History and Evolution of Medical Care Institutions Professor Edward P. Richards LSU Law Center

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

Critical Dates in Medicine

4 1400s Birth of Hospitals Places where nuns took care of the dying No medical care – against the Church’s 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

Edward Jenner Smallpox and the notion of vaccination

William Morton - Ether Anesthesia

Semmelweis Childbed Fever and sanitation Scientific Method Controlled Studies

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

s - 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 s Lead by the Shattuck Report on Sanitation in Boston Waste water disposal Drinking water treatment Pasteurization of milk Food sanitation The Jungle

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

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 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 s 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 company’s rules Physicians can be as ruthless as anyone

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

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

Federal Programs

36 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 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?