Health Care Evolution as Seen From the Bottom

We know that the money in health care is going to the hospitals. If you are half-decently managed and you have a half-decent payor mix, you will be making a lot of money. Non-profit has no meaning in health care; it was shown long ago that for-profit and voluntary hospitals act equivalently. The money they make goes for very handsome executive salaries and retained earning to be spent on system development. “System development” for hospitals can mean more and more technology. It can also mean buying up doctors and controlling the field, vertical integration.

Here’s what this process can look like on the ground. There is a voluntary hospital in Pleasanton called ValleyCare. The CEO is a firebrand named Marcy Feit, who began life as a nurse, but who has now been in Pleasanton for over a decade and is very well entrenched. She decided a couple of years ago to construct a Foundation. In other states the hospitals simply hire doctors; in California it is illegal for non-doctors to hire doctors, so instead there are Foundations, which are non-profit entities governed by Boards, which are essentially run by the hospitals that establish the foundations.

In forming the Foundation, Marcy and her aides identified a primary care doctor well-schooled in previous medical care wars, John Yee, to head the group, and I understand he is being paid $1.5 million over three years to be Medical Director. Between these two and some others, they rule the Foundation without opposition. Their view seems to be that anyone who hasn’t joined the Foundation is the enemy.

Two pediatric practices were approached about joining the Foundation on what they judged were unfavorable terms, so they declined. Outraged, Marcy vowed to hire pediatricians on her own, which she proceeded to do, and hired all the obstetricians practicing at ValleyCare, and ordered the obstetricians to refer exclusively to the newly hired pediatricians. It was essentially a got-out-of-town verdict for practices that had been there for 30 years and who had done much to build the hospital’s pediatric program.

Marcy and her associates, I understand, are insisting that most prominent Medical Staff positions be held by Foundation members, although so far the staff as a whole has managed to remain independent. They sought to vote democratically for their member on the hospital Board, but their nominees were disqualified by Marcy and a Foundation doctor appointed.

There are two large radiology groups in the East Bay, one of which holds the ValleyCare contract. Marcy informed the group holding the contract that if they wished to continue to do so, they would be required to discharge two of their radiologists there, both competent and very long standing members of the staff, whom she judged disloyal. The group is now in a condition similar to Google in China – important market, but mindful of their ethics. Not easy.

It’s an interesting story, and an extreme. But to my mind the ValleyCare situation highlights the forces in medicine as they are being played out currently. It’s hard to know how it will play out, but if people are interested, I’ll keep you posted.

Budd Shenkin