Physicians

POLICY/PHARMA/TECH/PHYSICIANS: The Industry Veteran thinks Uwe and McLellan are missing the point

It’s been a while since we heard from The Industry Veteran, but the dialogue between Mark McClellan and Uwe Reinhardt I reported on at WHCC last week did raise his hackles. I love Uwe’s analysis and think McLellan is very sensible (though suffering from obvious political restraints). But the Veteran didn’t exactly see it that way. Here’s his sense of what ‘s wrong with health care and how to fix it.

The dialogue you reported between Mark McClellan and Uwe Reinhardt was hugely disappointing as both appeared more intent on glad-handing each other than identifying culprits in the health care system. I offer the following as a useful rule of thumb for THCB readers: whenever someone says more IT represents a principal solution to a better health care system, the red light should flash on one’s shit detector.As uncle Marcus Aurelius advised, let’s return to first principles. Assuming THCB wishes to address the big issues and not turn into a blog for techie nerds, the problems of health care cost, quality and access in the U.S. result from some basic factors. The first of these is that there are too many middle men extracting too much profit (or, in Marshallian terms, too much economic rent) from the system. Among these, third-party payers are both pernicious and dispensable. Most analysts euphemistically classify payers and the efforts of other sectors to deal with them as “administrative costs.” It seems I’ve been seeing these administrative costs pegged at 25-30% of the health care bill for the past twenty years. Since Bush’s millenarian-oil junta has been running the country, I would guess that figure to be substantially higher because payments to providers have been tapering while premiums keep escalating. Given that the administrative costs for Medicare are approximately 2%, it appears self-evident that the current system, based on employers and insurance companies, should appeal only to Reagan-Bush types who consider the proper role of government to be one of handmaiden to business.Within the provider segment, specialist physicians are another extortionist bunch. There is simply no defensible reason for every mother’s doctor-son to expect an annual income between a quarter-million dollars and $650,000. Do I hear in the background, diminuendo, the arachnid voices of techie wonks crying for tactical proposals in lieu of venting and ideology? Sink your incisors into these. (1) Use relative value reimbursement scales to promote a systematic de-skilling. (2) Increase the labor supply in the medical specialties with U.S. citizens who graduate from foreign medical schools. (3) Feminize the medical profession by elevating nurse practitioners and using staff-model and other arrangements that permit 9-to-5 shift work.Manufacturers, particularly in pharmaceuticals, are due their reproach as parasitic middle men. The European countries routinely use reference pricing to help keep them in line and health care’s Iron Triangle of cost-access-quality does not appear worse there than here. In fact the WHO rates U.S. health care as thirty-something in world while France receives the number one spot.Now you’re probably correct, Matthew, in pointing out that the public opinion polls on health care have to show a larger percentage of people expressing a vehement discontent with the system over a sustained period before substantive change can occur. To foster that attitude, I humbly advise interested parties to hammer away at the big issues instead of creating diversions and wasting time with minor tributaries such as IT. I believe there is sufficient greed to expose, enough contradictions to raise and tragedies to highlight, all of which can help prepare the public mood. The drama that can affect public attention, however, seldom resides in the IT department

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  1. One other point of note – not to get embattled in what was clearly a nasty and personalized debate – but those ‘blood sucking’ health plans’ benefit decisions are made by employers – not by the plans themselves. Employers determine what they will buy for their employees, right down to the service – health plans just administer it and negotiate rates with providers. It is the employers’ benefit decisions that determine whether a claim is paid or not. It is unfortunate they cannot manage this perception better by focusing more on their customers’ benefit.

  2. I started reading it last week, after a quick skim. I don’t know how people can be constitutionally “required” by the Federal government to buy health insurance. Maybe, just possibly at the state level they could be. But even there I think its a stretch. The only thing the feds clearly can mandate is a tax. Ditto the states. But that requires the consent of the governed.
    I think Haase’s basically correct in his analysis of the situation. The government sponsored plans he’s talking about sound sorta Enthoven-ish and sorta German. (I do not claim to be an expert here). I didn’t read carefully enough to understand whether the feds would be able to address practice variation and other quality issues in this sort of plan. But presumably they could.
    None of this is a technical problem; it is all about sociology, and our population is greatly confused about what a human being is and what his relationship to other human beings is. The 18th century political theories tell him one thing, and the churches tell him two or three somewhat different things (depending on which church) and modern philosophers tell him three or four things somewhat at odds with all the foregoing. Until this gets sorted out, I am not sure there can be a satisfactory public policy.
    t

  3. Tom,
    I think the point you raised in your most recent post regarding reforming healthcare in a way that fits our national culture is extremely important and receives surprisingly little attention from most people debating this issue.
    Since you seem to be the foremost expert on this blog from the perspective of management / policy / administration, I, for one, would be most interested in how you think the overall healthcare segment should be changed with respect to both how it is organized and managed and how it is financed. Have you had a chance yet to review the Century Foundation reform proposal, and, if so, what is your assessment of it?

  4. > Tom, from reading your post we have a great system,
    > no reason to change course
    We do have a great system, partly because it is not a system. This fits our national culture. It should be improved in a way that fits our national culture. California is bigger and more diverse than Canada. That a tiny country of 33M souls having a different national culture, free-riding on the technology and excess economic capacity of the USA, does things judged (mostly by themselves) “better” than what is done here tells us nothing about what ought to be done here.
    Peter, have you thought for even two minutes about why you could buy surgery in Canada for 25% of the US price? Do you think maybe, just maybe, that revenue was all incremental to them? That the price you paid might not represent average costs? That the way “costs” are reported to and covered by the government in Canada might just possibly have subsidized you and at the same time provided “free money” to the hospital you were at? If you are really interested, contact me privately and I will give you the name of a man at a hospital in Montreal who can explain to you how this works in Canada. Or at least in Quebec.
    If you have something to offer that fits the circumstances here, please do. If the foregoing is the best you’ve got, move back to Canada and have whatever living you manage to earn in that currency taxed at Canadian rates, and wag your finger from there.
    t

  5. Tom, from reading your post we have a great system, no reason to change course; wonder why there so many complaints from the patients and voters? Maybe it’s just the press.
    Posts by: pgbMD
    “What a socialist viewpoint. Who are you going to go after next? Accountants?”
    From your username it looks like you are in favor of restricting lawyers incomes through restrictive malpractise compensation legislation.
    “Those that are so infatuated with socialized medicine in this country should just get out and move to Europe.”
    Canadian living in U.S., love the Canadaian system, even with its problems. I cut out income from some U.S. doc by going there and paying 25% of U.S. cost for cataract surgery, (outsourcing, how does it feel). Qualified surgeon, hospital setting, no waiting, 20/20 vision.
    “By the way, a single pay system as you imagine it is illegal in the US.”
    Laws can be changed.
    “Move to France or Britain where there is no US Constitution and join the NHS.”
    I wonder how the rest of the world operates every day without a U.S. Constitution? But if conservativces had their way I guess we would just invade and give them all our constitution through force. Seems to be working in Iraq.

  6. > Can you please explain this comment
    Yes, thank you for asking.
    It isn’t about roles or licensure, it is about cooperation and ownership.
    I’d like the docs to realize that the “technical” services of the hospitals they practice in are their services also. I think the radiologists should see themselves as responsible for the performance of the rad techs and registration people. Surgeons should see themselves are responsible for the PACU, the labs, now that I think about it, the whole d*mn hospital, including the patient accounting department.
    Think of it as a subcontracting arrangement where the doc is the general contractor and the hospital is a subcontractor. The patient may get seperate bills, but the general contractor is responsible for every component or phase of the project.
    So, if a local hospital is underperforming: can’t seem to have supplies on hand, or you can never get a consult when you need one, or the patient experience there is poor, or infection or medication error rates are not constantly improving, or the patient bills are inaccurate and confusing and late, or labs take too long to get, or any number of other things, what I’d love to see is the medical staff either lead the improvement, or if that proves impossible, shut the place down by leaving.
    Dr. Tuetur is right: doctors are the system. So the distinction between “professional” services of doctors and the “technical” services of everyone else is artificial. It will not do to say “We can’t do anything about it and it isn’t our fault anyway. I just want to practice medicine, I’m not an accountant”. Or whatever.
    You have incredible knowledge and power, and some of the last remnants of what David Maister calls True Professionalism are found among doctors. I want to see this fully recovered, and fostered. And therefore used.
    Excercising this power is easier for a bigger group to do — maybe because you can hire a high-powered practice manager, or because you have a senior guy who cares about these things, or because you can pool your income and not penalize the doc who does fewer procedures every month while he’s working with the hospital. Your scope of influence will be bigger when you organize yourselves. And so I want you to do it, but not just for your own sake.
    I know this has rambled, but I don’t have time right now to write anything shorter.
    t

  7. Tom:
    “use your newfound power to whip into shape the hospitals where you choose to practice and eliminate at least in your mind the wholly artificial distinction between “professional” and “technical” services.”
    Can you please explain this comment. Are you getting at the professional privileging required of hospitals (ie why an LPN/RN can’t perform surgery, etc).
    PGB

  8. Dr. Borboroglu:
    > many surgical specialties/groups are starting to fight
    > back by consolidating into larger groups to gain more
    > bargaining power with the insurers and to cut overhead.
    Super! I am sure that minimum efficient scale for physician practices is bigger than “one”, and it might be bigger than “ten”. While you are at it, use your newfound power to whip into shape the hospitals where you choose to practice and eliminate at least in your mind the wholly artificial distinction between “professional” and “technical” services.
    t

  9. Peter’s Rx:
    > What needs to be fixed first is the blood sucking
    > insurance industry. Can the whole thing for a single
    > pay cost effective system (not for profit) made for
    > both docs and patients.
    The blood-sucking insurance industry has mostly sucked blood out of docs and hospitals — let us be clear about that. It has not been allowed so much to suck blood out of the pharmas, and the progress that has been made in getting people to use generics (around 50% of Rx) has been accomplished in part by sucking blood from patients in the form of tiered co-pays. Some blood has been sucked from the pharmas through the use of formularies and other bargaining over price.
    This is not to minimize crimes committed, but even if we want to regard the 20% or so the insurance companies do not spend on medical services as blood sucked from their members and from the rest of the industry, they really have provided a service for it by having enough market power to bargain at all with docs, hospitals, and pharmas. Individuals can’t.
    It is not clear to me that a single payer will behave all that much differently. Should not the single payer try to get the best possible deal for its members from the industry? It might all be done somewhat cheaper by a single payer.
    > Then go after the slim drug industry and get their
    > gouging down to managable levels as is done in just
    > about avery other country on the planet.
    Drugs represent 10% of spending in healthcare. Only 10%. What I think gets people’s hackles up is that the profits get “concentrated” in pharma into a few big pots where it can be seen. I do agree there is some abuse of a few bits of silliness in patent laws: it should not be possible to extend patent protection by making trivial changes. But if people think a dose of Viagra is worth $10, or a dose of Nexium is worth $5 when they can have Prilosec for $1, who am I to argue?
    > Then regulate hospitals in the services they privide
    > to ensure no competetive overlap and over supply.
    This mystifies me. Don’t we want competition? Who is hurt by “oversupply”? It did wonders for airline fares.
    t

  10. “Frankly I think the last thing I worry about now is docs incomes.”
    Good. Let me worry about my own income and you can worry about your own.
    “If their watching their incomes against other professions that closely they should get out of medicine.”
    What a socialist viewpoint. Who are you going to go after next? Accountants? Those that are so infatuated with socialized medicine in this country should just get out and move to Europe.
    By the way, a single pay system as you imagine it is illegal in the US. Move to France or Britain where there is no US Constitution and join the NHS.

  11. Frankly I think the last thing I worry about now is docs incomes. I do agree that those docs enticed into the practise for money are not the docs I want to look after me. If their watching their incomes against other professions that closely they should get out of medicine. What needs to be fixed first is the blood sucking insurance industry. Can the whole thing for a single pay cost effective system (not for profit) made for both docs and patients. Then go after the slim drug industry and get their gouging down to managable levels as is done in just about avery other country on the planet. Then regulate hospitals in the services they privide to ensure no competetive overlap and over supply. After those battles we can worry about whether docs A should be earning more than doc B or company executive C.

  12. JD:
    I’ll drink to that!
    Surgical specialist pay is about half what it should be considering the training required. 4years of college, 4years of med school, 5years of surgical residency and then 2years of fellowship= 15years! The average surgical specialist doesn’t go into practice until about 33years of age. Most lawyers are nearing partnership in a firm by then looking at $800k/year for the big ones.
    Reimbursements for surgical procedures are artificially low secondary to the insurers and Medicare. The average reimbursement for a coronary artery bypass is $1800!! Probably really should be closer to $6000 considering the skill and training required to do one. So far the surgeons have just sat there and eaten it. The breaking point is near.
    Reimbursement for surgical procedures in hospitals is so low now that a doctor loses money when in the hospital. They make more money in the clinic doing minor procedures with less stress and liability. Thus the birth of the clinic surgeon. This of course is by design by the insurers to lower the financial incentives for surgeons to do big surgery. Big surgical procedures in the hospital lead to huge bills to the insurer. Those huge bills are not being sent by the surgeons who deserve them but by the hospitals with their monoplistic empires who have bid up the value of their services. So far surgeons have not been able to do what the hospitals have done b/c most practice in small groups and are eaten alive by the health insurers.
    As far as I can tell there has been a brain drain going on in the surgical subspecialties for years now. The quality of surgeons has declined over the years and is currently plummeting. I fear the day when I end up in the ER as a patient years from now with an emergency.
    Medical schools have been feminized already (>50% female in most med chool classes), but most women are smart enough to realize that they can make good money in radiology and dermatology and forgo the long training and work hours required for the surgical fields. Those women that do enter the surgical fields are hard core and just as good if not better than most men.
    As a final note, many surgical specialties/groups are starting to fight back by consolidating into larger groups to gain more bargaining power with the insurers and to cut overhead. Additonally, and probably the best way to go for surgeons, is that we are considering dropping insurance altogether and going back to fee-for-service. This is already beginning to happen. There will be a breaking point reached when this will happen overnight across the country. Hopefully sometime soon.
    PGB

  13. “Within the provider segment, specialist physicians are another extortionist bunch. There is simply no defensible reason for every mother’s doctor-son to expect an annual income between a quarter-million dollars and $650,000.”
    Very few specialists make 650k. The median is somewhere around 300k. Still a lot of money, but policies should be based on MEDIANS, not outliers.
    Consider that to get that 300k, you are talking about 9 years of training AFTER college. NO other profession comes even close to that, except perhaps some PhD level scientists.
    At any rate, I think that its misguided to gripe about the money that various people make. Where does it stop? Do you support legislation to put caps on everybody’s income? Lawyers average close to 100k, which is certainly more than they “need”, why dont we pass laws limiting them to 60k or so? Why not put cap of 100k on what CEOs can earn?
    Why dont we put a cap of 90k on what health policy analysts can earn at thinktanks?
    “(1) Use relative value reimbursement scales to promote a systematic de-skilling.”
    Well thats all fine and good, but I better never read a post on your blog about medical errors killing people or the number of people who die from medical mistakes or healthcare in general. Where is your evidence that doctors are “overtrained?”
    Bear in mind that even in socialized med nations, doctors are trained for long periods of time. So if you propose deskilling the profession that will be an absolutely unprecedented move.
    “(2) Increase the labor supply in the medical specialties with U.S. citizens who graduate from foreign medical schools.”
    The US takes more foreign doctors than all other nations COMBINED. The US is one of the only nations in the world that allow any foreign doctor to compete against US medical graduates for residency slots.
    Didnt you know that the UK just passed a new law barring foreign doctors from practicing in the country?
    There are many faults about the US healthcare system. Refusing to accept foreign docs/med students is NOT one of them. Its MUCH harder for a foreign doctor to go to Europe than it is for the USA.
    Besides there is no solid evidence of a doctor shortage. The US has one of the highest per capita doctor/patient ratios in the world.
    “(3) Feminize the medical profession by elevating nurse practitioners and using staff-model and other arrangements that permit 9-to-5 shift work”
    USA already does that. I hope you are not suggesting that NPs can replace doctors? They are fine for routine illness at urgent care clinics, which is exactly how they are used. But no way in hell would I want an NP doing surgery or managing diabetics. They are not trained for that and you are asking for trouble.

  14. I understand what you are saying Amy. What I am saying is that if somebody is choosing between (say) medicine and business, and chooses business because it pays better than medicine, then ceteris paribus this is certainly not a great loss to medicine, and might well be a gain. Charles Murray made this case in the 1980s. A few weeks back, Dr. Sidney Schwab popped-in to THCB to tell us about his book Cutting Remarks. I have read it, and one of the points he makes about (especially past) practices in medical training was that they were designed to weed-out those who loved lucre more than they were motivated by medicine. It seems to me that the financial rewards of some specialties are now so very great that they end up attracting admittedly bright people who are very highly motivated by both aspects, and maybe more by money than by medicine. Some leveling among the medical specialties might steer people in better directions, both for themselves and for their patients, individually and collectively.
    But even if not, I think the great majority will do the same work for less money. The academic researchers who invent the cures typically earn much less than the docs who dispense them, and the low salaries there have not driven out the “best and the brightest”.
    As for nursing being a low wage, low prestige job: it isn’t “low wage” — for two years’ training an RN can earn $40K — approximately the family median income. If nursing remains low prestige, who has made it so? Hint: it isn’t the patients.
    t

  15. “If slipping from the upper half-percent of income earners to the ranks of the upper one percent induces some specialists to leave medical practice, that is probably not all bad.”
    Well, if that would be good, it would obviously be even better to cut healthcare executive salaries from the MILLIONS to the ranks of the upper 1% right? How can executives possibly justify those salaries and bonuses and with a straight face talk about lower physician salaries.
    Tom, look what’s happened to nursing over the years. Women now have more opportunities. They don’t have to settle for low wage, low prestige jobs like nursing and they don’t. Nurses used to come from the top quarter of high school classes, now they come from the bottom and it shows. Would you like the same thing to happen to doctors?
    On the one hand, administrators push doctors to act like business people, then, at the same time, they imagine that somehow doctors won’t respond to the same economic pressures that anyone else would. I don’t know about you, but I’d like my doctor to have top notch educational credentials; I’d rather not have my doctor be someone who could have been a plumber (nothing against plumbers) and decided to be a doctor because it paid a bit more than plumbing.

  16. > Why shouldn’t specialist physicians make that kind of
    > money? That’s less than what they could make for
    > comparable jobs in law or business.
    Hmmmm. They’re not in law or business, and do I hear you saying that there exist job comparable to medicine? The provider side of the medical industry pays everyone less than they could make in other industries, even for strictly comparable jobs.
    Whether or not specialist physicians are worth or should make salaries like these, facing a monopsonist buyer they probably won’t. I expect that generalist reimbursements will rise somewhat, and specialist reimbursements will fall somewhat. The spread will narrow, making money and lifestyle concerns less important when choosing a specialty in medicine.
    If slipping from the upper half-percent of income earners to the ranks of the upper one percent induces some specialists to leave medical practice, that is probably not all bad.
    t

  17. In Defense of Minor Tributaries:
    Without Them There Are No Great Rivers
    Yesterday I attended the “Building a Healthier St. Louis” conference of the “St. Louis Regional Health Commission” (RHC). First of all, it was terrific to see 450 people get together to address matters of public health and cooperation among the many organizations for the sake of the un & under insured in the region. Which bring me to the point:
    One big project of the RHC has been to institute a “Primary Care-Home” program to provide better continuity of care and to steer people away from using the region’s Emergency Departments as primary care sites. As a part of this effort, there will be what they’re calling a “Network Master Patient Index” (NMPI) that will at first house demographic and some very rudimentary face-sheet features. What it (emphatically) is not (yet) is a RHIO.
    The two physicians on the panel at the panel discussion both said they had to be convinced of the need/value of this system. The objection was that the NMPI does not support clinical processes very well at all, so why bear the burden of creating it and maintianing it?
    Answers came to them on several levels, but the clincher seemed to be: “In order to support clinical processes, we need to do this part anyway, and starting here gets the 18+ partners in the habit of cooperating at all. When this works, with your (Ms. Physician) support, we expect to implement more of the clinical features you want, and we will have the technical and organizational framework on which to build.”
    So, yes: IT is a tributary. Like every other tributary, it changes the course and level of the river. I don’t know how “minor” this one is. It addresses two major problems: communication within a single organization, and communication with other organizations. The Information Technology is important because it focuses the people on their own work processes and on the manner of cooperation with others. Valuable for its own sake? No, not at all.
    t

  18. “That’s absurd. Why shouldn’t specialist physicians make that kind of money? That’s less than what they could make for comparable jobs in law or business. More to the point, it is less than they could make as a healthcare executive. Exactly how much money is a brain surgeon or a heart surgeon supposed to make after 10-14 years of postgraduate training?”
    Amy, I’m with you 1,000% on this one! As one who needed bypass surgery seven years ago, I thought my surgeon was worth every penny of his high fee, and I’m glad these doctors can earn enough money in our system to insure that we continue to attract the best and brightest to the profession.

  19. “Within the provider segment, specialist physicians are another extortionist bunch. There is simply no defensible reason for every mother’s doctor-son to expect an annual income between a quarter-million dollars and $650,000.”
    That’s absurd. Why shouldn’t specialist physicians make that kind of money? That’s less than what they could make for comparable jobs in law or business. More to the point, it is less than they could make as a healthcare executive. Exactly how much money is a brain surgeon or a heart surgeon supposed to make after 10-14 years of postgraduate training?
    Furthermore, where is the evidence that this is the problem? More than 80% of healthcare expenditures are unrelated to physicians. The cost of administrative salaries is rising faster than physician salaries. Why not start there?

  20. IV- please help me with a couple of your statements:
    first- what is a ‘systematic de-skilling’?
    second- upwards of 25% of postgrad medical spots are already filled by foreign medical grads… as I am going to guess you believe in the importance of good doctor-patient communication, etc., how do you plan to bridge to communications gap that is already a big problem in many communities where a growing number of docs (and nurses) are not completely facile with the language? Also, would you waive the requirements of passing the American medical board exams? Would you no longer require that the foreign docs complete the requirements for board certification?
    third- the 2% myth of medicare has been debunked many times at THCB. There still is a gap, but medicare does not consider the costs of complying with the >100,000 pages of regulations as an ‘administrative cost’ of medicare. The current coding system and billing system that the private sector uses is because it is the system the government devised for medicare…
    fourth- I would love further information about your desire to ‘feminize’ medicine (medical school enrollment is now about 50-50 men-women)
    fifth- how would you control costs (remember that medicare is well on its way to fiscal disaster)?
    Where we agree is here- IT is not the salvation; rather it is a tool. We disagree, however, in that you see the healthcare system as fixed with a bigger hammer, whereas I believe an entire workshop of changes- some big and some small, can together achieve the goal of a healthier US that is spending within her means.

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