Observations of the US healthcare system (managed care) from an Australian doctor, Dr Mark Colson who worked in the US as an anaesthetist in 1996-97. Dr Colson is currently an anaesthetist in Geelong. He kindly allowed the ADF to prepare this edited transcript from an email he sent to a colleague describing his experiences with managed care.

1.    Enormous healthcare disparity across the community, with incredible centres of excellence at one end of the spectrum, but very run-down low quality centres at the other. Most of the population had little choice as to which system they could access – such things were decided by secret agreements between their insurers and providers.

2.    Then of course you have a significant uninsured Diaspora – although contrary to common belief – these souls could still access true emergency healthcare via various federal programs (Medicare (elderly) and Medicaid (unemployed)).  Even those not registered with either program still received care at no cost- but only very limited, basic care. Mind you, this was no Australian capital-city hospital, but more a war-zone on many occasions where a busy night could involve receiving 5 patients with gunshot wounds to the chest. Or 18 on one memorable night.

3.    Insurers totally dictated what doctors could do – or not do. But not directly, they did this by exerting financial control over the hospitals. Random audits would pick-up the tiniest of discrepancy in one’s paperwork, which would then be used as an excuse not to pay for a whole care episode. If the audit uncovered 30% of cases to have such errors, they would then apply this factor to the facility’s entire claims for that month.  In one case, an HMO (health insurer) applied a 70% “adjustment” to the hospital’s claims. To put this in perspective, the [hospital name removed] might have billed the HMO $10m, but the HMO agreed to pay only $3m. In response, the [hospital name removed] black-banned patients insured with this particular HMO. Of course many patients were covered by this HMO though no choice of their own – as their employer had chosen their health insurer. Hospitals went to great lengths to tick all the boxes in the hope of being paid. At times, that meant ticking-off doctors who did anything that might prevent them ticking a box. I found this out the hard way when I initially refused to write a lengthy phrase on my [disclipline removed] charts which was HMO-mandated. To save time, a colleague had the phrase rendered onto a rubber stamp – but the HMO rejected this insisting that the phrase must be hand-written. Welcome to the quirky world of compliance with the US’s HMO’s!

4.    A large employer would typically offer its employees a range of insurers (some with extra monthly premium charges), but smaller workplaces were not so lucky. So, an employee of such a company could fall ill and present to hospital, only to find that his insurance was not valid at that only hospital in town. In most cases, what your employer actually paid for your health insurance was unknown, but inevitably the larger employers would use that power to negotiate better deals.

5.    HMO’s dictated treatment but in an indirect fashion such that they always had deniability. For instance, they would fund a patient for a 4-day stay, but when the patient developed complications requiring a longer length of stay the treating doctors would be pressured by the hospital to discharge because funding had run-out. Doctors resisting such pressure could be disciplined, but if it all went wrong, both the hospital and insurer could turn-around and claim it was a medical decision to discharge the patient.

6.    HMO’s were enormously wealthy companies, and this was immediately apparent driving around Sacramento (or any large US city), where the most extravagant, gleaming buildings perched along the riverbank were all occupied by the HMO’s. Meanwhile, the hospital’s themselves tended to be rather drab affairs. It’s easy to see why Americans spend about 50% more on healthcare than us. Much of it is surely the HMO profit margin.

7.    Another outrageous development I witnessed was a surgeon being placed on probation after a cluster of complications. The surgeon was then ordered to do a particular operation free of charge 20 times without complications before several of the HMO’s (collusion?) would resume funding the procedure. The surgeon reached about 8 cases without incident when a complication ensued. Unprepared to weather further losses, the hospital terminated the surgeon.

8.    Witnessing the outrages of managed care, one tends to ask how this flawed system ever came about. Although Bill Clinton is accurately “credited” with introducing the system it wasn’t his preferred model. In fact, healthcare reform was one of Clinton’s highest priorities, and as such was certainly a major factor in his election, after which he immediately appointed wife Hillary to lead a taskforce looking at the issue. Hillary even came to Australia (cynics might conclude Bill had other reasons for wanting Hillary out of the country for some weeks), and apparently so liked what she saw here that she returned proposing a government-run health scheme similar to our Medicare.

9.    But the conservatives, insurers and (US) AMA campaigned against the proposal, advocating that government (and patients) be cut-out of the system, which would be completely run by insurers. Clinton himself describes it as his greatest legislative failure. US managed care is a monster cobbled-together in a late-night acrimonious political deal which I would argue is far more terrifying, costly and unfair than anything in Clinton’s original plan. About the only part of Clinton’s plan which did survive was the proposal that employers would pay for their employees’ health insurance.  Not a bad idea – provided of course you have an employer.

10.  Are we heading down the same path? Sadly, I think so, but for different reasons. Critically, the US faced a healthcare crisis in 1992 (unaffordable healthcare) when managed care was proposed. But I submit no such crisis exists here, except in the fictional world of various media and political circles who have other agendas and little interest in the actual quality of healthcare. The only calls for managed care here seem to be coming from the insurance industry. And why not – they’ve seen how profitable health insurance is in the US and can’t wait to throw-off the shackles of our community rating legislation.

11.  In the US, the patient has been comprehensively excised both from the contractual arrangements between insurer and provider, and also from the very selection of their insurer in many cases. Now that insurers are increasingly both operating hospitals, and employing doctors, the doctor and patient have both become little more than bit players in this massive industry. Ludicrous as it may sound, if HMO’s could find a way to eliminate the need for both (nurses/automation/robots/”health homes”) while preserving their lucrative business model, they would have no hesitation in doing so.

12.  I believe the point at which the doctor-patient relationship was severed was a critical turning-point in the development of managed care. An insurer [prior to managed care] would never keep a pensioner waiting 12 months for their Medicare reimbursement, and demand endless paperwork be submitted before it was paid. If they did, there would be a public outcry. But Medicare and PHI’s routinely treat direct-billing doctors in this fashion. A friend working in a large (80 member) US [discipline removed] group tells me his group now has a dedicated secretary for each of the 24 or so major HMO’s – such is the back-office workload associated with their ever-increasing compliance requirements.

13.  One of the most tedious aspects of managed care was HMO’s holding compulsory Saturday morning “billing seminars”. After a busy week, this was all you needed, and by “compulsory”, I mean exactly that. A roll was taken and the insurer could withhold payments for any staff who failed to attend their seminars. At these dreary and interminable sessions, we’d typically sit through a 2 – 3 hour slide show. Generally I – like all others present – just found my eyes glazing over at these events, but the attached two slides did pique my interest. One shows a “simplified example of competition and collaboration” which I think you’ll agree is anything but [see attached slide]. The other perfectly captures everything that is wrong with managed care. Generally, “clinical renown” would be something we would all aspire to for our facility, but in the world of managed care, it is nothing more than a “cost magnet”. As the presenter asks, “who do you think will travel 70 miles to your facility except someone with cancer or needing a transplant?” To paraphrase, if you’re good at what you do, you will attract work, which will cost the insurer money. Solution: try not to be too good at what you do. Avoid “clinical renown” at all cost! This absurdly counter-intuitive world is precisely where managed care is leading us.

14.  Interestingly, some large medical (including [remove discipline]) groups in the US are now reverting to “cash only” arrangements.

  Edited by Stephen Milgate – Director & CEO of ADF, 23 May 2016