Cui bono? Is healthcare financing about funding providers or caring for patients?

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In a recent blog, GME funding must be targeted to Primary Care, December 10, 2011, I wrote about the fact that the financial interests of hospitals lead them to choose to support residency training positions which are not necessarily (or often, or usually) in those specialties that the nation most needs. I urged that funding from the government for graduate medical education (primarily through supplements to Medicare and Medicaid) include mandates as to the proportions of trainees in different specialties, with a strong emphasis on training more primary care physicians. This is only one area, however, in which the financial incentives to hospitals, and indeed all health providers including physicians, do not always jibe with the healthcare needs of our population.

A recent spate of news articles has discussed changes in the organization and financing of healthcare services. The New York Times recently covered the conflict between the governor of the state of New York, Andrew Cuomo, and the mayor of New York City, regarding the potential conversion of Emblem Health to a for-profit company (Bloomberg Predicts Fair Deal if Health Insurer Gets For-Profit Status, by Thomas Kaplan, December 23, 2011). Cuomo wants it because it could bring as much as $1B in tax revenue to state coffers; Bloomberg is concerned because Emblem is the insurer of the majority of municipal employees and he expects such a move will drive premiums up. But, as the title of the article suggests, he thinks they can work it out. Between them. For the benefit of both the city and state governments. Not, however, for the people insured by Emblem. Emblem was created by a merger of Group Health Insurance (GHI) and Health Insurance Plan (HIP) of Greater New York, two early not-for-profit HMOs, or managed care organizations. Except they were created before either term, HMO or managed care, existed. Back in the 1950s, these were consumer cooperatives, where it was recognized that by cutting out the (for-profit) insurance company middleman, people could have more care for the same money, or the same care for less money. No wonder the majority of city employees enrolled.

Over time, rebranded by the Reagan administration with the new name of “HMO” or managed care, became the de facto standard for US health care coverage. Why Republicans could buy into this vaguely populist or socialist concept was that the new HMOs would increasingly be owned by for-profit insurance companies, which they could literally buy into as shareholders. The savings that came from managing care would now accrue to the insurer, not the patient-owner-members. Many of the long-standing HMOs of the early period (e.g., Los Angeles’ Ross-Loos) were purchased by insurance companies, but there were a few holdouts that remained consumer cooperatives (e.g., Group Health of Seattle and the groups that became Emblem). And then, as we remember, came the consumer backlash against HMOs in the late 1990s, with people furious at the restrictions these organizations put on their access to health care. The mistake, however, was thinking that the problem was the organization of care with requirements for only approved therapies, relatively “closed panels” of doctors and hospitals, and capitated payments. The problem was that they were, and are, mostly owned by for-profit corporations, which increase their profits every time care is denied. This is a very different incentive than when the owners are the patients themselves through a cooperative.

As time went on, even the non-profit HMOs and other non-profit groups like the Blue Cross / Blue Shields that are not part of the for-profit Anthem/Wellpoint, have had to act like for-profits to compete. The advantages have all been for the insurers, which remain very profitable, not for the patients, who find both many of the same restrictions they bridled at in the past, and, in addition, increasing premiums, co-payments, and deductibles. If Emblem becomes for-profit, Michael Bloomberg may be able to work a deal where the city government is spared a major premium increase, but the city workers who are insured by Emblem will not be so lucky. In a typically excellent “Quote of the Day”, Don McCanne, MD, discusses the fact that the National Business Group for Health (NBGH) is predicting major increases in deductibles for all employees. As reported in an article in the Nashville Tennesseean, “High deductible plans on the rise”, by Tom Wilemon, December 27, 2011, “Helen Darling, its [NBGH] president, predicts that by 2016 the majority of all health plans will have high deductibles.” McCanne notes correctly that the members of NBGH are the nation’s largest corporations, mostly Fortune 500 companies, which have historically had the best health insurance coverage for their employees. If these deductibles – the amount a family has to pay out-of-pocket before any insurance coverage kicks in – rise to $1500 a year, it will be much worse for those working for smaller, less prosperous companies.

McCanne also comments on reports from the AMA that Highmark, the large Western Pennsylvania Blue Cross / Blue Shield affiliate, will be purchasing its own health system, where it will be able to profit on both ends, or, at least not pay as much for care. He observes that this will enhance its financial status, but not benefit patients, who will be preferentially locked into care at West Penn. The greatest complaints are from the competing University of Pittsburgh Health System, which believes it will Iose patient revenue from such an arrangement. So the conflict here is between the benefit for one health system versus another. It is not benefit for state versus city government as in the Emblem case, but it is still not about the health of the people. It continues to be about how the money from healthcare is distributed among the various players, including as insurance companies, hospitals and doctors.

My hospital, the University of Kansas Hospital (UKH), has done very well financially. In the most recent “Book of Lists” sent to subscribers to the Kansas City Business Journal (not on line; a copy will cost you $65, or $169.95 for immediate download!), it had the greatest revenue in the Kansas City area, at over $2.5B, more than $1B ahead of #2. The physicians who staff the hospital, faculty of the University of Kansas Medical Center, are seeking a restructuring of the current affiliation agreement to share more of that revenue with the doctors. As one of them, I do not disagree with the concept that the physicians, whose work generates much of the revenue, should share more equally, but, as with West Penn and University of Pittsburgh, this is about who gets what, not about how to provide better healthcare for less money to more people.

Health industry consulting groups, such as the Advisory Board, warn hospitals that there will be major cuts to their income resulting from federal budget cuts and programs such as pay-for-performance (P4P) and “value based purchasing” (this is “value” in the economic sense, that is cheaper, rather than having anything to do with “values”, such as caring for the sick!) Hospitals like UKH worry about whether their up-to-this-point successful strategy of investing in the highest-profit “product lines” such as heart disease and cancer will continue to work in the changing reimbursement system. They sense a pressure, as do physicians, to enter into “health systems”, collaborations, to maximize efficiency and profit (or at least not make much less than they are). There is a certain irony in pressures to re-create the managed care era.

But, because that “re-creation” is still about how hospitals, doctors, and insurers can make money, not about how we can provide the best health care for the most people, it is re-arranging deck chairs on the Titanic. If, when, we hit that proverbial iceberg and the ship goes down, many people will be hurt. Sure, just as on the Titanic, it will be the poor people on the lowest decks who get hit the worst. Then, the middle class. And even some of the rich, and some of the officers will go down. But, if you are a betting person, you bet on the most privileged being the most likely to survive; you would have been right in on the 1912 sinking of the boat, and you’d be right 100 years later in health care.

One day maybe we will develop a health policy that engenders behaviors that are about providing the best health to all of our people.
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