Saturday, August 8, 2009

The Commercialization of Medicine

As Congress breaks for its summer recess, the SpineBlogger decided that it would benefit our readers to revisit and think about how do we effect change in the U.S. healthcare system. The major challenge that we face is not just a divided Congress and country, it's about an uneducated and misinformed American public. Since U.S. expenditures for healthcare exceeds over $2 trillion per annum, affected by 46 million uninsured and underinsured citizens, that with one diagnosis can incur personal bankruptcy, or, add to the ever rising cost of medical care, it is obvious that the American healthcare system is broke. In other words, the high cost of delivering medicine is the crux of our economic problem.

Since the basic purpose of medicine is different than the commercialization of medicine, the U.S. needs to revamp our model. Market forces are now at the center of the debate. Just like JFK had to deal with a military industrial complex that was undermining his efforts at peace, BO is confronted in having to deal with a healthcare industrial complex (HIC) looking to undermine his efforts to salvage healthcare. The composition of the "HIC" includes, private investors, for profit insurance and hospitals, non-profit entities, pharmaceutical and medical device companies, and physicians. Market forces have shaped the current healthcare system.

Income maximization is the only incentive for those of us that collaborate on a day-to-day basis. The question must be asked, "how long will we all hide behind a mantra that opposes government involvement? Just look at the scrutiny that exists in our industry. Ten years ago we never heard of the DOJ investigating our industry practices. Somewhere our industry became like the old Black Sabbath lyrics, "I'm going off the rails like a crazy train."

The 90's gave us HMO's, then the PPO's, so where will the great debate lead us next? With the advent and power of the internet, and the commercialization of medical and pharmaceutical products on television, companies have created a consumer driver healthcare industry. This insanity has physicians becoming slaves to infomercials that fail to educate a patient about the efficacy of a product. If Congress would put aside its ideological differences, and stop placing special interests aside, and explain the nuances of this public healthcare plan, maybe the American public would stop acting irrationally. Isn't it embarrassing when a senior citizen gets up in the South and exhorts that government should stay out of their Medicare?

As one of my foreign readers asked, "why do you spend time politicking about healthcare?" I had to laugh. The answer was simple: "Just like Wall Street almost bankrupted the U.S., the American Healthcare System will bankrupt America!" Look at our industry. How many millions of dollars have been invested into products that investors don't have an inkling as to whether this product is truly an emerging technology, or, is this a product looking for an indication. Isn't it entertaining when you read an investors take on why they just infused millions of dollars into a company, just look at what happened at IST, Vertebron or Inion. These "Captains of Industry" use the right buzz words, yet, if any of us asked a clinical question as to the potential outcomes they wouldn't have a clue as to how to answer it.

So as we wind down to the end of a great summer, the SpineBlogger wants to know what you blokes and blokettes think is going to happen? And remember, don't Glenn Beck me!


  1. I'm not going to "Glenn Beck" you, but I am going to tell you that the lyrics, "I'm going off the rails like a crazy train." is from Ozzy Osbourne's Crazy Train (1980's Blizzard of Ozz). Ozzy was fired from Sabbath in 79. If you are going to choose a song, I would pick "Welcome to the Jungle" by Guns & Roses...

  2. Hey Mike, you know what Wayne use to say; "Excellent!" I like your knowledge of rock n' roll, because when it all comes down to it, it's only rock n' roll!

  3. I actually attempted to read the health-care bill. I felt inclined to disagree with it but did not think it was fair to disagree if I had not at least attempted to read it. This bill is the most unintelligible, non-sensical and confusing document that has ever been written. It is disorganized and completely full of ambiguous terms. For example, there are many paragraphs that begin with the words... ("In general."). The health-care system must be improved and made more cost efficient...but not through this horrendous piece of litigation.

  4. Wil: Like yourself I have attempted to read most of the bill. Ever ask yourself the question, why do legislators make things so complicated? I understand the law since I have a few family members that are attorneys, yet, reference upon reference, is ridiculous. This document is what confuses the general public. Yet, let's be honest, no one involved in the delivery of healthcare is willing to give an inch if it means losing revenue, and that's where the problem lies.

  5. So... Transparency will resolve the healthcare debate??? I don't understand your point. I will offer my own. Rather than Healthcare providers and lawmakers working "with" the HIC, they need to learn how to run "like" the HIC (or business in general). We need MORE consumer driven healthcare. After all, what is the point of healthcare? To improve the health of the patient (i.e. consumer). In any other sector of the economy, if a company is not satisfying their customers, the company will not be successful. The big barrier to more consumer driven medicine is transparency in efficacy. If consumers can choose providers based on efficacy with certain procedures, pathologies, etc., you will see hospitals specializing in what they are good at, thus improving results and efficiencies even more. The current bill should focus on covering the uninsured, but should mandate some type of reporting on efficacy. (these are not original ideas, check out Michael Porter's "Redefining Healthcare") One other thing, kind of a low-blow about the guy from the South. Where are you from? I'd rather live next to that guy than some a-hole in New Jersey that starts honking at me 10 seconds before the light turns green. There are ignorant people everywhere (even in the blog world).

  6. I agree with the last post and that we need a more consumer driven HIC. And to do that we need transparency from ALL concerned. Most of us who are truly interested in making healthcare better have at least attempted to read the bill before our congress. How many of you have tried to read a hospital bill to a patient or provider?

    In many instances we point towards the high cost of the implantable from the manufacturer (and there is room for work there) to the hospital without looking at what the hospital then charges the Insurance company, medicare or the patient. In most cases they will charge TRIPLE the price for what? allowing the physician to implant it? For the implants they no longer purchase? For the instruments the reps and manufactures now provide them? Or maybe this is to help cover the cost of putting programs like RepTrax into the system to protect the patient (sorry couldn't resist that one).

    And it doesn't stop with just the implant itself, look at a hospital bill and what they charge for a simple aspirin, look at what you pay for a 7 up if you request one without your meal. The bill itself is so confusing it is scary and I work in the industry what do you think these invoices look like to the average person with little to no working knowledge of the industry. For many cases the hospital will scan or open a custom pack of disposables to get one or two items out of the pack yet charge the customer two to three times the cost of the whole pack.

    If you question the hospitals about these things the standard answer is "it doesn't matter we receive a global payment for most procedures". Sure they do from Medicare and then they file for the good old disproportionate payment for "losing" money on the case. They then rase all of the procedures costs the next year to cover their "loss" from the year before. And what about the self pay patient who then signs on for a payment plan to pass down to their children to cover this bill.

    The truth is they have been playing in the equivalent of a cost plus system for so long they no longer know their actual costs or how to compete. I have had many hospitals look me in the eye and say they are losing money on procedures and when I show them a savings their response is "we can't by that your not on the contract". Silly me I thought the purpose of contracts was to SAVE money not spend it.

    Although somehow we have to have some regulation to get this under control forgive me if I'm not convinced that and entity (GOV.) which purchases hammers for $750.00 and toilet rings for $500.00 is the right person for the job.

    Competition is the true answer and to have competition you have to have a level playing field in which all people play by the rules and to play by the rules you have to be able to understand them.

  7. Doug: Thanks for your commentary. But why all the animus? I think we would all agree that anyone making the comment that Government should not touch their Medicare is ridiculous. But let's get down to the meat and potatoes of the debate. Cost is the central problem in healthcare and it generates most of the other problems associated with the system. In virtually every specialize field, technological advances have produced more expensive devices, and techniques for diagnosing and treating patients. An argument can be made that increased expenditures are buying better health and a longer life, and that those benefits are worth the cost. Yet, the question must be asked; is there a correlation between spending and longevity? It simply can't be argued that we are getting a good value if citizens in other countries enjoy better health that we do. Just look at where we rank? But correlation is not the same as causation, because we know that some of our improved health is attributed to a healthier lifestyle. Did your mother or father exercise and eat the same way that you do? In all likelihood, no!

    Reasoning assumes that healthcare expenditures are the result of accumulated free choice of consumers deciding on how they will spend their money. Those who receive medical care do not have a free choice, like ordinary consumers. People receive medical care because they have an injury or illness that has created a need. The identification of that need is determined by the doctor. Supply and demand forces are not operative in the healthcare system and it has been proven that pricing is not as important in determining demand for services as they are in other aspects of our economy. But if you are opposed to any bill that would cover the uninsured and underinsured, my question to you is, who absorbs the cost of covering those people? You and I! Competition in health care differs from competition in commercial markets in that it does not involve price, so where is the benefit to the public? Do physicians advertise their fees? Do hospitals ever advertise themselves as offering a consumer/patient better services at a cheaper price? Do you pay for your own healthcare? Or, are you provided coverage through your employer? Access to healthcare is limited largely to those who can afford it, or those whose employers subsidize it. As expenditures continue to rise in both the private and public sectors, insurance premiums will rise. Do consumers have the ability to judge the quality of service and make informed decisions about spending their money wisely on healthcare? At this point, probably not.

    In closing, I appreciate your opinion, but just remember, everyone called for transparency when the government was bailing out Wall Street, yet today, our economy is stabilizing itself because of government involvement. The beauty of blogging is that no one has to agree with me, because its only my opinion, yet, considering your response it's good to know that you do care about what happens. Keep on reading and keep on fighting the fight!

  8. • First of all, look at other industries for the model, not the failing healthcare system. New technology is expensive, but it provides value. In a fair, competitive economic environment prices fall along a standard cost/value curve, making higher value technology more expensive. However, as competition enters the marketplace prices plummet. Competition breeds innovation to do things cheaper (and better). Look at VCR’s, DVD’s and more recently Blu-ray players. Very expensive until more players enter the market and drive costs down. Why is the healthcare system immune to basic economic principals of the capitalist system?
    • Also, you are looking at through the eyes of the plumber instead of the eyes of the contractor. Devices and pharmaceuticals make up a small percentage of the overall healthcare expense in the US (only around 10% I think, but I don’t have time to check) There are bigger issues at play.
    • You mention that people do not have a free choice, like ordinary consumers and that an injury or illness requires medical care. I agree that people have little choice but to seek medical care when an injury or illness arrives, but I disagree that it is any different than a man that MUST by an automobile to provide transportation to and from work, or a house to provide shelter or food to provide nourishment. The point is, with these examples, the consumer has information (price, durability, features, nutritional information, etc.) that helps him make the right decision for himself. An informed consumer drives prices DOWN at the provider level.
    • You mention that demand for healthcare is exempt from the supply/demand forces of the rest of the economy. I disagree. Demand for healthcare is relatively inelastic due to the necessity of care and absence of substitutes. Because of this inelasticity, it is IMPERITIVE that the market is a fair playing field with lots of competition to drive down prices. A fair playing field in this case involves transparency in value (efficacy).
    • As for consumers’ ability to choose the best therapy for themselves, of course they cannot. They need the advisement of a doctor. For an analogy I will say that the doctor is like a stock broker or attorney on steroids. We need to rely on their knowledge and judgment, but the overall decision lies with the patient, and we need more information to make the right decision for us.

  9. Doug, or should I say "Mr. Friedman" I am lucky enough to bike or walk to work & do not require a car to travel to my job, hence I am unable to honk at someone here in the northeast! IMHO I find a few of your analogies a little lacking. To compare VCR and Blu-Ray players to say; the pedicle screw market can't hold up. Yes a SONY VCR came down as other manufacturers entered the marketplace, but I haven't seen the same benefit as 3 or 4 medical device companies originally designed and marketed pedicle screw systems and has now grown over the years to 20+ companies/systems marketing pedicle screws with little difference in price compared to the early days of the technology (even taking into play inflation). You could easily insert "cage" or "plate" instead of pedicle screw in the previous statement.

    Pharma companies can always fall back on their "R&D costs" that can exceed millions of dollars to bring a drug to market and justify their huge dispensing fees to the public. Device companies on the other hand, take an existing design and change a thread pitch, cutting flute, blocker design, etc. to get around IP...manufacture it for fifty bucks a unit(possibly overseas)....and then sell/market it for a list price that I would garner has not come down as competition has entered the marketplace similar to your VCR example. Just my humble opinion.

  10. Orthoneuroeng: Thanks for your commentary. I have to agree that allowing the free-markets to rein in the cost of medical care has not worked. Unfortunately, there are some economists, politicians and business people that will argue on behalf of free markets. Consumers may be able to determine which doctor they may want to go to, yet, the physician determines the diagnosis and the modality of treatment providing the consumer/patient with options. Unfortunately, those that oppose any type of healthcare for the underinsured and uninsured are attempting to simplify a market that isn't that simple especially if your life is on the line. Thanks for your commentary and keep on blogging.

  11. I'm going to have to put in some support for Doug here as I believe that we have never given free market an opportunity in the US.

    In the US for the most part we have always had a triangle where the consumer purchases the insurance and the insurance pays the provider. Due to this pool of money the amount they can pay for procedure is dramatically higher than if each individual were to just negotiate and pay for their own. In most instances even if you can get a copy of your bill from the insurance company you cannot understand it well enough to actually know what you are paying.

    Most consumers in the US still believe that it is the physician that is driving the cost of medicine out of the park when in fact if you look at surgical procedures the surgeon is less than 10% of the overall cost. This is odd when you consider most patients rate their satisfaction with their doctors well above the 80 percentile.

    The hospitals and the insurance companies have done a fantastic job of confusing the American public and keeping them uneducated in the actual delivery of medicine and until this changes it will be difficult to affect change in the system.

  12. Rookie/Seeking1ValueDecember 1, 2010 at 10:46 PM

    Healthcare functions on basic market forces but doesn't benefit the ultimate customer: the consumer, as do other industries. Contrary to other countries, the US pays a price premium for drugs and medical devices and as some would say, "the US subsidizes the rest of the world" when it comes to paying for healthcare, which is total Bull---t. It is hubris and typical American to believe our system is superior to the rest, when we are to blame for our own misfortunes. Why DO we pay more for a drug than Europeans if capitalism is the proper way to run the economy? Why are Americans having 3-4x the spine surgeries than the rest of the world on a per capita basis? Why does Medicare spend more per beneficiary in TX, FL and CA than in the midwest or northeast if we are not paying for the uninsured/underinsured/undocumented workers? Why do we mandate hospitals to admit anyone to the ER and allow doctors to offset negotiated rates with volumes on a fee-for-service basis? All this is because consumers aren't the ultimate customer, we are just paying for it because we are the peons who fund the system due to a tremendous imbalance of power in which there are semblances of a ponzi scheme here. There are plenty of Madoffs out there who are able to obfuscate the true value of services that we pay for in other ways. The government enables this bad bahavior by not regulating those same stakeholders who are predesposed to bad behavior. I'm referring to doctors who pursue a particular branch of medicine because there are big bucks to get rich instead of something like helping the sick, or the researcher who tilts the outcome of a clinical trial because their palm has been graced with green, or an insurance company that rejects claims on bogus rationale so someone who is genuinely ill will get treatment. This list is long and I don't know what to call it, but it is not run on fair economics in which price should be a function of supply and demand. There are too many imbalances and it will probably get worse before it will get better.