The Healthcare Innovator's Dilemma

Here is an excellent short video featuring Clayton Christensen from the Harvard Business School explaining his theory about "disruptive innovation", which in essence boils down to: existing companies' existing business models can help them innovate to build better products for existing customers, but shackle them from being able to go after truly disruptive innovations that can create different versions of those products for different customers - examples, cheaper high quality cars, or personal computers for the home.

He wrote a landmark book on the topic called "The Innovator's Dilemma", which identified how this dilemma plays out, and how companies can navigate their way out of this dilemma.



The dilemma lies ever so profoundly at the heart of the ailing healthcare system. Existing healthcare providers' products and services are driven by "more expensive, latest technology, more volume" consumption by all - including patients, doctors, insurance companies. It is not hard to see the medical and scientific innovation at play in these cutting-edge technologies. However, these companies have little or no incentive to deliver a different product that provides services at a lower price, is more oriented around wellness or primary care, is more oriented around the healthcare needs of the patient rather than the system, and can be delivered without the use of expensive technology.

Attempts underway to change the business model from within, by improving access to healthcare, or changing the compensation system, are just nibbling at the edges, and may not provide enough of an incentive for true disruption. How many entities will change their business model to a new way of providing care at the expense of their existing "book of business"? This schizophrenia is generally not sustainable within organizational environments which in order to be successful have to be organized around a common mission, vision, and goals.

Perhaps Clayton's ideas will hold some promise of redemption for healthcare innovators as well. Will blog about those in a subsequent post. 

How to Address Cleanliness Violations at Hospital? New Building or Performance Improvement

The LA Times posted this article about UCLA Harbor Medical Center's safety violations stemming from "lack of cleanliness".

The plan for correction: "Los Angeles County is spending nearly $323 million to construct a 190,000-square-foot building at the hospital that will replace both the surgical facilities and the emergency room. "

As some of the comments to the story point out, its not all about the facility - its also about management and leadership. I've worked with organizations that have faced even older infrastructure, and yet we have improved their cleanliness with good old fashioned management and systems:

• Leadership recognized the difficult situation but resolved to address it.
• Management threw its shoulder "to the flywheel" and made it turn.
• A voluntary team of "cleanliness inspectors" toured the hospital on a regular basis and documented cleanliness of high risk areas - in a manner that could be measured, easily disseminated, and compared.
• Performance improvement systems were installed to ensure improvement:
• Pulled together a "performance improvement team" to oversee the issue.
• Measured the results.
• Made the measurement consistent and reliable.
• Disseminated the findings.
• Developed policies for cleanliness that could be adhered to by all.
• Ensured accountability by reporting on the team's findings to the governing body through the appropriate oversight committees.
• Made the "clicks of the fly wheel visible to all" by showing that some departments (that were just as resource-starved as the others) were able to make improvements.

Perhaps a new building is necessary at UCLA Harbor for many reasons, but in order to reform healthcare, we as a society have to start recognizing that adding costs (staffing, equipment, and buildings) to solve a problem are not sustainable interventions. Improving leadership, management, and systems are.


ADDENDUM 11/1/11: This story published subsequently in the Daily Breeze provides further details about a corrective action plan being put into place at UCLA Harbor. "Those fixes include a reorganization and restructuring of the hospital's infection prevention and control unit, identifying problems with the physical plant and enhancing efforts to assure staff members are washing their hands and practicing good hygiene." All of these actions appear to be appropriate, however, the key to real and sustained improvement from the "corrective action plan" is to ensure that the actions are monitored regularly, and that comprehensive performance improvement systems are implemented.

Some MA Hospitals May Have to Fund Coverage

Cost pressures continue to rise in the Commonwealth, as well as indications that there may be some "redistribution of wealth" in the healthcare provider community ..

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By Kay Lazar

Globe Staff / May 15, 2010

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Many Massachusetts hospitals would be required to make a one-time contribution to a fund to help small businesses pay for health insurance, under legislation that the state Senate will vote on Tuesday.

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Senate President Therese Murray inserted the measure yesterday into a more sweeping bill she unveiled last month because almost no hospitals answered her call for voluntary contributions — other than Partners HealthCare, which pledged $40 million.

Murray, who formally filed the bill yesterday, hopes to raise $100 million to help small employers, who have faced double-digit health insurance rate increases. She said the money would reduce their premiums by about 2.5 percent.

“This bill will have an immediate and positive impact on small businesses that cannot be ignored,’’ Murray said in a statement. “It is not a permanent fix, but the shared sacrifice from both providers and insurers will bring necessary relief in the short-term as we continue to work on complicated, long-term cost-control measures.’’

The Massachusetts Hospital Association expressed reservations yesterday about the proposal, saying it is “concerned about the impact of the mandatory assessments this legislation levies on hospitals and how those assessments would be implemented.’’

The association said it will “continue to advocate to ensure that there is shared responsibility in addressing the healthcare cost issue that involves all stake holders — hospitals, insurers, employers, consumers, and state programs.’’

Partners HealthCare, whose Boston teaching hospitals have been blamed for helping to drive up medical spending, may end up owing more than the $40 million the health care giant already pledged, because Murray’s bill provides an exemption for small and financially struggling hospitals.

The complex formula requires hospitals that have more than a 2.5 percent profit margin to contribute money based on their patient population, with facilities that mostly treat patients who have private insurance kicking in more than those that typically care for lower-income patients on Medicaid.

Murray’s bill requires hospitals to deal directly with the health insurers, who would then distribute the refunds to small businesses over a two-year period, to be completed by September 2012. The state Division of Insurance would have to issue a public report by Oct. 1 that lists the names and the amounts to be contributed by each hospital.

Murray’s bill also includes a so-called transparency provision, which would require insurance companies to report annually to the state the rates it pays each of the hospitals for their services.

Partners, the parent organization of Massachusetts General and Brigham and Women’s hospitals, has come under scrutiny by the attorney general’s office and other regulators because it is among providers paid far higher rates than their competitors for similar services — payments Partners has been able to negotiate because of its market clout, regulators said. Partners says its higher rates reflect the complexity of the care its hospitals provide.

Kay Lazar can be reached at klazar@globe.com.

Can Small Practices Lead to Big Changes?

A daunting challenge ahead for small practitioners .. at the same time may provide some insight into what's keeping the healthcare system operating at the "cottage industry" level .. the key question appears to be "can fundamental quality improvement happen without consolidation of providers into larger scale operations"?

Small Practices Face Big Challenges
Elyas Bakhtiari, for HealthLeaders Media, December 10, 2009 

In Atul Gawande's latest piece in The New Yorker, the physician-author compares the current pilot-project approach to reforming healthcare with efforts in the early 1900s to improve agricultural production. Farmers at the time were struggling with analogous problems—spiraling costs, a lack of "comparative effectiveness research," poor quality rating mechanisms, and industry fragmentation—and only began to see improvements after government-initiated pilot programs spurred innovation. 

Gawande, who was named one ofHealthLeaders' 20 People Who Make Healthcare Better this year, offers long-term and clear-eyed hope amidst a lot of short-term nay saying and pessimism about the future of healthcare. 

But his analogy may not be very reassuring to one segment of physicians. A consequence of agricultural progress that Gawande briefly glosses over is the near extinction of the small family farmer. If healthcare follows a similar path, does the solo or small physician practice face the same fate? 

Before the transformation of agriculture, the industry presented a similar economic challenge as healthcare does today. Forty percent of a family's income went to paying for food and almost half the American workforce worked in agriculture, many on small farms. Scientific and technological advancements, as well as evidence-based efficiencies, cut spending to 24% of income and 20% of the workforce by 1930, Gawande explains. Today it only accounts for 8% of income and 2% of the labor force. 

Consolidation of farms and the rise of big agribusiness played a major role in that. Small farmers increasingly had trouble purchasing necessary new equipment and keeping up with productivity gains made by larger operations with more capital to invest. Sound familiar? 

It's no secret that, even with the reimbursement bonuses in the HITECH Act, solo and small physician practices face a steeper climb when purchasing and implementing electronic health records than larger groups. 

A new study published in the Journal of the American Medical Association highlights yet another small-practice struggle: Nearly 65% of primary-care physicians work in practices that are too small to draw meaningful conclusions about the quality of care they provide based on Medicare data. Even aggregating data over a 3-year period for each physician group failed to produce large enough sample sizes for half of the groups with fewer than six physicians.
Don Berwick, MD, MPP, president and CEO of the Institute for Healthcare Improvement, offered some suggestions to improve data collection without compromising the size and autonomy of practices, such as pooling data from all payers and surveying patients about their experiences. 

But measuring small-practice quality will become a more significant change if one of these payment pilot projects evolves into a full-fledged quality-based reimbursement system.
Given the general direction healthcare is heading and the financial pressures physicians face, it's likely that the proportion of doctors in small practices will continue to drop over the next couple of decades. 

There are some options for the little guys, though. An independent practice can have a managed service organization run by a hospital or other entity handle human resources and administrative tasks, or a physician-hospital organization, where money matters are handled jointly. Some physicians may also look at limited or divisional mergers, where a small practice retains its individual identity but joins other practices to form a corporation. 

To stay small, many practices will have to find help, and perhaps give up some of their autonomy. But that may be the only way to resist the tide of consolidation.

Health Insurers Compensate Providers Disparately

While acknowledging that employer payments are not their priority, insurers also continue to pay disparately to providers. While some spread in the compensation may be rational to account for higher cost specialty services, or more payment for coordination of care within larger networks, this method of relatively arbitrary compensation continues to compromise the delivery of care by smaller physician groups and hospitals. Will payment reform in Massachusetts address this matter, or will global capitation fees continue to unfairly favor specific providers over others?

Health insurers mum on practices  

State regulators’ get few answers about talks with providers

By Kay Lazar, Boston Globe Staff / December 10, 2009

Executives from some of the state’s leading health insurance companies, facing an unusual public grilling from state regulators yesterday, refused to answer key questions about why some hospitals and doctors are paid up to three times as much as others for the same services. But some of the company officials acknowledged that the affordability of coverage for employers and their workers is not a priority in negotiating contracts with health care providers. Instead, they said, provider payments are based on fierce competition among hospitals and doctors in some areas of the state, as well as employers’ insistence that a particular hospital or physicians’ group be included in their plan. The testimony was part of a monthlong probe by the state Department of Insurance into the reasons for disproportionately high health insurance rates paid by small businesses; but the agency has expanded its investigation to determine what is behind the soaring increases in insurance costs overall, including the large disparities in payments to providers. In at least a half-dozen instances, executives from the state’s second- and third-largest insurers - Harvard Pilgrim Health Care and Tufts Health Plan - declined to answer regulators’ questions. They explained their companies had signed confidentiality agreements with certain hospital or physician groups that prevented them from disclosing the information publicly because doing so would put the insurers at a competitive disadvantage. “You identified a number of answers you are reluctant to provide in a public forum,’’ deputy insurance commissioner Kevin Beagan said toward the end of an hourlong questioning of Marc Spooner, Tufts vice president of provider contracting. “Why?’’ “Some of these terms relate to confidentiality constraints,’’ Spooner said. Executives from the state’s largest insurer, Blue Cross and Blue Shield of Massachusetts, are scheduled to testify when the hearings continue tomorrow. While Tufts and Harvard Pilgrim officials did not name the providers that are getting more generous fees - and declined to identify them when asked later by a reporter - the Globe Spotlight Team reported last year that Partners HealthCare hospitals are often paid more for services than competitors. Some specialty hospitals, or hospitals with little competition in their area, also tend to get higher payments. Most of the questions the insurers declined to answer sought details about the balance of power between the insurers and the providers in their contract negotiations. For instance, the regulators asked whether the contracts allow the insurer to adjust or renegotiate reimbursement rates to a provider if the insurer obtains information about what another insurer is paying that provider. Harvard Pilgrim’s Rick Weisblatt, senior vice president for health services, testified that the insurer generally provides more generous reimbursements to large, well-organized networks of physicians compared with smaller groups for providing the same medical services. “It’s on average 45 percent higher [for a large network] than for a smaller, more loosely organized network,’’ Weisblatt said. “There can be as much as a 300 percent difference between the highest and lowest [paid provider] for the same service.’’ The sparsely attended hearing, in a drab fifth-floor conference room at the agency’s headquarters, featured mostly dense, bureaucratic answers to pointed questions. In one instance, Beagan, the deputy commissioner, pressed Spooner to explain whether Tufts considers the impact on employers when it sits down to negotiate expensive contracts with health care providers. Those contract costs are passed on to employers. “Do you start,’’ Beagan asked, “with what you think employers are willing to pay?’’ Spooner replied that contract talks with providers are “an interactive process’’ that takes into account the competition among providers. Undaunted, Beagan pressed again. “So the amount the employer would pay is not your target?’’ Beagan asked. “No,’’ Spooner said. Small-business owners say they have been clobbered by annual double-digit increases in health insurance costs for the past several years, and that increases for 2010 are the highest they have seen in years. While the state’s major insurers said in September the 2010 rate increases statewide would range from 7 to 12 percent for all employers, many small-business owners say they are getting hit with increases that are three times that amount. “These increases continue to be the worst in recent memory,’’ Retailers Association of Massachusetts president Jon Hurst said yesterday by e-mail. “Everything is in the 20-45 percent range from the feedback we are getting.’’ During a break in yesterday’s hearing, Beagan said they had yet to pinpoint anything from the testimony that would specifically explain the large disparities in insurance prices charged to small employers compared with larger companies. Beagan said testimony and data expected next week from the insurers about the amount of medical care that large and small companies use may shed light on why insurers charge different prices. Toward the end of the hearings, Joseph Murphy, acting insurance commissioner, told the insurers that state law gives his agency the authority to collect the information that the executives had declined to provide in public. He said the agency will be sending them letters demanding the information. He added that insurers’ individual answers would not be made public, but that his agency would release a report summarizing their answers in general.

Making Health Care Better - The Brent James Way

a fascinating article about improving the quality of healthcare .. the key seems to be getting physicians more involved in reviewing their data and outcomes instead of relying on experience and training alone .. physician engagement needs to be a cornerstone of reform ..

http://www.nytimes.com/2009/11/08/magazine/08Healthcare-t.html?_r=1&scp=1&sq=health%20economics&st=cse

Reform Management to Reform Healthcare

a compelling article discussing why current healthcare reform proposals are unlikely to yield real results .. not enough real innovation and performance improvement at the front line ..

Target antiquated management methods

By John Kenagy

Posted: October 15, 2009 - 11:00 am EDT

Everyone who has worked in a large, complex organization has run up against unmanageable “elephants in the room”—unresolved issues, major inconsistencies, or big problems that no one in the room can even acknowledge, let alone solve.

In my career, I have been a physician, healthcare executive and adviser, academic scholar, author and, perhaps most importantly, a patient once deeply immersed in healthcare with a critical injury. In each of those roles, I have seen big elephants in many rooms.

As a visiting scholar at Harvard Business School, I studied those few companies that innovated successfully when others failed to adapt, and discovered one of the most consistent indicators of success is the ability to turn unacknowledged elephants into real opportunities.

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For example, Intel saw its profit fall from $198 million in 1984 to $2 million in 1985, but then regained dominance. How? CEO Andy Grove famously identified Intel's elephant and turned it into an opportunity. Grove recognized he had successfully developed, led and grown a great computer memory company whose business model was no longer relevant in the marketplace. Rather than ignore this elephant and stay alive by downsizing and cost cutting, he identified it as an opportunity, marshaled his organization's forces, and adapted Intel's business model to a profitable focus on microprocessors.

Meanwhile, Digital Equipment Co. (DEC), another great technology company, saw its profits fall dramatically at exactly the same time, but failed to eliminate the elephant in the room. A Microsoft executive, who was formerly part of DEC's senior management team, told me this story: “I saw it happen. We formed consensus around the management table on key strategic initiatives over and over again while many around the table were thinking, ‘Here we go again, this is not going to work.' ” No one could acknowledge, or manage, the fact that DEC's previously successful business model was the problem. That's the elephant that killed DEC.

Fortunately, the key to reforming healthcare does not require eliminating a herd of elephants that silently stampede through many healthcare organizations. It requires eliminating only one—but it is a very big elephant.

Elephant No. 1 is the belief that we can transform healthcare with formerly successful, but now antiquated management methods that were originally designed for mid-20th century factories, not 21st century healthcare. “Try harder” is not the solution; it's part of the problem.



For example, let's look at the healthcare reform solutions proffered to Congress in the last few months. They generally follow this pattern: First gather and analyze the data, then assemble experts in meeting rooms to design and implement solutions and technology that “simplify administrative costs, develop new kinds of healthcare insurance, make hospitals and doctors more efficient, reduce hospitalizations, manage chronic illnesses more effectively and improve healthcare information technology.”

Data up to more meetings, then implement more solutions and technology down. Sound familiar? I've been in healthcare for 40 years and, for me, it's as Yogi Berra said: “Deja vu all over again.”

Just like DEC, we are not going to transform healthcare by trying harder with 1978 methods. Trying harder to move more data up to more experts in more meetings, who will then design and implement more solutions and technology down to the frontline, will deliver exactly what it has already delivered—less care at more cost. That's our Elephant No. 1.

Acknowledging Elephant No. 1 reframes the problem and the opportunity. Our dilemma is not a lack of technology, money, or effort by intelligent, hard-working people, and it's certainly not a shortage of meetings. It is a data up/implement down, industrial management model that has been overwhelmed by the complex, dynamic, unpredictable nature of 21st century healthcare. Our current system is not dysfunctional or broken. It delivers all it can.

Looking at business models and methods that successfully manage complex, unpredictable work delivers the solution. My Harvard Business School research and experience in the crucible of healthcare's frontline developed, tested and validated an “adaptive design” business model of innovation that eliminates Elephant No. 1.

The successful path is well-documented. Instead of moving information up to meeting rooms, a few leaders will use adaptive design methods to develop, coordinate and control new critical thinking skills and rapid, state-of-the-art decisionmaking close to the point of care.

The result? People and systems that address problems as they happen and then test, validate and replicate solutions in real time close to the patient. Everyone works every day to increasingly get patients exactly what they need at continually lower cost. Everyone is fixing healthcare.

Using the inspiration of adaptive design methods, skills and tools, a Massachusetts hospital increased surgical volume by 16% while decreasing surgical staff overtime by 14%; a Minnesota hospital nursing unit yielded a total return on investment of $1.7 million and at the same time won the award for most improved patient satisfaction in a 17-hospital system; and a Colorado hospital pharmacy generated $1.9 million straight to the bottom line by making it simpler for patients to get the medications they needed.

New adaptive design ideas—ideas that don't just try harder at old solutions—eliminate Elephant No. 1 and open the door to the true transformation of healthcare.

For example, innovation incubators inside frontline units always rapidly problem solve and simplify the work. That creates the opportunity to partner with technology companies to bring new, simple, testable and improvable enabling technologies into these frontline incubators as experiments. These new partnerships will then test, validate, improve, collect and disseminate the lessons learned to the broader healthcare community.

The broader community is now ready to learn because a few leading organizations have eliminated Elephant No. 1. They are developing people to get patients exactly what they need at continually lower cost in real time, not in meetings. That's the way to fix healthcare.

John Kenagy is a former visiting scholar at Harvard Business School, Cambridge, Mass.

Health Reform Will Make Americans Less Fat

Here's an excerpt from an article by Michael Pollan in the New York Times. Interesting to note how agribusiness has developed into an economy based on cheap, fast food, which in turn leads to obesity and chronic diseases that contribute to excess healthcare costs. It may be a longshot, but plausible hypothesis that true health reform can motivate insurance companies to try to turn around this trend.

By Michael Pollan, The New York Times. Posted September 14, 2009.

"There’s lots of money to be made selling fast food and then treating the diseases that fast food causes. One of the leading products of the American food industry has become patients for the American health care industry."

http://www.alternet.org/story/142597/michael_pollan:_health_reform_will_create_a_dieting_revolution

the mantle of world's best healthcare gets thrown around a lot .. mostly because there are many characteristics of the US system (physicians and institutions) that really shine .. however, the overall performance as evidenced by outcomes - mortality, longevity, public health - leave much to be desired .. once again a case of the haves versus the have nots .. the haves probably can access the best healthcare in the world; but the have nots - an ever growing group, including the working class, the poor, and the elderly - largely have to deal with an inferior system ..

Opinion

EDITORIAL

World’s Best Health Care

Published: August 25, 2009

Critics of President Obama’s push for health care reform have been whipping up fear that proposed changes will destroy our “world’s best” medical system and make it like supposedly inferior systems elsewhere.

The emptiness of those claims became apparent recently when researchers from the Urban Institute released a report analyzing studies that have compared the clinical effectiveness and quality of care in the United States with the care dispensed in other advanced nations. They found a mixed bag, with the United States doing better in some areas, like cancer care, and worse in others, like preventing deaths from treatable and preventable conditions.

The bottom line was unmistakable. The analysts found no support for the claim routinely made by politicians that American health care is the best in the world and no hard evidence of any particular area in which American health care is truly exceptional.

The American health care system puts patients at greater risk of harm from medical or surgical errors than patients elsewhere and ranks behind the top countries in extending the lives of the elderly. It has a mixed record on preventive care — above average in vaccinating seniors against the flu, below average in vaccinating children — and a mixed record of caring for chronic and acute conditions.

Contrary to what one hears in political discourse, the bulk of the research comparing the United States and Canada found a higher quality of care in our northern neighbor. Canadians, for example, have longer survival times while undergoing renal dialysis and after a kidney transplant. Of 10 studies comparing the care given to a broad range of patients suffering from a diverse group of ailments, five favored Canada, three yielded mixed results, and only two favored the United States.

There is no doubt that American medicine at its best can be awesomely effective. But there is clearly room for improvement. Far from threatening a superb health care system, reform should be seen as a way to improve a system whose bright spots are undercut by its flaws.

How to Mend the Hospital Safety Net

this article gives support to the fundamentals of management - planning, strategy, team-building, operations improvement - in turning around a failing hospital; if these elements are implemented with diligence, patience, and rigor, much success can be achieved .. more power to all of the turnaround efforts underway at many of the nation's healthcare institutions!

THE WALL STREET JOURNAL: HEALTH

AUGUST 7, 2009, 11:53 A.M. ET

Mending the Hospital Safety Net

by ABRAHAM VERGHESE, M.D.

At a time when many public hospitals around the country are in financial peril, R.E.Thomason Hospital in El Paso, Texas, has pulled off a miracle.

In the 11 years I worked at the hospital, it always operated in the red, a poor relative to the fancy private hospitals up on the hill. Most of our patients were indigent and often were not eligible for Medicare or Medicaid. Many were probably Mexican nationals—we never asked as long as they had a billing address in El Paso. The hospital was supported by a tax district, and perennially hamstrung by a politically appointed board that did the bidding of the city council members who got them the gig. It seemed as if the cronyism, the political infighting and the chronic lack of funds would never change.

Still, as a physician, it was the most satisfying place I ever worked. I was encountering third world diseases in a first world hospital—I saw typhoid fever, amebic liver abscesses, brucellosis, and many acute illnesses in young people—not what most internists see in American hospitals. Mexico was a stone's throw from my office window. It was an incredible place to train medical students. At the end of the day, I had the great satisfaction of knowing that despite all the hardships, I was providing yeoman service to patients who had no other recourse. I left for another medical school position (and another public hospital) in 2002.

On a visit to El Paso last week, I found wonderful changes afoot. The hospital, recently renamed University Medical Center, had so many additions and remodeled areas that I got lost in corridors that had sprouted new limbs and branches. Since the arrival of the new CEO James Valenti in 2004, the hospital's bond rating has risen, and work has begun on a huge new building approved by voters.

In talking to Mr. Valenti, I was struck by how his task resembled that facing public hospitals around the country (not to mention all of American health-care): How do you fix a broken system that is horribly expensive and running out of money?

The answers from Thomason may help rescue some of the struggling public hospitals around the country that train our young physicians and care for our poor and elderly -- iconic hospitals like Jackson Memorial in Miami, and Grady in Atlanta.

This was Mr. Valenti's fifth hospital turn-around project, but his first with a public hospital. He says he did it by applying the "the private-practice business model" to the public hospital: he demanded individual accountability and financial accountability; he developed a clear strategic plan, and recruited people who could execute the plan; he changed the culture from one of inertia, defeat and pessimism, to one of excitement and belief in the future. His recipe was "local, local, local—one person at a time." He gave up to three speeches a day to different community groups, selling them the hospital's mission and strategic plan. He won over the city council, the hospital board, law enforcement and the public with his singular vision of where the hospital needed to be.

When I worked there, we physicians were employed by Texas Tech School of Medicine (and we taught the third and fourth year med students who came from the mother ship in Lubbock). Though this was the sole hospital in which we practiced, we felt disconnected from the administration—we were not on their payroll. Valenti created a physician advisory group that met each Friday. The group looked at each specialty and asked, "What do we need to become leaders in this field in a year?"

The scrutiny extended to the patients. More than once I treated patients whose bodies showed no evidence of the operations and injuries described in their old records — they were borrowing identities to qualify for free care. Now Thomason does credit checks on patients, identifying those who misrepresent their financial situation and can afford to pay.

Valenti renegotiated contracts with insurance companies, with HMOs and with state agencies. The Dean of the medical school, Manuel de la Rosa said to me, "Care was not rationed so much as a rational approach made to giving care." For example, the hospital used to carry ten different types of implantable knee prostheses. Now, the hospital carries just one model, which it buys at a negotiated discount.

Here is the lesson I took away after my visit: Just as much of the funding gap for Medicare could be plugged by cutting out waste and fraud, sick public hospitals—and so many of them are sick-- do not always need infusions of money to be fixed. Instead they need discipline, accountability, and progressive politicians and hospital boards whose actions are made very public and who are held accountable. If a New Yorker article earlier this year portrayed the city of McAllen, Texas as the poster child of excess Medicare expenditure, El Paso's public hospital, which provides some $250 million dollars a year in charity care, might well be the poster child for fiscal prudence and genuine care for its community.

Abraham Verghese is a practicing internist and a professor of medicine at Stanford. His most recent book is Cutting for Stone.

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.

Who Pays for Complex Care Coordination?

Here's a great fundamental question posed in the WSJ. We certainly have many different criteria for determining who meets "acute level of care", without which qualification, a hospital is unlikely to get reimbursed for the hospitalization. However, how does the healthcare system take care of those individuals like the patient below who will not be able to get the care they need unless they are hospitalized. But if they are hospitalized, is it fair that the hospital carries the uncompensated burden for coordinating the complicated care required?

The issues in this case are not dis-similar from the recently well-publicized case of the Florida hospital that received court permission to deport a non-US resident patient directly to his home in Guatemala. The current reimbursement system provides very little compensation for such cases, and it is unrealistic to expect that the average community hospital with scant resources, many of which are at the brink of failure themselves, can provide this kind of care.

It is unlikely that issues like this will be significantly addressed within the current healthcare reform proposals. However, moving towards a system that provides near-universal coverage would be a step forward.

An ER Doc Grapples With ‘Unnecessary’ Hospital Admissions

Published On: July 31st, 2009

It’s all well and good to talk about reducing unnecessary hospital admissions to help control health costs. But the definition of “unnecessary” gets a lot more complicated when you’re the one doing the admitting, ER doc Jesse Pines writes in a column on WSJ.com. He describes the case of a woman with a probable case of lung cancer who needed a comprehensive evaluation. She was on Medicaid, the government health insurance for the poor, which meant she’d have a hard time finding specialists to treat her as an outpatient. So Pines admitted her to the hospital, even though she wasn’t acutely ill. In the hospital, she got a biopsy, a formal diagnosis of lung cancer and a plan for outpatient treatment. She met with a psychiatrist and a social worker. Pines argues that it was the best outcome, though more expensive than it would have been for her to be treated as an outpatient. “She was not sick enough to need a hospital bed,” he writes. “But I believe admitting her was the right decision.”

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."

Hospital Readmissions Gain Scrutiny

Hospital readmissions have been in the spotlight as a recent article demonstrated that a high percentage of patients are readmitted post an acute hospitalization. There is speculation that many of the readmissions are potentially preventable thereby leading to improved outcomes and reduced costs.

Coincidentally, The Joint Commission (TJC) Core Measures for Pneumonia, Acute Myocardial Infarction, and Congestive Heart Failure are also linked to reducing readmissions by implementation of the core measures. The Centers for Medicare and Medicaid Services (CMS) recently made public on its hospitalcompare.hhs.gov site information comparing hospitals on readmission rates.

Readmissions for specific diseases are likely to be reduced by improving adhering to evidence based interventions - including medications, counseling, and education. Across disease processes, there are some common interventions that are likely to yield reduced readmissions. These include medication reconciliation, ensuring understanding of discharge medications and instructions, scheduling a followup appointment, improving communication of discharge information to subsequent care providers, and undertaking either telephonic or in-person monitoring for high risk conditions.