Philadelphia Reflections

Increased Potential for Retirement Villages

Pennsylvania Hospital, Nation's First Hospital, 1751

Healthcare institutions may well have mission statements, but the main force visibly shaping hospital mission is third-party reimbursement. One must be sympathetic with institutions which really prefer their own mission to the pressures from third parties, particularly when the "second party" -- the patient -- also likes the original mission better. Teaching hospitals surely would prefer to concentrate on streamlining tertiary care, retirement villages on enriching the lives of elderly residents, etc. And they could probably make a better case for what they prefer than third-parties can. When one-size-fits-all health insurance is imposed on institutions which must survive by internal cost shifting therefore, insurance mandates invisibly prevail. It is not always strictly a matter of "Who pays the piper calls the tune", as it is "Who pays the most can run the place."

Considering these invisible forces of control at work, it seems highly desirable to search for situations in which the incentives of the third-party do not run parallel to the incentives of the provider community. In the case of government third-parties, the goals of the agency may not even be parallel to the will of Congress. The public clearly prefers to pay for private rooms and private duty nurses if it can afford to, but those are mainly relics of the past. Doctors used to work out of offices in their homes, but you seldom see that, now. There once were twenty hospitals in Philadelphia which were owned, paid for and operated by churches, but now at most, the church name is a relic on the front door surviving from a former era. If these changes were a response to public preference it would be another thing, but they are usually not even traceable to a written mandate which might be appealed. So it becomes all the harder to defy a mandate which grew out of the hospital's surmise as to what the third party would probably prefer. Perhaps some examples of social pressures at work would be useful.

It happens my own first office experience was in the home of an older doctor on vacation. The location of that family residence was a careful triangulation of convenience, expense, distance to the hospital, and the preferences of the patients. It was a grand experience to put aside the breakfast coffee, walk into the next room, and see the first patient of the day. Or to interrupt office hours for an emergency in the neighborhood for less than an hour and to have your excuses readily accepted by the waiting patients upon return. My colleagues had explained the financial advantages of sharing a roof and heating system with a tax-deductible business. But my accountant explained that the Internal Revenue Service didn't like offices in the house, and would surely audit any doctor silly if he persisted. So I spent fifty years in an office across the street from the hospital, commuting and seeing patients who had to commute to see me; the extra expenses of parking and the rest of that arrangement are easy to imagine. True, it was easier to visit the hospital patients, and nice to eat lunch with other doctors in the hospital cafeteria. But all of these decisions were not my own first choice. I never got a letter from the IRS or heard a murmur from them, but I always believed I was responding to their mandate. When an IRS agent finally wandered into my office as a patient, he admitted the IRS prejudice but said he believed it grew out of fear the business expenses reported would really be the expenses of a hobby, not a business.

A second relevant experience occurred when I was a resident physician. A staff physician at the hospital had a heart attack, and the Chief of Medicine asked me to take a few days off to tend to the problems in the stricken doctor's practice. His home and office were in the midst of a row-house district of town. When I arrived, the office was empty of patients, but the nurse was waiting with an umbrella. "Before we see the office patients, we must make rounds to see the bedridden patients at home." To my amazement, within a three-block radius of his office, there were nearly twenty patients in hospital beds at home. Some of them had oxygen tents, several of them had intravenous fluids dripping into their arms. The nurse told me that she drew blood for pickup by a laboratory and that with a little argument a portable x-ray machine could be brought to the home. At the foot of each bed was a hospital chart, all up-to-date with notes and reports. It might not be possible to run such a show in many other neighborhoods, but the city row house neighborhood was ideal. Or, not ideal perhaps, because there must have been many problems. But it was clear why Blue Cross had slow progress making sales to the people accustomed to this arrangement. And it even made clear why patients were content with open twenty-bed wards in a hospital, for at least ten years after Medicare would have gladly paid for a semi-private room. No private duty nurses, however, it might set an unwise example.

Two things are at work, here. Things happen to medical care which is undesirable, so someone needs to complain about them, and complainers must be provided with a place to appeal. The reverse is also true; good things which ought to happen, don't happen. So in addition to providing an appeals system, we somehow have to provide a wise and unbiased ombudsman to suggest what new initiatives ought to be undertaken. And the two functions, negative and positive, need to commune with each other. Parenthetically, since everybody gets involved in health care to some degree, adversary roles must be filled in this process, containing representatives of patients and also providers (both institutional and individual), as well as guardians of the purse. Since the process quickly becomes unwieldy, it needs to be associated with a special committee of Congress and needs to be able to summon both witnesses and experts. An annual convention in some pleasant spot might enhance the concept.

Institutions are another matter since quite often the personal opinions of the spokesman are constrained by the incentives of the institution. It must be made clear to them which opinion is desired.

Institutions choose their location for other considerations, chief among which is cheap land, but the location near public transportation is another factor. Whatever the thought process underlying it, nursing homes and retirement villages are almost always in the far suburbs. A related problem is a vexing difficulty for a center-city hospital to find a nearby nursing home for convalescents. These annoyances are protracted by the licensing rules in a round-about way. When a corporation is formed, typically a lawyer with a yellow pad asks two questions: "What are you going to name this organization?", and then, "What is its purpose?". Presumably, he then completes some forms and files the necessary applications. The stated purpose may well have other uses, but it defines the sort of license needed, and eventually either match or does not match the rules some third-party reimbursement agency has laid down for what sort of institution is eligible for reimbursement. After that, the system becomes much more rigid than it needs to be. As long as the institution remains defined as a hospital it will be paid by the third-party, and without that designation, it won't. Effectively, the state licensing board acquires the power to shut off the revenue of some institution which displeases it. But what displeases it (let's say, mice in the kitchen) usually bears a scant relationship to whether or not the institution is capable of performing additional tasks. It does not take long for these issues to get blurred and forgotten; the retirement village can't receive hospital reimbursement because it doesn't have a hospital license. A hospital license would permit it to do a lot of things it doesn't want to do. While the general idea is sound enough, the rigidity it imposes is excessive, particularly when you consider the penumbra of reluctance it provokes from employees. Obviously, the interpretations vary greatly between jurisdictions. It leads to hospitals which may perform heart transplantations but may not run a day-care center for the children of their employees.

There are many simple solutions to this simple problem, but because so much of it is buried in-laws, it would probably require a special court to be appointed to oversee it. How busy that court would be would depend on how vigorously competitors would resist it, which would probably vary with the region.

In any event, Society has a legitimate interest in preserving the quality of care, but it does not fulfill that duty by transferring it to reimbursement agencies. During wars, surgery is satisfactorily performed in tents, for an extreme example of how expendable much oversight can be. Another principle would be to ease impediments to overlaps of functions between institutions, particularly including the backward sharing of component services and records toward the lower-level institution. Since such sharing is often observed to occur without objection within vertically integrated institutions, there is every indication it is both desirable and feasible between competitors.

Going much farther back to the town meeting form of oversight, the most radical departure from present custom would be to encourage a shift of the center of care from inpatient hospitals toward retirement villages. The simplest definition of the center of care would be the location of primary physician offices, and the most important step would be to discourage mandatory links between referring physicians and particular acute care hospitals. Doctors left to themselves will locate where the patients are, and increasingly it is possible to see a shift of patients requiring chronic disease management and terminal care into the retirement village. The tendency of doctors and laboratories to cluster around hospitals impedes this natural shifting together. If doctors shift their offices and are allowed a choice, laboratories and x-rays will soon follow them. Before Medicare, the center of care was found near the high-rent districts of cities. In London it was Harley Street, in Philadelphia it was Spruce Street. As reimbursement changed, it shifted toward the hospital campus, where the parking problem is also solved. Nowadays, early discharge and reimbursement shifts have made it unattractive for a primary care physician to visit his patients in the hospital, so hospitalist and emergency room specialties are flourishing, with computerization feebly bridging interruptions to the continuity of care. The primary care physician would find the retirement village solves the parking problem; pharmacies and laboratory pick-up are often already in place, and non-surgical specialists would soon follow primary care physicians. Patient transportation, at present crippled by expensive municipal monopolies, would be greatly eased by such shifts of medical interaction. The ultimate shift of the center of care would be for the more mobile younger population of suburbs to shift allegiances toward the retirement village location, a change mostly affecting pediatricians. It would take some time, and it would always be a partial migration. However, the infirmaries of retirement villages offer convenience and comfort near home.

The most effective force maintaining standards for this level of care, have no doubt of it, is the ease with which friends within the community drop in for visits. They have time for it, especially to and from the dining room, and all of them keep a watchful eye on how they would likely be treated there themselves when their turn comes. In retirement communities, client consensus is a powerful force. What is lacking is a willing sharing of reimbursement with acute care hospitals. Therefore, the idea of brief hospitalization followed by longer recovery near home is now only realistically available to the affluent. But their choices show the way, as they always did before third-party insurance dominated the scene. For a while, little children may think it is funny to get their shots at the old folks home, but they will soon get over it.

Originally published: Sunday, April 28, 2013; most-recently modified: Thursday, May 02, 2019