The Hospital as a Factory and the Physician as an Assembly Line Worker

MBAs tell physicians how to practice Medicine. Costs rise and quality drops. Patients, physicians suffer.

“We see the hospital as a factory and our hospitalist group as an assembly line that is in the business of manufacturing perfect discharges.”¹ These words are not hyperbole. They are the exact words written by David J. Yu, MD, MBA, medical director of Adult Inpatient Medicine Services at Presbyterian Hospital in Albuquerque N.M. Yu cites the work of management guru W. Edwards Deming as a major authority for this approach to patient care. Deming’s business principles have been given much of the credit for Japan’s industrial revival after World War Two.

Theory is not practice. Ever since management and business school “experts” took charge of health care in the 1970s and 1980s not only have medical costs not decreased they have skyrocketed. There was no health care crisis in the 1970s and 1980s.² It was manufactured by the medical industrial complex composed of hospitals, insurance companies and drug companies for their own financial gain.

Exhibit 1 illustrates this. The graph shows that health care costs in the United States (U.S.) were essentially the same in the U.S. as they were in other OECD (Organization for Economic Cooperation and Development) countries until the early 1980s. In 1973 the Nixon administration introduced the Federal HMO act that required businesses with over 25 employees to offer HMOs to their employees.³ And in the early 1980s, ostensibly to improve hospital efficiency, Diagnostic Related Groups or DRGs were introduced by Robert B. Fetter PhD of the Yale School of Management and John D Thompson MPH of the Yale School of Public Health.⁴

Exhibit 1.

Health Care Spending as a Percentage of GDP, 1980–2013

The graph shows how health care costs spiraled out of control compared to other OECD countries only after HMOs, managed care, and DRGs were introduced nearly 40 years ago. The medical industrial complex has profited handsomely. Physicians are blamed for high health care costs. Patients are rushed through hospitals (and doctors’ offices as well) and are often discharged before they are ready.

Diagnostic Related Groups

Under Diagnostic Related Groups (DRGs) Medicare pays hospitals a fixed fee for specific diagnoses like congestive heart failure or knee replacement surgery. Simply put the hospital loses money if a patient is hospitalized too long and makes money with shorter stays. (There are certain exceptions for outliers which is beyond the scope of this discussion.) Hence hospitals put pressure on hospitalists like Dr. Yu to discharge patients as soon as possible. Hospitalists are well paid. The average yearly salary of a hospitalist is $251,000.⁵

In order to prevent patients from being discharged too soon, Medicare penalizes the hospital financially. Centers for Medicare & Medicaid Services (CMS) defines the return of patients to the hospital within one month of discharge as ‘poor quality care.’ To any physician with even a modicum of experience this rule is nonsense. Physicians can’t control patient compliance nor can they control certain unavoidable complications of an illness or surgery. Only when officious bureaucrats are put in charge of a profession, which they do not understand and is beyond their level of competence, can the return of critically ill patients to the hospital within one month of discharge be labeled poor quality care.

So what do hospitals do when patients with serious illnesses return to the hospital within 30 days of discharge? In order to avoid financial penalties they skirt the rules by devious means. A recent Wall Street Journal (WSJ) study showed that hospitals often change the status of patients who are readmitted to the hospital within 30 days to “observation status.” Patients can remain on observation for days and receive the same care that they would receive as an acute care admission.⁶

The problem with this is that Medicare won’t pay for post-hospitalization admission to a rehabilitation or skilled nursing facility after an observation admission. So the hospital shifts more costs to the patient. The WSJ cites the case of an 87-year-old wife of a school teacher who spent four days in the hospital on observation and two months in a nursing home which cost $20,000. To pay the non-insurance covered bills “the couple liquidated a life insurance policy and cashed certificates of deposit that had been set aside to pay for their burials.”

Medical education has also suffered under DRGs. In his recent book “Let Me Heal,” Kenneth Ludmerer, MD, Professor of Medicine and Professor of the History of Medicine at Washington University School of Medicine in St. Louis, describes the “turnstile” effect on residency training:⁷

“In all specialties residency training came to be dominated by an overriding goal; discharging patients as soon as possible. House officers were instructed to begin discharge planning on day one of a hospitalization sometimes even before meeting the patient.” He notes how the late David Kipnis, MD, former Chairman of the Department of Medicine Washington University School of Medicine, stopped teaching residents in the 1990s because house officers only wanted to talk about discharge and not about disease. He describes how the pressure to discharge stifles curiosity and the desire to learn. Ludmerer believes that the requirement that residents see as many patients as possible in as short a time as possible is a major cause of “burnout” among house officers.

Ludmerer blames the “dysfunctional largely commercialized health care system” for the harm it has done to medical education. But he also delivers a scathing indictment of his faculty colleagues and medical leaders for their role in allowing these harmful changes to occur:

“Academic leaders, faculty members, clinical departments, medical schools and teaching hospitals behaved in this way for a reason: They benefitted too much from the enhanced revenues they received for succumbing to the forces to increase throughput. They followed the money, resting content with the status quo as long as clinical revenues and their own pay continued to grow even if graduate medical education and patient care might have suffered in the process.”

DRGs have wrung all the savings that it can from hospitals even to the point that hospitals as noted above are engaging in subterfuge in order to comply with impossible Medicare rules and regulations.

Hospitals are the main driver of high health care costs consuming about 30% of the health care dollar.⁸ If Medicare was really serious about lowering hospital costs it would stop focusing on DRGs and physicians and develop policies based on the findings of recent independent objective research which show that hospital consolidation and hospital integration increase costs.

In the1990’s hospital boards of directors and administrators promised that hospital consolidation (coordination of care) and the purchase of physician practices (integration of care) would achieve economies of scale that would lead to greater efficiencies and cost savings. A landmark 2014 JAMA article explodes this theory.⁹ This research showed that expenditures in consolidated and integrated hospitals in California were significantly higher than in physician owned organizations.⁹

This finding should come as no surprise. Hospital consolidation and/or hospital mergers have led to monopolies and price fixing. The journalist Steven Brill pointed out in his landmark Time magazine article “Bitter Pill” how hospitals use the “charge master” to charge outrageous prices to consumers and their third party payers.¹⁰

Don’t expect the Federal Trade Commission (FTC) to engage in a serious effort to break up hospital mergers. This government agency is part of the problem not the solution. The FTC orchestrated the managed care takeover of Medicine in the 1970’s and 1980’s that allowed hospital monopolies to flourish. Ever since it filed suit against the American Medical Association in 1975 to remove the Hippocratic Oath from its Principles of Medical Ethics, the FTC, as one observer put it, has been out to “get the doctors.”¹¹

We see the hospital as a factory and our hospitalist group as an assembly line that is in the business of manufacturing perfect discharges.”

-David J. Yu MD, MBA

Source: http://ophelia.sdsu.edu:8080/ford/03-03-2012/innovation/innovation-features/innovation-detail/heritage-model-a-production-begins-at-rouge.html

Source: Ontario Hospital 2014 Medical Assembly Line The Canadian Press http://news.nationalpost.com/full-comment/michael-schweitzer-canadas-assembly-line-health-care

Likewise recent studies have shown that hospital integration of physician practices also leads to higher prices.¹² When private insurance companies and Medicare pay at least 70% more for office visits, laboratory tests, imaging studies, and outpatient surgery such as colonoscopies to hospital owned physicians than they pay to private independent practitioners for the very same services how can that possibly result in lower prices to the consumer? You don’t need an MBA or be a government “expert” to figure that one out. An average primary school fifth grader can give the correct answer to that question without doing any research at all!

MedPac the Medicare Patient Advisory Commission has long recommended that that this disparity in payments to hospital based and independent private physicians be corrected.¹³ But the ultra-powerful hospital lobby has been successful in preventing MedPac’s recommendations from being implemented. It’s much easier to blame physicians for the high costs of health care than blame hospital inefficiencies and waste. Administrative costs alone in U.S. hospitals are at least 25% higher than other OECD countries.¹⁴ In order to control hospital costs the government should break up hospital mergers and stop over paying hospital employed physicians and stop overpaying for their overpriced outpatient services. Medicare should also stop focusing on DRGs because they are not working.

When hospitals are factories and hospitalists are assembly line workers it follows that patients can easily become widgets. The take home message is this: If you or a loved one is admitted to a hospital with an acute illness and discharged before you think you are well enough to be discharged, protest. You can start with the patient advocate and hospitalist and go right on up the ladder from there to the CEO of the hospital if necessary. You’re not a widget. You’re a human being living in a free country. Your taxes paid for Medicare and you should have a right to see that it functions properly for your benefit and not for the hospital’s bottom line.

Biography

Arthur H. Gale, MD, MSMA member since 1976, is a Missouri Medicine Contributing Editor. He practices Internal Medicine in St. Louis.

Contact: agalemd@yahoo.com