Transcript Systems-Based Practice "Kickoff"

Medical Practice in the USA:
Current Issues and Concerns
Advanced Practice Selective
Day #1
Robert E. Gwyther, MD, MBA
Professor of Family Medicine
UNC School of Medicine
Is The US Healthcare System
Really Broken? (YES, it is.)
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It costs too much
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Quality Issues
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For U.S. companies, individuals, and taxpayers
A lot gets spent on things other than patient care
The U.S. system ranks low compared to other
developed nations
Medical errors are the 5th leading cause of death
Many people have little access to healthcare
The system is very complex and hard to fix
Overall Healthcare Spending
(OECD Countries, 2008)
~ $8800 per
capita in
2012 or 18%
of GNP
Per Capita Public and Private
Expenditures, % of GDP, 2012
Health Care Spending has
Risen Steadily for 50 years
Dollars
in
Billions
Growth Rate =
4.5% per year
Healthcare Inflation Started
about 50 Years Ago
(In 2005
Dollars
Per
Capita)
Medicare and Medicaid
Began in 1965
Source: The
New York Times
Healthcare Spending Over
Time
Overall inflation
rate =
4.5%/year
Growth in Total Spending by
Funding Source – 1960 to 2009
Overall cost was 13.3 times as
much in 49 years
Forbes Magazine
Growth in Healthcare Costs,
2000 until 2011
The Washington Post, 2013
Why Did Healthcare Expenses
Rise in 2008??
California Health Care Foundation, 2008
US Health Spending in 2011
By Category of Service
Public v. Out of Pocket
“Public Funds”

Come from Taxes Paid by
individuals and employers
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On personal income,
corporate profits, etc.
State and local taxes as
well as federal
Read as “out of many
pockets”
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“Out of Pocket Funds”
Co-pays, uncovered care,
medications, etc.
And, citizens pay even if
they seek no healthcare

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e.g. Health insurance
premiums deducted from
employee paychecks
Insurance is becoming
increasingly expensive

Policies cover less cost,
leaving patients to pay
more “out of pocket”
Myth: US Health Care Costs so Much Because
Americans don’t Personally Pay for Health Care
$7,000
Out of Pock
Priv Health Ins
Public
$6,000
$5,000
$4,000
$3,000
$2,000
$1,000
$0
in
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Steven Miles, MD, University of Minnesota, OECD, 2005
Unintended Consequences of
“Out of Pocket Expenses”
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Patients may spend their money on other
things
They may fail to:
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Return to the office as soon as you’d like
Have recommended procedures done
Take the medication regimens you prescribe

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Reduced doses or frequencies to make pills
stretch
Don’t take the medications at all
Simplee Healthcare Blog,
October, 2011
How Does ObamaCare Try to
Fix Some Problems ??
 Sets minimal criteria for qualified plans
 Eliminates prior condition rejections, treatment limits, doughnut holes..
 Improves access for lower income groups
 Aims to lower costs by:
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Earlier diagnosis and treatment
Making “meaningful use of computers”
Increasing incentives for “high quality, cost efficient care”
Making lower cost insurance available
 If their company’s insurance plan premiums > 9.5% of income, employees
can jump to the low cost pool
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Intends for competition between private insurers to result in
lower premiums
Possible ObamaCare Problems
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Insurance companies can increase prices
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More covered lives will increase the cost unless cost
reduction measures are very successful.
There is no single payer to set prices and payments
It needs healthy young people to sign up
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Especially if competition is not effective
Early on, many will elect the penalty in lieu of signing up
Politics, fueled those previously happy with the
system, will try to force return to business as usual
Efficient Use of Funds

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Medicare spends 95% of revenue on patient
care
The ACA requires companies to spend >
80% of their revenue on patient care (and
that’s an improvement!!!)
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Medicare Advantage programs must have
“medical loss ratios” > 85% of premium
revenue
Rhetoric about “value”/pay for performance
Medicare
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A Federal program, mostly for people > 65
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Initially covered a percentage of fee-for-service care
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Little “preventive care” to start; some now included
Open ended governmental commitment
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Premiums taken from Social Security benefits
Doctors should order only what is indicated
Professionalism keeps doctors from overcharging patients
Pays housestaff salaries!!!
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What are the ethics of finishing residency and joining a practice that
“doesn’t take Medicare”????
GME could get cut in the budget crisis/fiscal cliff
Medicaid
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A shared Federal / State program
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Split payment ratios vary by state; NC currently $2/$1
Historically for the poor, women, children, people
in nursing homes or have key diseases like CRF
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As of January 2014, ACA dramatically increases those covered
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Many states are electing NOT to increase their Medicaid population (e.g. NC)
Expenses of Medicaid are also open ended
Federal and state governments seeking to control
cost
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Block grants would cap spending
Some states willing to cap the money for control of the program
“Medicare for Everyone”
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A new cry from the left
Done in Canada for decades
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Would dramatically impact private insurance
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Single payer system, easier to control costs
Participating physicians are controlled
Many Americans would drop expensive, private
insurance and jump into Medicare
So, Medicare would have to find ways to control
volume of services delivered as well as
reimbursement for services
Health Spending is NOT
Uniform in the US Population
Per Capita Spending by State
in 2004
North Carolina
CMS
Health Spending v. Income
Level
Health Spending v. Race
US Bureau of Labor
Statistics, 2008
Canadian Per Capita Health Care Spending
by Age Group in 2007
Wikipedia
Health Spending on Geriatric
Patients, OECD Comparisons
Source: Paul Fishbeck, Carnegie Mellon University, 2012
Yeah, But Doesn’t Our System
Do a Good Job???
On a few measures, yes.
Overall, the US system is rated very low.
• #37 in the world in the 2000 WHO analysis
• Tied with Costa Rica at #34 out of 37 OECD
countries in 2007
Who Ranks International Healthcare
Systems? (WHO, Commonwealth, etc.)
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Access to care
Efficiency
Equity
Healthy Lives
Infant mortality
Life expectancy
Technology available
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Quality of care
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“Right care”
Safe care
Coordinated care
Patient-Centered care
Survival
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Breast, cervical cancer
Cardiovascular disease
The US Ranks High in Just a
Few Areas
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Availability of technologies (e.g. CT, MRI,
cardiac cath labs)
Rapidity of getting procedures done
Survival from some serious illnesses (e.g.
breast cancer, colorectal cancer, CAD)
“Right care” (chronic care and prevention)
The US Ranks Average to Poor
on Most Measures
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Access
Cost
Efficiency
Equity
Healthy Lives
Overall Rankings
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Childhood
immunizations
Influenza immunization
of the elderly
Following guidelines for
chronic disease
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We could do better by
using nurses to help
Will the Affordable Care Act
Matter in the Long Run??
Congressional
Budget Office,
2010
Did More Spending Allow a
Longer Life in 2000 ???
UCSC
Atlas of Global
Inequality,
2008
So, How Does the Public Rate
Healthcare Systems??
As opposed to WHO, Commonwealth, etc?
Quality of US system is #34
out of 37 countries
Q
u
a
l
i
t
y
United
Kingdom
Japan
United
States
(By WHO
Measures)
Cost of Health Care (% GDP)
Perceptions of the Public Are
Counterintuitive
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Of the effectiveness of their healthcare
system
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US ranks very high
Scotland (a UK Country) ranks lowest
Of their personal health status
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US ranks high
Japan ranks low
The Commonwealth Fund
Why Is Healthcare So
Expensive in the US?
1.
2.
3.
4.
5.
It’s a fee-for-service system
a)
b)
The more providers do, the more they get paid
So, we do a lot (“more is better”)
The only developed country without universal access
a)
b)
ED costs are high for people who cannot be seen elsewhere
Delay of care increases cost
Dysfunctional primary care system
The insurance industry is lousy at controlling costs
We use the “business model” for insured patients
a)
b)
Free markets, competition
Profit is the goal in business
Primary Care is Struggling,
Despite its Proven Benefits:
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Lower cost of care for patients managed
by primary care providers (IM, FM, Peds)
Better health status for populations
managed by primary care physicians
Lower mortality rates for populations
managed by primary care physicians
Barbara Starfield and colleagues
Multiple publications
Private Insurance Companies
Affect This Too (a Lot)!!
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Hospitals, physicians and other providers set prices using
insurance company fee schedules
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The insurance industry pays for almost half the services
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May care for patients of 30 or 40 different companies
Set their “price” as the highest available (leave no money on table)
Uninsured folks stuck with highest possible prices
Set reimbursement by contract, not the physician’s “fee”
Generally, private insurance companies pay more than
Medicare or Medicaid for any given service
 “i.e. we get 160% of Medicare”
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So, many physicians don’t treat Medicare or Medicaid patients
Leaving more elderly, complicated patients for other physicians
Background Issues I
Income and Wealth Distributions
Background Issues II
Business Practice 101
The “Business Model”
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Free market principles
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“Purchasers choose between products”
Competition between entities is good
The best companies survive
Has been applied to healthcare for
several decades
But, is this realistic for healthcare???
Profit v. Not-For-Profit
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Revenue – Expense = Profit (or loss)
[the “for profit” world’s (?only) goal]
Revenue – Expense = Margin
[the “not-for-profit” equivalent]
Ethical Responsibility of All “ForProfit” Companies
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Is to their stock holders
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To make a profit
Health Insurance Companies have no other
inherent responsibility, such as:
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Insuring that health care is affordable
Insuring access of patients to health care
The health of the public
National healthcare expenditures
Atul Gawande
Keeping Patients at the Center
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McAllen, Texas had the highest per capita
Medicare expenditure in the nation in 2006
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Despite being similar in demographics to nearby
El Paso, which was average
Dr. Atul Gawande says the difference is from
putting profit ahead of the needs of patients
He points out that the Mayo Clinic stays far
more efficient by putting patients’ needs first
Can This Be Fixed???
Who Provides Health Care in the US?
(It’s complicated)
Schematic of the U.S. Healthcare System
US House GOP Staff, 2009 or 2010
Who are the Players??
Providers
 Hospitals
 Physicians
 Pharmacies
 PA, NP, etc.
 Surgical Centers, etc.
 Home Health Services
 Laboratory Services
 Imaging Centers
 Equipment Suppliers
Payors
 Government
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Medicare (Federal)
Medicaid (Fed/State combo)
Local (e.g. county hospitals)
Armed Forces system
Veteran’s System
Tricare
Private Insurance
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For Profit (e.g. Cigna, Aetna)
Not-for-profit Insurance
(e.g. BCBS/NC)
States Govern Healthcare
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An important “states rights” issue
The feds have “invaded” somewhat
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Affordable Care Act
DEA regulations
Payments for federal programs
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Medicare (federally funded)
Medicaid (shared federal/state funding)
SCHIP
States have more regulatory clout
Fair Trade (Antitrust) Laws
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Designed to protect the public from
coercion or collusion between companies
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Avoids monopolistic industries and behaviors
Covers most industries, including health care
providers
Protects the health insurance companies from
doctors colluding on prices
But health insurance companies are NOT
subject to antitrust laws
Providers Are Regulated
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Physicians are subject to fair trade laws
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Importantly, it is illegal to collude on price
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Cannot share contractual information
Cannot “split fees”
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So doctors cannot negotiate together, unless they
are part of the same business entity
Separate fiscal entities sharing income
This limits provider negotiating strength,
especially for independent, private practices
How do Physicians Combat the
Power Discrepancy?
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Consolidate practice into groups (e.g. local
orthopedic surgeons or radiologists)
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Either Duke, UNC, Triangle Orthopedics or Wake
Radiology
Hospitals and private physicians merge
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Provides mutual strength and survival
Lots of primary care practices have consolidated
(e.g. Novant bought dozens all over NC)
> 50% of primary care practices now owned by
hospitals
The Health Insurance Industry
Health Insurance Companies
are Licensed
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To sell health insurance policies in states
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Under the appropriate laws of the state, and
Generally under the supervision of an
insurance commissioner
They are not licensed as health care
providers
Health Insurance Companies
Must Follow Regulations
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Written by the laws of the state (and, less the feds)
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They are not subject to antitrust laws
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Many laws and regulations govern the business, e.g.
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Cannot collude on prices with each other
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(They know each others’ prices from selling secondary policies)
Minimum benefit requirements
Parity between mental and physical health (new in 2009)
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Because they are regulated by the state like utilities, cable TV, etc.
But, only for companies with > 50 employees
Can no longer deny payment for preexisting diagnoses
ACA added more restrictions; started Jan ‘14
“Not-For-Profit” Companies Have
Some Different Regulations
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Frequently, have no taxation and instead are
required to provide certain services
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e.g. BCBS must sell insurance in all 100 NC
Counties
May have price controls
But, they are still trying to make money
Health Insurance Companies
Broker Business Using Contracts
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With purchasers of health care services
(Insurance company revenue stream)
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Frequently from public and private employers
National and state governments
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e.g. Department of Corrections
With providers of health care services
(Insurance company expense side)
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Doctors, nurses, pharmacists, hospitals, etc.
And, providers are tough in negotiations
Brokering is Inefficient
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They do not set prices, they negotiate them
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With every subscriber for premium rates
With every provider for service charges
Charges become irrelevant; reimbursement is
determined contractually
These rates and charges vary a LOT
Disputes settled in court
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Lawyers are expensive
Accounting is a necessary evil
US Payment of Providers is a Truly Chaotic System
Table 6.5
Payments Made by One California Insurer to Various Hospitals, 2007
Hospital
Appendectomy (1)
($)
CABG (2)
($)
A
1,800
33,000
B
2,900
54,600
C
4,700
64,500
D
9,500
72,300
E
13,700
99,800
1 = Cost/case (DRG 167)
2= Cost/case (DRG 107, tertiary hospitals only)
SOURCE: Final Report of the NJ Commission on Rationalizing Health Care
Resources, Chapter 6.
Uwe Reinhardt Slide, 2008
Table 6.4
Payments Made by a N.J. Insurer to Various
Hospitals for Four Standard Services, 2007
Hospital
Normal
Delivery (1)
( $)
CABG (2)
Appendectomy (3)
Hip Replacement
(4)
($)
($)
A
2,178
26,342
2,708
3,330
B
2,787
32,127
2,852
3,444
C
2,906
34,277
3,320
4,200
D
3,187
36,792
3,412
4,230
E
3,276
37,019
3,524
5,028
F
3,629
45,343
4,230
5,787
1 = Mother Only Case Rate, 2 = Coronary Bypass with Cardiac Catheterization (DRG 547)
tertiary hospitals only, 3 = Surgical per diem (DRG 167) with average LOS of 2 days, 4 =
Surgical per diem for Total Hip Replacement, average LOS of 3 days
SOURCE: Final Report of the NJ Commission on Rationalizing Health Care Resources, Chapter 6.
Uwe Reinhardt Slide, 2008
“Single Payer” Would Fix This
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Would lower prices/costs
Could make the system more equitable
But, physicians and hospitals would lose
their positions of power in negotiations
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Most would inevitably get lower salaries/fees
So, most professional associations oppose this
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Hospital associations
Medical societies
Medical specialty organizations
Health Insurance Companies
in NC (2011)
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100 companies sell health insurance
Individual and Group, classified as:
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Life, Accident and Health
Health Maintenance Organizations
Health
42 sell individual health insurance
~ $12 Billion in direct premiums written
Top 6 Private Health Insurers in NC
(Excludes Medicare, Medicaid, TriCare, etc.)
2011 Market Share
(% of $$ written)
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BCBS
United Healthcare
Wellpath Select
America’s First Choice
First Carolinas Care
Cigna Healthcare
78.9
14.8
3.2
1.0
0.7
0.5
NC DOI Website
Blue Cross/Blue Shield of NC
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Only company written into NC statues
Has financial and regulatory advantages
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No taxes; no profit distributions to share holders
Supposed to plow savings into services
Tried to go “for profit” in 2002
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State wanted > $100M back to compensate for
past advantages
Dropped their attempt (at least temporarily)
The Cost of Health Insurance
Has Been Growing Fast
Many Americans Cannot Afford It
Boston Area Health Insurance
Prices
Mass-Care
Website
Does This Affect Employers?
Sure, in lots of ways
It Hits Their Bottom Line
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Insurance premiums are effectively a tax
on their productivity
Must manufacture/produce enough to pay
for employees’ insurance before making
profits for the company
Recent GM settlement involved cutting
healthcare benefits for current and past
employees in order to re-emerge from
bankruptcy as a financially viable company
Revenue Streams for Physicians
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Patient billings
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Using Current Procedural Terminology
(CPT) codes
Capitation payments
Contractual fees
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Salaries to provide service
Economics for Inpatient vs.
Outpatient Physicians
Inpatient Physicians
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Bill patient for MD
services
Pay overhead expenses
(<10% of the revenue)
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Malpractice premiums
Billing expenses (maybe)
Hospital bills the rest
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Or the surgical center, etc
Outpatient Physicians
 Bill patient for MD
services
 Pay overhead expenses
(60 – 70% of the
revenue)
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Malpractice premiums
Billing expenses
Office staff salaries
(nurses, clerical, etc.)
Rent, utilities, maintenance
Medical records
Supplies
So, Who is Getting Rich??
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Physicians?
Insurance Companies?
Hospital Employees?
The Pharmaceutical Industry?
Mean U.S. Physician Salaries
*Profiles – Graduate Physicians Seeking Practice Opportunities, 2014-15
Specialty
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Neurosurgery
Radiology (diagnostic)
Plastic surgery
Anesthesia (general)
Ophthalmology
OB/Gyn
Pathology
Psychiatry
Pediatrics, general
Internal Medicine , general
Family medicine (no OB)
Initial Salary
($)
395,000
330,000
273,000
265,000
210,000
200,000
206,000
165,000
162,000
145,000
138,000
> 6 years
($)
593,500
447,850
385,000
363,000
251,000
282,750
237,000
213,000
204,500
212,790
212,850
How About the Insurance
Industry???
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Financially, it has been doing very well
for several decades
Executives are among the highest paid
in the USA
Very reluctant to change things

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Are less supportive of the Affordable Care
Act than they are of the status quo
Likely, the financiers of opposing the ACA
Insurance Company
Executive Salaries
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William McGuire, United Healthcare, $1.6 B
bonus in Dec 2005
Bob Greczyn, BCBS/NC, $ 2.15 M salary
2004 plus a bonus ($3.2 M in 2007)
News & Observer Articles, 2012
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Many insurance executives earn > $ 2 M
How About the Hospitals?
There are thousands of them.
They admit a lot of patients and charge a
lot of money.
Right???
But, there are LOTS of Hospital
and other HC System Employees
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Executives with high salaries
Lots of employees in many geographic
areas (e.g. Triangle of North Carolina)
America spent millions building hospitals in
the 1950s and 1960s
And, now we try hard to keep people out of
them (> $500/day room fees, plus many
other charges)
News & Observer Series, 2012

Executive Compensation is high

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Listed 25 hospital CEOs and healthcare
organization CEOs making $1M to $4.2 M/year
(Carolinas)
Duke CEO was > $2.2 in that series
UNC and Wake CEOs not listed
News & Observer Series, 2012

Even “self pay” makes a profit

Charges studied were > 3 x the cost to
deliver

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Hospitals do have to cover expenses such as
the laundry and the cafeteria
But overall, many are very profitable
Rural hospitals do not do as well

They are at a bargaining disadvantage
News & Observer Series, 2012

Neither Patients or Physicians understand
how much things cost

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Physicians recommend “best practice” therapy
Patients agree to the recommended plan
Hospitals and physicians turn patients over to
collections agents

Can wind up in garnisheed wages, liens on
homes, bankruptcies, etc.

Reason cited for 62% of personal bankruptcy in 2010
News & Observer, 2013
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Couple buys a new health insurance policy with no
maternity benefit; get pregnant
Asks clinic clerk “how much will hospital charge us
for our delivery?”
Clerk does not know, but promises to find out
Eventual range: $ 4000 to $42,000

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Because insurance reimbursements vary
Hospital accepts Medicaid reimbursement of about
$3600
Bitter Pill: Why Medical Bills
are Killing Us

Article ridiculing the cost of medical care

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Exorbitant mark ups on pills, lab tests
Vastly more expensive than the same service
in other developed countries
Linked to the APS website
Steven Brill, Time Magazine, March 4, 2013
US Prices Much Higher than
Other Developed Countries
Angiogram
Colonoscopy Hip Replac’t
Lipitor
(1 month)
MRI Scan
USA, average
USA, average
USA, average
USA, average
USA, average
$914
$1,185
$40,364
$124
$1,121
Canada
Switzerland
Spain
New Zealand
Netherlands
$35
$655
$7,731
$6
$319
E. Rosenthal, New York Times, June 2013
How About the Drug
Companies?
So, Where is the Waste?
Wasted Money

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Unnecessary services (procedures, visits, tests, etc.)
Huge variations in charges/reimbursements for the
same things

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Inflated prices for medical services
Insurance companies have hard times negotiating

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Physicians are smart, competitive people
Advertising
Billing and collection expense
Fighting over authorizations
Lawsuits about denials of payment
Dollars per person per year
Amounts more than $ 140 Billion per year in the USA
Who Can Save Us ????
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The president?
Congress?
The governor?
State Legislatures?
Professional organizations?
Hospitals?
My Summary and Crystal Ball:
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Healthcare costs too much in the USA
For economic reasons, more major changes are going to
happen soon (politically difficult)
A leveling of the % GNP spent on healthcare is in our future
Some alternative to the insurance industry controlling half
of our healthcare expense is inevitable (huge political issue)
Some “public option” may still happen
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Supported by 63% of physicians (RWJ, 9/09)
Average physician earnings will drop somewhat and
disparity in compensation by specialty will shrink
What Should You Do??
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Find a field of medicine that you enjoy and
endeavor to get into one of its residency programs
Count on earning a top 10% US salary; beware of
expectations to be in the top 1% income group
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If $$ is your issue, consider marrying a classmate
Keep patient satisfaction at the center of your
professional goals
Get involved in physician oriented political
activities if you enjoy that sort of thing
Questions, comments????
Mean U.S. Physician Salaries
C. Peckham Medscape: Physician Compensation Report 2015
Specialty
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Anesthesia (general)
Plastic surgery
Radiology (diagnostic)
General Surgery
Ophthalmology
Pathology
OB/Gyn
Psychiatry
Internal Medicine , general
Family medicine (no OB)
Pediatrics, general
Average Salary ($)
358,000
354,000
351,000
317,000
292,000
267,000
249,000
216,000
196,000
195,000
189,000
N.C. Health Insurance Rates Among
Nation’s Highest (N&O) 10/20/13
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Rural counties have higher premiums than
urban counties
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State decided NOT to operate an
exchange
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But, some individuals will qualify for subsidies
Tacked on 3.5% for Feds to run the exchange
State opted out of expanded Medicaid
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200,000 additional people will qualify for
subsidies on policies they buy
The Affordable Care Act stipulates that an employee paying > 9% of their income
on health insurance can leave their employer ‘s plan and go to their state’s
exchange for a cheaper option
Spending v. Life Expectancy