By now everyone has heard the phrase “Big Pharma.” Lately, its pricing power has come under attack even from supposed allies such as a Republican President. Less attention has been paid to the notion of “Big Medicine,” but it has become a reality for many people without them realizing the ramifications. Ostrov has published a news article titled “Patients Suffer As Insurers and Big Health Systems Spar For Market Share.” It focuses on a contract fight between Anthem Blue Cross of California and Sutter Health, where the latter will be “out of network” beginning in July.
Sutter Health is described as a system which operates 24 hospitals with about 5,000 physicians in its network. Certainly, it is “big medicine.” Proponents argue that only a system like Sutter is big enough to negotiate with “big insurance” on a relatively equal footing. The problems this fight poses are illustrated by case studies, and examples from other parts of the country are also reported. It concludes by noting that Anthem is being investigated by state regulators in California, and notes it reported $3.8 billion in profit in 2017. I don’t propose to take a position in this argument, but rather use it to point out the race to bigness has a lot of financial impetus. Hospitals, doctors, drug stores, pharmacy benefit managers, and insurance companies everywhere are in the process of forming business combinations to make sure they retain their part of the health care dollar.
Jeff Goldsmith points out one problem is that many “health systems” aren’t really systems, rather they are agglomerations of business units with a common letterhead. He lists several characteristics a real system should exhibit, which I think are worth repeating. First, he points out “owning assets means nothing to patients and their families.” I have had many conversations with people who talk about getting “assets cheap” but haven’t really got a strategy for using those assets for anything other than bargaining power with an insurance company.
“The core of a health system should be a sentient clinical entity governed by the clinicians themselves, with system logistical and financial support. This means that its clinicians—whether they are employees, contractors, or independent practitioners—must collaborate in a consistent way across the system. The care they provide must be organized, not improvised. It must be driven by consensus best practice and grounded in the best available scientific evidence of what works. To drive results, the clinical enterprise should rely on strong professional values articulated by clinical leadership, not compensation formulae. Care performance should be constantly examined and continuously improved.”
I have spent a great deal of time and energy over the years discussing this issue with health care administrators and physicians, mostly without constructive results. I have thought a lot about why success has been so rare and so difficult. At the risk of being unfair to some of those individuals, let me summarize what seem to be the chief issues first with administrators, then with physicians.
Administrators generally assume physicians make a sharp distinction between “my money and your money.” Of course, we all know it is easier to spend other peoples’ money, but here the thought seems to be doctors are paid piece-rate, so they only care about things that increase their money. They don’t care about the impact of their behavior on the system. By the same token, doctors recognize when they are being asked to forego income to make some change, but know the administrator, who is salaried, won’t pay a personal cost for the change.
There also seems to be an assumption that healthcare is too important to be left to the doctors, who can’t organize their way out of a paper bag. I once heard an administrator who had started working for a medical group and then moved over to the hospital side after a merger report that his new administrative colleagues were horrified at what he called “the rough Jacksonian democracy” of the doctors. While this might not appear to be a substantive issue, I argue it is the basis of the cultural divide between doctors and administrators that makes “system-ness” hard to attain.
Doctors have their issues, too. The biggest, in my view, is the difficulty of changing from a 1:1 view of relationships that is the core of medical practice to a 1:n relationship that is the core of administrative practice. Taking care of groups of people is hard for physicians to understand sometimes. The tendency to think of the patient who is the exception, rather than the patient who is typical, when thinking about best practices, makes progress hard to obtain.
Physicians are often over-scheduled, particularly if they are not meeting their income expectations. Many practitioners have worked hard to eliminate “downtime” from their daily schedules to maximize productivity. Thus, it is challenging for them to make time to sit down with administrators to talk over issues and develop possible solutions. Too often, physicians write off the meeting as “I haven’t got time to waste on this meeting where nothing is going to happen.” Or they come but spend the time on their cell phones answering text messages from the hospital. As a result, establishing “consensus best practice” is difficult, if not impossible. Some might argue if the doctors were employees and salaried to do the work, it might happen. Maybe, but it would require protecting time. Further, systems could compensate independent physicians for their time and effort, so this is not an insurmountable barrier.
Mr. Goldberg concludes with two other points. First, real systems will provide a seamless and consistent experience across the system for patients and their families. Sometimes no one spends much effort thinking about the bureaucratic impediments they experience—consider patient registration and medication reconciliation as two common examples.
Second, real systems will actively, and proactively, manage their cost of care. Yet few hospitals know what the marginal cost of any component of care is. The mandate to become “transparent” on pricing has caused them to place charge-master spread sheets on the Internet, but no-one, including the hospital business people, know how much is actually costs to deliver a “standard” bundle of services for a given patient. Intermountain Health has spent more than a decade and untold millions of dollars trying to develop this capacity, with intermediate results, but most haven’t thought the effort had any return on investment. Yet, until health care systems know how much it costs to deliver given bundles of service, they will continue to approach contract negotiations as wanting what we got last year plus X % more. Insurance companies have used this approach to pricing coverage but are meeting resistance in the market place. But this clash of perspectives leads to the sorts of struggles outlined by Ostrov in her article, and patients will continue to be adversely affected.
31 January 2019.
 Ostrov, Barbara Feder. Patients Suffer As Insurers and Big Health Systems Spar For Market Share. 30 January 2019. https://www.npr.org/sections/health-shots/2019/01/30/689543362/patients-suffer-as-insurers-and-big-health-systems-spar-for-market-share. Accessed 30 January 2019.
 Goldsmith, Jeff. What a “Health System” Is and Isn’t. 24 January 2019. https://hbr.org/2019/01/what-a-health-system-is-and-isnt. Accessed 24 January 2019.
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