An interesting recent editorial in the New England Journal of Medicine asks that doctors be explicit about what they will support and what they won’t. In particular, would we agree to pay cuts? The essay points out that, at least early in the process, drug companies, insurance companies, device manufacturers, and hospitals all agreed to some limitation on their income. (If they still would, of course, is another question.) But doctors have made no such pledge. In fact, as a group, we’ve demanded more of the healthcare pie. Is that fair?
I don’t think it is fair. To me, the biggest problem with physician salaries is that they are so spread out from lowest to highest in a manner that doesn’t really reflect training or expertise — the variance primarily reflects custom. My own family’s experience with medicine spans well over a century, with my grandfather graduating from medical school in 1903 and my father in 1944. Some doctors have always made more money than other doctors, either from being busier or from getting more training. Surgeons and other doctors who do procedures have always made more than those who don’t do these things, but the huge variance in physician salaries we have seen emerge in the past several decades is a new phenomenon. To me it parallels the huge (and recent) disparities we see between what a CEO gets paid and what an the average employee gets paid. Things have gotten out of balance.
If you want to learn more about how medical practice, including how it is paid for, emerged in the last century, there is no better book about it than The Social Transformation of American Medicine, by Paul Starr. The book won a Pulitzer Prize in 1984. And if you’re wondering: yes, I’d give up some salary to get healthcare reform, so long as everybody else would, too. It’s only fair.
Ground zero for many of the medical care debates today is the large, urban hospital — places such as Beth Israel Deaconess hospital in Boston. Even though it is one of the flagship hospitals of Harvard, it struggles along with all urban hospitals to balance its books every year and still carry out its mission. What makes Beth Israel interesting for anyone following the healthcare debates is that its President and CEO, Paul Levy, writes a blog called Running a Hospital. In it he is quite forthright, as when he wrote frankly about an egregious medical error.
What makes Levy’s blog unusual in the medical blogosphere, besides the stature of its author, is that he writes under his own name — most bloggers don’t, although a moderate amount of sleuthing can sometimes identify who they are.
Anyway, Levy recently laid out for anyone interested the nuts and bolts of how a major urban hospital plans its budget. It makes for pretty sobering reading. Long ago most large hospitals were charity operations, with physicians donating their time but patients having little or no say in what kind of treatment they got. These days hospitals, even the non-profit ones, are often urged to be run more like a business.
One of the fundamental differences between most businesses and a hospital, however, is that although hospitals have some control over the cost of the service they provide, they have little or no control over what they get paid to provide the service. It puts them in a severe squeeze when costs rise but reimbursement does not — they must find other sources of revenue to bridge the gap, and their options to do that are limited. (It turns out that philanthropy gives the best return on investment, about 16:1.) Levy’s blog gives you an insider’s close-up view of how a huge hospital like Beth Israel (1.2 billion in annual revenues) juggles these competing demands.
My own view? Healthcare is not a widget, a commodity. It’s a basic human need. It doesn’t follow the usual rules of the marketplace, and it shouldn’t.