Agustus 2010

The Wall Street Journal reported on a study in Health Affairs entitled "A Progress Report On Electronic Health Records In U.S. Hospitals" by Harvard researcher Ashish Jha and colleagues.

An Aug. 27 WSJ Health Blog post was entitled "Only 2% of Hospitals Could Have Met ‘Meaningful Use’ in 2009."

While the topic of this Healthcare Renewal post is not about Jha's new article per se, I will provide the article's summary:

Despite all the talk about digitizing the health-care world, only 11.9% of U.S. hospitals had adopted at least basic electronic medical records by last year, and only about 2% had done enough to qualify for future government financial incentives, a study finds. The study, published online in Health Affairs, covers responses from 3,101 hospitals surveyed by the American Hospital Association

... It’s actually not surprising that hospitals were slow to adopt new systems in 2009, given the horrible economic conditions, difficulty of raising money for capital investments and uncertainty over what the final government requirements would be. “I’d be shocked if we didn’t see an uptick in 2010 and an even bigger one in 2011,” Jha tells the Health Blog. “But are we going from 2% to 40%? No. We might go from 2% to 5% [in 2010] to 15% or 20% in 2011.”

No surprises there. Jha has previously published research articles I've mentioned on Healthcare renewal such as at "Science or Politics? The New England Journal and "The 'Meaningful Use' Regulation for Electronic Health Records" and "Hospitals Under the Knife: Sacrificing Hospital Jobs for the Extravagance of Healthcare IT?":

... Ashish Jha’s research at the Harvard School of Public Health that compared 3,000 hospitals at various stages in the adoption of computerized health records and found little difference in the cost and quality of care. A New York Times story "Little Benefit Seen, So Far, in Electronic Patient Records" on those findings is here.

What is of interest to me are statements made by Jha in response to questions asked by the WSJ reporter Katherine Hobson. Hobson: "We hear from a lot of physicians and others who are doubtful about the benefits of electronic records, and we asked Jha about the evidence supporting quality and safety improvements."

Jha's response was quite interesting. There are a number of issues he raises:

[Jha] "There are really two sides of the coin. I can point to about 400 studies done really well that show electronic health records can have a substantial impact on improving quality and safety. [But] we had a paper published earlier this year [Electronic Health Records’ Limited Successes Suggest More Targeted Uses - ed.] showing that when hospitals adopted EHRs, there was no impact on quality. So how to reconcile that?"

[Hobson] Jha says we have evidence that “when high-performance hospitals develop their own systems, implement them and tweak them, they can work wonders.” But the benefits gained from purchasing an off-the-shelf product and failing to implement or tweak it to meet an institution’s particular needs are likely to be “far less pronounced,” he says. “If you adopt a new technology, and do it badly, you can end up making productivity worse” or causing harm, he says.

[There must be a lot of organizations meeting that description for such low impacts on quality to be the norm - ed.]

“This is not a plug and play.”

I find this interesting for several reasons.

First point of interest:

On doing health IT badly, and on health IT not being "plug and play":

I came to the same industry-challenging conclusions a decade ago observationally that Jha came to through empirical research and review of the literature. On "doing health IT badly", in the late 1990's I'd written the following (now at my academic health IT site here):

... While clinical IT is now potentially capable of achieving many of the benefits long claimed for it such as improved medical quality and efficiency, reduced costs, better medical research and drugs, earlier disease detection, and so forth, there is a major caveat and essential precondition: the benefits will be realized only if clinical IT is done well. For if clinical IT is not done well, as often occurs in today’s environment of medical quick fixes and seemingly unquestioning exuberance about IT, the technology can be injurious to medical practice and biomedical R&D, and highly wasteful of scarce healthcare capital and resources.

Those two short words “done well” mask an underlying, profound, and, as yet, largely unrecognized (or ignored) complexity. This website is about the meaning of "done well" in the context of clinical computing, a computing subspecialty with issues and required expertise quite distinct from traditional MIS (management information systems, or business-related) computing.

I'd also made the observation, to the consternation of health IT marketing departments I'm sure, that health IT was not plug-and-play in an essay entitled "Cultures of mismanagement: toxic to healthcare quality" about my experiences as a CMIO:

... To make matters worse [in an ongoing EPR project], the executive team then gave a key EPR staff member, a Senior Resident who'd done an excellent job writing and programming custom templates for the EPR system, a difficult time on promised payment for his services.

They believed such a customization function was trivial and wasteful, and essentially reneged on their agreements with the Resident. When challenged by the informaticist and others that this person's services were essential, the views were met with indifference, if not disdain, for facts and logic. In fact, the executive team clung persistently to a mind-numbing leap of logic: they seemed to believe that just as home computers were "plug and play", so was [or should be - ed.] clinical IT. Their attitudes seemed to reflect a belief that the EPR team and resident were basically deceiving them.

... Unfortunately, healthcare IT is never plug-and-play, and in IT a person is either part of the solution or part of the problem.

Second point of interest:

Jha did mention two systematic reviews as describing hundreds of articles in the literature supporting potential benefits of health IT, one in May 2006 by Chaudhry et. al in the Annals of Internal Medicine (link), and one by Goldzweig et. al in Jan. 2009 in Health Affairs (link).

These reviews were rather weak on substance, though, in terms of robustness that could support spending hundreds of billions of dollars on health IT as national policy. The former article concluded:

Limitations: Available quantitative research was limited and was done by a small number of institutions. Systems were heterogeneous and sometimes incompletely described. Available financial and contextual data were limited.
Conclusions: Four benchmark institutions have demonstrated the efficacy of health information technologies in improving quality and efficiency. Whether and how other institutions can achieve similar benefits, and at what costs, are unclear.

The articles' conclusions matched my own writings from observation and critical thought about what I was seeing personally and hearing from Medical Informaticists in the field.

Third point of interest:

In the WSJ blog post comment section, several commenters including Dr. Jha opined on the issue of lack of regulation of health IT as a factor in its limited diffusion and benefit to date. In a comment of 8:06 am August 29, 2010 Jha wrote:

... On the issue of FDA approval [of HIT devices - ed.] — this is a tricky issue on which reasonable people can disagree. FDA regulates devices that are used on patients (not on doctors and nurses) traditionally so you could make a very reasonable argument that this is out of their scope.

This argument goes back to the customary notion of the clinician as "learned intermediary" thus providing a shield from liability for the vendors of commercial HIT systems.

Here I disagree with Jha. I would argue, again from observation, that this notion is obsolete.

For example, in an item from the HIStalk blog site news of 8/30/10 (lin k):

... [a reader] sent a UPMC internal document describing a quality improvement project at Shadyside [Shadyside Hospital, Pittsburgh - ed.]. Before Cerner was implemented, the ED stocked 95% of the meds they used in their automated dispensing cabinet and the other 5% were requested by tubing the paper order to pharmacy, resulting in a pretty good turnaround time of 28 minutes. With CPOE, the ED had no good way to alert pharmacy about those 5% of meds, so turnaround time shot up to over two hours. An ED nurse came up with a solution: tubing a yellow “Stat ED Med” card to pharmacy along with an index card listing the patient and med needed, dropping TAT back to six minutes.

From the medical informatics perspective, the lesson here is that the physician is effectively no longer a “learned intermediary” between computer and patient when a complete system of EMR, CPOE, decision support etc. linked to Pyxis medication dispensing and other machines is constructed.

This model from the earlier days of simple advice-giving and-records keeping health IT no longer holds (arrows represent interaction):

[Computer] <---> [Clinician] <---> [Patient]

Rather, the computer has become a cybernetic governor of care, as in a programmatic intermediary between clinician and patient regulating care operations:

[Clinician] <---> [Computer] ---> [Patient] (note one way arrow).

The fact that a “workaround” a.k.a. an “override around the cybernetic regulator of care” had to be created in order for appropriate care to be delivered in a critical care environment supports the latter conceptual and legal model.

You should not have to work around something that is not in the way.

In other words, the computer is now the intermediary. There only way around it are workarounds. Articles by Koppel on CPOE and barcoding workarounds are other examples of how the health IT system is now the intermediary between clinician and patient, not the clinician as learned intermediary between IT and patient.

One might also ask - what is the cognitive impact of continually devoting intellectual power to create work arounds, which add to the already complex multi-tasking of clinicians? It likely is not a positive contributor to the best care.

These and many other issue contribute to the low diffusion of health IT in 2010. It is interesting that much of this was known to people in Medical Informatics (at least those without industry conflicts of interest) through in situ observation of health IT projects, going back many years, in fact decades with regards to the pioneers (as mentioned in my post "Healthcare IT: How Much More Out of Control Can An Industry Be?").

Finally:

The question should be asked: will health IT ever achieve the benefits claimed for it? Will it ever "revolutionize", or even make substantial contributions to medicine in a cost effective, non negatively-disruptive fashion?

Will we ever stop "doing it badly" (per Jha) and start consistently "doing it well" (per me?)

I am beginning to believe that health IT will never be successful without a major revolution in the IT field itself. Currently, its culture is one of cavalier practices regarding talent management, and it lacks a culture of safety.

In 1969, EMR and Medical Informatics pioneer Donald A. B. Lindberg, M.D., now Director of the U.S. National Library of Medicine at NIH, made the observation that

"... computer engineering experts per se have virtually no idea of the real problems of medical or even hospital practice, and furthermore have consistently underestimated the complexity of the problems…in no cases can [building appropriate clinical information systems] be done, simply because they have not been defined with the physician as the continuing major contributor and user of the information" (Lindberg DAB: Computer Failures and Successes, Southern Medical Bulletin 1969;57:18-21).

I believe the problem was -- and is -- not "computer engineering experts" but "business computing personnel."

First, there's the issue of the customs and traditions of business IT. As I've written before, these rigid traditions are antithetical to the poorly bounded, rapidly changing, improvisation-rich world of clinical medicine.

Second, the current status quo is highly profitable to the vendors, resulting in reactionary mindsets and conduct.

Third, there is a lack of appropriate intellectual capital in leadership roles in health IT. Medicine is a largely scientific field. Automation in the field is a highly scientific endeavor. Yet the field is dominated by business computing personnel (usually of a management information systems background), instead of true computer scientists and engineers, human factors scientists, safety and risk management experts, information scientists, and the like.

If my observations of who went into science/medicine/perhaps law vs. who went into business-related fields when I graduated high school and college are indicators, the very best scientific minds are poorly represented in healthcare IT leadership circles.

In summary, both observations of health IT and research on health IT show many stumbling blocks towards achieving major, unequivocal, reproducible benefit with a robustness that could support spending tens or hundreds of billions of dollars on the technology in ambitious national-scale implementations.

I fear that under the current culture of IT, achieving effective national health IT is Mission Impossible.

Your mission, Mr. Phelps, should you choose to accept it...

A vast body of new, critical thinking about the technology and its industry is needed.

Aug. 30 note: As a result of a rather underhanded complaint to the blog owner (not to me, curiously) that I am not providing answers to the problems I write about, that the blog owner informed me of without naming names ...

... his long screed ends with "national Health IT is mission impossible"... and while he says "new, critical thinking is needed", he doesn't say what that is. His next post is even more out there.

... I will add this:

I do not have all the answers (if I did, I'd sell them). This is a serious social problem. The best I can do, and have done, is point out what not to do - and even that has not had much of an effect despite ten years of public writing in numerous venues.

I do know that believing there's a major problem is the first and most important step to solving these vexing issues. We as a country and culture have not yet reached that point; irrational exuberance prevails. Thinking about health IT requires a reboot, but denial of the problems must stop before that can occur. I exert my efforts largely in an attempt to bring the health IT patient out of denial.

Final addendum 8/31:

On reconsideration, it's not as if I haven't offered advice on "what to do" as well; see for example my post "Science or Politics? The New England Journal and The 'Meaningful Use' Regulation for Electronic Health Records."

-- SS

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Making a Community Health Agency into the Leaders' Private Sand-Box

As we predicted, it seems that the US Internal Revenue Service's (IRS) increased reporting requirements for not-for-profit organizations are leading to more examples of the coziness now prevalent among the top leaders of such organizations. The latest entry in this new parade comes from a story in the Bradenton (Florida) Herald about a not-for-profit community health agency whose mission is to provide health care to the poor and disenfranchised:

Providing medical services to the indigent and uninsured in Manatee and Sarasota counties has financially benefitted some of Manatee County Rural Health Services Inc.’s officers, board members and their families, records show.

The nonprofit agency has paid nearly $2 million in recent years to businesses owned by board members, officers, employees or their relatives, according to tax documents obtained by the Bradenton Herald. And its chief executive officer, Walter “Mickey” Presha Sr., has long been the highest-paid CEO of any such agency in Florida: His salary last year was $433,000 — $140,000 more than that of his closest counterpart, records show.

The article listed multiple examples self-dealing by the top leaders of Rural Health Services.

According to tax returns filed since 2004, Rural Health has paid:

- $558,121 to John Lewis, a board member, for optometry services.

- $536,591 to The Pinnacle Group of West Coast Florida Inc. for construction, maintenance and repair work. One of its principals is Trina Presha-Rosier, Presha’s daughter.

- $344,766 to The Lawn Authority of Manatee County Inc. for lawn care maintenance at the agency’s facilities. Wardell Jackson, the agency’s vice president of support services, is a principal in the business.

- $387,673 to A to Z Complete Property Management Inc. for janitorial cleaning and maintenance services. It is owned by Chris Mullinex, the agency’s facilities director.

- $96,000 to R & L Healthcare Advisors, whose principals include Marc Lazarus, a board member, for consulting services.

- $44,242 to More Power Properties and Investments LLC, co-owned by board Chairman J. Garry Lowe, for storage of agency files and equipment and the purchase of a modular building.

Leaders of rural health offered mostly the usual explanations:

>>As long as we say it is not a conflict, it is not a conflict<<

According to a conflict of interest statement that board members are required to sign, Rural Health prohibits them, management and their families from having any 'beneficial interest or substantial obligation to' any entity engaged in business with the agency. But some have been able to bypass that prohibition because of this loophole: 'Unless it has been determined by the board, on the basis of full disclosure of facts, that such interest does not give rise to a conflict of interest.'

>>We, our relatives, and our firms are the best possible source of the services<<

Jackson, Mullinex and Presha-Rosier’s businesses won competitive bids, which are reviewed by a board committee and approved by the full board, Lazarus said. Presha said he is not involved in reviewing bids for construction projects that his daughter might seek.

The agency chose to do business with the three board members’ companies because of special circumstances, agency officials said.

Lewis is one of Manatee Rural Health’s founders and has overseen its optometry services since the beginning. Lowe offered the storage space for less than what commercial storage facilities charged, then sold one of the storage buildings to Manatee Rural Health for a reduced price. And Lazarus has 36 years’ experience in the health care field, including as an executive at Sarasota Memorial Hospital.

They were hired because they provide needed services at a lower cost, thus allowing the agency to spend more money on patient care, officials said.

>>Trust us, because we are wonderful people<<

'It’s always disclosed to the board, so we always have the opportunity to not do it,' said Juanine Lowery, a board member since 1984. 'It hasn’t been a problem. It’s always been competitive.'

And a slightly more coherent version of that:

'Everything’s checked out and vetted,' Lazarus said. 'The arrangements are as good as or better than what we could get on the open market.'

The explanation for the CEO's out-sized salary should come as no surprise. He got that high salary because

>>I am a wonderful CEO and I deserve it<<

Rural Health board members also defend Presha’s $433,000 salary, which makes him the highest-paid chief executive officer of any federally qualified community health center in Florida. His job performance, managerial skills and the organization’s complexity and size are all reasons he makes the top salary, board members say.

Of course, the CEO himself thinks he is a wonderful CEO and deserves it:

'I know what I do,' said Presha, who said he took a pay cut to take the Manatee Rural Health job in 1984 and has turned down job offers with higher salaries since then. 'If I could do it for free, I would do it for free. But I earn my keep.'

So here we have another case of the cozy leadership of a not-for-profit health care organization, who all think they are doing just a wonderful job, who never seem to question their own actions, and who all believe all their buddies are also doing just a wonderful job. So naturally, since they are all such wonderful people doing a wonderful job, we should not begrudge them a few dollars here and there.

Of course, if they were the leaders of a privately held company that made widgets, it would be their own money that they are spending, and maybe no on else should care.

Even if the amounts involved seem relatively small relative to some of the cases that appear on Health Care Renewal, we should care particularly about how the leaders of Manatee County Rural Health Care Services throw around money (to each other), because of the nature of the organization's mission, as described by CEO Presha himself:

MCRHS has served the poor and underserved in our communities with the mentality of a 'provider of choice.'

Our group is not only compassionate, but also innovative,....

It is truly unseemly for a not-for-profit community health care organization dedicated to serving "the poor and undeserved" lead by people so complacent about their own entitlement.

So to repeat what I have written before, in my humble opinion, this sort of coziness, this sort of fuzziness at the boundaries of institutional duties and personal interests, may be a fundamental reason that our current health care system has become so solicitous of the interests and prerogatives of its leaders, and so cold to the needs of patients and the values of professionals.

The need for more transparent, accountable leadership of health care who explicitly are subject to clear ethical rules was never more apparent.

Stay tuned as more and more cases like this appear....

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Where There's Smoke? ... A University President Who Simultaneously Lead a Failed Financial Company and a Tobacco Company Which Apologized for International Bribery

A long time ago, in 2006, we first blogged about a "new species of conflict of interest" which we thought might prove to be even more important than those afflicting health care that were then starting to be discussed. This involved health care organizational leaders who were simultaneously members of the boards of directors of for-profit health care corporations. We posited these conflicts would be particularly important because being on the board of directors entails not just a financial incentive. It ostensibly requires board members to "demonstrate unyielding loyalty to the company's shareholders" [Per Monks RAG, Minow N. Corporate Governance, 3rd edition. Malden, MA: Blackwell Publishing, 2004. P.200.] Thus, for example, the conflict posed by the president of a university, to whom a medical school and academic medical center report, who also is the director of a pharmaceutical company, would be extreme.

Since then, we noted yet another variant on this theme, university presidents who were supposedly the top leaders of failed financial firms, and then who did various dances to try to avoid accountability for these firms' fates. That theme recently made it to the big time, a front page article on the Sunday Business section of the New York Times.

The most extreme version was the case of that of Eugene Trani, the former President of Virginia Commonwealth University ( full disclosure: I spent 7 years on the faculty of its medical school, and am still an adjunct faculty member). Trani turned out to be on the board of a tobacco company, and soon after this was revealed, retired from the presidency (see most recent blog post here).

Now a Washington Post blogger has yet another twist on this case:

Eugene P. Trani left the presidency of Virginia Commonwealth University in 2009 after improving the school and expanding its presence in downtown Richmond. But Trani was also a director of LandAmerica Financial Group, a Richmond-area title insurer that went belly-up in 2008, taking with it millions in investors' money.

Today, Trani is on the board of Richmond-based Universal Corporation, a global tobacco marketer. Universal's subsidiaries have just agreed to pay $8.98 million in a tobacco bribery scandal that stretches from Brazil to Thailand to Africa. The firm has issued a public apology. Trani received $159,032 in total compensation for his board service.

So Trani was not only on the board of directors of a tobacco company, he was on the board of directors of a tobacco company that was forced to settle charges of international bribery and issue apologies for same, and just to ice the cake, was on the board of a failed financial company whose failure affected residents of the locality which his university served.

As the saying goes, "the fish rots from the head down." How can academic leaders expect integrity from their faculty when they willingly take on such grotesque conflicts? Leaders who thus try to serve two, or many masters are likely to run health care organizations that do not serve their primary constituents, patients who expect good care, learners who expect honest, competent teaching, and the public who expects important, unbiased research, well. If we really want to reform health care, we need leaders who put the mission, not their own pocketbooks, prestige, and cronies, first.

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How Oligopolists Rationalize Their Market Domination: the Examples of Sutter Health and the Carilion Clinic

Advocates of laissez faire commercialized health care often trumpet the advantages of competitive markets as a rationale for deregulation. While there are theoretic, and possibly empiric reasons to think that competitive markets are the optimal way to distribute goods and services, we recently discussed aspects of health care that make it extremely hard for health care markets to be ideally competitive.

Meanwhile, two news articles gave some case-based evidence about how current health care markets are hardly competitive.

Sutter Health

A Bloomberg article focused on Sutter Health in northern and central California. Sutter Health commands a substantial part of a very large market:

Sutter Health Co., the nonprofit that owns Sutter Davis, has market power that commands prices 40 to 70 percent higher than its rivals per typical procedure -- and pacts with insurers that keep those prices secret.

Sutter can charge these prices because it has acquired more than a third of the market in the San Francisco-to-Sacramento region through more than 20 hospital takeovers in the last 30 years, according to executives of Aetna Inc., Health Net Inc. and Blue Shield of California, who asked not to be named because their agreements with Sutter ban disclosure of prices.

Also,

Operating as a nonprofit, it has $8.8 billion in revenues, 24 hospitals, 17 outpatient surgery clinics and a 3,500-doctor network, making it the largest health-care provider in an 11- county region -- from San Francisco Bay to the Sierra Nevada mountains -- where 10 million people live.

Sutter has 35 percent of the revenue and 36 percent of beds that compete for patients in the region, according to a state hospital database, including 100 percent of beds the state tracks in Placer and Amador counties east of Sacramento.

Sutter care seems to cost a lot more than care from other doctors and hospitals:

After Mark Logsdon tore a ligament in his knee skiing at Lake Tahoe in March, he returned home to suburban Sacramento and had an MRI scan at Sutter Davis Hospital.

Sutter’s price for the knee scan was $1,271, payable by Logsdon and his insurer. Exactly the same MRI at one of the local imaging centers owned by Radiological Associates of Sacramento would have cost $696 -- 45 percent less.

A few other examples of Sutter's prices compared to others;

'Instead of leveraging its system to be more cost- effective, we’ve seen Sutter leveraging its system for monopoly pricing,' said Peter V. Lee, who in June became director of health-care delivery system reform for the U.S. Department of Health and Human Services. Lee was interviewed while he worked at the Pacific Business Group on Health, a coalition that includes Chevron Corp., Walt Disney Co., General Electric Co., and Wells Fargo & Co.

In San Francisco, Aetna pays Sutter’s California Pacific Medical Center in a range with a midpoint of $4,700 for an abdominal CT scan, compared to $3,200 at St. Francis Memorial Hospital, owned by Catholic Health Care West. For colonoscopies, Aetna’s midpoint price is $3,200 at Sutter’s flagship CPMC and $2,800 at St. Francis Memorial.

In Palo Alto, Aetna pays Sutter $349 per visit for new patients to see Manju Deshpande, a family doctor in Sutter’s Palo Alto Medical Foundation clinic. Three miles away, Paul Ford’s Stanford Medical Group receives $222. If the patient needs an immunization, Aetna pays Palo Alto Medical $85, and Stanford Medical, $16. Deshpande removes wax from the ear for $175. Ford scoops it out for $104.

Down the road in Silicon Valley, when obstetrician Sarah Azad, a solo practitioner, delivers a baby for a patient covered by Aetna, the insurer pays her $2,052. When Nicole Wilcox of Sutter’s Palo Alto Medical Foundation does the same job, Aetna pays Sutter $5,890.

The doctors practice blocks apart in Mountain View, California. Performance isn’t an issue -- Azad has Aetna’s top rating for quality of care and trained Wilcox during residency.

The Sutter CEO, of course, denies there is a problem:

Sutter operates in a competitive market, Chief Executive Officer Patrick Fry, 53, said in an interview. 'I don’t see Sutter Health as having market power, given the choices that employers can make,' Fry said. 'The market has a lot of room to make a lot of decisions.'

The people who most praise competitive markets often seem to be those who have done the most to reduce the competitiveness of these markets. The CEO also trotted out another old saw, that his organization has grown not to charge more, but to be more efficient.

While Sutter may have higher 'unit' prices than its competitors, Fry said, it is not the most costly for patients over the long run because its integration of hospitals and doctor groups allows it to provide more efficient care, cutting down on the number of procedures.

'Our mission isn’t to maximize profits,' Fry added. 'Our mission, to the extent we can, is to optimize services.' Insurers and patients have many alternatives to Sutter, according to Fry.

That is a tune would-be monopolists have been singing at least since the days of the "robber barons" and their monopolies such as Standard Oil.

Of course, he is likely to defend a system that makes so much money and pays him and his buddies in top management so much, (and, contrary to his statement above, seems to have maximized profits):

Sutter, with 48,000 employees, was among the most profitable hospital groups in the U.S. in 2009, with income of $697 million, up more than three-fold from 2008 due to large investment gains, on revenue that grew 6 percent to $8.8 billion.

Its 5.2 percent operating margin -- or operating income as a percentage of revenue -- was 73 percent higher than the median for all nonprofit hospital systems in 2009, according to Standard & Poor’s.

As of Dec. 31, Sutter had a $2.63 billion investment portfolio. Sutter paid Fry $2.8 million in 2008, according to its latest Internal Revenue Service filing. His top 14 lieutenants made between $830,000 and $1.8 million each.

The article on Sutter emphasized how the strategic use of secrecy has helped Sutter maintain its remunerative ways:

Sutter doesn’t allow its prices to be disclosed on insurers’ websites because it believes the information is often misleading and doesn’t reflect the variables of each patient’s case, [Sutter spokesman William] Gleeson said.

Of course, keeping prices secret just makes the market even less like an ideally competitive one:

As Sutter’s confidentiality terms show, the actual prices that hospitals receive are often kept secret by insurers. Patients in need of hospital care, especially in emergencies, often can’t travel very far, restricting competition. And if they have health insurance, they have little incentive to price shop.

Finally, the article reminds us that the latest fad from health policy and health management circles (which seem increasingly to overlap), "accountable care organizations," may just be a pretext for even more market consolidation:

The federal Patient Protection and Affordable Care Act is looking for $500 billion in savings over the next decade to help pay for extending coverage to 32 million uninsured Americans. Yet it doesn’t address the problem of market concentration -- and may make it worse, said Robert Berenson, a physician and policy analyst at the Urban Institute in Washington D.C.

The 'unchecked' clout of hospital and physician groups in California is a 'cautionary tale for national health reform,' Berenson said in a February article in the journal Health Affairs. He warned that incentives in the new legislation to improve treatment by promoting doctor-hospital alliances -- called 'accountable care organizations' -- could backfire by strengthening providers’ bargaining leverage.

Carilion Clinic
A Washington Post article discussed the example of Carilion Clinic in Virginia, whose increasing market power we had blogged about in 2008:

Railroads put this city on the map, but the king of the domain is now health care -- or rather, the Carilion Clinic.

Carilion owns the two hospitals in town and six others in the region, employs 550 doctors and has set off a bitter local debate: Is its dominance a new model for health care or a blatant attempt to corner the market?

The Carilion story emphasized again how the "accountable care organization" meme is being used to justify market consolidation, allowing health care oligopolies to appear politically correct:

Carilion says it represents an ideal envisioned by the nation's new health-care law: a network that increases efficiency by bringing more doctors and hospitals onto one team, integrating care from the doctor's office to the operating room. The name for such networks, which the new law strongly promotes with pilot programs, is accountable care organizations, or ACOs -- providers joining together to be 'accountable' for the total care of patients, with incentives from insurers to keep people healthy and costs down.

Note that this political correctness is also used to justify further consolidation of power by limiting outside referrals:

Independent doctors say Carilion is urging its employees to refer patients only to providers within the Carilion network, cloaking its expansion in the lingo of health-care reform.

Of course, the Carilion CEO also denies anything but the most altruistic intent, but he too is making a lot of money from the current system:

[Edward] Murphy, Carilion's chief executive who earned $2.3 million in 2008, acknowledges that providers holding excessive leverage over insurers is cause for concern but argues that ACOs can be a corrective.

Summary

We noted earlier this week that multiple kinds of uncertainty (e.g., about diagnosis, prognosis, and the effects of treatment), and information asymmetry make it theoretically difficult for the health care market to be truly competitive. Meanwhile, there is increasing evidence that the market is actually uncompetitive. Although there are many hospitals and health insurers across the US, in many areas there are very few insurers and very few hospitals or hospital systems from which to choose. We have previously blogged about how market dominant hospital systems seem to be able to charge more than any others.

In the 1960s, it became recognized that physicians' professionalism, hospitals' devotion to their missions, and sometimes even (gasp) government regulation might partially compensate for distortions in the health care market. However, as supposed free market advocates became more powerful, they pushed for the commercialization of medicine and hospitals, reducing professionalism and mission support, and the hollowing out government regulation. (However, why did the people who attacked medical societies' codes of ethics as monopolistic have no interest in attacking market domination by insurers or hospital systems? Inquiring minds want to know.)

As we said last time, true health care reform would help physicians and other health care professionals uphold their traditional values, including, as the AMA once stated, "the practice of medicine should not be commercialized, nor treated as a commodity in trade." True health care reform would put health care "delivery" back in the hands of mission-focused, not-for-profit organizations, which put patients' health, safety and welfare first.

Meanwhile, these latest stories about market dominating hospital systems suggest some additional lessons.

Secrecy is the would-be monopolist's best friend. However, it is hard to think of very many kinds of information that hospitals really ought to be able to keep as proprietary secrets. As usual, sunshine is the best disinfectant.

There seems to be a strange and increasing alliance between politically- correct academic theorists and proponents of raw economic power. The theorists' notion of "accountable care organizations" seems to have become a great foil for would-be monopolists, yet the theorists have done nothing to show how their creation would really bring "power to the people." Meanwhile, maybe "ACO" should stand for "aggressive care oligopoly." Meanwhile, be extremely skeptical of the latest health care fad, especially when it is supported both by academics and CEOs.

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