The Real Crisis in Our Healthcare “System”
By Earl W. Ferguson, M.D., Ph.D.

The American healthcare system is broken. It is too complex and fragmented.  Excessive bureaucratic policies, regulations and “safeguards” built into healthcare have made our system extremely expensive, inefficient and unresponsive to the needs of patients. These are increasingly preventing providers, clinics and hospitals from providing cost-effective healthcare.

Increased application of information communications technologies (ICT)/health information technologies (HIT) to healthcare (telehealth or e-health) could markedly increase the effectiveness and efficiency of healthcare services, but regulations to facilitate their application have been both inadequate and, in some cases, inappropriate. Inadequate regulations include delay in or failure to set adequate standards for some critically needed ICT/HIT applications to healthcare. Inappropriate regulations include limits on reimbursement for services provided using those applications. Current healthcare reimbursement policies are harmful to the entire system, but are devastating to delivery of healthcare services in rural, underserved communities. 

Recommendations: 

1. Decrease the heavy administrative burden for healthcare services by mandating simplified reimbursement policies and fee schedules for all government and private insurance programs. 
2. Reimburse healthcare services regardless of whether those services are provided in a face-to-face encounter with a physician in the office or in a face-to-face encounter over an interactive video telemedicine connection. 
3. Provide reimbursement incentives for physicians and other healthcare providers (hospitals, insurance companies, etc.) to implement advanced information technology applications (telemedicine, telehealth, electronic medical record systems, etc.) that will increase the efficiency, safety and the cost-effectiveness of our healthcare system, markedly decreasing the costs of our current fragmented and inefficient system.
4. Give all patients a stake in constraining the cost of their healthcare.   
5. Provide reimbursement incentives for physicians to work in rural and underserved areas.  

Background: 
Telecommunications and computer technologies have the potential to provide access to healthcare services wherever and whenever they are needed without regard to distance or geographic isolation of patients. Telemedicine is the provision of healthcare using real-time interactive video communications between patients and specialists, as well as store-and-forward applications (transfer of information and images related to patient care). Healthcare services provided face-to-face in physician offices are reimbursed according to level of complexity of the service provided. Much of the information to support that visit can be obtained over computer connections. However, if the same information is obtained and the same healthcare services are provided in a face-to-face interactive telemedicine visit, it is only reimbursable when the patient is located in a rural area. For example, Ridgecrest Regional Hospital (RRH) is located in Ridgecrest, California, a remote high desert community of approximately 29,000 people. It has a Medically Underserved Population (MUP) because of the lack of critical specialists (there no pulmonologists, anesthesiologists, critical care specialists, psychiatrists, neurologists, etc. living within 90 miles and Ridgecrest is more than 120 miles from the nearest tertiary care hospital). Because Ridgecrest has a population of greater than 20,000, it is considered an “urban cluster” by the U.S. Census and Medicare will not reimburse for telemedicine visits. Therefore, general medicine physicians must care for complex, unstable patients in the RRH ICU without access to specialty consultations that could be provided by real-time interactive video. 

Applications of integrated real-time interactive video and store-and-forward telecommunications technologies have the potential to save our healthcare system $4.28 billion/year with on-going costs of $950 million/year (The Value of Provider-to-Provider Telehealth Technologies, Center for Information Technology Leadership, November 2007, available at www.citl.org). This does not include integration of electronic health records (EHRs) into these systems, which a RAND Corporation study concluded could save more than $81 billion/year in healthcare costs by improving healthcare efficiency and safety. The study also concluded that prevention and management of chronic disease could eventually double those savings plus increase health and other social benefits, but that major changes in the healthcare system would be required (Can Electronic Medical Record Systems Transform Healthcare? Potential Health Benefits, Savings, and Costs, Health Affairs, 24(5): 1103-17, 2005 [Available as RAND RB-9136]).  

Even if we make major changes in our healthcare system, we must also give all patients a stake in constraining the cost of their healthcare. The current culture of “entitlement” to healthcare is a major burden to our system. The feeling of entitlement encourages over-utilization and is a national problem. Some responsibility needs to be placed on each individual. Recent increases in co-payment by private insurance companies have had a noticeable, beneficial effect on patients' awareness of cost. Requiring increased co-payments at the time of service for everyone (including Medicare, MediCaid/ MediCal, and all other forms of insurance, and those without insurance, making allowance for ability to pay) and making co-payments high for inappropriate use of emergency departments and low for primary care clinics would encourage appropriate use of services. However, this would require that primary care services are universally available. Assuring that primary care services are universally available, adequately supported and continually viable is an inexpensive investment, compared with the continued inefficiencies of our current system. 

While we are waiting on the promise of implementation of new healthcare information technologies, rural healthcare is being decimated by current policies.  Seventy-five percent of U.S. physicians still work in small practices or as solo practitioners. Cuts in reimbursement for healthcare services have had a disproportionate effect on these small practices in rural areas. A decade ago, rural practices could do well compared to their urban counterparts who were dominated by HMOs and PPOs. As Medicare and PPO healthcare services reimbursements have been drastically reduced, small rural practices have had increasing difficulties. A high ratio of support staff to physicians is required because of the high administrative burdens placed on physician practices by Federal and State laws, rules, regulations and policies and by the requirements of numerous third party payers who have diverse policies and fee schedules. More than half of rural physician practice costs are for high fixed administrative and management costs, not physician income. As a result, physician income in rural areas has plummeted and it is now more lucrative to work a 40 hour week with no night or weekend call in an urban HMO or to work as a hospitalist (a physician who cares only for hospitalized patients). Our rural physicians work 60 or more hours a week with long office hours, many hospital patients and extensive night and weekend call. The mean age of physicians on our hospital staff is now 54 years and one-third are over 60 years. Our hospital active staff has dropped from 33 in 2005 to 30 in 2006 to 21 in 2007 and we have only nine adult primary care providers to serve a community of almost 30,000 that by national standards should have at least 14.5 adult primary care providers. 

In summary, the high fixed administrative costs required for physician practices to meet regulatory and insurance company requirements for reimbursement, the lack of healthcare services reimbursement when provided by telemedicine and other innovative telecommunication technologies applications, and the failure of patients to take responsibility for constraining the costs of their own healthcare are increasing healthcare costs and slowing the application of more cost-effective solutions to healthcare.  In addition, the markedly decreased rural physician reimbursement for healthcare services, and the rigors of rural practice make it almost impossible to recruit and retain new physicians to rural communities. 

Earl W. Ferguson, M.D., Ph.D. is responsible for telemedicine, outreach and rural healthcare development at Ridgecrest Regional Hospital. He is also a member of the Board of Directors at the California State Rural Health Assocation. Mr. Ferguson can be contacted at: e.ferguson@rrh.org; EWFerguson@SunBMT.com; or (760) 499-3901.

Article posted on 1/17/08