Health Care Reform (2) - Hospital Culture

Well, we’re back to discussing health care reform. I was so wise in choosing the health care system as something to become interested in, back in the 1960’s! It’s an interest to last a lifetime. (Ironic comment.)

On April 3, 2008, an article was published by my old friend Jim Mongan and colleagues in the New England Journal of Medicine, called Options for Slowing the Growth of Health Care Costs. On July 24 the NEJM published my letter:

To the Editor: The limitation of the article by Mongan et al. (April 3 issue)1 on options for slowing the growth of health care costs is the acceptance only of reforms that will not irritate powerful, entrenched corporate and labor interests. Our system is costing us perhaps twice as much as it should. We need to target the fattest cats and slim them down. Hospitals currently seek consolidation rather than efficiencies, charge a fortune for routine services, and pay higher wages rather than taking strikes. Insurance companies add so little at so high a charge. Pharmaceutical companies advertise, develop frivolously repetitive drugs, and charge without restraint. Medical specialists in some areas operate and serve dying patients with little restraint.

The interventions suggested in the article are popguns against a profit-bound army. Restraint in our mixed system needs to come from government, not voluntary acts by corporations.2 Schlesinger3 has identified a cycle of government activism at 30 years, the last peak being 40 years ago. It is possible, then, that suggestions that are more challenging to entrenched interests should be entertained.

So, I guess that’s pretty clear.

This post is about the hospital part of health care reform. Unfortunately, I don’t have a solution. I have to admit that. But at least let’s recognize where the problem is. Hospitals take 35% of the health care dollar, and if they are not reined in and redirected, it’s not clear to me how health care can really be reformed.

Here is just a vignette from my life that is not the heart of the problem, but is reflective of it.

Two weeks ago I attended a Board Meeting of a little group of doctors called Children First Medical Group, which is an Independent Physicians Organization (IPA) that contracts on behalf of these pediatric doctors solely for Medicaid contracts.

During the first part of the meeting we heard that the group’s financial situation is declining. Compared to last year, our revenues will decline by 10% perhaps, and our expenses are forecasted to increase by 5-10%. No one seemed very concerned about this as it was presented, there was no action plan, and no one said anything from the group except me. What that illustrates is that physicians, who are on the Board, are not business people, and that the staff might not be so intent on business either.

But then at the end of the meeting, the President of the Board, an anesthesiologist, dismissed the staff so we could have an executive session. He then said that the contracting committee had met, chaired by him, and they were recommending a 30-40% increase for the COO, and a salary for our Chief Medical Officer of $240,000 plus benefits for “at least 1000 hours of work a year.” His defense of these increases were that they had done an excellent job (true), that the ongoing automatization will reduce FTE’s by two, and that in former years we had paid more for these functions.

He always said, and this is the point I want to highlight, that he himself had recently been made director of a hospital-sponsored surgery center, and he himself would not take less than $400,000 for the CMO job.

He then called for an immediate vote even though there was little haste necessary and railroaded it through.

The similarity to what happened on Wall Street is very obvious. How this man can emulate a dying culture (hopefully) at this time is astonishing.

But here’s the point. Look at how hospital corporate culture operates! Arrogant and not too bright. He acts just like most hospital managers. Indeed, as an anesthesiologist, just like the hospitals, he is used to have a monopolistic situation and pushing it for all it is worth – this is what anesthesiologists do with health plans. If health plans want to cover a hospital, they need to have the anesthesiologists serving their patients, and single groups of anesthesiologists have exclusive contracts with the hospitals. This is SOP for hospitals in a community as they consolidate with each other. Hospitals are price-givers, no price-takers, and ditto for anesthesiologists.

The anesthesiologist is getting paid a very high salary for his Directorship, all the while continuing "full time" as a clinician. He is thus part of the hospital culture. The hospital officials pay themselves very well. After all, it's Other People's Money (OPM). Even though this hospital is losing money, has just gone to the state for bond money, raises money from the Foundation charity each year - they still pay themselves very well.

And they use the same arguments as Wall Street. Our COO and CMO are not going anywhere, and not threatening to do so. But the Compensation Committee says, "We don't want to lose them. And compared to others in the field (just where the comparisons come from is not specified), they are underpaid, he claims. Right! Does it sound familiar?

So, when health care organization experts talk about health care reform, this culture and practice is what they have to address. They can talk about electronic medical records, they can talk about increased efficiency, they can talk about reforms that gore no one’s ox. But all the reforms in the world won’t work where the culture and custom tells everyone to act this way.

This is a very impressionistic and perhaps not very convincing post. In posts to come, I will probably be able to point to excessive salaries – the very ordinary CEO of a local non-profit hospital is making more than $800,000 as we speak; hospitals recruit very ordinary employees from our offices to make 30% more plus benefits, with no discernible reason. They order medical devices without even knowing how much the cost is, and without trying to get a favorable deal. Believe me, it’s a morass.

So talk about efficiency reforms, go ahead. It won’t make any difference. Heads have to be butted.

Budd Shenkin