Scott MacStravic, PhD
The healthcare industry has long been accused of being subject to the “law of the hammer”, or reflecting the fact that when you have a hammer in your hand, a lot more things begin to look like they need nailing. It is well known that the kind of treatment you get for whatever ails you is greatly influenced by the particular specialist you go to, for example, and that the higher-tech academic medical centers tend to deliver more intensive and expensive care for similar conditions, without necessarily producing better results.
When hospitals and physician practices invest in new or upgraded facilities and equipment, they presumably do so in order to improve their capabilities in quantity, quality or both. But they automatically also increase their fixed cost overhead and need to generate added revenue merely to cover the additional costs. There is always the risk that the capability will be accompanied by a compulsion to use it, since otherwise the hospital or practice may not prosper or even survive.
I recall one multi-specialty practice I worked with that used what seemed on the face to be a rational and conservative policy regarding investments in new technology. Whichever of its specialties requested the investment became at risk for ensuring that the investment paid off. If the new diagnostic or treatment technology did not generate enough revenue to cover its costs, those particular specialists would have to take an income cut in order to make up the loss.
This policy would clearly tend to make the physicians more careful when proposing new investments. But it would also make them feel even more pressure to see to it that the “hammer” was used often enough, and potentially move them toward over-prescribing its use in marginal cases. The combination of not wishing to be perceived as mistaken in making the investment recommendation, not wanting to harm the practice’s performance, and wanting to avoid an income reduction could combine to create a powerful compulsion.
The perception that this potential exists clearly prevails among patients and payers. In a recent example, Whole Health Management, Cleveland, Ohio, for example, a healthcare organization devoted exclusively to onsite medical clinics and wellness centers that promote employee health and productivity, enjoyed a significant advantage when competing with a local hospital that was also bidding for an employee medical clinic contract.
Whole Health could fully align the interests of all parties, the employer, the patients, and itself as provider in pursuing and achieving the results the employer desired – healthcare cost reductions plus productivity improvements. By contrast, the hospital’s “…inherent need…to obtain use of its services and fill its beds…” created conflicting interests. [L. Butcher “The Workplace Doctor Is In” HealthLeaders Magazine Mar 2007 (www.healthleadersmedia.com)]
For example, when the City of San Angelo, Texas opened an onsite medical clinic for its employees, in its first year of operation, employee ER visits were cut by 85%. The risk manager for the city, originally skeptical about the value of the clinic now works as a consultant for CareHere, LLC, another developer of onsite clinics that is promoting such sources of care for governments and school districts throughout the country. While Whole Health focuses on large employers with 1000 or more employees at one location, CareHere aims for those with only a few hundred. In any case, there appears to be the potential for many thousands of such clinics in the US, which will not only compete with but reduce the demand for traditionally sickness-focused hospitals and physician practices. (www.carehere.com)
It is certainly a legitimate question – whether traditional providers can compete in the proactive health management market, encumbered by their capability/compulsion mix in the reactive sickness care market, which will, after all, persist even if proactive health management efforts succeed, though at a lower level than otherwise expected. There are hundreds of traditional providers already competing in this market, proving that the encumbrance is not totally debilitating, and the missions not incompatible in practice. But there is likely to be at least a perception of potential conflicts of interest when traditional providers compete with the growing number of organizations that are specializing in the proactive market.
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