Tuesday, January 31, 2012

The Problem Is Profit (At Least in Healthcare)

If the vagaries of the medical system has you frustrated, look no further than today's New York Times opinion page for a little shot of optimism to your system. There you will find some government/academia heavy hitters (Ezekiel Emanuel and Jeffrey Liebman, both former advisers to the Obama administration) explaining how wunnerful healthcare is gonna be due to the impending extinction of health insurance companies. How's that possible, you ask? Well, the details are complicated, but the gist is that due to the changes wrought by the health care bill so stupidly referred to as "Obamacare" by the vast majority of Americans, a new system of apportioning dollars for healthcare will come into being in the next few years. This new system will have organizations known as "accountable care organizations", or ACOs, which "will increase coordination of patient’s care and shift the focus of medicine away from treating sickness and toward keeping people healthy". And, the authors contend, it's going to make everything better.

How that will take place is explained in two terse grafs midway through the article:

Because most physicians and hospitals today are paid on a fee-for-service basis, medical care is organized around treating a specific episode of illness rather than the whole patient. This system encourages overtreatment and leads to mistakes and miscommunication when patients are sent between their primary care doctors, specialists and hospitals. Indeed, under today’s payment system, investments in providing better care are doubly penalized. If a hospital hires a nurse to follow up with patients after they are discharged in order to reduce readmissions — for example, to help patients with diabetes improve blood sugar control — it must pay for the nurse, which is typically not reimbursed by insurance companies or Medicare, and it loses revenue by preventing the readmission.

In contrast, accountable care organizations will typically be paid a fixed amount per patient, along with bonuses for achieving quality targets. The organizations will make money by keeping their patients healthy and out of the hospital and by avoiding unnecessary tests, drugs and procedures. Thus, they will actually have a financial incentive to hire that nurse for follow-ups.

To give some context, a major chunk of Zeke Emanuel's career has been defined by paying attention to the issue of "overutilization"--the overuse of extremely expensive resources by physicians and hospitals--and ACOs appear to constitute a solution to this problem. Stop overutilization, you drive costs down because you stop needless testing. Create incentives to limit spending, you stop overutilization. QED. Thus, the new rules of the healthcare act will massage this new model into place.

Now that all sounds very nice and well, but color me dubious for the most part. I don't dispute Emanuel's contention that we spend too much on healthcare (we spend twice the amount of any other country per capita), and I agree with much of his analysis of the root causes of overutilization. But Emmanuel and Liebman appear to think that the private sector is up to the task of doing this, and on this point I am skeptical. Oh, we'll have changes with this ACO model, I'm pretty confident, but several of them are going to take a system that already has huge problems and make at least some of them worse.

The problem is profit. Healthcare companies are like any other capitalist venture: the bottom line is that they are in business to make money, and make a lot of it. Companies exist to make shareholders wealthy, and they will engage in whatever practices are legal in order to do so. In healthcare, this means, on the whole, that corporations wishing to make money have to increase production (having doctors see more patients, not by having more sick people) and/or reduce costs (either by making people healthier, which is easier said than done, or by decreasing overutilization, or by having cheaper labor than doctors see patients, or just paying doctors less).

I'll let the economists wax eloquent on how this makes the world a better place in theoretical terms, but I want to give you some idea of what this means in the real world. Let's take Your Local Little Hospital. If you go there nowadays, you're as likely as not to be cared for by something called a "hospitalist", which is an internal medicine doctor whose sole job is to care for hospitalized patients, and thus this doctor has no "practice" in the traditional sense of having a group of patients for whom he or she cares for an extended period. These hospitalists often work for either the hospitals themselves, or for corporations involved in the profit business.

If you go to Your Local Little Hospital and your hospitalist works for a corporation, that corporation likely is putting an enormous pressure on Dr. Hospitalist to see as many patients as they possibly can in one day, upwards of 20 to 25 patients. If you have ever spent time in a hospital or been with a loved one or friend, you'll know that face-time with the doc can (one hopes at any rate) be a huge factor in understanding what's going on. Suppose a conversation with a doc takes just five minutes; most people would want more, especially if they're sick, but let's just be conservative for the sake of the numbers to make a point. If that doc spends just five minutes talking with each patient and/or family of the patient, the doc with a census of 25 would spend about two hours each day just doing that task. That leaves the tasks of reviewing data, interpreting the data, writing a note, calling consultants, examining the patient, placing orders, and then reviewing the new data from that day's tests and making plans as necessary. It takes a lot of time to take care of a patient, about an hour each day by my estimation, so you can see what happens when you have 25 patients on your census.

The difference between this world and the one where the hospitalist is employed by Your Local Little Hospital is that the hospital--assuming it is a non-profit hospital--is not driven to quite the same extent by raw money. Of course, even non-profit hospitals need to keep a positive cash flow, but they don't have to worry about creating huge amounts of cash so that their CEO and major shareholders can afford lovely getaway ski chalets. Their only real bottom line is to stay in business, so they can afford to let their hospitalists see, say, 12 to 15 patients a day--considered by most in the biz to be an entirely reasonable number and still do good medicine. That's nearly half the workload of the hypothetical hospitalist in the graf above, and while this is all hypothetical, it really is happening out there right now.

In the brave new world of ACOs, all of these numbers may eventually seem quaint. Here's an op-ed--from the CEO of the Society of Hospital Medicine, mind you--that blithely chirps about "new paradigms" in which a hospitalist can see up to forty patients in a day! I have no understanding of what such a new paradigm could be except for one in which mistakes will be made and families and patients will wonder who the hell is in charge of their care.

So when people write feel-good phrases like "the new system will encourage treatment of the whole patient instead of being organized around treating a specific episode of illness", and that the remedy for such problems is by bringing the magic of market-based solutions to bear on them, I think that such people have learned the high art of euphemism because they either don't understand, or don't care about, the realities of what caring for patients actually means. (Though Zeke Emanuel must--he's a doc himself! What happened to his rhetoric I can only guess.)

I make good money as a doc, but I'll never be CEO-rich doing it, which is fine with me since becoming rich wasn't my priority in going into medicine. Most of the docs I know could be described similarly. But for us, profit wasn't the primary motivation. It's true that most of us make enough for the occasional nice bottle of Cabernet, but for people who want to be rolling in it, being a doc is not the right way to go, as there are easier ways of making a buck. The same should be true, by and large, for the entire biz of healthcare as well.


  1. I think the principle in health care is that the providers put too much premium in gaining a profit that is obscures the credo of health care concept.

  2. Accountable care organizations will increase coordination of patient’s care and shift the focus of medicine away from treating sickness and toward keeping people healthy.
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  3. For individuals and small businesses, health insurance companies usually do provide insurance; they take a premium and assume financial responsibility for paying the bills.
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