The landscape of healthcare financing has changed dramatically since the insurance industry captured the market by promising lower costs and higher quality service. Barron’s columnist Tom Donlan made note of this trend as long ago as 1997 when he wrote that the promise of “high-quality care at lower costs,” was a myth. Since then, things have gotten worse for the patient and physician.
Roughly 20 years ago the insurance industry entered into a pact with physicians. Insurance companies would determine a fee schedule for various services and keep 20 percent of what they determined was reasonable and customary payment. Physicians were supposed to create efficient fiscal models that would allow them to provide quality care and still earn a profit.
The doctors continued to deliver quality health care and developed organizations to manage services efficiently to meet insurer’s goals, but the healthcare industry was forever changed. Insurers did not hold up their end of the bargain, mostly because their goals were not realistic. Each insurance company had a different budget but did not specify what exactly was expected of the doctors, which led to uncertainty and ultimately chaos.
The physicians had become the risk managers by assuming responsibility of the financial plan, while insurance companies, through their micromanagement techniques, dictated care thereby becoming the “doctors.” Failure was inevitable.
Physicians then developed large groups. Theoretically this would allow better management of care, more efficient use of resources and grander economies of scale. And it would create greater leverage for caregivers to negotiate rates with insurance companies. As a general rule, very large groups — 50 or more physicians — have been successful. Many, however were not. Physician groups just did not speak the financial talk, and had no experience in business. Fortunately for the patients, the physicians’ focus continues to be on care rather than money.
The same dynamic was applied to hospitals. Single hospitals joined with their neighbors, bed capacity was reduced, and duplication of services was eliminated as much as possible. In Connecticut this model evolved into two major healthcare groups: Yale New Haven Health System and Hartford Healthcare. Though there are still some freestanding hospitals in the state, large networks seems to be the current model. Of course the insurance companies, including Medicare, have responded to those changes and reimbursements have continued to plummet.
So hospitals took the next step. Instead of acting like hospitals they began to structure themselves as corporations. This implies that the focus of the hospital business would be money rather than care. Good care would be the byproduct of financial success.
The hospitals have adapted well to this model. They pay their executive staff a lot of money and pay their employees less and less. At least 15 of the state’s top hospital executives earn more than $1 million a year.
A consequence of all this is that physicians who were unable to survive administratively and financially on their own have become hospital employees. As such, the physician is not now bound solely by the Hippocratic Oath, but by hospital rules and regulations. This includes ordering of tests and dispensing drugs. On the surface this seems like it should work. After all what corporation doesn’t pay attention to how their employees spend money?
The conflict occurs when the corporation requires one direction of care and the physician determines that a different care pattern is required. The patients may suffer.
Physicians, in all their training, obey rules. But they don’t typically respond well to micro-management. Physicians are not particularly good business people either; they are trained to do what is best for their patients. So how will the physician react when his manager says he cannot/should not do what he thinks is appropriate for a patient. In the corporate world, if an employee refuses to follow directions, he or she might be subject to termination.
The physician lives by a code: do no harm. One would like to think that the physician would stand up for his patient’s welfare. But this might cost him his job, and loss of income. This would be a tough decision for a young physician with a family to feed and perhaps college costs to manage. Will we need a new set of regulations to manage this issue? And if so, who will write them, and who will oversee the compliance?
Perhaps a new type of committee will be formed to deal with this issue. Or perhaps the CEO of the hospital, looking at his potential bonus, would make this decision himself. That would be the corporate way. But one needs to remember that in any business focusing purely on profit has never really worked.
Just ask General Motors.
Dr. Jeffrey Rabuffo is a urologist living in Haddam.
