Is Bigger Better?

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Commentary – July 2011

Tex Med. 2011;107(7):5-6. 

Is Bigger Better?   

By Louis J. Goodman, PhD, and Timothy B. Norbeck    

Who would deny that health care is big business? It is also the most personal of all human endeavors. Why then does the federal government appear to be in such a rush to depersonalize our medical care? 

"Bending the cost curve" seems to be the driving force behind the recent health care reform, especially in light of the fact that national health expenditures have doubled over the past decade from $1.3 trillion in 2000 to $2.6 trillion in 2010. And the Affordable Care Act rewards hospital systems at the expense of small and solo, personally-oriented medical practices, under the mistaken theory that bigger systems are, or can be, more cost-effective. 

Where was the voice of two of the most important constituencies in these discussions: patients and practicing physicians? The answer: Their voices didn't matter to the reformers. There was a time when physicians and their patients worked together to determine what was best for the patient. Such participation has been ceded to the federal government. 

The question of size may well be the most important aspect of the congressional overhaul. More than 80 percent of personal medical care services are provided in the doctor's office, and less than 20 percent of services are provided in the hospital. 

Why should health care delivery remain in the doctor's office? Because it is the most cost-effective setting to receive health services. Medicare says the average visit to the doctor's office costs $61, compared with the cost of an average visit to the hospital of $10,908. 

Why then is Congress pushing as many services as possible to the hospital through consolidation, merger, acquisition, and shared savings programs?  If the hospital is the most expensive place to provide care and the physician's office is the most cost-effective place to receive care, why has Congress moved care away from the doctor's office and into a hospital waiting room? 

The answer appears quite evident: Congress and the Executive Branch believe that a Canadian-style single payer system is where health system reform will rapidly evolve our current system. Here is the evidence. 

First, the government's share of our national health care bill, which was 44 percent in 2000, was projected to be 50 percent in 2010. Or more aptly stated, the government's share of national health care expenditures has doubled over the past decade, from $596 billion in 2000 to $1.3 trillion in 2010. 

Second, hospital systems are getting bigger and in many markets, they exercise monopoly power. For example, the Texas attorney general filed suit against a large Houston-based health care system alleging violation of state antitrust statutes by unreasonably restraining competition among acute-care in-patient hospitals. 

Third, physician practices are evolving from predominantly solo practice to four- or five-doctor groups to remain economically viable. Large hospital systems are rapidly gobbling up small hospitals, and large health insurers are purchasing small insurers, further eroding what little competitiveness remains in the market. 

The consolidation of the American health care system is following the path of banking, telecom, and, most recently, the American automobile industry. The health system reform law in many ways is modeled after the Canadian national health system, with centralized government planning power as the dominant feature. But similarities between the United States and Canada stop there. Most physicians in Canada are private practitioners, and while this is still the case here, powerful and economically driven systems are gathering up and purchasing physician practices outright with the goal of gaining as much market share as possible. Their thinking is that the new accountable care organizations will provide a safe harbor from federal antitrust enforcement. Thus, the bigger the system, the more market dominance it would command. It is all about control, and, unfortunately, practicing physicians and patients don't have any! 

After a short period of predatory practices, monopolistic dominance will result in higher prices, less service, and arbitrary control over patient waiting times. And sooner than later only a few big hospital systems and health insurance companies will remain. 

Voila! Then the federal government will proclaim that there is no competition in the health care marketplace and therefore the government must intervene and create a national health service modeled after Canada.  Economist Milton Friedman's comment about the inefficacy of government resonates today. If you put the federal government in charge of the Sahara Desert, he said, in five years there would be a shortage of sand. And so it will be with health care. 

To move forward, physicians and patients must become part of the dialogue. Decisions cannot simply be made by large health systems and the federal government. A more constructive discussion is needed, or patients (and we are all patients eventually) will incur long waiting lines, rationing of care, and higher taxes. 

Dr. Goodman is the executive vice president and chief executive officer of the Texas Medical Association and president of the Physicians Foundation. Mr. Norbeck is chief executive officer of the Physicians Foundation.

Created by the settlement of organized medicine's class action lawsuit against for-profit HMO abuses, the Physicians Foundation is a nonprofit 501(c)(3) organization that seeks to advance the work of practicing physicians and to improve the quality of health care for all Americans. It pursues its mission through a variety of activities including grant making, research, and policy studies. Since 2005, the foundation has awarded numerous multiyear grants. Additional information about the foundation is available online at .

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