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Feeding at the Trough

Why much of the health-care industry is backing Obamacare.

12:00 AM, Oct 7, 2009 • By STANLEY GOLDFARB
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Health insurance companies- It is pretty obvious that the insurance companies, if they survive, will have more potential subscribers and hence their acquiescence to the general proposition of universal coverage. They know they cannot compete with the federal government on price, as the government has the capacity to subsidize premiums. They also understand something that most physicians and other health care providers have not understood: It is very difficult to administer health care payments if you are interested in a variety of benefits like variable co-pays and deductibles. Since there is universal understanding that Medicare will be bankrupt in the next 5 or so years, Medicare will have to start managing care and not simply paying whatever bills are submitted. Only the insurance companies know how to do this. They will be hired to do so. They wisely but cautiously support reform because the truth is that a country as large and diverse as ours and a health care system that needs to manage costs cannot get along without them.

Integrated delivery systems-Organizations like the Mayo Clinic and the Cleveland Clinic have been cited by President Obama of examples of how to reduce health care costs, in part, because they pay physicians a salary and therefore do not have an economic incentive to perform as many tests or procedures. This latter idea is truly absurd because that is the current means by which hospitals and physicians generate revenue. The money that pays the salaries comes from performing tests and procedures and seeing many, many patients. At this time, there is no other important source of revenue. The salaries are based on how much revenue the physicians generate. There can be no other way, unless there is a large endowment that subsidizes activity.

So what is in reform that benefits these integrated systems? Partly it is the fact that most of their revenue comes from their hospitals and the benefits to the hospitals are noted above. I also think there may be another issue at work here. These systems often are composed of hundreds or even thousands of physicians, most employed but some independent. The so-called demonstration projects embedded in HR3200 and in the Baucus bill will lead to the incorporation of doctors and hospitals into a single, pre-paid, risk-bearing entity called an "Accountable Care Organization". These are also advocated by many foundations and think tanks that are from the progressive side of the ideological spectrum. If these ACO's become widespread, physician autonomy will be a thing of the past. The hospitals will dominate any physician group given their relative size and administrative resources.

Many might welcome such a development but patients may not be among them. It will be the most clear-cut example of implicit rationing of care as those ACO's that spend the least on care will be the most economically successful. This may be the way the curve of the growth of health care costs may "be bent" but there should be a bit of transparency around this proposal.

Large-for-profit Health Care Companies- Hospital Corporation of America, recently in the Fortune "100" until acquired through a leveraged buyout, was started by the Frist family although the former majority leader of the Senate, Dr. Bill Frist, has sold his stock in the once public company. Companies like HCA have the same incentives as the hospitals described above. If the tax advantages of the not-for-profit hospitals disappear, then these for-profit entities will be perfectly positioned to dominate the entire hospital sector in the United States.

Medical Device Manufacturers- This group may have the most to lose. They actually benefit very nicely from our current health care system. Any reduction in hospital spending will dramatically reduce the dollars now spent on maintaining a hospital's technological capabilities. Since they are not directly in the stream of dollars from the payers such as Medicare and the private insurance companies to hospitals and other health care facilities, the device makers will only be secondarily affected. Congress has asked them to simply make a big donation to the health care reform effort, some $40 billion.

If all these entities are in synchrony with health care reform as outlined in HR3200 or the Baucus bill, it is either the right thing to do and all its critics are mistaken, or it is a set of proposals that each of the entities has decided is in their economic interests and therefore they have joined the parade of supporters. I think the latter is always worth considering when it comes to government programs.

Stanley Goldfarb MD is associate dean of clinical education at the University of Pennsylvania School of Medicine and a nephrologist.