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by Emily Friedman

First published in Hospitals & Health Networks OnLine, April 6, 2004

Just about every powerful sector in health care has gotten confrontational with other sectors; the result is stalemate, strong-arming, even virtual extortion. The question is, who really wins these battles?

I should not have been surprised. After years of increasingly partisan and downright nasty debates in Congress, truly scurrilous political attack ads and no-holds-barred competition among contestants on "reality" television shows (as if they had anything to do with reality), it is obvious that confrontation has become an acceptable and even encouraged behavior in this society.

I just did not expect it to erupt with such force in health care, which is usually thought of as a somewhat gentler environment. Indeed, Harris Berman, M.D., a former HMO executive, now a professor at Tufts, said recently that it had been the premise of his health plan that relations with providers were "a gentleman's game." He believed that right up until Partners HealthCare System, a large Boston provider organization, refused to contract with his plan unless it received a huge rate increase. His plan resisted, and three months of nasty public fighting ensued. An agreement was reached, but only after 100,000 health plan members were threatened with losing their hospitals and physicians. The same thing happened to two other health plans in the area.

This was not the first act in the drama, however. It was not so long ago that insurers began their consolidation and conversion to for-profit status, producing a situation in which hospitals and physicians--many for the first time, with little or no experience in negotiations--were blitzed with extortionate lowball contract demands by plans with hundreds of thousands of members. Many gave in and signed.

After losing their shirts on those contracts, providers got up off the floor and started engaging in a little consolidation of their own, creating dominant organizations in many urban markets. And when the insurers came back, looking for even greater discounts, they were confronted with smiling provider organizations whose leaders knew the plans could not avoid contracting with them.

Given this history, it is somewhat amusing now to hear insurers whining about unfair market practices and monopolies. As kids like to say, they started it.

A National Trend

The same scenario has played out across the country. In Orange County, Calif., in 2000, St. Joseph Health System changed the rules and announced it would contract with only a few plans, which would have to submit bids. (That must have produced smiles among hospital leaders.) One plan, PacifiCare, refused to come to terms, and St. Joseph refused to budge. The result? Contract termination--and more than 100,000 people forced to choose between their health plan and their hospitals and physicians. Not surprisingly, the majority chose the providers and switched plans.

These are not isolated incidents; the same sort of thing happened in Seattle and in Indianapolis, according to the Center for Studying Health System Change. And last fall, Advocate Health Care, a very large Chicago-area health care system, refused to renew its contract with UnitedHealthcare. According to the Chicago Tribune, the health care arrangements of more than 40,000 people were disrupted.

Now the payers are starting to push back. The Big Three auto manufacturers--GM, Ford and DaimlerChrysler, all self-insured and heavily unionized--are seeking to block the construction of two hospitals in suburban Detroit, saying that more hospitals means higher costs. Employer and payer interests are resisting the construction of six new hospitals in the Chicago area. And both Partners and Advocate became the targets of Federal Trade Commission antitrust investigations, which may or may not be a coincidence. (This is the same FTC that decided that Microsoft isn't a predatory monopoly. And pigs fly.) A new round of insurer consolidation is under way, with the marquee merger being that of Wellpoint and Anthem, which will produce a health plan with 26 million members. Negotiating with them ought to be fun.

Meanwhile, the same tactics have come into vogue in other areas of health care. The eyeball-to-eyeball stalemate between pharmaceutical manufacturers and those who wish to obtain prescription drugs in Canada or reimport U.S.-made drugs from Canada into this country has grown remarkably ugly.

With drug prices rising at a 20 percent annual clip, individual seniors and entire states have sought relief by obtaining lower-priced pharmaceuticals from Canada. Patients in many northern-tier states take bus trips to Canadian pharmacies; the cities of Springfield, Mass., and Montgomery, Ala., among others, want to obtain Canadian drugs for their employees and retirees, as do Illinois and Minnesota. Wisconsin and other states are providing information to residents on how to obtain drugs from Canada.

The pharmaceutical industry has fought back, claiming that such drugs are dangerous. The Food and Drug Administration has joined the fray on the manufacturers' side (there seems to be a pattern here...) and announced in January that almost all drugs imported from Canada are unsafe (which leads one to wonder about the stuff we're taking in this country, given that most of the manufacturers are the same). The FDA is also threatening municipalities and states that if they implement their planned reimportation programs, they and firms working with them could be prosecuted.

But it hasn't stopped there. Big pharmaceutical firms, including Pfizer and GlaxoSmithKline, have restricted shipments to Canadian wholesalers, demanding that they sell only to approved pharmacies and not to individuals. And a Canadian pharmacists' organization that is reportedly allied with the manufacturers has warned that high American demand for drugs could lead to shortages for Canadians. And on and on.

The Losers

I think that before this goes any further (and it will), a question has to be asked: Who really wins and loses in these confrontations? And what is the real purpose? Everyone yammers about quality and safety and economic survival and fairness, but it seems to me that it's really about something else, and that is money. Insurers just came off their most profitable year in a decade. Hospitals just got a financial windfall from the 2003 Medicare legislation. Pharmaceutical profits have been at record levels. Federal agencies have made it clear whose side they are on. And every sector wants to increase its share of the pie. No one wants to lose out.

But I think there are at least four losers in these games, beyond whoever fails in a specific tug-of-war. The first is that this environment guarantees a downward spiral of ever-nastier behaviors, more stalemate and more bitterness. The result is a death knell for cooperation and communitywide efforts to improve quality and patient safety and people's health. There are some goals that can be reached only by everyone working together, and they are unlikely to work together if they hate each other's guts.

The second loser is the policy process, which has never been exactly pretty, but is eroded further when policy-makers are forced to deliberate with a gun at their heads. If you don't legislate what I want, I'll go on strike. If you don't stop this practice, we'll pull out of the program. If you don't pay us more, we won't take Medicare patients. If you try to regulate us, we'll support your opponent. It becomes policy by extortion, and whoever has the biggest gun wins. Anyone who thinks that this produces anything but lousy policy either isn't paying attention or is too self-absorbed to care.

Other losers are patients and communities, and it is a devastating loss. What does the poor average slob think when he is informed one happy day that he either has to ditch his doctor of 10 years, or else find himself a new insurance plan? What is the impact when tens of thousands of people in a community are forced to scurry around making new arrangements for themselves because their hospital and their health plan got into a scrap? What does that do to their trust in the stability and reliability of the health care system?

That goes double for communities. The health care powers that be may have all kinds of justifications for their behavior, and many of them probably enjoy these battles royal and the use of tough-as-nails tactics; it makes you feel powerful, after all. But the rest of the community is sitting there, watching this, and thinking, "Who cares about us? What does our opinion count for? The only communication I get from these guys is a request that we complain to the other side. None of these outfits cares what I think, or whether my life is turned upside down."

But the biggest loser of all may be our society. Not just for the loss of civility. Not just for the loss of reasonable discussion. Not even for the loss of faith in the health care system. The loss is that while those at the top are having a ball arm-wrestling each other, almost 44 million Americans have no coverage and health care costs are rising at nearly 10 percent a year. Those are the core problems, and no one seems to see the obvious endpoint: When Americans have had enough of this, they are going to push back with such force and fury that no one will escape unscathed.

First published in Hospitals & Health Networks OnLine, April 6, 2004

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