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Steven Brill: Let Hospitals Expand, But Regulate Them Tightly

America's Bitter Pill book cover
Random House

Journalist Steven Brill has spent the last two years examining the question of why healthcare is so expensive in the United States, both in his series of Time Magazine articles and his bestselling book, America’s Bitter Pill. He’s pointed the finger at the growth in non-profit hospitals where executives earn enormous salaries as one driver of high costs. During the same time, big hospitals have continued to get bigger. They’re merging, taking over outpatient offices, forming statewide collaboratives, and some are even launching their own health insurance plans. And surprisingly, Steven Brill now says this isn’t such a bad thing. He believes that with the right regulations, the current trend towards larger hospital systems could both improve Americans’ health and save us money. Sound Medicine contributor and health policy researcher Dr. Aaron Carroll spoke with Brill about his views on health care reform and the potential upsides of hospital expansion.

Aaron Carroll: What do you think the Affordable Care Act has done well? And what are the big challenges still facing the health care system?

Steven Brill: It indisputably allowed 15 to 20 million people to have access to healthcare, and in doing so began to erase what is a national embarrassment, which is that we're the only developed country in the world that doesn't do something to make sure that all or most of our citizens have access to healthcare. 

[But where it’s failed is that] it doesn't do anything to address the exorbitant cost and the exorbitant profiteering in our healthcare industry that allows everybody involved except the doctors and the nurses to ride a gravy train. 

I think that the relatively piddling penalties for having above-normal hospital readmission rates for Medicare patients created a kind of scorecard where hospitals actually began to focus on their readmission rates, so that's a good thing. But the core structure of healthcare commerce in the United States has not been affected to Obamacare, except to, on the government's dime, add a lot more people into that commerce stream. 

AC: In your [Time Magazine] articles you focused on how hospitals were often screwing patients on price. But at the end of Bitter Pill, you’d made a significant change. Now your prescription is almost: We should let some of these hospitals and the people that run them loose and give them even more control over the system…

SB: You left out the “but” there…but we should regulate them. If I’m in Ohio, I like the idea of [CEO of the Cleveland Clinic] Toby Cosgrove organizing my health care, controlling the quality of the doctors and hospitals and clinics I go to. He could be a one-stop shop with his brand name, so if I go to a walk-in clinic it's got the same standards and is under the same accountability and brand as the Cleveland Clinic. And I also think if you house all those people under one roof you're likely to get the kind of economies that you're supposed to get with accountable care organizations.

But having said that, I want to have regulations that say that if you have an oligopoly or a monopoly in a given market, your profits are controlled, and various aspects of what you do and how you charge are going to be tightly regulated. 

AC: How is this different from the old managed care model?

SB: The managed care that rose and fell in the 1990s didn't have that kind of regulation. The drivers of managed care were for-profit insurance companies.

Now, you say to a big hospital system like New York-Presbyterian or University of Pittsburgh Medical Center: You have a not-for-profit tax exemption and we're going to attach a lot of conditions to that. You have an oligopoly or a monopoly, we're going to attach conditions to that. We have the regulatory authority to do this. We’re going to have ombudsmen in the hospital reportable to us, the regulators, who are going to process complaints very quickly if you try to skimp on care. But because you're doctors and you've taken an oath, we have a little more confidence you won’t try to skimp on care the way someone on the phone at an insurance company or customer service center might.

AC:  So, it almost seems as if we're getting to a system of localized, one-stop shops run by private nonprofit groups as opposed to the government.

SB: That's right. It’s [already] happening. You have four or five huge hospital systems where I live in New York gobbling up practices, competing with each other for patients. But what they're now competing for, by proxy, is to have leverage with the insurance company. The next step is to sell their own insurance, as in fact, North Shore-LIJ, one of the big ones in New York is now doing. And Cleveland Clinic has applied for an insurance license. 

[This model] cuts out that middle man, and removes that incentive to over-test and overbill. Right now if any of those hospital systems over test and overbill, they're going to a third-party insurance company that's going to pay the bill. If they're selling their own insurance, in other words if I give the Cleveland Clinic $9,000 a year as an insurance premium to keep my family healthy, there's no incentive to over-test me, because the only thing they have from me is $9,000. The issue is: Will they skimp on my care?

***Dr. Aaron Carroll is director of the Center for Health Policy and Professionalism Research at Indiana University School of Medicine. He is an editor at the health policy blog The Incidental Economist