Show me the evidence: healthcare consolidation & corporations cut costs compared to independent practices?

Hello everyone. As Christmas and New Year season approaches, I wanted to thank you all for reading my articles this year. I’ve very much enjoyed writing them, and am appreciative for the many comments and emails I’ve received from readers. For the next couple of weeks of this festive season, I will be posting more than the usual one article a week. I hope you all enjoy this extra reading!

Let’s start with requesting more evidence for the promised cost-cutting in healthcare…

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 One of the biggest changes to the healthcare landscape over the last twenty years has been the dramatic consolidation of care and the rise of big corporate medicine. No longer is healthcare about good-old Dr Johnson’s primary care office around the corner, which would serve the needs of you and your whole family. Nowadays, healthcare is all about big business, mega-mergers and hostile takeovers.

The fact that the majority of physicians are now employed versus being in their own independent or small-group practice, has enormous consequences for the profession as a whole. The perceived comfort and “security” of employment, needs to be balanced against the loss of autonomy and other drawbacks of being in a controlled employee-type environment.

A major reason why the enormous push towards healthcare consolidation and physician employment happened in the first place, through various national policy measures, was that it was sold to the medical world that having larger organizations administer healthcare would dramatically improve cost, efficiency and outcomes.

However, evidence is now accumulating that suggests quite the opposite: namely, that the push towards having big business administer healthcare, is actually dramatically increasing costs—and expenses tend to soar when large healthcare organizations buy up smaller independent physician practices. This New York Times article used the example of an echocardiogram (heart ultrasound), which can spiral in cost when performed by a hospital instead of an independent physician. Another study showed that cancer care is 60 percent more expensive when it is done in a hospital versus a smaller outpatient community setting. Even electronic health records, which have cost the healthcare system billions of dollars, are often much cheaper and better when they are chosen and installed by private practice physicians versus large hospital giants.

However, regardless of this evidence (and I’m sure more is on its way) anecdotal common sense observations would have questioned the assertion of how healthcare consolidation could have possibly decreased costs. Consider the following:

 

  • Think of a large healthcare organization and how it operates. Think about the large corporate headquarters with fancy cars rolling in and out. Think about the layers of administration, the new positions being created all the time: Vice-President of this, VP of that. Executive Director of this, executive director of that. Not to mention the multi-million dollar executive take home pay packages (bonuses not included). It doesn’t take an Einstein to work out that this model couldn’t possibly be cheaper than a network of independent small physician practices that operate with a small-business ownership financial mentality. Those smaller practices could often see patients much faster, perform minor procedures, and make patients much happier (with a closer doctor-patient relationship too). Of course, the regulatory and bureaucratic environment was very different back when it was possible for the smaller physician practices to exist. But unfortunately the answer to more bureaucracy—has been to add more bureaucracy and administration—in a vicious escalating circle.

 

  • The healthcare-industrial complex in America is a behemoth. To give you some perspective, total healthcare spending in America is more than the entire GDP of every country in the world except for China and Japan, given the overall size of the US economy. Having these large corporations, with all of the multi-billion dollar associated side industries, including healthcare information technology—means that often healthcare becomes not so much about the patients at the frontline, but about generating as much money as possible for those companies and their shareholders.

 

  • Healthcare is an industry like no other. The normal rules of business engagement, that may exist in selling goods online or trading commodities, do not quite apply to healthcare. There is a massive emotional, societal, and yes, political component as well. Businesses cannot operate in their usual way.

 

 

Let me be clear. I am far from being an anti-capitalist. I am for a free market system (at least in most industries, even if it doesn’t always quite work in healthcare) and delivering the best possible service at the lowest possible cost. I am also not somebody who is advocating for socialized medicine. I’ve worked in a completely socialized system, and truly believe that most American physicians who are advocating so strongly for one, have never actually worked in that type of system before, and have not a clue how bad centralized government control can be. If anything, I am for a hybrid sort of healthcare system, which lies between the two extremes and is similar to a country like Australia.

But as for big corporate medicine in America, I am also a realist and someone who likes to see the hard numbers. Healthcare executives and administrators won’t like to talk about it, because they are so entrenched in the current system. However, if compelling evidence is now showing that the consolidation and corporatization of medicine has done the complete opposite of what it was supposed to—in other words, escalated costs and lowered efficiency, compared to the traditional small private practice model—and in doing so produced a series of self-serving business empires, what a travesty that is.

 

 

Suneel Dhand is an internal medicine physician, author and speaker. He is the co-founder at DocsDox and founder of DocSpeak Communications. Learn more about him here.

 

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