sounds pretty simple until you review the trouble the Irish Republic got into when it reduced them too fast. But when corporate taxes are the highest in the world, and international trade is threatened -- is certainly the best time to do it. And politically, when wealth redistribution has just been given a thorough pounding in the polls, is also a good time to advance the idea. If everyone would be reasonable about the details, an important tool for managing international trade could be fashioned out of needed healthcare reform. It certainly is a double opportunity.

A fiduciary puts his customer's interest ahead of his own. {bottom quote}

The End of The World?

One way or another, the success of Health Savings Accounts will depend on crossing the tipping point, where investment income is greater than borrowing cost. These accounts will be forced to do a great deal of internal borrowing, particularly at first, when some financial information does not exist, and therefore must be deliberately over-funded. We have a reasonably workable idea of total health care costs and longevity, but an uncertain grasp of the shape of the revenue and cost curves in the middle. Inevitably, certain age groups will be in chronic debt, and others will run protracted surplus; the situation demands low-cost internal borrowing. Meanwhile, the overall prediction can be made that healthcare costs will generally be lower for young people, higher for the elderly. If the premiums of young people can be invested at least 8% net, the system should work. When we learn common stocks are averaging 11% returns, and investment intermediaries frequently capture 85% of it, the whole idea of passive investing is ruined until this is repaired. Requiring Health Savings Account agents to be, and to act like, fiduciaries is just about mandatory. A fiduciary puts his customer's interest ahead of his own. The day of opaque pricing must come to an end.

We mentioned earlier, Roger G. Ibbotson, Professor of Finance at Yale School of Management has published a book with Rex A. Sinquefield called Stocks, Bonds, Bills and Inflation. It's a book of data, displaying the return of each major investment class since 1926, the first year enough data was available. A diversified portfolio of small stocks would have returned 12.5% from 1926, about ninety years. A portfolio of large American companies would have returned 10.2% through a period including two major stock market crashes, a dozen small crashes, one or two World Wars hot and cold, and half a dozen smaller wars involving the USA. And almost even including nuclear war, except it wasn't dropped on us. The total combined American stock market experience, large, medium and small, is not displayed by Ibbotson but can be estimated as roughly yielding about 11% total return. Past experience is not a guarantee of future performance, but it's the best predictor anyone can use.

During that most recent prior century, we had a lot of crisis events, which normally bump the stock market up and down. A standard deviation is an amount it jumps around, and one standard deviation plus or minus includes by definition two-thirds of all variation. During the past ninety years, the standard deviation has been 3 percent per month or 11% per year. Standard deviations for the whole century are not meaningful because of more or less constant inflation. Throughout this book, we repeatedly describe investment income as 10%, for a simple reason: money compounded at 10% will double every seven years. Using that quick formula, it is possible to satisfy yourself what 11% can do if you hold it long enough. Since no one knows what will happen in the next 100 years, it is futile to be more precise. We may have an atomic war, or we may discover a cheap cure for cancer. But 10% is about what you can reasonably expect, doubling in seven years if you can restrain yourself from selling it during short periods when it can deviate less or more. The most uncertain time is immediately after you buy it before it has time to accumulate a "cushion". As we see, your money earns 11%, but it isn't necessarily what you will earn.

Your money earns 11%, but that isn't necessarily what you will earn. {bottom quote}

Expecting it and getting it, can be two different things, therefore. And even if Congress establishes it, as they say in Texas, "You can't turn your head to spit." Because, for one thing, most expenses for a management company also come in its first few years, on their first few dollars of revenue. Wide experience with a cagey public, therefore, teachers experienced managers to get their costs back as soon as they can. Until most managers get to know their customers, in this trade, charging investment managing fees which amount to 0.4% annually is considered normal for funds of $10 million, so charging 1-2% for accounts under a thousand dollars is common practice. These things make it understandable that brokers are slow to lower their fees, or 12(1)bs, or $250 charges to distribute some of your proceeds. But our goal as customers is to negotiate fees reasonably approaching those of Vanguard or Fidelity, which have fees of about 0.07% on funds amounting to trillions of dollars. Such magic can only be worked by purchasing index funds from a broker who aggregates them, and also develops a smooth-running standardized service with minimal marketing costs to cover the debit card, help desk, hospital negotiating, and banking costs. And who, by the way, may make really serious income from managing pension funds, so they remain wary of antagonizing corporate customers who get a big tax deduction from giving employees their subsidized health insurance. Remember, stockbrokers are not fiduciaries; they are not expected to put the customer's interest ahead of their own. A broker sells stock to anyone who wants to buy it, even if two successive customers are bitter rivals of each other. One of the better-known brokerage houses advertises charges of $18 a year for HSA accounts over $10,000, but only after it reaches that size will it permit the customer to choose a famous low-fee index fund. With $3300 annual deposit limits, it eats up three years of your earnings even to get there. You really have to feel sorry for an industry experiencing such a general decline of net worth, but the incentive it creates is obviously for you to get the account to be over $10,000, as fast as you possibly can. To many people, those sound like staggeringly large amounts, but they are realistic at this stage of the market, if not entirely accessible to everyone.

The last few paragraphs sound like a digression, but they aren't. The question was, Where does all this money come from? Would there be wealth creation if the system favored the retail customer more, or wouldn't there be. I don't know the answer, but one likely approach is, let's try it.

Doses of Medicine: A Physician Prescribes Changes for the Health Industry

George Ross Fisher, M.D.

In science, is civilizationâ€™s future. -Francis Bacon

CHAPTER 1: How Did We Get in This Mess?

The medical profession is pretty bewildered; facts have somehow stopped speaking for themselves. It now actually seems urgent to defend Medicineâ€™s traditional arrangement against hostile challenges. No increase in life expectancy, no conquest of yet another disease, no miracle drug seems to constitute a self-evident defense. We must answer for sins; Even the wry old joke about What have you done for us, lately, is easily answered. We give, for a quick example, vastly improved cataract surgery to nearly a third. Yet all that does not seem to matter to people; the health system is asserted to be in â€œbig troubleâ€.

My morning newspaper, for example, tells in a single day of the bankruptcy of two local medical school hospitals, while Moodyâ€™s rating service reduces the credit rating of my own hospital, the first and oldest in the country. Medical care almost seems to be entering what chess players call the endgame. We have too many hospitals and medical schools, weed them out. We have too many doctors and other medical personnel; overvalued services must be downsized, in contemporary parlance. Even technology advances are blameworthy. New medical technology is produced endlessly, demand for it consequently unlimited, continuing to grow until it impoverishes the nation if not the world. Belief in social justice will be destroyed by denying new technology to the poor. But the nationâ€™s economy will be destroyed by providing it to everyone.

There is some painful truth to these complaints, but they go too far, unleashing avalanches which are not easily stopped. Changes to the medical system taking fifteen years to evolve might possibly be a good thing; three years convulsions are surely only harmful. Take for example the pursuit of social justice in providing the best medical care for everyone, rich or poor. If the country canâ€™t afford it, what then? Surely, social justice is not achieved by denying, in the name of even-handedness, treatment to the majority who can still afford it. Women and Children First is a noble thought, but Nobody in the Lifeboat at all is just intolerable.

All of these are the confused shouts of a quarrel over â€œhealthcare reform,â€ or more accurately, healthcare financing reform. Most ordinary Americans sense that something has gone very wrong and it didnâ€™t require the scare tactics of â€œHarry and Louiseâ€ to bring them this awareness. They want to preserve all that is good about medical care. They want to find a rational and equitable way of paying for it. Unfortunately, they donâ€™t find most proposed fixes acceptable, while our leaders cannot openly express the possibility that there just might not be enough money to do everything equitably, within a competitive global economy. The present prosperity of the country actually makes the dilemma seem worse. There does not even exist much likelihood that future gains in an already exuberant economy could pay for constantly improving the medical care of highest quality, denied to no one. In the main sections of this book, it will be my contention that the only force which can resolve these dilemmas is medical science itself. The way to reduce the cost of medical care is to eliminate disease.

Formative Years.

For those who feel more comfortable leading rebellions than defending against them, it must be consoling that todayâ€™s conservative medical establishment is a product of two centuries of revolution so radical and continuous that famous colonial notables could not possibly survive in practice today. Indeed, neither could those who graduated just twenty years ago, except for continuous study and retaining. Significant changes usually have insignificant beginnings. In that spirit, someone dug up the possibly apocryphal story of the daily diaries of King George the Third of England, where the entry for an important day for King would have been, July 4, 1776. His Majestyâ€™s alleged comment:

â€œNothing much happened, today.â€

Well, that was wrong, and much of what later happened was caused more by the Kingâ€™s invincible oblivion, than by a mere 30 days lag in transatlantic communication. We cannot trust the continuation of present trends, but at least we can see that lesson of history. What happened to medical care in the future may well depend on whether the reading thinking public wakes up and takes a stance, after first troubling to learn something about the matter. Begin, with a quick history.

Twenty-five years before that fateful day in the colony. Benjamin Franklin and Dr. Thomas Bond in 1751 had founded the Pennsylvania Hospital. In the style of the English voluntary hospital, it was founded primarily for the sick poor and perhaps, if there was room, for those who could pay. Since for decades it was the only hospital in America, it established a purely charitable tradition which lasted more than a century. Poor people went to the hospital. Persons of means were visited by their physicians at home, had their illness, babies and operations, and eventually expected to die, at home.

Franklin had hoped taxation would eventually pay for the care of the indigent, but the Legislature soon taught him (and us) not to count on it. The receipts from paying patients were also minimal. For nearly two subsequent centuries, the charity hospital was primarily financed by gifts and bequests and managed to get by.

Around 1870, two major changes occurred in the character of hospitals. Joseph Lister, an English Quaker surgeon recognized Miss Nightingaleâ€™s militarily disciplined hospital, fanatically clean and airy, as an ideal place to practice aseptic surgery. And incidentally, of course, to have paying patients transported to the surgeon and the equipment, rather than the other way around.

At about the same time, the Canadian physician William Osler came to the Philadelphia General Hospital, where he developed a medical education system which was to revolutionize the non-surgical part of hospitals as much as Lister had revolutionized the surgical wings. Osler was largely unappreciated in Philadelphia and soon went on to John Hopkins in Baltimore to perfect a system of medical education through barter. The student nurses, medical students, and interns worked free of charge (and very hard, by the way) in return for education, the patients permitted themselves to be used as an example for teaching in return for free care. (you can still get free haircuts at barber schools), and the community physicians gave free teaching in return for concentrated experience and prestige, highly useful in attracting paying patients.

Although the Osler and Lister systems persisted for little more than a century, the synergies of the arrangement transformed the typical American hospital from an almshouse into the local center of medical care. In many parts of Europe, that system was not followed, so ten-bed clinics owned and operated by a single prominent physician were often the prestige professional centers. In America, it is true, country doctors would often start small private hospitals, but the Osler/Lister model created a strong imperative to merge them or close them. Is somewhat lower prestige somehow implied that the small hospital, unless striving for a transition to a medical school teaching hospital model, might be inherent of lower quality? This was a circular argument, one which certainly raised costs long after costs became a central issue. At any rate, it is difficult to name any other profession where the trade school is also the epicenter of practice.

The Great Depression following the 1929 stock market crash suddenly exposed the fact that this hospital-based system was more expensive than community-dispersed medical care, possibly unsustainably more expensive. Dr. Oslerâ€™s system of organized free service in return for training had until then largely concealed the steady march of increased expense caused by Lord Listerâ€™s summoning the populace into the surgical temple. The hospital added hotel costs on top of medical costs, and for paying patients there needed to be more amenities. Whenever you cluster six employees together, you need a seventh to supervise them; seven supervisors need a super-supervisor, and so ad infinitum. A supervisor needs an office, maybe a secretary. Pension benefits need a specialist. The expanded mission for hospitals was probably more expensive, but uncertain just what size was the optimum for a hospital, they mostly just got bigger. After the first World War, however, and for the first time in a century the financial options began to be reexamined.

The stresses of the great economic Depression forced all hospitals to recognize that their dependence on financial benevolence would bring them to extinction. The solution they devised was health insurance. Around 1935 the hospitals organized Blue Cross, a non-profit system for community sharing of cost and spreading risk. An insurance company needs reserves to protect against unexpectedly high claims. The hospitals provided such necessary guarantees behind the insurance by agreeing to reduce their prices if necessary to preserve Blue Cross solvency. In 1940 state medical society doctors used the same strategy in founding Blue Shield, similarly putting themselves at risk in lieu of the needed cash reserves. Blue Shield never could quite overcome the disproportionately heavy administrative costs of paying smaller claims for non-surgical physician care, since the insurance mechanism costs money and the costs of processing a small claim are about the same as for a big one. Non-surgeons sulked over this relative exclusion because any bill is easier to collect f insurance makes it appear free at the time of service. You (and fellow insureds) have paid in advance by paying the insurance premium.

Going back a few decades a social cancer had been growing in the medical community, the Technological Entitlement. Best summarized by example, this sense of entitlement grows in the mind of a specialist when he sees a general practitioner performing services he wishes he might do himself, or in the mind of a teaching hospital administrator when he sees a rural hospital keeping cases rather than sending them to Big City. As long as specialists or the specialty hospitals depend on voluntary referrals from the generalists, they must be civil about their sense of entitlement, but professional fraternity inevitably suffers when there is a surplus of specialists. On the other hand, a shortage of generalists leads to referring patients unnecessarily to specialists just to lighten the workload. The issue would resurface in a few decades when â€œmanaged careâ€ reversed the financial incentives. Within this specialist/generalist tension lay a whole host of unrecognized problems for the future. The best and most economical situation for the public is to have just the right balance of generalists and specialists. There is a long lead time before you restore balance once you recognize an anomaly because the commitment to a specialty is made at the beginning of a forty-year practice. And smashing through the whole tense situation is a loose cannon. Manpower is in the hands of the medical schools, and the medical schools are competing for patients. Tuition receipts once were their main source of income, but now the majority of medical school income is derived from the practice receipts of the faculty. The conflict of interest is extreme.

These professional bickerings are now intensifying at the end of the 20th Century. They have shoved aside during desperate days of the depression, rendered meaningless during the five-year physician shortage caused by the Second World War. But after America won the War, everything changed. The nation in post-war exuberance felt it could afford some seemingly bold steps. But problems are often caused by solutions. The nation unwittingly committed itself to a financial premise which apparently can now only be altered by a disaster. The Second World War totally changed the financing of medical care.

America Medical Care After the Second World War

In 1940 only 10% of the working American population carried health insurance. By 1950, 50% did, and the explanation is simple. Wartime industries hampered by wage controls had employee recruitment difficulties and were therefore allowed (by the War Production Board) to offer free health insurance benefits without calling the wages. Not only were wage ceilings broken, but the added â€œfringe benefitsâ€ escaped income taxes, probably to maintain the fiction they were not extra wages in disguise. Henry Kaiser was a pioneer in this system; needing people to build â€œLibertyâ€ ships he launched what would evolve, ultimately, into the HMO or Health Maintenance Organization. By 1950, so many people enjoyed the tax exemption of employer-based health insurance that the Internal Revenue Service tried to get it repealed. In the end, Congress lacked the political courage to do so, knowing very well how people hate to lose something they have come to expect. The post-war economy boomed. Loss of revenue from the tax exemption, although huge, was seemingly bearable. When threats to repeal the tax preference gradually subsided, the matter was forgotten. By 1998 most people are quite unaware of the two main truths of American health insurance: a) It isnâ€™t really insurance, itâ€™s prepayment and b) Itâ€™s a rather inequitable tax dodge, which you can fully enjoy only if, and while you are paid a salary by an employer.

Helms, Robert B., The Tax Treatment of Health Insurance: Early History and Evidence in A Fresh Approach to Health care Reform, Galen Institute, Washington DC, March 25, 1996,

This system raised medical prices, perhaps intentionally. After the Second World War, there just didnâ€™t seem to be enough medical capacity to serve the country. Fifteen years of neglect had left almost every American hospital with a run-down physical plant. The population had grown, the backlog of untreated conditions seemed unlimited. The country meanwhile enjoyed a world monopoly of undestroyed industrial plant. The Richest Country in History enjoyed prosperity. Nurses an intern were starting to get paid; why not when most people had insurance to pay for it? Medical advances, stimulated by government-funded research, began to produce unimaginable benefits. Hospital construction was stimulated by the Hill-Burton Act. Medical schools were not only urged but almost threatened and bribed, to expand medical student enrollment. And so, in this climate Lyndon Johnson succeeded in getting part of universal national health insurance enacted in 1965, by restricting coverage to the elderly (Medicare) and the indigent (Medicaid). The AMA protested the costs were underestimated; liberal proponents scoffed and announced fully universal coverage would come soon because it was â€œinevitableâ€. Little noticed at the time, reimbursement to hospitals was made open-ended under the new system, completely reimbursed after the money had been spent. Money for hospital construction was particularly generous, and with sensible accounting, a hospital could be repaid $1.04 for every dollar it spent on construction. Little did the country care.

The country nowadays cares a lot about medical costs, because for so long it cared not a whit. And so, we are now busy bankrupting hospitals, threatening holders of hospital municipal bonds with potential default, and getting ready to go back to operating on kitchen tables. But before we get to that, notice that in 1973 Congress passed an equally colossal bill, a pension bill called ERISA (Employee Retirement Income Act). Nobody in Congress appreciated it at the time; hardly anyone in the public knows, even twenty-five years later, what a fundamental upheaval in medical care had been set in motion by few afterthought clauses in this act. President Gerald Ford, at the time he signed it, could well have written an entry in his diary similar to what George III of England supposedly wrote on the Fourth of July. Nevertheless, today Blue Cross is on the brink of being ruined because of ERISA. Many more people today have health coverage under ERISA provisions than have Medicare. Effective control of a large part of the trillion-dollar medical industry is effectively in the hands of the executives of self-insured big businesses. Control is perhaps too strong a word. The CEOâ€™s make it clear that while they prefer their self-insurance for employee health to be good, they definitely donâ€™t want to hear about it. And, oh, by the way, see to it that Congress doesnâ€™t touch it. It is harder to characterize the United Auto Workers contract with the automaker as a single event in history with a notable birthdate, but it does stand as some sort of high-water mark of the money-no-object era of medical care, which stretched from 1945 to perhaps 1975. Since the UAW contract is still in force and extends for the rest of every auto workerâ€™s life, however, it is not just a quaint relic of a gilded age. it created a $15 billion contingent liability for General Motors alone, and surely will cause immense pressure to apply to Republicans in Congress by management, corresponding to equally strong pressure on Democrats by the union. What was agreed in a binding contract? That the auto companies would pay full medical benefits, a fee for service and without gatekeepers, for the rest of an employeeâ€™s life. As long as Medicare reduced the companyâ€™s cost for retirees, that was fine. But no matter how much or how little Medicare would soften the burden, the company had to make up the difference. Consequently, if Congress or the President thinks Medicare benefits should be reduced, any savings to the government would then simply translate into costs for General Motors, so think again. This serious quandary tends to make management and stockholders of auto companies view national health insurance proposals in an unexpectedly favorable light, while conversely it sometimes makes auto workers unexpectedly cool to be â€œsingle payer systemâ€. Single payer is very definitely still being promoted n liberal circles, nominally as an innovative way to provide coverage to the uninsured. Although a 1998 decision by the U.S. Supreme Court somewhat let General Motors off the hook on its lifetime contracts, we will surely hear more of this. Somewhere around 1975 (The Vietnam conflict had its effect), the country lost faith that all the health system needed was somewhat more money. The new concern was that the health system is a bottomless pit which will bankrupt us all. Carefully considered, the real panic should have been based on a recognition that health insurance itself had pushed up health costs to a point where no one could afford to be without health insurance. Societyâ€™s dilemma appeared insoluble, so everyone looked about for individual ways to survive. Someone was going to get hurt, look out for yourself. The emotional counter-revolution about costs soon generated the various enabling acts for HMOâ€™s (Health Maintenance Organizations), which passed the state legislatures around 1980. The HMO was scarcely a new idea; many had been around for decades. A blender and less effective national law had been passed seven years earlier. The driving features of the model act promoted by the National Association of Insurance Commissioners was a bias in favor of investor-owned companies, particularly those with no physicians running them. It is worth nothing that those who framed the HMO legislation incorporated into it the first explicit statutory exception to the long-standing prohibitions against corporations practicing medicine. Up until that moment, all states had a ban on corporate practice. The HMO acts specified that HMO corporations might practice, just in case anyone wanted to obstruct them on that level. In fact, the law created an enormous hidden incentive for doctors to combine into corporations. Furthermore, since the 1975 Supreme Courtâ€™s Goldfarb decision, groups of independent physicians are expensively investigated under antitrust for doing things they could freely do if they worked for a corporation. Meanwhile, the managers of any corporations have only one duty to their stockholder owners; make as much money as possible. Managers have ample power and considerable experience imposing this imperative on anyone they employ, doctors or not. Meanwhile, the courts are interpreting ERISA as prohibiting an injured patient from suing the HMO, even for the corporate policy as the source of injury.

We can now see the imperative to control medical costs, mainly driven upward by widespread insurance eliminating price resistance, is curiously linked with a contradictory mandate: expand insurance coverage even further. A notable piece of legislation was enacted in 1983, demonstrating the national carelessness about this contradiction. In response to widespread criticism, by me among others, Congress abolished the 1965 system of unlimited cost-reimbursement for hospitals and substituted payment by diagnosis, the DRG (diagnosis-related groups) system. Hastily crafted, the 1983 budget reconciliation bill included an overpayment to teaching hospitals based on the number of resident physicians they had in training (â€œthe indirect medical educational allowanceâ€). It also created a bonus for hospitals who have a â€œdisproportionate shareâ€ of indigent patients (please remember the irony of how hospitals started). And, finally, it phased in the new payment system in different quadrants of the country in stages, basing payments on the ongoing experience, but with resulting regional differences.

While the DRG system worked better than its crude construction suggested was likely, the indirect educational allowance created a multimillion-dollar incentive for hospitals to hire unneeded residents, whether domestic or foreign-trained, thereby both expanding a physician specialist glut and resulting in a differential overpayment to the teaching hospital. The disproportionate share payments intentionally skewed payments toward urban hospitals but also created a perverse incentive to maintain medical ghettos for indigents, just the reverse of bringing poor people into the mainstream as Lyndon Johnson had hoped to do. And the rolling phase-in of the 1983 law, for its part allowed some regions of the country to set costs at an artificially high level during the on-going year, effectively setting an inflated standard that suggested they could be overpaid forever. Efforts to create rebasing, or to reform the disproportionate share or the indirect teaching bonuses, have led to a rather dismaying 14-year stonewalling in Congress, reflecting resistance from the winners in this lottery. Worse still, it presented Congress with the political difficulty that all rectifications, if nationally uniform, would only exacerbate the competitive disadvantages of hospitals which had been unintentionally neglected in 1983.

In 1993 the Clinton health Plan net with disaster. While it masqueraded as a way to extend health coverage to the uninsured, it was primarily a cost containment plan. It had largely been developed by the Jackson Hole Group, consisting of the major health insurers, meeting in the vacation home of Paul Ellwood. Following the defeat of the national legislation, this interest group put enormous resources behind a campaign to force the health system to adopt â€œmanaged careâ€ universally. Part of the reason for haste was the recognition that a strong argument mighty emerges that employee health benefit money really belonged to the employee. It was doubtful that employees would agree to managed care once unions and the public generally woke up to the fact that employers really had almost no right, apart from their responsibility as agents acting on behalf of employees, to insist on particular insurance choices. Or physicians, specialist, drug, and hospital choices.

In response to this astounding shift in the nature of health insurance in just two or three years, the really serious and possibly irrevocable reaction began. Hospitals responded with consolidations into chains and mega-corporations. Traditional hospital incorporation as not for profit was typically circumvented by consolidating the business aspects into a for-profit subsidiary, and then selling it (mostly stripped of its cash reserves). Seven thousand hospitals may consequently soon be only five hundred. There is even talk of consolidation into thirty national chains. One large chain is noted for its unique method: buy five hospitals in a town, close three of them, make everybody pay your price to use the remaining two. The non-profit shells of former voluntary hospitals still wonder about, uncertain of their control. Things are moving too swiftly for the convoluted antitrust statutes to catch up; thatâ€™s another incentive for haste. The Supreme Court, through a century of decisions, had established complex definitions of what constitutes anti-trust violations by a business. But it little imagined that such definitions and sanctions might later be mindlessly applied to either learned professions or charity hospitals.

However, in 1975, thatâ€™s what happened. Irritated by the behavior of some fellow lawyers in Virginia, the lawyers on the Court handed down a decision which removed all lawyersâ€™ traditional anti-trust immunity. Unfortunately, lesser courts defer to every word of a Supreme Court decision, and by speaking of â€˜learning professionsâ€ rather than just lawyers, the Burger Courtâ€™s Goldfarb Decision suddenly astounded physicians, as well, into an industrial model that largely bears little resemblance to the practice of medicine. While it may be true for other forms of business, the medical profession has never acknowledged that money, efficiency, and prices (economic standards) are more important than the health of their patients (non-economic standards, excluded from antitrust consideration). Case law had earlier evolved in the courts defining concepts like â€œvertical integrationâ€, which had manufacturer, wholesaler, and retailers in mind. Such rulings now present bewildering obstacles to rationalizing insurance companies which own hospitals, or hospitals which employ physicians. By applying ancient â€œper seâ€ doctrines to an amazing medical profession, the Court even blocked the medical anti-trust neophytes from explaining their unique facts under the â€œrule of reasonâ€. The hodge-podge of the Goldfarb Decision with Burger terminology embellishment was soon made worse by a particularly egregious lapse of common sense, called the Maricopa Decision. In that case, the Court made a chilling example of a county medical society, found guilty of the newly invented crime of placing maximums on their own fees. Since doctors were thereafter not allowed to publish a schedule of either maximum fees, they had to stand by and watch the insurance company chosen by the employer divert their patients into the offices of competitive physicians who were perfectly free to fix prices, by being employed or part of a group practice. The patients may not have been happy about this, but the too found little choice. What the Supreme Court didnâ€™t notice in the Maricopa decision was that for practical purposes prices were no longer set by physicians in a physician-based marketplace. Rathe, physician prices are really set by insurance companies in an insurance-based marketplace. If price fixing has any modern significance in healthcare costs, it is a collective significance, not an individual one. To tangle one group of market participants in per se price-fixing arguments while a competitive group runs loose with collective pricing is scarcely equal justice, and is obviously destabilizing the market.

In the 1997 arguments about State Oil v. Kahn the Justices challenged the Solicitor General to name a single instance in which someone had been prosecuted for maximum price fixing unless the maximum price was just a minimum price in disguise. The Solicitor General couldnâ€™t think of any, but the Maricopa case was the perfect example if it had been permitted to have a hearing.

In 1998 it is fair to say the country is fed up with intractable healthcare contradictions Physicians consequently tell themselves that Managed Care stands convicted in the court of public options and will surely be mostly abandoned. But just a minute. The desperate hospitals have meanwhile turned the healthcare system on its ear, scrambling eggs that not be easy to unscramble.

In the next two sections of this book are my best efforts to suggest some ways to get out of this mess. In the section of Part, I which immediately follows I will propose some incremental and I hop achievable reform proposals for health insurance, with the goal of improving general access to healthcare. In Part II of the book are suggested ways to reduce the cost of care which are far less radical than chain-saw massacres presently in prospect, but consequently more likely to endure. This book would then still not be complete without a final assessment of the present blood-soaked battlefield, the villains, and the heroes. After two hundred pages of constructive suggestions, I do ultimately feel entitled to say my say about the destructive ones proposed by others. Read on but keep pondering the original questions. In the name of medical evenhandedness, if we cannot have everything we want, must nobody have anything at all?

`

Essentials of An Integrated PSRO Data System. January, 1976

Stimulated mainly by the passage of PL-92-603 and the data requirements of the PSRO's established by that law, a lively debate has developed as to how health care data will be collected and processed. The three main topics around which the debate revolves are:

1.) Accuracy of the data

2.) Confidentiality and access

3.) Cost.

Recent passage of PL 93-641 has increased the urgency of this debate, as it would seem logical for the HSA's established by this law to work closely with the corresponding PSRO's and to use data provided by the latter. It is apparent that they will not be able to become effective until such data is available.

Therefore, it seems appropriate at this time to develop a general scheme for data management which would:

1) Meet the requirement of accuracy, confidentiality/access and cost effectiveness

2) Provide a minimum data set necessary for a uniform national system of peer review.

3) Be flexible enough to adapt to specific local needs and to unforeseen future needs.

PRESENT SITUATION

It is apparent that there is a considerable investment (both private and public) in data systems at present of the order of magnitude of billions in hardware and annual expenditures of approximately billions in EDP operations, related to healthcare. Among the larger data processors is the National Center for Health Statistics, the Bureau of Health Insurance, SRS, State Medicaid programs, Blue Cross / Blue Shield, and private health insurance companies. In addition, the considerable data-collection capability exists in private monitoring systems (such as the Commission on Professional and Hospital Activities) as well as within individual hospitals. Because of the substantial existing investment, legitimate concern has been expressed that PSRO's might simply add "another layer of data-gathering" and further increase cost and confusion. This concern must be addressed.

In spite of the significant capacity in existing systems, there are several glaring defects. One is compartmentation. Data collected by one organization is not available to other organizations that need it. The corollary to this is duplication, organizations have set up duplicating systems because of ignorances of data available elsewhere or inability to get it. Both of these problems tend to increase the total cost of data collection. Related to the problems of compartmentation and duplication is the significant problem of harassmentof the provider. Hospitals have increased administrative costs simply to provide the information required by federal state and local agencies of government as well as third-party payers, and physicians and clinics are likewise struggling under an increasing load of paperwork which threatens to impede their ability to deliver the medical services which are urgently needed.

In spite of the complexity and extent of existing data-gathering apparatus, there are areas in which gross inaccuracies occur. In Hospitals the crucial point of data-gathering is usually in the hospital record rooms, and the causes of inaccurate data fall into two main categories;

1) Insufficient, inaccurate or illegible recording of diagnoses and procedures by the attending physician.

2) Deliberate distortion of information to accommodate third-party payment mechanisms.

3) Inadequate or inaccurate identification data due to lack of uniformity of hospital discharge data sets and lack of uniformity of training and supervision of personnel abstracting the data.

The problem of confidentiality and access to data are magnified considerably by the present uncoordinated system not only are there flagrant breaches of confidentiality because of the multitude of people handling this data without overall supervision, but conversely, when a public party has legitimate need to know certain information, it is often nowhere readily available in an aggregated format.

These defects in the present system relate mainly to data concerning institutional care. When it becomes necessary to collect ambulatory care data, all these problems will be multiplied manyfold. Additionally, present data collection systems are seldom demographically oriented so that what actually happens within a given geographic area or within a defined population is difficult to determine.

PROPOSAL

A. Structure.

In an attempt to bring more order into the presently fragmented system and to address the three basic issues of accuracy, confidentially/ access, and cost, we would propose the following scheme diagrammed in Figures 1 and 2: (see diagrams following)

These figures are based o the concept of a "data brokerage" (Ref.), and a common pathway for all health care data, with management of the system at the PSRO/HSA level by a Data Sub-Committee of the PSRO, and at the State Support Center or State PSRC level by a similar data sub-committee of that body. Both sub-committee would, of course, be responsible to their Boards.

A key feature of the system is the data-processing contractor at both levels. This organization would be chosen after competitive bidding in response to an RFP put out by the data management sub-committee. Organizations which might bid for such contracts would be either existing data processing firms, specializing in health care data, such as EDS, like wood.

Optimum Systems, Health Application System, etc..., or they could be spin-offs of existing third-party payers, either the Blues or commercial health insurance companies. In the latter case, the EDP organization, handling data under the integrated PSRO system, would have to be managerially divorced from the parent corporation in order to avoid conflict of interest. Existing organizations such as BHI, the Blues, commercial carriers, etc., would continue to maintain data systems for their own internal needs, but common needs would be met by the PSRO network.

A second key feature of the system is that management information, quality assurance data, and claims payment data would all flow over a common pathway. The compelling reasons for this are

1) Economy of operation

2) Minimal harassment of providers

3) Effectiveness of managerial control.

Economy and minimal provider-harassment would be accomplished by the necessity for submission of only one abstract containing the necessary data elements for each service rendered, whether in hospital, nursing home, doctor's office, or patient's home. This could be submitted to a local PSRO data center, generally by direct terminals located in community hospitals. When ambulatory care review becomes required, doctors and clinics or medical office buildings may find it expedient to have entry terminals primary for ambulatory care data in their own facilities. Doctors in solo practice or in more rural communities could submit abstracts by mail to their OSRO data centers or to the entry \terminals in their community hospitals. Large hospitals having their own computer systems at present would only need to make arrangements for linkage from their computers to the PSRO data center for transmission of essential data elements.

B. Management

Managerial responsibility at the PSRO/HSA level would be invested in the PSRO Board and delegated to the Data Management Sub-Committee. Although the Board membership is restricted to M.D. or D.O. members of the local PSRO, the sub-committee could, and should, include non-M.D. members. Certainly a member of the corresponding HSA should sit on this committee, and if the PSRO is statewide, each of the main users of this system should be represented; namely, BC/BS, HIAA, State Hospital Association, Inc.

At the level of the state or regional support center (of which 12 exist at present), the Data Management Sub-Committee would be even more broadly representative, with representation from the appropriate state health agencies, medical schools, regional HEW offices, and responsible consumer organizations, etc.

Confidentiality/access issues would be settled by the Data Management Sub-Committees at the appropriate levels. A uniform policy would be established, and there would be no question as to where to fix responsibility for the release or retention of information.

Although not shown in the second diagram, there is a third, or nation, level of data-handling represented by such organizations as the National Center for Health Statistics, Bureau of Health Insurance, SRS and, When some national health insurance plan is voted by Congress, whatever federal agency will be given authority to manage this program. These organizations should be concerned mainly with aggregated data and only when necessary for eligibility determination or payment of claims with individually identified data.. Much of the argument on this subject at present seems pointless if it is recognized that disciplinary control of both patients and providers should be delegated to the PSRO level and at higher levels. Management should be concerned with managing the systems, not with the disciplining of individuals.

On this subject, it might be pertinent to observe that, as the data system becomes operational, the present tendency of BQA to try to control process in each PSRO should be drastically curtailed, and the role off BQA should be mainly to monitor the outcome of the efforts of each PSRO actually relying on the support centers to provide most of the data that will be necessary to do this.

C. Funding.

Funding of the PSRO Data System is a part of the general problem of funding PSRO operations, which is an issue at present. We will not go into this question in detail in this paper, other than to observe that we feel strongly that PSRO's should receive their income mainly from those institutions for which they provide services so that all purchasers of data from the PSRO would pay an appropriate amount for it. It should be remembered that in addition to providing data, the PSRO also providers certification of the necessity, quality, and the appropriateness of the service, upon which payment will be based. The cost of EDP and certification must be recognized as reimbursable costs, and provision made to pay for these functions through the same reimbursement mechanism which pays for the health care services themselves. At present the total cost of PSRO review of institutional care including administrative, EDP, and certification costs is between $10 and $35.00 per hospital admission (Ref.).

It would appear that, as PSRO's become more efficient, this cost will settle down to between $10-$15 for a total of $110-$165 million dollars for present 11 million Medicare and Medicaid admissions annually. Reimbursement for review of nursing home care and ambulatory care will require slightly different arrangements, but the principles should be the same.

Funding for the State-Support Centers and the data libraries, which would be used primarily for medical care evaluation studies and other retrospective research, might come directly from BQA and research grants from medical schools or schools of public health.

DISCUSSION

Questions which have been raised in regard to the feasibility of such a common data system are;

1) The possibility of requiring a significant investment in "new hardware" by duplicating existing capacity. We anticipate that the successful bidders for the data-processing contracts would use existing hardware to a large extent and only invest in new hardware as technologic advances in the industry require it. Certainly, new software systems would be required and the stimulus of competitive bidding on some 200 individual PSRO contracts, plus the stimulus of minimal data requirements, established, presumably by the Professional Standards Review Council would, we feel, be a healthy influence to continued improvements in the system.

2) A single, nationwide data system would be another example of "Big Brother is watching you", and a further breach of individuals privacy in a particularly sensitive area.

As we have mentioned above, there are numerous possible "leaks" in the present, uncoordinated system, and essentially no control of confidentiality by any responsible public party. The proposed system clearly fixes responsibility for release or retention of information with data management sub-committees of the PSRO at the local level and the corresponding committee of the support center at the state or regional level. All requests for access to data would be channeled through these committees, and such request would have to be supported by documented "need-to-know".

The converse problem of access to health care information by consumer groups and public parties with a legitimate interest in health care data would be much more readily solved in our proposed scheme than at present. With regard to individual data relating to a particular patient-doctor relationship, confidentiality is the predominant issue, and professional control should be maximal at this level, with only enough non-professional input to keep the professionals honest. At the state, regional and federal levels, access to aggregated data, in order to assess the elements of the healthcare delivery system becomes the dominant concern, and at this level non-professional control becomes important, with a small component of professional input, principally to safeguard privacy and to ensure accuracy. This relationship is shown in Figure 3, taken from a report of the Institute of Medicine, entitled, "Advancing the Quality of Health Care".

Confidentiality of "business" information is a legitimate concern to many providers. For instance, how many beneficiaries Mutual of Omaha or the Blues have in a given area, or the total benefit payments for a given group of beneficiaries, or the retention rate for administrative costs and reserves, are generally regarded as business information, which should not be released to competitors. We are satisfied that the technology exists to build into a "common pathway" system adequate safeguards to secure the privacy of this information.

It should be noted in our scheme that the repositories of "old" data (as opposed to "online" data needed for day-to-day operation) are the "data libraries" controlled by the state / regional support centers. Such data would be used for retrospective MCE studies comparing the performance of different PSRO's, hospitals, clinics, HMO's and other provider groups. Since, as a result of such comparison, someone is always going to come off second best, strict control of such studies and release of information only to those with a legitimate need for the information will be important. The conduct of such studies and the monitoring of the coordinated data system for accuracy and efficiency are two reasons why we feel the support centers should continue to exist and not be phased out (as is present HEW policy).

3) . A large amount of data which would have to pass over a common pathway would "jam the system" and slow the speed of transportation of information, particularly that required by third-party payers for payment of claims

We have reason to believe that, conversely, the transmission of such information would be accelerated rather than delayed, and the efficiency of claim payment would be increased. How to claim payment request comes from a variety of providers (hospital, doctor, pharmacy, VHA, etc.) . and to a variety of payers (Medicare, Medicaid, the Blues, commercial health insurance companies, and the patient himself). Attempts to coordinates the payments of benefits are still clumsy, resulting in duplicate payments, incorrect payments, retroactive denial of payments, and a tremendous volume of correspondence phone calls, etc., trying to rectify these errors.

The "common pathway" scheme would afford an opportunity to gather together the claims of all providers pertaining . to a given case, and to compute accurately the deductibles, co-insurance and coordinated payment of benefits by various payers. At the same time, the PSRO certification (required at present only for payment under federally-funded programs, but eventually in all probability for payment under all health insurance program) would be added to the claim. In approximately 85% of cases based upon present experience, the claim would pass through the screens built into the local and regional computer systems without delay, arriving essentially instantaneously at the office of the third-party payer. The third-party payer would then only check eligibility and conformance to the scope of benefits provided by his contract, and issue checks or payment credits to the appropriate providers.

For approximately 15% of cases requiring review at the PSRO level, the review process would be accelerated by the gathering of all information regarding a particular case in one locus, and the development of online accessible data systems for review of much of this data. We visualize a BSRO room in each community hospital where the paramedical and professional personnel would review questioned cases, using a CRT terminal to access the PSRO data bank (for details of such a system,). Experience to date indicates that of the approximately 15% of cases "kicked out" by computer screens, all but 2-5% can be certified after paramedical review and promptly returned to the payment mechanism. The 2-5% requiring professional review would be reviewed by doctors at their community hospitals (where they are usually available on a daily basis), and certification would have to wait for weekly or monthly meetings of peer review committees only in rare instances. The virtually total abolition of delayed, retroactive review of claims and denial of payment, which is a source of considerable irritation to all providers at present, should be achievable under our proposed scheme.

4). Such a scheme would be exorbitantly expensive.

We have previously mentioned that the system would not require significant capital investment in new equipment nor in the training and employment of large numbers of personnel as these already exist and need only to be organized in a different management structure. It is even possible that by eliminating some presently duplicative systems, there may be a net saving. There is reliable evidence that the review of institutional care can be done at present for approximately $10-15, per admission. With the costs per hospital admission of Medicare and Medicaid patients averaging $750-$1,000, this amounts to 1-2% of the total cost of care. Experience in the costs of ambulatory care review indicates that it can be done at present for approximately 3-5% of the cost of providing that care and as volume increases that figure can be reduced.

It might be pointed out that when such a scheme becomes operational for both ambulatory and in-patient care, we will have available for the first time reliable data on the costs of an entire spam of illness, from the first patient contact to eventual recovery or death. Such information will give us much more useful information with regard to the cost-effectiveness of different elements of the healthcare system that is available at present.

The question as to how much effect the PSRO review system will have on total costs of healthcare in the nation has been widely debated, and it does not seem wise to make any sweeping generalizations on this point. It seems apparent that initially some unnecessary services will be eliminated, and the length of stay in expensive institutions will be reduced, and there will be an opportunity for better control of provider charges.

On the other hand, insistence on a higher quality of care will, in some instances, increase costs and the inevitable pressure of inflation in the national economy and the continuing introduction of high-cost technology into the healthcare field may offset any potential savings resulting from the PSRO review system.

5). A "common pathway" system might multiply errors in data-gathering and information-handling.

On the contrary, we believe that the proposed scheme affords opportunities for control of the accuracy of data which do not exist in the present "patchwork" system. One important feature is the initial control of data input. We have mentioned that institutional data at present is subject to several causes for the error. In our scheme, all institutional data would be gathered initially by trained nurse-coordinators and transferred from their abstracts to the computer terminal by another specially trained individual. These individuals should preferably e on the payroll of and supervised by, the local PSRO, although in some cases they may be on the hospital payroll and supervised by the PSRO.

When ambulator review is added, we recommend the adoption of the minimum data set for ambulatory care review, which is similar to the UHDDS, which is becoming standardized for institutional care review. We also recommend the adoption of a simple encounter-reporting form for ambulatory care, adapted to individual practices, similar to that developed by H. Philip Hampton of Tampa, Fla. This will provide all information necessary for both claims payment and quality review, reducing the "harassment factor" to a minimum. Information from these encounter forms would be entered likewise by trained data entry personnel in either the local PSRO office or at computer terminals located in community hospitals, clinics, and doctors' office buildings.

One of the important functions of the Bureau of Quality Assurance, working cooperatively with state regional support centers, would be to monitor the accuracy of data system and to continue to develop and introduce into the system improved techniques to ensure accuracy. Such control is impossible at present.

SUMMARY

In this paper we have attempted to demonstrate the need for, and the feasibility of an integrated PSRO data system, addressing the three main issues of accuracy, confidential/access, and cost. A proposed scheme is described in general outline. Some frequently voiced questions regarding such an integrated data system are posed and answered.

Philadelphia Reflections

The musings of a physician who served the community for over six decades

Obituary

George R. Fisher, III, M.D.

Friends Lifecare at Home

The Pharmacy Example.

Epilogue: Where Does All This Money Come From?

Doses of Medicine: A Physician Prescribes Changes for the Health Industry

Essentials of An Integrated PSRO Data System. January, 1976