Steven Brill, in the January 19th issue of Time Magazine
I learned from my $190,000 Open-Heart Surgery),
revives an interesting idea. He proposes that large
regional health care systems be encouraged to assume the
function of medical insurance companies. He argues that
having separate insurance companies between providers and
the patients adds cost and complexity but not value.
The original medical insurance organizations were formed
by hospitals and by doctors to distribute the risk of
expensive care across many subscribers, and increase the
chances of getting paid. From the provider's point of
view, an insured patient is still better than one without
insurance, but dealing with insurers costs lots of
clinician and administrative staff time, and, hence,
From the patient's perspective, in years past, having
health insurance let a person get their care from most
any doctor or hospital with confidence that insurance
would cover the bill. As insurers negotiate reduced rates
with a select few providers, some patients' choices of
clinicians have narrowed.
The insurer collects premiums, maintains required
financial reserves and pays bills. For this, the company
gets to keep 15 or 20 percent of the cash flow depending
on the nature of the account.
Brill's proposal will get attention because it's a lead
article in Time. It's a “back to the
future” idea. The country tried an assortment
of organizational models for health care and financing
between 1980 and 1995. Brill's proposed arrangement was
one of those. For example, Humana started as a chain of
hospitals and clinics. They added health insurance to
their business. In 1993 Humana disposed of its hospitals
to specialize in insurance.
The current, dominant arrangement, i.e., for-profit
insurance companies separate from hospitals and clinics,
won out, perhaps because it made a lot of money for
investors. Therefore the system is relatively stable
politically and economically. The Affordable Care Act
further stabilizes it by making the existing scheme
accessible to more people and eliminating some flaws.
What appeals to me about Brill's proposal is the
possibility of genuine regional systems of care. A person
could enter at any point and move without
pre-authorization and with minimal confusion. Each system
would use a common information system and be stitched
together with a range of telemedicine resources.
Would the scheme Brill proposes, writing as he does from
a highly urban perspective, be good for rural America? I
doubt it. The largest teaching hospitals with their
unique system of Medicare supplemental payments are the
ones with the financial reserves to become their own
insurance companies and build the networks he describes.
Investor-owned hospital systems will be able to raise the
required insurance reserve capital if they choose to.
Medicare recently announced plans to shift its basis of
payment from quantity of care provided to quality of care
and results. Such schemes seem likely to favor
organizations that can accept responsibility, and
payment, for the full range of care from head colds to
heart surgery. On the positive side, smaller, rural
facilities joining regional systems would be better
positioned to share in new Medicare reimbursement
schemes. They should get help with professional
recruitment, continuing education, and the torrent of
regulatory and technical challenges pouring down upon
Patients would be assured that they could enter
“the system” in their hometown and
move to the level of care appropriate to their condition.
It seems to work for the Geisinger Health System
operating out of rural Danville, Penn. Geisinger insures
467,000 people and cares for over three million.
On the down side, though, what are the incentives for the
large urban centers to enter into equitable long-term
arrangements with smaller, more rural facilities? Why
should central system managers offer membership in the
network to rural hospitals and clinics when insured
country people seem willing to drive past their local
facilities for care in larger towns? Given the fact that
there is a modest surplus of hospital beds nationally,
does an urban-oriented network need a rural hospital with
more empty beds?
Given the record of urban affiliates closing rural
hospitals and relocating Critical Access Hospital
designations, can contractual relationships be devised
that safeguard local interests while meeting the
network's needs? Would some “patchwork
quilt” of facilities belonging to different
networks give rural people some choice of providers?
Analogous developments in pharmacy have been hard on
independent rural pharmacies. National retail pharmacy
chains have developed their own prescription insurance
plans. They favor their own stores. Rural independent
drugstores have fared poorly dealing with such plans. As
“out of network providers” they may
be paid below wholesale costs for some prescriptions.
From the patient's perspective, Brill is describing a
form of “health maintenance
organization,” (HMO). The network gets your
money. The less the network spends on care the more it
gets to keep. Supporters feel this gives HMOs incentives
to practice evidence-based medicine and keep people
healthy. Detractors say it motivates them to under test,
underdiagnose and undertreat.
Through my working life, the large referral teaching
hospitals have been largely responsible for the
overspecialization of our physician workforce. If the
entities managing these institutions were financially
dependent on giving routine, evidence-based quality care
to the general population, values and prestige
relationships might shift. Over time we might see more
generalists and fewer subspecialists coming out of the
My guess is that more provider systems will go into the
insurance business. This will be mostly an urban and
suburban model. Medicare payment changes will encourage
the process. Insurers will lobby state government to
prohibit such arrangements. It will be hard for small,
freestanding rural hospitals and clinics to find
appropriate places in such systems. To that extent,
development of these insurer-provider networks will
become an additional force pulling patient care out of
rural communities. Rural facilities and their
associations should begin planning to contend with this
Wayne Myers is a retired pediatrician and rural
medical educator. He directed the federal Office of Rural
Health Policy from 1998 through 2000, and was President
of the National Rural Health Association in 2003. He and
his wife, JoAnn, farm in rural Maine.
Opinions expressed in this column are those of
the author and do not necessarily reflect the views of
the Rural Health Information Hub.
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