Everybody says universal coverage is a good idea, but
few can agree on how to get it. And the uninsured are hardly a
politically active bloc
Why can't the richest nation in the world provide
health-care coverage to all its people? It's the question that hangs over
all debates about medical care and insurance -- particularly in an
election year when jobs -- and the employer-based health system that ties
insurance to work -- are a key voter concern.
The answer: It's not
that Americans don't want to cover the 41 million uninsured. And the cost,
pegged by Kaiser Commission on Medicaid & the Uninsured at less than
$69 billion a year, isn't insurmountable, adding just 6% to annual health
spending.
It's just that no consensus exists -- in the public,
among politicians, or in the health industries -- about how best to get
the job done. And because the vast majority of voters have health
insurance (85% of the population is insured, but 92% of those who
participated in the 2000 election were covered), political leaders have
little incentive to overcome that impasse.
TURNING TO HYBRIDS. "Most Americans think that
the wealthiest nation in the world should wipe this problem out," says
Robert J. Blendon, an expert on polling and public attitudes on health
care at the Harvard University School of Public Health. "But there's no
single plan for universal coverage that more than one-quarter of the
nation thinks is a good idea." And each of the leading alternatives has
substantial and obvious trade-offs -- in cost, freedom, quality, and
economic growth -- that make it hard for voters and politicians to rally
around a second-choice plan.
So the most likely course toward
expanded coverage will involve what Blendon calls "hybrid plans" -- a mix
of state-run Medicaid programs to extend coverage to currently uninsured
groups, enhanced incentives for employers to make insurance affordable for
low-wage workers, and personal tax breaks to encourage individuals to buy
coverage.
The truth is, Americans have long rejected sweeping
attempts to solve the problems of health coverage by creating a single
seamless system. President Harry S. Truman proposed a universal health
plan in the late 1940s, only to be soundly beaten. The next steps were
incremental: Lyndon B. Johnson won government-run coverage for the elderly
(Medicare) and poor (Medicaid).
A SIMPLER
PAST. The last Democratic attempt to overhaul the entire
system -- President Bill Clinton's reform drive in 1993 -- was shot down
in partisan warfare that led to Republican control of Congress in the 1994
election. In the decade since, changes have once again been incremental --
adding more children to Medicaid, offering prescription-drug coverage
through Medicare, and pursuing the conservative vision of individual
insurance through tax-favored Medical Savings Accounts.
"In most
countries, one political party had a vision for a health system, and when
they took power, they put it in place," Blendon notes. But that was a lot
easier in parliamentary systems, where the same party controls the
legislature and the executive, and in post-World War II boom days, when
health care was simpler, costs and expectations were much lower, and
voters were willing to redirect their heavy tax burden from warfare to
health care.
Now, most Americans have a strong vested interest in
their employer-based insurance, even though they complain about cutbacks
in coverage and higher costs. And when only a small, politically inactive
slice of the public is uninsured, it takes an economic upheaval to raise
enough fear about losing coverage to prompt political action.
LOWER PRIORITY. Compare public
concerns today with the fears following the 1991 recession -- the first
"jobless recovery." Back then, more than 50% of respondents told Harris
pollsters that health care was one of the two most important issues for
government to address. But last December, in the midst of a seven-month
string of weak employment reports, only 16% of respondents ranked health
care in that league, far behind the economy and jobs (40%) and war and
defense (32%). (One explanation: The jobs figures have been weak because
of a lack of new hiring, rather than layoffs, which have remained low. So,
current workers have less reason to fear losing their insurance.)
That's not to say Americans don't wish that health care was
available to all. Some 62% support universal coverage, according to an
October, 2003, Washington Post/ABC News Poll. But that's not their
top concern: A poll for the Harvard School of Public Health and the Robert
Wood Johnson Foundation last December found that dealing with the
uninsured was only the third-most important health-related issue. The cost
of health care (36%) and Medicare's problems (26%) outstripped helping the
uninsured, which tied with prescription-drug costs at 21%.
As
Blendon noted, none of the major alternatives for reaching universal
coverage commands anything close to universal support. The leading choice
is further expansion of Medicaid, favored as a top pick by a mere 22% of
respondents in the Harvard/Johnson poll. That's closely followed by a
mandate on employers requiring them to offer insurance, the top pick of
21%. But after that, none of the likely ideas -- mandates for families to
buy insurance, tax breaks for individual coverage, universal Medicare, or
its close cousin, a government-run single-payer plan -- is the clear
choice of more than 14% of the public.
NO
URGENCY. Furthermore, when the drawbacks are pointed out,
support for any alternative drops sharply. A separate 2003 Harvard School
of Public Health poll of Massachusetts adults found that 82% of the public
generally supports expanded Medicaid -- but only 55% like the idea when
they're told taxes might rise to pay for it. Similarly, support for an
employer mandate falls by more than half, from 76% to 35%, when
respondents are told that the cost of insurance might force businesses to
lay off workers.
Blendon sees little on the health-care or
political scene that's likely to change this picture. "There's no American
Association of Uninsured Persons issuing report cards on candidates or
holding feet to the fire," he notes. "President [George W.] Bush knew he
couldn't run for reelection without passing a drug plan for the elderly.
No one thinks he faces that same urgency on taking care of the uninsured."
Until that changes, America will at best nibble away at the problem of
ensuring that all its people are covered.
By Mike McNamee, deputy
Washington bureau chief Edited by Douglas
Harbrecht
Instead of the powerful market forces that drive
retail costs down, insurance, inefficiency, and soaring demand
create ever-higher prices
In recent years, Americans have enjoyed the glories of
falling consumer prices. It's commonly called the Wal-Mart (WMT ) effect: Huge
retailers use their buying power to force suppliers to cut costs, then the
retailers pass some of those savings on to their customers. Forced to stay
competitive, other retailers follow suit. The result: The price of, say, a
DVD player, plunges from $1,000 to $50 in just a few years. It is, for
consumers at least, the sort of virtuous cycle that economists dream
about.
And it has worked for everything from gizmos to food. But
it hasn't worked in one corner of the market -- health care, which
accounts for 15% of the U.S. economy and is growing. Why don't the same
market forces that drive price competition for DVD players keep health
costs from rising at double-digit rates?
BALLOONING PAYMENTS. To start, it's important to
remember that two very different things are going on in health-care
spending. The first has to do with the price of what the health-care
industry calls "an individual unit of care" -- that one visit to the
doctor's office or that bottle of pills. In 2003, unit-of-care prices rose
by more than 3.5% -- twice as much as overall inflation.
The other
issue is what's happening to total health-care costs, which rose by about
8% last year. Much of that increase results from more people using more
care, not because the cost of each individual procedure is going up. Over
the past decade, the amount each American spends on medical care has
ballooned from about $3,400 per year to nearly $6,000.
In some
cases, more care is used because the treatments are now easier. For
instance, the number of cataract surgeries has exploded in the past
decade, while the cost of the procedure has been stable. But instead of
having major surgery and spending three days recovering in the hospital,
you can have cataracts removed and be home in just a few hours. As a
result, total spending for cataract surgery has boomed.
WHO'S PAYING? Sometimes, however, Americans use
more care because they think it's free, or almost free. And that's one big
reason why health care hasn't become Wal-Mart-ized. When you buy that DVD
player, you whip out your credit card and pay with your own money. That
makes you want to comparison shop for the best deal. But when it comes to
buying drugs, consumers have little incentive to shop around. If you have
good insurance, you're going to pay the same $10 or $15 whether you need
the most expensive drugs or not.
A recent study that looked at
drugs used to treat arthritis pain provides some insight. Arthritis
sufferers can buy relatively inexpensive over-the-counter treatments, such
as Motrin or similar generics, or much more costly prescription
medications called cox-2 inhibitors, such as Celebrex or Vioxx. Both kinds
provide equal pain relief, but the cox-2 drugs may reduce the chances of
stomach bleeding or ulcers.
The study concluded that people with
good drug insurance were twice as likely to get the more expensive drugs
than those without insurance, whether they were at risk for bleeding or
not. If someone else -- the insurance company -- is paying, price doesn't
matter.
18TH CENTURY TECH. Another
reason why the Wal-Marts of the world can keep retail prices down -- but
the government and big companies can't on health care -- is technology.
This is a truly strange situation. You'd probably think about a big boxy
store as being technologically backward -- just a bunch of stuff piled up
in a huge building, right? But in fact, modern retailers use very
sophisticated information technology to maintain inventories. And their
suppliers use high-tech gear to make the products the retailers sell.
Hospitals may appear to be centers of the slickest technology
imaginable. But in the critical links with patients, many hospitals are
stuck firmly in the 18th century. Think about it: paper charts hanging
from the end of a bed, prescriptions written on scraps of paper that are
carried by hand to the hospital pharmacy. Only slowly are doctors using
devices such as personal digital assistants.
This unwillingness to
adopt advanced IT is hugely expensive, and in some cases leads to
unnecessary deaths. The result is huge added expenses that are, sooner or
later, built into the price.
THE X
FACTOR. That's not all. For example, there's no real link
between quality and price in large swaths of health care. There's no
mechanism to comparison-shop. Even if you wanted to find the best price,
no one would tell you. And don't forget the emotional X factor: Americans
equate the best care with the most care, despite the absence of evidence
that the two have much of a link. These are all very tough problems to
solve.
Modern health care is many wonderful things. But it isn't a
market. And until it becomes one, consumers will have little chance to
enjoy the same benefits of price competition they get at their local
Wal-Mart.
By Howard Gleckman in
Washington, D.C. Edited by Douglas
Harbrecht
How's it done? Is it legal? Safe? Why do drug
companies object? Here are the answers to many questions swirling
around the
practice
You don't have to be an accomplished cybersurfer to
know that plenty of Internet operations do a brisk trade selling drugs.
And it's not just Viagra, Oxycontin, and steroids that are being peddled
online. Many legitimate Web pharmacies have evolved into popular
money-saving options for retirees, state and city workers, and the
uninsured who need prescription drugs.
One of the industry's
fastest growing segments is so-called reimportation sites, which allow
people to buy essential pharmaceuticals at lower prices from foreign
countries. By some estimates, this year Americans will buy more than $1
billion in drugs from pharmacies in Canada alone. And sales from Canadian
pharmacies account for only 20% of all reimported drugs.
The issue
has become a political hot button. While federal and state regulators
watch growing online pharmacy sales warily, politicians from both parties
are listening to their constituents, many of whom are angry at Big Pharma
over high drugs prices in the U.S., where much of the industry's revenue
comes from. Instead of siding with regulators, several members of Congress
have introduced bills that would ease restrictions on reimportation.
Some lawmakers are even providing lists of Web sites and other
programs that will connect people to non-U.S. pharmacies. In its defense,
the drug industry contends that high prices in the U.S. are necessary to
pay for research into new drugs.
Here's a look at the status of
cross-border buying and selling of prescription drugs, and the controversy
over the issue:
What is reimportation, exactly? The way
the drug market works, big pharmaceutical companies make the bulk of their
profits by selling drugs at higher prices in the U.S. to a wealthier
customer base. In recent years, however, reimportation has revealed a
major crack in the U.S. health-care system. Millions of Americans can't
afford the out-of-pocket cost of prescription drugs (43 million have no
health insurance, according to the 2000 U.S. census). So, many have
resorted to buying their medicines from outfits in foreign countries,
which typically charge prices that are between 30% and 70% lower than in
the U.S.
How many people are doing it? The practice has
become quite widespread. Market researcher IMS Health estimates that $695
million worth of drugs were bought in Canada alone in 2003, up from $414
million in 2002. The rise of the Internet in the late 1990s made buying
drugs from abroad easier. At first, people seeking painkillers and
"lifestyle" drugs like Viagra were the main buyers. In the last several
years, however, more and more people have flocked to sites that promise
lower prices for drugs to treat chronic conditions.
How does
one go about reimporting? Today, the predominant method has become
ordering through Web sites or storefronts, which often, but not always,
require patients to fax a copy of a physician's prescription. Of course,
it's hard to know for certain what happens once the order leaves the fax
machine, but many sites promise that licensed pharmacists in their country
then check that the prescription is legit. After a money-order or
credit-card payment for the drug and shipping fees is received, the
prescription usually arrives on your doorstep within a few days.
Even with the Internet, many people still physically travel to
foreign countries to buy prescription drugs on the cheap, however.
Is reimporting safe? That's hard to say. The FDA has
been consistent in saying that people shouldn't do it. Bill Hubbard, the
agency's associate commissioner for policy and planning, points out that
the FDA "can't stand behind those drugs" since it can't track where
they've been or how they are stored. Still, reported cases of harm caused
by prescriptions filled abroad are "fairly limited," Hubbard admits. "We
have no mechanism to know how many people are being harmed. We don't
expect people to drop dead, but we would expect diseases are not being
properly treated."
Is it legal? It's legal for
individuals to personally import a drug supply of less than three months
for their own use (the "personal-use exemption" that many of the U.S.
storefronts and Canadian phamacies are exploiting).
Otherwise,
it's illegal for Americans to buy drugs that are not manufactured at an
FDA-approved facility. (Proponents of reimporting point out that drugs
bought through pharmacies in certain countries, particularly Canada, were
likely made in government-inspected facilities.) However, the FDA has done
little to enforce the law. "We have never attempted to arrest or take away
drugs from anyone," Hubbard says. The same is true of any packages sent
through the mail.
Still, the agency has been vigorously going
after commercial operators. Late last year, the FDA shut down Rx Depot, a
popular Oklahoma-based Internet pharmacy that helped people get
prescriptions filled from Canada. The FDA is also talking to package
carriers like FedEx (FDX ) and to credit-card
companies about how they might help in tracking large amounts of
prescription-drug imports from Canada.
Aren't some states and cities trying to help people
buy drugs through Canadian pharmacies? Yes. Budget-strapped states
and cities say they can save money if employees and retirees use
pharmacies in Canada or elsewhere. The Canadian drug-purchasing program
set up in Springfield, Mass., for example, could save the city as much as
$4 million depending on how many of its 900,000 workers and former workers
use the program.
Four states -- Minnesota, Wisconsin, North
Dakota, and New Hampshire -- have set up Web sites or other programs to
encourage and help its state workers buy drugs through non-U.S.
pharmacies. Cities with similar efforts to Springfield's include
Burlington, Vt., and Montgomery, Ala. North Carolina's Caldwell County has
a site, and Boston and the state of West Virginia may set up programs by
this summer.
If it's illegal to reimport drugs, why do local
and state governments enable people to do it? The increase of
elderly and uninsured people resorting to illegal and potentially unsafe
drugs to save money on medicines is a heart-tugger for politicians.
"Obviously there's lots of political appeal to make drugs less expensive,"
says lawyer Al Lorman, a partner at Mayer, Brown, Rowe & Maw LLP, in
Washington, D.C. In February, with public encouragement from the mayor of
Chicago, an elderly Illinois couple filed a suit against the federal
government for "limiting their access to medical choices."
In
situations where states and cites are enabling reimportation, "we have
warned them that it is illegal and urged them not to do it," says the
FDA's Hubbard. So far, the agency hasn't prosecuted the states and cities,
though down the road it "may have to ask a federal judge to mediate."
Could reimportation become legal this year? Not likely,
although the issue will certainly get a lot of attention on Capitol Hill.
As part of the Medicare bill that was passed last December, the Health
& Human Services Dept. must present a report to Congress by yearend
that looks at whether and how reimportation could be done safely.
Several bills are in the works. In early April, Senator Charles
Grassley (R-Iowa) unveiled legislation that would legalize importing of
drugs from Canada and create a 90-day deadline for the FDA to set up a
system to register and inspect Canadian suppliers. After two years, the
bill would allow Australia, Japan, and European Union countries to
participate.
Senators Byron Dorgan (D-N.D.), Judd Gregg (R-N.H.),
John McCain (R-Ariz.), and Olympia Snowe (R-Me.) are all working on
various reimportation bills.
What would the impact be of making
imports legal? Would it ultimately drive down drug costs? Increased competition could certainly cause a dramatic fall in prices
in the short run, says Joshua Cohen, senior research fellow at Tufts
Center for the Study of Drug Development Research. But critics point out
that allowing regulated drug imports in Europe was no panacea. A study by
Panos Kanavos and other economists at the London School of Economics
provided evidence that savings to insurers and patients were modest. And
supply shortages became common in countries where the cheapest drugs were
available.
"Reimporting is skirmishing around the edges of the
problem," says Alan Sager, professor at Boston University's School of
Public Health and co-director of the school's health-reform program. "The
real problem is getting affordable medications for all Americans while
enhancing research for breakthrough drugs."
How are the drug
companies reacting to this? This much is certain: The drug industry
won't give up its fight to keep reimportation from becoming legal.
Drugmakers contend that lower prices (and lower profits) would limit the
incentive to invest in their new-product pipelines.
Given that the
drug industry has been built on constant innovation, however,
reimportation isn't likely to seriously crimp companies' incentive to come
up with new, lifesaving drugs. Boston University's Sager argues that lower
prices resulting from reimportation would be more than offset by the sharp
rise in volume of new prescriptions for people who couldn't previously
afford the drugs at all.
What about the bigger issue of making
drugs more affordable? How might that get fixed? Unlike most
developed countries around the world, Washington doesn't set price caps on
drugs. However, the U.S. market could see an effect similar to having
price caps in the next couple of years. In 2006, when the Medicare drug
benefit kicks in, the country's largest insurer "could use its
sheer-volume clout to reduce the price of drugs," Cohen says. That will
likely create a powerful -- and lasting -- downward push on U.S. drug
prices.
By Amy
Tsao in New York Edited by Douglas
Harbrecht
They're doing surprisingly well, thanks to
innovation, cost-cutting, and flexible plans. But investors better
brace for political fireworks
The last two years may have been a struggle for the economy, but
they've been surprisingly strong for managed-care stocks. Since the New
Millennium, most outfits in the sector have increased prices on their
products and services, while their costs have been falling. The result is
improved profit margins, and in 2003, earnings for the group rose 32%.
Yes, lost jobs and layoffs during the downturn resulted in HMO
membership losses, but managed-care companies have found many ways to
offset the lower subscriber rolls. The biggest gains have come from
technology improvements and better designed plans that encourage consumers
to be more thrifty. That's why HMO costs were lower than expected in 2003
and will likely decline again in 2004. And it explains why the Standard
& Poor's Managed Health Index rose 64% since January 2003, compared
with a 23% gain for S&P 500-stock index.
Analysts are starting
to have doubts that 2005 will be so robust, however. "Costs are still
moving down, but not as quickly as before. And pricing is not rising as
much," says Brandon Carl, health-care analyst at BB&T Asset
Management. The outlook is solid, but blowout results aren't likely,
particularly as new-job creation remains lackluster and opportunities for
lowering costs become fewer.
UNREALISTIC
EXPECTATIONS? The stocks could be due for a break as a
result. Signs of a pause are already appearing. In recent weeks, fear of
rising rates have driven many investors from HMOs into drug stocks, which
historically have done well during periods when interest rates are on the
upswing, Carl says. "We've been positive on managed care, but we believe
the magnitude of trends is declining, and we want to reduce exposure," he
says.
A few large-cap names should continue to post gains, despite
the short-term uncertainties. UnitedHealth (UNH ), the nation's
largest HMO, is "probably the best from a growth perspective," says Carl.
(United is a holding in BB&T's growth funds.) The stock, at $64,
recently lost some ground as investors were disappointed that the outlook
for new membership growth wasn't stronger. Kris Jenner, health-care
analyst at T. Rowe Price, says "there's nothing fundamentally wrong with
United," although he's concerned that the market's expectations have
become somewhat unrealistic. (Jenner owns United Health stock personally.)
Still, United has an anchor: A large part of its business lies in
providing to large, self-insured corporations services like claims
administration and management of mental-health benefits (see The BW50,
4/5/04, "Vim
and Vigor at UnitedHealth"). Higher medical costs don't affect these
services, which account for the majority of United's operating income,
says Robert Mains, analyst at Advest in Hartford, Conn. And continued
improvements with information technology will also save administrative
costs over the next year or so, Mains says. He recently raised his
12-month price target on UnitedHealth to $71. (Mains doesn't personally
own managed-care stocks.)
HOT ON THE
STRIP. Another large-cap favorite is Anthem (ATH ), which recently
announced plans to buy rival WellPoint (WLP ). The $16.4 billion
merger will make Anthem the country's largest Blue Cross/Blue Shield
insurer. "There is broad-based revenue opportunity that didn't exist when
each company was on its own," Jenner says. At Anthem's current price of
$88, it's trading at just under 12 times his estimated 2005 earnings per
share of $7.50, while the broader stock market is trading at a forward p-e
ratio of 17. For the long-term, the merged company should increase
earnings at about 15% annually, says Jenner.
Among smaller
companies, Sierra Health Services (SIE ) is the top pick of
BB&T's Carl. It has been shedding peripheral businesses to "really
focus on the core business, which is providing traditional managed-care
services to mid-market companies," Carl says. It's the biggest player in
the burgeoning Las Vegas area and one of a few small-cap, publicly traded
managed-care companies remaining in the industry. (Sierra is also a
holding in BB&T's growth funds.)
That it hasn't yet been
scooped up by a larger company makes Sierra an attractive holding. "It
won't be a stand-alone company in a couple years," Carl predicts, offering
much bigger outfits a quick and easy way to grow through acquisition. Its
dominance in an attractive market and cheap valuation -- $36, or 12 times
2005 EPS -- make it a promising long-term investment.
ESCAPING CRITICISM. As consumers pay more for
health care, the fundamentals for these companies should remain solid.
"The industry will not lose as long as people are coming into the
workforce," says Phil Seligman, analyst at S&P. A profitable,
efficiently run managed-care industry is good for consumers in the long
run, he says. "If you didn't have the incentive to keep costs down, you
would end up paying a lot more for health care."
Managed care has
also escaped the brunt of criticism for soaring health-care costs, which
has fallen mostly on drug companies. The industry has deftly made its
rules more flexible for patients to choose doctors and other services,
offsetting ire about higher out-of-pocket expenses. "People certainly hate
HMOs," says Mains. "But the realization is that we have to pay for
services, and HMOs are just the middleman."
Still, in an election
year where rising health-care costs are a focal point, HMOs could come for
renewed criticism by campaigning pols. "I'd be surprised if it didn't
become something of an issue," says Mains, especially as the profits of
many managed-care providers continue to be strong while Jane and Joe
Worker pay more across the board for premiums and co-pays. Already,
Democratic Presidential candidate John Kerry vows not to allow seniors to
be "forced into HMOs" in order to get prescription drugs.
Investors in the sector should probably anticipate volatility in
the coming months, although the negative political attention probably
won't be enough to send the industry back to its early days. At least not
yet.
By Amy
Tsao in New York Edited by Douglas
Harbrecht
A physician talks about the few things his practice
can do: Increase patient volume, take pay cuts, and lean on
insurers
Everyone is affected by the rise in health-care costs.
Individuals covered by Medicare continue to struggle to pay for
prescriptions. Medicaid recipients are finding services cut or curtailed.
And the price of employer-sponsored insurance, which covers some
two-thirds of the population, has been rising well beyond the rate of
inflation.
Doctors, too, are feeling the pinch, as large insurers
use their weight to limit how much physicians are reimbursed. "Managed
care is being managed to maximize profits [for the insurers]," says Dr.
Ronald Ruden, a primary-care physician with New York City-based Yaffe
Ruden & Associates.
Ruden says financial pressures have become
an everyday reality for physicians as they attempt to provide quality care
and stay in the black. "Most doctors are caught in this situation," he
says. His practice has increased its volume of patients to bring in more
revenues, but he and his partner have had to take drastic pay cuts to keep
the practice above water.
A breaking point in the health-care
system is coming, Ruden says, and physicians will have to take the lead in
making sure that insurers keep patient care, rather than financial
concerns, at the forefront. "What's going to happen is that providers are
going to become savvier about how to negotiate with the insurers," he
predicts. His practice has just wrangled price increases from the insurers
it works with and is making information-technology upgrades it hopes will
pay off.
Ruden spoke about these issues with BusinessWeek Online
Reporter Amy Tsao on Apr.
7. Edited excerpts of the conversation follow:
Q: How has the
health-care system changed in recent years? A: The providers, like
me, get contracts with the managed-care companies -- companies like Aetna
(AET ), Oxford (OHP ), and Cigna (CI ). The revenue
received by primary-care physicians is fixed by the managed-care company.
But the problem is that as costs of running a practice go up --
the rent goes up, the cost of supplies go up, the cost of employee
salaries goes up, the cost of paying for health-care insurance for our
employees goes up -- the only way the practice can cover these costs is by
increasing patient volume.
Q: Have the insurance company's fees
to you increased? A: We hadn't had a raise for six years from any
insurer, and we reached a crisis point in our practice. We've increased
patient volume as much as we could. We're seeing more patients, they have
to wait longer on the phone.
In our practice, they can be seen the
same day, but nonetheless as you increase volume, you increase all those
things which make both the patient unhappy and the doctor more stressed.
Q: Could you further increase the number of patients you
see? A: Our practice already sees around 1,100 patients a week
between seven primary care physicians. We increased patient volume
enormously. There's a plateau at which you can no longer see more patients
without having to add extra staff or other extra costs. So there is a
marginal benefit, with more liability.
Q: What have you done to
offset rising costs? A: Over the last year, my partner and I up
have been taking less salary than our first-year associates because we
were unable to increase patient volume enough to cover the costs. The
practice wasn't generating enough income to pay for all the salaries and
the raises [for our employees]. My salary and my partner's salary are
probably cut down by 66%.
Q: That doesn't seem like a long-term
solution. What else have you done to improve the practice's financial
position? A: Several years ago, my partner and I predicted this
would happen. We recognized that there were three major areas which we did
a lot of referring to other doctors. So we built a space to accommodate
part-time employees who would see our patients for dermatology, optometry,
and physical therapy.
We're able to pay these individuals a salary
and recoup about 20% of their fee, which would normally be lost to outside
referral.
Q: Have you been able to get any concessions from the
insurance companies? A: We began to negotiate with the insurance
companies about six months ago. We're fortunate in that we have some
modicum of leverage because we have a large practice.
We
negotiated with the insurers to say, "Well, if you want to keep us, this
is what we need." I think the managed-care companies are wise to want to
keep us [because we have so many patients]. But many doctors live in fear
that if they raise a stink, the managed-care companies will take them off
their [rosters].
We also brought in a new set of accountants to
give us the advice and guidance and banking connections that we needed to
move ahead.
Q: Can technology solutions save money? A:
We're going to be entering into the area of electronic medical records so
individuals will be able to schedule their own physicals and get access to
their records. It costs substantial amount of money. Right now, we have
people just coming in the weekend to file this stuff, the volume is so
large.
Hopefully, when this is all electronic, someone just scans
it into the machine, and then it gets put away in a data file. Ultimately,
we hope that this will save some money, but it's expensive in bringing it
to fruition.
Q: What other IT solutions might
help? A: Some colleagues of mine began a company called Managed
Care Advisory Group. We have these brilliant IT guys that have been in the
health-care industry for years. We put together a system that allows a
doctor to make sure that the managed-care companies are meeting their
contractual obligations. The group will be working with the American
Medical Assn. and some state societies in the near future.
Q:
Has the constant focus on getting paid affected the way you want to
practice medicine? A: We're reaching a point where there has to be
something new. We need to find a way so that primary-care doctors can
increase revenue without continually increasing patient flow, which is our
only source of revenue. Our practice is currently looking at a voluntary
administrative fee to help cover our costs.
I believe every single
doctor in the entire world knows the secret to a successful patient-doctor
relationship is maintaining good [communication]. It becomes more
difficult when you have many more patients.
I would rather find a
way to make patients feel that I know who they are, that I have their best
interests at heart, and that I'll use my skill and judgment in a
thoughtful way.