Washington Policy Favors Hospitals, Sacrifices Private Physicians

May 22, 2014
James Doulgeris

It hasn’t dawned on Washington that hospitals and hospital systems will never commit financial suicide by reducing volume, and physicians will pay the price.

"No margin, no mission," is the bottom line for hospitals. For profit, not for profit, non-profit; it holds true for all.

So, why do Washington lawmakers and policymakers shower huge grants and other financial incentives on hospitals, particularly the biggest and most expensive among them, for accountable care organization programs and related initiatives that can only succeed at their substantial expense?

Let me preface the following by saying that I worked in the hospital industry for decades, a lot of that time in the CEO role. It would be fair to say I am a hospital guy, and speak from experience:

The simple reality is that hospitals are clinical facilitators for physician’s orders, and outcomes are only as good as the physicians treating patients in their beds. They should not be running the delivery system.

Will there be any real policy change? Unlikely because major hospitals, especially teaching hospitals and hospital systems, have very smart managers. They have lots of money. They are well organized. They are powerful. And, they know that if they keep control, they will forestall or prevent their inevitable decline if health status improves as it must.

To reduce spending, there has to be a winner and a loser between hospitals and physicians. It has to come from less utilization in the form of eliminating unnecessary hospitalizations, procedures and readmissions at first, and, further decreases from improved health status in years to come.

Physicians represent less than a quarter of healthcare spending as a whole, and that is generous, even though they could control virtually every penny.

Hospitals are winning the battle. Healthcare spending is rising rapidly after years of relative stability even though unprecedented amounts have been dumped on patients in the form of copays, deductibles, and co-insurance.

The Obama Administration would like us to believe that costs are rising because more people are accessing the system, but that does not hold up to the real numbers even though they show increased utilization. McKinsey and Company just did the math and concludes about three in four of those buying policies in the exchanges were previously insured, equating to about 6 million people.

As it stands, the only place for insurers, including CMS, to go without any other options is to put more pressure on pricing and for Washington to pile on more regulations in a vain attempt to control spending. Hospitals will take their lumps, but physicians will be wounded, being forced to do yet more with less while being smothered with reams of new regulations. That means even fewer resources, time, and capability for the people who can affect the most spending reductions - physicians, particularly those in primary care. That cost is just today. Tomorrow will deliver an explosion of new costs because resources that can prevent higher acuity in chronic disease are being starved out.

Washington is just doing what it knows: Treating the healthcare system like another massive government agency. This one, however, is not only unsustainable, it is deadly if present policy is not addressed properly.

There is a bright spot on the horizon though, and it is breaking through despite present policy.

The best and the brightest are forming physician-governed, invitation only high-performing networks with real population health management capabilities and new clinical tools under functioning common platforms with healthcare business experts running the business end. Only a very few can walk that walk, provide the means and organization to generate real savings, and negotiate keeping, and sharing, the lion's share. They are the future, and best hope of turning these tables. Commercial payers are anxious to find and partner with them.

One can only hope they are not regulated out of business to prove a political point.

Call me cynical … or just experienced.