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The Stealthy, Ugly Growth of Corporatized Medicine

Tuesday, April 29, 2014 By Yves Smith, Naked Capitalism | Op-Ed
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 (Photo <a href="http://www.shutterstock.com/pic-86451001/stock-photo-doctor-wearing-stethoscope-reaches-palm-out-behind-medicine-bottles-and-piggy-bank.html?src=b_D0slnsGcXCmNfmr6lSMw-1-54" target="_blank"> via Shutterstock</a>)(Photo via Shutterstock)

Yves here. We’ve written a great deal about Obamacare, since it epitomizes so much about what is wrong with contemporary America: the use of complexity to mask looting, the creation of two-tier systems, the crapification of the underlying service, which in this case is vitally important to society as a whole.

But Obamacare also needs to be recognized as a big step forward in a process that was already well underway, which is to convert the practice of medicine from a patient-oriented to a profit-driven exercise. This is perverse because medicine is so highly valued that medical practitioners almost always enjoy high status and at least decent incomes in most societies. And in societies undergoing breakdown, being a doctor is about the safest place to be, provided you can manage to avoid becoming aligned with the wrong warring faction.

But what is going on in the US is a type of under-the-radar enclosure movement. Doctors historically have been small businessmen, either operating solo or in a group practice. But big corporations see their profits as another revenue opportunity, and have become increasingly adept at making it so hard for them to operate independently that becoming part of the corporatized medicine apparatus looks like the least bad of the available options.

We warned last year that current institutional efforts to regiment doctors undermine the caliber of medical care. It has become distressingly common for HMOs and other medical enterprises to have business-school trained managers putting factory-style production parameters on doctor visits. Outside of foreclosure mills, it’s hard to find similar approaches in other professions.

Doctors are already being told of the Brave New World that is about to be visited on them. One account came from Whole Health Chicago. The writer, Dr. David Edelberg, describes a recent presentation by a large insurance company. They’ve apparently been hosting similar sessions with physicians in the Chicago area in large medical practices. Here are the key bits (emphasis original):

The speaker at these evenings is always a physician employed by the insurance company. His/her title is medical director (I begin to think there must be dozens and dozens on their payroll) and he always begins by reassuring the audience that he was in clinical practice himself so he understands something of what physicians–especially primary care physicians–are facing. I view this physician more as a “Judas steer,” the animal that leads an innocent but doomed herd of cattle through the slaughterhouse corridors to the killing floor.

• The health industry hopes that individual medical practices and small medical groups will ultimately disappear from the landscape by being financially absorbed into larger groups owned by hospital systems.

And here’s what you as patient should expect:

Physicians are expected to spend a limited amount of time with each patient, and are encouraged to see as many patients as possible during a workday. The insurance companies, sometimes with the token cooperation of a few physician-employees, create vast books of patient-care guidelines to which they believe their physicians must be “accountable” (remember this word, it will crop up again). These guidelines might mean documented Pap smear and mammogram frequency, weight management and exercise, colonoscopies for patients over 50, and getting that evil LDL (bad cholesterol) below 99 by any means possible…

If the chart audit system discovers that a physician, for whatever reason, is an “outlier”–that she’s either not following the guidelines exactly or not getting the results anticipated for her patient population—she’ll be financially penalized. A quick example of what might occur: if your LDL is 115, you may be on the receiving end of a statin sales pitch from your doctor, not because bringing it down to 99 will improve your longevity, but because your refusal to do so will impact her financial bottom line.

Now how are doctors being forced into this horrible position? The big one, as the update below states, is cost pressures. I guarantee one big source is the cost of dealing with insurers, both government and corporate. One culprit is Medicare, but I strongly suspect you see similar patterns with private insurance.

As a mere patient, I always paid for medical services and submitted for reimbursement. My claims would be processed, and only occasionally would they be haircut because the insurer thought the charges exceeded “ordinary and customary” prices (your humble blogger would generally contest these and would prevail over half the time). But about 4-5 years ago, Cigna suddenly ratcheted up its tricks for not paying me, including simply not processing the claim at all and hoping I wouldn’t notice (this still happens to about 20% of my submissions). I began having my doctors submit for reimbursement when I was seeing an in-network doctor to escape the hassle.

I have to imagine that insurers are making doctors spend even more on claims processing, as well as squeezing them on their contracted reimbursement rates, both as profitable exercises in and of themselves and to push more doctors into practicing out of hospitals, which further fattens insurer bottom lines. And why am I so confident insurers are helping to drive this bus? Again, from the Whole Health Chicago post:

 As a test run, the insurance industry, large hospital systems, and government jointly created a healthcare delivery system called Accountable Care Organizations (ACOs). They’ve tried it with certain Medicare patients, liked what they saw in terms of both savings and patient surveys, and now ACOs will be the health care of the future. To cobble together an ACO, hospital management (or a very large medical group such as Northwestern or Advocate), speaking for its salaried physicians, contractually agrees to provide all health care (primary care, specialty referrals, hospitalizations, etc) for a certain patient population–say Medicare recipients, employees of a particular company, or members of a union. For this, the hospital is paid a very large sum annually from which to fund the health care of their enrollees.

And now we present more on how this grand scheme works in practice.

By JB McMunn, M.D., a board-certified pain specialist who trained at the Massachusetts General Hospital who has spent over 35 years practicing medicine. He writes under a pseudonym because he still works in his medical community and there be peeps who don’t like what he says fo’ shizzle. Cross posted from Testosterone Pit

Over the past decade, Medicare fees have risen about 10% while the cost of running a medical practice has risen about 30%. It has become increasingly difficult to stay in business as a private practitioner. At the lower range of compensation – pediatricians, family doctors, internists – it has become almost impossible.

Many practices have stopped accepting Medicare or Medicaid, and some have opted out of third party payment altogether, electing to go to a concierge practice (flat fee for all services the doctor provides, usually paid monthly or annually) or just a straight cash-based fee-for-service model.

Another option is to work as an employee of a hospital. There are several advantages for the physician: a more secure and predictable level of income, none of the hassles that face a small business, such as personnel management, billing and collections, rent, equipment expenditures, maintenance, and so on. They have fixed hours, guaranteed vacation, a 401(k), health insurance, malpractice coverage, etc, and … higher income.

Higher income? Yup, but there’s a catch.

Physicians can receive a higher income when employed by a hospital because hospitals often receive higher payments than a private practice for the same service. For instance, a hospital can tack on a facility fee in addition to the physician fee, something a private practice cannot do. This can easily increase the fee by 70%. Thus, the hospital can afford to pay the physician more because they collect 70% more than the private office across the street just on the fee differential. Since the doctor also leverages the system with referrals for other services, they can also supplement physician salaries. If a doctor increases hospital revenues by $1,000,000 a year, do they mind paying her an extra $50,000 a year above the usual level of compensation?

Impact of Corporatized Medicine on Physicians and Care

Is it all rainbows and unicorns once a doctor goes to work for a hospital? What many doctors discover is that they are reduced to the status of livestock – that it’s all about production.

Probably the worst aspect of being a hospital employee instead of a private practitioner is the loss of autonomy. A doctor has a fiduciary obligation to the patient to do what’s best for the patient, not for the doctor. This not just a legal consideration; it’s pounded into physicians during their training (at least 7 years of indoctrination). Supermarkets, gas stations, airlines, and movie theaters have no such encumbrances.

While there are greedy doctors who exploit their patients, the vast majority of doctors, based on my 30-plus years of observation, do place their patients first. That’s one area where corporate people and medical people often bump heads.

The most significant problem with loss of autonomy is production pressure. The employed physicians are hired to draw patients into the larger system where they can be funneled into other hospital services. Many hospitals are quick to claim that there is no policy or contractual obligation to refer internally, but the physician who takes them at their word does so at his peril.

Compensation is usually linked at least in part to productivity, which can be measured in various ways, all of which have a final common pathway: money. There is intense pressure for the employed physician to use ancillary services such as blood work, x-rays, MRIs, physical therapy, etc and to refer to doctors either employed by the system or system-friendly. 

How has Corporatized Nedicine Worked Out So Far?

Some snippets from online physician discussions:

  • In the past we were very picky in who we had join our group. Now the hospital was in charge of recruiting, and they hired any old warm body they could find. They would show us CVs of candidates with red flags all over, and we said we would never even interview these people. The hospital would hire them. And of course it would be a disaster. We had a revolving door of anesthesiologists while the old core group tried to hold it together. The hospital made ridiculous demands, required expansion into unprofitable service lines and then constantly bitched at us that we were unproductive and underutilized. Meeting after meeting: “You need to be more productive.” They just never seemed to get it that we can only provide care to the patients that surgeons bring us. If the surgeons don’t have cases, we don’t have cases. [From an anesthesiologist. They can only do as many cases as surgeons bring them. It’s like blaming the truck driver for not delivering enough packages when the factory isn’t producing enough to deliver.]
  • The administrators and medical directors are always focused on where they stand on the corporate ladder and how they can get more leverage, not only over the doctors below them, but on their counterparts and their superiors. Large systems have all the loyalty, well meaning, and altruism demonstrated by a character from Game of Thrones. [Arguably, the main difference between a large hospital system and the Lannisters is that hospital systems have more money.]
  • I knew things were severely problematic when I was having a meeting with my bosses, and the head of the PCP division said, “We don’t understand why you’re not being a ‘team player’. We expect this to operate like the Coumadin clinic. We start them on the opioids, and you just take over prescribing, and the nurses monitor the urines!” At which point the business manager for my division pops in, before I can retort, to say, “Yeah we should be able to operate that way.” Needless to say, the professional bullying from the PCPs, the administrators, etc. to run both a pill mill and a needle jockey business was tremendous. I resisted the entire time, but god it wore me out. [From a pain specialist for a large multi-specialty group.]
  • We had a meeting with administration and the whole medical staff. They wanted to know why staff meetings were so poorly attended. (They didn’t used to be.) One brave soul spoke and said “It’s a waste of time for us to attend meetings where our opinions aren’t valued and our concerns aren’t addressed.” He was gone shortly thereafter.
  • I have watched employed physicians who do it ethically, at least in their viewpoint, and are only driven out. When the hospital system starts hurting for cash, it isn’t the CEO’s salary that will be examined, it is yours and your production value . . . The Admins . . .  refer to the independents as being “outside of the framework” which seems like a bureaucratic euphemism for not liking the lack of ability to direct and control their work.” [It’s amazing to me that they allow this independent physician to hear these conversations.]
  • One day, administration fired all the ER physicians and put in place an entire department of locums and tried to rebuild. It was a disaster. They couldn’t cover shifts, the competency level was horrendous. The hospital had 3 major law suits out of that ER in the first two months of this transition.

“Locums” is short for “locum tenens”, or a doctor who is hired for a short period of time to cover vacations or other temporary short-staffing situations. Doctors who do this type of work aren’t called “temps.” They are “locum tenens.” That’s Latin for “place holder” or in common parlance, “temp worker.” Doctors have learned that you can charge more when it’s in Latin or Greek. And it all follows the theme: a perfect storm of unhappy doctors, corporate-style medicine, and higher prices.

This piece was reprinted by Truthout with permission or license. It may not be reproduced in any form without permission or license from the source.

Yves Smith

Yves Smith has been in and around finance for more than 30 years as an investment banker, management consultant to financial institutions across a large range of wholesale banking and trading markets businesses, and a corporate finance adviser. She has also written for The New York Times, Al Jazeera, the New Republic, Salon, the Conference Board Review, the Australian Financial Review and other financial publications. Her TV appearances include NBC News, CNBC, Fox Business, PBS, Bill Moyers, The Real News Network, Democracy Now!, Russia TV, ABC (Australia), Al Jazeera and BNN (Canada). Follow her on Twitter: @yvessmith.

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The Stealthy, Ugly Growth of Corporatized Medicine

Tuesday, April 29, 2014 By Yves Smith, Naked Capitalism | Op-Ed
  • font size decrease font size decrease font size increase font size increase font size
  • Print

 (Photo <a href="http://www.shutterstock.com/pic-86451001/stock-photo-doctor-wearing-stethoscope-reaches-palm-out-behind-medicine-bottles-and-piggy-bank.html?src=b_D0slnsGcXCmNfmr6lSMw-1-54" target="_blank"> via Shutterstock</a>)(Photo via Shutterstock)

Yves here. We’ve written a great deal about Obamacare, since it epitomizes so much about what is wrong with contemporary America: the use of complexity to mask looting, the creation of two-tier systems, the crapification of the underlying service, which in this case is vitally important to society as a whole.

But Obamacare also needs to be recognized as a big step forward in a process that was already well underway, which is to convert the practice of medicine from a patient-oriented to a profit-driven exercise. This is perverse because medicine is so highly valued that medical practitioners almost always enjoy high status and at least decent incomes in most societies. And in societies undergoing breakdown, being a doctor is about the safest place to be, provided you can manage to avoid becoming aligned with the wrong warring faction.

But what is going on in the US is a type of under-the-radar enclosure movement. Doctors historically have been small businessmen, either operating solo or in a group practice. But big corporations see their profits as another revenue opportunity, and have become increasingly adept at making it so hard for them to operate independently that becoming part of the corporatized medicine apparatus looks like the least bad of the available options.

We warned last year that current institutional efforts to regiment doctors undermine the caliber of medical care. It has become distressingly common for HMOs and other medical enterprises to have business-school trained managers putting factory-style production parameters on doctor visits. Outside of foreclosure mills, it’s hard to find similar approaches in other professions.

Doctors are already being told of the Brave New World that is about to be visited on them. One account came from Whole Health Chicago. The writer, Dr. David Edelberg, describes a recent presentation by a large insurance company. They’ve apparently been hosting similar sessions with physicians in the Chicago area in large medical practices. Here are the key bits (emphasis original):

The speaker at these evenings is always a physician employed by the insurance company. His/her title is medical director (I begin to think there must be dozens and dozens on their payroll) and he always begins by reassuring the audience that he was in clinical practice himself so he understands something of what physicians–especially primary care physicians–are facing. I view this physician more as a “Judas steer,” the animal that leads an innocent but doomed herd of cattle through the slaughterhouse corridors to the killing floor.

• The health industry hopes that individual medical practices and small medical groups will ultimately disappear from the landscape by being financially absorbed into larger groups owned by hospital systems.

And here’s what you as patient should expect:

Physicians are expected to spend a limited amount of time with each patient, and are encouraged to see as many patients as possible during a workday. The insurance companies, sometimes with the token cooperation of a few physician-employees, create vast books of patient-care guidelines to which they believe their physicians must be “accountable” (remember this word, it will crop up again). These guidelines might mean documented Pap smear and mammogram frequency, weight management and exercise, colonoscopies for patients over 50, and getting that evil LDL (bad cholesterol) below 99 by any means possible…

If the chart audit system discovers that a physician, for whatever reason, is an “outlier”–that she’s either not following the guidelines exactly or not getting the results anticipated for her patient population—she’ll be financially penalized. A quick example of what might occur: if your LDL is 115, you may be on the receiving end of a statin sales pitch from your doctor, not because bringing it down to 99 will improve your longevity, but because your refusal to do so will impact her financial bottom line.

Now how are doctors being forced into this horrible position? The big one, as the update below states, is cost pressures. I guarantee one big source is the cost of dealing with insurers, both government and corporate. One culprit is Medicare, but I strongly suspect you see similar patterns with private insurance.

As a mere patient, I always paid for medical services and submitted for reimbursement. My claims would be processed, and only occasionally would they be haircut because the insurer thought the charges exceeded “ordinary and customary” prices (your humble blogger would generally contest these and would prevail over half the time). But about 4-5 years ago, Cigna suddenly ratcheted up its tricks for not paying me, including simply not processing the claim at all and hoping I wouldn’t notice (this still happens to about 20% of my submissions). I began having my doctors submit for reimbursement when I was seeing an in-network doctor to escape the hassle.

I have to imagine that insurers are making doctors spend even more on claims processing, as well as squeezing them on their contracted reimbursement rates, both as profitable exercises in and of themselves and to push more doctors into practicing out of hospitals, which further fattens insurer bottom lines. And why am I so confident insurers are helping to drive this bus? Again, from the Whole Health Chicago post:

 As a test run, the insurance industry, large hospital systems, and government jointly created a healthcare delivery system called Accountable Care Organizations (ACOs). They’ve tried it with certain Medicare patients, liked what they saw in terms of both savings and patient surveys, and now ACOs will be the health care of the future. To cobble together an ACO, hospital management (or a very large medical group such as Northwestern or Advocate), speaking for its salaried physicians, contractually agrees to provide all health care (primary care, specialty referrals, hospitalizations, etc) for a certain patient population–say Medicare recipients, employees of a particular company, or members of a union. For this, the hospital is paid a very large sum annually from which to fund the health care of their enrollees.

And now we present more on how this grand scheme works in practice.

By JB McMunn, M.D., a board-certified pain specialist who trained at the Massachusetts General Hospital who has spent over 35 years practicing medicine. He writes under a pseudonym because he still works in his medical community and there be peeps who don’t like what he says fo’ shizzle. Cross posted from Testosterone Pit

Over the past decade, Medicare fees have risen about 10% while the cost of running a medical practice has risen about 30%. It has become increasingly difficult to stay in business as a private practitioner. At the lower range of compensation – pediatricians, family doctors, internists – it has become almost impossible.

Many practices have stopped accepting Medicare or Medicaid, and some have opted out of third party payment altogether, electing to go to a concierge practice (flat fee for all services the doctor provides, usually paid monthly or annually) or just a straight cash-based fee-for-service model.

Another option is to work as an employee of a hospital. There are several advantages for the physician: a more secure and predictable level of income, none of the hassles that face a small business, such as personnel management, billing and collections, rent, equipment expenditures, maintenance, and so on. They have fixed hours, guaranteed vacation, a 401(k), health insurance, malpractice coverage, etc, and … higher income.

Higher income? Yup, but there’s a catch.

Physicians can receive a higher income when employed by a hospital because hospitals often receive higher payments than a private practice for the same service. For instance, a hospital can tack on a facility fee in addition to the physician fee, something a private practice cannot do. This can easily increase the fee by 70%. Thus, the hospital can afford to pay the physician more because they collect 70% more than the private office across the street just on the fee differential. Since the doctor also leverages the system with referrals for other services, they can also supplement physician salaries. If a doctor increases hospital revenues by $1,000,000 a year, do they mind paying her an extra $50,000 a year above the usual level of compensation?

Impact of Corporatized Medicine on Physicians and Care

Is it all rainbows and unicorns once a doctor goes to work for a hospital? What many doctors discover is that they are reduced to the status of livestock – that it’s all about production.

Probably the worst aspect of being a hospital employee instead of a private practitioner is the loss of autonomy. A doctor has a fiduciary obligation to the patient to do what’s best for the patient, not for the doctor. This not just a legal consideration; it’s pounded into physicians during their training (at least 7 years of indoctrination). Supermarkets, gas stations, airlines, and movie theaters have no such encumbrances.

While there are greedy doctors who exploit their patients, the vast majority of doctors, based on my 30-plus years of observation, do place their patients first. That’s one area where corporate people and medical people often bump heads.

The most significant problem with loss of autonomy is production pressure. The employed physicians are hired to draw patients into the larger system where they can be funneled into other hospital services. Many hospitals are quick to claim that there is no policy or contractual obligation to refer internally, but the physician who takes them at their word does so at his peril.

Compensation is usually linked at least in part to productivity, which can be measured in various ways, all of which have a final common pathway: money. There is intense pressure for the employed physician to use ancillary services such as blood work, x-rays, MRIs, physical therapy, etc and to refer to doctors either employed by the system or system-friendly. 

How has Corporatized Nedicine Worked Out So Far?

Some snippets from online physician discussions:

  • In the past we were very picky in who we had join our group. Now the hospital was in charge of recruiting, and they hired any old warm body they could find. They would show us CVs of candidates with red flags all over, and we said we would never even interview these people. The hospital would hire them. And of course it would be a disaster. We had a revolving door of anesthesiologists while the old core group tried to hold it together. The hospital made ridiculous demands, required expansion into unprofitable service lines and then constantly bitched at us that we were unproductive and underutilized. Meeting after meeting: “You need to be more productive.” They just never seemed to get it that we can only provide care to the patients that surgeons bring us. If the surgeons don’t have cases, we don’t have cases. [From an anesthesiologist. They can only do as many cases as surgeons bring them. It’s like blaming the truck driver for not delivering enough packages when the factory isn’t producing enough to deliver.]
  • The administrators and medical directors are always focused on where they stand on the corporate ladder and how they can get more leverage, not only over the doctors below them, but on their counterparts and their superiors. Large systems have all the loyalty, well meaning, and altruism demonstrated by a character from Game of Thrones. [Arguably, the main difference between a large hospital system and the Lannisters is that hospital systems have more money.]
  • I knew things were severely problematic when I was having a meeting with my bosses, and the head of the PCP division said, “We don’t understand why you’re not being a ‘team player’. We expect this to operate like the Coumadin clinic. We start them on the opioids, and you just take over prescribing, and the nurses monitor the urines!” At which point the business manager for my division pops in, before I can retort, to say, “Yeah we should be able to operate that way.” Needless to say, the professional bullying from the PCPs, the administrators, etc. to run both a pill mill and a needle jockey business was tremendous. I resisted the entire time, but god it wore me out. [From a pain specialist for a large multi-specialty group.]
  • We had a meeting with administration and the whole medical staff. They wanted to know why staff meetings were so poorly attended. (They didn’t used to be.) One brave soul spoke and said “It’s a waste of time for us to attend meetings where our opinions aren’t valued and our concerns aren’t addressed.” He was gone shortly thereafter.
  • I have watched employed physicians who do it ethically, at least in their viewpoint, and are only driven out. When the hospital system starts hurting for cash, it isn’t the CEO’s salary that will be examined, it is yours and your production value . . . The Admins . . .  refer to the independents as being “outside of the framework” which seems like a bureaucratic euphemism for not liking the lack of ability to direct and control their work.” [It’s amazing to me that they allow this independent physician to hear these conversations.]
  • One day, administration fired all the ER physicians and put in place an entire department of locums and tried to rebuild. It was a disaster. They couldn’t cover shifts, the competency level was horrendous. The hospital had 3 major law suits out of that ER in the first two months of this transition.

“Locums” is short for “locum tenens”, or a doctor who is hired for a short period of time to cover vacations or other temporary short-staffing situations. Doctors who do this type of work aren’t called “temps.” They are “locum tenens.” That’s Latin for “place holder” or in common parlance, “temp worker.” Doctors have learned that you can charge more when it’s in Latin or Greek. And it all follows the theme: a perfect storm of unhappy doctors, corporate-style medicine, and higher prices.

This piece was reprinted by Truthout with permission or license. It may not be reproduced in any form without permission or license from the source.

Yves Smith

Yves Smith has been in and around finance for more than 30 years as an investment banker, management consultant to financial institutions across a large range of wholesale banking and trading markets businesses, and a corporate finance adviser. She has also written for The New York Times, Al Jazeera, the New Republic, Salon, the Conference Board Review, the Australian Financial Review and other financial publications. Her TV appearances include NBC News, CNBC, Fox Business, PBS, Bill Moyers, The Real News Network, Democracy Now!, Russia TV, ABC (Australia), Al Jazeera and BNN (Canada). Follow her on Twitter: @yvessmith.