History and Evolution of Medical Care Institutions

1. History and Evolution of Medical Care Institutions Professor Edward P. RichardsLSU Law Centerhttp://biotech.law.lsu.edu/

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

3. 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

8. 1800 • Edward Jenner • Smallpox and the notion of vaccination

9. 1846 • William Morton - Ether Anesthesia

10. 1849 • Semmelweis • Childbed Fever and sanitation • Scientific Method • Controlled Studies

11. 1854 • John Snow • Proved Cholera Is Waterborne • Basis of the public sanitation movement

12. 1860-1880s - 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 - 1900s • Lead by the Shattuck Report on Sanitation in Boston - 1850 • Waste water disposal • Drinking water treatment • Pasteurization of milk • Food sanitation • The Jungle - 1905

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

15. 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 - 1910 • 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 - 1920s • 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

21. 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

32. 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

35. 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 - 1983 • 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?