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Matthew’s health care tidbits: Hospital System Concentration is a Money Machine

Each week I’ve been adding a brief tidbits section to the THCB Reader, our weekly newsletter that summarizes the best of THCB that week (Sign up here!). Then I had the brainwave to add them to the blog. They’re short and usually not too sweet! –Matthew Holt

For today’s health care tidbits, there’s an old chestnut that I can’t seem to stay away from. I was triggered by three articles this week. Merril Goozner on GoozNews looked at the hospital building boom. Meanwhile perennial favorite Sutter Health and its price-making ability came up in a report showing that 11 of the 19 most expensive hospital markets were in N. Cal where it’s dominant. Finally the Gist newsletter pointed out that almost all the actual profits of the big health systems came from their investing activities rather than their operations.

None of this is any great surprise. Over the past three decades, the big hospital systems have become more concentrated in their markets. They’ve acquired smaller community hospitals and, more importantly, feeder systems of primary care doctors. Meanwhile they’ve cut deals with and acquired specialty practices. For more than two decades now, owned-physicians have been the loss leader and hospitals have made money on their high cost inpatient services, and increasingly on what used to be inpatient services which are now delivered in outpatient settings at essentially inpatient rates. Prices, though, have not fallen – as the HCCI report shows.

Source: HCCI

The overall cost of care, now more and more delivered in these increasingly oligopolistic health systems, continues to increase. Consequently so do overall insurance premiums, costs for self insured employers and employees, and out of pocket costs. And as a by-product, the reserves of those health systems, invested like and by hedge funds, are increasing–enabling them to buy more feeder systems.

Wendell Potter, former Cigna PR guy and now overall heath insurer critic, wrote a piece this week on how much bigger and more concentrated the health plans have become in the last decade. But the bigger story is the growth of hospital systems, and their cost and clout. Dave Chase likes to say that America has gone to war for less than what hospitals have done to the American economy. That may be a tad hyperbolic, but no one would rationally design a health care environment where non-profit hospitals are getting bigger and richer, and don’t seem to be able to restrain any aspect of their growth.

Hospital Systems: A Framework for Maximizing Social Benefit

By JEFF GOLDSMITH and IAN MORRISON

Hospital consolidation has risen to the top of the health policy stack. David Dranove and Lawton Burns argued in their recent Big Med:  Megaproviders and the High Cost of Health Care in America (Univ of Chicago Press, 2021) that hospital consolidation has produced neither cost savings from “economies of scale” nor measurable quality improvements expected from better care co-ordination. As a consequence, the Biden administration has targeted the health care industry for enhanced and more vigilant anti-trust enforcement.

However, as we discussed in a 2021 posting in Health Affairs, these large, complex health enterprises played a vital role in the societal response to the once-in-a-century COVID crisis. Multi-hospital health systems were one of the only pieces of societal infrastructure that actually exceeded expectations in the COVID crisis. These systems demonstrated that they are capable of producing, rapidly and on demand, demonstrable social benefit.

Exemplary health system performance during COVID begs an important question: how do we maximize the social benefits of these complex enterprises once the stubborn foe of COVID has been vanquished? How do we think conceptually about how systems produce those benefits and how should they fully achieve their potential for the society as a whole?

Origins of Hospital Consolidation

In 1980, the US hospital industry (excluding federal, psych and rehab facilities) was a $77 billion business comprised of roughly 5,900 community hospitals. It was already significantly consolidated at that time; roughly a third of hospitals were owned or managed by health systems, perhaps a half of those by investor-owned chains. Forty years later, there were 700 fewer facilities generating about $1.2 trillion in revenues (roughly a fourfold growth in real dollar revenues since 1980), and more than 70% of hospitals were part of systems. 

It is important to acknowledge here that hundreds more hospitals, many in rural health shortage areas or in inner cities, would have closed had they not been rescued by larger systems. Given that a large fraction of the hospitals that remain independent are tiny critical access facilities that are marginal candidates for mergers with larger enterprises, the bulk of hospital consolidation is likely behind us. Future consolidation is likely not to be of individual hospitals, but of smaller systems that are not certain they can remain independent. 

Today’s multi-billion dollar health systems like Intermountain Healthcare, Geisinger, Penn Medicine and Sentara are far more than merely roll-ups of formerly independent hospitals. They also employ directly or indirectly more than 40% of the nation’s practicing physicians, according to the AMA Physician Practice Benchmark Survey. They have also deployed 179 provider-sponsored health plans enrolling more than 13 million people (Milliman Torch Insight, personal communication 23 Sept, 2021). They operate extensive ambulatory facilities ranging from emergency and urgent care to surgical facilities to rehabilitation and physical therapy, in addition to psychiatric and long-term care facilities and programs.

Health Systems Didn’t Just “Happen”; Federal Health Policy Actively Catalyzed their Formation

Though many in the health policy world attribute hospital consolidation and integration to empire-building and positioning relative to health insurers, federal health policy played a catalytic role in fostering hospital consolidation and integration of physician practices and health insurance. In the fifty years since the HMO Act of 1973, hospitals and other providers have been actively encouraged by federal health policy to assume economic responsibility for the total cost of care, something they cannot do as isolated single hospitals.

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Silence Can Be Deadly: Speak up for Safety in a Pandemic

By LISA SHIEH MD, PhD, and JINGYI LIU, MD

Jingyi Liu
Lisa Shieh

There have been disturbing reports of hospitals firing doctors and nurses for speaking up about inadequate PPE. The most famous case was at the PeaceHealth St. Joseph hospital in Washington, where Dr. Ming Lin was let go from his position as an ER physician after he used social media to publicize suggestions for protecting patients and staff.  At Northwestern Memorial Hospital in Chicago, a nurse, Lauri Mazurkiewicz warned colleagues that the hospital’s standard face masks were not safe and brought her own N95 mask. She was fired by the hospital. These examples violate a culture of safety and endanger the lives of both patients and staff. Measures that prevent healthcare workers from speaking out to protect themselves and their patients violate safety culture. Healthcare workers should be expected to voice their safety concerns, and hospital executives should be actively seeking feedback from frontline healthcare workers on how to improve their institution’s Covid-19 response.

Share power with frontline workers

According to the Institute for Healthcare Improvement, it is common for organizations facing a crisis to assume a power grab in order to maintain control. As such, it is not surprising that some hospitals are implementing draconian policies to prevent hospital staff from speaking out. While strong leadership is important in a crisis, it must be balanced by sharing and even ceding power to frontline workers. All hospitals want to provide a safe environment for their staff and high-quality care for their patients. However, in a public health emergency where resources are scarce and guidelines change daily, it’s important that hospitals have a systematic approach to keep up.

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Leadership During a Healthcare Crisis: Kaiser Permanente’s Response to COVID-19

A Conversation with Dr. Richard Isaacs, CEO of The Permanente Medical Group and the Mid Atlantic Permanente Medical Group

By AJAY KOHLI, MD

Organizations aren’t built in crises. Their mettle, their history and their leadership define how organizations adapt and succeed, particularly in difficult times. Of the three, the most important quality is leadership. In this regard, Kaiser Permanente is leading the way in healthcare delivery.

I had the opportunity to speak with Dr. Richard Isaacs, CEO of The Permanente Medical Group and The MidAtlantic Permanente Medical Group, to discuss the strategic vision and granular details of Kaiser Permanente’s response to the global pandemic of COVID-19.

Kaiser Permanente has a strong foundation in the history of delivering care to the vulnerable. Founded in 1945 by a surgeon, Dr. Sidney Garfield, and an industrialist, Henry J. Kaiser, the organization grew from a single hospital in Oakland, California into one of the largest physician-led organizations in the world. Currently, it boasts more than 22,000 physicians responsible for the care of more than 12.5 million lives.

Many question how large healthcare organizations, like Kaiser Permanente, can adapt to a rapidly evolving problem, like the global pandemic of COVID-19, especially when cities and even countries are struggling under the burden.

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“Essential Oncology”: The COVID Challenge

By CHADI NABHAN MD, MBA, FACP

One harsh Chicago winter, I remember calling a patient to cancel his appointment because we had deemed it too risky for patients to come in for routine visits—a major snowstorm made us rethink all non-essential appointments. Mr. Z was scheduled for his 3-month follow-up for an aggressive brain lymphoma that was diagnosed the prior year, during which he endured several rounds of intense chemotherapy. His discontent in hearing that his appointment was canceled was palpable; he confessed that he was very much looking forward to the visit so that he could greet the nurses, front-desk staff, and ask me how I was doing. My carefully crafted script explaining that his visit was “non-essential” and “postponable” fell on deaf ears. I was unprepared to hear Mr. Z question: if this is his care, shouldn’t he be the one to decide what’s essential and what’s not?

This is a question we are all grappling with in the face of the COVID-19 pandemic. The healthcare industry is struggling to decide how to handle patient visits to doctor’s offices, hospitals, and imaging centers, among others. Elective surgeries are being canceled and advocates are arguing that non-essential outpatient and ER visits should be stopped. Ideas are flying left and right on how best to triage patients in need. Everyone has an opinion, including those who ironically consider themselves non-opinionated.

As an oncologist, these various views, sentiments, tweets, and posts give me pause. I understand the rationale to minimize patients’ exposure and thus prevent transmission. However, reconsidering what we should deem “essential” has made me reflect broadly on our method of providing care. Suddenly, physicians are becoming less concerned about (and constrained by) guidelines and requirements. Learning how to practice “essential oncology” may leave lasting changes in our field.  

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Infection Control for COVID-19 Imaging

By STEPHEN BORSTELMANN, MD

Occasionally, you get handed a question you know little about, but it’s clear you need to know more.  Like most of us these days, I was chatting with my colleagues about the novel coronavirus. It goes by several names: SARS-CoV-2, 2019-nCoV or COVID-19 but I’ll just call it COVID.  Declared a pandemic on March 12, 2020 by the World Health Organization (WHO), COVID is diagnosed by laboratory test – PCR.  The early PCR test used in Wuhan was apparently low sensitivity (30-60%), lengthy to run (days), and in short supply.  As CT scanning was relatively available, it became an important diagnostic tool for suspected COVID cases in Wuhan.

The prospect of scanning thousands of contagious patients was daunting, with many radiologists arguing back and forth about its appropriateness.  As the pandemic has evolved, we now have better and faster PCR tests and most radiologists do not believe that CT scanning has a role for diagnosis of COVID, but rather should be reserved for its complications. Part of the reason is the concern of transmission of COVID to other patients or healthcare workers via the radiology department.

But then someone asked: “After you have scanned a patient for COVID, how long will the room be down?” And nobody really could answer – I certainly couldn’t.  A recent white paper put forth by radiology leaders suggested anywhere from 30 minutes to three hours. A general review of infection control information for the radiologist and radiologic technologist can be found in Radiographics.

So, let’s go down the rabbit hole of infection control in the radiology department. While I’m a radiologist, and will speak about radiology-specific concerns, the fundamental rationale behind it is applicable to other ancillary treatment rooms in the hospital or outpatient arena, provided the appropriate specifics about THAT environment is obtained from references held by the CDC.

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Who’s in Your Supply Chain?

By KIM BELLARD

Tesla is now, by market cap, the second largest auto manufacturer (after Toyota).  Its market cap exceeds U.S. auto makers Ford, G.M., and Fiat/Chrysler — combined.  This despite selling less than 400,000 vehicles in 2019, a figure that is more than the prior two years combined.   

Tesla has made its bet on the future of electric cars.  It didn’t invent them.  It isn’t the only auto manufacturer selling them.  But, as The Wall Street Journal recently said

Investors increasingly see the future of the car as electric—even if most car buyers haven’t yet. And lately, those investors are placing bets on Tesla Inc. to bring about that future versus auto makers with deeper pockets and generations of experience.

 A recent analysis suggested a big reason why, and its findings should give those in healthcare some pause.  Tesla’s advantage may come, in large part, from its supply chain.

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Healthcare Has a Moral Injury

By KIM BELLARD

The term “moral injury” is a term originally applied to soldiers as a way to help explain PTSD and, more recently, to physicians as a way to help explain physician burnout.  The concept is that moral injury is what can happen to people when “perpetrating, failing to prevent, or bearing witness to acts that transgress deeply held moral beliefs and expectations.”  

I think healthcare generally has a bad case of moral injury.  

How else can we explain physicians practicing surprise billinghospitals suing patientshealth plans refusing to pay for pre-authorized treatments, or pharmaceutical companies charging “skyrocketing” costs even for common, essential prescription drugs?  There are people involved in each of these, and countless more examples.  If those people haven’t suffered a moral injury as a result, it’s hard to understand why.  

Melissa Bailey, writing for Kaiser Health News, looked at moral injury from the standpoint of emergency room physicians.  One physician decried how “the real priority is speed and money and not our patients’ care.”  Another made a broader charge: “The health system is not set up to help patients. It’s set up to make money.”  He urged that physicians seek to understand “how decisions made at the systems level impact how we care about patients” — so they can “stand up for what’s right.”

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Medical Records in Primary Care: Keeping the Story of Phone Calls and Medication Changes with Less than Perfect Tools

By HANS DUVEFELT, MD

I need the right information at the right time (and in a place that makes sense to me) to make safe medical decisions.

Here’s another Metamedicine story:

In learning my third EMR, I am again a little disappointed. I am again, still, finding it hard to document and retrieve the thread of my patient’s life and disease story. I think many EMRs were created for episodic, rather than continued medical care.

One thing that can make working with an EMR difficult is finding the chronology in office visits (seen for sore throat and started on an antibiotic), phone calls (starting to feel itchy, is it an allergic reaction?and outside reports (emergency room visit for anaphylactic reaction).

I have never understood the logic of storing phone calls in a separate portion of the EMR, the way some systems do. In one of my systems, calls were listed separately by date without “headlines” like “?allergic reaction” in the case above.

In my new system, which I’m still learning, they seem to be stored in a bigger bucket for all kinds of “tasks” (refills, phone calls, orders and referrals made during office visits etc.)

Both these systems seem to give me the option of creating, in a more or less cumbersome way, “non-billable encounters” to document things like phone calls and ER visits, in chronological order, in the same part of the record as the office notes. That may be what IT people disparagingly call “workarounds”, but listen, I need the right information at the right time (and in a place that makes sense to me) to make safe medical decisions.

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Healthcare Needs Some IHOPs

By KIM BELLARD

The New York Times had an article that surprised me: Current Job: Award Winning Chef.  Education: IHOP.   The article, by food writer Priya Krishnaprofiled how many high-end chefs credit their training in — gasp! — chain restaurants, such as IHOP, as being invaluable for their success. 

I immediately thought of Atul Gawande’s 2012 article in The New YorkerWhat Big Medicine Can Learn From the Cheesecake Factory.

Ms. Krishna mentions several well-known chefs “who prize the lessons they learned — many as teenagers — in the scaled-up, streamlined world of chain restaurants.”  In addition to IHOP, chefs mentioned experiences at chains such as Applebee’s, California Pizza Kitchen, Chipotle, Hillstone, Houston’s, Howard Johnson’s, Olive Garden, Panda Express, Pappas, Red Lobster, Waffle House, and Wendy’s.  

Some of the lessons learned are instructive.  “It was pretty much that the customer is always right,” one chef mentioned.  Another said she learned “how to be quick, have a good memory, and know the timing of everything.”  A third spoke to the focus that was drilled into all employees: “Hot food hot. Cold food cold. Money to the bank. Clean restrooms,” 

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