First National Conference on Primary Health Care Access (3rd Plenary Panel, Part 1, Sundwall)

Last Updated on April 16, 2022 by Lee Burnett, DO, FAAFP

The archiving and publishing of the  proceedings of the third and fourth plenary sessions of the First National Conference on Primary Health Care Access (April 20 and 21, 1990) is made possible, in part, through the generous support of the San Joaquin General Hospital Department of Family Medicine (Stockton and French Camp, California):



John Midtling, MD, Chair, Department of Family Medicine, Medical College of Wisconsin (Dr Midtling is a Senior Fellow of the Coastal Research Group): This session is entitled, “The Impact of Changing Reimbursement on Our Ability to Manage Access to Primary Care.”

Our lead presenter is David Sundwall, who is Medical Director of American Health Care Systems Institute and former Administrator of Health Resources and Services Administration, Department of Health and Human Services.  The panelists are Jerry Rodos, Consultant to the Director of the National Health Service Corps and Special Assistant to the President of the Chicago College of Osteopathic Medicine; myself; and Greg Nycz who is Director of the Wisconsin Rural Health Research Center in Marshfield, Wisconsin.



David N. Sundwall MD, MPH, Medical Director, American Health Care Systems Institute, Washington, DC

David N. Sundwall, MD, MPH, Medical Director, American Health Care Systems Institute (Dr Sundwall is a Senior Fellow of the Coastal Research Group): I have been asked to be funny.  It’s pretty hard to be funny talking about federal health policy, but I’ll start with a true story.  This was very painful but it was forever humbling and was one of the best experiences I have ever had in my life to let me understand the relative importance of federal health policy.

After I had been in the Senate about a year and thought I was really important – the Health Staff Director of the Labor and Human Resources Committee with all these important responsibilities – I was invited to speak to the Wyoming State Medical Society.  They had a wonderful conference at Jackson Hole.

The speaker proceeding me was a pathologist from UCLA who spoke about the Shroud of Turin. He showed ultrasounds and X-rays of the actual cloth.  He had us captivated and in the palm of his hand.  Everyone, including myself, was enthralled with his presentation.  I wasn’t quite convinced of the significance, but he essentially said yes this is the cloth that Christ was wrapped in.

Anyway, after he finished, and they introduced me, 75% of the audience got up and walked out.  I’m not kidding, at least 75%.  Talk about putting me in my place. I never again presumed that people were waiting with baited breath to hear what was new from Washington.

However, you’re a captive audience and if you get up and drift out, I won’t hold it against you – I’ll just leave when you talk.

I am very pleased to be here and honored to be with such a distinguished faculty.  As all good speech teachers tell you, you’re supposed to tell the audience what you’re going to tell them, tell them, and then tell them what you told them.

So what I am going to try to do tonight, at the recommendation of John Midtling, is to give first of all an overview – a snapshot of federal health policy – before we talk about physician reimbursement reform.  Then I am going to give you some personal predictions about what’s coming in the next decade.  (I couldn’t agree more with David Schmidt that we’re not likely to have major national health reform very soon.)

To understand what we’re doing now, you really do have to step back and look at where we have been.  When I walk to the “hill,” and I do often, along Pennsylvania Avenue there’s engraved in the Archives Building a statement that says something to the effect that “The Past is Prologue”.  Well, I can guarantee you from what I see in Washington, that is not true in health care, because we’re going to be charting new territory.

We’re kind of learning as we go along.  And one way to understand this a little bit better is to appreciate that the federal government’s role in health care is a relatively recent phenomenon.

The History of the Federal Role in Health Care

Concurrent with my going to Washington in 1981, I agreed to write a chapter for Dr Bob Rakel’s Family Practice textbook on the federal government’s role in health care.  It forced me to do some homework – to go to the Library of Medicine and look up past articles.

I determined that there have been four eras of the federal government’s role in health.  I decided the first era was from 1789 to 1900.  That era began when Congress first convened in Philadelphia. While they did say there was a proper role for the federal government in health, it was limited to maintaining the health of merchant seamen.  And to do that they built maritime hospitals in seaports.  That’s about all they said about health.

For over a century, that’s pretty much all they did, with the exception of feeble quarantine efforts and trying their best to contain massive epidemics.  To let you know how ineffective they were, it’s estimated that in the 1860’s in the Ohio River Valley alone, between 20,000 and 100,000 people died of yellow fever. That’s a pretty broad estimate.  It shows you that they didn’t have a CDC or any effective epidemiological methods.  But on the heels of that epidemic, they did create the Commissioned Corps.

The second era I said was from 1900 to World War II.  At the close of the 1800’s there was finally enough “science” in medicine to actually help people.  With an understanding of disease transmission through germs, the importance of antisepsis and the development of effective anesthesia, physicians for the first time had tools which were effective in preventing illness and saving lives.

But in this era, it was not improvement in clinical practice which were so important, but laws passed giving the federal government responsibilities as a regulator of air, water, food, drugs and biologics.  As we all know, basic sanitation measures done at the local level with federal guidance and support have done more to improve our health than anything we have done since and remain the most effective means to improved longevity.

My description of this is a very broad brushstroke, as I am skipping over the creating of VA system after World War I, and very serious efforts to regulate a national health system.  When the Social Security Administration was formed in the 1930’s, national health almost made it, with schoolteachers being the most vocal proponents.  But it didn’t succeed.

The third era I wrote about in this chapter was from World War II to 1965.  I categorized this period by an explosion of medical science and information and the government taking the lead in two areas – research and hospital construction.  This was when our National Institutes of Health underwent multiple births and became the greatest biomedical research effort anywhere in the world.

The rationale was that basic science research would never be funded in the private sector, because there was no apparent immediate payback.  Consequently, it was perceived as a proper role for the federal government.  I think that was a very wise decision.

Congress also determined after World War II that the federal government should improve the nation’s hospitals (it was, I think, primarily a labor and employment issue).  With Hill-Burton Act loans, they provided the catalyst to build a greatly expanded hospital intrastructure in this country.  They also got involved with health manpower concerns in the early 1960’s and began providing funds for education.

The fourth era commenced in 1965, and when I wrote the chapter, I believed it extended to the “present” which was then 1980.  I categorized this period as multi-specialty medicine, with the government for the first time becoming a major payor, or purchaser, of health care.  Medicare and Medicaid were enacted in 1965 and were intended to pay for health care for certain sectors of our population.  So it was the year I went to medical school that the federal government got into “health care” for the first time in a major way.

Before that, their total expenditure was a few billion dollars.  So, it’s only been in my adult lifetime that our national government has been significantly involved in health care.  But if I had done my homework more carefully, I would have realized we have already entered a fifth era which began sometime in the 1970’s.

I can’t determine just when it began because there was no landmark legislation.  When Medicare and Medicaid were passed, for some reason it seemed as though it was now O.K. for the national government to start addressing lots of specific health problems.  Social activists succeeded in obtaining federal funds for “neighborhood clinics”, which became a large network of community health centers.

The National Health Service Corps was established.  There were more training grants in primary care, and there were dozens and dozens of good ideas that legislators translated into legislation – categorical grant programs to deal with rodent control, lead poisoning, emergency medical services, etc.  These projects seemed to be good vote getters.  It was the time when there was lots of good health legislation (if you think “good” means that there are federal efforts to address several social concerns).

“Cost Containment” as a Federal Policy Imperative

But it was not too long into the 1970’s that you didn’t see much of that any more.  In fact, by the mid-’70’s the focus of Congress and the administration was not on addressing health programs, but on reining in costs.  I categorize this new fifth era as high-tech medicine having outstripped our capacity to pay for what we’re theoretically capable of doing.

Paul Starr’s “Social Transformation of Medicine”

Much to my pleasure, after I prepared my chapter of Paul Starr’s book, “The Social Transformation of Medicine,” he suggests similar eras, and he also said we were in a protracted period of cost containment and retrenchment at the federal level.

So, where are we today?  We have heard our speakers this morning talk about the unhappiness with our system.  I am going to quote a few things to emphasize that.  The AMA News had a cover earlier this year that I thought was accurately illustrative of the physicians perspective of the 1980’s.  It shows the reflection of a doctor in a shattered mirror and it was titled “The Decade of the 80’s in Medicine.”

Discontent with the Present Health Care System

Without having to read what’s in between the pages, you know that organized medicine is very unhappy about the current state of affairs.

Dan Callahan’s new book – “What Kind of Life?” –  was referred to earlier this morning.I particularly liked the introduction of the New York Times review of that book. It says this:

“These are the best of times for American health care.  They are also the worst of times. Most of us will live to attain the biblical three score and ten.  Many of us will avoid the pain and incapacity that would have bested the long-lived a century ago.

Daniel Callahan’s What Kind of Life?

“Medicine’s technological capacity has never been more impressive and our society has shown itself willing to pay an ever-increasing amount for the promise of health and long life.  No other industrialized society allocates so much of its gross national product to health.

Yet, we Americans feel cheated, dissatisfied with many aspects of a system that has promised so much.  Certainly, we are unwilling and perhaps unable to bear its ever more burdensome cost.  There is a broad consensus that something should and must be changed.”

Well, there is no shortage of ideas.  We have an increasing array of proposals on how to fix things.  I would like to review some of them for you.

Before I review the specific proposals, let me make a few points.  While all here are well aware of the unacceptable high cost of health care in the U.S., I just want to emphasize the current state of affairs with the budget.

Try to imagine you are an elected official and dealing with the current economic climate and a president who is very, very popular (I guess the last poll was one of the highest popularity polls ever – 82% approval in one poll) who says “no new taxes.”  They’re really in a quandary.  But, let’s just look at these slides.

The first slide (Figure 1) illustrates health care costs for the nation over the recent past, with projections for the future.  It was prepared by Senator Kennedy’s staff in 1984.  I was working as a professional staff member.  Senator Kennedy is famous for having hard-working and capable staff, and they used this data for hearing on the cost of health care.

At the time, I frankly disbelieved the projections. Senator Kennedy, in his own inimitable way, with a deep sonorous voice, said that if we keep spending at the rate we had, we’re going to be spending by 1990 three-quarters of a trillion dollars.  That seemed ludicrous to me because when I went to Washington in 1981, the entire federal budget was three-quarters of a trillion dollars.  It just seemed impossible.

However, we saw this morning data which illustrates we’re just about on Senator Kennedy’s target.  Even more scary is the projection that by the year 2000, if spending stays at the level of increase it is, we will be spending one-half trillion dollars for health care alone.

It reminds me of a joke.  In the New Yorker, there were two doddering old Congressmen walking down the Capitol steps.  One turned over tot he other and said, “You know I’m not going to run again next term because I don’t know what comes after a trillion.”  I think most of us also are boggled by these extraordinary expenditures.

The second slide (Figure 2) is just another way of illustrating health expenditures, but as a percentage of Gross National Product (GNP).  We’ve all heard arguments – “So what?  Why don’t we keep spending whatever it takes?  Health care is a good thing to invest in.”  But when it’s in competition with so many other important federal agendas, it doesn’t wash well with the voters.

I also used to say why not?  It employs lots of people.  It’s a non-polluting industry.  But now it seems that our hospitals – at least their refuse – are a legitimate target of environmental concerns.

Slide 3  illustrates the governments share of spending. The federal government’s concern is understandable when you understand these projections. If we are going to be spending half a trillion for “health” and the government’s share is 40%, then with a budget deficit they’ve got to restrain this growth. It would be irresponsible not to.

But what I really want you to note is the percentage of increases. From 1965 to 1988, it has increased about 3000 percent.

A health economist named Lynn Ethridge who worked for Presdient Carter in the Office of Mobilization and Budget (OMB) said at a recent meeting that if we had convened in 1965 the world’s greatest minds in business, and charged them to create something that would be a growth industry, they couldn’t possibly have come up with anything better than the catalyst that Medicare and Medicaid were to stimulate the “health care industry”.

When the government assumed a major role as a purchaser of health care services for the elderly and the poor, few expected it would be so costly.

The increases caught everyone by surprise in the 1970s.  For example, when the End Stage Renal Disease Program (ESRD) was started, it was projected to cost $200 million. In fact, in less than ten years it was $2 billion, and continues to grow as we continue to dialyze more and more older people.

Slide 4 (Figure 3) compares us with other industrialized nations.  Those horizontal bars are countries, the United States at the top and Turkey at the bottom.  We spend more of our gross expenditures, and more per person, for health care than any other country by far, yet we all know that we don’t rank very well on commonly used health measures.

As an aside, I want to take issue with the infant mortality statistics that David Schmidt showed this morning.  I had a chance to serve on the National Commission to Prevent Infant Mortality, representing Secretary Bowan, from 1986-1988.  I learned that there is a lot more to be considered than nationally comparative data.

For example, Minnesota and Sweden are not very different in population, mix and size, and Minnesota has better infant mortality statistics than Sweden, the reason being that we do a better job at saving the very low birth rate babies with our high-tech neonatal units.  It seems patently unfair that we measure the United States with countries that are much smaller and much more homogeneous.

Those kinds of gross comparisons that we often banter about aren’t altogether accurate nor fair.  (I’m not saying that we can’t do a much better job, and the population-specific differences shouldn’t be improved.  Black infant mortality in the U.S. Is clearly a disgrace.)

O.K.  So, this is the climate we’re working with.  We’re spending more than everybody else; we seem to be getting less value for our money, or at least that’s the perception; costs are out of control; access is limited for fully 30 million to 60 million (I hear such different figures; people say the census will double those who are estimated to be without insurance).  And the quality of what we do provide is seriously under question.

Serious analysts from the Rand Corporation, led by Dr. Brooks, claim that much of what we do isn’t useful, isn’t helpful, and is unnecessary, if not harmful.  That kind of scrutiny in what we do in the name of modern medicine is painful, but is understandable and appropriate, given economic concerns.

Now, one observation I have made of “Washington policy” is that part of the mess we’re in is because our policy makers for two decades have focused almost exclusively on financing of care and they’ve let so many other things essential in public health efforts slide.  The reasons for this focus is understandable, given that those who benefit from the financing are clearly the most vocal lobbyists.

The providers, meaning doctors, hospitals, pharmaceuticals, medical devices, many more who are employed in our “medical-industrial complex,” are in a position to benefit from attention being paid to the financing.

Unfortunately, the poor and the disadvantaged don’t have a very effective lobby.  The other observation I have made is that we have, in fact, “medicalized” or made part of the health care system things which really are not traditional health concerns.

And I don’t mean to say they aren’t eventually a health problem, but if you look at the big ticket items we’re dealing with, many are the result of social-behavioral problems.

Alcohol abuse and dependence is far and away the biggest problem statistically and cost-wise for the country.  Perhaps second is tobacco use.  Other costly social problems are drug abuse, sexually transmitted diseases, (the cost of care for uninsured AIDS patients being the most pressing of these), injuries, premature births, and infant mortality.  All of those are theoretically preventable, saving the costs of medical treatment.  But we’ve medicalized them and put them on the shoulders of the health care system.

The last issue I’ll mention before talking about specific health care reform proposals is malpractice.  I also think it’s patently unfair to compare our country’s costs of health care to other countries when they don’t have anything similar to our system of seeking redress form malpractice, substandard care and, in many cases, “disappointments” in the outcome of medical intervention.

The total costs are unclear, but it is enormous.  Former HEW Secretary Joseph Calafano used to state about $35 billion, or 25% of the total costs.  My former boss, Senator Orrin Hatch of Utah, has been a champion of malpractice reform and thinks it exceeds 30%, when all factors are considered.

The AMA states $18 billion is spent for defensive medicine alone, and that doesn’t include the costs of payments for injuries or litigation.  Anyhow, it’s “real money” no matter how you count it.  And other countries don’t have anything resembling our tort system, and, thus, don’t spend extraordinary sums on related issues.

So where are we?  We’re at the point in time where there is so much dissatisfaction that all kinds of good ideas have been put forth to reform U.S. health care. The American Public Health Association has prepared a comparative chart listing many of the proposals for health care reform, and then plotted them out to see how they address their against their association’s principles for reform.

The one they like the best is the most politically unfeasible legislation introduced by Congressman Roybal.  His bill essentially federalized health care for all citizens.  It must sound great on the speaking circuit, but cost estimates indicate it would add tens of billions to the federal outlays, so it’s not taken seriously.

There are other serious proposals – the Consumer Choice for Health Plan for the 1990’s by Enthoven; the Progressive Proposal for National Medical Policy; the U.S. Health Service Act (another free, comprehensive health program); and the Basic Health Benefits for all Americans (the Kennedy-Waxman proposal) which as received a lot of attention.

The latter may, in fact, have the most promise; however, again their costs estimates are around $60 billion when done by independent analysis.  Their cost estimate is only about $30 billion.

Health Care for the Nation is the proposal of the National Leadership Commission on Health Care, a private sector coalition with former presidents Nixon, Carter and Ford serving as honorary chairmen, but actually chaired by former Congressman Paul Rodgers and Governor Raye of Iowa. This has limited federal involvement and this proposal would put more responsibility on states.

Other proposals include Health Access to America from the American Medical Association (which is endorsed by the American Academy of Family Physicians) and a call for comprehensive national reform from the American College of Physicians.

Then there’s the Pepper Commission.  In fact, this year has been called “the year of the commissions” because we have three major high-level groups meeting, all charged to come up with the right answer.  The Pepper Commission was the first out of the blocks with their report.  It’s bipartisan, and  includes people from the private sector.  It is comprehensive, compassionate, and very well thought out.

However, in my opinion, it focused too much on coverage and financing, not on what’s immediately wrong with the health care system.  Regardless, this proposal was put on the back burner because they didn’t come up with any mechanism to pay for it  The costs are about $66 billion for the federal government, about $20 billion for the private sector (for employers) and those costs were so great that it has not yet received serious consideration.  However, I expect elements of their recommendations to keep surfacing and eventually be adopted.

When President Bush spoke in the “State of the Union,” he mentioned health.  You don’t understand how important that is until you realize that it was not mentioned during several recent “States of the Union.”  But he did mention health and his chief health advisor on the campaign trail, was Debbie Steeleman now chairs the Quadrennial Social Security Commission.

This group is also charged to look at the future of health care in the nation and make recommendations.  The President said he was concerned about cost, access, and quality and he was going “to do something” about the costs.  That was interesting.  He didn’t say he was going to do something about access or quality.

However, he subsequently directed Secretary Sullivan to come up with a plan to cover the uninsured.  The chairman of that group is his HHS Undersecretary, Constance Horner, and she is now working with the help of Gail Wilenski, Administrator of the Health Care Financing Administration (HCFA).  Their proposal is due next January.

The Steeleman Commission isn’t due until next year, but I have an “inside source” who sits on that Commission who told me what they’re considering.  I think this is promising because if, in fact, that group can come to agreement on the five elements my friend tells me have been discussed, and the President makes it part of a legislative proposal, something constructive might happen.

The most exciting to me is the possibility of dealing with the access issue by federalizing Medicaid.  I think that’s long overdue.  I believe the state-by-state variation in Medicaid simply shouldn’t exist.  Poverty is the same in Utah or Mississippi or Alabama or New York and I think there ought to be a national standard, and that services provided should be determined on the federal level.

Long-term care would be dealt with by creating incentives for a  private insurance market.  As I understand it, they believe that if the risks were shared broadly, long term care could be paid for through a private insurance program.  Among this group there is great resistance to federalizing long-term care for fear it would be extraordinarily costly and replace so much of the care given by family providers and others.  The third area of focus is on inefficiency, redundancy, and waste.

I don’t know what they’re going to propose to do about it, but it’s of major concern.  I do know they are hopeful the attention recently focused on medical effectiveness studies will result in better financing.  They are going to try and persuade the public that they’re going to have to carry more of the burden of their health care personally with co-payments and other forms of cost sharing.  And the last area of focus is a recognition that the public health service delivery system works for targeted populations and that they should recommend strengthening this effort.

Believe it or not, Debbie Steeleman and the National Health Council talked about school-based clinics, about what she called “non-insurance models,”  which I think means publicly funded clinics like HRSA’s community and migrant health centers.  I personally believe that that’s the most appropriate and the best way to care for our medically indigent citizens.

There are probably other proposals in the process of development.  My discussion has not been comprehensive.  But, although the chorus is growing louder, they’re singing very different songs and there’s not agreement on many of the major issues.

The Institute of Medicine had a conference on access to health care about two weeks ago and Bob Blended from Harvard chaired a panel that included David Axelrod from the New York State Health Department, representatives from the United Auto Workers, Hewlett-Packard (representing big business), and the Small Business Coalition of Cleveland.

These representatives were all smart, sincere, and well spoken, but their views on health care reform were all over the map.  If they are representative of our nation’s major voice in policy, we’re a real long way from agreement yet.

Before I give you my prognosis for the future, I would like to talk about one of the recent efforts in cost containment, which is physician payment reform.  I have provided for this conference a monograph that I prepared on “The Impact of Physician Payment Reform on Hospitals.”  I will make this available to be included in the Proceedings of the conference.

Although it sounds vain for me to say so, I recommend it to anybody interested in the history of how the federal government pays doctors.  It has been a very complex process and the law recently enacted has been a long time coming.  I”m not going to bore you with all the details but I”ll give you a brief run-through.  When Part B Medicare was enacted, there was a half-and-half co-payment by patients.

Part B Medicare pays for physician and ancillary services, (about 80% going to doctors, 20% going to outpatient and ancillary services.  This program is optional.  When you get over 65 you can choose to buy that or not, but the vast majority of our citizens do.  In 1972, the government started noticing, “Hey, wait a minute!  This is getting out of hand here and the poor citizens can’t pay that much.”

And so they decided to help the beneficiaries by saying that the premium increase could not go up any more than the cost of living adjustment.  So when they did that, guess what happened?  The beneficiaries share went down, and down, and down, until now it’s about 25% and the rest of it is paid by the government.

When they did that, the government adopted pretty much what Blue Cross and Blue Shield had been doing.  In other words, they decided to pay doctors the usual and customary fee in their community.  But to let you know how complex that is, there are about 280 regions on which they base those usual and customary fees, and there is an extraordinary amount of variation.

In spite of efforts to restrain Part B spending, there have been sharp and almost unrelenting increases since the early 1970’s.  Congress then tried to tie increases to a medical economics index (like a health inflation index).  In the 1980’s, they also tried to freeze physician fees.  They have crated a thing called PAR (Participating Physicians) giving doctors who agreed to accept Medicare as full payment some guaranteed increases.

All of those efforts sounded good on paper but the aggregate increases in Part B over the previous two decades have been about 15% per year!  Some have been higher than that and this particular program sticks out as the fastest growing health expenditure in government.

As I said, the movement toward physician payment reform is not new.  Anybody in family medicine has known for a long time that there has been inequity in how procedural specialists are paid as compared with primary care physicians, even though we all go the the same medical schools, we’re all smart, and we all care for people.

For years there have been consensus among health policy analysts that technology is overpaid.  However, much to everyone’s surprise, Congress created, in 1987 a study group, which became the Physician Payment Reform Commission (PPRC).  That’s when they also contracted Dr. William Hsiao of Harvard to develop the Relative Value Scale.

This study was then given to the Physician Payment Review Commission, chaired by Dr. Phil Lee of UCSF, who refined it, modified it, and sent it to Congress.  To be honest with you, last year we thought it was dead, that it would sit on the shelf.  We thought that there was “so much on their plate” and they didn’t have time to seriously consider this major reform proposal.

But do you know who saved it?  I don’t think he gets sufficient credit, but it was Senator Jay Rockefeller of West Virginia.  Senator Rockefeller surprisingly was unrelenting in getting this passed.  In the monograph I referred to, I give some of the history of what happened.  Another major surprise was that Secretary Sullivan testified in favor of physician payment reform if there was an expenditure target and only if there was a limit on the aggregate spending.

It seemed extraordinary that a Republican administration would not only set a national fee schedule but also support regulation of how much should be spent for doctors’ services.  The AMA went bonkers.  They were bitterly opposed to this.  So when it was passed out of the House and went to the Senate, they lobbied hard for changes which modified the “expenditure target,”  into “volume performance standards.”

I have heard Dr Allen Nelson, the President of the AMA, try to explain the difference, and ti sounded like a great success for the AMA to get this change.  But I must have a learning disability, because it still seems like our national leaders have put physicians on notice that there is a limit to how much the public is willing to pay for our services.

Regardless, with Jay Rockefeller, the President, and Dr. Bill Roper (who was the administrator of HCFA) all saying this was a good thing, it was passed into law in the ‘Omnibus Budget’ Act of 1989.

n short, we now have a new national fee schedule (to be developed and phased in over the next five years); we have theoretical targets or Medicare Volume Performance Standards (MVPS) that will determine how much the federal government is willing to spend in each subsequent year for doctor services (for Medicare Part B); and, lastly, it limits doctors in their ability to “balance bill” or to recoup what they consider their losses by passing it on to the patient.

If you thought prospective payments for hospitals was a major accomplishment and hard to do, understand that there are only 472 diagnostic categories for hospital services and there are only 5,000 hospitals.  This task that HFCA now has to implement is horrendous.  There are over 7,000 doctor codes for billing and they have just begun to get what the relative value for each of those is, and there are 500,000 doctors!

Don’t hold your breath for this thing to be fully implemented.  It’s going to take a long time for this thing to be completely phased in, and it will inevitably need to be refined.  I’m certain that it will be challenged and tested every step of the way.  But the bottom line is that it is going to happen, and it will make a difference.

The cost shifting probably will be more significant from region to region that it is from specialty to specialty due to consideration on inclusion of “geographic practice cost index” (GPCI). However, it has been estimated that primary care doctors, family physicians, internists, pediatricians, will have a raise of about 27% of their income from the care of Medicare patients.

Sub-specialists in certain fields would go down about 14%.  How this will be “budget neutral” as promised, I don’t understand.  But we’ll have to wait and see.

Now, let me get to he meat of what I was asked to address.  I was asked to talk about what is going to be the implication for physicians and especially family physicians of these new payment reforms.  In my monograph, I speculate about a number of things doctors might do to maintain their income, such as seek arrangements with hospitals, align themselves in groups, and do more things outside of hospitals if they can.

One intent of those who wrote this law is that if primary doctors were paid better, more people would choose to go into primary care.  However, I am skeptical that the difference in income is going to be sufficient to make someone change their career.  It would possibly make a difference if people were “on the line” but I don’t think that a thoracic surgeon’s income dropping from $500,000 a year down to $380,000 is going to dissuade someone from choosing that specialty.

A family doctor’s income may increase from $80,000 clear up to $110,000 or slightly more.  Those are ballpark figures, but I believe that even under these reforms, our specialists are going to be paid significantly more than primary care physicians.  The geographic redistribution may make a real difference.  I think that, because specialists in rural areas will maintain much of their income with enhanced rates, it may help to address some of the rural and geographic maldistribution problems.

There’s one thing in here that troubles me, but I don’t know any of you are bothered by this.  I have been a practicing clinician and I understand that if you do more you get paid more.  But this doesn’t address the volume issues, aside from the aggregate volume performance standard.  For example, ti says clearly in the law that a physician will be paid the same for a procedure regardless of their specialty.

Our family physicians colleges are going to catch on to this, and recognizing that the gastroenterologists can’t be paid any more than he or she could for doing a gastroscopy or colonoscopy, the family physician will seek to become “proceduralists”  This law may greatly increase the number of procedures done overall.

By the way, by my introduction you may not know I really am a board certified, licensed family physician. I still see patients every week.  Before I took my last re-certification exam I wen tout to UC Irvine for their 65 hour refresher course.  I studied hard, took notes and passed my re-certification.

But what troubled me was the last day of the conference was an optional course on colonoscopy.  I went and played with the various fiberoptoscopes (provided, of course, by the vendors).  You could try your hand at the different models (ranging from $5,000-$10,000) practicing on rubber dummies.  At the end of the day I received a certificate stating something like “you, too, are a colonoscopist.”  Talk about collusion with the medical industrial establishment!

The proponents say “think of the screening for cancer.”  I can’t deny that.  Family physicians certainly may detect more colon cancer by doing this.  However, I still think that serial stool tests for occult blood are pretty good screens, and probably preferable to routine colonoscopy.

There is a legitimate concern that our primary care docs, with encouragement from this law, will continue to escalate health expenditures by doing many more procedures.  It will help close the gap in income between the specialist, but is it in the best interest of the patient?

Congress is not waiting for this law to be phased in before seeking more savings in Part B.  The President’s budget this year requested a $2.2 billion cut in Part B Medicare, far and away more than the PPRC has recommended.  So, due to pressures from the budget deficit, they’re not about to relax their efforts to seek more savings over time.

Let me just close on a more optimistic note.  I think that there is a growing awareness and consensus about the flaws in our health care system.  We see it in all the proposals for reform.  They say the same things need to be fixed and that is heartening.

The best talk I have heard in a very long time was Robert Heisel, the President and CEO of the Johns Hopkins Hospitals, who gave the Rosenthal Lecture at the Institute of Medicine this past week.  He said things that sounded as though he were a member of the Society of Teachers of Family Medicine from its inception.

I won’t read all of this but I”ll just tell you that he said without holding back that “academic health centers have simply breached their social contract with society, that [the academic health centers] one legitimate responsibility  has always been better care for the American public.  However, we fail to adjust our patient care orientation because the specialists are ever more narrowly focused and are not excited by prevention, primary care, and the problems of the aged.”

He goes on to say that “we need a new system.  We need explicit responsibilities, new accountability, new incentives, both positive and negative.

In such a system, medical schools would be forced to reexamine how they teach, what they teach, where they teach, and primary care would assume its proper ascendant role.  We would examine appropriateness of care and, by extension, outcomes of care.  We should not need the almost overwhelmingly and increasing burdensome utilization review mechanisms.

We would begin to coalesce around a simplified payment system.  We would break down the domination of specialist societies, and we would deal with our new realities by stepping up our old responsibilities.  And we would create a series of nationwide demonstrations that would take into account geographic, demographic, epidemiological variation and local values across the nation.”

I won’t emphasize the importance of that last statement more because I honestly don’t think the federal government is going to come up with solutions which are likely to be as effective as those developed at the local level.

I now work for a large alliance of not-for-profit hospitals and I was very pleased to see the recent cover article in Hospitals magazine with my old pal Dr. David Smith, who used to work in HRSA, prominently pictured on the cover.  David has left the Public Health Service and is now with Parkland Memorial Hospital.  He’s in charge of setting up a network of primary care clinics to deal with the very serious medical indigency problems they have.

What I find fascinating is that the reason the hospital is doing this is not only out of altruism, but they have come to realize that it’s in their best interest.  They can’t bear the unnecessary ER visits, the woman showing up with no prenatal care  and no insurance, the AIDS patient with no primary care.  For their economic survival, they’re investing in primary care.  I would like to think that this and other examples are going to get the attention they finally deserve.

And the last note of optimism, I’ll just say that in spite of my and David Schmidt’s previously expressed pessimism about imminent national health reform, who knows?  To use a chemical analogy, something that might catalyze as a major reaction in the next few years.

When Danny Ortega and Danny Quayle are “doing lunch” in Nicaragua (and this really happened) to talk about the transition of power, when there’s a McDonald’s in Moscow, and when Fitzhugh Mullen is in Russia right now on a meeting to talk about a western-style reform of their health care system, I’m telling you we’re living in strange and wonderful times, and all bets are off.

So hang on to your seats!  Maybe we’ll have more in the way of progress towards a more rational and fair health care system sooner than we expected.

Thank you.

This presentation was preceded by:  First National Conference on Primary Health Care Access (2nd Plenary Panel, Part 4, Q & A)

This presentation was followed by: First National Conference on Primary Health Care Access (3rd Plenary Panel, Part 2, Midtling)


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