Healthcare is tired. Doctors are cranky. Managed-care plans are almost as unpopular as tobacco companies. Hospitals, which were doing very nicely, thank you, up until the Balanced Budget Act of 1997 hit, have since plunged into financial despair, kept above water only by the run-up in their Yahoo! stock.
As the bottom line disappears, hospitals are backing away from integrated systems and their commitments to healthier communities as fast as you can say "focused factory."
In 1999, the economy is on a roll. Costs are falling in many industries as the vicious, brutal, wondrous world of e-commerce guts the margins of business after business and gives the consumer the benefit.
Yet in healthcare we are seeing the reverse. Premiums are rising at 8% to 10% annually, and it will be the employee who pays for most of the increase. Yes, consumers have been empowered (code for "You're on your own, pal!") and asked to pick up the burden of healthcare in a massive shift from defined benefit to defined contribution.
What is going on here? Is this the consumer nirvana we were promised? And what should our leaders do about it? In my view it is a crisis of vision, values and leadership.
Today we don't have a clear vision of where we want to be in 2020. In the old vision of managed competition, vertically integrated healthcare systems competed to care for a defined population. For one wonderful moment in the sun, healthcare all made sense. This permitted leadership on the cheap. Everyone could give the keynote address. It was like a rap song -- capitate, integrate, communicate, yo bro' I wanna be an HMO. The vision was so clear that hospital CEOs could persuade boards that they had to take responsibility for the health of their communities, because, after all, they were about to assume the risk for that population on a capitated basis. This wasn't all that goofy a vision, but it only existed on Powerpoint. We never actually implemented any of it.
That vision has been discredited and abandoned. A handful of forward-looking hospitals across the country, such as Baptist Health System of South Florida, actually did the hard work of integrating across the continuum of care, building physician-hospital organizations, and creating a 100,000-enrollee HMO.
But relentless managed-care consolidation, brutal competition with for-profit hospital chains, and weakening Medicare reimbursements for acute care, skilled nursing and home care turned the model upside down. Now they find themselves having to undo these initiatives without having reaped the rewards of their visionary leadership.
Like many hospitals, they are turning to focus on managing acute care and competing on basis of quality for the insured population in a defined geography. That makes sense under the circumstances. But is that all there is for healthcare?
The prevailing trend in healthcare financing and delivery is horizontal consolidation. Health plans becoming "virtual single payers" that consolidate their firepower in a particular geography to have such contracting clout that they can simultaneously offer big, broad open networks (because choice in America is a surrogate for quality) and low costs.
Virtual single payers are a for-profit reincarnation of Canadian provincial ministries of health or German sickness funds. As single buyers they have enough market power to turn physicians into hamsters on a treadmill of ever-decreasing fees for services.
Hospitals, too, are consolidating into cartels -- OPEC Healthcare -- or better yet, turning into benevolent monopolists who own the local catchment area and kill any interlopers. In this way the smart hospitals can accrue countervailing clout with health plans, but not with Medicare. Doctors, on the other hand, seem incapable of organizing themselves, as the implosion of the practice management industry proves.
We can do better. True integration is not dead. Some, like Kaiser Permanente in Oakland, Calif., and the Henry Ford Health System in Detroit, remain committed to vertical integration as the best shot to improve quality, keep costs low and bring discipline to medicine in an age when both clinical knowledge and information technology are surging.
Kaiser Foundation President and Chief Executive Officer David Lawrence, M.D., argues that the fundamental challenge for the healthcare industry in the new millennium is that the "chassis of healthcare delivery cannot support the new science." Lawrence argues that the innovations in molecular biology and the power of the Internet (and other technological developments to come) cannot be bolted onto a healthcare financing and delivery model that is at least 100 years old. He is right.
We need to change. We talk about change in healthcare, even though we do more wheel-spinning than changing. We have lots of fabulous new medical technologies. But we also have the same old problems of cost, quality, access and security of health benefits that we have worried about for the past 30 years.
The reason we are dazed and confused about the future of healthcare is that we have never connected all the dots. Healthcare is a product of the culture. Our vision of healthcare should reflect our values -- not the values we would like to have but the ones we've got. We Americans believe in choice, pluralism, tiering, consumerism, competition and the power of innovation and new technology. We do not believe in universality, equity, rationing, global budgeting or the management of innovation. These latter are the basic values underlying most other healthcare systems around the world. And they've allowed those countries to spend far less for healthcare and have higher aggregate health status than the U.S.
We are different. We are not Canadian. We want a system that is cutting edge, especially for those who can afford it. As Monty Python once said, we want a system that is "cruel but fair."
Making that connection between vision, values, policy and strategy requires leadership. If we connect vision, values and leadership we can build a healthcare system that is at least coherent and sustainable. It might not be all that we might want, but it would be better than what we have.
Here are five big challenges that healthcare leaders must meet by 2020:
Are we going to fix Medicare for the new millennium? Better yet, can we use a reformed Medicare system as a platform for universal coverage? Don't hold your breath. Medicare reform is simply a venue where politicians can fight one another. It is the Colosseum of politics. The opening round will be an attempt by hospitals to claw money back out of the BBA abyss. Some relief may occur. The next round will be about drug coverage. But don't make those pharmaceutical companies mad or you will see precision bombing of Capitol Hill by the lobbyists that will make the first 30 minutes of the Gulf War look like a picnic.
E-health and the new consumer
Many consumers are voting with their feet and embracing alternate therapies, such as acupuncture. Many more -- 60 million Americans last year, according to one poll -- are online for health information and increasingly "in your face" with physicians. The 60-page Internet print-out, or worse yet, the e-mail with 400 attachments, has become the communication du jour with the doctor.
Oncologists, pediatricians and women's health specialists among others point to an explosion in time spent with patients going through a bad bibliography downloaded from the Net.
Investors have given the green light to Healtheon/WebMD, Dr. Koop and many other e-health plays. They shake up the healthcare system by empowering consumers with information. Let's hope they help us get it right. To date all we have done is piled cyberchondria onto the list of things doctors have to deal with in an ever-shorter office visit.
Designing the new chassis
The problem is that the office visit, the history, the physician and the referral are old ideas. We need a new chassis for the delivery of new science. We need to reconceive how medical care is organized and how practitioners interact to best utilize technology, especially the Internet.
But it doesn't all have to be high-tech. For example, why don't doctors do more group teaching of patients? There is a CPT code for it but most doctors couldn't tell you what it is. Psychologist Ed Nofsiger and colleagues at Kaiser Permanente have had spectacular clinical results by offering a group visit for 20 to 30 cancer patients who can participate in a two-hour conversation with a clinical team of doctors, nurses and psychologists. The patients love it, the providers love it and clinical outcomes have improved.
Docs behaving badly
In anticipation of being overwhelmed by HamsterCare, physicians are acting out in a multitude of ways. Some are joining unions, although doctors don't do solidarity real well. Others are going all retail -- "I don't take managed care, I just take cash." An elite few will prosper this way. In the middle are responses ranging from virtual unions -- where doctors lobby their state attorneys general for the right to bargain as a group with the virtual single payer -- to passive-aggressive tactics with the managed-care bureaucrats.
Doctors and their leaders need to stop whining and step up and tell us what medicine in 2020 ought to look like. And please don't say, "Let's go back to 1975." Remember, doctors' real incomes have gone up in the past 25 years in the U.S.; in most other countries, they have gone down. These are the good old days.
Drugs and innovation
The pharmaceutical industry is on a roll. It has dazzling new technologies, which it promotes to consumers and physicians, and it can end-run the managed-care button counters. But the pharmaceutical industry is killing the managed-care industry. The response by managed care has been to create tiered formularies where the consumer has to pay as much as $50 per prescription in copayments. (Typically, in a three-tiered formulary, the generic drug is available for a $5 to $10 copayment, brand-name sole-source drugs for $15 to $25 and so-called lifestyle drugs such as Viagra at a $35 to $50 copayment.)
At the same time, the absence of drug coverage for Medicare is gaining political attention. The result may be drug price wars as managed care and government gang up on the drug industry.
But we should think long and hard. America values technology and progress. Science holds so much promise, which could lead to meaningful cures. Drug companies may be capable in the next three decades of providing a technological fix to healthcare by creating new vaccines and gene therapies. We don't want to kill off the pharmaceutical industry in the process of providing drug coverage. But this will require leadership from Congress, the managed-care industry and the pharmaceutical barons.
Right now leadership in the pharmaceutical area seems fat, happy and oblivious to the emerging threats. The industry's executives have beaten managed care and are reaping the benefits of aggressive consumer advertising, comforting themselves that all they are doing is responding to the market. The market was created with the aid of regulation, and it can be undone through regulations such as price controls, the shortening of patent protections and the use of the government's massive potential purchasing power in pharmaceuticals.
Pay a visit to Canada and see. Let's not make this a bad replay of the past with mindless Senate hearings full of snow jobs from all sides. Leaders need to get together and plot a course that enhances coverage and preserves innovation. Figure it out, and we might all be better off in the new millennium.