History and Evolution of Medical Care Institutions

1
History and Evolution of Medical Care
Institutions

• Professor Edward P. RichardsLSU Law
  Centerhttp//biotech.law.lsu.edu/

2
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

3
Critical Dates in Medicine
4
1400s

• Birth of Hospitals
• Places where nuns took care of the dying
• No medical care against the Churchs teachings
• No sanitation assured you would die

5
Early 16th Century

• Paracelsus
• Transition From Alchemy

6
Mid 16th Century

• Andreas Vesalius
• Accurate Anatomy

7
Early 17th Century

• William Harvey
• Blood Circulation the body is dynamic, not
  static

8
1800

• Edward Jenner
• Smallpox and the notion of vaccination

9
1846

• William Morton - Ether Anesthesia

10
1849

• Semmelweis
• Childbed Fever and sanitation
• Scientific Method
• Controlled Studies

11
1854

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

12
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

13
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

14
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

15
Transition to Modern Medicine and Surgery
16
Surgery Starts to Work in the 1880s

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

17
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

18
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

19
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

20
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 companys rules
• Physicians can be as ruthless as anyone

21
From L'Hotel-Dieu to High Tech The Evolution of
Hospitals

• From Nuns to MBAs

22
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

23
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

24
Post WW II Technology

• Ventilators (Polio)
• Electronic Monitors
• Intensive Care
• Hospitals Shift From Hotel Services to Technology
  Oriented Nursing

25
Post World War II Medicine

• Conquering Microbial Diseases
• Vaccines
• Antibiotics
• Chronic Diseases
• Better Drugs
• Better Studies
• Childhood Leukemia

26
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

27
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

28
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

29
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

30
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

31
Break
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Introduction to Medical Care Economics

• From the Blues to Managed Care

33
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

34
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

35
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

37
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?

38
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

39
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

40
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

41
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

42
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

43
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?

44
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

45
Managed Care Organizations - MCOs

• Insurance Plans That Control Patient Care
• Includes the Old Alphabet Soup
• HMOs
• PPOs
• IPAs

46
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

47
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

48
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

49
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?

50
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?

51
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

52
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

53
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

54
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

55
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

56
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

57
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

58
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

59
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?

60
Health Care Reform

• Who will lose?
• Who will win?
• How will we pay for expanding access?

61
First Shot in the War Against ReformComparative
Effectiveness Research

• Pharma and their supporters say it will interfere
  with your doc's right to make the best decision
  for you
• Question - how can he make that decision with no
  comparative effectiveness data?
• What is Pharma really worried about?