Monthly Archives: August 2012

Pirates of the healthcare industry

The New York Times recently did an expose on hospital overbilling by a group of cardiologists at some hospitals owned by the Hospital Corporation of America (HCA). Immediately after a few days, a rather gloating article about how HCA had become the poster boy of Wall Street with its double digit growth strategy appeared. If the first story had not raised enough doubt about the prudence of the profit motive in healthcare, the second story rammed the point right into place.

Back in the 1950s Kenneth Arrow (a side note: the Nobel winning economist is Larry Summers’ uncle if that’s of any interest) published a paper in the American Economic Review about how healthcare is unlike any other commodity that is freely tradable at the markets. The core of his argument was  that healthcare unlike regular commodities follows a warped logic that does not bow at the altar of demand and supply economics.

Here’s why: first, there is no real linkage between demand and supply with healthcare. In ordinary market economics, demand and supply tend to have an inverse relationship  with each other. Not so with health care; since nobody can really predict the need for a certain health service. And when you do need it, there isn’t really the time to shop around. So the demand and supply can’t really be moderated based on each other.

Second, and equally important, is the fact that there is a huge information asymmetry between the provider and the consumer of the service. As a result, not only is the consumer not able to shop around for healthcare when he needs it, he has no idea about making an estimate about the quality of the same. Think about haggling around for a cardiac cath when  you have a heart attack. Or for that matter, think about trying to second guess your doctor when she says you need a certain procedure. That puts the doctor at a rather unusual predicament for a service provider; he is not only the provider but also oftentimes the person who determines when there is a need for a certain service. In an idealised situation, the doctor is expected to not only provide services to his consumers, but also be a vanguard the interests of his patients and the society at large.

When doctors are able to fulfill that obligation as the custodians of the well being of their patients and communities, that’s where they derive their reverence. When doctors choose to forgo that obligation, like the Florida cardiologists, it is too easy to make a quick profit. The price that you pay for earning that quick buck however depends upon how much of importance you place upon your moral obligations and failings. Physicians have ordinarily been expected to subscribe to their own ethical tenet. When they fail to do so, they can do undue harm to our communities by virtue of the trust that has been laid on them. The lure of money can be a powerful force to cause a breach of such trust.

And that has already been happening at an alarming pace. HCA is a very relevant case in point. Fuelled by their own greed and the pressure from their administrators to upcode on their services as well as provide services that were not really required, these doctors sold themselves for a quick buck.

Like the NYT story points out, it’s for a reason why the for profit healthcare industry has become the new darling of the private equity industry. At a time when demand for goods and services is sagging almost everywhere, healthcare continues to be a major exception. And when the provider himself can be the arbiter of demand, that is too fertile a ground for private equity firm to not try to stick its feet in.

One may argue, so what is wrong with making money if they provide better services, bring in efficiency and add value to the system. Here’s why that argument is faulty. First, the Florida story is a firm rebuttal to the fact that for profit hospitals provide efficient services. They just provide services that makes them more money irrespective of the need. That loses money for everyone in the longer run. Second the belief that such hospitals create value is faulty as well. Paul Levy has a really interesting blog post on his Not Running a Hospital blog, about how private equity firms dress up results for the short term for the consumption of wall street, fatten up the stock and make their quick exit, while holding such institutions hostage to maverick financial instruments in the longer run. There is a reason why the term “vulture-capitalism” sticks. Dive in, make a quick buck and make an equally quick exit.

A third argument is made about how private entities bring in investment that no non profit institution would have been able to manage on their own. That argument too has no merit when you consider the fact that, as Levy mentions,  no for profit hospital will have access to cheap capital the way a non profit will have given the need to pay taxes, the lack of access to charitable donation  and the constant need to placate the demigods of the markets.

As long as healthcare continues to be a societal good hinged on our belief that it should be a right for all irrespective of the ability to pay, health care services will not be tradable like every other good or service. When it’s defined as a societal good, healthcare is too easy a target to profit from; and making a quick buck out of it is not a terribly difficult thing to do; unfortunately such profiteering tends to be antithetical to larger societal interests. Either the profits or the common good. Unless we recognise that fact,our confusion with whether the market is the best vehicle for delivery of healthcare will continue to throw up buccaneers like these that try to make a quick buck at the expense of everyone else.


I don’t know what’s wrong with you lady

I think my patient hates me! Okay I will admit I am sure she hates me. If it’s any consolation, she hates all her doctors at the hospital. Up until this morning I’d been thinking she hated me a little less than everybody else, by the afternoon I managed to gravitate right to the top of her hate list.

The 78 year old codgette is not entirely without charm though. This morning, for a change, I wasn’t running around like a squirrel, so during my morning rounds I drew up a chair by her side and had a rather longish conversation. She seemed to appreciate that. She even gave me what looked like a begrudging smile.

Resentment however, was still the overbearing emotion during the entire conversation. The lady thinks she has no business being in the hospital. I don’t blame her for that. She thinks I am keeping her here for no reason.

How would you feel if you were brought to the hospital because your daughter thought you were a little short of breath, and the doctors at the ER admitted you because they found a fever on exam which you never experienced, all the while you never really had any inconvenience or felt anything?

Since the admission almost a week ago, it has been just more of the same. Everyday the lady thinks nothing is wrong with her. We however, ever so cautious in tracking the fever, manage to find one spike of fever at least every day that makes us nervous. Okay there are reasons: she is on on an immunosuppressant, and her temperatures records are rather high. However I still don’t have an adequate explanation for the lady.

The enterprising and ever so inquisitive doctors that we are, we never fail to dig. First we start lowbrow, with a simple infection screen. We fail to find anything, and the digging gets deeper. In no while, the digging is walrusian. Yesterday we got a few CT scans, we do the blood works every day. If anything the lady thinks she is starting to get weaker due to the constant blood draw.

I have a hard time justifying all that we are doing. A snippet of our conversation this morning.

Lady: Why are you keeping me here?

Me: You have a high grade fever. We think its viral, but we are not sure. We are trying to find out why.

Lady: So what did you find?

Me: Well, really nothing thus far.

Lady: So what are you going to do now?

I wanted to say we wanted to do a few more tests, but I simply did not have the liver to verbalise that. I kept mum and gave her a vacant stare.

I did not have to. The lady already knows that.

Yesterday the attending physician had ticked her off on a possible spinal tap if the CTs came up to nothing. The lady was livid. We pitch the idea to her daughter. She has been having headaches now. She complains of weakness. And the fevers. With the suppressed immunity, there are reasons to be worried.

The lady half heartedly approves the procedure, all the while not really hiding her indignation toward all of us. We plan the tap for the afternoon today. I tell her not to worry, the procedure will be over in 10 minutes. Let me try that on you first- she retorts!

Afternoon comes. The lady asks who is going to do the procedure. I tell her I will. The lady is incredulous; she invokes the name of god. Her barometer rises, I can see her fuming. Right there I ascend to the top of her hate list.

The procedure thankfully is smooth. I ask the lady to lie down afterward. She does, and our eyes cross. She rolls her eyes away from me. I don’t really have to guess how she feels about me. What are you going to do now, she asks me, while she looks out of the window. I am going home, I tell her. Good for you she says, the sarcasm very visible.

I call up the hospital later in the day to find out the preliminary results of the tap. Everything normal. I can already imagine my conversation with the lady for tomorrow.