By Steven Pearlstein
washingtonpost
Wednesday, June 8, 2005;
D01
As the head of Medicare and Medicaid, Mark McClellan may be the most powerful
man anywhere, in control of about 7 percent of the U.S. economy. And today was
to be the deadline for him to rule on one of the most heavily lobbied issues of
the past year: whether to lift an 18-month moratorium on creating new
physician-owned specialty hospitals. It's all very technical and bureaucratic, to be sure. But in deciding the
issue, McClellan is being asked to choose between two competing and
fundamentally irreconcilable models for the U.S. health care system. One model would rely even more on competition among self-interested providers
for the business of increasingly empowered consumers to restrain prices, assure
quality and spur innovation. That, after all, is how it works in nearly every
other industry. The other model is based on the premise that competition in health care will
always be highly imperfect, and that too much competition will have socially
unacceptable consequences. This model envisions even more government regulation
and stronger management by public and private health plans. In a decision that seems only fitting for a Harvard-trained physician and
MIT-trained economist, McClellan has decided to kick the can down the road,
extending the moratorium until year-end. There are about 130 physician-owned specialty hospitals, most of them focused
on heart, orthopedic or other types of surgery. There is some evidence that by
doing large numbers of the same kinds of operations, the tightly focused
hospitals lower costs, improve medical outcomes and deliver more patient
satisfaction. And, in theory, giving doctors a stake in the enterprise not only
gives them greater control over their professional lives, but also offers extra
incentive to innovate and improve service. General hospitals, by contrast, see the move toward specialty hospitals as
nothing more than cream-skimming by self-dealing doctors that will put community
hospitals into an economic death spiral. They argue that doctors referring
patients to hospitals they own is an unacceptable conflict of interest. And by
siphoning off the most profitable patients in the most profitable parts of
medicine, the specialists rob general hospitals of the scale, scope and profit
they need to operate unprofitable departments such as burn units and emergency
rooms 24/7. In truth, the arguments tend to jumble different issues that need to be
pulled apart. While specialized, high-volume units are probably a better way to provide
some health services, they don't need to be owned by physicians. There are
plenty of other sources of investment capital. And the experience with
doctor-owned labs and MRI machines suggests that physician ownership of surgical
hospitals will inflate total health care spending by increasing the number of
unnecessary operations. At the same time, community hospitals are probably right that specialty
hospitals cream-skim the most profitable business. But the larger question is
why the system doesn't allow hospitals to price their services so that "hard"
cases are just as profitable as "easy" ones and emergency rooms enjoy the same
operating margins as cardiac units. Eliminating cross-subsidization within
hospitals would significantly reduce the amount of "cream" available for
"skimming." McClellan hopes that by adjusting and refining Medicare reimbursement rates
for different categories of services, and allowing general hospitals to offer
"gains-sharing" payments to doctors that could substitute for ownership of their
departments, he can level the playing field enough to diffuse the specialty
hospital issue. Like many conservatives, he looks to specialty hospitals,
consumer-driven health savings accounts and new reimbursement schemes that pay
doctors and hospitals for the quality rather than the quantity of care they
provide to push the U.S. health care system toward the market model. McClellan's crusade is likely to fail, however, if he doesn't resolve a
fundamental question about the proper role of doctors in the health care
system. When they are vilifying insurers and managed-care companies, physicians like
to present themselves as Dr. Welby -- selfless professionals whose medical
judgments would never, ever be colored by their financial interests. But in
lining up behind physician ownership of specialty hospitals, the doctors
essentially acknowledge that they are just like the rest of us, their behavior
swayed by even modest financial incentives. You can't have it both ways. And the way the people would have it is to pay
their doctors well, put them in the central decision-making role in the health
care system -- and then demand that they give up the right to invest in MRI
machines or specialty hospitals or get incentive payments from drug
companies. For most Americans, providing health care ought to be different from selling
soap; they won't tolerate doctors acting like commissioned salesmen and
investment bankers. And if that means having less market competition and more
regulation in the health care system, it seems to be a trade-off they're willing
to make. Steven Pearlstein will host an online discussion at 11 a.m. today athttp://washingtonpost.com/. He can be
reached atpearlsteins@washpost.com.