Can Health Care Be Reformed?
100 CAN HEALTH CARE BE REFORMED?
Alden H. Harken M.D.
1. Is health care reform an oxymoron?
Show answer
Yes.
2. What is fee for service?
Show answer
The doctor establishes the price, and the patient agrees to pay it. This traditional system of exchange has great merit if both parties understand the value of the service provided. If either party (usually the patient) cannot estimate the service value, it is possible (even likely) that the doctor will honestly escalate the service value in a fashion unchecked by the patient’s perceptions. Thus, in a fee-for-service system, medical prices tend to increase.
3. What is discounted fee for service?
Show answer
The patient gets together with a group of friends, and they come to the doctor with the following proposition: “Hey, Doc, you can dazzle us with your fancy medical talk, but we still think that your prices are too high. How about my pals and me will pay you 80% of what you charge us?”
4. Is there a difference between hospital costs and hospital charges?
Show answer
Absolutely. Hospital cost is the sum of the expenses (e.g., sutures, nurses’ salaries, electricity, instrumentation sterilization, Band-Aids) that are expended in suturing a laceration, for example. The hospital typically charges about twice the cost (100% markup) for repairing a cut finger. This markup is highly industry specific. Thus, whereas intensely competitive food chains may make a profit of only 1 penny on a loaf of bread, hospitals and liquor stores usually charge twice the cost.
5. What are fixed costs?
Show answer
After accounting for light, heat, and staff (nurses, housekeepers, administrators) at a hospital but before seeing a single patient, doctors and the hospital have already spent a huge amount of money. Doctors and hospitals must pay fixed costs whether or not they provide any medical services at all.
6. What are actual costs?
Show answer
These are the incremental costs of actually providing a service in a hospital (in addition to the fixed costs of light and heat). For example, a patient shows up in the emergency department at midnight complaining of a lump on the tip of his nose. The doctor, with characteristic erudition, says, “Yep, you have a wart on your nose,” and sends the patient home with a bill for $500. The actual cost of this encounter is obviously negligible. The patient is really paying for the fixed costs of nurses and emergency resuscitative equipment should he have a cardiac arrest.
7. Is hospital accounting a precisely scientific and objective analysis of financial data?
Show answer
No.
8. What is health insurance?
Show answer
Traditionally, people can purchase insurance that may pay either all or a portion of their hospital and physician charges if they become ill. Insurance companies make a profit, therefore, only if the patient stays healthy. Insurance companies have elaborate tables to predict who will get sick, and they prefer to sell policies exclusively to young, healthy individuals. This practice is termed “skimming.” The insurance company takes all of the risk-and they like to keep it low. Conversely, hospitals must cover fixed costs-and the more expensive (and more frequent) the health care that physicians provide, the better it is for the hospitals.
9. What are health maintenance organizations (HMOs)?
Show answer
HMOs are complex systems composed, in their most comprehensive form, of hospitals, doctors plus offices, and an insurance company. HMOs contract with large groups of people (potential patients) to maintain their health. Enrollees pay a monthly fee (just like health insurance) so that all hospital and physician charges are covered if the enrollees become ill. Unlike health insurance, however, in the HMO model, hospitals and physicians get paid whether or not the enrollee gets sick. So, it is better for everyone if enrollees stay healthy-and out of the hospital.
10. Initially, a lot of physicians did not like HMOs. Why?
Show answer
Because physicians are fiercely independent. They did not want a bunch of business managers telling them how to manage patients.
11. Why are physicians fiercely independent?
Show answer
We were probably born that way.
12. Is that good?
Show answer
Probably not. Eventually, everyone will need to work together and not hit each other when they are mad.
13. Do HMO administrators really dictate how physicians manage their patients?
Show answer
Yes and no. Physicians have developed medically effective and optimally efficient strategies-termed clinical pathways-for caring for many common illnesses. Although physicians must treat each patient individually, when we adhere to predetermined treatment guidelines (as encouraged by HMO administrators), patients usually get better faster and cheaper.
14. Do physicians follow these clinical pathways?
Show answer
Traditionally, no.
15. What do HMO managers do?
Show answer
They evaluate each physician’s utilization of expensive resources (within the predetermined clinical pathways) relative to the health of the physician’s patients.
16. Do physicians welcome this kind of scrutiny?
Show answer
No.
17. What is a preferred provider organization (PPO)?
Show answer
A PPO is a group of doctors who have elected to remain legally independent of a hospital and insurance company (if they joined together, they would be an HMO) and, most of all, patients. But PPOs maintain their independence as physicians, even though most PPOs require administrators to coordinate programs, keep the books, and keep the doctors from hitting each other. PPOs have the perception of independence, however.
18. Is health care expensive?
Show answer
Unfortunately, yes. Physicians argue that patients pay a lot but also get a lot. In the United States, patients expect unlimited access to liver transplantation and magnetic resonance imaging (MRI) for every headache. Americans believe that fancy, expensive health care is not just a privilege-it is a right.
19. So what is the problem?
Show answer
The chief executive officers (CEOs) of big American corporations argue that the obligatory expense of health care is driving up the cost of U.S. products and making American companies less competitive in the global market-there is more health care than steel in a new Chevrolet.
20. Does big business have a solution?
Show answer
They think so. The CEOs still want unlimited access to the most modern health care for themselves and their families. Without sounding cynical, the CEOs want to save health care dollars spent on their employees and “other people’s families.” They want to limit access to health care, but they do not want to wield the ax personally. So they developed the idea of capitation.
21. What is capitation?
Show answer
The CEOs of large businesses come to hospitals, HMOs, or PPOs and say: “Why don’t you provide all health care for all my employees at a fixed price, say, $180 per month per head?” (hence, capitation). In this model, physicians make the decisions about who gets how much medical care (satisfying their urge for independence), but they also promise to provide all necessary medical care for a prearranged price. Thus, they take all of the risk. CEOs like this model because they can still offer health care as an employee benefit and budget the cost in advance.
22. Why do physicians not like capitation?
Show answer
All of a sudden physicians may have acquired a little more independence than they bargained for. Now they are paid in advance so that all costs of patients’ health care are subtracted from the money they negotiated up front. Now they must advise against an MRI for every headache and break the news to Granny that she will not think better if they dialyze her blood urea nitrogen down to 50. This is the reverse of the good old days when physicians were rewarded if their patients got sick and stayed sick. Physicians could ply them with a smorgasbord of drugs and technologies. Now physicians are trying to control health care costs.
23. Is all this change good?
Show answer
Absolutely. Medicine has always changed-and the faster, the better. Physicians were initially attracted to medicine as an intellectually stimulating discipline because medicine and surgery evolve rapidly.
24. Can physicians keep up with all this change?
Show answer
Absolutely.
25. Despite all of the medical Chicken Littles who sonorously declare that the sky is falling, is medicine (and even more clearly, surgery) still the most gratifying, stimulating, and rewarding profession?
Show answer
Absolutely.
References
BIBLIOGRAPHY
1. Blumenthal D: Controlling health care expenditures. N Engl J Med 344:766-769, 2001. Medline Similar articles Full article
2. Dudley RA, Luft HS: Managed care in transition. N Engl J Med 344:1087-1092, 2001. Medline Similar articles Full article
3. Fuchs VR: What’s ahead for health insurance in the United States? N Engl J Med 346:1822-1824, 2002.
4. Iglehart JK: Changing health insurance trends. N Engl J Med 347:956-962, 2002.
5. Schroeder SA: Prospects for expanding health insurance coverage. N Engl J Med 344:847-852, 2001. Medline Similar articles Full article
6. Wilensky GR: Medicare reform-now is the time. N Engl J Med 345:458-462, 2001. Medline Similar articles Full article
7. Wood AJ: When increased therapeutic benefit comes at increased cost. N Engl J Med 346:1819-1821, 2002. Medline Similar articles Full article
8. Wright JG: Hidden barriers to improvement in the quality of health care. N Engl J Med 346:1096, 2002. Medline Similar articles
Comments
Leave a Reply
Abernathy’s Surgical Secrets, Updated Edition (Book w / Student Consult)
Author / s: Harken Alden H., Abernathy Charles, Moore Ernest Eugene
Year: 2004
Pages: 473
Publishers: Elsevier Mosby; 5th Bk & Acc edition
ISBN: 0323034160
