Big Hospitals, Big Bills, a Better Idea

December 2, 2014

“What does ‘free’ healthcare mean?  . . . It isn’t free treatment, it’s depersonalized treatment.” — Dr. Oreshchenkov in Aleksandr Solzhenitsyn’s 1967 novel “Cancer Ward.”

By Craig Ladwig

An idea planted here six years ago could make the difference in Indiana healthcare. It begins by asking Indiana hospitals to give patients a firm price in advance of a procedure or operation. It ends by restoring the relationship between patients and their doctors. It all is part of a movement toward consumer-driven healthcare reform.

Dr. Regina Herzlinger led a seminar on the subject for the Indiana Policy Review Foundation in Indianapolis in 2009. Now, with hospital bills heading upward at an alarming rate and ever more difficult to justify, hers is an idea whose time has come.

“The fixes are not difficult,” said Herzlinger, the Nancy McPherson professor of business administration at Harvard Business School. “We must get back the money our employers and government now take from our salaries and taxes to buy health insurance on our behalf so that we can choose it for ourselves. Our innovative, caring doctors must be empowered to design better, cheaper healthcare.”

The current issue of the foundation’s quarterly journal compares a bill for a routine operation performed this year at a general hospital in Indianapolis with the price advertised by a small surgery center for 85 percent less. Such disparity is the result of a system in which pricing is detached from either cost or profit.

If Indiana could adopt consumer-driven healthcare as state policy it could establish itself, ante-ObamaCare, as a national leader in healthcare reform. In addition to transparent billing, there is a range of suggestions for legislative action. Here are two of the more measured ideas, both from Avik Roy of the Manhattan Institute:

To summarize, there’s almost nothing else in our economy that works the way hospitals do — and for good reason. Where else do you buy something and get the bill weeks later for either one amount or a multiple of that amount for a good that could be found at a fraction of the cost down the road?

“What’s most frustrating is that the patient has no right to choose an ‘inappropriate’ treatment in many of these all-encompassing healthcare systems, a treatment that in fact may be best for him,” adds Dr. Bruce Ippel, a private practitioner and adjunct scholar of the foundation.

Ridding ourselves of such absurdity can only begin if we re-orient policy to reflect the proper relationship between the patient and the individual physician.

Specifically, that relationship must reflect the truth of why people become doctors in the first place. It is not to find sinecure in a sparkling new hospital set in beautiful acreage. Nor is it to please an administrator or to meet the actuarial expectations of an insurance company or a federal agency. Rather, it is to put his knowledge and skills to work healing the patients in front of him, hour after hour, day after day.

Such a role assumes — requires — ownership of the process. The research tells us that in healthcare this ownership, epitomized by the private practitioner, is absolute. It is corrupted by even the smallest changes imposed by the command-and-control system that is absorbing our doctors. And the loss of transparency, the inscrutable billing, the impersonal economics applied to even life and death decisions, all warn us that there is no substitute.

We ignore that reality to our great detriment.

Craig Ladwig is editor of The Indiana Policy Review.

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