This article is more than 5 years old. Information may no longer be current.
While we wait for the polls to close
Click Here to Manage Email Alerts
Speculating about the winners of the November presidential election may be entertaining, but predicting what will happen to cardiology practice in the coming year, regardless of which politicians are elected in the upcoming election, may be more constructive and certainly less contentious. A fundamental transformation in how we deliver health care is well under way and will continue regardless, or in spite of, who is in the White House and Congress.
Direction of change
The elections do matter, but the direction of change is already set. Consensus on how to correct our course is lacking, but nearly everyone agrees that we have reached the breaking point in the cost of health care. Many initiatives are already under way to reduce the cost of health care — some by government, some by employers and insurers, others by physicians and hospitals and some by consumers themselves. None of these initiatives are pain-free or guaranteed. Many will fail, but others will survive. Costs will be controlled.
L Samuel Wann
Growth in health care spending is already slowing — the recession, cuts in government payment rates, reduced employer coverage, higher consumer co-pays, increased use of generic pharmaceuticals and physician compliance with appropriate use criteria in the utilization of expensive resources have all acted to reduce consumption while we continue to deliberate health care policy decisions. Visits to physicians’ offices and hospital admissions have declined nearly every quarter for the last 4 years. Despite this restraint, per-person spending for health care for the same period continued to grow at 2.1% annual rate, and is predicted to rise another 3.3% per year over the next 5 years. The cost of health care already amounts to 18% of the nations’ yearly output, taking a quarter of all federal outlays. This outlay is double that of the rest of the industrialized world, without proportional improvement in our health. This situation can only be expected to worsen as our population ages. Something must give.
Absent a fiscal miracle, the squeeze on providers will be relentless. On the government side, we can expect a lame duck session of Congress to deal temporarily with budget sequestration and the recurring threat of the Sustainable Growth Act. The full impact of these programs will likely be mitigated, but immediate reductions of 2% to 20% are possible. “Discretionary” spending, such as support of NIH research programs, will suffer even more.
Medicaid, jointly funded by the federal and state governments, provides essential medical care to millions but has some of the worst attributes of a single payer system — low payments, limited eligibility, long waiting lists and restricted services. Taking advantage of the recent Supreme Court ruling, some states will not accept federal money to expand Medicaid, relying instead on existing programs or hoping that the Affordable Care Act’s subsidized private insurance market will eventually fill in the gap. In the interim, physicians and hospitals can expect to provide more uncompensated care.
Medicare payments to physicians have been frozen for a decade while costs have risen 20%. Medicare payments will continue to lag behind cost increases. Expensive equipment and procedures, such as defibrillators and imaging, are likely to require precertification from Medicare, similar to programs already used by private insurers to reduce utilization. Massachusetts, which already has universal coverage with health care costs rising more than 30% in the last 10 years, will mandate sharply limited increases in provider reimbursement based on financial performance, quality, market share and other metrics.
Private employers large and small will limit their exposure to increasing health care costs. General Electric recently put 85,000 US white-collar employees on a high-deductible health care plan to reduce its $2.5 billion per year care bill for all its myriad business units. Overall revenue from GE’s $18 billion per year health care business has been stagnant, as per capita use of imaging services continues to shrink. Less expensive ultrasound devices have produced more growth than advanced imaging, as image quality continues to improve and manufacturing costs are reduced. Perhaps prophetically, GE recently moved management of its X-ray business to China.
Ongoing transformation
Sears and Darden (Olive Garden and Red Lobster) have instituted a radical change in the way they provide health benefits to their workers. Similar to 401(k) retirement plans, these companies are making a fixed sum of money for health care, allowing employees to shop for their own plans. Other such innovations can be expected in the private sector. The Wall Street Journal reported that in 2001 only 8% of covered workers were required to pay more than $1,000 before their insurance kicked in compared with 19% in 2011. Consumers are feeling the crunch, too, and are cutting back.
Small employers with fewer options may simply stop offering health insurance to their employees. Clearly, much hinges on policy issues related to our historic reliance on employers to provide tax advantaged payments for their employees’ health care, but none of predicted scenarios includes a pay raise for health care providers.
Hospitals, seeing the coming crunch, have been busy locking in their market share by buying physician practices and other hospitals. Seventy percent of cardiologists practicing in the US will be employed by hospital organizations by 2013. As cardiology practices are consolidating and joining hospitals to reduce costs, improve efficiency and stabilize incomes, hospitals themselves are also consolidating into bigger regional or national chains, many for-profit. In a recent trend, non-profit hospitals are forming for-profit businesses in partnership with venture capitalists to buy and mange independent hospitals, often in smaller communities or relatively affluent suburbs.
According to the American Hospital Association, more than one-quarter of US community hospitals are now investor owned. In addition to providing access to capital markets to finance purchases of hospitals and physician practices, for-profit owners are expected to aggressively manage their assets, including reductions in supply chain and personnel costs, to maximize operating margins and provide profit to shareholders. Some hospital services and whole hospitals will simply be eliminated. Investments are focused in areas with well-insured populations, and services even include trauma centers, which traditionally lose money on inner city uninsured victims of gun or knife violence, but can be very profitable in other locations.
Continued consolidation of hospitals gives them increasing power to bargain with insurers for higher rates, raising scrutiny of the Federal Trade Commission for anti-trust violations. To counter the bargaining power of hospitals, insurers have begun to invest directly in physician practices. While affecting only a small fraction of physicians, most for-profit insurance companies, including United, Wellpoint, Cigna and Aetna, have purchased medical groups independent from hospitals. The insurance companies hope to control costs by limiting the bargaining power of hospitals.
As hospitals come to be recognized as cost-centers rather than profit-centers, physicians, physician extenders and integrated medical groups will become ever more important in negotiating a landscape in which demand for high quality, cost-effective care continually increases without commensurate increases in reimbursement. In many communities, fee-for-service medicine will gradually morph into a team-based systems delivering coordinated, comprehensive care, care which can be documented to improve the overall quality and length of life at a fixed maximum cost.
Physicians at internationally renowned institutions, including the Mayo Clinic, the Cleveland Clinic and The MD Anderson Cancer Center, are busy sharing their expertise and extending their “brands” across the country by affiliating with prominent regional institutions in joint efforts to deliver high quality, high value specialty care locally, as well as at their hub locations. According to Dr. Joseph Cacchione, chairman of operations and strategy for the Heart & Vascular Institute, the Cleveland Clinic plans to establish a network of 20 or more affiliates across the country with the intent of offering highly competitive cardiac care packages with documented high quality to large employers and insurance companies. Many of these prominent institutions are also expanding overseas.
Nearly all physician groups, hospital owned and independent, are responding to demands to reduce waste and redundancy in their delivery of health care, concentrating on efficiency and improving quality and value. Measurement of quality and documentation of improved outcome is becoming more important than simply counting procedures and individual episodes of care. The electronic health record (EHR), essential to this process, has been painful and time consuming for physicians, expensive to implement and slow to produce desired results. Unintended consequences include the ability to use the EHR to “up-code” patient encounters by minutely documenting services rendered. Repetitive cloning of data to pad notes not only makes the notes less useful clinically but also may be fraudulent.
Staying in the game
Conventional wisdom holds that physicians and patients must both have “skin-in-the-game” if health care costs are to be contained. In our complex, modern world, the structure of our health care system can help or hinder the contract between patients and physicians. But the relationship between us has endured before and will again. Like Hippocrates, physicians should put their patients’ interests before their own. And patients must accept responsibility for their own lives.
Disclosure: Wann reports no relevant financial disclosures.