Health reform and professional ethics

By Stephen B. Kemble, M.D.

PNHP note: The following is the inaugural address that Dr. Kemble, president of the Hawaii Medical Association and single-payer advocate, delivered to the HMA at its annual Ola Pono Ike (“Health is Knowledge”) assembly on Oct. 6, 2012.

I have been thrust into HMA leadership based on my advocacy for universal health care. Although single-payer health care financing is not AMA policy, I want to thank all of you who have supported me in advocating for truly cost-effective, universal health care that puts the needs of our patients first, in keeping with the highest tradition of professional medical ethics. I also want to thank my family and friends for putting up with my obsessive preoccupation with health care reform over the past 5 years, and with all the time that has gone into what I refer to as “community service,” sometimes at the expense of time for family and for my psychiatric practice.

Much of the national discussion and policy initiatives on health care reform have been based on the assumption that runaway health care costs are due to “too much care,” either instigated by doctors due to fee-for-service incentives, or instigated by patients who want to “consume” too much care because it is covered by insurance. The assumption that we are delivering too much care is driving efforts to reform physician payment away from fee-for-service and towards pay-for-performance, pay-for-outcomes, bundled payments, capitation, and related schemes intended to counter the supposed incentive under fee-for-service to provide too much care. “Too much care” is also the rationale for increasing cost sharing for patients in the form of higher deductibles and co-payments. However, the beliefs that our health care cost problems are due to “the fee-for-service treadmill” and to patients demanding too much care are fundamental misdiagnoses of the problem. Inadequate access to necessary and appropriate care is a much bigger problem in the US than excessive care.1

If fee-for-service were a root cause of runaway health costs, then how are other countries that use fee-for-service payment of doctors able to cover everyone and spend 50-60% of what we do per capita on health care? These other countries include Canada, Australia, New Zealand, Taiwan, Japan, Germany, France, Switzerland, Israel, and many others. Much of the evidence for a large amount of unnecessary care in the US is based on studies of regional variation in Medicare spending2, but if this is due to fee-for-service, then how do we explain the fact that high and low spending regions use fee-for-service equally?

Although some “worried well” patients may be deterred from seeking unnecessary care by increased cost sharing, these patients account for only a tiny fraction of total health expenditures. For the seriously or chronically ill who account for 80-90% of health care spending, increased cost sharing deters necessary and beneficial care and has been shown in studies to increase total health care costs, especially for the poor and elderly who are the highest risk populations.3,4

So what is causing US health care to cost so much? There is plenty of evidence that administrative complexity is a large part of the problem.5,6 This is due to fragmentation of US health care and use of competing health plans to finance health care, whether private health insurance plans provided through employment, or privatized government-funded programs such as Medicaid managed care, Medicare Advantage, and Medicare Part D.

In my opinion, another major factor is the de-professionalization of doctors. There are two broad ethical paradigms in the world of economics: commercial ethics and "guardian" ethics. The commercial paradigm assumes a seller and buyer of goods or services, whose power and interests are balanced through the marketplace and the laws of supply and demand, with financial incentives as a primary motivator. Guardian ethics are applicable to socially necessary services that require specialized training and expertise not available or achievable by the general public, so that there is an inherent imbalance of power between the provider and recipient of services. Classic examples are the military, medicine, and other specialized professions. In these cases, the interests of the public are protected by a tradition of professionalism and concern for the welfare of the public, or patient, or client, which is held to be a higher ethical value than financial considerations.7

There has been a movement in this country for the past 50 years to de-professionalize medicine, with an underlying assumption that commercial ethics are the only valid and trustworthy ethics. This justifies increasing interference in health care decisions by hospitals, insurance plans, and government, and an over-reliance on financial incentives to "fix" problems in health care, and especially its high cost.

Medical students start their training with the Hippocratic oath and with an idealistic desire to help others. However, they are often burdened with exorbitant debt, and they discover that half their time is spent “treating the chart” so that the hospital or clinic where they are working can get paid. These problems are compounded by payment reform initiatives that rely on financial incentives, supposedly intended to “improve” care, such as diagnosis related groups (DRG’s), pay-for-performance, pay-for-outcomes, and denial of payment for adverse events. These strategies add administrative burdens and generally fail to account for the difficulties in accurately defining “quality” or “outcomes” due to the complexity of health care.

Unfortunately, if doctors are stripped of their professional autonomy and treated as if financial considerations are paramount, they actually do start to abandon professional ethics for commercial ones. They start responding to financial considerations above patient needs; they select patients according to their insurance status; they try to avoid taking on sicker, more complex patients, and they look for ways to game the system or to make more money from things other than professional services. They begin to try to maximize income by any available means, helping drive the cost of health care higher. Sometimes this leads to outright fraud.

If these de-professionalizing forces are combined with fee-for-service, then we do indeed get unnecessary and inappropriate care. Insurance plans and government agencies then double down on monitoring documentation to look for fraud and abuse and try to develop financial incentives to deter unnecessary care. The result is a vicious cycle of escalating administrative burdens, declining access to care for patients who need it, and a demoralized physician work force8. This is exactly what we are now experiencing!

In the effort to slow the escalation in health care costs, whose ox will get gored? Will it be doctors and hospitals, in the form of rising administrative burdens and declining pay? Will it be patients, in the form of increased cost sharing, most of which is not affordable for those with significant health problems, and in declining access to needed care? Or will it be the insurance industry? Only one of these is not an integral part of health care, and the explosion in health care costs in the US is largely on their side of the ledger. However, the insurance industry does not want to be pushed out of health care and they have accumulated a lot of money to protect their interests, hence the focus on blaming doctors and patients for rising costs.

What are the solutions?
1.  Although health care does require some administrative functions, we need to minimize the role of competing insurance plans in managing delivery of care. This can be accomplished by developing a unified delivery system for a State or region in which all doctors and hospitals in a community participate, with standardized benefits and payment for providers, so that they are paid the same regardless of the source of funding for an individual patient. This is called an “all-payer” system, with a unified delivery system even if there are several sources of funding.
2.  We need public subsidies for medical education in exchange for practicing in underserved specialties and locations, as is being initiated here in Hawaii in the form of a new Hawaii State Loan Repayment program.
3.  We need to ensure the cost-effectiveness of care with physician-led quality improvement instead of insurance-driven managed care. Financial incentives such as pay-for-outcomes, bundled payments, and capitation of doctors ignore the complexities of health care and introduce perverse incentives to avoid treating sicker, more complex patients. They should have no place in quality improvement. A far better approach is William Demings’s Continuous Quality Improvement model, as has been demonstrated in auto manufacturing, airline safety, and in health care in some US communities, such as Intermountain Health Care in Utah, Rocky Mountain Health Plans in Western Colorado, and Community Care of North Carolina.9,10,11 With Continuous Quality Improvement all errors and quality problems are viewed as system problems, instead of looking for individuals to blame and punish. Everyone involved in health care is enlisted in sharing information and ideas to solve problems and improve delivery of care. Blaming individual doctors and hospitals, whether through individual sanctions or individualized performance and quality ratings tied to financial rewards and penalties, drives everyone into gaming documentation, and when there is an error, into silence and the arms of the attorneys, preventing effective improvement of care.
4.  We need to organize doctors for quality improvement. Physician-directed quality improvement requires organization, sharing of information necessary to improve quality, and a mechanism for shared savings from improving care. The alternative to organization of physicians is more managed care administered by insurance plans and government, and the continued de-professionalization of doctors.
5.  Quality improvement and efforts to make care more cost effective should not be based primarily on financial incentives, but must be rooted in professional ethics and in the goal of meeting the health care needs of both individual patients and population health.
6.  Instead of the complexities of the Resource Based Relative Value Scale and Evaluation and Management procedure codes, let’s simply pay doctors for their time, with a multiplier for training and practice costs.12 Separate quality incentives may be appropriate, but must be in proportion to those components of health care that can be accurately and meaningfully measured, and these are probably only about a quarter of health care due to its complexity. Specialties requiring more training and overhead would be paid at a higher hourly rate, but for each individual doctor this rate would be the same regardless of the activity or procedure being performed. Time for care coordination should be included in reimbursement. This would greatly reduce the complexities required by “pay-for-documentation” and it would allow documentation to be re-focused on patient care and quality improvement instead of reimbursement. If payment were task-neutral, then there would be no preferential incentive to do procedures instead of things like talking to patients and obtaining a good history and thorough physical exam. The primary incentive for physicians would then be to simply use their time and skills, to the best of their ability as professionals, to serve the health care needs of their patients.
7.  Above all, we need to place the best interests of our patients at the center of health care again.

Thank you.

1.  Elizabeth A. McGlynn et al., The quality of health care delivered to adults in the United States. N Engl J Med. 2003;348:2635-2645, 2641.
2.  Fisher ES, Bynum JP, Skinner JS. Slowing the Growth of Health Care Costs – Lessons From Regional Variation. N Engl J Med. 2009 Feb 26;360(9):849-52.
3.  M. Gregg Bloche. Consumer-Directed Health Care And The Disadvantaged. Health Affairs, 26, no.5 (2007):1315-1327
4.  Trivedi AN, Husein Moloo, Mor V. Increased Ambulatory Care Copayments and Hospitalizations among the Elderly. N Engl J Med. 2010;362:320-8.
5.  Blanchfield BB, Heffernan JL, Osgood B, Sheehan RR , Meyer GS.
Saving Billions Of Dollars−−And Physicians' Time−−By Streamlining Billing Practices. Health Affairs 29,
No. 6 (2010): 1248–1254
6.  Morra D, Nicholson S, Levinson W, Gans DN, Hammons T, Casalino LP. US Physician Practices vs. Canadians: Spending Nearly Four Times as Much Money Interacting With Payers. Health Affairs 30 , No. 8 (2011): doi: 10.1377/hlthaff.2010.0893.
7.  Jacobs J. Systems of Survival: A Dialogue on the Moral Foundations of Commerce and Politics. New York: Random House; 1992
8.  Chen P. The Widespread Problem of Doctor Burnout. New York Times. Aug 23, 2012.
9.  James BC and Savitzdoi LA. How Intermountain Trimmed Health Care Costs Through Robust Quality Improvement Efforts. Health Affairs 30, no. 6 (2011); DOI:10.1377/hlthaff.2011.0358
10.  Bodenheimer, T, West D. Low-Cost Lessons from Grand Junction, Colorado. N Eng J Med 2010; DOI:10.1056/NEJMp1008450.
11.  Community Care of North Carolina: Putting Health Reform Ideas into Practice in Medicaid. The Kaiser Family Foundation Publication #7899, May 2009. (
12.  Wachtel TJ, Stein MD. Fee-for-Time System: A Conceptual Framework for an Incentive-Neutral Method of Physician Payment. JAMA 1993;270(10):1226-1229