In U.S. health care, the relentless pursuit of sky-high profits goes on

cashflush-150x150While the folks who toil in the front lines of U.S. health care deserve the highest praise and support in the continuing battle against the coronavirus pandemic, those who run care systems deserve a Bronx cheer and worse for their rapacious pursuit of profits — at the expense of patients:

Rewarding volume, not value

With medicine upended by the pandemic, most patients likely didn’t know or took little note of a disconcerting trend affecting their doctors and how they work. In brief, doctors who own and run their own practices no longer are in the majority in this country, and a preponderance of MDs now are employed by medical groups. These, in turn, have been gobbled up by health systems, big hospitals, and, yes, “equity investors” — aka hedge funds.

A growing body of research is showing this is bad for patients. The independent, nonpartisan RAND Corporation has reported in a new study that “most physicians employed in group practices owned by health systems are paid primarily based on the volume of care they provide” — not the quality and value of their treatment. As the researchers found in their study, published in a medical journal and described in a RAND news release, thusly:

“Examining a wide range of medical practices owned by health systems, researchers found that volume-based compensation was the most-common type of base pay for more than 80% of primary care physicians and for more than 90% of physician specialists. While financial incentives for quality and cost performance were commonly used by health systems, the percentage of total physician compensation based on quality and cost was modest — 9% for primary care providers and 5% for specialists.”

Rachel O. Reid, the study’s lead author and a physician policy researcher, said of the RAND findings:

“Despite growth in value-based programs and the need to improve value in health care, physician compensation arrangements in health systems do not currently emphasize value. The payment systems that are most often in place are designed to maximize health system revenue by incentivizing providers within the system to deliver more services.”

Those unfamiliar with the jargon still may recognize the results in their own medical care. Does your doctor seem harried and spends far less time with you than before? Does she whirl into the examining room, laptop in tow, and begin to order an array of tests and procedures, describing many as necessary and routine, but piling them on with the polish of the neighborhood used car salesman pushing paint protectors, undercoatings, and extended warranties? This kind of conduct is the consequence of the high pressure practitioners are put under by the pay-for-procedure prevalent in U.S. health care.

Reformers have campaigned for a while now to emphasize and to compensate doctors for overall care that leads to positive outcomes. Wouldn’t patients prefer if doctors took time, for example, to help them manage chronic conditions like diabetes, rather than just dealing with problem incidents, or, worse, watching individuals decline into needing extreme care like limb amputations? Wouldn’t patients value that their doctors had the time to make correct, definitive diagnoses, rather than racing through appointments and ordering, in ticky-tack fashion, unnecessary, costly, invasive, and painful tests and procedures — all to increase charges and profits. Wasteful over testing, over diagnosis, and over treatment costs U.S. consumers billions of dollars annually — and costs some patients dearly, including their lives, other researchers have found.

Rebuke to a big hospital’s plan to get bigger

In Massachusetts, state officials apparently discovered their limits with the revenue hunger of hospitals there. A state Health Policy Commission decided to wrangle with a health care powerhouse by just saying “no” to the profitable ambitions of respected Mass General Brigham. As the Kaiser Health News service reported:

“Mass General Brigham, which owns 11 hospitals in the state, has proposed a $2.3 billion expansion including a new 482-bed tower at its flagship Massachusetts General Hospital in Boston and a 78-bed addition to Brigham and Women’s Faulkner Hospital. The most controversial element, however, is a plan to build three comprehensive ambulatory care centers, offering physician services, surgery, and diagnostic imaging, in three suburbs west of Boston.”

Making the hospital bigger and allowing it to sprawl across the metropolitan area would have negative consequences, state officials decided, determining “these expansions would drive up spending for commercially insured residents by as much as $90 million a year and boost health insurance premiums,” KHN reported. The hospital disagreed. The policy panel said it would advise the state Public Health Council to use its authority to disapprove of the hospital plans. And the state officials did this:

“The commission also ordered Mass General Brigham to develop an 18-month ‘performance improvement plan’ to slow its cost growth. The action, believed to be the first time in the country a hospital has been ordered to develop a plan to control costs, reflects concern about giant hospitals’ role in rising health care costs.”

As KHN reported, the Massachusetts demurrer is part of a growing, national resistance to unchecked hospital growth, mergers, and acquisitions:

“Other states, including California, Delaware, Oregon, Rhode Island, and Washington, have created or are considering commissions on health care costs with the authority to analyze the market impact of mergers and expansions. That’s happening because the traditional ‘determination of need’ process for approving health facility expansions, which nearly three dozen states still have in place, has not been effective in the current era of health system giants, said Maureen Hensley-Quinn, a senior program director at the National Academy for State Health Policy.”

The news article also frames this Massachusetts battle in broader, health care economic terms:

“The controversy signals a shift in the concerns about the cause of rapidly escalating health care costs. Up to now, state and federal policymakers examining how hospital system growth affects costs have largely focused on hospital mergers and purchases of physician practices. Studies have found that these deals significantly boost prices to consumers, employers, and insurers. State and federal regulators have stepped up antitrust scrutiny of mergers and acquisitions. Deep-pocketed hospital systems increasingly are turning to solo expansion to gain a bigger share of the market. These expansions fall outside the legal authority of antitrust enforcers. Health systems are building satellite ambulatory care centers to attract more well-insured patients and steer them to their own hospitals and other facilities, said Glenn Melnick, a health economist at the University of Southern California. ‘The outcome is the same as a merger — capturing patients and keeping them,’ he said. ‘That’s not necessarily good for consumers in terms of access to care or cost efficiency.’”

Normalizing ever-rising prices

Big Pharma, of course, may have written the book when it comes to maximizing profits, including, in case you missed it, with its annual product price increases, quietly taking effect at the start of the year. With Congress then still pondering the possibility of allowing the federal government, via Medicare, to negotiate at least a few drug prices — and to use the big cost-controlling sway of a mammoth client — drug companies took this action, according to the Wall Street Journal:

“Drug makers raised list prices by an average of 6.6% in the first few weeks of this year on cancer, diabetes, and other prescription medicines, sticking with more moderate increases while lawmakers scrutinize pricing practices. In all, about 150 drugmakers raised prices on 866 products in the U.S. through Jan. 20, according to an analysis from Rx Savings Solutions, which sells software to help employers and health plans choose the least-expensive medicines. Price increases on drugs rivaled the 7% overall consumer inflation rate, the highest in nearly four decades. Drug makers often raise prices of their products during the first few weeks of a new year.”

The news article reported these notable hikes in drug costs:

“AbbVie Inc. raised the price of its anti-inflammatory drug Humira by 7%; Bristol-Myers Squibb Co. raised the price for blood-thinner Eliquis, which it co-markets with Pfizer Inc., by 6%; and Eli Lilly & Co. raised the price of its diabetes medicine Trulicity by 5% … There were some large price increases. AmerisourceBergen Corp.’s Blue Point Laboratories, a seller of generic drugs, more than doubled the price of the cancer chemotherapy drug cisplatin to $30 … Exelan Pharmaceuticals Inc. raised the price of its generic lisinopril to treat high blood pressure by 536% to a range of $6.17 to $549.85, depending on the dosage and package size.”

Note to readers: The article in a respected financial journal mentions nary a word from Big Pharma about needing to increase product prices, say, due to higher costs for its supplies or shipping or to keep competitive with its labor force. Hmm, imagine that. Maybe drug makers jacked up prices just because they could? With Congress deadlocked in deep partisan strife, who will stand up for patients and say “no” to Big Pharma’s relentless boosting of drug prices? Are there any limits to how drug companies will pad their profits at our collective expense? Consider this information from researchers on their recent findings:

“[I]n a JAMA theme issue on drug pricing, [we] showed that from 2000 to 2018, the 35 largest pharmaceutical companies collectively had revenue of $11.5 trillion, spent $1.8 trillion on research and development, had profit measured by net income (the difference between revenue and expenses, also called the bottom line or earnings) of $1.9 trillion, and distributed $1.8 trillion of this amount to their shareholders through dividends or stock buybacks. Overall, we found that the median earnings of large pharmaceutical companies over this period was 13.8% of their revenue, significantly higher than that of 357 companies from other industrial sectors, whose median earnings were 7.7% of their revenue.”

Geez. In my practice, I see not only the harms that patients suffer while seeking medical services, but also their struggles to access and afford efficient, excellent health care. This has become an ordeal due to the skyrocketing uncertainty, complexity, and cost of treatments and prescription medications, too many of which turn out to be dangerous drugs.

U.S. health care spending exploded in 2020-21 to more than $4 trillion, yes, due to the coronavirus pandemic. But Americans still saw poorer outcomes for their walloping spending than their peers in other advanced, industrialized nations. And, even factoring out the giant government expenditures for health care, the costs in this area keep rising in an unsustainable, crushing way.

Patients long are past the breaking point with doctors and the fee-for-service approach. We’re getting slammed by big hospitals getting bigger, shinier, and expanding, margining, and consolidating, all so their bottom lines burgeon. Research shows that far too many patients simply skip beneficial drugs because they just can’t afford them. We have much work to do to rein in health care costs and to keep Americans fiscally well as well as in good health.


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