Medicynic

In olden days practitioners of alchemy claimed they had “the capability of turning base metals into the noble metals gold or silver“.”  In the modern day drug manufacturers have actually achieved this goal.  They have become one of the most profitable industries with margins that even Apple would envy.  Imagine charging over $100,000 for a few milligrams of a product that works for just  a few months—if at all.  (With a few exceptions but that’s another story)

I’m not criticizing the fact that pharmaceutical manufacturers want to help with such problems but rather that they expect unrealistic, unsustainable profits from the endeavor.  They claim that their wildly inflated cost structure is the reason.  But one can counterclaim that they have long gamed the costs by over-paying each step of the way in the drug’s development and marketing based on high profit hopes.  They are inefficient.

It’s a flaw in the “not so free” health market that once a drug is developed manufacturers have a monopoly for a generation and can hype  and overcharge for the drug as much as they want.  They take advantage of the sickest most desperate of our patients by heavily marketing marginally effective product.

It’s not surprising then that other people want in and that counterfeit very expensive drugs are showing up.

In Whatcom County, Washington, as in other smaller more rural venues,  there is one dominant healthcare provider. 

PeaceHealth describes itself:

We carry on the healing mission of Jesus Christ by promoting personal and community health, relieving pain and suffering, and treating each person in a loving and caring way.

At PeaceHealth, the fulfillment of our Mission is our shared purpose. It drives all that we are and all that we do. To those who embrace the spirit of these words and our commitment to Exceptional Medicine and Compassionate Care, we offer the opportunity to learn and grow as a member of the PeaceHealth family.

Sounds great and I certainly don’t doubt the dedication of individuals in the PeaceHealth System, but, always a but, it has become a near monopoly. 

In the early 90’s Peacehealth bought out the only other hospital in the county and  has been the only show in town for hospitalized care.  It has had a strategy to dominate the health care in the county.  At present they account for over 60% of medical billings (probably higher).  They completely own the radiology, pathology, pediatrics,  oncology (both radiation therapy and medical oncology) and for the most part internal medicine services for our region.  They recently purchased the dominant cardiology practice in Northwest Washington as well.  

Shopping for care  in the county is impractical as the nearest alternative facility is between 45 minutes and two hours away (depending on where you live in the county).

PeaceHealth  maintains it is doing community service by owning these medical facilities and certainly one cannot complain about the quality of care offered.  It appears to be quite acceptable. 

Peacehealth though appears to be doing well, while doing “good,”   As monopolists will do, Peace Health has taken advantage of their control of services to keep costs high and raise them whenever they can.  For example, after purchasing the medical oncology service in town the hospital moved the outpatient infusion center into the hospital proper.  Patients reported a significant  increase in their billings.  Similarly with the completion of the purchase of the county’s dominant cardiology provider, many interventions that were previously done outside the hospital were moved into that facility resulting in a dramatic increase in costs. 

Medicynical Note:  PeaceHealth is a quality provider but a high cost one.  It’s  practices are not unique as noted in this recent article by Uwe Reinhardt.  (“To a man with a hammer, everything looks like a nail.”—even to a “non profit” hospital system)

In December of 2010, the American Health Insurance Plans (AHIP), the national association of private health insurers, published an eye-opening report on the actual prices private insurers paid to hospitals in California and Oregon (American Health Insurance Plans, 2010). Figures 7 and 8 are based on the data in that report. 

That hospitals in Oregon were able to raise their prices thus in a period when the US economy was sliding into the deepest recession since the Great Depression in the 1930s is astounding and raises the question why private insurers accepted these price hikes. (Reinhardt, 2011b). 

One theory is the one advanced in this paper and elsewhere (Reinhardt, 2011b), namely that in most market areas in the USA, private health insurers have relatively less bargaining power than do hospitals or the larger physician groups. The alternative theory, highly popular among insurers, hospitals, and employers, is that government is the culprit behind the high prices paid by private health insurers (Dobson, 2006). This ‘cost-shift theory’ holds that whenever government insurance programs reduce the ‘reimbursement’ rates (i.e. prices) they pay the providers of care, hospitals shift any shortfall of public ‘reimbursement’ from their cost of treating publicly insured patients (Medicare or Medicaid beneficiaries) to private payers who are made to cover the short fall by being charged higher  prices in effect,that the government is indirectly raising taxes on the private sector (Gelfand, 2010). It is assumed to be so even for physicians. Of course, the logical extension of the theory is that large private insurers with more bargaining power also shift costs to smaller insurers with less market clout and to middle-class uninsured Americans who, as noted, often are charged the highest prices.

The “private”market has it’s flaws.  Companies at every level compete to gain market dominance, and when they have achieved their goal they take advantage.  Guess who pays?

Nice review of an article in the Journal of General Internal Medicine at the Incidental Economist.  The article documents delays in care by people with chronic illness and high deductible coverage. 

It was pointed out:

  that people aren’t very good at discriminating between necessary and unnecessary care. This is fine if you’re healthy, when pretty much all care is unnecessary. If you’re sick, though, then across the board care cuts can be bad.

And they found:

More than a quarter of adults had delayed or went without care because of cost. Adults were specifically more likely to delay or forego acute care visits, chronic care visits, checkups, and tests.

There were similar findings for care in children whose families had this type coverage.  The delays were particularly noted in those below 400% of the poverty line. 

Medicynical Note:  I’ve previously expressed reservations regarding high deductible insurance  and Health Savings Accounts.    

For those at or below the median wage, high out of pocket expenses influence whether or not to seek care—a form of implicit financial rationing.  In this setting the least knowledgeable, most emotionally involved get to decide whether or not to go for expensive interventions  for which they will have to pay. 

This might work if our costs were affordable, but they’re not.