The vertical integration of hospitals, physicians and health plans is "the grand illusion in American healthcare," a leading healthcare prognosticator asserted last week.
And he warned that healthcare executives should think twice before drinking an elixir that's making no one healthy except the consultants peddling it.
That's the outlook from the Institute for the Future, a Menlo Park, Calif., organization headed by J. Ian Morrison.
Morrison vented his contrarian views to about 1,000 listeners at the American College of Healthcare Executives' Congress on Healthcare Management in Chicago last week. In the Arthur C. Bachmeyer memorial address, the Glasgow, Scotland, native professed his admiration for the Canadian system and then went on to cheerfully disembowel the conventional wisdom in the United States.
The market-driven managed-care model is bound to fail because of internal contradictions that Americans are not yet willing to face, he said. The drive to cut costs at any price will eventually stall in the face of disintegrating quality of care, consumer dissatisfaction, physician revolt and general exhaustion, he suggested.
The free-market mechanisms put in place to control costs have spawned an extremely vicious species of competition, especially in California. There, "big, ugly buyers" have been allowed to swell to such a size that they are in a position to "beat up on the providers" with impunity, he said.
Employers and other payers may think they've won the upper hand and stopped the cost spiral, but not for long. "We're kidding ourselves if we think costs will continue to go down," Morrison said.
It's simplistic to think all markets are going to move to pure capitation, he thinks. Even Kaiser Permanente, long a one-product shop, is stepping back from pure capitation to offer a point-of-service plan.
"We overestimate the degree to which the United States is going to resemble Los Angeles," one of the most competitive markets in the country, he said. Instead, the country is splitting into distinct regions, distinguished by preferred financing methods and ways of organizing care. The West Coast will be very different from the rest of the United States, he predicted.
In the meantime, the market system no longer will underwrite the perquisites and prerogatives of academic medicine. Centers of medical education will have to either adapt or decline.
The safety-net institutions are about to run out of money, pinched by politicians who want to save tax dollars and by managed-care companies. "Their gold card, the Medicaid population, is being stolen from them by the private for-profit operators," Morrison said.
The public and media are becoming alarmed by perceived imbalances in rewards to healthcare operators, especially HMO executives. But "you can't have it both ways," Morrison argued. "You can't invoke the magic of the marketplace to control healthcare costs and then get upset when some people make too much money." HMO executives, he said, are being rewarded by the market "for sticking it to hospitals and specialists," as they were supposed to.