Thursday, April 16, 2020

The ACP Leadership Stands Up to Health Care Dysfunction: A Good Beginning, but the Problems May be Even Bigger than They Realize

Introduction: Health Care Dysfunction Has Been With Us for a Long Time

The American College of Physicians (ACP) is the largest physician specialty society in the US.  So it was news when outgoing ACP  President Dr Robert M McLean's article, "Battling the Hydra of the Medical-Industrial Complex" in the ACP Internist, decried "the dysfunction that has become our [health care] system's status quo" and noted "how our health care delivery system is so dysfunctional and fragmented."

[Gustave Moreau, Hercules and the Lernaean Hydra, Art Institute of Chicago]

Better late than never. We have been decrying health care dysfunction since 2003, and on this blog since 2004.

To better understand health care dysfunction, I interviewed doctors and health professionals, and published the results in Poses RM.   A cautionary tale: the dysfunction of American health care.  Eur J Int Med 2003; 14(2): 123-130. (link here).  In that article, I postulated that US physicians were demoralized because their core values were under threat, and identified five concerns:

1. domination of large organizations which do not honor these core values
2. conflicts between competing interests and demands
3.  perverse incentives
4. ill-informed, incompetent, self-interested, conflicted or even corrupt leadership
5.  attacks on the scientific basis of medicine, including manipulation and suppression of clinical research studies

After that my colleagues and I have tried to raise awareness of these and related issues, now mainly through the Health Care Renewal blog.  We also set up FIRM - the Foundation for Integrity and Responsibility in Medicine,  a US non-profit organization, to try to provide some financial support for the blog.

Now the ACP seems to have embraced some of our concerns.

Putting Financial Concerns and Management Dogma Ahead of Patients

Dr McClean started by asserting that:

Smart minds have taken business models to the extreme in health care-related corporations. Decisions on resource allocation or new initiatives are driven by the critical concept of return on investment (ROI).


budget items that we know are clinically necessary for better patient care don't get resourced and as other initiatives of dubious clinical value move forward, all due to the omnipotent ROI calculation.


Corporations of many types (insurance, pharmaceuticals, pharmacy benefit managers, and medical devices, to name just a few) are making millions and billions in profits that are pulled out of the health care system instead of being used to provide better care to our patients.

These are clearly major issues.  Let me take this opportunity to enlarge upon Dr McClean's essay, based on our experience writing for Health Care Renewal.

Dr McLean briefly noted the problem of "business models" driving health care leaders' decision making. This has been called managerialism. As discussed in an article from the June, 2015 issue of the Medical Journal of Australia (which we noted here)
- businesses of all types are now largely run by generic managers, trained in management but not necessarily knowledgeable about the details of the particular firm's business, and in a health care context, not necessarily having any experience or background in biomedical science, medicine, health care, or public health
- this change was motivated by neoliberalism (also known as economism or market fundamentalism)
- managerialism now affects all kinds of organizations, including health care, educational and scientific organizations
- managerialism makes short-term revenue the first priority of all organizations
- managerialism in health care undermines the health care mission and the values of health care professionals

Managerialism is not limited to the list of organizations mentioned by Dr McLean.  

Managerialists are often greatly influenced by currently fashionable management dogma.  A dominant dogma in management is that pursuit of shareholder value comes before all else, and thus that the pursuit of short-term revenue comes before all else. Managerialists running nominally non-profit organizations, like non-profit hospitals, still often put short-term revenue ahead of all other concerns.  As we posted here in 2012, quoting Lazonick:

in 1983, two financial economists, Eugene Fama of the University of Chicago and Michael Jensen of the University of Rochester, co-authored two articles in the Journal of Law and Economics which extolled corporate honchos who focused on 'maximizing shareholder value' — by which they meant using corporate resources to boost stock prices, however short the time-frame. In 1985 Jensen landed a higher profile pulpit at Harvard Business School. Soon, shareholder-value ideology became the mantra of thousands of MBA students who were unleashed in the corporate world.

Lazonick added:
When the shareholder-value mantra becomes the main focus, executives concentrate on avoiding taxes for the sake of higher profits, and they don’t think twice about permanently axing workers. They increase distributions of corporate cash to shareholders in the forms of dividends and, even more prominently, stock buybacks. When a corporation becomes financialized, the top executives no longer concern themselves with investing in the productive capabilities of employees, the foundation for rising living standards for all. They become focused instead on generating financial profits

Thus the influence of business thinking on health care (and public health) leadership is even greater than what Dr McLean discussed.

Furthermore, Dr McLean issued the following apologia:

We cannot blame health care system executives solely for this ROI focus; they are merely playing by the existing rules of the game, dysfunctional as those rules are

In  my humble opinion, they do not deserve the only blame.  However, hospital system executives are part of the larger community of executives who run pharmaceutical/ biotechnology/ device companies, health insurance companies, organizations that provide direct patient care, consulting firms, medical societies, health care charities, etc, etc, etc  Most of them have been trained in these "rules of the game." 

These executives often reap considerable personal benefits from these rules.  For example, hospital system executives, even those of non-profit hospital systems, have become rich in the currently dysfunctional health care system. Our latest example of hospital executive compensation that seems wildly disproportionate to the value of their work appeared here in 2019.

We have long contended that a major reason for health care dysfunction is perverse incentives, including those that allow top health care leaders to become rich by putting money ahead of patient care.  We have presented case after case supporting this point.

The plutocratic compensation given leaders of non-profit hospitals is usually justified by the need to competitively pay exceptionally brilliant leaders who must do extremely difficult jobs.  Yet even leaders whose records seem to be the opposite of brilliance, or whose work does not seem very hard, often end up handsomely rewarded.

Other aspects of top health care managers' pay provide perverse incentives.  While ostensibly tied to hospitals' economic performance, their compensation  is rarely tied to clinical performance, health care outcomes, health care quality, or patients' safety.  Furthermore, how managers are paid seems wildly out of step with how other organizational employees, especially health care professionals, are paid.

I can understand the leadership of the ACP may feel very uncomfortable challenging the executives of hospitals in which most of the ACP membership's patients receive care.  Nonetheless, we need to reconsider the downsides of a health care system in which paying generic managers enough to make them rich now seems to be the leading goal of hospitals.

Private Equity as an Egregious Example

Dr McClean noted the

entry of private equity and venture capital firms into the health care space and the expansion of pharmacy chains into retail health clinics.... whose leadership] see ripe potential to disrupt the dysfunctional status quo quasi-marketplace, increasingly treat patients like consumers, develop systems of improved efficiency, at least on the surface, and in the process destroy or undermine the patient-physician relationship.

We have been writing about the nefarious role private equity has been playing in health care since 2010.  Private equity firms have been buying up for-profit hospital systems and other firms that employ physicians to provide direct patient care, like physician staffing firms.  They also may own medical education institutions, including offshore medical schools that  train physicians for the US (and Canada), and even for-profit medical schools in the US (look here).

We first discussed the perils of private equity takeovers of hospitals here in 2010, and of physicians providing direct patient care as employees of corporations owned by private equity here in 2011.   The private equity business model seems particularly unsuitable for organizations which provide patient care, as we discussed in some detail in 2012.

For a quick modern summary of why it is bad to have private equity involved in direct patient care, see Merrill Goozner writing in Modern Healthcare, September 5, 2019,

The private equity business model in healthcare parallels other industries: Use highly leveraged private capital to roll up a number of small firms into one entity, with the private equity firm providing collective management. In addition to hefty fees for arranging the transaction (generally 1% to 2% of the purchase price), the private equity firm typically demands a 20% return on its investment after paying interest on the debt.

After three to seven years, assuming all goes well in achieving the promised efficiencies, the private equity firm and its junior partners (who are the specialty physicians in this latest wave of takeovers) earn a windfall by taking the company public or flipping it to another set of private equity investors. If things don’t work out as planned, the firm cuts its losses and declares bankruptcy (most of its capital will have been recouped through the 20% annual returns).

The management company has two paths to achieve its financial targets. It can either reduce costs sharply or look for ways to increase revenue.

A private equity firm running a hospital is likely to be even more focused on putting short-term revenue ahead of all else, including patient's and the public's health, and ahead of health care professionals' safety and welfare.

The Role of Corporate Propaganda and Disinformation

Dr McClean noted:

The disinformation media blitz has already begun. Organizations with altruistic-sounding names such as Partnership for America's Health Care Future, a coalition representing insurers, pharmaceutical companies, and hospitals, assert that we should 'build on what's working in our health care system.' Do you remember the success of the Health Insurance Association of America at turning public opinion against the Clinton health plan back in 1994, using its year-long advertising campaign of 'Harry and Louise' commercials in which a couple expresses dismay at their dwindling insurance options and rising costs? We should expect a new generation of that type of commercial in the near future. 

Again, this is a severe, long-standing issue that involves are more than just health care insurance companies and related issues.

We had previously noted that promotion of health policies that allowed overheated selling of overpriced and over-hyped health care products and services included various deceptive public relations practices, including orchestrated stealth health policy advocacy campaigns.  Third party strategies used patient advocacy organizations and medical societies that had institutional conflicts of interest due to their funding from companies selling health care products and services, or to the influence of conflicted leaders and board members.  Some deceptive public relations campaigns were extreme enough to be characterized as propaganda or disinformation.

As of 2019 we noted the participation of foreign powers, some potentially hostile, in the dissemination of health care related disinformation.  Even more disturbing, we began to see the dissemination of health care related disinformation by the executive branch of the US government under the Trump administration (look here).   In particular, disinformation is distorting the conversation about and maybe the response to coronavirus (look here). 

Thus countering the negative, and now often dangerous effects of propaganda and disinformation in health care and public health will require taking on far more bad actors than just health care insurance companies.

Conclusion: Issues Not Discussed

We have been cataloging aspects of US (and sometimes global) health care dysfunction for a long time.  There are many more issues than those about which Dr Cleary wrote.  In late 2019 I provided an updated summary of them. Reprinting it here would double the length of this post, so let me simply summarize the list of topics

Threats to the Integrity of the Clinical Evidence Base

Deceptive Marketing

Distortion of Health Care Regulation and Policy Making

Bad Leadership and Governance

Abandonment of Health Care as a Calling
Perverse Incentives Put Money Ahead of Patients, Education and Research

Cult of Leadership


Impunity Enabling Corrupt Leadership


We strongly welcome the active participation of the ACP in the fight against health care dysfunction. Unfortunately, it may turn out to be a much more difficult and complex task than many would expect.

Now that health care dysfunction is in the headlines, we hope health care and public health professionals, patients, and all citizens will have a much more vigorous response to it.  US health care dysfunction was always part of the broader political economy, which is now troubled in new and dangerous ways.  We do not have much time to act.

If not now, when?

If not us, who?  

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