“If you think health care is expensive now, wait until you see what it costs when it’s free.” 
- P.J. O’Rourke

Regardless of one’s political persuasion, no one hopes for a future health system that creates worse patient outcomes at higher cost. However, that is where we are headed under the Affordable Care Act (ACA). While the goals of the ACA are laudable, the execution of the plan is faulty, from the website, to enrollment of doctors and patients, and inclusion of hospitals.  You can have your insurance plan, but you can’t. You can have your doctor, but you can’t. You can have the highest quality medical care, but –oops – you can’t have that either.

In a graphic example of cost cutting myopia, the state chartered health care exchanges in Washington, California, and Minnesota do not offer any health plans that would allow access to the states’ most sophisticated hospitals. Specifically, the exchanges will not pay for Washington patients to go to Seattle Children’s Hospital, or California patients to go to Cedars-Sinai Hospital in Los Angeles, or Minnesota patients to go to The Mayo Clinic (Washington Post, Nov 9, 2013).

These centers of excellence are more expensive than community hospitals for patients with same diagnoses, but they also treat illnesses that community hospitals can’t, create innovations in medicine, and train the next generation of doctors to use them. In the name of short-term affordability, these state-run exchanges hurt patients needing specialized care, and will cost all of us money in the long run.  The Mayo Clinic, Massachusetts General, Beth Israel, Seattle Children’s Hospital and their ilk have the singular ability to care for complex patients, analyze the data, and develop solutions that can be implemented by smaller hospitals everywhere.  They require a critical mass of patients to do this. If one deprives them of patients, and revenues, the innovation cycle will slow or stop. We, as a nation, already tried to save money by denying care at these hospitals with HMO’s. It was a bad idea then; equally so now.

We have beneficial goals that are inextricably linked. Centers of excellence develop medical innovations that result in lower costs of care which create the funds for universal coverage. While short-sighted bureaucrats will reflexively deny access to sophisticated care to save money, the brighter bulbs recognize that improving care cuts costs.

The Beth-Israel Deaconess Medical Center (BIDMC) is improving the care of congestive heart failure. The average cost associated with a CHF hospitalization is $10,000. While approximately 14% of Medicare beneficiaries have heart failure, they account for 43% of Medicare spending. BIDMC has installed remote biometric sensing devices in the homes of patients with congestive heart failure and trained a team of home care visitors, remote technicians, and physicians to interpret patients’ home symptoms and data, providing care at home or admitting patients to the hospital before they are critically ill.  Early results indicate that savings of 50% might be possible. In terms of dollars, every 200 CHF patients costs $1.2 million annually when unmonitored. Same group costs $540,000 on the monitored program. Annual Medicare expenditure on CHF is 31 billion dollars a year, so the potential savings is billions. Better care equals a better bottom line. To Beth Israel’s credit, this effort in medical excellence preceded the Affordable Care Act.

Massachusetts, having seven years more experience than the rest of the country,  has followed a much more sensible path than the Affordable Care Act. Our insurance plan allowed hospitals to increase revenues while the hospitals absorbed the cost of consolidation (if you’ve been wondering why your premiums have risen).  Massachusetts now has organized hospital systems, called Accountable Care Organizations, such as Partners and BIDMC, and the state expects them to decrease expenses as they enjoy efficiencies of scale, purchasing leverage, and better terms from insurers. In addition, the ACO’s can direct patients to lower cost community hospitals in their network when the diagnosis is appropriate, such as Lahey Clinic does with Beverley Hospital. The hospitals will make more money as well as they at innovate, as in the Beth Israel example.

The Affordable Care Act does not recognize innovation for its ability to contain cost.  Instead it recruits highly biased “expert” panels to discourage utilization, most notably the US Preventive Services Task Force recommendation to stop Prostate Specific Antigen (PSA) testing and to curtail mammography in certain age groups, rather than reshape how screening tests are used. Caveat emptor.

The Federal Trade Commission relaxed antitrust regulations on hospital mergers in 1996, and the nascent Partners Healthcare purchased North Shore Medical Center the same year. We now have several large hospital networks across the country that are capable of analyzing the cost of care. They also have the financial wherewithal to bring out their own insurance plans, either in conjunction with private insurers, or on their own.

Hospital systems are offering plans, and the most educated purchasers of health care – their own physicians, administrators, nurses, and staff – are signing up. While nothing is settled, one future is where one purchases medical insurance from hospital systems that include centers of excellence, as well as convenient local networks of primary care providers. The federal government’s role in insurance will be confined largely to subsidy programs like the Affordable Care Act, Medicaid, and Medicare. The majority of American citizens, and especially those working for American corporations, will prefer to pay less, and still have access to the best medical care when needed

(FYI – The government tried to get into the innovation business last year. Medicare gave 32 hospitals  “Pioneer” status (including coincidentally Beth Israel) to serve as innovators-who-cut-costs, and agreed to share savings 50/50. Only 88 million dollars were saved, and 9 of the 32 hospitals dropped out because the administrative costs were more than the savings. This exemplifies policy makers myopia. Medicare claims to operate with “2%” administrative costs, but those are their internal costs to create regulations, not the costs of hospitals’ implementing regulations, which costs many times more. So they created a showcase program that was too expensive to work.)

James Katz MD

Be the first to know

Join our mailing list to receive Dr. Katz' blogs, medical insights, and advice. 

Thanks! You have successfully subscribed.

Pin It on Pinterest

Share This