1.
Featured Article:
The Innovator's Prescription to Transform Health Care
The Innovator's
Prescription: How Disruptive
Innovation Can Transform Health Care
By Clayton
Christensen, Harvard Business School, April 2008
Disruptive Technologies: A driver of leadership failure and the source of new
growth opportunities. Disruptive technologies always start at the bottom. Their
struggle is to sustain that innovation and keeping pace with technological
progress and improved performance that customers can utilize or absorb.
Entrants nearly always win. Meanwhile, incumbents who are able to sustain
innovation and keep pace with technological progress, also nearly always win.
The trajectory of technological progress, nearly always outstrips the ability
of customers to utilize that progress.
In medicine, the x-ray was
disrupted by the CT scan, which in turn was disrupted by the MRI, and now the
MRI has been disrupted by the PET scan.
The microprocessor was
disruptive of the large IBM mainframes. IBM, however, has been able to sustain
innovation at this time.
Toyota, coming in at the
bottom of the market, disrupted General Motors and Ford. This creates conflict
within those companies. Toyota started with the very basic Corolla, and then
gradually moved upward to the Camry, Avalon, and then Lexis.
Meanwhile, General Motors
and Ford were already there. It's so easy to continue upwards in that
trajectory, but so difficult to move downward. They already had the high-end
customers for which the ordinary automobile would never satisfy. However, in
their conflict, GM & Ford aimed downward, made smaller and cheaper cars and
lost their quality as Toyota continued their upward trajectory in quality,
performance, value and price. It made no sense to go down, when they had the
option of going upwards and competing with Mercedes and the world's best.
The same disruption is
happening from the department stores to Wal-Mart to Internet marketing; from
IBM, to Microsoft, to Linux; from AT & T, to Cingular, to Skype.
Disruption in production
moving from Japan, to Korea and Taiwan, to China and India; The Sony DiskMan
being replace by the Apple iPod; and now Cell Phones.
Disruption in business has
been the key to progress.
There are three enablers of
disruption: Technological; Business Model; Commercial system
Disruption is facilitated
when historically valuable (and expensive) expertise becomes commoditized. Then
when disrupted, experimentation and problem solving occurs. Then patter
recognition occurs.
Molecular diagnostics and
imaging technologies are important technological enablers for disruptive
business models in health care. The body has a limited number of symptoms.
There are not enough symptoms to go around for each disease to have its unique
one. Symptoms are not specific to each disease. Then patterns begin to emerge.
Intuitive Medicine is the
standard approach of treatment. Intuitively, physicians have learned that one
therapy in hypertension may not work in another patient with hypertension. In Diabetes, there is elevation of blood
sugar. There are about 20 causes of such elevation or hyperglycemia. Empirical
medicine is the process of determining which of the causes are present in a
particular patient. The Precision Medicine is targeting that particular
etiology or cause to make an accurate diagnosis and a more specific treatment
program.
What is a business model,
and how is it built?
The following basics on
which to build are interdependent.
THE VALUE
PROPOSITION: A
product that helps customers do more effectively, conveniently & affordably
a job they've been trying to do
PROFIT FORMULA: Assets & fixed cost structure, and the margins & velocity
required to cover them.
PROCESSES: Ways of working together to address recurrent tasks in a
consistent way: training, development, manufacturing, budgeting, planning, etc.
RESOURCES: People, technology, products, facilities,
equipment, brands, and cash that are required to deliver this value proposition
to the targeted customers.
We always revert to a fee
for service. Everything is unique. There is no alternative.
There are three types of
business models.
SOLUTION SHOPS,
examples are as follows:
•Consulting
firms
•High-end law firms
•R&D
organizations
•Diagnostic
activities of hospitals
VALUE CHAINS, examples
are as follows:
•Manufacturing
•Food
services
•Retailing
•Medical
procedures
FACILITATED USER
NETWORKS, examples are as follows:
•Telecommunications
•Insurance
•EBay
•D-Life
(for diabetes patients & families)
Business model
disruption in health care
Today's hospital and
specialists physician practices are agglomerations of Solutions Shops, Value
Chains, and a few are Facilitated User Network Activities.
Hospitals become focused
solution shops, practicing intuitive medicine;
Focused value chain
hospitals provide procedures after definitive diagnosis;
Facilitated networks
take dominant role in the care of many chronic diseases.
Disruptive innovation in the hospital
business model
"General
hospitals" and "Focused value chain hospitals are both driven by
profit."
The Value Proposition of a General Hospital: Don't
know what's wrong? We can address any problem you bring.
The Value Proposition of
a Focused Value Chain Hospital: When you know what you need, we provide it
efficiently, effectively.
Disruptive business model innovation in
physicians' practices
The "physician's
office" and the "three minute clinic" are both driven by profit.
The Value Proposition
of a "physician's office" is: "The solution to any problem
begins here."
The Value Proposition to
a "Three minute clinic" is "Fast, convenient resolution of
rules-based acute disorders."
Integration will be
crucial
Reimbursement
Rational, accurate
pricing
Licensing restrictions
Behavioral incentives
Personal electronic
medical records
The above five are all
interrelated. One cannot discuss reimbursement without rational pricing. One
cannot have rational pricing without understanding licensing restrictions,
incentives or EMR. Hence, all five must move together.
Disruptions are
rarely "hot-swapped" into the old commercial system. An entirely new
commercial system typically emerges to replace the old one.
Everyone in the health
care has a different perspective. There
was an extensive discussion of the patients, providers, employers, insurers,
and the politician's perspective. The politician's perspective was the easiest
to keep accurate:
Help me stay in office
while I balance the budget
Make health care
affordable and conveniently accessible
The
predictive power of theory improves markedly when careful researchers move
beyond statements of correlation to statements of causality.
The reactors were Delos (Toby) Cosgrove,
MD, CEO and President, Cleveland Clinic Foundation who pointed out the
disruptive technologies in coronary disease as technology allowed more accurate
diagnosis and therefore, treatment including managing arrhythmias via the
internet; Grant Harrison, VP, Integrated Consumer Experience, Humana, Inc, and
Lee Shapiro, President, Allscripts, who spoke about the Electronic Medical
Records.
Clayton Christensen, co-founder
of Innosight, is also the Robert and Jane Cizik Professor of Business Administration at
Harvard Business School, where he teaches Technology & Operations
Management and General Management. His research and teaching interests center
on the management of technological innovation, developing organizational
capabilities, and finding new markets for new technologies.
You can read more about Clayton Christensen at www.claytonchristensen.com
*
* * * *
2. In the News: Environmentalist Predictions
A minority view: Environmentalists' wild
predictions by Walter E. Williams
Now that
another Earth Day has come and gone, let's look at some environmentalists'
predictions that they might prefer we forget.
At the first
Earth Day celebration in 1969, environmentalist Nigel Calder warned, "The
threat of a new ice age must now stand alongside nuclear war as a likely source
of wholesale death and misery for mankind." C.C. Wallen of the World
Meteorological Organization said, "The cooling since 1940 has been large
enough and consistent enough that it will not soon be reversed."
And in 1968,
Professor Paul Ehrlich, former Vice President Al Gore's hero and mentor,
predicted that there would be a major food shortage in the United States and
that "in the 1970s … hundreds of millions of people are going to starve to
death." Ehrlich forecasted that 65 million Americans would die of
starvation between 1980 and 1989, and that the US population would have declined
to 22.6 million by 1999. Ehrlich's predictions about England were even
gloomier: "If I were a gambler, I would take even money that England will
not exist in the year 2000."
In 1972, a
report was written for the Club of Rome, warning that the world would run out
of gold by 1981, mercury and silver by 1985, tin by 1987, and petroleum,
copper, lead, and natural gas by 1992. Gordon Taylor, in his 1970 book, The
Doomsday Book, wrote that Americans were using 50% of the world's resources
and that "by 2000 they [Americans] will, if permitted, be using all of
them." In 1975, the Environmental Fund took out full-page ads warning,
"The world as we know it will likely be ruined by the year 2000."
Further, in
1970, Harvard University biologist George Wald warned, "civilization will
end within 15 or 30 years unless immediate action is taken against problems
facing mankind." That was the same year that Senator Gaylord Nelson
warned, in Look Magazine, that by 1995 "somewhere between 75 and 85
percent of all the species of living animals will be extinct."
Latter-day
doomsayers are not the only environmentalists who have been wrong. Doomsayers
have always been wrong. In 1885, the US Geological Survey announced that there
was "little or no chance" of oil being discovered in California, and
a few years later they said the same about Kansas and Texas. In 1939, the US Department of the Interior
said American oil supplies would last only another 13 years. In 1949, the
Secretary of the Interior said the end of US oil supplies was in sight. Having
learned nothing from its earlier erroneous claims, in 1974, the US Geological
Survey advised us that the United States had only a 10-year supply of natural
gas. The fact of the matter, according to the American Gas Association, is that
there is a 1,000 to 2,500-year supply.
Here are my
questions: In 1970, when environmentalists predicted man-made global cooling
and a coming ice age, and warned us that millions of Americans would starve to
death, what kind of government policy should the United States have undertaken
to prevent such a calamity? When Ehrlich predicted that England would not exist
in the year 2000, what steps should the British Parliament have taken in 1970
to prevent such a dire outcome?
In 1939, when
the US Department of the Interior warned that Americans only had oil supplies
for another 13 years, what actions should President Roosevelt have taken?
Finally, what makes us think that environmental alarmism is any more correct
today, now that environmentalists have switched their tune to man-made global
warming?
Here are a few
facts: . . . To read the rest of this report, go to
www.fraserinstitute.org/Commerce.Web/product_files/EnvironmentalistsWildPredictions.pdf.
*
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3. International Medicine: Wishful thinking about Canada's current health care system
Wishful
thinking to believe Canada's current health care system is financially
sustainable
TORONTO,
ON-The current rate of government spending on health care is not sustainable,
despite the wishful thinking expressed in articles published in a recent edition
of the Canadian Medical Association Journal, says Brett Skinner, Director of
Health, Pharmaceutical and Insurance Policy Research for independent research
organization The Fraser Institute.
In
his latest paper, Misinformation and Wishful Thinking about Medicare's
Sustainability, Skinner refutes arguments put forth by Irfan Dhalla
and François Béland in the July 2007 edition of the CMAJ suggesting there is no
reason to worry about the annual rate of growth in government spending on
health care.
"The
articles contained methodological and conceptual errors that resulted in
misleading conclusions," said Skinner, who has published several
peer-reviewed studies examining the sustainability of Canada's health care
system.
Skinner
points out that the Dhalla and Béland articles only looked at health
expenditure trends during the 1990's -- a time dominated by unpopular
government restrictions on health spending and rationing of access to health
care resources.
"But
the slowdown in spending growth was only temporary because restricting access
to necessary medical care is not a sustainable way to control health
costs," he said.
"Since
1997 public health spending has continued to increase, growing much faster than
our ability to pay for it through the public system alone."
Skinner
points out that one of the articles also excluded spending on drugs and other
out-patient services funded through various provincial health programs, a logic
that implies public money spent on doctors should be counted, but not the
public money spent on the treatments they prescribe.
Skinner
argues that the most accurate way to measure sustainability of health care
spending is to look at the ratio of public health spending to government
revenue, which measures the ability of government to pay from current revenues.
This
metric directly satisfies the definition of long-run sustainability and
immediately exposes any attempt to use deficits to finance public health
spending. The ratio of public health spending to revenue also makes the tax implications
clear.
For
example, if public health spending is to be kept at a stable percentage of
revenue, then revenue must grow at least as fast as public health spending. If
the required growth rate for revenue is higher than can be generated by GDP
growth alone, it is clear that, if governments insist on clinging stubbornly to
the existing system of financing health care, tax rates must rise or new taxes
must be introduced. . .
Skinner
finds that researchers who deny that the growth of government spending on
health care observed in Canada is unsustainable base their analyses on four
unrealistic assumptions:
·
That the scope of coverage for and access to medically necessary care can be
reduced indefinitely;
·
That tax rates can increase indefinitely to fund health spending growth;
·
That the proportional growth of spending on health care can indefinitely
squeeze out spending on other things; and
·
That any of the above can happen without negative medical, economic or
political consequences.
"Past
research has clearly demonstrated that each of these assumptions are not
realistic and Canadians should not be lulled into a false sense of security by
such wishful thinking," Skinner said.
"Whether
you look at health care spending trends over the past five years or over the
past 31 years, the conclusion is the same – our current public health care
system is not financially sustainable."
Read
the entire report at www.fraserinstitute.org/newsandevents/news/4561.aspx.
Canadian Medicare does not give timely access to
healthcare, it only gives access to a waiting list.
--Canadian Supreme Court Decision 2005 SCC 35, [2005] 1 S.C.R.
791
http://scc.lexum.umontreal.ca/en/2005/2005scc35/2005scc35.html
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4. Medicare: Dead Doctors Get Paid Well by Medicare
Report Links Dead Doctors to
Payments by Medicare By ROBERT PEAR, NYT, July 9, 2008
WASHINGTON
- Congressional investigators said Tuesday that Medicare had paid
tens of millions of dollars to suppliers improperly using identification
numbers of doctors who died years ago.
The
government has no reliable way to spot claims linked to dead doctors, many of
whom are still listed as active Medicare providers though they died 10 or 15
years ago, the Senate Permanent Subcommittee on Investigations said.
Medicare
covers wheelchairs, walkers, home oxygen equipment and many other types of
medical equipment. When suppliers file claims for equipment provided to a
Medicare beneficiary, they normally must list an identification number for the
doctor who prescribed or ordered it.
"From
2000 to 2007, Medicare paid 478,500 claims containing identification numbers
that were assigned to deceased physicians," the subcommittee said in a new
report. "The total amount paid for these claims is estimated to be between
$60 million and $92 million. These claims contained identification numbers for
an estimated 16,548 to 18,240 deceased physicians."
In 16
percent of these cases, the report said, suppliers used identification numbers
of doctors who had been dead for more than 10 years. In one case, Medicare paid
more than 2,000 claims totaling $479,000 for services provided from 2002 to
2007, even though the doctor had died in 1999.
Another
doctor died in 2001, but his identification number was used in more than 3,800
claims from 2002 to 2007, with payments totaling more than $354,000.
"Scam
artists have treated Medicare like an automated teller machine, drawing money
out of the government's account with little fear of getting caught," said
Senator Norm Coleman of Minnesota, the
senior Republican on the subcommittee. "When Medicare is paying claims and
the doctor has been dead for 10 or 15 years, you know there is a serious
problem."
The
subcommittee, headed by Senator Carl Levin, Democrat of Michigan,
plans to hold a hearing on the issue on Wednesday.
Herb B.
Kuhn, deputy administrator of the Centers for Medicare and Medicaid Services,
said he shared the concern that "Medicare is continuing to pay claims to
providers who are using invalid or inactive physician numbers.". . .
Mr. Levin
said Medicare and its contractors shared responsibility for "this taxpayer
rip-off."
About
2,500 doctors who died before 2003 "still had active identification
numbers" in May of this year, Mr. Levin said.
www.nytimes.com/2008/07/09/washington/09fraud.html?pagewanted=print
Government is not the solution to our
problems, government is the problem.
-
Ronald Reagan
* * * * *
5. Medical Gluttony: Cyber Medicine without Cyber Space;
The Hazards of Practice
A patient from the foothills who drives an hour to our
office states that when he doesn't show up for appointments, I should just
pretend he's sitting in the patient chair, go through the motions, write up a
visit and send in the usual charges.
I immediately told him this was
not only dishonest, but highly unethical and violated the Medical Practice Act.
He said that he understood that.
But that was no reason not to proceed. He further stated that it was a win-win
situation. He would save a tank full of gas and I would preserve income from
him.
He thought this was funny until I
warned him that I normally don't care for people who suggest criminal behavior
that jeopardizes my licensure.
He laughed half-heartedly saying
it was really a joke. He really got worried that he might have to find another
lung doctor. He apologized profusely, held out his hand to make sure I forgave
him.
This reminded me of another patient who tried to be
helpful. He thought he was making a helpful suggestion about how I could double
my income. He said I was too thorough and should spread out my consultation. He
suggested doing the pulmonary function on one visit, the chest x-ray on another
visit, return again for the electrocardiogram and a final visit after the lab
testing. I thanked him for his concern but told him I didn't know of any
patients that would allow themselves to be so greatly inconvenienced.
A kindly old family doctor
saw an officer as a patient. He thought he was examining a deputy sheriff and
when he was leaving, the patient asked him to authorize a cane for his mother
who would be coming in the next week. The doctor had been doing kindly things
for his patients and their families for forty years as an old country doc. Not
being aware of the details of the Medical Practice Act, he signed the script
and handed it back to his new patient with a smile. "Glad to oblige,"
he said. "I'll be looking forward to seeing your mother next week."
The officer stated that there would be no mother, and that the doctor had
prescribed without examining the patient in violation of the Medical Practice
Act and, therefore, arrested him. After handcuffing him, he led him through the
waiting room where his patients were aghast. His staff tried to explain as they
cancelled the appointments. This kindly doctor did some jail time and never
practiced again. His quarter million dollar investment in his education just
depreciated 100 percent to zero. What a waste of a valuable professional
education.
This family doctor probably did more good for
humanity than a dozen officer stoolies.
*
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6. Medical Myths: Organized Medicine Supports Doctors
Organized Medicine's Unhealthy Focus on "Medical Loss Ratio" By John R. Graham, Pacific Research Institute
Why
Does the California Medical Association Want Accountants to Run Health Care?
The California Medical Association has released its annual
ranking of the state's health plans. No, the ranking does not
measure health plans by the degree to which their reimbursement
policies hew to medically recognized standards of care, which I believe
most laymen would consider a public service.
Instead, they've measured health plans by the medical
loss ratio (MLR): the percentage of premium dollars spent on medical
care, as opposed to administrative costs. Currently, this is an accounting
measure that California health plans report to the state, but which has no
regulatory implications. The CMA supports a bill, SB-1440, that would mandate an MLR of
at least 85 percent.
While this sounds patient-friendly, it is not. I
addressed the fallacy of regulating the MLR in my January paper on the California Health Care Deforminator, ABX1 1,
the Schwarzenegger-Nuńez bill that also included an 85% MLR.
Put simply, the MLR is an accounting measure, not a
measure of quality or efficiency. For some plans, the MLR is quite
impossible to interpret, especially those that serve government programs. For
example, Molina Healthcare of California is a Medicaid managed-care plan that
reported an MLR of 167.26 for 2006. Obviously, there is no real way for a
health plan to spend two-thirds more on medical costs than it earns!
According to Professor James C. Robinson of the
University of California, Berkeley, "the Medical Loss Ratio is an
accounting monstrosity that enthralls the unsophisticated observer and distorts
the health policy discourse." There are a number of reasons for this
"monstrosity," according to Professor Robinson. Many health insurers
compete in markets across the country, allocating overheads across state lines,
which makes accounting conventions even more arbitrary.
Narrow networks obviously have fewer administrative
costs than broader networks, but patients appear to value broader networks
nevertheless. Also, integrated managed-care organizations, such as Kaiser
Permanente, can have much higher MLRs because they move administrative costs to
the provider side of their organizations. PPOs have higher administrative costs
because they cannot do this.
Regulating the MLR is also deadly for
consumer-directed plans, which are becoming increasingly popular. Let's assume
a scenario where a consumer-directed health policy incurs exactly the same
costs as a traditional policy. (In fact, this is unlikely, because total costs
of consumer-directed plans are significantly lower than for traditional ones,
as patients have better incentives to control costs.) The traditional policy
costs $4,000 and spends $3,400 on patient care, for an MLR of 85.00. With the
consumer-directed policy, the patient controls $800 more of the medical
spending than with the traditional policy (through a higher deductible), and
his premium goes down by $800. In this case the MLR goes down to 81.25
($2,600/$3,200). There is no real difference, but the accounting looks worse.
The CMA's report also rails against the
"profits" of the for-profit health plans, blaming high MLRs on
capitalism. (To drive the point home, the report gratuitously announces the
total remuneration of senior executives at health plans that are listed on the
stock market. I wonder when the CMA will publish remunerations of the highest
paid doctors in the state?)
But of the three health plans with the
"worst" MLRs, which the CMA chose to single out in its press release,
one is a not-for-profit. Of the two plans that it singled out for the
"best" MLRs, one is for-profit. There is no consistent
relationship between a health plan's taxable status and its MLR.
Somehow, the CMA believes that if the law compelled
all health plans to magically adhere to an 85% MLR, that money would go to
patient care. But it would not: capital would flee the state, fewer
medical procedures would get done, and more Californians would become dependent
on the state for health care. . . .
Organized medicine must focus on restoring physicans'
right to practice medicine - not imposing a government accountant's right to
practice it for them.
http://liberty.pacificresearch.org/blog/organized-medicines-unhealthy-focus-on-medical-loss-ratio
It's time
that physicians have an organization that supports the doctor-patient
relationship.
*
* * * *
7. Overheard in the Medical Staff Lounge: Peer Review:
Doctors policing their competition
Dr. Dave: I received a letter from the medical staff office
that I had a patient in the hospital with a BP of 160/90 and I wasn't very
aggressive in reducing it to the 120/70 range.
Dr. Patricia: Isn't that the goal on reducing BP?
Dr. Rosen: I go to the Medical Grand Rounds at UC Davis and the
visiting professor stated that 160/90 should be considered the normal for
people in their eighth decade of life.
Dr. Dave: Well my patient was 80 or approaching the ninth
decade of life.
Dr. Patricia: I go to our hospital noon conferences and I've never
heard of a normal being that high.
Dr. Dave: I think that points out the hazard of doctors who are
in competition with each other reviewing each other's charts in Peer Review.
The doctor being reviewed can be made to look bad when in fact, s/he may know
more than the doctor reviewing the chart.
Dr. Milton: It wouldn't be so bad if these were open discussions.
But Peer Review is a closed confidential system designed to eliminate bad
doctors.
Dr. Dave: Precisely. It is being utilized as a system to
eliminate those who are perceived as bad doctors when instead the reviewing
doctor may be the one most out of date.
Dr. Rosen: Of interest to me at the Medical Grand Rounds was a
question the visiting professor asked. "Do you want my professional
opinion or do you want the evidenced-based opinion?"
Dr. Dave: That was an interesting response. I can't wait.
Dr. Rosen: The doctor in the audience replied, "Give us
both."
Dr. Milton: This is an unbelievable response from a professor.
Dr. Rosen: The visiting professor gave the evidence-based
opinion quoting all the conflicting references and said the information for the
best evidenced-based answer was not well defined. He then gave his own clinical
opinion, which I'm sure the evidence will eventually uphold.
Dr. Dave: This just shows that the cut and dried measurements
of a doctor's competence leaves a whole lot to be desired.
Dr. Milton: Looks to me like this is a hazardous road for doctors
to allow. What can we do?
Dr. Sam: I think we need to email these types of problems to
the entire medical staff individually and throw the medicine committee out.
Dr. Rosen: Easier said than done.
Dr. Sam: If we all just respond to the last newsletter we got
from the department, and answer it so all those 400 email addresses are still
in there, and change the body to what we just talked about, then we all can
inform the entire medical staff of the problem.
Dr. Milton: Don't you think herding doctors into a unified
response is like trying to herd a flock of chickens?
Dr. Sam: But the chickens will do enough pecking and
cackling. I think the attention may make the powers that be rather
uncomfortable.
Dr. Rosen: But the culprits will tolerate almost any pain to
protect their hospital-based income and drive the competition into the National
Data Bank.
Dr. Sam: And the NDB is the permanent tomb for doctors. Once
there, they're dead. Never to compete again.
Dr. Milton: And their families have to apply for welfare.
Dr. Rosen: Who would have thought while in medical school that
doctors would ever be bottom dwellers?
Dr. Sam: Well, I've thoroughly discouraged my kids from ever
going into medicine. That's like sending sheep to the slaughter.
*
* * * *
8. Voices of Medicine: A Review of Local and Regional
Medical Journals
SONOMA MEDICINE, the Magazine of the Sonoma County
Medical Association, Spring 2008
FEATURE ARTICLE - What's Really Killing
Medicine By Brien Seeley, MD
Wanna fix health care in the United States? Then fix the
ridiculous way the system pays physicians and other providers. Having recently
been forced to learn medical billing, I can attest that the current system:
- pays with
excessive delay
- uses
unfair, irrational and inconvenient rules
- offers a
bewildering array of different benefits packages from different insurers
- uses too
many payment sources (copays, deductibles, primary coverage, secondary
coverage, etc.)
- distracts
scarce physician attention from care delivery
- is
fundamentally nonproductive (delivers no health care)
- disrespects
physicians
- entails
huge, unnecessary costs
The system continues to drive many of Sonoma County's
private practitioners to outright quit or seek refuge in salaried positions
with large foundations or HMOs. Meanwhile, physicians still in private practice
are struggling just to manage the accounts-receivable quagmire.
In 2003, a New England Journal of Medicine article estimated that
administration accounted for about 31% of all health care costs in the United
States.[1] I would wager that figure substantially underestimates the true
waste. Nonproductive administrative costs are soaring because insurers are
allowed to systematically delay, deny, obfuscate and diminish payment for
services performed. Their powerful lobby and the politicians who feed from it
perpetuate this absurd system by claiming that reform would destroy private
practice and bring on socialized medicine, with its long waits for services,
lack of choice of physician, poorly trained providers, and other nightmares.
Guess what? Those scares are already here because of the payment system we have
now.
In the current system, after a patient visits a
private-practice physician, insurers usually send the patient an Explanation of
Benefits (EOB) showing a sizable-looking bill for the physician's services.
Truth be known, the bill often gets so whittled down that the physician
ultimately takes home a small fraction of the amount shown.
After the EOB is issued (typically 18 days or more), the physician can seek
payment for the remainder of the fees denied by the EOB. While Medicare
electronically forwards a claim on behalf of the physician for the remaining
amount due to the appropriate secondary insurance company (e.g. Blue Cross),
there is no guarantee that such will be paid. Nor is it likely to be paid
before a legally sanctioned 45-day delay. What's more, some secondary insurers
make it their business to hide from Medicare's electronic bill forwarding.
Only if the physician's biller assiduously follows up each EOB with another
time-consuming cycle of billing, stamping, mailing and then waiting 45 days
will secondary insurers be confronted with the obligation to pay their share.
After 45 days or more, when the secondary insurer has presumably paid, the
physician is finally allowed to bill the patient for the patient's
responsibility.
Some patients pay their bill within two weeks, but many have to be contacted
repeatedly by the physician's biller, with lengthy phone time explaining the
tortuous billing process to convince elderly, deaf or confused patients that
they do indeed owe the physician the remaining charges. That same biller must
also navigate the onerous voice-mail trees of dozens of different insurers as a
large part of each day's work, all while getting paid $20 to $30 an hour by the
physician.
This wicked diffusion of responsibility by payors divides the proper amount due
to the physician into essentially the low-hanging and the hard-to-reach fruit.
Many offices, realizing that each mailed billing statement effectively costs
them $10, simply choose not to play "fetch" and therefore do not
attempt to collect the "dregs" of $15 or less. Those dregs then
become a huge unaccounted shortfall for physicians - a hidden subsidy that is
conveniently not talked about by insurers and to which patients are oblivious.
Insurers and politicians have long perpetuated the idea that
patients should not have to pay at the time of their visit. Thus the familiar
"When you're sick, the last thing you want is to worry about paying right
then," or "Don't worry, the physician's office can easily wait to
receive payment." . . .
Physicians, perhaps the most educated of professions,
are being grossly devalued by the present system. Today, many full-time
private-practice physicians earn less than RNs, and some earn less than rookie
police officers. If we fixed our ridiculous payment system, patients would have
more options, health care would cost less and physicians would be better paid.
Such a fix could stem the collapse of private practice and its valuable legacy
of personalized care.
To read the rest of this article, go to www.scma.org/magazine/scp/SP08/seeley.html.
Dr. Seeley, a Santa Rosa ophthalmologist, serves on the SCMA
Editorial Board.
To read more VOM, please go
to www.healthcarecom.net/voicemed.htm.
To read HMC, please go to www.delmeyer.net/HMC.htm.
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9. Book Review: A Call to Action by McKinnell, speaker, 4th Annual World
Health Care Congress
A
CALL TO ACTION - Taking Back Healthcare for Future Generations, by Hank McKinnell, McGraw-Hill, New York, Chicago,
San Francisco © 2005, ISBN: 0-07-144808-X, 218 pp, $27.95.
Hank
McKinnel, Chairman & CEO, Pfizer, opens the preface with the question,
"Is our healthcare system really in crisis?" He finds the question
difficulty to answer because it makes a presumption he doesn't accept. The
phrase with which he has trouble is "healthcare system." He agrees
there's a crisis, but it isn't in "healthcare" - it's in
"sick-care."
He
quotes Mohandas Gandhi who had similar difficulty in 1932. He had led a
campaign of non-violent disobedience to help colonial India win independence
from Britain. After being named Time magazine's "Man of the
Year," Gandhi visited London for the first time. The entire world was
curious, the press swarmed wherever he went, when one reporter's hastily
called-out question became a defining moment, both for him and for the nation,
he was trying to set free.
"What
do you think of Western civilization?" yelled the reporter.
"I
think it would be a good idea," replied Gandhi.
That's
what McKinnell thinks about our healthcare system: It would be a good idea.
He
maintains we've never had a healthcare system in America. As far as he can
tell, neither has any other nation. What we've had - and continue to have - is
a system focused on sickness and its diagnosis, treatment and management. It's
a system that is good at delivering procedures and interventions. It's also a
system focused on containing costs, avoiding costs, and, failing all else,
shifting costs to someone, anyone else. In fact, discussions about better
health now take a back seat to arguments about costs. In the United States, a
nation already spending nearly $2,000,000,000,000 a year on sick care, tens of
millions of people do not have adequate access t the system. I other developed
nations, rationing and price controls undermine the patient-physician
relationship, degrade the quality of care, and add to the anxiety of
individuals struggling with health issues. An aging population around the world
clamors for relief from chronic diseases and the cumulative effects of heredity
and lifestyle behaviors. Some of these we cannot as yet prevent. Others, such as
smoking, we can.
Today,
in healthcare, we have it entirely backwards. We're like a community that
builds the best fire-fighting capability in the world but stops inspecting
buildings or teaching kids abut fire prevention. Fighting fires is sometimes
necessary, and we must be prepared to do that with the most modern technology
available. But firefighters around the world will tell you that they'd rather
prevent fires than fight them.
To
put it simply, McKinnell feels that our fixation on the costs of healthcare -
instead of the costs of disease - has been a catastrophe for both the health
and wealth of nations. By defining the problem strictly as the cost of
healthcare, we limit the palette of solutions to those old stand-bys -
rationing and cost controls. What if we reframe the debate and consider
healthcare not as a cost, but rather an investment at the very heart of a
process focused on health? Then other solutions suddenly appear out of the fog.
That's
why this book was titled A Call to Action. It represents McKinnell's
conviction that the debate on the world's healthcare systems is on the wrong
track. Unless we correct our course, we will not be able to make the same
promises to our children and grandchildren that our parents and grandparents
delivered to us: that you will receive from us a better world than we received
from our forebears. He feels that the basic biomedical research conducted by
his company is doing just that. But he's concerned that his and other
research-based pharmaceutical companies might lose the capacity to advance the
science that can change the lives of our children and grandchildren for the
better, just as polio vaccines and cardiovascular medicines and other therapies
changed out lives. . . To read the rest of the review, please go to www.delmeyer.net/bkrev_ACallToAction.htm.
--Del Meyer, MD
To read more book reviews, go to www.delmeyer.net/PhysicianPatientBookshelf.htm.
To read book reviews topically, go to www.healthcarecom.net/bookrevs.htm.
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10. Hippocrates & His Kin: Doctors are laying off
their staff.
The grape-vine in doctor's offices
frequently are the pharmaceutical reps. One told us that many of the offices
that she calls on have laid off nurses, medical assistants, receptionists and
medical billers. Some are moving to smaller offices. This obviously does have a
possible side effect of improved efficiency.
The economy has been very disruptive.
But will doctors be able to improve their bottom line?
California's Governor,
Arnold Schwarzenegger, who in the past has vetoed any increase in the minimum
wage, is threatening to reduce state salaries to the minimum wage until the
California Legislature comes up with a budget. The controller is threatening to
stop him with a lawsuit.
You suppose that a government could be run with
business accountability?
There is also a threat to
lay off thousands of superfluous government part time, seasonal, and
unnecessary workers that don't do any useful work. With the debates on talk
radio, maybe the wrong people are being laid off. The prevailing opinion is
that salaries of state legislators should go to zero until we have a state
budget.
That certainly would be very effective.
To read more HHK,
go to www.healthcarecom.net/hhk2001.htm.
To read more HMC, go to www.delmeyer.net/hmc2005.htm.
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11. Organizations Restoring Accountability in HealthCare,
Government and Society: