Technology, aided by the information revolution and faster and cheaper computers, has exploded. Newer and more powerful imaging devices, moving cardiac cath labs out of the hospital, enhanced lab analyses and creating a completely new flow of information are making medical decisions easier and faster. For some physicians, they can be on call and never leave their homes. An orthopedic surgeon can have a huge LCD screen in his living room. The hospital and some of the clinics where he works can route digitized X-ray images to that screen and he can then decide the next step.
Rural America has benefited by having high-speed information flow to and from major medical centers.
But it’s not clear whether all this new technology is helping the bigger picture. Are we a healthier nation? Are our mortality rates dropping? Are we better off now than X-number of years ago?
And, the cost of health care in the aggregate for the nation soared some more.
The pharmaceutical revolution also played a role in the high cost of medical care. With a “free market” and a compliant Federal Drug Administration, Big Pharma began pumping drugs into the public’s minds through massive direct-to-consumer advertising campaigns — huge ad campaigns on TV and, since women make many of a family’s health decision, women’s magazine. It’s massive, but only part of the sales job.
Pharmaceutical representatives called on doctors to “educate” them on the latest and greatest therapy. Some of these drugs have not proven to perform better than cheaper and older generic stand-bys, but writing the prescription for the brand name drug earned the doctors’ privileges — like being asked to tear himself away from his Minnesota practice in February to present company-authored research at the Maui Hilton. The firms covered the air fare, hotel and greens fees.
Then, of course, the pharmaceutical industry told the American people three other things it hoped the public would believe.
The first is that it costs millions of dollars to bring a new and drug to market. And yet the industry had to contend with problems with drugs like Vioxx that was pulled from the market for being tied to heart attacks. It doesn’t take much research to see the problem. About twice a month we read about the need to pull a drug from the market or to change the labeling because of nasty side effects. Until either a lawsuit or congressional probe, the public may never know how much it will cost to bring a new drug to market.
Second, BigPharma invented drugs and found a disease it would treat, filling the public’s mind with made up problems in direct-to-consumer ads. An example? Restless leg syndrome. Effexor found generalized anxiety disorder (GAD); and, a patient’s depression about Effexor’s cost can mean a prescription for Prozac.
Third, by tweaking a formula, drug companies tried to convince the ethical physicians that the older formula won’t work as well or it’s not designed for the therapy. An example: Genentech makes Avastin and Lucentis. Both are ranibizumab. It marketed Avastin for treating colorectal and lung cancers and Lucentis for macular degeneration and some other rare conditions. Avastin is about $75 a dose; Lucentis is about $2,500. Genentech argues that using Avastin for eye treatments is “off-label” and shouldn’t be done. But a reputable retina specialist will tell you that Avastin is just as good, if not better, for treating certain eye diseases. And, the recent ruling against Johnson & Johnson over Risperdal, which it marketed “off label” pretty much tells the story of BigPharma’s hypocrisy as it contradicts itself.
These massive and multi-million dollar efforts to convince Americans a little pill will do you had to be paid for by someone and those costs, too, were passed on to the consumer or the insurance company.
But insurers noticed how their drug costs were rising, and those brand name drugs are costly. Now, they set limits on which drugs doctors can use and the costs. If the drugs don’t meet the profit criteria for the drug company after insurance firms cut costs, then the consumer has to pay the difference. Or the consumer has to forgo taking the drug.
The reason that the current approaches to health care reform will not work are because neither the politicians nor the public wishes to educate itself on the history of health care in the United States. Further, by ignoring the history public policy makers are ignoring solutions that may work. But, clearly the other reason the public won't benefit from health care reform are:
• The medical community shot itself in the foot by loosing control of the medical decisions and will have a hard time getting control back;
• The institutional part of the health care industry has betrayed its charitable history, its decency and its doctors and patients by accepting the free market model without a fight. Leaders of the industry and the medical profession need to decide what the system should look like, curb any greed, which is not good, and stand up for what’s right — show some courage; as a former hospital administrator, I can say I’ve never met a group with less backbone.
• The insurance industry became the more powerful player in the system, taking away choices from patients and doctors alike. Congress needs to regulate it, treating health care insurers including all forms of HMOs as public utilities; but, it won’t.
• Congress has been useless, lacking the will to tackle the problem. They are, almost to a person, bought and owned by the corrupt corporate interests and don’t want to give up the bribes, both blatant and subtle that go with protecting the system;
• The media have failed our nation. Corporate media will not offend the advertisers. And, it would rather report on celebrities than do a good job of explaining our failing systems. Media leaders need to accept a lower rate of return and recognize that with press freedom comes press responsibility and change the business model to do so. And it needs help foster a renewed appreciation for education; and,
• Consumers and patients have failed themselves, tolerating politicians who pander and line their pockets from a corrupt system. And they too would rather read about Britney and Paris, rich ne’er do wells, than serious stuff that actually affects their lives. Parents and older people should also engender an appreciation for education and knowledge and should assist in boycotting those businesses that continue to foster the problems outline above.
Thursday, November 21, 2013
Why health reform won’t work — a historical perspective - Part 2
Ronald Reagan had won the 1980 election and his pro-big business push for supply-side economics, lower taxes and deregulation changed the course of America’s economy. Remember the famous line from the movie “Wall Street,” uttered by Michael Douglas’ character, “The point is, ladies and gentleman, that greed, for lack of a better word, is good. Greed is right, greed works. Greed clarifies, cuts through, and captures the essence of the evolutionary spirit. Greed, in all of its forms; greed for life, for money, for love, knowledge has marked the upward surge of mankind. And greed, you mark my words, will not only save Teldar Paper, but that other malfunctioning corporation called the USA.”
And what of the health care industry?
First and foremost was the illusion that the entire American economy was classical free market. The rules that applied to food and air travel and other transactions now were said to apply to the health care industry. Some of this was sold as “consumer driven” health care.
But health care is not a “free market” commodity. The basic free market, supply and demand rules don’t apply. Here is why:
1. There is little price elasticity, which means no matter how many doctors there are, the price won't change much because (a) patients/consumers don't have free market knowledge of the price, (2) patients/consumers won't price shop because they don't choose their physician that way even if they could and (c) because the private insurance company sets the price through negotiation with the doctors, hospitals and other providers. And, don’t forget, these are products that, in the main, most people really don’t want to buy.
2. There's no free entry into the market. Physicians are licensed by the state and must graduate from an accredited school of medicine or osteopathy and not everyone can get into a school of medicine or osteopathy. Or pass licensure exams. You just can’t hang out your shingle and pretend to play doctor. And, to argue that the market action and lawsuits over bad outcomes would prevent this is illusory because it’s only the survivors could sue. Let that sink it.
3. There is no free choice among doctors and hospitals because private insurance provide high disincentives for patients going "out of network." Or your private HMO won't allow a certain test or x-ray — a decision made by a bureaucrat in private industry, not a qualified medical professional.
4. Buyers and seller don't have equal knowledge of the product or service — unless the patient is another clinician, the consumer can't choose by quality, which means "competition" is based on non-rational factors while the marketplace is supposed to be rational.
5. Supply creates its own demand and raises prices because with an over-supply there is under-utilization, leading to spreading overhead over a smaller patient base, which all insurers pass on as premiums.
In the 1980s, the reason for turning the patient into a “consumer” was easy because of a backlash against the medical profession. The paternalistic approach of many physicians was such that they bristled that a patient or patient’s family could question them. But after the tumultuous 1960s and early 1970s, aided by the women’s movement, all consumers wanted to be empowered. And, to be fair about it, many folks were better educated and could ask decent questions about their medical issues. The majority of the population still didn’t understand the sea change in the economics of health.
Then, with Kenneth Cooper and aerobics and the “get healthy” movement grew, the insurance firms saw another way to shift the burden of cost to consumers. If you weren’t in shape, exercising and eating health, any disease problem was the patient’s fault. Never mind that it as unfair to millions who became ill through no fault of their own. But, it was an easier sell to tell people they were responsible for their own health care decisions — and for paying for gym memberships — than it was to deal with lower profits from paying hospital and doctor bills.
Deregulation also dismantled the national mandate for Certificate of Need although some states retained their capital regulation programs; but, for the most part, Reaganomics opened the door to massive building booms and equipment acquisitions that continue to this day. Contractors, big equipment manufacturers (GE, Picker, Siemens), medical device makers and suppliers had a field day.
But the floodgates that opened the competitive free-for-all had consequences: overbuilding meant over-supply and those costs had to be recouped. So, the list prices of the services skyrocketed and some of the insurers and HMOs put their collective feet down. So did Medicare and, consequently Medicaid, which took much of its guidance from Medicare regulations. One could argue, by the way, that Medicare was the first to try reining in costs and insurance firms followed.
Either way, what matters is that the revenue that hospitals and others lost had to come from somewhere. And it came from those insurance plans that could hike premiums as they saw fit or from those without insurance or who chose to pay. The two “uninsured” groups were the very rich, who in their own way are self-insured; and the poor and working poor who couldn’t afford the premiums or whose employers didn’t have health coverage. For the former, the massive bills didn’t matter; for the latter, the burden was crushing.
The cost of health care in the aggregate for the nation soared.
But the deregulation also killed another program before it could really help rationalize the system. The comprehensive health planning legislation of the mid-1970s recognized that emergency medical and trauma services needed to be coordinated. The levels of trauma care were established and systems of routing patients to different levels of hospitals had begun. But the deregulation ended that initiative also.
And, the cost of health care in the aggregate for the nation soared.
Meanwhile, the hospital administrators had sold the doctors down the river a long time ago. Certificate of Need programs gave them the excuse they needed to not buy capital equipment, especially in non-competitive markets. Of course, that led to friction with physicians, who — especially in competitive markets — were no angels either. In those instances, medical staff played hospitals off against one another.
Hospital administrators also jumped on the marketing bandwagon. “Branding” became popular, so basic maternity services got an interior decorator and the name “Women’s Center.” Fitness services led hospitals to build or invest in health clubs.
The lack for regulation opened the door for some other moves. First, skilled nursing facilities, nursing homes and long term care facilities, boosted by Medicare and Medicaid revenues, burgeoned. For-profit companies dominated the industry, lured by promises of an aging population and Medicare’s focus on controlling hospital costs. Add to that, the rise of for-profit HMOs as part of the for-profit insurance industry and the focus become one of bottom line, not patient care. Then, to escape the scrutiny of hospital regulations and the controls on revenue, outpatient facilities blossomed, including the free-standing surgery centers, diagnostic imaging centers, GI labs and treatment centers.
And, the cost of health care in the aggregate for the nation soared some more.
Few hospital administrators stood up to the public policy makers to tell them that health care wasn’t just another commodity. Few hospital administrators saw the flaws in the deregulation and, out-numbered by the sycophants who dared not upset the powerful in Washington, cowered in the corner. Few hospital administrators really allied with physicians and their medical staff to create a real team.
While not much in the economic model has changed since the 1980s, two other trends have influenced the health care industry.
And what of the health care industry?
First and foremost was the illusion that the entire American economy was classical free market. The rules that applied to food and air travel and other transactions now were said to apply to the health care industry. Some of this was sold as “consumer driven” health care.
But health care is not a “free market” commodity. The basic free market, supply and demand rules don’t apply. Here is why:
1. There is little price elasticity, which means no matter how many doctors there are, the price won't change much because (a) patients/consumers don't have free market knowledge of the price, (2) patients/consumers won't price shop because they don't choose their physician that way even if they could and (c) because the private insurance company sets the price through negotiation with the doctors, hospitals and other providers. And, don’t forget, these are products that, in the main, most people really don’t want to buy.
2. There's no free entry into the market. Physicians are licensed by the state and must graduate from an accredited school of medicine or osteopathy and not everyone can get into a school of medicine or osteopathy. Or pass licensure exams. You just can’t hang out your shingle and pretend to play doctor. And, to argue that the market action and lawsuits over bad outcomes would prevent this is illusory because it’s only the survivors could sue. Let that sink it.
3. There is no free choice among doctors and hospitals because private insurance provide high disincentives for patients going "out of network." Or your private HMO won't allow a certain test or x-ray — a decision made by a bureaucrat in private industry, not a qualified medical professional.
4. Buyers and seller don't have equal knowledge of the product or service — unless the patient is another clinician, the consumer can't choose by quality, which means "competition" is based on non-rational factors while the marketplace is supposed to be rational.
5. Supply creates its own demand and raises prices because with an over-supply there is under-utilization, leading to spreading overhead over a smaller patient base, which all insurers pass on as premiums.
In the 1980s, the reason for turning the patient into a “consumer” was easy because of a backlash against the medical profession. The paternalistic approach of many physicians was such that they bristled that a patient or patient’s family could question them. But after the tumultuous 1960s and early 1970s, aided by the women’s movement, all consumers wanted to be empowered. And, to be fair about it, many folks were better educated and could ask decent questions about their medical issues. The majority of the population still didn’t understand the sea change in the economics of health.
Then, with Kenneth Cooper and aerobics and the “get healthy” movement grew, the insurance firms saw another way to shift the burden of cost to consumers. If you weren’t in shape, exercising and eating health, any disease problem was the patient’s fault. Never mind that it as unfair to millions who became ill through no fault of their own. But, it was an easier sell to tell people they were responsible for their own health care decisions — and for paying for gym memberships — than it was to deal with lower profits from paying hospital and doctor bills.
Deregulation also dismantled the national mandate for Certificate of Need although some states retained their capital regulation programs; but, for the most part, Reaganomics opened the door to massive building booms and equipment acquisitions that continue to this day. Contractors, big equipment manufacturers (GE, Picker, Siemens), medical device makers and suppliers had a field day.
But the floodgates that opened the competitive free-for-all had consequences: overbuilding meant over-supply and those costs had to be recouped. So, the list prices of the services skyrocketed and some of the insurers and HMOs put their collective feet down. So did Medicare and, consequently Medicaid, which took much of its guidance from Medicare regulations. One could argue, by the way, that Medicare was the first to try reining in costs and insurance firms followed.
Either way, what matters is that the revenue that hospitals and others lost had to come from somewhere. And it came from those insurance plans that could hike premiums as they saw fit or from those without insurance or who chose to pay. The two “uninsured” groups were the very rich, who in their own way are self-insured; and the poor and working poor who couldn’t afford the premiums or whose employers didn’t have health coverage. For the former, the massive bills didn’t matter; for the latter, the burden was crushing.
The cost of health care in the aggregate for the nation soared.
But the deregulation also killed another program before it could really help rationalize the system. The comprehensive health planning legislation of the mid-1970s recognized that emergency medical and trauma services needed to be coordinated. The levels of trauma care were established and systems of routing patients to different levels of hospitals had begun. But the deregulation ended that initiative also.
And, the cost of health care in the aggregate for the nation soared.
Meanwhile, the hospital administrators had sold the doctors down the river a long time ago. Certificate of Need programs gave them the excuse they needed to not buy capital equipment, especially in non-competitive markets. Of course, that led to friction with physicians, who — especially in competitive markets — were no angels either. In those instances, medical staff played hospitals off against one another.
Hospital administrators also jumped on the marketing bandwagon. “Branding” became popular, so basic maternity services got an interior decorator and the name “Women’s Center.” Fitness services led hospitals to build or invest in health clubs.
The lack for regulation opened the door for some other moves. First, skilled nursing facilities, nursing homes and long term care facilities, boosted by Medicare and Medicaid revenues, burgeoned. For-profit companies dominated the industry, lured by promises of an aging population and Medicare’s focus on controlling hospital costs. Add to that, the rise of for-profit HMOs as part of the for-profit insurance industry and the focus become one of bottom line, not patient care. Then, to escape the scrutiny of hospital regulations and the controls on revenue, outpatient facilities blossomed, including the free-standing surgery centers, diagnostic imaging centers, GI labs and treatment centers.
And, the cost of health care in the aggregate for the nation soared some more.
Few hospital administrators stood up to the public policy makers to tell them that health care wasn’t just another commodity. Few hospital administrators saw the flaws in the deregulation and, out-numbered by the sycophants who dared not upset the powerful in Washington, cowered in the corner. Few hospital administrators really allied with physicians and their medical staff to create a real team.
While not much in the economic model has changed since the 1980s, two other trends have influenced the health care industry.
Why health reform won’t work — a historical perspective Part 1
The economic model of the United States’ health care system — which really isn’t a system — is not the supply and demand free market model some would have you believe. And some of those who want you to believe that it is a free market knows full well it isn’t, but fooling the public serves certain purposes.
And one of the business sectors foisting this lie on the public is the insurance industry.
It is little known that Blue Cross/Blue Shield not only has its roots in Texas, its seeds were planted by group of Dallas teachers contracting with Baylor University Hospital, according to University of Iowa master’s thesis by Frederic R. Hedinger also credited Baylor. What’s more important than that detail is the plan worked and that it spread across the country, especially during the Depression.
Blue Cross was a benefit plan, meaning it paid for what the doctors thought the patient needed. If the patient needed surgery, the patient got it. And Blue Cross paid the hospital for its charges. The premiums were based on community ratings, which meant that the entire population’s medical needs were estimated and were the basis for the premiums.
Meanwhile, in California, Kaiser-Permanente was formed, becoming the first true HMO. It was a closed panel HMO because the physicians worked for the Permanente Medical Group and the medical group contracted with the insurance plan, Kaiser, which also owned the hospitals. This gave the insurers control of the costs and it succeeded in lowering costs of health corer.
But something happened on the way to the 21st Century.
First, some hospitals and some doctors took advantage of the benefit plans’ no-questions-asked fee-for-service system. Some greedy doctors (surgeons got most of the bad rap) got profligate with diagnoses based on wallet biopsies and performed hysterectomies and tonsillectomies and adenoidectomies. The old joke about hysterectomies was that the only criteria for those procedures were the presence of a uterus and a Blue Cross card, and the uterus wasn’t always needed.
The few rotten apples spoiled the basic for everyone because as people who paid for health care discovered the greed and looked for ways to curb the abuses. So began such things as peer review and utilization review, with the former being doctors who looked over each others’ shoulders and the latter involving non-doctors — and that opened the door for the insurance companies to gain control of the medical decision-making.
Kaiser had a better handle on how to deal with inappropriate utilization. The Permanente Medical Group, which contracted with Kaiser, was essentially told: Here are X-number of lives and our actuarial tables tell us that they will require Y-amount of care. So, here’s the math and the dollars. You take care of folks within that amount and anything you do over it, you eat; you keep the difference to distribute among yourselves.
The doctors watched over the utilization and took care of the over-users. In short, at this point, they retained some semblance of control of the decision-making.
Another part of the story is important and coincides with these mid-20th Centaury events.
Recognize that the structure of the system was that the hospitals were predominantly nonprofit and so there was a certain lack of business pressure with respect to performance and the bottom line. In addition, the people with the financial responsibility on board of directors were the moneyed movers and shakers of the community. Physicians, while having plenty of interest in the hospitals’ functioning well, were neither employees nor contractors. They were free agents within their own organization.
In some communities, working with the medical staff was like herding cats. It’s not that the doctors were evil. It’s that they wanted some things and the hospitals sometimes couldn’t give it. The entire structure was complicated.
At the same time — this was post-World War II and Korea — the population was growing, the need for a full range of services was being demanded and the federal government was there to help. The passage the Hill-Burton Act spurred a boom in hospital contraction that lasted from the late forties until the mid-1970s. While the main purpose was to build hospitals in communities that didn’t have them — read rural — like most federal programs, people who played the game well got the money and hospitals sprang up everywhere. Or, existing hospitals got new wings.
Policymakers came to realize, however, that supply created its own demand. If a hospital built the beds, ORs and x-ray suites and so on, they had to be used to cover the debt service. At the micro level, the community had to pay for the over-building and cover the costs of the resources. At the macro level, pumping patients through the system to fill beds and finance the growth added up to higher costs for the country.
And guess what came along to help fill them? Medicare and Medicaid. They created another revenue stream for the system. In economic terms, they created demand. Remember, though, that some of that demand wasn’t need based on clinical judgment and evidence-based medicine. The model for paying doctors by the procedure and service still prevailed in the early days of those huge programs.
But they also filled hospitals and clinics and added to the total medical and health care costs for the nation. Combine this influx of revenue with the supply creating its own demand, and medical costs skyrocketed. By the way, some researchers noticed that all of these medial resources didn’t lower what were then considered key indicators of a nation’s health — infant and material mortality, life expectancy and other measures of morbidly and mortality.
Around the mid-1960s, scientific advances and medical technology were having a greater effect on medical care .The first kidney transplant had already occurred in Boston in the 1950s. By 1967, Dr. Christian Barnard stunned the world with the first heart transplant. The first CAT scanner came along in the 1970s, but the people who came up with the idea had developed it in the 1960s. And so it went.
But, for all the good the technology did, and it did no doubt, it also drove up the costs. And it was around the mid-1960s we began to hear the word “crisis,” which we’re still hearing today. Some of those people taking about “crisis” were members of Congress. One would think that if they could call it a crisis for 40-plus years, they might have found a way to solve it, but that’s another story.
One of the answers Congress had for cutting costs in the 1970s was to control capital expenditures. It passed a series of law establishing coordinated planning for communities that required states to institute programs to assure that expensive capital expenditures could be justified by community need and not duplicate other services. This was called Certificate of Need, or CON, and remains on the books in some states. If a hospital wanted a new CAT scanner, or someone wanted to build a new nursing home, they had to get approved through a process that justified the expense. The theory was that if s need was proven, the utilization would be optimized.
Some hospital administrators understood this was a good thing for the community, the nation and the system. But as a group they fought CON. Then they got smart and began to work with their doctors and gamed the system — except in two hospital towns. Behind the scenes, medical equipment and hospital construction interests (contractors, architects, etc.) fought CON. But despite the political nature of the local competition for new toys, many felt that the legislation provided for a rational distribution of resources and to some degree held back the growth of health care costs, if only a little.
Was the approach to controlling costs by treating the system as a quasi-public utility a success?
Policymakers will never know. The programs were not in place long enough to fully test them because in 1982, something happened to change the landscape once again.
That and how these forces got the United States to where the system is today are in the next installment.
And one of the business sectors foisting this lie on the public is the insurance industry.
It is little known that Blue Cross/Blue Shield not only has its roots in Texas, its seeds were planted by group of Dallas teachers contracting with Baylor University Hospital, according to University of Iowa master’s thesis by Frederic R. Hedinger also credited Baylor. What’s more important than that detail is the plan worked and that it spread across the country, especially during the Depression.
Blue Cross was a benefit plan, meaning it paid for what the doctors thought the patient needed. If the patient needed surgery, the patient got it. And Blue Cross paid the hospital for its charges. The premiums were based on community ratings, which meant that the entire population’s medical needs were estimated and were the basis for the premiums.
Meanwhile, in California, Kaiser-Permanente was formed, becoming the first true HMO. It was a closed panel HMO because the physicians worked for the Permanente Medical Group and the medical group contracted with the insurance plan, Kaiser, which also owned the hospitals. This gave the insurers control of the costs and it succeeded in lowering costs of health corer.
But something happened on the way to the 21st Century.
First, some hospitals and some doctors took advantage of the benefit plans’ no-questions-asked fee-for-service system. Some greedy doctors (surgeons got most of the bad rap) got profligate with diagnoses based on wallet biopsies and performed hysterectomies and tonsillectomies and adenoidectomies. The old joke about hysterectomies was that the only criteria for those procedures were the presence of a uterus and a Blue Cross card, and the uterus wasn’t always needed.
The few rotten apples spoiled the basic for everyone because as people who paid for health care discovered the greed and looked for ways to curb the abuses. So began such things as peer review and utilization review, with the former being doctors who looked over each others’ shoulders and the latter involving non-doctors — and that opened the door for the insurance companies to gain control of the medical decision-making.
Kaiser had a better handle on how to deal with inappropriate utilization. The Permanente Medical Group, which contracted with Kaiser, was essentially told: Here are X-number of lives and our actuarial tables tell us that they will require Y-amount of care. So, here’s the math and the dollars. You take care of folks within that amount and anything you do over it, you eat; you keep the difference to distribute among yourselves.
The doctors watched over the utilization and took care of the over-users. In short, at this point, they retained some semblance of control of the decision-making.
Another part of the story is important and coincides with these mid-20th Centaury events.
Recognize that the structure of the system was that the hospitals were predominantly nonprofit and so there was a certain lack of business pressure with respect to performance and the bottom line. In addition, the people with the financial responsibility on board of directors were the moneyed movers and shakers of the community. Physicians, while having plenty of interest in the hospitals’ functioning well, were neither employees nor contractors. They were free agents within their own organization.
In some communities, working with the medical staff was like herding cats. It’s not that the doctors were evil. It’s that they wanted some things and the hospitals sometimes couldn’t give it. The entire structure was complicated.
At the same time — this was post-World War II and Korea — the population was growing, the need for a full range of services was being demanded and the federal government was there to help. The passage the Hill-Burton Act spurred a boom in hospital contraction that lasted from the late forties until the mid-1970s. While the main purpose was to build hospitals in communities that didn’t have them — read rural — like most federal programs, people who played the game well got the money and hospitals sprang up everywhere. Or, existing hospitals got new wings.
Policymakers came to realize, however, that supply created its own demand. If a hospital built the beds, ORs and x-ray suites and so on, they had to be used to cover the debt service. At the micro level, the community had to pay for the over-building and cover the costs of the resources. At the macro level, pumping patients through the system to fill beds and finance the growth added up to higher costs for the country.
And guess what came along to help fill them? Medicare and Medicaid. They created another revenue stream for the system. In economic terms, they created demand. Remember, though, that some of that demand wasn’t need based on clinical judgment and evidence-based medicine. The model for paying doctors by the procedure and service still prevailed in the early days of those huge programs.
But they also filled hospitals and clinics and added to the total medical and health care costs for the nation. Combine this influx of revenue with the supply creating its own demand, and medical costs skyrocketed. By the way, some researchers noticed that all of these medial resources didn’t lower what were then considered key indicators of a nation’s health — infant and material mortality, life expectancy and other measures of morbidly and mortality.
Around the mid-1960s, scientific advances and medical technology were having a greater effect on medical care .The first kidney transplant had already occurred in Boston in the 1950s. By 1967, Dr. Christian Barnard stunned the world with the first heart transplant. The first CAT scanner came along in the 1970s, but the people who came up with the idea had developed it in the 1960s. And so it went.
But, for all the good the technology did, and it did no doubt, it also drove up the costs. And it was around the mid-1960s we began to hear the word “crisis,” which we’re still hearing today. Some of those people taking about “crisis” were members of Congress. One would think that if they could call it a crisis for 40-plus years, they might have found a way to solve it, but that’s another story.
One of the answers Congress had for cutting costs in the 1970s was to control capital expenditures. It passed a series of law establishing coordinated planning for communities that required states to institute programs to assure that expensive capital expenditures could be justified by community need and not duplicate other services. This was called Certificate of Need, or CON, and remains on the books in some states. If a hospital wanted a new CAT scanner, or someone wanted to build a new nursing home, they had to get approved through a process that justified the expense. The theory was that if s need was proven, the utilization would be optimized.
Some hospital administrators understood this was a good thing for the community, the nation and the system. But as a group they fought CON. Then they got smart and began to work with their doctors and gamed the system — except in two hospital towns. Behind the scenes, medical equipment and hospital construction interests (contractors, architects, etc.) fought CON. But despite the political nature of the local competition for new toys, many felt that the legislation provided for a rational distribution of resources and to some degree held back the growth of health care costs, if only a little.
Was the approach to controlling costs by treating the system as a quasi-public utility a success?
Policymakers will never know. The programs were not in place long enough to fully test them because in 1982, something happened to change the landscape once again.
That and how these forces got the United States to where the system is today are in the next installment.
Thursday, November 14, 2013
A Change in Situation
As long as I’ve been a journalist, I’ve felt ethics and transparency were keys to how I comported myself and how I guided The Amarillo Independent. I tried to uphold high standards when the Indy was a print product and then when I converted it to a news website.
The Independent’s political and public policy positions, when in print and online, mostly reflected my own views, although sometimes molded and tempered by others working with me. Then, at the end of August, I converted the website to a blog — a personal blog for which I was solely responsible.
But I now must disclose a change in my situation. I have accepted a position consulting with KVII - ProNews 7. My part-time effort working with the ProNews 7 staff will focus on hard news and investigative reporting.
What needs to be clear here is that to the degree that I express either public policy positions on this blog, those remain mine and only mine. However, note that I will also promote ProNews 7 on my blog now.
Please let me know if you have any questions.
Wednesday, November 6, 2013
Is the defeat of the bond issue for the ARC a backlash against city leaders?
Backlash.
That’s the word that comes to mind to describe the defeat of the $31.5 bond issue for the $37.5 million Amarillo Recreation Complex. The measure, which would have raised taxes $25 per $100,000 valuation per year for homeowners to put the city further in debt, had the backing of the “establishment,” a/k/a the good ole boy network that includes the newly renamed City Council.
Why the backlash?
The public perception was the city leadership rolled the plan out and shoved it at the voters at the last minute. And, in doing so, the plan followed the city’s similar last minute move in acquiring the old Santa Fe Depot from auctioneer Bob Goree. Both moves were seen as fast and slick, and not in a good way. But the negative perception didn’t stop there.
Proponents of the ARC couldn’t convey that they’d raised the $6 million in private money to supplement the bond issue and bring the capital raised to the full $37.5 million project. On the other hand, opponents, without the help of the big marketing campaign, reminded voters that the Globe-News Center
In short, the pitifully few voters, some 16 percent of the registered voters in Amarillo, simply didn’t trust the City Council to be good enough stewards of taxpayer money to permit the city to and ask property owners to shell out more for a what is essentially a big loan.
Whether the City Council gets that message or comes up with some other spin to justify other unpopular moves remains to be seen.
Sunday, November 3, 2013
Don't increase the Amarillo City Commission's powers -- reject charter changes
Tuesday is Election Day.
With no candidate on the ballot you’d think that this isn't an unimportant election with no significance for the future of the city of Amarillo . If you think that, you’re wrong. This election is more important than the last one at which we elected people to the City Commission.
Why?
Because the City Commission is asking voters for approval to “update” the 100-year-old City Charter. To modernize it, they say. Be careful. Propositions 11 through 21 would concentrate the power of the commission further and make it harder for the citizenry to buck the commission. They are designed to make it more difficult to petition the commission and to run for mayor. Please go to the page on the city website to look at the proposed changesto the charter. Some are relatively harmless.
If you’ve followed the city’s business as closely has I have, you will understand why these changes should be rejected. The City Commission’s efforts to “revitalize” downtown Amarillo started with a bad premise and became a runaway train. Instead of asking for a bond issue to renovate the Civic Center , something that would have passed with little controversy because the venue’s deficits are obvious, the commission went down an Alice in Wonderland rabbit hole. Who knows what the commissioners, past and present, were smokin‛, drinkin‛ or chewin‛ to come up with third-rate developer Wallace Bajjali and a $113 million package for a convention center hotel, parking garage and baseball park to cure whatever woes they thought needed curing.
If people want some key pieces of information, I’ve gone back to the original video of a Nov. 16, 2010 City Commission work session. The commission’s delay in awarding a contract to Wallace Bajjali Development Partners came at that meeting. The Amarillo Independent had just broken the story on Wallace Bajjali’s troubled history — I’ve retrieved it from The Amarillo Independent’s former website backup — and posted it here. The story, which then-Mayor Debra McCartt acknowledged during the meeting, forced commissioners to step back from the slam-dunk that Amarillo Globe-News Publisher Les Simpson clearly wanted. At the time, Simpson was president of the Downtown Amarillo Inc. board — a clear conflict if one subscribes to the Society of Professional Journalist’s Code of Ethics.
Simpson, former Commissioner Ron Boyd and Commissioner Brian Eades statements at that work session show why the commission hasn’t been held accountable and why those changes to the charter shouldn’t occur. Let’s look at those:
·At about 2½ minutes into the meeting, after explaining that Wallace Bajjali was recruited to Amarillo , Simpson said, “… I know the feeling from Wallace Bajjali is any proposal they would ask you to consider would be one in which they would not get any payment for projects unless those projects were completed. They come prepared to put some skin in the game.”
But two years ago and without any progress, the City Commission approved paying almost $1 million to the developers.
That’s a broken promise.
·At that same meeting, a little past 9½ minutes into the video, Boyd clearly implied that the citizens would get to vote on the downtown proposal. The commission went forward without giving Amarillo ’s voters a chance to formally endorse this plan. There was a good reason, of course. McCartt and others expressed concern they couldn’t get the votes.
That’s another broken promise.
·David Wallace, on Nov. 9, 2010, had pitched the City Commission. His bravado about being able to bring financing to the project hasn’t panned out. Instead, as evidence that the “skin in the game” may be the city’s taxpayers, not Wallace Bajjali’s, in a well-spun presentation, we learned last week that the developers couldn’t even put together the hotel deal they said they could as promised in the Globe-News’ Nov. 2, 2009story cited above. By all accounts, the city finessed a deadline for the developers using the Amarillo Government Corp. to front for the developer’s failure.
That’s another broken promise.
Let’s also not forget how quickly the City Commission moved on acquiring the old Santa Fe depot, with little public notice. The same holds true with the bond issue for the Amarillo Recreation Complex. In these two cases, my issue isn’t my position on those matters. It’s the lack of the city’s transparency and notice in moving on them.
I could reach back to 2008 when the commissioners acted with thoughtless abandon in adopting design standards for downtown while treating those who object with shoddy disdain — a pattern that continues to this day for anyone who dares question the commission. And, I could cite some other actions the commissioners pushed through based on false and faulty information. The two most glaring that come to mind is the over-reaching hands-free cell phone ordinance and the red light camera program.
Don’t get me wrong, I think texting and driving is reprehensible and should be barred. I also think it’s stupid to talk on one’s cell phone without a hand’s-free device. But the commission knowingly passed this measure on the basis of the chairwoman of the Traffic Commission misrepresenting the traffic group’s findings in its “extensive” study of the issue. It kind of reminds me of the run up to the war in Iraq when the Bush administration lied about weapons of mass destruction. As for the red light cameras, none of the data posited by the Amarillo Globe-News or other outlets used proper statistical techniques such as used by the Insurance Institute for Highway Safety.
Under these circumstances, it’s my belief we need more than an election every two years to impose checks and balances on city government. The proposed changes to the City Charter move in exactly the opposite direction needed. Please vote against these changes in the charter.
Original Text of article describing Wallace Bajjali's troubled past - published Nov. 16, 2010
By Gina Haschke, Greg Rohloff and George Schwarz
The Amarillo Independent
The principals in the development firm that the Amarillo City Commission is considering as the master developer for downtown revitalization are no strangers to litigation, with one of the firm’s showcase Houston area projects the subject of a foreclosure and lawsuit. And, those same principals, David G. Wallace, and Costa Bajjali, are on the periphery of an ongoing Securities and Exchange Commission fraud investigation.
Last Tuesday, Wallace, co-founder and chief executive officer of Wallace Bajjali Development Partners, Inc., impressed city commissioners and staff with a presentation touting his experience with developments in his hometown of Sugar Land, where he served as mayor until 2008. He also touted his firm's developments in other cities, including Waco and the Houston area.
(See the video of Wallace’s presentation here.)
But at least one development has soured — the Creekmont Plaza mixed use commercial development in Fort Bend County.
According to a petition filed June 10, 2010, Frost National Bank foreclosed on the Creekmont Plaza Development in Missouri City.
The two men took out a loan of more than $1.9 million with Frost in August 2008 as the general and limited partners in Creekmont Plaza Partners, L.P. and personally guaranteed the loan.
“Despite demand for payment of the balance due, Mr. Wallace and Mr. Bajjali have failed to pay the balance due,” the petition alleges.
The petition states that the property was sold in a foreclosure sale in April at the Fort Bend County Courthouse. But the sale, which brought $1.1 million, was almost $820,000 short of the loan amount. At that time, taxes on the property were also overdue.
“The delinquent taxes for the years 2007 through 2009 were in the amount of $157,494 if paid on March of 2010, plus the 2010 taxes and the Defendants are jointly and severally liable to Plaintiff for the taxes plus interest thereon as allowed by law,” the petition alleges.
The petition asks for payment of the shortfall of the sale, interest, court costs and lawyer’s fees.
All the defendants have entered a general denial and, as of Monday, the case is set for trial in March 2011, according to Harris County District Court records.
A search of additional Harris County District Court records shows Wallace involved in several other lawsuits, including litigation in 1995 with Mark Thatcher, son of former British Prime Minister Margaret Thatcher and Wallace’s former business partner in several United States-based businesses.
How much Downtown Amarillo, Inc. is aware of all the court actions isn’t clear.
Melissa Dailey, executive director of Downtown Amarillo, Inc., said she had done “quite a bit” of background research on the firm. She said she had not looked into the Thatcher alliance in detail, but added, “I’m more interested in his development activities here in the United States.”
When asked about a Securities and Exchange Commission investigation, she said she was “aware of the situation.”
It has little negative reflection on Wallace Bajjali, Dailey said, adding, “In fact, it’s a positive.”
Daily wouldn’t discuss the matter further, saying instead Wallace would talk about it when he was in Amarillo in the next week or two “because he knows the details much more intimately than I do.”
Several calls and repeated messages left for Wallace for comment were not returned.
The SEC investigation focuses on Kaleta Capital Management, or KCM, a Houston business known as BizRadio, and may yet reach Wallace and Bajjali or some of their business entities.
The year-old litigation — the SEC filed suit Nov. 13, 2009 — names Albert Kaleta and KCM as defendants in a claim that they defrauded investors of $10 million.
According to a July 2010 update on the receivership website, “Based upon the recent inclusion of BizRadio in the Receivership Estate, negotiations have now been commenced with respect to potential liability of the Wallace Bajjali entities and their principals with respect to investments by members of the public in BizRadio directly, and in other related investment vehicles. To date no agreements have been reached with respect to these matters.”
On Monday, Thomas L. Taylor III, the Houston attorney who is overseeing the SEC-ordered receivership of KCM, said neither Wallace nor Bajjali or their entities are yet named in any of the court papers but he would also neither confirm nor deny that they could be pulled into the federal investigation at a later time.
In negotiations with Taylor, Wallace has paid back $92,348 and Bajjali has paid back $45,550 to date, according to the publicly available information.
Taylor said negotiations are ongoing about further repayments by Wallace and Bajjali.
Nevertheless, DAI’s Dailey said Monday, “We have not come across anything negative. When we looked into it in detail, it all was positive.”
The Amarillo Independent
The principals in the development firm that the Amarillo City Commission is considering as the master developer for downtown revitalization are no strangers to litigation, with one of the firm’s showcase Houston area projects the subject of a foreclosure and lawsuit. And, those same principals, David G. Wallace, and Costa Bajjali, are on the periphery of an ongoing Securities and Exchange Commission fraud investigation.
Last Tuesday, Wallace, co-founder and chief executive officer of Wallace Bajjali Development Partners, Inc., impressed city commissioners and staff with a presentation touting his experience with developments in his hometown of Sugar Land, where he served as mayor until 2008. He also touted his firm's developments in other cities, including Waco and the Houston area.
(See the video of Wallace’s presentation here.)
But at least one development has soured — the Creekmont Plaza mixed use commercial development in Fort Bend County.
According to a petition filed June 10, 2010, Frost National Bank foreclosed on the Creekmont Plaza Development in Missouri City.
The two men took out a loan of more than $1.9 million with Frost in August 2008 as the general and limited partners in Creekmont Plaza Partners, L.P. and personally guaranteed the loan.
“Despite demand for payment of the balance due, Mr. Wallace and Mr. Bajjali have failed to pay the balance due,” the petition alleges.
The petition states that the property was sold in a foreclosure sale in April at the Fort Bend County Courthouse. But the sale, which brought $1.1 million, was almost $820,000 short of the loan amount. At that time, taxes on the property were also overdue.
“The delinquent taxes for the years 2007 through 2009 were in the amount of $157,494 if paid on March of 2010, plus the 2010 taxes and the Defendants are jointly and severally liable to Plaintiff for the taxes plus interest thereon as allowed by law,” the petition alleges.
The petition asks for payment of the shortfall of the sale, interest, court costs and lawyer’s fees.
All the defendants have entered a general denial and, as of Monday, the case is set for trial in March 2011, according to Harris County District Court records.
A search of additional Harris County District Court records shows Wallace involved in several other lawsuits, including litigation in 1995 with Mark Thatcher, son of former British Prime Minister Margaret Thatcher and Wallace’s former business partner in several United States-based businesses.
How much Downtown Amarillo, Inc. is aware of all the court actions isn’t clear.
Melissa Dailey, executive director of Downtown Amarillo, Inc., said she had done “quite a bit” of background research on the firm. She said she had not looked into the Thatcher alliance in detail, but added, “I’m more interested in his development activities here in the United States.”
When asked about a Securities and Exchange Commission investigation, she said she was “aware of the situation.”
It has little negative reflection on Wallace Bajjali, Dailey said, adding, “In fact, it’s a positive.”
Daily wouldn’t discuss the matter further, saying instead Wallace would talk about it when he was in Amarillo in the next week or two “because he knows the details much more intimately than I do.”
Several calls and repeated messages left for Wallace for comment were not returned.
The SEC investigation focuses on Kaleta Capital Management, or KCM, a Houston business known as BizRadio, and may yet reach Wallace and Bajjali or some of their business entities.
The year-old litigation — the SEC filed suit Nov. 13, 2009 — names Albert Kaleta and KCM as defendants in a claim that they defrauded investors of $10 million.
According to a July 2010 update on the receivership website, “Based upon the recent inclusion of BizRadio in the Receivership Estate, negotiations have now been commenced with respect to potential liability of the Wallace Bajjali entities and their principals with respect to investments by members of the public in BizRadio directly, and in other related investment vehicles. To date no agreements have been reached with respect to these matters.”
On Monday, Thomas L. Taylor III, the Houston attorney who is overseeing the SEC-ordered receivership of KCM, said neither Wallace nor Bajjali or their entities are yet named in any of the court papers but he would also neither confirm nor deny that they could be pulled into the federal investigation at a later time.
In negotiations with Taylor, Wallace has paid back $92,348 and Bajjali has paid back $45,550 to date, according to the publicly available information.
Taylor said negotiations are ongoing about further repayments by Wallace and Bajjali.
Nevertheless, DAI’s Dailey said Monday, “We have not come across anything negative. When we looked into it in detail, it all was positive.”
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