In Lessons Blog

As the former CEO of the nation’s largest medical group, I’m passionate about (and frustrated with) the current care-delivery system in the United States. Today’s hospitals are inefficient, ineffective and expensive. That is why, beginning January 16, 2018, I will kick off a four-part series on about how to improve U.S. hospital performance.

Until then, I invite you to view the following excerpt from my book, “Mistreated: Why We Think We’re Getting Good Healthcare – And Why We’re Usually Wrong.” Never before published online, these sections from Chapter Four: The Legacy Players introduce the four superpowers of the healthcare industry, including American hospitals.

It is my hope that a better understanding of our nation’s lagging hospital performance will help leaders generate the will and courage to make significant improvements.


Meet Health Care’s Legacy Players

Legacy players in health care represent some of the biggest organizations in America—multibillion-dollar companies and associations that advocate on behalf of the most powerful industry sectors. Together they wield massive influence with market control that, in some cases, borders on monopolistic. Through their lobbying, advertising, and financial donations, they effectively shape the perceptions of doctors, patients, regulators, and legislators.

Their impact on the health care industry is widespread and dichotomous: they simultaneously account for major advances in medical care, and yet they create some of the biggest barriers to progress. You can laud their contributions and accomplishments or criticize their abuses of power. But to truly understand the factors shaping American medicine, both now and in the future, you’ll need to understand health care’s legacy players better. Let’s meet the four most important players in health care today.

  1. Major insurers. Providing coverage to more than half of the US population, the five largest health-insurance companies have dominated for decades. The annual revenue for each of them currently exceeds $30 billion annually and is projected to exceed $100 billion per company once these powerhouses successfully consolidate down into three. When and if regulators approve these mergers and acquisitions, we can predict that each insurer will exert even more industry control and that their CEOs, who today earn tens of millions each year in salary, stock, and incentives, will be rewarded handsomely for completing the deals.
  2. Hospitals. With nearly 6 million employees across the United States, community hospitals are the second-largest source of private-sector jobs. Their boards comprise CEOs and other business leaders. Similar to insurance company executives, hospital administrators are well compensated, often in proportion to the number of beds they fill and the profits they generate. Community hospitals account for more than 30 percent of all health care costs in the United States, driven in no small part by inefficiencies in the way they deliver care.
  3. Physician specialty societies. Not all physician membership groups are created equal. There are about 200,000 primary-care physicians in the United States. That’s a lot of doctors. But in the pecking and economic order of American medicine, they exert very little influence. By contrast, the American societies for cardiology, orthopedics, oncology, and other high-cost specialties have a huge impact. With their ties to drug and device companies, they have deep resources to lobby for their members and affect legislation.
  4. Drug and device companies. These two prominent manufacturing sectors exhibit major influence over US politicians, doctors, and patients. As drug prices continue to increase at double-digit rates, these players account for much of health care’s rapidly rising costs. Patent laws and restrictive regulations on prescription drugs in the United States protect drug-company profits more than they protect patients.

All four of these legacy players rose to power over several decades. They designed the system’s current policies and practices, and they are likely to shape health care well into the future. They wrote the rules governing how health care is structured, reimbursed, and technologically supported. Each has contributed to the best aspects of our current system, but all have worked hard to tip the balance of power in their favor and resist true change. Today, the design and economics of the American health care system reflect their influence.

To better explore the context and the perceptions of these legacy players, I will examine each of the four in greater detail, “zooming out” to offer a broader, more global look at their respective industries before “zooming in” to analyze the factors that influence how each American legacy player operates.

*   *   *

2. Hospitals

Zooming Out: The Swedish Formula

A few years ago, I spent a week visiting the main hospital in Jönköping, a lakeside town in southern Sweden. Health care experts around the world regard this hospital as the crown jewel of clinical outcomes. As I observed the hospital’s remarkable efficiency and highly coordinated care, it became quickly clear how perception and culture impact clinical quality. These forces combine for the benefit of Swedish patients in a nation that, overall, ranks third globally in the Commonwealth Fund report (on global healthcare quality).

In Sweden’s medical culture, physicians and hospital administrators view health care as a public service. To them, providing medical care is an honor. The ideals of collaboration, not competition, power their day-to-day practices as Swedish health care professionals work together as a team on behalf of the entire population. It’s a mindset that contrasts vividly with American medical culture, which elevates and celebrates the contributions of individuals.

This difference in cultures shouldn’t be surprising. The citizens of Sweden are overwhelmingly Scandinavian, reflecting a common culture and national values. They’re appalled when one of their own suffers or hurts another, which explains why the nation has some of the strictest drunk driving laws in the world.

And because most of Sweden’s citizens embody a shared history and ethnicity, Swedes embrace a strong sense of familial kinship. As in most families, the greater good trumps the desire for personal freedom and individual accomplishment. Cooperation and concern for the well-being of others makes for a powerful societal norm, which in turn has made the Swedish health care system both high performing and incredibly safe for patients.

The facility I visited was built decades ago and would be considered dated by American standards. The care, however, was outstanding. The hospital team generates world-class clinical outcomes for every problem the doctors treat. Working together, physicians, nurses, and hospital leaders analyze data on clinical outcomes to determine the best approaches for all patients. They translate these practices into consistent pathways that all physicians follow, scrutinizing them down to the smallest detail.

For each medical problem a patient may experience, hospital leadership identifies the best set of steps for treatment and gets agreement from all to use them. Everyone, from the most senior to the newest physicians, follows these clinical protocols. Tell this to American doctors and patients, and they’d be skeptical. How could a consensus-building medical culture be better or more efficient than ours? The answer is simple. By elevating the performance of every doctor to match the best, the entire hospital achieves superior outcomes at lower costs.

For example, by agreeing on a single type of orthopedic implant, everyone learns how to use it, thereby reducing the risk of medical error. And rather than having to stock a variety of implant types in all different sizes simply to match the preferences of individual surgeons, the Swedes figure which is actually the best, and they purchase it in higher volumes at reduced prices. The esprit de corps and level of fulfillment of the doctors and nurses in this hospital were nothing short of inspiring.

Zooming In: The Inconsistencies of US Hospitals

In American medical culture, doctors in hospitals perceive variation in practice quite differently. Most perceive it as positive.

It’s yet another paradox of American medical practice. Our doctors spend hours each month reading the latest medical journals and insist that research studies should be scientifically controlled and subject to statistical analysis. Then when it comes to their own practices, they resist the idea that every doctor should adhere to specific evidence-based best practices.

To understand the impact of this paradox on patient care, let’s start with the following question: If you knew you were going to be admitted to the hospital for a serious and unexpected medical problem, on which day of the week would you want it to happen?

If you said Monday or Tuesday, you’d be correct. Those are the best days to get sick if you need immediate hospital care. If you said Friday or Saturday, guess again. If you’re admitted on a weekend, your treatment will be delayed. You’ll spend a day longer in the hospital on average. And that extra day may prove very hazardous to your health.

Most people think of hospitals as the safest place to be. They are not. Bacteria abound. Hospital-acquired infections affect more than 700,000 people in acute care hospitals and prove deadly for 10 percent of them.

Hospitals on weekends are worse for one basic reason: they are understaffed. Not by necessity, but by choice.

Doctors and nurses defend the current staffing approach. They assume that seven-day coverage would require as many people on Saturday and Sunday as they currently have Monday through Friday. They will reassure you that in case of a life-threatening emergency, the on-call staff is available. What they can’t see is how the delay from Saturday to Monday ushers in the risk of infection, the anxiety of waiting, and the added cost to our nation’s health care system. The real solution would be to spread the elective work over all seven days, providing enough staff every day while avoiding overtime and on-call pay. But that would mean doctors would need to work more Saturdays and Sundays than they prefer. And in the context of their personal life, they don’t see that as an optimal solution. When it’s your weekend and you want to spend time with your family, you don’t notice the impact on patients.

Today’s wait-and-see approach leads to predictable outcomes. A 2008 Journal of the American Medical Association (JAMA) study found that hospitalized patients who suffered a cardiac arrest over the weekend were less likely to survive than those admitted on a weekday.

Imagine if hospitals had to post signs in their lobby detailing the average time delay for patients hoping to obtain care on weekends. Or imagine if they were prohibited from billing insurance companies for the extra day. It would be the right thing for the patient. But given the power of the hospital industry, don’t expect this type of transparency anytime soon in a hospital near you.

Dr. Robert Pearl is the former CEO of The Permanente Medical Group, the nation’s largest physician group. He’s the bestselling author of “Mistreated: Why We Think We’re Getting Good Health Care–And Why We’re Usually Wrong” and a Stanford University professor. Follow him on Twitter @RobertPearlMD.

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