Thursday, June 28, 2007

Academic Medicine - Rip Van Relman

No Margin, No Mission

A company's primary responsibility is to serve its customers and to provide needed goods or service. The company exists to produce a profit. Profit is not the primary goal, but rather an essential condition for the company's continued existence. Other responsibilities, e.g., to employees and society, exist to support the company's continued ability to carry out its primary purpose.

Peter F. Drucker, Management and Social Philosopher, 1919-2006

In 1999 I wrote “No Margin, No Mission” for The Physician Executive. The article opened with this paragraph,

A tough-minded Catholic nun, the CEO of a major not-for-profit health system on the West Coast, captured the dilemma of our health system with this down-to-earth comment:” No margin, no mission.” This article and many others indicate any organization, however noble its mission , whether “for-profit” or “not-for-profit,” must make a profit to survive as an institution and to serve its constituents. Whether a business or a charitable organization runs the enterprise makes little difference. Both need to make profit to survive. No mission is morenoble than caring for the sick. That's what medicine and hospitals are for. But to say openly that one must "make a profit" running a hospital, medical practice, or health insurance company or "compete for patients" is unseemly. For example, you may recoil at the thought of New York City hospitals' escalating competition for cancer patients to build cancer "market share."

I thought of this passage when I read a review of Arnold Relman’s latest book, A Second Opinion, Rescuing America’s Health Care, A Century Foundation Book, 205 pp, New York, Public Affairs, $24, 2007) in the June 28 New England Journal of Medicine.

Arnold Relman. M.D., has been fighting a valiant war against profit-making U.S. health care companies since 1981, when he wrote “The Medical Industrial Complex,” in the The New England Journal of Medicine, of which he was then the editor. Relman, a nephrologist, is a long-time card-carrying member of the New England academic intellectual elite who believe they hold the best answers to most U.S. health system problems, if only the rest of the world would listen.

Here are some of Relman’s solutions.

•Eliminate all for-profit health companies

•Implement a single payer system run by government or quasi-government agencies

•Have doctors provide care through organized, not-for-profit prepaid group practices

•Limit primary care practice panels to 1500 patients (the average is now 2300 patients)

•Finance health care through a national tax earmarked for health care

•End health care commercialism and multi-payer financing

•Return health care to a human service rather a market commodity

•Organize preventive, acute, and chronic care programs of consistently high quality.

There is much to admire in these proposals. Relman has been fighting his gallant, noble, and losing campaign for 25 years now. But in many ways, he is a modern day medical Rip Van Winkle. He has remained asleep in his intellectual academic cocoon in Boston while the rest of the real world moves on.

•Is he aware 75% of physicians beyond Boston and its medical schools practice in groups of 5 or less?

•Does he know 95% of doctors still charge fee-for-service while prepaid capitated care languishes?

•Does he know there are now over 190 recognized medical specialties in which physicians can obtain board certification and to organized them into prepaid groups borders on the impossible?

•Does he realize most health care innovations, e.g. new drugs and new devices, flow out of the commercial sector, not out of academia?

•Does he appreciate academic institutions have extraordinarily high costs, vis a vis community hospitals, and those high cots pose cost problems for patients and insurers?

•Is he oblivious to the reality most not-for-profit hospitals behave precisely like their for-profit brethren?

•Does he realize health care professionals live and work and pay their debts in a capitalistic democracy fueled by profits?

Without profits, there’s no money to invest in opportunities to improve care, recruit better doctors, train and educate future doctors, retain doctors you already have, invest in new technologies, build new hospitals, establish new medical schools, and lobby in Washington for what you believe in.

Not all academic Bostonians think alike. Regina Herzlinger, a professor of business at Harvard Business school, prefers a market and consumer driven system to big government and big academia. In her book, Who Killed Health Care? she argues that government and academics and general hospitals are a big part of the problem—not the solution.

She and Relman reside at opposite ends of the ideological spectrum and operate at cross-purposes. The debate between the “commercial” interests, which in Relman’s world include all those who make a “profit” and idealistic reformers, who believe health care should be “money-neutral” and guided by high ethical principles of academics and policies of government officials, will rage on.

Where it stops no one knows.


Mike said...

Excellent post.

I know a lot of medical innovation comes from the United States. But what about countries with socialized medicine? Do they suffer from a lack of such innovation? If so, this would go a long way in arguing against the socialized set.

Richard L. Reece, MD said...


The late Peter Drucker consistently argued that innovation and entrepreneurship separates the American economy from European economies. Most, but not all, drug, device, and IT innovations come form America. We simply have more of an infrastructure and more of a reward system to support innovation. I am not sure this applies to genomic research because of the political controversy surrounding that issue. Other comments are invited.

Richard L. Reece.MD

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