Bottom-up Vs. Top-Down Bottom-Line Medicine

Despite the conceits of New York and Washington, almost nothing starts there. In the course of my work, I have been overwhelmingly impressed with the extent to which America is a bottom-up society. Trends are bottom-up, fads top-down.

John Naisbitt, Megatrends, 1982

August 4, 2012 - John Naisbitt, America’s best trend forecaster, has always been dead-on in predicting trends in his books, which include Megatrends, Global Paradox, High Tech High Touch, and Mindset!  Naisbitt insists the strength of America is its bottom-up, common-sense approach to major social issues.

Our fearless forecaster feels advances in  individual connectivity   in telecommunication,  telecommunication, and the social media industries strengthen this trend.

But do they?  These electronic advances also play to the strengths of organizations and  payers, now able to track  billions of transactions, determine short -term and long term outcomes,   manage utilization, and rationalize, even ration, using the principles of management by objectives.

Obamacare proponents maintain electronic health records and electronic tracking will lead inexorably to lower costs and higher quality. These electronic capabilities, they say,  will work particularly well because  they can restructure medical practice by ending fee-for-service and having doctors work on salaries and in clinical, coordinated teams in integrated large organizations 

There is nothing new in this approach.   Arnold Relman, in a 1981 New England Journal of Medicine article,  “The Medical-Industrial  Complex,”  proposed an early non-Internet version consisting of  “not-for-profit” physician organizations working under the aegis of a single-payer system; Paul Ellwood, MD,  father of the HMO,  sold it to President Richard Nixon in his first term. Ellwood forecast that 10 or so “megaclinics” would dominate American medicine.  Victor Fuchs  and colleagues at Stanford said only competing  large organizations like Mayo had the wherewithal to administer  and rationalize health care. Daniel Zimmer, an influential Minnesota health care consultant said doctors and hospitals should co-invest in “Big Box Medical” facilities, the medical analogue of something for everyone  in fast-food  markets;  and Obamacare has proposed placing doctors and hospitals into accountable  care organizations,  with fixed, or capitated, bundled budgets putting providers at risk.

But vexing questions remain:   Will placing  doctors on salary in large organizations truly lower costs and raise quality?   Will these organizations satisfy Americans accustomed to receiving care from their neighborhood physician d with knowledge of ther families work better rather than driving to a regional medical marketplaces whose doctors may not know them?  Will health reform measures empahazing data rather than personal patient relationships drive doctors out of medicine and exacerbate doctor shortages?

And what about historical factors?  It has been known for a long time that hospital outpatient care costs considerably  more than physician outpatient care?  It is also well-established that once hospitals dominate a geographic region, hospitals can negotiate higher fees from private payers and government Medicare and Medicaid vendors and can add “hospital facility fees” for the privilege of being treated in their facilities.  As one cynic remarked,  old hospital administrators never die; they just expand the power of their facilities and raise their prices.  

Finally, there is the argument, that once in total control,  the government Piper can control costs by slashing payments to hospitals and doctors  and  offering free preventive services, like free contraceptive and abortifacient drugs, imminent  death counseling, and coordinated care.   It is a compelling argument, but if you believe it will contain costs,  I have a compelling counter argument to sell you – the government record of cost-overruns in every entitlement program it has even offered, attempted, and  and implemented.

But time and trends may be on the government’s side – even though these trends  give lie to the government’s arguments that costs are excessive on the private, not the government’s side.  Yeterday’s New England Journal of Medicine, has an article containing these figures, which speak for themselves.

Average Annual Growth Rates in Spending (%)

Private Insurance

Total spending,  6.0%

Enrollment,  0.9%

Spending  Per Enrollee, 5.0%

Medicare

Total spending,  6.1%

Enrollment, 2.9%

Spending per enrollee, 3.1%

Medicaid

Total spending, 8.5%

Enrollment, 4.7%

Spending  per enrollee, 3.6%

Source:  (John Holahan and Stacey McMorrow, “Medicare and Medicaid Spending and the Deficient Decade,"  New England Journal of Medicine, August 2, 2012

Tweet:  Total health spending in Medicare and Medicaid programs is far outpacing growth of spending in private sector, making one wonder if government can contain costs.