History and Evolution of Medical Care Institutions

Professor Edward P. RichardsLSU Law Center

http://biotech.law.lsu.edu/

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Key Issues

Scientific medicine is about 120 years old Technology based medicine is less than 60 years old Doctors are not scientists and many do not practice

scientific medicine. Modern medicine is shaped by its history

Health care finance shapes medical care Special interests undermine cost-effective care Financial tinkering destabilizes primary health care

Critical Dates in Medicine

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1400s

Birth of Hospitals Places where nuns took care of the dying No medical care – against the Church’s teachings No sanitation – assured you would die

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Early 16th Century

Paracelsus Transition From Alchemy

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Mid 16th Century

Andreas Vesalius Accurate Anatomy

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Early 17th Century

William Harvey Blood Circulation – the body is dynamic, not

static

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1800

Edward Jenner Smallpox and the notion of vaccination

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1846

William Morton - Ether Anesthesia

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1849

Semmelweis Childbed Fever and sanitation Scientific Method Controlled Studies

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1854

John Snow Proved Cholera Is Waterborne Basis of the public sanitation movement

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1860-1880s - Development of the Germ Theory

Louis Pasteur Simple Germ Theory Vaccination For Rabies Pasteurization to kill bacteria in milk

Joseph Lister Antisepsis – surgeons should wash their hands and

everything else, then use disinfectants Koch

Modern Germ Theory

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Sanitation Movement - Modern Public Health: 1850s - 1900s

Lead by the Shattuck Report on Sanitation in Boston - 1850 Waste water disposal Drinking water treatment Pasteurization of milk

Food sanitation The Jungle - 1905

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The Business of Medicine in the 1800s

Physicians are Solo Practitioners Most Make Little Money Have Limited Respect

No bar to entry to profession Most medical schools are diploma mills Limited or no licensing requirements

Cannot make capital investments Training Medical equipment and staff

Transition to Modern Medicine and Surgery

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Surgery Starts to Work in the 1880s

Surgery Can Be Precise - Anesthesia Patients Do Not Get Infected - Antisepsis

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Effect on Licensing and Education

Once there are objective differences (people live) between qualified and unqualified docs, people care You can make more money with better training You can make more money with better equipment and

facilities Effective Medicine Drives Licensing

Licensing Limits Competition Physicians Start to Make Money

Allows capital expenditures

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The Tipping Point - 1910

About 1910, going to the doctor, and particularly the hospital, shifted from being more dangerous than avoiding them to increasing your chance of survival.

Flexner Report - standardized medical education and shaped the modern training system

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Legal Limits on Physician Practice Organization - 1920s

Corporate practice of medicine Physicians working for non-physicians Concerns about professional judgment Cases from 1920 read like the headlines

Banned in most states

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Impact of Corporate Bans on Institutional Practice in Most States

Physicians do not work for non-governmental hospitals Independent contractors governed by medical staff

bylaws Sham of “buying” practices Not as much of a factor in LA

Charade of captive physician groups Managed care companies contact with group Group enforces managed care company’s rules Physicians can be as ruthless as anyone

From L'Hotel-Dieu to High TechThe Evolution of Hospitals

From Nuns to MBAs

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Reformation of Hospitals

Paralleled Changes in the Medical Profession Began in the 1880s Shift From Religious to Secular

Began in the Midwest and West Not As Many Established Religious Hospitals

Today, Religious Orders Still Control A Majority of Hospitals

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Technology in Hospitals - The Advantage of Hospital Care over Home Care

Driven by antisepsis - homes were safer before antisepsis

Started With Surgery Medical Laboratories

Bacteriology Microanatomy

Radiology Services and Sanitation Attract Patients

Internal Medicine Obstetrics Patients

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Post WW II Technology

Ventilators (Polio) Electronic Monitors Intensive Care Hospitals Shift From Hotel Services to

Technology Oriented Nursing

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Post World War II Medicine

Conquering Microbial Diseases Vaccines Antibiotics

Chronic Diseases Better Drugs Better Studies Childhood Leukemia

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Effect of Medical Science on Hospital Care

1930s Few effective treatments means no cures other than

surgery Long stays, hospitals act as nursing homes Care is nursing and palliative

Post-1960s Many effective treatments Much shorter stays - expansion of nursing homes Most care is technological

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Changes in Hospital Financial Models

Pre-1970s Mostly Charitable Built on donations, not debt or bonds Reduced operating costs and pressure on occupancy

Post 1970s Debt Stock market - pressure for performance Huge pressure on occupancy and profitability

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Joint Commission on Accreditation of Hospitals

1950s American College of Surgeons and American Hospital

Association Now Joint Commission (on Accreditation of Anything

that Makes Money in Health Care) Split The Power In Hospitals

Medical Staff Controls Medical Staff Administrators Control Everything Else

Enforced By Accreditation Depends on Medicare/Medicare waiver Seldom pulls accreditation

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Contemporary Hospital Organization

Classic Corporate Organizations CEO Board of Trustees Has Final Authority Part of Conglomerate

Medical Staff Committees Tied To Corporation by Bylaws Headed by Medical Director

Raises Conflict of Interest/Antitrust Issues

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Medical Staff Bylaws

Contract Between Physicians and Hospital Not Like the Bylaws of a Business Selection Criteria Contractual Due Process For Termination

Negotiated Between Medical Staff and Hospital Board

Limits corporate control as compared to employee models

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Break

Introduction to Medical Care Economics

From the Blues to Managed Care

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Paying for Medical Care

Pre-WW II Mostly Private Pay Some Employer Provided - Kaiser

WW II Price Controls

Post WW II Health Insurance As Benefit Private Insurance The Blues Medicare/Medicaid

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Blue Cross - Blue Shield

Developed by Docs and Hospitals Sold to Teachers Assure Access Assure Payment

Reimbursement Policy Pay Whatever Was Charged Subsidize the Rural Areas Subsidized Over-bedding and Over Treatment

Federal Programs

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Social Security Income and Disability

1930s Lifted the elderly out of poverty Provided disability insurance for workers The disability is quite a big and valuable program

and pays for a lot of medical care

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Hill-Burton

Post-WWII Funded construction of community hospitals Had community service requirements, but those

have all expired Created the US emphasis on hospital based care Spent from the 1970s to the 1990s reducing

hospital beds to control costs Excess beds or Surge Capacity?

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The Great Society

Medicare Old People Certain disabled people

Medicaid Poor People Nursing Homes

About 40% of medical dollars Fought by the AMA Made Docs Rich

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No Good Old Days for Patients

Gaming the System under Fee For Service Right to Die As Example Cannot Just Open the Checkbook

Greed Is Not Good in Medical Care Fee for Service Drives Unnecessary Care Hospitals Have to Care More About Money

Than Patients Rich Docs Are Not Always Better Docs

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Federal Interventions

Feds Pay About 45% of Health Care Other Plans Follow the Feds Usual and Customary Charges for Docs

Based on the Community Adjusted for the Docs Previous Charges Complex

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Hospital Costs

Big dollars are in the hospital charges Docs only get 20-25% of the health care budget Hospitals get a lot of the rest Drugs are an increasing share Fee for service drove unnecessary care Open-end reimbursement drove high prices Hospitals did not even know what things cost

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Diagnosis Related Groups - DRGs - 1983

Watershed in Health Care Reimbursement Prospective Payment (Capitation) Based on Admitting Diagnosis Fixed Payment Some Adjustments

Encouraged health insurers to also manage physician care

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Making Money Under DRGs

Fewer Tests and Procedures Complete Reversal of Prior Reimbursement No Bump for ICU

Reduce Length of Stay Dropped About 20% at Once, continued to drop Ideal Is Out the Door, Dead or Alive Patients Discharged Much Sicker

Which Was Right, Then or Now?

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Federal Laws Enabling Managed Care for Docs

Federal HMO Act in the 1970s Preempted State Laws Banning Prepaid Care

ERISA Passed to allow labor unions to negotiate national

health plans with big employers Preempts state regulation of certain self-insured

health plans Gave self-insured plans an edge and drove most

employers to them

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Managed Care Organizations - MCOs

Insurance Plans That Control Patient Care Includes the Old Alphabet Soup

HMOs PPOs IPAs

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Two Major Variables

Employer or Contractor Do the docs work for the plan or a captive group? Do the docs contract with many plans, treating

patients based on different plan benefits? Open or Closed

Do the docs treat only patients from a single plan or a mix of plans?

Why do these matter? Leverage on the doc's decisions

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Direct Controls on Costs by the Plan

Pay Less for Services Use Market Power to Bargain Control Access Points Limit Hospital Stays Limit Tests, Procedures, and Referrals

Direct Control of Access Pre-approval Tell the Docs What to Do Most Honest

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Indirect Controls

Capitation CRF--Consultation and Referral Funds Withhold and Incentive Pools Stop-loss and Reinsurance Total Capitation

Economic Credentialing Dumb Down Services Free Ride on Other Plans or the Government

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The Cost of Medical Care in the United States

Health As % of GNP Has More than Doubled in 50 Years

It is 20%-50% Higher Than Europe Their Health Statistics Are Just As Good Do They Know Something We Don't?

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U.S. Has A Lower Life Expectancy than Most Other Industrialized Countries

Taken as a major criticism of the US system Is life expectancy really the right measure?

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Life Expectancy Is Not Health

Bias Weighted Toward the Young One Baby Is Worth Several Grannies

Only Life Counts Discounts Quality of Life Nursing Home Is As Good As the Ski Slopes Masks Aging Population Masks Improved Health

A Good Measure for Developing Countries

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What Complicates Health in the US?

We Have 3rd World Public Health Ineffective Prenatal Care Poor Immunization Practices Limited Access to preventive and routine care

Teen Pregnancy Prematurity Poor Parenting

Developed World Leader in AIDS

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Non-medical Issues

The Problem of the Poor Poor Education Poor Health Habits Cannot Afford Prevention

Geography Too Many Isolated Areas Expensive to Deliver Care

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How has the Health Care Umbrella been Expanded?

Sin to Sickness Alcoholism Drug Abuse

Miscatagorization Nursing Homes - housing? Vanity Surgery - life style?

Should Compare Total Social Welfare Budget with Europe

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The Core Problem

Public health and primary care does not work well Chronic diseases can be mitigated, but not

cured or prevented Shifts care to expensive technology and drugs

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Second Order Demographics

People live longer because of medical care and public health More old people More people with chronic illness do not die Old people need more Total cost goes up

Health is much more expensive than death

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Impact of Governmental and Private Plan Economics and Special Interests on Care

High tech care has the strongest interest groups Providers and suppliers have a lot of money Patient advocacy groups are easy to capture Captures every more of the budget

Primary care, prevention, and public health Not sexy Big savings are low tech, long term Not a good news story Providers do not have the money to fight

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Specialty Hospital Example

Pros Complex care is safer when regionalized Better care at lower prices

Cons Do not money losing services Do not take uninsured patients Shift the most valuable patients from community hospitals No EMTALA requirements if no ER

Dramatically increase unnecessary surgery No limits on construction in LA

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Patient Directed Care Example

Patients will spend their own money and will thus make better decisions What is their knowledge base? Can you really learn what you need on the WWW?

How will this play out for preventive care? What is the incentive for providers?

Feel good drugs? Antibiotics?