Wally, who is being given a neurological and cardiac workup following a car accident, is staying in a step-down unit in a private room. He has 24-hour room service, and his family has access to broadband internet in the unit's lounges. The hospital, one of two in a city of 60,000, stretches like a vast nautilus along the shores of a lake, from a tiny brick structure dating back to 1907 at one end, to an enormous new wing built in the 1990s. The hospital, part of a large clinic system, strives to be all things to everyone, from trauma to cardiac care to neurology, in spite of an excellent neurology department in the town's other hospital. The hospital bombards its public with glossy flyers, billboards and nightly television ads, striving to dominate the little town's health care market as surely as it dominates the lakeshore.
Meanwhile, Wally, who is uninsured, contemplates divorcing his wife of fifty years in order to save some of his family's assets. The dunning letters will come.
Follow along past the jump for the sixth diary in a series about Health Security America.
This diary is sixth in the Heath Security America series that I've written:
- Retired M.D. & HMO administrator speaks out introduces myself and the health care reform plan
- Health Security America: Kicking the donkey explains the need for independent administration of he new single payer plan, and why Democrats have gotten nothing done in 30 years
- Health Security America: People-powered health care introduces the blueprint of HSA's independent administration
- Breaking the special interest hammerlock on health care outlines the "8 inviolable rules" to free up competition.
- Health Security America: Howard unbound In which I use my M.D. colleague's example to show how HSA will trim expenditures in physician and clinical services
The series draws heavily from my experience as a physician and in clinic and HMO administration, and from the
book I wrote about health care reform. In "Howard Unbound," I showed an annual savings of 142 billion dollars from the physician and clinic services, based on 2003 statistics. In this post I am going to simply give you, the citizen, a guide to controlling our hospitals to contain costs. We spend 556 billion dollars annually on our hospitals, yet they continually agitate for rate increases.
In this article, excerpted from Chapter 10, "The Hospital," I'm starting with an 83 billion dollar annual savings as a base, but also give guidelines toward achieving untold potential savings. They could easily go to the 50-percent savings side of the ledger, possibly more. The figures are huge. Add them up yourself and ask yourself a simple question. Is it time for the ordinary citizen with everyday common sense take charge of health care? We think so, and that is why the Health Security America health plan exists.
I don't claim to have hands-on experience with hospitals as I do with physicians, clinics, patient's responsibility and prescriptions. I needed to tour some hospitals and cajole a hospital administrator, a friend of mine, to "'fess up." While I will keep his name a secret, I will tell you about him and his hospital and the two associated hospital-owned clinics that he runs. The facts and figures are real, and the area is within a day's driving distance of my community, Chetek, Wisconsin. "Jim" is a good friend of mine, and has, within fifteen years of earning his MBA, become one of the top hospital administrators in the region. The hospital and its associated clinics gross 90 million dollars per year. During my interview, I asked early on what he could save in expenses, and he replied that the savings would easily total fifteen percent. His answer surprised me, since my knowledge of the business of hospitals is restricted. And while I am sure that the hospital administrators reading this paragraph are sitting bolt upright, wondering when the heat will be on them, my guess is that they will ultimately be relieved to have a different operating paradigm.
In Part Two I listed some of the rules to free up competition and thus constrain costs for physicians and clinics. But the new paradigm for hospitals under Health Security America [HSA] will be in many ways exactly the opposite, since competition among hospitals long ago ran amok. Competition among hospitals created a medical arms race of first-class proportions. The arms race metaphor refers to hospitals in close proximity to each other competing with each other for patients to create revenue. It also refers to the cold war, when the USSR and the U.S. needlessly spent billions on weapons after either side could have destroyed the world with one tenth of what already was available.
Much that I am going to describe was given to me by Jim, but not all. Anyone active in his or her community probably wonders about the same questions as I have, watching television, listening to the radio, and getting huge packages of junk mail from hospitals with a yen for profits. The rest of the "arms race" is a bit subtler, but real nonetheless.
The week of September 4th, 2005, I received a beautiful, high gloss, multi-page publication from Froedtert Hospital in Milwaukee, Wisconsin. It had imposing pictures of its leaders in administration and medicine. After reading it, one could not imagine not getting the best of the best from this hospital (it is in fact a wonderful place with a good reputation, and I am sure the care is above reproach). But my thoughts centered on the cost of the glossy publication, and why they would send it to me, when I live and work six hours away from Froedtert, yet live only two and a half hours from the world-class Mayo Clinic in Rochester, Minnesota. This publication, Jim assured me, could cost three to five dollars per piece to send out. If it went to all doctors in the state, as seems likely, then multiply the cost by 15,000. If it went out to the greater public, then all bets are off; there are five million people in Wisconsin. Froedtert Hospital invested in the mass mailing of a costly, slick flyer to somehow encourage people to use its services. Some of the money Froedtert receives comes from Medicare fees and/or patient's insurance. Given that, one can easily imagine the implications of such high-priced advertising in rising health care costs. These massive advertising campaigns should not and indeed can not continue.
On almost any night, television carries the battle of the hospitals, each one aiming to convince people to use their hospital rather than the competition just twenty blocks away. Many times, these costly ads showcase the local "arms race" by featuring a newer machine or more sophisticated technology than the competition can boast. Sometimes the carrot dangled before the potential consumer's nose is a raft of amenities calculated to remind a patient of home--or even of a five-star hotel. For instance, my friend Jim's hospital has 24-hour room service with a full menu, a waterfall in the atrium, pullout beds for relatives in patient's rooms and obstetric suites with cherrywood cabinets. The latest plans entail offering full valet service at the front door. Jim's hospital takes Medicare fees and part of those fees would be used to pay for these frills. These kinds of hyper-competitive expenditures can not continue; we all pay, yet no one can afford them, ultimately. The benefits of such competition accrue in too few accounts. In Jim's defense, patients have not complained that these services were unwarranted, but all of us can stand some straight talk.
I'm sure most readers can relate stories about their own hometown hospitals, their ad campaigns, luxuries and duplicated equipment and service. What can we do about it?
First of all, we must start with the premise that hospitals belong to all of us and are there to serve our needs above all else. HSA has a way of ensuring that.
The new operating paradigm for hospitals will be guided by the concept that hospitals are community assets to be run at the least possible cost necessary to provide the best care. There can be no question but that we will have to implement a system of regional, citizen-based decision-making in order to determine the services a given hospital will provide, constraining costs and minimizing duplication. Regional planning agencies will have to be set up to provide information to the regional representatives and board of information of HSA. (Yes, these are the same regional planning agencies that I opposed during my first thirteen years in practice. I was wrong.) This is a situation in which the regional representative will present the planning agencies' conclusions about which hospitals might do certain care and others different care, depending on the area served. One example of that might be to allow only one of two hospitals situated close together to do brain surgery and orthopedics, while the other might concentrate on pediatrics and psychiatry. Staffing and equipping two hospitals near each other to perform the same tasks--some of which are highly specialized--is cost-ineffective. We don't need competition in these situations. In fact, competition hurts, because patient volume has to be there for the hospital to be efficient and to furnish high quality care. It is vital to cut down on duplication. In Jim's case, a hospital twelve miles down the road offers the very same technical skills as Jim's, as far as diagnostic machines and procedures are concerned. It is probable that soon no one will be able to afford that kind of continual battle for updated equipment at hospitals just blocks or miles apart.
Jim discussed another problem with me--a typical problem that citizens will have to solve, under HSA. He described an instance of his hospital having an MRI and CAT scan with a clinic across the street proposing to acquire the same costly equipment, which is, frankly, absurd. The total capital costs could run into millions of health care dollars. The capital costs would come out of the pockets of the populace. We can no longer bear such waste. Regional health planning agencies in the past dealt with hospitals. Are we going to have them approve clinic purchases of this highly costly equipment? This interferes with the individual private clinics. Yet, if both of these health care facility owners don't keep their MRI and CAT scan machines tightly booked and busy, the costs will be out of line. Imagine what kind of decisions interested, responsible citizens would make, given the proposed usage and costs. If there were a true need, that sort of duplication most likely would be allowed, but not if the duplication amounted to nothing more than competitive acquisition.
I have not touched on all the different opportunities to squander money that hospitals have, but the examples above should give an idea. The aforementioned HSA governance, accomplished by interested citizens, will correct this potential waste of money before it even starts. The people will receive the medical care that they need, but I guarantee that the waste will not continue, since no group of sane people would tolerate it as reasonable. If a hospital administrator or board member should disagree, I can only remind him or her that what is now in place is not working. If 45 million people lack health insurance and 24 percent of them are children, the situation absolutely must change, if we are to call ourselves civilized. Twenty-five years of this type of failing has to be corrected. We are approaching critical meltdown.
The new hospital paradigm that I have suggested will work, and the populace will insist on its working. No entrenched government bureaucracy will call the shots; it will be the citizens implementing their own guidelines through their own corporation. If a hospital takes HSA money, it will follow HSA rules--the people's rules. And people will insist on getting what they pay for. Administrators will do as they ask; their job will depend on it. Fifteen percent of 555.6 billion is 83 billion. What could the American people do with a spare 83 billion dollars?
Duplication of facilities and service isn't the only problem with profit-minded hospitals, so is the huge discrepancy in fees. An uninsured patient is often charged more than his or her insured counterpart. Imagine that you're uninsured, have coronary artery disease and need a bypass. That CABG might cost you a year's salary.
Or then again, it might cost you two years' salary.
I received a copy of an article, "Exposing Hospital Costs" by Guy Bolton in the Milwaukee Journal Sentinel, quoting prices for procedures done in Milwaukee, Wisconsin. Listed below are two procedures and their charges for patients not covered by Medicare insurance or managed care plans. In other words, their price list for employers self-insuring their employees' health needs without purchased insurance, people with no insurance and other plans.
Treating heart disease is one of the biggest uses of the health care dollar with 22 million Americans affected (according to Center for Disease Control statistics, 2000). The situation described is the difference in cost for one person. The reader can calculate the savings potential in just this one example of billings--it will be enormous. HSA, through its governance, will not tolerate these situations, and I predict that the fifteen-percent cost savings quoted me by my hospital administrator friend, Jim, is but scratching the surface.
Health Security America will provide the leverage--and the hard common sense--to standardize hospital fees.
HSA will require that whoever owns the hospital--whether it be a religious order, non-profit corporation or longtime foundation--provide information about all their operating expenses to HSA, and then HSA, in turn, will determine the money paid for hospital procedures. The hospital will act as a community asset and not as a profit center for a foundation or private company. HSA will have a beneficial moderating effect on those community assets by setting the conditions and the fees it will pay a hospital, and in some cases, if a hospital is noncompliant, withholding payment. So as a community asset, hospitals will be working together, not as individual entities. With hospitals working together, along with regional planning agencies determining which hospital is best suited to do certain procedures, with the objective of saving money without sacrificing quality, a new transparency will evolve, and it will save enormous sums of money. The motive will not be profit for the few, but for the many, by saving money and furnishing more efficient care of the highest quality, so that all people have access to affordable medical care, including the 45 million without coverage today. The HSA board of information will work with the regional health planning agencies on fact finding, in order to oversee the reduction of wasted resources--a key mission. The gathered information will be passed to the regional representatives and then the mechanism for governance will function as it should. These are some hospital-side savings that we can expect very early on in the life of HSA. I have no doubt that more savings will be vetted by patients and their representatives once they are given the authority.
After discharge from the hospital, Wally is in good health, newly diagnosed epilepsy under control, and is paying the bills from three different hospitals and many duplicated tests as quickly as he can. He did not have to resort to divorce, but did sign over his house to his children. Such are the things we do to save the assets for which we worked a lifetime, and after 50 years of hard work, Wally is not about to empty his bank account so that his hospital can launch yet another ad campaign. There are far wiser ways to allocate our limited health care resources, and curbing hyper-competitive hospitals is a start.
The next diary details how savings can be achieved in the third major area of health care expenditures, the patient. We'll discuss determination of coverage, treatment protocols and personal responsibility.
Health Security America: Fixing the health care crisis is my blueprint for this single-payer plan. All profits from the book go to the Coalition for a Health-Secure America, which is working to promote the plan among lawmakers and ordinary citizens alike. Wisconsin's largest congressional district adopted our resolution modeled on Health Security America in the 7th CD convention April 22, and our effort is attracting quite a bit of media publicity. A feature is scheduled to appear today about HSA in the Eau Claire Leader-Telegram.
Fred Bannister, M.D.
"We are the government, you and I." ---Theodore Roosevelt