dr. solomon's dilemma


Dr. Kim Saal

solomon profile
financial incentives
cost v. care

photo of andrew w. brotman, m.d.
Brotman was previously a Senior Vice President at CareGroup in Boston, Massachusetts, and Psychiatrist-in-Chief of The Beth Israel Deaconess Medical Center. He is the author of over 80 publications and speaks widely about eating disorders, depression, psychotic disorders, and the impact of managed care on hospitals, doctors and patients. Currently, he is Vice Dean for Clinical and Hospital Affairs at NYU School of Medicine.
Take me back to the era before all these tremendous changes took place.What was the atmosphere like among the hospitals, the doctors, and the whole Harvard Medical School cluster of hospitals?

The Harvard hospitals always had very interesting collegiality on the one hand, and competition on the other hand. There were the three or four major Harvard teaching hospitals. Then that expanded to four or five--the Mass. General, the Brigham, Children's Hospital, Beth Israel, and the New England Deaconess Hospital.

Everybody values their affiliation with Harvard Medical School, but pretty much their primary allegiance has historically been to the hospital in which they work. So there were fairly fierce rivalries, particularly between the Massachusetts General Hospital and the Brigham and Women's Hospital. It was quite a fierce rivalry, those being the two largest, and all looking for supremacy in terms of reputation and whatnot. I had worked at both the Mass. General Hospital and the New England Deaconess Hospital, which was the upstart hospital, and it was generally considered to be the fifth and smallest. People had a significantly high morale. They felt good about being in a medical mecca, which really valued teaching, research, and education. They had collegiality with other members of the faculty, but fierce loyalty to their own hospital. As the world started to change, there was significant discussion about all of those Harvard hospitals coming together in some kind of formal consortium to meet the challenges of the managed-care world.

Was there a single event that changed all that?

Yes. There was a series of negotiations amongst the hospitals, led by the former dean of Harvard Medical School. There were discussions about bringing all the major Harvard teaching hospitals together in some kind of consortium. Then, quite quickly one weekend, Massachusetts General Hospital and Brigham and Women's Hospital went off on a small retreat, and announced their merger the following week. This was clearly the hallmark event that changed the face of medicine at Harvard--I predict for the next several decades.

During that period of time, there was the thought, at least, that all the hospitals were discussing doing something like that. That duo, which was then named Partners, became directly competitive in a formal corporate way with all of the other hospitals. This was a bold, in-your-face-move, basically saying, "We have a vision--Partners. We have a vision of the new world. We feel like the way to address that is to formally get together in a corporate structure, plan our strategy together, and truly act as an integrated delivery system, without necessarily having the support of the Harvard Medical School administration or the other teaching hospitals."

What was the impact on everybody else? What was the reaction?

Absolutely chilling, absolutely chilling. There was anger, shock, surprise, and sadness among the leadership of the other teaching hospitals. I think there was a great deal of disappointment at the medical school about having obviously lost control of the process. At that point . . . it became a free-for-all in terms of affiliations, mergers, etc., because Partners became an organization that, in my opinion, changed the market.

You say they changed the market. What happened?

It went from sort of a gentleman's competition to a Pepsi-Coke kind of rabid corporate business competition. Partners came together and basically said, "We have evaluated the environment. We have decided that it's going to change markedly, so we have come together in this corporate structure. We are going to recruit 1,000 primary care physicians from the region in which we live. We are going to do that through affiliation and acquisition. We are going to establish a system whereby we can manage prepaid capitated contracts, as opposed to fee-for-service contracts. We are going to go to the insurers and negotiate those contract proactively. We are going to create a system whereby we have a million and a half people associated with our system, in order to basically have the premier system in this new world."

They went about the business of doing that, and the business of doing that included significant recruitments of primary care physicians and specialists from all competitors. It was quite a bold step that just didn't respond to the environment--but changed the environment. The bidding war started on primary care physicians. Every good primary care physician in the greater Boston metropolitan area had a contract offer on their desk for an acquisition. Those of us who were not part of this system, in the sense of an administrator from the Beth Israel or from the Deaconess, became quite defensive. Every day, one of their prime physicians would come to them, put a contract on their table, which was from Partners or another competitor, and basically say, "This is what I've been offered. What can you do?" And we went into a period of two or three years where many of us in leadership positions were marching all over the state, seeking affiliations with other hospitals, physician groups and individual physicians in order to marshal our forces to be competitive.

We didn't feel that we had the ability or the stature or the cash to basically say, 'No, we won't participate in this.  We won't have a contract from the largest insurer in the state.'  So we felt we had little choice. People believed that we were moving to an era of capitation, where there were pre-paid contracts. If you believe that, you need large numbers of people in order to balance the risk. If I'm paid the same amount for me as for you for a year of treatment, if you get very sick and there's only me and you, we will go broke. However, if there's me and you and a million other people, the actuarial risk will even out. So the march became to have primary care physicians who have large patient panels, and to create a system where you had a large number of what are now called covered lives-- used to be called patients. They would be able to create a system within which one can manage the actuarial risk which insurance companies have been managing for years.

So this whole environment was fundamentally different. It was no longer "Let's compete over this grant," or "What percent of this cancer center will be ours and what percent will be yours?" This was money on the table, spending assets, acquiring assets all around the state. It was very much like a military action where you were collecting and basically massing your troops to stand up to the assault that you knew was coming.

What's driving this? What's making this whole process go on?

The forces that are driving this process are primarily economic. We had a period in the early 1980's, late 1980's, where there was significant inflation--sometimes ten, 15, 20 percent a year for health care premiums and costs. There was a general consensus between employers who were paying health care premiums, the government paying Medicare, and individuals who didn't want to see their co-payments increase--that this was out of control.

There was a variety of creative procedures in response to that to bring down the costs. One of those major procedures was to begin to shift risk from being totally on the insurance company, and to bring doctors into sharing that risk. That led to this whole process which requires people to be part of larger consortiums. If you are assuming financial risk, in order to be able to make decisions that are correct for any individual patient, you need to have enough of a pool of individuals so that your decision on that one patient will not result in devastating budget outcomes.

The backlash these days is a disbelief on the part, particularly of the public, that the physicians can, in fact, do that--that they can separate their decision making on an individual case-by-case basis from a population basis. At any rate, the economic forces were such that inflation basically stopped; budgets were basically capped; rates were basically decreased both for physicians and for hospitals; risk was shifted from insurance companies to physicians; and choice was limited for patients. Basically, there was an attempt to say, "If your group of physicians is going to provide this care for a fixed fee, we will decrease the choice that patients have. We'll basically say that, if they pick you, they have to stay within your group."

Are you describing a situation in which doctors are becoming insurance agents?

I am. I'm describing a situation where the actuarial risk that, since the beginning of insurance companies, was laid on the insurance companies, has been shifted to groups of doctors and health systems. The basic business of insurance--having large numbers of people, and accessing the actuarial risk--is what one needs to do, irrespective of whether the insurance company does it, or the integrated delivery system or group of physicians do it. That led to what I call this "medical arms race" of having large numbers of primary care doctors who have large numbers of patients, so you can have a large patient population and stabilize the risks. . . .

How did doctors feel about being, in effect, insurance agents?

Early on, there was a real split. There are a group of entrepreneurial physicians who feel as if they are in a small business. Many of them look forward to seeing if they could participate in this new world in a successful way, and I think many of them did. By and large, academic physicians, and physicians who are more traditional, found it extraordinarily distasteful to take on risks. They wanted to make and continue to make independent clinical decisions with free choice.

As time has gone on and managed care has expanded, in general there has been a basic dissatisfaction with taking on a financial risk. Many things were unanticipated. One of the most unanticipated things has been that if you are taking on risks, you need an infrastructure--a real business infrastructure, where you're getting data and reporting. Just like in corporate offices, the CEO sits down every day with a sheet, and basically says, "Sales are this, inventory is this." If you're going to do that in medicine, you need the same type of data, and in great part, that data has not been available.

At one point, CareGroup--Beth Israel, Deaconess--decided that they wanted to take the risk. Describe the thinking at that time. Was that a smart move?

I would say that there was a decision to take risks on the basis of a defensive action. The large competitor in town, Partners, had decided to do that, and in a proactive way. After Partners made their first risk deal with an insurance company, that insurance company then knocked on our door and said, "Your colleagues across town have just signed the following type of contract. We want you to sign one, too."

I wouldn't call that choosing to take risks. I would call that choosing to take risks with a cocked gun at one's head. It was clear, however, that the market had fundamentally changed. The insurance companies were all going to take the posture that, if you wanted to negotiate contracts as a large integrated delivery system, their bottom line was that there had to be some associated risks.

So we went about the business of trying to prepare our organization to take risks, because that was the fundamental way of doing business in our market. Was it smart? We didn't feel like we had any choice, as the Avis to the Hertz in town. We didn't feel that we had the ability or the stature or the cash to basically say, "No, we won't participate in this. We won't have a contract from the largest insurer in the state." We weren't prepared to accept the risk of losing a large contract, and perhaps large numbers of patients. So we felt, defensively, that we had little choice.

What was the result of taking on the risk for the Beth Israel Deaconess groups?

The result was that we lost money on almost all of our managed-care contracts.

Big money?

Big money--probably somewhere in the neighborhood of ten or twelve million dollars per contract. The reason for that was several-fold. One was that the actual rates that were paid to the hospital were substantially decreased as part and parcel of the contract. . . .

The only way to succeed financially in these contracts is to keep down what is called utilization, which means how much health care is used--how many days in the hospital, how many tests, how many visits to specialists, etc. And there is a theory that, if one does a lot of preventative care, that one can decrease all those costs down the line. . . . That being said, we were not able to manage the utilization of medical care to the degree in which we would be successful. Part of the reason for that is, as an academic medical center who specialized in treating people who were severely ill, there was a culture where that's what people did. When they have people who are ill, particularly those who have tertiary and coronary problems, multiple problems, diabetes, cardiac disease, cancer, etc., you treat them. It was very difficult to try and shift the culture towards the notion of trying to prevent days in the hospital, and trying to prevent tests. That was very difficult for an integrated delivery system with an academic core.

Now what's happening to the relationship between doctors and patients in this environment?

Doctors and patients are actually lining up from a philosophical point of view, in the sense of saying, "We both agreed on choice. We both agree that doctors should make the medical decisions. We both agree that you should trust that your physician is going to act in your best interest, and not in the best interest of some kind of outside economic organization." So I think that philosophy is lining up. But the day-to-day practice in the office is still rife with tension, because a doctor is pulled between an insurance company that has one outcome, a hospital that wants another outcome, and a patient who's an educated consumer pushing very, very hard for the best quality care. Doctors feel very much caught in the middle and unable to satisfy all those goals.

Do doctors feel as though their medical ethics are at stake?

Doctors do feel as if their medical ethics are at stake. Doctors feel that when it gets down to an individual decision-making process, as to "How am I going to treat the following patient, and is that treatment going to, in any way, be jeopardized or impeded by the economic environment?" It's in that situation that doctors feel like their ethics are at stake.

So it's a battle of values.

It's a battle of values, but it's not black and white. In other words, many doctors, quite frankly, don't want to change at all, and say, "If have to change at all, that's a violation of my ethics." The truth is that there is some movement which can take place that will not compromise quality. But at a certain point, and beyond that certain point, it is an ethical and a mission problem. The problem is that it's very hard to define what exactly that point is, and different physicians will feel that they've reached that point at different times.

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