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The Power of the Doctors

Nevertheless the first half of Starr’s book is one of the most illuminating and provocative social histories of the American medical profession yet written. He shows how the medical care system was shaped, and does so with a perception and richness of insight that set his book apart from most others on this subject. Physicians will dislike much of what is said here, but they and anyone else interested in understanding our medical care system would do well to read it carefully.

In the second half of his book, Starr is concerned with health care policy and politics. In four heavily footnoted chapters, he painstakingly describes the recurrent efforts over the past sixty years to establish a national health insurance program in the US. Unlike almost every major European country, we have not set up such a system partly because of the pressures against it from the medical profession itself. Instead, a pluralistic—some would say “chaotic”—pattern of health care has evolved, including both public and private financing, and almost every conceivable kind of organizational arrangement.

In effect, we had a two-class system. The poor were treated largely in clinics and hospitals supported by state or local governments or by private charitable institutions. Doctors gave their services gratis or reduced their fees in proportion to the ability to pay. Many of those unable to pay their doctor and hospital bills had great difficulty getting medical treatment and when treatment was available it was often inferior. But even the middle class needed protection against increasingly expensive hospital bills, and in the decade before World War II, Blue Cross and other private hospital insurance plans became popular. After the war, more and more employers offered health insurance to their workers, but most of the unemployed and the elderly poor still remained outside the insurance system and had to depend on public or private charity.

During the mid-1960s federal support of health care greatly expanded with the introduction of Medicare and Medicaid, which recognized the right of the aged and the poor to have standard medical treatment. This legislation reflected a growing national refusal to accept a two-class system. The AMA at first opposed these programs, as it had opposed virtually every other involvement of government in health care; but the economic advantages to doctors soon became apparent. Many billions of tax dollars were suddenly available for medical care. Growth of medical insurance benefits and the federal subsidy of hospitals and medical research and education led to a large increase in the use of hospital services, and the almost explosive growth of new and expensive medical technology. The result was predictable and not long in coming. By the early 1970s, many Americans suddenly discovered that the system was “in crisis.” Public expressions of discontent were heard everywhere; impending disaster was predicted unless drastic steps were taken. The “crisis” involved many things but, as Starr says, it mainly concerned money: medical costs had got out of hand.

There were other complaints as well: about overspecialization of doctors and the disappearance of the family physician; too much medical paternalism and too little concern for patients’ rights; social and geographical inequalities in the distribution of medical care. But these and other criticisms were overshadowed by the grim economic facts. Health care costs were rising at an ominous rate, even when the figures were adjusted for inflation and related to national growth. Furthermore, Starr points out, there was no evidence that all the billions of additional dollars being spent each year were buying better medical treatment. To the contrary, as critics suggested, money was being wasted in the excessive use of hospitals for the diagnosis or treatment of conditions that could be managed as easily—and less expensively—in local clinics or doctors’ offices. They also argued forcefully that there was much money wasted in constructing and maintaining unnecessary or duplicated health care facilities, and in the use of many kinds of medical technology that were of marginal or unproven value.

Throughout the 1970s the federal government and the states attempted to respond to the “crisis” with various efforts aimed at slowing medical expenditures, but with little success. Facing the immediate threat of a federally imposed limit on reimbursement for hospital costs, and the prospect that the government would impose limits on physicians’ fees, medical and hospital organizations mounted campaigns to persuade physicians and hospital administrators to limit costs. In view of the reluctance of doctors to impose financial restraints on themselves, the results, as Starr notes, were predictably modest and short-lived. Health costs continued to rise and in 1982 reached $322 billion, or approximately 10.5 percent of the GNP. National health insurance, which only a few years ago seemed like an idea whose time had come, was swept away from political consideration by concerns about its cost, including the fear that any comprehensive insurance plan might bankrupt the federal treasury.

Meanwhile, beginning in the late 1960s, soon after the introduction of Medicare and Medicaid, the economic structure of the health care system began to change dramatically. Corporations set up by investors to make profits were getting into the business of health care and competing with voluntary nonprofit hospitals for federal and private insurance money. Such corporations built or acquired general hospitals, psychiatric hospitals, nursing homes, the prepaid group practices called “health maintenance organizations” (HMOs), ambulatory surgical centers, free-standing and in-hospital emergency rooms, renal dialysis centers, diagnostic laboratories, home care services, and a wide variety of other health care facilities and services. These new companies were seeking to make money from an expanding health care system and from government and private insurance arrangements that virtually guaranteed profits to any business capable of raising the capital necessary for the initial investment. Within a relatively short time, a huge new industry arose, which gave every sign of continuing its rapid growth in the years ahead.*

At the same time, many private “not-for-profit” hospitals and other health care institutions were beginning to resemble their profit-making competitors in their aggressive search for more patients and more income. Whether in response to the competition from the rising number of profit-seeking health organizations, or to the increasing financial pressure from the insurance companies and others who were becoming reluctant to pay, many voluntary hospitals have begun to market their services more aggressively. They have reorganized their corporate structure to allow them to acquire various kinds of satellite and affiliated institutions such as nursing homes or medical office buildings. Some nonprofit hospitals, Starr points out, have even tried to make money by establishing charitable foundations that own businesses that can in turn contribute their earnings to the foundation for the benefit of the hospital. Competition for medical business and for new sources of income has thus impelled many voluntary hospitals to become more commercial and entrepreneurial.

Starr shows how health care, once considered a social good, a right of every citizen even if he were poor—is now being marketed and sold for profit in a competitive marketplace as if it were a private commodity. Whereas providing medical care was traditionally the responsibility of public institutions, or of private voluntary organizations, investor-owned corporations were now taking over an increasing share of patients—but of course, only those who could pay. The “nonprofit” institutions were either selling out to the corporations or were forced to imitate the commercial methods of their profit-seeking competitors. Entrepreneurial hospitals, whether for profit or nonprofit, were not interested in treating those who could not pay, and so hard-pressed public hospitals and the large teaching hospitals were being forced to bear an ever-increasing burden of unreimbursed medical care. Two-class medicine, which Medicare and Medicaid had been designed to eliminate, was not only continuing, but being reinforced.

In this increasingly competitive climate, with the delivery of health care becoming ever more dominated by corporations and a business philosophy, the former control by the medical profession of markets, health facilities, and standards is now in serious jeopardy. In a final chapter (“The Coming of the Corporation”), Starr describes the rise of corporate health care and argues that “unless there is a radical turnabout in economic conditions and American politics, the last decades of the twentieth century are likely to be a time of diminishing resources and autonomy for many physicians, voluntary hospitals, and medical schools.” Until now, he says, physicians and the voluntary hospitals they have used as their workshops have been preoccupied with resisting government regulation; but they may be on their way to losing their independence to another master—the new health care corporations. “Medical care in America now appears to be in the early stages of a major transformation in its institutional structure, comparable to the rise of professional sovereignty at the opening of the twentieth century.”

According to Starr, the main reason for the profession’s loss of autonomy is the growing power of corporate health care organizations to build and control health care facilities and to employ or contract with physicians. Hospital and clinic managers, reporting to corporate executives rather than to members of the medical staff, will have more responsibility—and physicians less—for the critical decisions that determine where the money and medical technology will go. More physicians will be salaried employees and fewer will be independent fee-for-service practitioners.

This turn of events,” Starr concludes,

is the fruit of a history of accommodating professional and institutional interests, failing to exercise public control over public programs, then adopting piecemeal regulation to control the inflationary consequences and, as a final resort, cutting back programs and turning them back to the private sector. The failure to rationalize medical services under public control meant that sooner or later they would be rationalized under private control. Instead of public regulation, there will be private regulation, and instead of public planning, there will be corporate planning. Instead of public financing for prepaid plans that might be managed by the subscribers’ chosen representatives, there will be corporate financing for private plans controlled by conglomerates whose interests will be determined by the rate of return on investments. That is the future toward which American medicine now seems to be headed.

Starr’s predictions may well be correct—although at the end he hedges his bets by observing that “a trend is not necessarily fate” and that what will really happen “depends on choices that Americans have still to make.” He is certainly right about the increasing power of the corporations over our health care system and their challenge to the independence and authority of the medical profession. Unfortunately this last and most provocative chapter is too brief. It raises many disturbing questions but examines none in depth. Nowhere, for example, does Starr mention the ethical issues that arise when physicians are employed by, or own equity in, health care corporations.

Will doctors employed by profit-seeking businesses continue to serve their patients’ interests first, or will their professional judgment be influenced by the economic interests of their employers? And what about the growing number of physicians who are becoming partners or investors in such businesses? Will they act as businessmen or as trustees for their patients? If the medical profession has any claim to special treatment by society, it rests on a moral commitment to put the patient’s welfare above personal gain. Can this claim be sustained if doctors become part of a commercialized health care industry?

These questions are likely to become even more important as a result of a recent change in the way the government pays hospitals for Medicare patients. Instead of reimbursing hospitals for the costs of treating each patient, the government will pay a fixed but different amount for each type of medical problem, regardless of how much service the patient actually receives. If a hospital spends less than the preassigned payment for a patient with a given problem, it can keep the difference; if it spends more, it must meet the deficit from its own resources.

This new Medicare system will revolutionize the economics of hospital care, particularly if it is also adopted by the insurance companies and other third-party payers. The idea is to give hospitals an incentive to reduce their costs, but they can’t do this very well without the cooperation of their medical staff. Doctors largely determine how much hospitals spend in the diagnosis and treatment of each patient. Not much economy can be achieved unless the doctors use fewer tests and procedures and make every effort to shorten the length of hospital stays. Physicians will have no economic incentive to do that—indeed, independent practitioners paid on a fee-for-service basis may have incentives to do just the opposite—unless they either are employed by the hospital or share in the hospital’s profits through some sort of joint venture. Many hospitals, as well as businesses providing health care outside the hospital, are now considering such arrangements. Their effects on the quality of care will have to be watched very carefully. This development is too recent to have been included in Starr’s book, but it illustrates how rapidly the “social transformation of American medicine” is proceeding.

During the next few years, at least, most doctors will not be working for the corporations, although many may choose to invest in or enter into joint business ventures with them. Unless the health care corporations hire large full-time medical staffs (an unlikely prospect at least for now) they will still depend on independent doctors to refer patients to their hospitals. Profit-making as well as voluntary hospitals will therefore continue to court the patronage of doctors without controlling them. Physicians still have strong influence over our health care system for precisely the reasons Starr so clearly gives. The future depends not only on the choices that the American public still has to make, as Starr says, but on whether doctors will decide to become businessmen and entrepreneurs, or will decide to represent their patients’ interests, including those patients who are not well-off or lack adequate medical insurance.

As a member of the medical profession I find that what I fear most about the increase of medical commercialism is not that it will cause a loss of control by doctors but that it will erode the ethical foundations upon which our profession rests. The moral commitment of physicians to put their patients’ interests first has given the medical profession its “authority”—that, and its technical competence. About medical treatment and research itself, Starr has little to say. And while he reasonably implies that doctors should have been devising more equitable schemes for health care, he does not suggest how the moral obligations of doctors should be fulfilled. Nor, it must be said, have most of the other experts who have written on fundamental questions of health care. At least Starr has provided a historical analysis that will be indispensable to any discussion of the medical profession’s responsibilities and its future.

  1. *

    For a description and analysis of the growing health care industry, see a new book by Stanley Wohl: The Medical Industrial Complex (to be published by Harmony Books in April).

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