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We delve into the evolution of health care with our guest, Brian R. Jackson, a pathologist. Once a local industry where doctors and hospitals were deeply integrated into their communities, health care has now become a major business dominated by large corporations. We explore the implications of this shift, examining the impact on patient care, community responsiveness, and accountability. Brian shares his insights on whether it’s possible to reverse this trend and return to a more locally-run health care system, drawing from examples in both the U.S. and international models.

Brian R. Jackson is a pathologist.

He discusses the KevinMD article, “Why health care organizations must be accountable to local communities.”

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Transcript

Kevin Pho: Hi, and welcome to the show. Subscribe at KevinMD.com/podcast, get CME for this episode by clicking on the CME link in the show notes. Today we welcome Brian Jackson. He’s a pathologist, and we’re going to talk about the KevinMD article that he co-wrote, “How big business is ruining health care.” Brian, welcome back to the show.

Brian Jackson: Hi, thanks for having me back.

Kevin Pho: So Brian’s been on in the past. Go to KevinMD.com/podcast to hear his story and prior episode. But today let’s jump right into the KevinMD article that he co-wrote with Paul DeMuro. It’s titled “How big business is ruining health care.” For those who didn’t get a chance to read this article, tell us what it’s about.

Brian Jackson: Well, essentially health care, in our opinion, should be a small or small to medium-sized business. And instead, in the United States, health care has become this massive, huge business, and it doesn’t have to be that way.

So the easy example for Americans would be to just imagine 100 years ago, when physicians were solo practitioners, when hospitals were locally run by the local religious order or community. And it works this way in some other countries as well.

When we lived in Belgium about 20 years ago, if you’re in Belgium and you call the doctor’s office to make an appointment, the doctor is probably the one who’s going to pick up the phone, because primary care there is organized as very, very small businesses. Typically one provider and a couple office staff, and that’s about it, a nurse and an assistant.

Even in the National Health Service, so I’m currently living in London, and most people think of the NHS as this massive government-run plan, and it is in some respects, but primary care is actually incredibly decentralized. Every general practice office is its own small business that contracts with the NHS to manage a population of patients. So you get very personalized care. I’m not saying it’s perfect, but the trade-offs of organizing as small businesses versus the trade-offs of running things as big, massive bureaucracies, it’s much better for patients to have things stay small.

Kevin Pho: So how did we get to be in this state? Why is it that the American health care system is dominated by conglomerates, in contrast with other countries?

Brian Jackson: There are a few reasons. So we’ll start with a couple that I think are partial players, but the big one’s going to be the payment scheme in the end.

So one of the trends, I think, that sort of laid the groundwork in an unfortunate way was, you remember back to the 1990s when the conversation started around accountable care, and hospital leaders, particularly the big academic medical centers, started promoting this idea of, we just need health systems to be bigger and more powerful so that we can take care of all the quality issues. And that’s where they started consolidating and growing. And Mass General and Brigham and Women’s became Partners HealthCare and dominated the Boston area.

And the quality promises didn’t bear out. What happened was, they had more pricing power. So as the health systems started getting bigger, the insurance companies basically said, well, we need to be able to negotiate with them, so we need more power. And the Affordable Care Act unfortunately gave the insurance industry a lot more power.

So you’ve got this arms race between the two sides. Hospitals consolidate, not so they can improve quality, even though that’s what they say they’re doing, and they say they want to lower prices, but it’s bogus. They consolidate so they can raise prices. And the insurance industry does everything they can at their end to consolidate and play hardball, and they do. And the insurance industry’s actions are exactly why hospitals have a hard time surviving as small entities, and so they feel forced into consolidation.

So it’s basically a giant arms race between these two mega industries, and doctors and nurses and patients are the collateral damage.

Kevin Pho: Tell us specific ways how doctors, nurses, and patients are being affected by this arms race of consolidation by both large systems and the insurance companies.

Brian Jackson: Well, one, pricing is obviously huge, because this whole dynamic just leads to more cost inflation and more opacity and more hidden prices. So that’s huge. The Wall Street Journal just did an article this week on how cancer destroys people’s lives, not just healthwise, but it destroys their financial lives as well.

But there’s this word, bureaucracy. So one of the inspirations for the article that we wrote was a book, a business book, has nothing to do with health care per se, but it’s titled Humanocracy. No kickbacks for the promo, but I happen to like the book.

But in this book he talks about just all the bad stuff that bureaucracy brings with it in a large business. It makes things inefficient, you’ve got more layers of decision making, and you take decision making away from the front line.

So contrast that. One comparison, this isn’t from the book, but think about the car industry back in the 70s and 80s. The Japanese car industry blew away the American car industry even though they were smaller. Why? Because Toyota figured out how to put more decision-making power, more managerial authority, at the front lines, for frontline workers and supervisors, because they were the closest to the quality issues. And they did a really good job of that. Well, Ford and GM were micromanaging decisions from the corporate office. So that’s sort of a metaphor for what’s going on in health care.

In the Humanocracy book, what I really like about the book is he gives some counter examples, and again this is not a health care example, but you can see how the health care analogy holds up here. So have you ever heard of a company called Nucor Steel?

Kevin Pho: I have heard of that company, but obviously I don’t know very many details about it. Tell us about it.

Brian Jackson: OK, so I just got this from Hamel’s book. But so, Nucor is a steel manufacturer. They run steel mills, and these are called minimills because they’re basically recycling plants, they take scrap metal and turn it into higher quality steel.

And Nucor is pretty big. They have dozens of mills scattered all across North America, and they have about 30 million a, or sorry, 30 billion a year in revenue. So it’s a pretty good sized company.

So you’d think that a $30 billion a year company that’s spread over an entire continent would probably have a big giant corporate headquarters in maybe Manhattan or Chicago, where all of the overpaid executives would have their executive suite and everything else. That is not the case. Nucor’s corporate is the workplace for about two dozen people, and it’s in a little office park somewhere in a suburb. Nucor does not run a big corporate headquarters. Instead they delegate almost all business decision making to the individual plants.

And the reason that works is that in the steel industry everything is driven by these regional relationships. You’re selling products to maybe a building contractor supply company, or you’re selling sheet metal to a car manufacturer, but those tend to be regional business relationships, and the individual regional companies associated with each mill can do a better job of managing those relationships and understanding those customers.

Part of why this works is, if you go to one of Nucor’s plants and you talk to the senior management team, the general manager and the operations manager and the quality manager and the human resources manager and the director of sales are probably all going to be former steel workers, people who grew up, career-wise, getting their hands dirty doing the work of making steel. So they know their product, they know the operations, they know how it works, they know how the quality works, they know the people and the culture, they know their customers.

So they can do a much better job making the complicated trade-offs. Should we focus more on structural steel for buildings, or should we shift more of our capacity into maybe this other up-and-coming industry? They’re better able to make those decisions locally, because they’re hard trade-offs.

Now, health care is the same way. Health care has incredibly complicated trade-offs because they’re all human. So let’s say you’re a rural hospital and you’re having a hard time keeping your obstetrics unit open, or your emergency room. This is a really common problem. That’s a high-stakes decision, because it affects the community.

Who should be making that decision? You don’t want that decision made by some executive in a gleaming office tower three states away, who by the way makes 30 million a year and has never talked to someone in your community, and who’s making that decision entirely based on the combination of a spreadsheet and their annual bonus, which is based on hitting a certain margin. You do not want that person making that decision. You want the person making that decision to be someone who goes to the same grocery store as the people who are going to be affected, who has lunch with other community leaders, and is going to have to defend that decision to them. So accountability needs to stay local, and it just isn’t today.

Kevin Pho: So are there any paths to get from where we are now, with a lot of corporate health care decision making, to a more accountably local decision-making process? So what’s the path for us to get there?

Brian Jackson: So all paths in the health care industry are hard, obviously. So if I said, oh yeah, this is easy, then obviously I’d be lying. But Paul, my co-author, and I do believe there is a path here, and we believe the path goes through state government.

So in order to pull this off, there is going to have to be some form of payment reform. You can’t have insurance companies negotiating pricing the way they do it today, because it forces the small players into bankruptcy and it allows the big players to get really wealthy, and it just isn’t working. So there’s got to be some level of doing that. I’d love to see hospital leadership step up, and particularly boards of directors of community hospitals step up and lobby for this. But ultimately we think that the best path to this is through state law.

So when people think about health care reform, a lot of people tend to immediately think about federal-level changes. And I don’t know exactly why that is, if that’s because we’re thinking about the way the Affordable Care Act played out, and the Clinton plan a few years before that, and that was all federal level. But there’s a lot of interesting health care action that happens at the state level, and it turns out that most health care regulation is actually at the state level. Medical practice law is at the state level. You’ve probably published some pieces, you’ve probably done some podcasts on corporate practice of medicine.

Kevin Pho: Of course, yeah.

Brian Jackson: So that’s a really important topic today, and that’s all state-level law. So state legislators have the power to make these fixes, but they need the right pressure at that level.

So corporate practice of medicine is obviously one. No medical practice should be owned by a private equity company, that’s unaccountable. But I would say no medical practice should be owned by a health system either, and certainly not by a health system where the headquarters is in another state. The word owned is an awkward word here, but the key stakeholders and decision makers need to be local, in the community that they’re serving. Hospitals, same deal.

So we believe that state-level law could take care of this. So for example, you don’t hear a lot about it, but there are state laws around certificate of need laws, which is basically, in certain states you can’t go build a new hospital unless you can demonstrate that there’s a medical need, because they don’t want you just building a facility to drive up procedure rates for something or other. Whether or not these certificate of need laws are good ideas is sort of a different conversation, but the point is that state legislators have the power to regulate who can run a hospital and who can’t.

And in principle, state legislators could require that community hospitals have local decision making, that they can’t ship off 5 percent of their revenues to a corporate headquarters in another state, for example, or allow corporate headquarters to decide for them what their level of nurse staffing should be, or whether they have an emergency department or not.

Kevin Pho: Are you seeing any states implement some of the ideas that you mentioned?

Brian Jackson: Not yet, but if any are, I’d love to hear from them.

Kevin Pho: So I assume that some of the obstacles, of course, to some of these ideas would be from the lobby from both health insurers and hospitals.

Brian Jackson: Absolutely. So that is a powerful force and an intimidating force. But counterbalancing that, every one of us is a patient, every one of us has family. And so all of us are on both sides of this. Even people who work for insurance companies and big health systems are in some sense on both sides of this. So politically, from that perspective, because it affects people in such intense and personal ways, it ought to be politically feasible, I do believe.

And the reason why I wanted to publish the article on KevinMD, I think it’s critically important that the medical community take a leadership role in this. The medical community has moral authority, has influence. And so I’m hoping that, obviously doctors are really frustrated with the current system, with prior authorization, with all this kind of stuff, I would really love to see doctors, to the extent that doctors are starting to unionize, I think this is something to think about.

And then doctors who participate in organized medicine, I think organized medicine has not done nearly as much as it should. And again, you’ve probably covered this in some of your articles and interviews, on things like private equity. But I think state medical societies could absolutely play an important role in helping the legislators understand that going back to the idea of local medical practices and local hospitals can actually make business sense, and it absolutely makes community sense.

Kevin Pho: Now, is there anything individual physicians can do? Because I know that there are some doctors who break away from these large conglomerates, they open up some direct primary care practices, for instance. Or do you think that’s a little bit too niche to make a substantial ripple?

Brian Jackson: I don’t know. I mean, I’m a fan of direct primary care, I think it’s a great model. Another model that I’ve seen work really, really well is worksite clinics. So at ARUP Laboratories, which is a testing business that’s basically part of the University of Utah, there’s an on-site clinic run by family physicians, with nutritionists and pharmacists, and it’s really a full-service medical home, completely free of charge for the workforce and their families.

And it saves the company money, because good primary care and good care coordination reduces emergency visits, it reduces complications, and frankly it’s a lot more efficient because none of that care gets billed through insurance, so you cut out the 30 percent overhead right there. So I think there’s a lot of opportunity, both direct primary care but also setting up similar models, medical home models, with self-insured employers.

Kevin Pho: We’re talking to Brian Jackson. He’s a pathologist. We’re talking about the KevinMD article “How big business is ruining health care.” Brian, as always, we’ll end with some of your take-home messages that you want to share with the KevinMD audience.

Brian Jackson: So number one, when we think about health care reform, a lot of people immediately jump to public versus private, and there’s this huge debate that just never seems to end, about, should government run health insurance or should private companies run it? I would like to see people reframe their thinking. Instead of public versus private, think big versus small. And we can work out the public private mix later.

But health care is fundamentally about relationships between physicians and their patients. It’s something that happens at a local level. It’s a technologically supported activity, but it’s fundamentally a personal service that happens at a local level, and that’s what the organizational structures need to be designed to serve.

Kevin Pho: Brian, thank you so much for sharing your perspective and insight. Thanks again for coming back on the show.

Brian Jackson: All right, thank you very much.