The Obama care runaway train.

There is talk of repealing Obamacare if the Republicans take over Congress on November 2. Of course, that is unlikely with President Obama ready to veto any repeal legislation. “OK, we will defund it,” is the response. I doubt anyone realizes how fast this is moving and how difficult it will be to alter the course of this program.

A week ago, I posted on my blog a set of new rules that are being implemented for physician reimbursement. I review workers compensation cases as a part time job. The company that employs me has now come out with a new line of business to review cases for Obamacare. I have been asked if I would be willing to review cases on a 24 hour timeline. This includes weekends. I have spent 40 years reviewing cases for Medicare and the state medical boards for poor care. Now, I am being solicited to do concurrent review on a 24 hour basis for healthcare. I do some concurrent review for workers comp cases but the timeline is usually 3-5 days. Why weekends ? Does this mean that care cannot be provided without approval ?

The pace of change is breathtaking. Today, the Wall Street Journal explains.

A wave of consolidation is washing over the health markets, and the result is going to be higher costs.

The turn toward consolidation among insurance companies is not new, and neither is it among doctors, hospitals and other providers. Yet the health bill has accelerated these trends, as all sides race to anticipate and manage political risk and regulatory uncertainty. This dynamic is leading to much larger hospital systems and physician groups, and fewer insurers dominated by a handful of national conglomerates. ObamaCare was sold using the language of choice and competition, but it is actually reducing both.

The first surge will come among the 1,200 insurers doing business in the U.S., given that a major goal of ObamaCare is to convert these companies into de facto public utilities. Those regulations are now being written—and once they’re up and running some medium-sized carriers will collapse under the new mandates and higher overhead. State insurance commissioners warned the Administration this month that “improper or overly strident application . . . could threaten the solvency of insurers or significantly reduce competition in some insurance markets.” They also implied that bankruptcies are likely.

With these headwinds, investors and Wall Street analysts are now predicting a lost decade for health insurance stocks. But it may be more accurate to say that there will be a lot of losers and some very big winners. Mergers and acquisitions will increase dramatically once companies get a better look at the regulation and figure out the valuation of M&A targets. Larger carriers will swallow smaller ones quietly before they fail.

The pace of change is far more rapid than is appreciated.

Across the country, providers are building giant hospital systems and much tighter doctor alliances like multispecialty groups to get out ahead of a concept known as “accountable care organizations,” or ACOs. To modernize the delivery of medical services, ACOs would encourage doctors to work in teams to use resources more efficiently, streamline treatment and improve quality. The model is the Mayo Clinic and other large integrated systems.

The Mayo Clinic has concluded that it cannot afford to treat Medicare patients. The Phoenix branch of the Clinic has already informed patients that they will accept no more Medicare. The model does not think it will work.

At the moment ACOs are only a gleam in some bureaucrat’s eye, and no one has a clue how they’ll operate in practice until the government releases a working regulatory definition next year. Yet the percussive effects are already being felt across medicine.

Hospitals are now on a buying spree of private physician practices in the rush to build something that will qualify as an ACO. Some 65% of doctors who changed jobs in 2009 moved into a hospital-owned practice, while 49% of doctors out of residency were hired by hospitals, according to the Medical Group Management Association. In its 2010 census, the American College of Cardiology reports that nearly 40% of private cardiology groups are currently integrating with hospitals or merging with other practices.

I spent a few minutes researching the doctors who appeared in white coats to support Obamacare last spring. Those who really were doctors were all hospital employees. Most of them had been hired right out of residency.

Doctors are selling because complying with the ever-growing list of mandates has become more cumbersome; and while staff physicians on salary do gain predictability, they also lose the autonomy of independent practice. The other problem is price controls in Medicare, which are about 20% below private payments for doctors and 30% lower for hospitals. Hospitals are also scooping up practices to lock in referral sources and make up for ObamaCare’s Medicare cuts. As it is, two-thirds of hospitals lose money today on Medicare inpatient services, according to Medicare.

This is an impossible situation and the Medicare patient will become indistinguishable from the Medicaid patient, a burden on the system to be treated by “physician extenders.”

The changes are coming like a runaway train and they will change American medicine irreversibly. Private medicine cannot afford to care for the discounted Medicare patients. Obamacare will convert private care to Medicare. Every one will be a charity case except for the gentry class that votes for Obama. University Hospital physicians may feel that they are immune to these changes but it has been known for 50 years that the value of salaried university physicians is directly related to the income of private physicians. In fact, the university physician has no overhead but they can always tell the administration that they can leave and earn as much, if not more, and this has given them a lot of power.

When I was in training, my surgical training program had three full time faculty members. Now, the same program has 90 full time members. In the same interval, their success in having graduates pass the American Board of Surgery has declined. That may or may not be significant but the culture of medicine is changing rapidly. Many physicians no longer recommend medicine as a career for their children. What this all means, I don’t know. What I do know is that it is coming very fast and few people realize it.

17 thoughts on “The Obama care runaway train.”

  1. People who argue that Obama is in a good position because he can run against the Republican Congress in 2012 seem to be ignoring the possibility that his vetoing of healthcare repeal bills will not endear him to the voting public. Of course I am assuming the Republicans will be smart enough to try to pass repeated repeal bills rather than cut stupid split-the-difference deals, which is assuming a lot.

    If Obamacare stands, I predict an industry of legal advisers, how-to books etc., all devoted to helping individuals to avoid getting screwed by the new bureaucracy. Look for enterprising younger doctors to go cash-only en masse, and if doing so is forbidden, to set up shop in the Bahamas and so forth.

    Anyone who has lingering medical concerns should probably attend to them ASAP.

  2. We just got a notice that our current health insurance provider for my company is getting out of the health insurance business within three years. I don’t think this notice and the passage of Obamacare are a coincidence. Lovely.

  3. Now, I am being solicited to do concurrent review on a 24 hour basis for healthcare … Does this mean that care cannot be provided without approval?”

    Does this mean the Death Panels are being staffed? Does this mean that if I am turned down for treatment I will be unable to find someone to treat me because everyone will belong to an ACO?

  4. Sol, this is the way I interpret it. Concurrent review is something that every insurance company does. The patient has been in the hospital a week. Do they need three more days or should they have gone home yesterday ? These are payment decisions. The hospitals know this and will self police if they know the criteria. Why weekends ? It sounds to me like more than payment criteria are coming.

    The potential ban on private practice was the main reason why doctors opposed Hillarycare in 1994. It was a felony to provide care outside one of the coops it set up. Now, Massachusetts has a bill in the legislature to tie licensing to membership in the state health system. Canada outlawed private care in the 80s by refusing a billing number to any physician who accepted payment outside the system. Now, private clinics are appearing all over Canada as the government system slowly breaks down.

    Australia had an almost ideal system back in the late 70s. The government built the hospitals. There was a program called “Medicare” which paid the doctors. I knew surgeons who saw both private and charity patients in the same hospital, maybe the same room. The 1986 election changed all that as the Australian equivalent of Labour campaigned on a platform that, if they were elected, they would provide “free” care. After they won, it turned out that they had made no plans for how doctors were to be paid. It was chaos. The only state that remained undisturbed was Queensland, which had private and public hospitals. The doctors told their patients that they had better keep up their Medicare payments if they wanted access to the private system.

    I was there in January 1987 when the chaos in NSW was still rampant and only GPs were getting paid. I was there again in 1988, this time in Queensland, and saw how wise the doctors had been. Two GPs I knew had built their own combination office and surgery center (They called it a “day surgery.”). They were doing very well. Other specialties, like gastroenterology, had rented office space and were using the day surgery for procedures. Across the street, the public hospital had built their own day surgery and finally came to my friends and asked them to take it over and run it for the state. The public hospital had botched the job.

    Several years later, when I was there again, the newspapers were full of medical horror stories. I fear we are headed the same way. The Australian system was excellent before the politicians wrecked it. The Medicare payments were quite reasonable because the states provided the hospitals and most were post-war construction and excellent. I was in the one in Freemantle and it was beautiful. My wife was having a small asthma attack and we went in and she had a breathing treatment. No charge. They didn’t even have a mechanism for charging.

    Our system is far from perfect but the one way to make it worse is to promise more routine care without payment.

  5. Per me si va ne la citta dolente,
    per me si va ne l’etterno dolore,
    per me si va tra la perduta gente.
    Giustizia mosse il mio alto fattore;
    fecemi la divina podestate,
    la somma sapienza e ‘l primo amore.
    Dinanzi a me non fuor cose create
    se non etterne, e io etterno duro.
    Lasciate ogne speranza, voi ch’intrate

    “Through me the way to the city of woe,
    through me the way to everlasting pain,
    through me the way among the lost.
    Justice moved my maker on high.
    Divine power made me,
    wisdom supreme, and primal love.
    Before me nothing was but things eternal,
    and eternal I endure.
    Abandon all hope, you who enter here.”
    Divine Comedy by Dante Alighieri,
    Book Inferno, Canto III: 1-9

  6. I see a lot of slogans about repealing Obamacare.

    What is the best proposal anyone has seen about what to actually do to not only repeal Obamacare, but move us toward a better system?

  7. I have posted a series of articles on my blog about the French system, which is considered the best in Europe (for a large country) and has the highest satisfaction rate, yet costs about 2/3 of ours. The basic principles include, fee-for-service for most (those who pay their own way), free choice of physician or hospital, funding by payroll deduction into health plans based on occupation, but not employer and fixed reimbursement with the ability to negotiate with doctors and hospitals on price.

    It begins here and goes for several posts. The French are having lots of economic problems but, I submit, they are not a consequence of health care costs. They are seeing some recent pressure because most of the traditional British middle class is moving to France and is determined NOT to go back to the NHS so they are applying for the French system that is tax supported and intended for the poor. These people are not members of a health plan in the French system and the NHS is not interested in funding their care in France.

    A few comparisons between our system, or at least where we are going, and the French. Medicare does not allow “balance billing.” That means that the price determined by Medicare is the full price and this results in withdrawal of providers from discounted care. Our private insurance system is similar in that a co-payment is all the physician is allowed to charge in addition to the insurance payment. High deductible policies and HSAs have allowed more freedom but there is a problem here in that the customer is still paying an inflated retail price. The doctors are not allowed to have a “cash price” if they are Medicare providers. This is why many are dropping out. The same applies to private insurance, albeit at a higher price point.

    The French do not have tuition for medical school. The French doctor’s income is less than that of the US physician, at least until recently, but there are no student loans to pay. This suggests a trade-off. French doctors may decide to accept the national fee schedule as full payment and, in return, they are allowed paid vacations and pension plans. The same could be done with student loans, forgiving a year for a year of practice at the low fee schedule.

    The doctor is free to charge more than the fee schedule but must post all charges in the office or online. The same applies to hospitals. About 25% of French hospitals are private.

    Here, I think, is the model for our own reform. Instead, Obama and the Democrats have gone the opposite direction.

  8. The fundamental problem of socialized medicine is the misallocation of resources. The fundamental virtue of a free market system is the rationalization of the system of allocation based on the collective decisions of all involved mediated by the profit motive.

    If you want to move to a free market system start by saying the truth. Let everybody know that we don’t have a free market in medicine. Move on to freeing the CPT code system from copyright, either by adopting a free system or paying a national license to the AMA. Let people know that they are paying outrageous charges because you can’t price shop and the government is forcing so much under-cover subsidized care that it’s distorting the whole market.

    Everybody has to start getting educated on how to price shop for elective care. With a vibrant elective market, the prices for emergency care can imitate real prices close enough to be relatively efficient. As the free market in medicine has been hemmed in and constrained, prices in the government controlled market have lost their moorings.

    The realization that we’ve been pricing in fairy land for decades is going to create a lot of pain, a significant number of bankruptcies, and the possibility of loss of medical coverage. Treat it as a national emergency, as if the local hospitals had all gotten nuked because financially that might be the case. What free market systems emerge are likely to be much more efficient.

  9. I would gladly practice under a direct fee for service, ‘parts extra/insurance subsidized’ system.
    I am one of those physicians who moved from large private practice to hospital-employed status. Our group, the largest of its kind within 100 miles went from >25 physicians to <15, and falling, in 18 months' time. Various factors, but a steadily contracting economic situation despite a very busy, and financially well-run organization is the central theme. University 'providers' moved into a few of the vacuums left by our contraction; care at those sites by the patients' description is worse. And will get more worser still (grammar intentional).

    If physicians could simply charge for their services, while the nuts 'n bolts—hips, meds, chemotherapy, imaging, etc—were covered by 3d party payors vaguely similar to what we have now—you would see improvement in the overall costs, and resource distribution. Perfect? Hardly. But far less onerous, and more efficient, and less intrusive in the physician:patient relationship.

    But government DOES NOT want to get out of the physician:patient relationship any more than they want to extricate themselves from ANY function in American society. We have a saying, "If it made sense, it wouldn't be Medicare". It's not far off. I was informed by an experienced cardiologist (board member of this, chairman of that, and so forth) that a proposed rule to make cath lab staff wear lead-lined helmets–yes, you read that right—to reduce a possible association with a modestly increased risk of brain tumors, was written by a 26 year old Washington staffer with a liberal arts degree from Yale—who'd never been in health care, had no experience in cardiology nor radiology, and had never even been IN a cath lab. Lead helmets? 500% rise in C spine-related workman's comp cases, anyone?
    That is the level of thought that goes into more than a few of federally mandated 'standards'.

    I despair of the US healthcare system as distorted by the Feds. I fear it will take near-collapse: exodus of senior, exasperated specialists, massive backlogs for new patients for primary care, and shuttering of private facilities to get the message across to government that they're doing it wrong. We will hear no such admission; it will be purely the fault of greedy pharmaceutical companies, greedier, uncaring doctors, —and somehow, I'm sure, George Bush. Meanwhile, federal employees will keep their special status with regard to healthcare access, and no doubt the unions will grimly keep their grasp on goldplated insurance coverage as they spiral down the financial drain.

    Sorry for the long screed, but the difference between what we can deliver as effective physicians, and what we are to be saddled with that will effectively preclude the best healthcare ever developed in human history, is intensely frustrating to all of us in medicine: nurses, physicians, PAs, and so on.

  10. We can’t afford the medical system that we have today. The costs have gone beyond the ability of our society to pay.

    Maybe somewhere in here there is some efficiency. As we dumb down the level of care for the average person they will probably see more PA’s and acute care clinics. Probably more self diagnosis and pharmacy care rather than going to visit.

    The continuous investment in state of the art facilities will be the first to go. These don’t pay for themselves unless you can pass it on. The first thing you do is defer capital spending when you are in a spiral.

    We will run down our investments in doctors and facilities and it will take years before we see the effects. But they will come. Visit public schools in a bad area of town to see the future, or Cook County hospital.

  11. Part of the problem with the present system is that it is not insurance; it is prepaid care. I bought a house in August. I moved away from the metropolitan area to a mountain resort. A couple of reasons prompted the move but that is not the topic. A few weeks ago, I began to have a problem with the water heater. The pilot light was going out. I would discover this when I tried to take a shower. For the first time in my life (I’ve owned my own homes since 1969), I allowed myself to be sold a “home warranty” by the real estate agent. I called the warranty company to report the water heater problem and, after two days, finally got a plumber to come out. He changed the thermocouple that keeps the pilot light lit and cuts off the gas to it if it goes out. A week later, the same thing happened. I was told I had to call the warranty company again. Sound familiar ?

    To shorten the story, this happened repeatedly over the next several weeks until the pilot was going out every few days. The only way I could deal with this was to replace the water heater (the plumber couldn’t explain why it was happening. He suggested a draft was blowing it out.) Finally, I called the warranty company for the fifth or sixth time and asked that the water heater be replaced. They called the plumber and then they told me that he said he could find nothing wrong with it (aside from the pilot light going out every four days) and so they would not pay for a water heater.

    I called another plumber and had it replaced. That plumber told me that in old water heaters (This one was dated 1987), there are magnets in the gas control unit that lose their ability to keep the gas flowing to the pilot and replacing the gas system would cost almost as much as a water heater. I bought a new water heater.

    Does that sound just like our health care system ? I think so. Except an Obama home warranty plan would not allow me to buy the new water heater.

  12. Dear Mr Kennedy:

    “You do not need hot water. Our government panel in Palm Beach Florida has established that hot water wastes fuel, and kills polar bears. You will take cold showers, as our commissioned study, written by a 27 year old Berkeley grad (BA, Interpretive Dance Studies) clearly shows them to be ‘experimental hygiene’.
    “You are authorized two cold showers per week. Our Hygiene Counselor will stop at your house weekly to ensure compliance and check for unauthorized water heating, which is a Federal offense. You are prohibited from visiting any hot springs, as they are in Noncompliance for Hygiene or unauthorized enjoyment.
    “Please make sure to identify any unauthorized water heating, and notify the appropriate authorities for removal of illegal heating sources and proper reeducation of the involved felons.

    Joseph S.
    Department of Energy and Polar Bears and Stuff

  13. MK: The Weekly Standard recently had a bit about the following:

    Addressed by Dr. Friedman was Section 6101 of the Affordable Health Care Bill which forbids physicians from owning hospitals. Eighty-six physician-owned hospitals, many of which were in low income or depressed neighborhoods, were in the works when ObamaCare passed. Construction of those hospitals was halted upon passage of the Healthcare Bill.

    I wonder how that got in to the bill? Who wrote that part, why it was inserted, and why it was “championed?”

    – Madhu

  14. I hadn’t seen that but I am not surprised. Privately owned hospitals have been a leftist target for many years. The hospital in which I practiced for 30 years was originally owned by a partnership of physicians plus a few major investors, including Richard O’Neill whose family developed Mission Viejo. Most of the major owner physicians were from a different part of the county and, frankly, we would not have let most of them on the staff. However, local primary care docs were offered shares in the hospital very early in its development. They didn’t offer them to general surgeons, worse luck. I arrived a year after the hospital opened.

    There was a big scandal in the late 70s with some Medicaid billing and the hospital had a poor reputation for a while. The scandal did not involve any of the physicians on the staff. As luck would have it, the hospital opened just as a large influx of physicians trained at LA County Hospital arrived in the community. Those already there recruited friends and by the early 80s, it was very difficult for any specialist who was not a very good doc to make it. Some came and went. We also got a bunch of Navy docs who had served their time at Camp Pendelton and got to know the local docs. A whole group of six orthopedic surgeons developed over several years who were all Navy trained. The quality of care (if I do say so myself) was very high. One of the neurosurgeons had been recruited by Johns Hopkins to stay on the faculty when he finished his training but he came out west to join his brother on our staff.

    To counteract the problem of the scandal, in 1979 I convinced the board, made up of GPs from older communities in the north of the county, that we wanted to be a trauma center. There was a move to regionalize trauma care and I was concerned that this presaged regionalization for other specialties, like total hips or dialysis. The board approved the plan and we were selected by the outside selection committee which was quite surprised to see a “proprietary hospital” interested in trauma, which is usually seen as a big money loser. We actually were rated higher than the university hospital which was having some problems just then. At the time, the hospital had 120 beds.

    A few years later, there was a proposed rule that all trauma centers had to have in-house surgeons and anesthesiologists. This would have bankrupted our trauma center which was still seeing only about 5 cases a week. (It receives about 5 a day now) The hospital was not paying stipends but would have to if such a rule was passed by the state EMS office. I went to Sacramento to testify against it and Don Trunkey, who had been the author of most trauma center regulation, was at the commission meeting. After I testified, he ruefully admitted that we had probably the highest rated trauma center in the state and he could not explain it. We only had two trauma surgeons, my partner and me. The rule was tabled.

    Years later, after I retired, the hospital was bought by the sisters of some order that runs a chain of non-profit hospitals and it is now non-profit. When we applied to be a trauma center in 1979, there were three administrators. Now, the hospital is about four times the size and there are about 200 administrators. I was on the city planning commission a few years ago when the hospital applied for a big expansion. They asked for a separate meeting with the planning commission and I was asked to be on the subcommittee. They showed up with, literally, 30 staff members to make their presentation. They must have had 20 easels for posters. I finally left after three hours when my patience was exhausted. The other subcommittee member agreed to stay.

    They will get along very well with Obama’s bureaucracy. Most of the older docs like me have retired so they will have little opposition to their plans. The care is still quite good but the bureaucracy is growing like a staph infection.

  15. And people say that Democrats can’t fix unemployment.
    Just look at all the underemployed (and likely undertalented) middle managers that now have jobs, thanks to hospital and medical bureaucracy!
    A valuable post—thanks, Dr Kennedy.

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