“A Showdown Between Corporate Oligopolies”

Congratulations to New York Times reporter Anemona Hartocollis for a very informative article on a contract dispute between UnitedHealth Group and a consortium of New York hospitals.

The health plan wants to insert a clause in its contract with the hospitals that will reduce fees by 50 percent if a hospital does not inform the plan within 24 hours of one of its enrollees being admitted.  The incentives are obvious: The health plan wants to know ASAP before the hospital staff start running up the bills.

In this case, my sympathies lie (ever so slightly) in favor of UnitedHealth Group, if only because UHG is attempting to insert the condition in a privately negotiated contract, whereas the hospital consortium is running to the state government to stop it (as other hospitals in Tennessee have done, according to the article).

However, one expert quoted in the article described this as a “showdown between corporate oligopolies”.   That may be a little extreme, but it brings us to the gist of the issue.  As long as we rely on a third party to pay for our medical services, piece by piece, it will be subject to micro-management.

I expect that if every American were free to buy a health-insurance policy of his or her own choice, a catastrophic illness or accident that required hospitalization would result in a cash pay-out by the insurer, and the patient would go to whichever hospital he preferred.  There would be little or no need for wasting time and effort negotiating “networks.”

But that’s just one man’s opinion: Government needs to give that money and power to patients, and then we’ll find out.

We need more ORs, we have too many, we need more

The one good thing about North Carolina’s efforts to control medical capital investment is that they don’t create five-year plans. In 2008, regulators thought Wake County (Raleigh and Cary, NC) needed four operating rooms (ORs). By the time they granted approval to a hospital and orthopedic center in 2009, state regulators said the county had too many ORs. For 2010, they now say Wake County needs three more ORs, plus another two for somewhere in the Wake-Orange-Durham Triangle area.

Hospital Shoppers Get Research Tool

David Gratzer, among others, has written that it’s easier to find out about hotel rooms than hospitals.

The night before the surgery, we sat in a Hamp­ton Inn that we had selected through hotels.com. We had a rating system for the hotel. We knew the price when we walked in. We knew everything there was to know of significance about the hotel: the AM/FM radio in the room, the fact that they had an outdoor pool–not that we would be doing much swimming–and so on. And there I was in this West New York hotel mulling the dark choice that lay ahead. Here was the mundane decision I had perfect information on–the hotel–and the big decision–who was going to cut into my wife the following morning–I knew practically nothing about, nor the hospital he worked in.

Thanks to a new database in Ohio, residents of the Buckeye State now have access to more information about hospitals. The Cleveland Plain Dealer has the story.

Tales from The Antipodes: When The Government Runs The Hospitals

OK, I’ll admit that this study only came into my purview because the author has the same name as myself. Nevertheless, it clearly explains (from the physician’s experience) what happens when the federal government takes over the financing of hospitals.

According to Dr. John R. Graham, MD, who has spent his career at Sydney Hospital, in Australia’s largest city, things started going down the tubes in 1984, when the federal government crowded out financing of hospitals by private payers.  According to Dr. Graham, “…the record of the last 25 years demonstrates, governments have been pouring increasing sums of taxpayer money into public hospitals for poor returns, as measured by ever lengthening waiting lists and quite unbelievable levels of waste on useless bureaucracy” (p. 6).

Dr. Graham’s observation corresponds with a research paper written by the economist Martin Zelder, which addressed the true cost of government-run hospitals in Canada.  I subsequently wrote a short article about government versus private financing of Canadian hospitals.

But wasted capital is not the only cost of government-run hospitals: There’s also the lack of transparency.  Once hospitals become focused on government’s needs, instead of patients’, they “clam up”.  The private, non-profit Fraser Institute has had great difficulty compiling report cards for Canadian hospitals, because disclosing the relevent information would harm the government’s interest.

Of coures, the U.S. is not about to adopt a government-monopoly, single-payer, health system in the short term.  But the shenanigans around stuffing earmarks for parochial interests, especially hospitals, into the current legislation are a clear warning sign.

LA Hospital Suffers from Political Control

Earlier this year, John Graham called the Martin Luther King, Jr.-Harbor Hospital in LA’s Watts neighborhood a canary-in-the-coal-mine warning signal of life under increased government control over health care.

There’s a new agreement on the hospital, involving a new governing structure, and a new “private” status. I’m skeptical of how private the new hospital’s board will be appointed by two different units of government, but the hospital will certainly have new oversight.

Certainly, though, some changes are called for:

“The nonprofit entity would do all the hiring, a main point in the negotiations because the hospital had long been seen as a job placement center for various elected officials and others with political connections to it. Some county supervisors and other critics suggested that this had led to people looking the other way when bad things happened.”

Given the hospital’s history, the new arrangement should be an improvement.

How Much Does that Surgery Cost? Who Cares?

The Illinois Hospital Report Card has gone live, letting consumers compare hospitals on price and quality measures. According to an article in the Chicago Tribune, “The data include information about what these medical providers charge, how many procedures they perform, how often they deliver recommended care, and how consumers rate their care.”

In a perfectly competitive market, the price for a given product or service will be identical, or nearly so. (Look, for example, at any intersection at which there are two or more gas stations.) That health care is not a market of perfect competition is obvious when you do some looking on the report.<blockquote>The median list price for a bunionectomy (the surgical removal of a bunion) is $21,616 at The Oak Brook Surgical Centre but just $3,516 at the Hinsdale Surgical Center. Hospitals show similar ranges: The charge for an uncomplicated vaginal birth is $16,134.97 at the University of Chicago Medical Center, compared with $6,614.04 at Hinsdale Hospital.</blockquote>I suppose this is all well and good (I’d rather that it not come about through a law, but that’s another story). But Congress is determined to obscure the prices of health care services, and insulate patients from any knowledge of pricing. (See, for example, the fact that high-deductible insurance policies will be wiped out.)

If “the rich” are going to pay for my health care, why would I give a flying fig about whether hospital A costs someone (not me!) $3,000 and another $16,000 for roughly the same service? In a world in which patients are responsible for and control their health care spending, such a site makes a lot of sense. But if someone else is paying the bill …..

By the way, a companion article in the Tribune says that the state’s hospital association plans to unveil a more comprehensive site in the next few months.

Putting Performance Online

How good is that hospital on the other side of town? If you live in the Badger State, you might consult the Wisconsin Health Information Organization, which describes itself as “putting shared knowledge into action to improve the transparency, quality and efficiency of health care.”

The Milwaukee Journal-Sentinel says Wisconsin is “is among a handful of states – including Minnesota, Massachusetts, Oregon and Washington – that have put infrastructures in place for pooling health data to improve quality and transparency.”

While this sounds great, demand-side reforms are not enough. We must allow physicians and other medical providers to innovate, and remove protectionist measures such as certificate-of-need laws.

Connecticut AG Wants Hospitals to ‘Fess Up

Richard Blumenthal, attorney general of Connecticut, says that hospitals in the state don’t do enough to disclose their deadly mistakes. “Right now, deaths and severe injuries caused by medical mistakes are undisclosed and unreported, to the detriment of Connecticut patients.”

Regina Herzlinger, author of Who Killed Health Care?, says “I know more about my Raisin Bran cereal than about the guy who delivered my children and the hospital in which he practices. As FDR did to corporations, the next president must require that data about the quality of the care of hospitals and doctors are readily available to us.”

Linda Gorman, meanwhile, asks “Does hospital ownership matter?” when it comes to hospital infections.

U.S. Index of Health Ownership 2nd Edition Is Here

Pacific Research Institute has published the 2nd edition of the U.S. Index of Health Ownership, the only ranking of health care in the states that uses criteria of individual choice.

Americans lack the basic freedom to make their own health care decisions. The Index measures the degree to which individuals, be they patients, health professionals, entrepreneurs, or taxpayers, “own” the health care in their states.

The lack of health ownership is a real problem. Almost half of the country’s health care spending is in the hands of the government, instead of patients themselves. The other half is governed by regulations inflicted upon doctors, health plans and patients.

The Index uses 24 variables to quantify how state laws and regulations affect the liberty of citizens involved in state government health plans (primarily Medicaid), the private health-insurance market, and the provision of medical services. It also assesses the effect of medical tort on people’s freedom to engage health services.

Alabama, Montana, Nebraska, North Dakota, and New Hampshire finished in the top five, as the states that allow their citizens the highest degree of health ownership. Alabama leads the pack primarily because of a lightly regulated private insurance market, and good control of state government programs. Also, the state performs well on medical tort indicators. Alabama’s regulatory environment for providers favors competition, and government health programs run more effectively than in most states.

New York, Massachusetts, Rhode Island, Vermont, and North Carolina rounded out the bottom five, as the states in which the government has taken the most undue control of health care from its citizens. This is the second year that New York was in last place. The state suffers from government health-care programs that are out of control, a grossly overregulated private-insurance market, and almost completely uncompetitive provider markets.

A full listing of all 50 states and their rankings is contained in the Index.

The Index will give concerned citizens a good basis to demand reforms from their state politicians that will put American families in charge of American health care, instead of government and special interests.

Private Care, Better Care

Want to see how getting government out of health care improves it? The James Madison Institute points to the case of a mental hospital in Florida that the state privatized.

Leonard Gilroy and Anthony Randazzo tell what happened (PDF) to the South Florida State Hospital after it was privatized: waiting lists were reduced, the use of seclusion as a treatment nearly disappeared, and electronic medical records were introduced–at no cost to the taxpayer.

After seeing these and other developments, a patients' rights group called for further privatization.