Musings of a Philadelphia Physician who has served the community for six decades

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SECTION TWO: Hidden Economics of Healthcare
Here are samplings of the reasons Healthcare Reform still isn't going anywhere.

Healthcare Reform: Looking Ahead (2)
New topic 2015-07-12 03:32:17 description

Methods in the Madness

Even today, many people are uncomfortable about psychiatric illness in their family. In the Nineteenth century, this feeling was much more pronounced, so wealthy families sought out luxurious psychiatric hospitals where wealthy patients were kept out of sight. Rich families also sought out psychiatrists of their own class to be in charge; not only keeping matters out of sight, they were also likely to be discreet in their outside discussions. Sigmund Freud wrote a whole book to the effect that getting richer brings on mental disorders.

Snake Pits. By contrast, saying institutions for indigent psychiatric patients were once substandard, is quite an understatement. Indigent cost to society must have been a considerable burden fifty years ago, with over 500,000 licensed beds nationally in 1955, even though society is a notorious pinch-penny with indigents in any era. When Thorazine made its appearance as the first really effective anti-psychotic drug in 1953, it was prematurely followed in 1955 by President Kennedy announcing a plan for cutting the number of inpatient psychiatric beds by half. This goal was quickly and drastically achieved, cutting beds in "psychiatric snake-pits" to 40,000 by year 2000. To a certain degree, however, we have simply moved mental patients from snake pits into prisons at higher cost. In all this turmoil, upper-class institutions at first were much less affected.

Rest Cures. During the last half of the Nineteenth century, psychiatry itself had become a distinctly upper-class specialty. To what extent this class isolation was a cause of the profession's later troubles is hard to say, but it probably was a factor. In the early Twentieth century, this social situation was upset by a pell-mell rush of enthusiasm by psychiatrists to follow the teachings of the Austrian doctor, Sigmund Freud, introducing psychoanalytic methods of treatment at significantly higher cost.

The Analysts. For a while, no academic psychiatrist could expect promotion unless he was an analyst, and this attitude spread out into the practicing profession, too. But its time was brief; psychiatric drugs starting with Thorazine swept the scene. Soon, anybody with a fountain pen and a prescription pad could be a psychiatrist; seven years of specialist training were no longer required. Hope was soon raised that psychosis would next follow the example of tuberculosis, first with effective patient treatment, and evolving later into the closing of highly expensive specialty hospitals.

Fads and Fashions. Many of these changes did result in general savings. In each step in the therapeutic process, the leadership of the specialty were thrown into disarray by radically new treatments requiring many years of re-training to master. Brash young physicians displaced the experienced older ones; the older ones never quite got it, and the younger ones never quite got over it. The ultimate outcome of this uproar was what you can now see in the center of many cities: "homeless" people living in rags on steam grates, because there are few psychiatric hospitals for chronic indigents, anymore. And basically, no good ways to define and reimburse psychiatrists.

Trust Fund Babies. The effect on upper-class "trust fund baby" patients is harder to notice, but inevitably young people of any class will outlive their parents, and often outlive the trust fund as well. What did further disrupt the vulnerable changing treatment scene, was the introduction of large numbers of addicts to recreational drugs, which tended to affect those who could afford the cost, sooner than those who could not. The system was disrupted from the top down at first, and then it became a regular feature of the youth scene for young people of any social class. The closing of upper-class inpatient facilities is particularly disruptive when the signs of addiction first make their appearance, encountering a distraught family having no familiarity with what to expect, or whatever treatment facilities are available, however abundant or scarce, good or bad.

Non-Relatedness of Psychiatric Severity to Hospitalization. There is an old saying in psychiatric circles: "People aren't hospitalized because they have psychiatric conditions. They are hospitalized because they are bothering somebody." Because psychiatry at the time was regarded as a state responsibility rather than a federal one, there were enormous disparities in treatment adequacy. It should be recognized that interstate disparities are part of the force behind the move to federalize. It's actually one of the pressures by interest groups to upgrade spending in poor states, which in time will correct the imbalances between states which James Madison envisioned as a driving force for change. Because California was particularly generous, it was punished by attracting large numbers of psychiatric patients. The response of neighboring states was quite the opposite; they closed what few state facilities survived, and the patients drifted to California. In both cases, local politicians found something to boast about, and their opponents found something to complain about.

The Rather Drastic Philadelphia Method. One place they couldn't quite boast of, was the relative absence of drug addiction in Philadelphia, for quite a long time. The local Mafia chieftain declared anyone selling drugs in his territory wouldn't even live to regret it. His methods were easy to notice, and for a number of years Philadelphia was "clean". The proof that this was the cause was easily demonstrated by an upsurge in drug addicts soon after a neighboring Mafia tribe "bumped him off".

Cycles. One psychiatric social worker looked on the scene with disgust, and offered this explanation. "These psychiatric fads come and go, and they always will. We see patients on steam grates and we say they must be hospitalized to get better treatment. After a while, we call those hospitals 'snake pits' and then say the patients should be integrated back into society." That was her view of it, and everybody else except me may be right. But I feel blame for the present mess is partly shared among many forces: To over-enthusiasm for a new treatment, partly stimulated by a desire to save a lot of public money which encourages a suspension of disbelief, and adverse decisions made by public officials, with other priorities being pressed upon them. Increasing longevity caused adverse de-selection to emerge from state governments funding nursing homes for the indigent elderly, for example. We unfortunately do need some bad examples to trigger improvement, but too many of them will overwhelm a government into seeing no way out except hunkering down.

{top quote}
John Kennedy closed the Snake Pits. Who will close the steam grates? {bottom quote}

The End of the Dream Economy The shift in American international trade payments from positive to negative, which took place around 1966 reminded us we weren't as rich as we thought we were, while the recreational drug scene shifted attention to different clients for psychiatric care. The two movements have a certain amount in common. In other words, the nation shifted charitable priorities away from chronic psychosis. It was a result of a whole host of pressures independent of the inclinations of the psychiatric patients and the psychiatric doctors. Psychiatry is an extreme case, because the patients always surrender a certain amount of autonomy. But it is a warning to everyone that it is dangerous to surrender the remaining control of your fate to people who have limited incentive to look out for your interests. I have been convinced by the arguments that the closing of high-class, high-cost psychiatric hospitals for the rich, did not start this trend. But when wealthy powerful people cannot find an institution they are perfectly willing to pay for, (as is now true in the case of chronic adult psychosis), it is a remarkable development. And it raises a question how much further this trend might go.

That Dratted DRG, Again. Hospital payment by diagnosis makes a reasonable assumption that hospitalization costs are somehow related to the diagnosis, but while that's often true it is seldom precise. The less the precision of the diagnosis, the less precision it will have in determining cost. When it reaches the extreme of two million diagnosis categories lumped into two hundred diagnosis-related groups, it is inevitable that some diagnoses are unrelated to the mean, in the services they require. Furthermore, some patients with identical diagnoses have complications involving fresh departures in treatment. Or they will be affected by unusual manifestations of illness requiring them to run up special costs. Variations are sometimes enough to bankrupt a family, sometimes they are so extreme they bankrupt a hospital. Bigger hospitals find the law of large numbers often takes care of the problem, but combined with local environmental or politician problems, sometimes even a very big hospital can be shaken by an epidemic.

Outliers. That is, "outliers" will be found, where the DRG payment is not even remotely appropriate. But the main reason DRG is adequate for most hospitals, is the payer wills it to be so, and the hospital then devises some work-around which the payer chooses not to notice. In the case of psychiatry, whole disciplines of illness are occasionally found to have little association between diagnosis and cost of treatment. No matter what his diagnosis may be, a person who thinks he is Napoleon can stay in a hospital for one day, or his whole life, depending on circumstances. So the DRG law at first provided outliers should be paid the old way, by itemized services, for psychiatry and other outliers. That was once the way we paid for all hospitalizations, so why wouldn't it continue to suffice for outliers to be treated as exceptions? The flaw in this reasoning, of course, was prices of individual services were discretionary, and pretty much limited to exceptional cases, plus psychiatry. That led to two clusters of prices in the chargemaster lists, one for outliers in conventional general hospitals, and a second one for psychiatric hospitals. Either way, it seemed a good precaution to set the prices high.

Strained State Budgets. In government circles, there is a standard sort of behavior, usually tolerated as a normal part of the negotiations. To get a bill passed in Congress without delay, technical adjustments can come later. In retrospect, it is unclear whether readjustments were bungled or whether the problem was unsolvable; the payers' fuse did seem to have been rather short. In any event, when the number of psychiatric beds fell toward 40,000 from an earlier 500,000, many gave up and went out of business.

Windfall, Then Disaster. And so it came about in those days that general hospitals were chafed by low prices set for DRG, while psychiatric hospitals were effectively given blank checks, and prospered notoriously. A movement was even under discussion, to move non-psychiatric patients into psychiatric hospitals, but events headed this off. It took some time for all of this to work through the system, but eventually three situations survived. Prices were drastically reduced for psychiatric DRGs, to the point where hospitals of this type were driven out of business. Secondly, the DRG system proved to be a highly efficient rationing system, eventually moving toward a pattern of 2% profit margins within a 2% national inflation rate. And thirdly, the Chargemaster rates remained high, discouraging hospitalization and encouraging outpatients. One by one, famous established psychiatric facilities closed their doors, to the point where indigent patients are found on steam grates, and some affluent ones, too.

The Veterans Administration. As a matter of fact, there is one place left to treat inpatient psychiatric patients -- the Veteran's Administration hospital system, if you can find an empty bed. The bed capacity is small, but at least they do not segregate by ability to pay. Social workers desperately looking for somewhere to place psychiatric patients, quickly learned to ask the most important question first: "Have you ever been a veteran?" If so, regardless of income, but somewhat dependent on locality, it is one lucky patient. All of the inadequacies of the VA informal rationing system soon come to light, however; the long waiting lists, remoteness of location, the recreational drug epidemic, the demoralized staff. With thousands of patients on their outpatient waiting lists, it was just not possible to cover all this up, to say nothing of fixing it before newspaper reporters arrive. Newsmedia have generally been ardent supporters of Obamacare and government-run medical care, but even they have been chastened by the example of it encountered in the Veteran's Administration. Let me help them with their outrage. The Armed Forces themselves will have nothing to do with VA, running an independent system of military hospitals for active-duty military, and politicians they wish to court. When President Eisenhower had a heart attack, he went to Walter Reed Hospital, Franklin Roosevelt and a host of other presidents went to the Naval Hospital in Bethesda. Even Senator Joe McCarthy died in the Naval Hospital, where the first thing a VIP says is, "No one must know I am here." That's the motto of military hospitals. But if any important government official is ever cared for in a Veteran's Hospital, by contrast, it will be very big news, indeed.


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