Hospitals, Health Care, Buggies, and Automobiles

I've been thinking a lot about the shape of health care, and working on a paper that is so tortured in its development, I'm beginning to think that it's a paper that will never be finished. Which is a shame, because I think the ideas are good, and naturally, because I love to see my name in print. But in a way it's not a shame, because what the paper is doing is forcing me to learn, which is I guess what a paper should actually be about.

The essence of the paper is that the shape of health care is changing, and what I see is that hospitals are trying to centralize care around themselves by buying up medical practices, and buying up skilled nursing homes and other allied facilities. You could call all this vertical integration (VI). At the same time you see lots of horizontal integration, with medical practices merging, hospitals merging, insurance companies becoming fewer and larger, etc. So there it is, lots of agglomeration, all in the service of protection of them that is and them that has. Rationalizing the industry? Somewhat, yes. But also protecting and aggrandizing themselves.

But, is centralization the best model? I think not. I think that decentralization would be better. We need lots of coordination of care, true, but VI is probably not the best way to get there, although coordination does need leadership, and that's hard to find in a decentralized system. But especially with modern IT and communication technology – if the government mandated that Electronic Medical Records (EMR) all be inter-operational, which it has to do, has to do – decentralized systems could work just fine. The decentralized system could be called the Center of Excellence (COE) system, because with all the competition for patients, each unit would have to work to become excellent. By contrast, if a unit is in a system like Kaiser, where all referrals are mandated to be intra-organizational, a mediocre unit is cushioned from competition.

Here are a couple of paragraphs in praise of COE from my paper:

The COE model envisions not VI corporations, but rather individuals and groups networked together by information and communication technology, rather than by ownership and overt direction. In this model, for instance, incorporating the model of the Patient Centered Medical Home (PCMH), the patient and the primary care provider would be choosing referrals among competing centers with varying combinations of cost and quality, be they large or small specialist practices, general or specialty hospitals or procedure centers, etc., rather then being tied into a mandatory network.

The more direct financial and personal connection to the patient may provide increased incentives for patient-centered care. Information in small units can be informal and immediately visible. Staff in smaller units specialize in only one enterprise with the skill that repetition conveys, and can focus on detail with unmatched attention. Hiring can be made appropriate to the specific need without the need to explain the job to HR. Talented and creative professionals and staff can exercise their particular abilities (e.g., computerized innovation) without corporate restraint.

The “caring function” may be easier to convey in decentralized settings, as patients may be more easily known personally by staff and professionals. Small units may have great flexibility to serve individual patient needs, whereas large companies may have relatively general and inflexible guidelines. (On the other hand, classically underserved populations might welcome general policies applicable to all, as they will not be discriminatory.) Staff and professionals can likewise benefit from enhanced non-bureaucratic personal relations.

Modern information and communication technology has given added strength to the decentralization argument. What had been a weakness – coordination and information exchange – is now easily effected by small offices as well as large, so long as the EMRs are inter-operative. If run well, a small practice can be exquisitely efficient with modern technology.

Anyway, I've got a lot more written about the details, so many details that it is probably pretty unpublishable, at least for this non-academic writer. But this is all prologue. As I lay awake this morning thinking about it, I had a thought that I liked. Unlike all the details of my paper that contrast the pros and cons of the integrated system vs. the pros and cons of the COE, this thought is succinct. And so appropriate for a blog post. Which, with no further ado, here follows.

What happens when an obsolescent institution seeks to direct an emerging institution? By this I mean:

the hospital has been the center of medical care for a very long time. It looks as though it has become very expensive, too expensive for the system as a whole. It looks also as if the locus and means of care is changing. It is becoming outpatient, with specialty units such as the outpatient surgicenter, and more and more elements of care can be lodged in outpatient settings. In addition, it seems that more and more “medical care” should really be “health care,” with attention to prevention, social determinants of disease, etc. And as we live longer and acquire more chronic diseases and we just get run down, residential facilities become merged with health care units.

So the system is changing, and the money still resides with hospitals, and they will use that money to perpetuate their predominance. But they are aware of the changes, and so they change their definition of their mission accordingly. They become not purveyors of inpatient medical care, but purveyors of health care in general. This is what organizations do. (Parenthetically, one of the reasons they do this is that the people in those organizations are loathe to give up on the organization, since the organization works, and the organization also confers onto those individuals a means of livelihood, and perks, neither of which is to be abandoned.)

So what are the consequences of this means of succession from one type of organization to another – where the obsolescent institution seeks to direct the birth of the emerging industry? One consequence is that the change is delayed by old habits that are not suitable for the new challenge. Another is that the change is wasteful, since old functions persist and are paid for. A third consequence is that the new organization has trouble being shaped into something that looks new.

What it reminds me of is the original automobiles. What preceded them was buggies, so of course the new autos looked like the old buggies, just with an engine behind instead of a horse ahead. The old stereotypes persisted and it took a couple of decades of persistent change until the Model T didn't look like a buggy at all.

I'd say that's the way we should look at the emerging health care system. It still looks like a buggy.

To really accelerate change, what's needed is a way for inventors to make gobs of money. Right now, everyone is (rightly, I guess) focussed on reducing the cost of health care. But it's hard to make money by reducing costs. When someone figures out how to make money with new institutions, that's when the buggy will come to look new and streamlined. Idealism is great and medicine has probably more of it than any other industry. But Schumpeter's fabled “animal spirits” come out when the scent of money to be made is in the air. That's what we are praying will happen with renewable energy – find a way for the animal spirits to do well by doing good. I'm thinking, same thing with health care.

Right now, the health care animal spirits are still looking around, to the on-line doctor (doomed!), to health monitoring by your smart watch (better chance here.) When the specialty hospitals take over, when money flows into primary care, when teaching is divorced from tertiary and quaternary care, when pharma is rationalized – that's when the reorganization will really take place. But while money is still with the bloated hospitals and academic centers with their gobs of money and administrators and grants and God knows where it all goes – while all that is still predominant, the future will still lie pretty far ahead.

Anyway, that's what I've been thinking.

Budd Shenkin