THE COST OF HEALTH CARE

ONE ASPECT OF SETTLEMENT PATTERN’S IMPACT ON HEALTH CARE COSTS – UNDER USED MEDICAL OFFICES.

The escalating cost of health care is a drag on society and a potential death threat for every citizen.

The current administration has vowed to do something about escalating health care costs. One idea is to increase the number of doctors. However, doctors are not anything like widgets. Having a greater supply does not drive down the cost. Doctors have worked for centuries to raise the bar to becoming a doctor and thus limit the supply. That seems to have worked to the doctors advantage but it will not work in reverse without draconian intervention in ‘private practice.’

In a CNN commentary titled “We don’t need more doctors” two well qualified observes today make good case for a proposition that all who want to cut the scale of Agency spending should applaud.

While the Association of Medical Colleges advocates a 30 percent increase in medical school enrollment, Professor Christensen and Dr. Hwang at the Innosight Institute argue instead for transformational change in the delivery of health care. Their diagnosis matches EMR’s experience.

Fundamental Transformation of health care anyone? It goes hand in hand with Fundamental Transformation (FT) of settlement pattern, FT governance structure and FT the economic system.

What society needs is not just a better delivery system but better educated, better trained and more motivated citizens who can manage their own health care. Only the president and hypochondriac billionaires have doctors who know enough about the patient to ‘manage their health.’ All doctors can do is mitigate the crisis when the patient gets sick. Usually it is too late and that is why a quarter of what is spent an individual’s health care is spent in the last three months of their life.

There is a settlement pattern perspective that will not save as much money as many aspects of systemic change in medical service delivery but one that needs to be considered if only to expand the universe of health system transformation options:

Society does not need more doctors AND it for sure does not need as many doctors offices.

How is THAT important? Thousands of new doctors offices have sprouted up in the past decade. Building and maintaining doctors offices that are not used full time is a waste and the cost is passed directly to those who need medical help and to all tax payers.

How did this happen?

Every doctor likes to get out of the office - a little golf on Tuesdays, fishing in Montana next week ... and have someone to cover for them 24-7. No one can blame them but this means that group practices are very attractive. Group practices are attractive to both specialists and general practitioners. (The desirability of practicing in a group contributes to why many smaller Urban agglomerations in Urban Support Regions have no doctors – but that is another story.)

Medical practice business advisors recommend from 5 to 25 in a group practice depending on the specialty and the settlement pattern. Because of the dysfunctionally low distribution of human settlements, getting a critical mass of patients to support a practice of 6 to 10 doctors in one location is not easy.

The solution, especially in Beta Communities of under 10 persons per acre, is multiple offices. Under recent past conditions – cheap gasoline, luxurious Large, Private Vehicles, electronic connectivity, tax advantages and developers who profit from packaging a build to suit for a limited partnership made up of doctors – multiple offices are a win-win.

The trend has been for group practices to have 2, 3, 4 or 5 offices where one or more doctor practices when the schedule is convenient. It is a grand slam. All the expenses, including depreciation on the building, can be written off and the doctors have flexibility as well as building equity in real estate. (What is the past tense of ‘building equity’?).

It is not just doctors that are doing this. Dentists, especially specialists, do it too as well as most of health related professionals.

How big is the problem? The doctors offices that sit empty much of the time would pay for building a lot of hospitals and walk-in clinics for those who really need health care provided by those who do not cost hundreds of thousands to train.

How to cure the waste? Only allow a doctor’s practice to write off the cost of only one office per doctor. In a heartbeat there would be a whole new advocacy group for better settlement patterns. The benefit of grouping medical services is a current hot topic in the field – see “One-Stop shopping for Better Health” WaPo 21 April 2009. More on that soon.

In the meantime, there are many ways to cut the cost of delivering health services but if the whole health care system were examined in a way that ferrets out waste such as the excess of Class A speciality office space, the cost of health care would be a lot different.

EMR

A Trip Back to West Virginia

When I was nine years old and was living in the Washington suburbs, my father, a Navy doctor, decided to retire. He chose to move us to central West Virginia and join a medical practice -- a strange choice since we had no ties at all to the area. But Dad was always altruistic and thought he might be able to do some good. It was 1962 and community service, John F. Kennedy style, was the prevailing mood.

So, we left affluent Bethesda, Md. for rural, coal-battered Harrison County. I had been taking French in the fourth grade back in Bethesda, but when I got to school in the Mountain State, I found that my arithmetic book had been in use since it was printed in 1903. Culture shock is probably too mild a world.

But I learned a lot. At night we'd hear the throb of diesel locomotives as they pulled a coal haul up a branch line. I would walk for miles, hiking up the hills that had been laid open with big shovels on strip mines. Few laws were in place then, and people would find the beautiful vista next to them blown up and ripped apart for coal.

Coal operators were supposed to shove the dirt back, but few did. The coal was heavily sulfuric, so leachate from rainwater created orange-yellow ponds of toxic water. We used to gather the skulls of animals next to them, and when we were old enough, blast them apart with the .22 caliber single shot, bolt action rifles that every boy in the Mountain State, including me, had to have.

My point is that for the several years we lived in West Virginia in the 1960s, I grew to love the place. Some of my school mates' dads were miners. Some worked on the strip mines. And there was an uneasy history kept quiet by the authorities. The famed rebel organizer Mother Jones was actually put on trial once in town, but I didn't learn about it until years later. We still were living there when a deep mine explosion killed 78 miners at Farmington on Nov. 20, 1968, including the fathers of some grade school friends.

So, I was glad that Style Weekly, the only print media outlet left in Richmond that actually does any real journalism, sent me out to southern West Virginia to do a piece about Massey Energy, the Richmond-based firm whose name is usually associated with cancer treatment centers and charity.

Yet Massey Energy (the Massey family sold their interests years ago) is anything but their Richmond image. Run by a strong-willed CEO, the firm is regularly sued for any variety of matters, including safety issues, deaths, mountaintop removal and union bashing. Last year, the EPA ordered it to pay $20 million for Clean Water Act violations, the largest penalty of its kind. In 2000, a Massey sludge pond spill in Kentucky was judged to be several times the size of the Exxon Valdez tanker disaster in Alaska.

The firm's CEO contributes heavily to West Virginia political campaigns, especially that for judges and drew controversy when he was photographed vacationing with the then-chief of the West Virginia Supreme Court on the French Riviera.

I also visited with environmentalists worried about the threats of floods from sludge ponds and coal silos spewing coal dust next to elementary schools (see photo). But the most stunning thing I saw was mountaintop removal, which is strip mining on steroids. A fairly new concept, it was a topic for a report I did for BusinessWeek back in the 1990s. It is a quantum leap from the old strip mines I used to play on.

See the story at:

http://www.styleweekly.com/ME2/Audiences/dirmod.asp?sid=&nm=&type=Publishing&mod=Publications::Article&mid=8F3A7027421841978F18BE895F87F791&tier=4&id=1A983B598E58434D9AE65733495D82C7&AudID=AE6FBAD9A9574D429566425E856C8C66

Let me know what you think.

Peter Galuszka

What's With VPA Going Private?

The Virginia Port Authority has always been a kind of strange duck -- not quite public, not quite private. Its leadership swings one way or the other as whims suited.

If it needed money from the state's transportation funds, it was suddenly more public. But if the news media wanted data about top officials' salaries, its coloration changed, lizard-like, back to being private, at least until 2007, when salaries were finally disclosed.

The VPA, an "autonomous state agency," was created in 1952 and operates three major water cargo facilities in Norfolk, Portsmouth, Newport News as well as a transshipment facility in Front Royal. Just about all of Virginia-bound cargo containers, the most popular way of sending goods, goes through its facilities. The VPA boasts of some of the best deepwater facilities on the East Coast, although aggressive Savannah has beat out Hampton Roads in terms of volume and the global recession has cut shipments everywhere.

For years, the VPA was run by J. Bobby Bray who helped built up its facilities, and while personable enough, was surrounded by a tough squad of gatekeepers who tended to regard him as a kind of deity needing protection. Until he left several years ago, Bray held court in posh offices on Norfolk's waterfront and was frequently seen schmoozing with legislators and state officials in Richmond.

So, one has to wonder what Bray's role is with proposal to run the facilities and invest in them from CenterPoint Properties, which is an arm of CalPERS, the California state pension system. The Chicago-based firm has presented an unsolicited offer to lease the port with all kinds of goodies thrown about.

Bray says he likes the idea and small wonder he does. The former VPA executive director is now with Kaufman & Canoles Consulting which has been hired by CenterPoint to help prepare its bid, according to The Virginian-Pilot.

Bray told the Pilot's editorial board that other groups are talking about the same kind of public-private partnership deal with the VPA but that they "just didn't, fit whereas CenterPoint did."

Further details are somehow not available. We don't know who the other supposed contenders are. Bray could not be reached when a Pilot reporter called for more details. But then, that's par for the course, isn't it?

Consider that Virginia loves public private partnership deals. It is a cunning way that the state's fiscal conservatives can unload public facilities onto private entities and not have to raise as many taxes while praising free market economics and letting somebody else make a profit. And, private entities can bail out projects after somebody in planning screws up on traffic volumes and tolls or other sticky little details.

That's just what the state did with the Pocahontas Parkway in Richmond when the superhighway and magnificent bridge spanning the James River did not live up to revenue expectations. Panicky state officials, worried about what a default would mean for the state's pristine bond credit rating, got the Australian TransUrban firm to bail them out.

So what goodies is CenterPoint Properties and/or the California Public Employees Retirement System offering? From what I can make out of the deal, CenterPoint pays VPA $500 million upfront, an ongoing profit share of up to $1.3 billion and greater cargo volumes if it lets CenterPoint manage its properties for something like 60 years.

CenterPoint claims that the state would $8.9 billion in economic benefits. About half of that, $4 billion or so, would come from money the state would save by not having to run operations. The private firm would get the VPA's annual claim on 4.2 percent of the commonwealth transportation fund which last year amounted to $36 million. CenterPoint would fund the deal with a 39 percent equity payment and 61 percent in debt that it would absorb.

VPA would continue to get $987 million in annual payments from CenterPoint and pay local communities such as Norfolk which is still being paid for terminals VPA took over years ago.

What does CenterPoint get? Some pretty darned good cargo facilities built with considerable public money and (semi) public oversight, that's what. And CenterPoint gets first rights to develop the gigantic Craney Island spoil site which has long been intended for a massive new cargo crane facility costing billions. Craney Island must be one of the best, and last, undeveloped deepwater port facility sites left on any American coast.

CalPERS is one group that the financial community watches closely for market cues. It had been reputed to have some of the brightest and most aggressive investors short of TIAA-CREF. But don't forget that in last year's financial meltdown, CalPERS took some huge lumps by having invested in dicey California real estate, losing about 35 percent in its housing portfolio and forcing a shift in top management.

So, forgive me for being simple, but am I missing something here? What's the urgency? Why does a big time institutional investor like CalPERS so badly need to come swooping in to line up managing some of the best and most promising port facilities in the U.S., especially when it is taking a huge hit with bad real estate plays? Is VPA going under and we don't know it? Can't Virginia's officials can't help themselves when they hear the words "public private? They seem to absolutely love shoving public projects paid for with public money off to the private sector because it fits some kind of fiscal philosophy they all subscribe to, the real public be damned.

Or is it inside baseball? Given Bray's conflicted involvement, that's probably a fair guess.

Peter Galuszka