Outrageous behavior by hospitals harms Americans' health to make money

The article in the NY Times (June 1, 2023) titled “This Nonprofit Health System Cuts Off Patients With Medical Debt” carries the subhead “Doctors at the Allina Health System, a wealthy nonprofit in the Midwest, aren’t allowed to see poor patients or children with too many unpaid medical bills”. That sounds bad. It is bad. It is disgusting. It is reprehensible. But it is only one example of the extreme lengths many “non-profit” hospitals go to in order to maximize their income (their “non” profit!) at the cost of limiting care to people.

I don’t know how many hospitals, hospital chains, or “health systems” have gone as far as Allina in explicitly refusing to see patients, but most of them go as far as they think they can – and maybe tiptoe over the line. The article states that “Many hospitals in the United States use aggressive tactics to collect medical debt. They flood local courts with collections lawsuits. They garnish patients’ wages. They seize their tax refunds.” This is, unsurprisingly, most prevalent among those that can do it, those that are wealthy, those that are in urban or suburban areas where they can make money taking care of insured people. (A different calculus informs the often-marginal rural hospital.)

It is, in theory, possible to have two different worldviews regarding this situation. One (mine) is that the main purpose of health care, hospitals, doctors, etc., is to improve the health of the population, not to make money. To the extent that the pursuit of money gets in the way of (or explicitly blocks) caring for the health of people, it is wrong, unethical, and should be condemned. Another possible view, however, is that the business of any business (making widgets, providing income tax services, flogging corporate interests on the internet) is to make money, and that healthcare is just another business, and if some people can’t afford it this is no different from someone not being able to afford a car. I do not believe this, and think it is a morally vacuous position (and, more important, one that actually hurts people), but it is popular in some circles. Folks cite the maxim attributed to economist Milton Friedman that the only responsibility a corporation has is to make profit for its shareholders.

But wait – these are NON-profits! They do not HAVE shareholders! They do have Boards of Directors and (very) highly paid management teams, but they don’t pay taxes. Because they are non-profits! The reason that they don’t is because, under the law, they are expected to provide “community benefit”. While such systems often try to claim that they are doing so by occasionally sponsoring low-cost events such as health fairs where you can get your blood pressure or blood sugar checked, that is not what the requirement actually intended. The Times article correctly states “Nonprofit hospitals like Allina get enormous tax breaks in exchange for providing care for the poorest people in their communities.” That means taking care of people who have need, and not pursuing ANY of the gross collection tactics, not to mention refusing care. “But a New York Times investigation last year found that over the past several decades, nonprofits have fallen short of their charitable missions, with few consequences.” Put simply, these non-profit hospitals are given very large benefits (no taxes) because they are supposed to care for those with need, for the poor, but then they do not. But they keep the money.

These non-profit hospitals (and systems), run by finance people and accountants, operate as if they were for-profits, seeking to maximize income just as much as the for-profits do. Not having to pay shareholders, they can pay huge salaries to management, and accumulate enormous bank balances. In fact, this is an incredible competitive advantage – if you are a for-profit, you have to pay taxes! As a result, most for-profit hospitals in large urban markets cannot, and do not seek to,  compete with non-profits, and are found primarily in niche markets, for example in subspecialty hospitals providing particular kinds of procedural care to well-insured people.

Not that I am endorsing overtly for-profit health care. It is also slimy and disgusting, meeting some needs of some people and openly refusing care to others. The pursuit of profit and money is the root of the failure of our health system to do what most of us think it is there for: to improve health. However, non-profits operating in this sector get huge government (meaning taxpayer!) subsidy for doing – things that they do not do, do not want to do, and will take every legal (and often extra-legal) avenue to avoid doing. Indeed, in addition to not paying taxes they get great financial payments from other government programs, such as the 340B drug program, often worth tens of millions (see "Non-profit" hospital systems behaving worse than for-profits: No end to the scams, October 1, 2022).

If there is anyone left who is still taking evidence-free issue with the idea that the US health non-system is a failure at providing health, take a look at this recent piece from the Washington Post by Steven Woolf and Laudan Aron. Yes, it is an “Opinion” piece, but it is full of facts (see graphic) and backed up by the work of the National Academy of Medicine in its report “Shorter Lives, Poorer Health”. Since 1980, when the life expectancy of Americans was in the lower half of wealthy countries, it has slowly dropped so that by the early 2000s it was the lowest, and well before COVID arrived, had plateaued while that of other countries continued to rise. Almost all countries took a “life-expectancy” hit with COVID, but for most it was short-lived and has since rebounded. Except the US, where it has just started to drop a little more slowly.

 

Life expectancy is not the only measure of health system function or success. However, there is no accepted measure (deaths of middle-aged people, infant mortality, maternal mortality, years of productive life lost, etc. etc.) in which the US does not lag its peers, and often poorer countries. Unless you think the provision of boutique specialty care to wealthy people (including foreigners) is somehow a measure of health system success.

Woolf and Aron cite the National Academy report which lists a number of reasons why the US does poorly:

(1) unhealthy behaviors, such as our diets and use of firearms;

(2) inadequate health care and public health systems;

(3) poor socioeconomic conditions;

(4) unhealthy and unsafe environments; and

(5) deficient public policies.

They note the last is most important, including failure to address basic human needs for food, housing, education, and jobs. The continuing effects of racism. The failure to have an adequately funded public health infrastructure.

The National Academy did not look at the fact that our gangster-capitalist system has taken over health care as a cash cow to have money extracted and only incidentally (when convenient and profitable) provide health care, but this too is a clear failure of public policy.

If hospitals, non-profit or for-profit, are not providing all the health needs of our people, rich and poor, they must be forced to do so, by public policy. They should be provided with a negotiated, global, annual budget for operations (and a separate one for capital, so they don’t milk patients to make money to expand) by a national health system. And be held to it.

Addressing the problem of greedy hospitals, the pursuit of money rather than health, will not solve our health problems. Not only does it leave the other parasites, insurance and pharmaceutic companies, it leaves all the other societal inequities cited above, that also must be aggressively acted on.

But it is a necessary step, and a good start.

Primary Care, Medical School Debt, and US Health Needs: Analysis from the Graham Center

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Bob Phillips MD, Executive Director of the Robert Graham Center, the American Academy of Family Physicians’ (AAFP) DC-based policy center, gave one of the plenary speeches at the recent annual meeting of the Society of Teachers of Family Medicine (STFM). His talk, available at the Family Medicine Digital Resource Library (www.fmdrl.org) presented a great deal of data regarding the current, and anticipated future, state of the US primary care workforce. There are currently 222,308 primary care doctors (FPs, GPs, general internist, general pediatricians and geriatricians), or one for every 1358 people, and an additional 86,000+ NPs and PAs in primary care, for a total of about 308,000, or about 1 primary care provider for every 1000. This is not a bad ratio, looking at the nation as a whole, but geographic distribution is another matter, with the ratio of primary care providers (PCPs) to person ranging from 500:1 to 5,000:1 in various primary care service areas (PCSAs); the nearly 5000 PCSAs with a shortage have a deficit of over 54,000 PCPs, which is equal to the “surplus” in the 1,600 or so PCSAs who have higher ratios. And, of course, those underserved PCSAs comprise the vast majority of the US geographic area (see figure).

Phillips and colleagues estimate that we will need an additional 50,000-60,000 primary care physicians by 2025. The largest cause of the growth is, of course, the projected growth in the US population, but it is augmented by the aging of that population (older people require more health care services) and, significantly, the increase in the number of insured-and-thus-likely-to-access-health-care created by the new coverage provisions in the Affordable Care Act (ACA). This portion of the increase is smaller, but unlike the gradual growth resulting from the other two causes, will “hit” all at once in 2014, and our primary care workforce is in no way prepared to meet it. This lesson was emphasized by the experience that Massachusetts had when it introduced near-universal coverage; in addition to adding more people to the “insured pool”, the group that is added has pent-up health care needs. Moreover, the currently uninsured are largely clustered in areas with the lowest current PCP:population ratios, so that what will happen when they gain insurance is that they will end up seeking primary care in the emergency room. While the Graham Center estimates a need for an additional 8,500-10,000 primary care doctors, given what Dr. Phillips calls our “voodoo” workforce policy -- which not only does not incent students to enter primary care or locate in rural and underserved areas, but in fact does quite the opposite -- the actual increase in the number of providers would need to be many times higher. Much recent work has demonstrated the decrease in student interest in primary care, and in particular the phenomenal decrease in the percent of internal medicine graduates entering primary care (as opposed to entering subspecialties or hospitalist practice), as documented by Garibaldi[1] and Hauer[2] among others (see A Quality Health System Needs More Primary Care Physicians, Dec 11, 2008). More recent data collected by the American College of Physicians (ACP – the internists’ group) from residents taking required examinations in 2009 indicate that only 21% of these residents are planning careers in general internal medicine (65% subspecialties, 10% hospitalist) and the actual results tend to show that these plans tend to skew even more to the latter two groups when decisions are actually made.

I have pointed to money, specifically the anticipated income related to student debt, as a major determinant of specialty choice, and Dr. Phillips makes this quite graphic by comparing the ratio of primary care and family physician incomes to more highly paid specialties over time. Using Diagnostic Radiology and Orthopedic Surgery as comparators, primary care incomes, which were about 60% in 1979, dropped to barely 35% in 2003, a trend that has not decreased since. Other graphs show that the % of graduate training (residency) positions filled by US medical graduates tracks linearly with specialty income, and that the growth in new residency positions has been almost entirely in those high-income specialties with drops in primary care positions. (This is not only because of student interest; it is also because many of these new positions are funded by hospitals. The same specialists – radiologists, cardiologists, orthopedists, anesthesiologists – that make big incomes for themselves also make big profits for the hospitals, so that hospitals are more interested in increasing their capacity to do these functions by having more trainees, residents and fellows, in these specialties.)

This creates a problem. The Graham Center data support much other research that has been cited in this blog by Starfield and others indicating that a health system that is based on primary care, with 40-50% PCPs, creates the greatest benefit in health and lowers cost. We have currently about 32% PCPs. With an interest in primary care among medical students now at about 22%, the problem is going to grow, not shrink. And, as I have often written, if we are interested in increasing primary care specialty choice, we are largely taking the wrong students into medical schools (e.g., Primary care specialty choice: student characteristics, July 12, 2010). Given that these characteristics are in large part negatively associated with family income, the changes in funding for medical schools are also troubling. Phillips cites an interview with the founding dean of the University of Missouri-Kansas City (UMKC) medical school, E. Grey Dimond MD, in the Kansas City Star (April 25, 2011). Dr. Dimond is asked how UMKC, as the “public” medical school with the least state funding of any in the US, survives, and he answers that they have increased tuition to become the highest tuition school in the country. This, of course, does not bode well for low-income students, urban or rural, becoming physicians: “Farm kids in Missouri from little towns that need doctors can’t pay what we have to have.” And, for those low (and middle, and even upper-middle) income students who graduate with debts often exceeding $250,000, those income differences among specialties loom very large – and this does not bode well for primary care.

Phillips provides evidence that Medicare costs and avoidable hospitalizations and hospital readmissions drop dramatically when there are higher primary care ratios (ratios of 1 FP+NP+PA:1500-2000 people, or 1:1000 if all PCPs considered[3]). He cites a large number of studies demonstrating essentially the same thing.

Is there a bright side? Are there solutions? Well, the contributions of primary care are now being widely acknowledged, and there are lots of calls for increasing primary care physicians. The ACA bill provides some increased funding for primary care (about a 10% increase under Medicare) and major funding increases for the National Health Service Corps (NHSC), which pays for medical education by (some) scholarships or (mostly) loan repayment for physicians who enter primary care (and sometimes general surgery) and practice in an underserved area for a period of years. Unfortunately, these are not sufficient; a 10% increase sounds like a lot, but if it brings the primary care doctor’s income from 33% to 37% of that of a specialist (and this would be if the whole practice were Medicare), it is not going to do the trick. The loan repayment from NHSC is good, but it rarely covers the whole bill.

What would work? Medicare, taking the lead among all payers, needs to increase primary care physicians’ income dramatically. The Council on Graduate Medical Education (COGME) estimates in its very impressive 20^th Report, Advancing Primary Care, that a family physician must be able to anticipate earning 70% of what a subspecialist makes if the goal of having a 40% primary care workforce in 20 years is to happen., the level at which income expectations tend to wash out of the decision on specialty choice. The federal and state governments should learn from successful models and repay all of the loans of medical school graduates who enter primary care over 8-10 years (enough time to ensure they are actually practicing primary care) and do it twice as fast for those who practice in an underserved setting.

This is what it will take to bend the curve of specialty choice, and, as a result, to bend the cost curve of providing health care.

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[1] Garibaldi, RA, Popkave C, Bylsma W, “Career plans for trainees in internal medicine residency programs”, Acad Med 2005 May;80(5):507-12

[2] Hauer KE, Durning SJ, Kernan WN et al., “Factors associated with medical students’ career choices regarding internal medicine”. JAMA 2008;300(10):1154-64

[3] The benefit on cost of hospitalization, avoidable hospitalizations, and readmissions is more difficult to assess for general internists than for family physicians; this would be unsurprising given that their training in almost all in the hospital rather than in the ambulatory setting.