U.S. Health-Care System Changes Proceed In Absence Of Reform

Since September 26, when Sen. George Mitchell (D-Maine) officially pronounced health-care reform dead for 1994, each sector of the biomedical research community has been reacting in its own way to the news of its demise. Officials at academic health centers, for example, have been lamenting this year's missed opportunity, while leaders of biotechnology and pharmaceutical firms have been celebrating the congressional reprieve. Industrial and academic biomedical scientists are increasingly affected by 'competition without the management end' But regardless of their position on the issue, research administrators in industry and academia agree that the United States health-care market is already driving the system toward reform, even without legislation. And in the two years since Bill Clinton became president, they say, these market-influenced changes have dramatically altered the way virtually everyone in this sector does business. "The market forces are out there, which are pushing toward the managed competition [and] the HMOs," observes Bruce L.R. Smith, a science-policy analyst at the Washington, D.C.based Brookings Institution. "The whole Clinton health [plan] was more a reflection of those forces than the cause of the debate. And those forces will continue, and they'll have some impact." "Though we didn't make any policy headway, the market has changed phenomenally in the past 22 months," reports Edward O'Neil, an associate professor of family and community medicine at the University of California, San Francisco, School of Medicine and executive director of the Pew Commission on Health Professions. "It's created a managed competition model without the management end of it." Several policy analysts predict that some attempt will be made to reintroduce a reform bill--and the related Harkin Hatfield Fund for Medical Research amendment (see accompanying story)--in the 104th Congress in 1995. But Alan Hillman, director of the Center for Health Policy at the University of Pennsylvania's Leonard Davis Institute for Health Economics, contends that, because the system has already changed of its own accord, to a certain extent "it doesn't matter what specific plan comes out of Washington." Hillman, who served on a 500-person task force organized by Clinton in early 1993 to design the president's reform plan, maintains that such legislation would "really simply be a catalyst or facilitator. It will not be the end-all or beall of reform unless it's a drastic plan, which I don't think now has any chance of passing." The relief on the part of top executives of drug and biotech firms at the collapse of reform efforts stems from their strong objection to price controls, a component of Clinton's original plan. Limits on prices, in the view of Richard De Schutter, president of Chicago-based Searle and Co., would have "stifled research," marking "the end of the industry as we know it." While the issue of price controls was on the table, many companies, fearful of the potential detriment to their profit margin, put ambitious research plans on hold. Now, says De Schutter of his pharmaceutical house, "we plan to spend more on R&D in '95 than in '94. That would not have been possible if the Clinton plan had gone through." Had the president's original vi-sion become a reality, he speculates, companies would have adjusted through "massive layoffs, which clearly is not the case now." Likewise, Carl Feldbaum, president of the Biotechnology Industry Organization (BIO), reports that the notion of price controls served to "scare the heck out of our investors." Biotech CEOs, according to Feldbaum, were "threatened by this episode and distracted, as well." But, notes Robert Bell, a professor of economics at Brooklyn College, City University of New York, the nationwide move to managed care is limiting what drug and device manufacturers can charge even in the absence of legislation. "Insurance companies are imposing the price controls," he observes. He and other pharmaceutical industry analysts point out that the most notable effect of market forces has been the decreased desirability of "me-too" drugs--those that duplicate the functions of existing medications. "Insurers set up a formulary, or a list of drugs they'll pay for," says Bell, author of Impure Science: Fraud, Compromise, and Political Influence in Scientific Research (New York, John Wiley and Sons Inc., 1992). "They are not at all interested in these 'me-too' drugs. [They] will only approve something that's tried and true." Manufacturers "can't expect to market drugs on the grounds that those drugs are going to be widely prescribed unless they [genuinely] add something or reduce costs," asserts Kenneth Shine, president of the Institute of Medicine (IoM). Because it is less costly to produce a "me-too" drug than a novel product, "their profits are going to be squeezed." As a result, Shine foresees that "jobs in industry will shrink in the aggregate for scientists." Searle's De Schutter agrees: "As the marketplace flexes its muscle, the pharmaceutical industry has to change. The consolidations are not over." With this shift in focus, Bell predicts, "medical research is more likely to become more bona fide research. There is more incentive to develop an AIDS drug or a cancer drug than a 'me-too' drug. [While] those people working on [duplicate medications] will be looking for work, those working on AIDS, cancer, or many, many problems that need work will do fine." As more individuals enroll in cost-conscious managed-care plans, academic health centers are forced to compete with community hospitals for patients. This situation puts the university facilities at a disadvantage, since they need patient-care revenues to fund their research and teaching operations. "When the hospital starts to bleed, the medical school goes into shock," says John W. Rowe, president of Mount Sinai School of Medicine and Mount Sinai Hospital in New York City. A number of reform proposals under discussion would have included subsidies for academic centers to help offset the decrease in internal support for these functions. Without reform, "the bottom-line message is that managed-care organizations competing in a price-driven environment will not pay for research or education," laments IoM's Shine. "If you're negotiating in a managed-care environment in which price is the determinant, it's very hard to generate margins," he elaborates, adding that he expects a shrinkage in university research. "You can't raise people's tuition [more]. The endowment has been committed umptity-ump times. You can't ask a donor to pay your indirects. It's potentially a very serious problem if no reform is [passed]." On the other hand, reform would likely have included some provisions detrimental to academic centers, such as reductions in Medicare and Medicaid and decreased support for specialty medical education, according to Mount Sinai's Rowe. While decreasing the number of specialists is desirable in the long run, he says, in the short term the measure "has a potentially adverse effect on the very population that health-care reform was designed to assist." Academic medical centers--many of which are located in urban areas--"provide needed specialty care to indigent neighborhoods through supervised residents and fellows," Rowe notes. With a reform-driven reduction in the number of residents in medical specialties, "it costs a hospital a substantial amount of money to replace a resident with a health-care provider [such as a nurse practitioner or physician assistant]. We saw no provision to assist these institutions in coping with this effect." UC-San Francisco's O'Neil sees changes on the horizon. While academic health centers have traditionally viewed their mission as "training specialized providers," now "those that can't diversify their patient-care programs are at risk." At his institution, he reports, administrators are pondering the issue of "How can we bring a richer mixture to our training programs and position the biomedical research enterprise so that it remains strong and vibrant?" The answer, he suggests, may lie in shrinking the medical school and downsizing specialty care. But, he adds, this strategy cannot be adopted by all institutions. Issues each school must address for itself, according to O'Neil, include: "Should we just become a biomedical research institution, and cut out most of the patient-care program? Should we expand the primary-care network to have enough people in our programs to support the tertiary care that we do? Should we develop partnerships with new merging systems?" The last tactic, he points out, has been aggressively pursued by the University of Pennsylvania and several other institutions. Although national health-care reform has not become a reality, several states have proceeded with their own legislation, which has affected the academic health centers within their borders, according to administrators at such institutions. Minnesota, for example, is one of the most regulated states in terms of health-care policy, with a sizable majority of its population enrolled in managed-care plans. In addition, there are local reform laws in the Minneapolis St. Paul area, notes Shelley Chou, interim dean of the University of Minnesota Medical School, Minneapolis. In his region, Chou says, "managed care has now progressed to an integrated service network. It is not easy for patients to go out of the system unless they co-pay." In the absence of a contractual agreement between a university facility and a system insurer, he explains, "going back and forth from an academic health center to the system is not easy" for patients. His institution is developing "a Centers of Excellence type of package" to make it attractive to managed-care systems, offering tertiarycare services such as bone- marrow transplants for a flat fee. "It's a moving target," Chou says. "We do the best we can to build up a primary-care practice in greater Minnesota. The maturity of the market is a factor--how many patients are locked [in]" to particular managed-care packages. "We may not have enough revenue to run the kind of quality projects that we do." For now, academic and industry administrators are trying to deal with the market changes already occurring, while bracing themselves for the plans that might be introduced in Congress next year. "Some people will say it was good to step back and think about [the optimal measures to be taken]," remarks Roy Silverstein, president of the American Federation for Clinical Research (AFCR) and chief of the division of hematology and medical oncology at Cornell University Medical College in New York City. "I view it as an opportunity that was lost." AFCR, Silverstein vows, will continue to lobby for reform: "We will keep supporting [legislators] who support aspects of health-care reform that we think are important, and keep reminding them how important we think this is." From the biotech industry's point of view, says BIO president Feldbaum, "the silver lining was that, instead of biotech being buried in the noise level, we were able to be heard above the din. We were able to explain ourselves." He anticipates "not having to be on the defensive" when the debate resumes. Clinton administration officials maintain that they will continue the reform effort. At the Albert Lasker Medical Research Awards luncheon, held on September 30, Health and Human Services Secretary Donna Shalala gave the attendees "a message from the first lady that she has no intention of giving up on health-care reform." Penn's Hillman is skeptical, however. "We'll have to see how receptive Congress and the United States people are," he cautions. "We'll have to wait and see what happens in January and February--what tactics are going to be used by various members of health-care industry. Then we'll see if there's a chance for serious reform. If not, we'll go back to the tried-and-true method of incremental change."

U.S. Health-Care System Changes Proceed In Absence Of Reform

Interested in reading more?

Become a Member of