A Rational Health Care System

A rational health care system would require access, both financial and (within practical limits) geographical, for all our people. It will also require a rational system for allocating resources, choosing the resources to use, and distributing those resources based upon need. Systems for determining which drugs are worth developing and utilizing will require a different approach than that the FDA currently uses, requiring only that a new drug be shown to be more effective (and not necessarily safer than) a placebo, rather than that it be more effective, or at least as effective, or safer than, or at least as safe as, the currently used drugs. It will require purchase of a limited number of medical devices, replacing the one currently used only when a new one is shown to be more effective, safer, or cost-effective (at least in certain populations) than the one currently being utilized.

It will also require a more rational and systematic allocation of resources, based on NEED rather than the opportunity for every individual provider or hospital to maximize its income. Current incentives are perverse, because they do the latter but do not do the former, whatever advocates of a “market-based” approach would say. It doesn’t work, if by “work” one means, as I do, meet the health needs of our people in a high-quality, comprehensive, rational, systematic, and cost-effective manner.

Consider hospitals. A rational system would build upon a network of clinics that utilize a community hospital, with several community hospitals feeding into a district referral hospital, and several referral hospitals feeding into a large regional medical center in which the most difficult and complex care can be provided (such as that in use in most industrialized countries, and designed for the US in the old “Dellums bill” for a national healthcare system). Rather, each hospital functions on its own, usually to maximize revenue, although sometimes with other goals such as maximizing research opportunities (usually combined with maximizing revenue) but rarely primarily the health care needs of the population. University academic medical centers, whether state supported or “private” (although these always have large amounts of public money) choose what services they wish to provide; the smallest and local community hospitals are often left only with the opportunity to meet the needs of those left over – or not, if they cannot afford to. Many large academic health centers, such as Johns Hopkins in Baltimore and the University of Chicago, are located in communities of great need, but do little do meet the core needs of their surrounding communities. They frequently indicate that they see themselves as national leaders, coincidentally existing in their neighborhoods, but make these decisions on their own, rather than as part of a rational health system.

The University of Kansas Hospital illustrates some of the contradictions that arise from the perverse incentives in our current health system. The hospital justifiably prides itself on a tremendous “turn-around” in the ten years since the creation of an independent hospital authority (KUHA) made it a “quasi-public” institution no longer under the control of the University, Board of Regents, or State of Kansas. Skilled leadership, with particular financial skills, have led it from losing to earning hundred of millions of dollars, from a building with serious physical plant failings to one which has added new floors, a new heart hospital (“Center for Advanced Heart Care”), a new Cancer Center, and is planning a new Medical Office Building for the physicians’ practice. It has also moved from near the bottom to near the top of the national rankings for quality of care. All good. The skills of the leaders were helped by the freedom from state purchasing and hiring processes (unions, seen by some state universities as a bane in their insistent efforts to protect the living wages of their members, were already not much of a factor in Kansas), allowing it to move much more nimbly. In addition, the fact that the facility, which if not in great shape was at least owned outright, allowed the hospital to take on capital debt for its renovation and expansion. All this is described in a celebratory article in the Business section of the Kansas City Star on Oct. 7, 2008, “KU Hospital's independent path has led to success”, which also quotes hospital leaders as crediting the success in part to not trying to be great in everything, but concentrating on two areas, heart and cancer care.

So far, so good. The hospital has indeed been successful in the current market and reimbursement system. But the concentration on heart and cancer care was not a random decision, and illustrates the problem created by our having the “non-system” of health care described above (and analyzed brilliantly by Bob Ferrer in his classic piece “Within the System of No System” published in JAMA in 2001.)[1] Cancer and heart disease are major health problems in our country, but they are also the most lucrative “product lines”; there is no coincidence that every hospital that can wants to expand these services and increase their “market share” by making their facilities for caring for these conditions more attractive to physicians and patients (note: in this context please read “well-insured patients”) than those of their competitors. They (all hospitals, not just KUH!) are not developing services as arguably important, such as obstetrics, pediatrics (which is in some ways a special case; while general care of children is not a profit center, in most large cities – including Kansas City – it is concentrated in children’s hospitals that are huge recipients of philanthropy), psychiatry, or goodness knows, primary care for the poor. There just is no money in it. So hospitals build excess capacity for caring for the well-reimbursed problems of the well-insured, hoping to lure these patients from other institutions, and quite understandably de-emphasize programs to care for the problems that are poorly reimbursed, or care to the poorly insured. This can provide a challenge for the educational function of academic health centers, which need to train students and residents in all facets of medicine. More important, the problem is that these are, well, health problems. We do not have a system that provides all needed care to all people because the individual institutions are driven by their own individual bottom line.

A study some years ago in Oregon looked at the characteristics of those family medicine residency programs that were closing. They were not those that were inferior in quality or had a more difficult time attracting good students. It turns out that the greatest determinant was whether they were in “one hospital” or “two hospital” towns. In a one hospital town, the hospital knows that everyone will end up there eventually, even the poor; if a family medicine residency can keep their private doctors happy by taking care of the poor and uninsured, and maybe even keep them healthier so they don’t end up in the emergency room in extremis, that is a good investment. In a two-hospital town, there is only one financial goal – all the uninsured should go to the other hospital. Thus, any program, such as a family medicine residency, that might attract the poor, make them feel more welcome, in your hospital than in the other is a negative! How financially understandable, how morally and socially bankrupt!

The competitive market has no place in healthcare because it leads to perverse incentives that lead each institution to look out for its own interest, rather than being based in how the health needs of our people are best met, in terms of medical quality and cost effectiveness, from a system perspective. Even if we develop universal financial access, we will need a rational system of service, and we are long way from having that.
[1] Ferrer RL, “Within the System of No System”, JAMA.2001; 286: 2513-2514.

Happy Holidays to All!