Tectonic Forces At Work


Originally published 1/31/11 on [Not] Running A Hospital

We are about to witness the clash of two tectonic plates in health care. The creation of Accountable Care Organizations, combined with a movement towards capitated and other types of bundled payments, will be forces towards integration of care across the continuum. From primary care to tertiary care to skilled nursing and rehabilitation, principles of care management will combine with financial incentives to create ever more concentration in the health care market. Proprietary electronic medical records systems and “captive” doctor organizations will work towards reducing consumer choice in this new environment.

You already see health care companies engaged in this and advertising it as an attribute. Here, for example, one company notes: [Q]uality care is not just about the care in one institution – it’s what happens between institutions. And if we don’t pay close attention to those gaps – which means measuring and acting to improve the information flow – the patient will suffer. (And, you already see health care companies engage in deceptive behavior with regard to referrals, too, like here.)

Yet, at the same time, patients and their advocates will be demanding more choice. Fully trained in consumerism in other fields, they will expect the same in health care. They will want internet-based transparency of clinical outcomes, along with tons of disease-specific information, so they can seek out and obtain the best possible care for themselves and their loved ones. They will press captive doctors to allow them to be referred to out-of-network health care companies that appear to provide better, safer, and/or more compassionate care.

How will this crash of the tectonic plates be resolved? One answer is to ignore consumer preference and rely on monopoly-like organization of care. We know from other fields, however, that this not only results in monopoly pricing, but it slows down innovation. Think of the Bell System in years past, which provided integrated service, from telephone instruments to long distance calling. Many people alive today do not know that the Bell System conspired to limit people’s choice to the extent that you were not allowed to connect a non-Bell telephone in your house. The company argued that doing so would cause irreparable harm to the network and knock out telephone service for miles! You could not buy your phone. You had to rent it for a monthly fee, payable forever (see below). Actually, it was even worse than that. Your bill also included a fee for every extension outlet in your house, even outlets that did not have telephones attached.

And, if you wanted to make a long distance call, there was only one provider, AT&T Long Lines, the one affiliated with your local Bell operating company. You paid by the minute: There was no unlimited service based on a fixed monthly fee. Why? Because they could.

Eventually, the government broke up the Bell System when upstart competitors wanted to sell telephone sets and other companies wanted to offer long distance service. Standards were established that allowed anyone to use the local network and get access to dial tone. Eventually, even that monopoly was broken when other telephone companies and cable companies were permitted to string wires into the neighborhoods. And then, even those technologies faced competition from cellular networks and voice-over-internet.

Is there a lesson from all this for health care? You bet.

The heart of the problem in health care has two dimensions. First, electronic medical records are often based on proprietary systems, limiting interoperability between health care networks. Second, doctors are captive members of a provider network, often one controlled by a region’s major hospital or health care company.

As computer guru John Halamka would note, the first problem is gradually going away, in a technical sense. With the advent of national data standards, it will be easier and easier to electronically connect patient records across multiple providers. There are already clear demonstrations of full integration in place, where two or more organizations have found it to be in their mutual interest. But we can expect geographically strong networks to resist this. It will take government action to enforce interoperability.

The second problem, though, requires a Bell System-like solution. As long as physician groups are owned by or otherwise financially affiliated with hospitals, the doctors in those groups will not have the freedom to refer folks to the facilities that are optimal for patients. We can make all the claims we want about the need to have a closely tied physician network to provide integrated health care delivery, but those claims are vacuous. Such systems tend to be driven by — and serve — the hospitals and the specialists in them rather than the community-based physicians.

Ask this question to any primary care doctor you know who is part of a hospital-based network: “Do you feel you have the freedom to send a patient to a hospital in another network? ” At best, they will say, “If I really feel strongly about it, I can do so.” But, if they are honest, they will say, “I don’t dare do that very often, if at all. My continued participation in the contracting benefits of my network depend on sending my patients to affiliates in that network.”

It is time to break this system wide open and prohibit corporate affiliations between community-based providers and hospital-based health care delivery networks. Let’s free up the community doctors to make referral choices based on publicly available data about clinical outcomes, quality of service, and other items that matter to their patients. If global payments become the norm, the PCPs should “own” the payment and then apportion it among secondary and tertiary providers who best serve their patients. Let the marketplace decide which hospitals rise or fall in this environment.

Short of that, we will retain Ma Bell in health care. Then, the answer will be the one given by Lily Tomlin (aka, Ernestine, the telephone company operator):

“Next time you complain about your phone service, why don’t you try using two Dixie cups with a string. We don’t care. We don’t have to. We’re the Phone Company!”


Paul Levy is the soon-to-be former CEO of Beth Israel Deaconess Medical Center in Boston. He writes at [Not] Running A Hospital.

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