Philadelphia Reflections

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

Related Topics

George Ross Fisher III M.D. : Memoirs
New topic 2018-08-23 16:15:31 description

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

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

George Ross Fisher, M.D.

In science, is civilization’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 Medicine’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 “big trouble”.

My morning newspaper, for example, tells in a single day of the bankruptcy of two local medical school hospitals, while Moody’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 nation’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 can’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 “healthcare reform,” or more accurately, healthcare financing reform. Most ordinary Americans sense that something has gone very wrong and it didn’t require the scare tactics of “Harry and Louise” 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 don’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 today’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 Majesty’s alleged comment:

“Nothing much happened, today.”

Well, that was wrong, and much of what later happened was caused more by the King’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 Nightingale’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. Osler’s system of organized free service in return for training had until then largely concealed the steady march of increased expense caused by Lord Lister’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 “managed care” 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 “fringe benefits” 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 “Liberty” 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 isn’t really insurance, it’s prepayment and b) It’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 didn’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 “inevitable”. 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 CEO’s make it clear that while they prefer their self-insurance for employee health to be good, they definitely don’t want to hear about it. And, oh, by the way, see to it that Congress doesn’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 worker’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 employee’s life. As long as Medicare reduced the company’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 “single payer system”. 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. Society’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 HMO’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 Court’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 (“the indirect medical educational allowance”). It also created a bonus for hospitals who have a “disproportionate share” 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 “managed care” 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; that’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, that’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 lawyers’ traditional anti-trust immunity. Unfortunately, lesser courts defer to every word of a Supreme Court decision, and by speaking of ‘learning professions” rather than just lawyers, the Burger Court’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 “vertical integration”, 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 “per se” doctrines to an amazing medical profession, the Court even blocked the medical anti-trust neophytes from explaining their unique facts under the “rule of reason”. 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 didn’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 couldn’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?

`

Originally published: Friday, July 20, 2018; most-recently modified: Thursday, May 16, 2019

 

Please Let Us Know What You Think

 
 

(HTML tags provide better formatting)