Volume Pressures Affect Entire Healthcare Industry

Below is an excerpt from a recent NYT article talking about the same hospital in McAllen TX featured in Dr Gawande's New Yorker "expose" about why healthcare costs are high in some areas of the country compared to others - namely the profit motive. While the profit motive may certainly be linked to increased volume of procedures, it would be over-simplifying to think of profit as the net motive, as the increase in volume is likely in part to make up for lost compensation from reduced reimbursement and increased expenses.

It is also a distraction to focus the debate on physicians and physician-owned facilities as the profit or net income motive applies to all healthcare entities, be they constituted as for-profit or not-for-profit. All institutions are struggling with how to maintain or increase volume in order to drive or sustain revenues and net income, as the dominant source of revenues for the industry continues to be dependent on the number of encounters. The debate on this topic needs to shift to payment reform for all providers, encouraging meaningful discussion about outcomes, quality, and overall health.

Texas Hospital Flexing Muscle in Health Fight

By KEVIN SACK and DAVID M. HERSZENHORN

Published: July 29, 2009

The gleaming, well-equipped Doctors Hospital at Renaissance, which has expanded to 503 beds from 30 in six years, has become a footnote in the health care debate. It was featured unflatteringly in a June article in The New Yorker about geographic disparities in health care spending, a story that President Obama has cited repeatedly in speeches and meetings.

The article, which is sharply disputed by hospital officials, posited that physician ownership provided “an unholy temptation to overorder” tests and procedures because doctors earn not only their fees but also a share of the hospital’s profits. At Doctors Hospital, where 353 of its 452 owners are physicians, net revenue amounted to $64 million in 2008.

Leading members of Congress have long been concerned about the potential for conflicts of interest, lapses in patient safety and cherry-picking of patients with the best insurance at the country’s 230 physician-owned hospitals. Past efforts to restrict ownership by doctors have stalled, but language to that effect is currently included in health care legislation in Congress, though in ways that are unlikely to hurt Doctors Hospital.

Increased Equity in Compensation for All Specialties

The excerpt below is from a CBS Evening News Report sent to me by ACPE Digest. The cuts proposed to specialists are certainly dramatic, but given the overall financial condition of Medicare, the extreme shortage of primary care physicians, and the growing concerns that the runaway costs can only be tamed by increasing primary care services (and decreasing procedures done by specialists), some income redistribution is going to be inevitable. Even though the proposed increase to primary care is up to 8%, and the proposed decrease to some specialists is up to 40%, I believe equity in compensation is likely to drive more satisfaction among primary care physicians. For those already practicing in the field to feel that their work is valued. Physician satisfaction will drive patient satisfaction and quality. It's a relatively long term outlook, but once the practice environment for primary care improves, only then will more emerging students and residents seriously consider going into primary care fields in the numbers required to turn the tides. The need for equity is widely prevalent in many of our psychologies, and it must be recognized as well within the healthcare debate.

The Institute of Medicine identified as one of its dimensions of quality that care must be equitable. Granted that this was primarily applied in the context of the patient, however, I think it must also be considered as a key dimension with respect to physicians and the practice environment.

Paying primary-care physicians more may require pay cuts to specialists. The CBS Evening News(7/28, story 10, 3:15, Couric) reported that, in the healthcare reform debate, there is "one thing everyone involved...agrees on," and that is "there's a shortage of doctors. Not specialists, we have plenty of them. What we need more of is primary-care physicians." By 2025 the primary-care "shortage could top 40,000." CBS noted that, "on average, specialists make twice as much as primary physicians." But, as "the system begins to pay primary-care doctors more, the pressure is on to pay specialists less. Medicare just proposed a pay cut of up to 40 percent for specialists like radiologists and cardiologists and pay increases of up to eight percent for family doctors. Specialists predict the cuts will reduce their service in rural areas and still not raise enough money to recruit more family physicians." The network asked, "Does this get us to more primary-care doctors?" According to American College of Cardiology CEO Dr. Jack Lewin, "No, absolutely not. Because there's not enough, the cuts to cardiologists are devastating to them. It's not even close to helping primary care in the way they need to be helped."