PNHP

Is health care a commodity?

Health care’s new maverick

By Geoff Colvin
Fortune, August 13, 2012
What’s the future of American health care?
Dr. Ralph de la Torre, CEO of Steward Health Care System, may represent the answer. Steward, owned by the private equity firm Cerberus Capital Management, is a growing Massachusetts-based group of community hospitals, and industry analysts say de la Torre is one of the most dynamic and influential executives in the business. He’s consolidating hospitals, finding efficiencies, investing big in infotech, and creating a new model that he says won’t change much regardless of how Obamacare’s future plays out. De la Torre, 46, is the son of Cuban immigrants and became the chief of cardiac surgery at Harvard’s Beth Israel Deaconess Medical Center at age 38, then gave up practicing medicine to become a CEO.
You’ve hosted the President at your house for a Democratic fundraiser. Have you advised him on health care policy?
I always give my opinions, but they’re not always listened to by either side of the aisle. One of the harder realities is that health care reform is not about public health. That’s the mistake people make…
Health care reform is public finance. And when you get into public finance, it’s not about doing a study to guide policy; it’s about creating a business plan…
You’ve bought a lot of community hospitals, and it wouldn’t be surprising if you bought more. Is this consolidation trend going to become a nationwide phenomenon?
It has to. In deference to those who love the individual hospital, you have to look back at America and the trends in industries that have gone from being art to science, to being commodities. Health care is becoming a commodity. The car industry started off as an art, people hand-shaping the bodies, hand-building the engines. As it became a commodity and was all about making cars accessible to everybody, it became more about standardization. It’s not different from the banking industry and other industries as they’ve matured. Health care is finally maturing as an industry, and part of that maturation process is consolidation. It’s getting economies of scale and in many ways making it a commodity.
http://management.fortune.cnn.com/2012/08/02/steward-health-de-la-torre/
Merriam-Webster
Commodity:
: an economic good
: something useful or valued
: a good or service whose wide availability typically leads to smaller profit margins and diminishes the importance of factors other than price
: one that is subject to ready exchange or exploitation within a market
http://www.merriam-webster.com/dictionary/commodity

Massachusetts has been leading the way in health care reform, even if in the wrong direction. Now, instead of reform heading in the direction of public health, we are seeing the commoditization of health care. Even Puck could see what fools these mortals be.
Comment by Quote of the Day subscriber Sarah K. Weinberg:

Dear Don,
Americans seem to get stuck on the idea of health care as a privately traded commodity, and therefore, in general, something the government should not interfere with. The rest of the world (all of the industrialized nations and most of the less developed nations as well) views health care as an essential service that is a governmental obligation to provide for all its citizens. In my opinion, we will not get a universal health care system in the U.S. until we change our view of the role of government.
This particular American exceptionalism goes back to our founding fathers, who had just fought a nasty war to separate us from England. Much of the impetus for fighting for independence was unhappiness over excessive intrusion by the British crown in American life, especially in levying excessive (punitive?) taxes. Our first attempt at an independent government was a confederation with an extremely weak central government. I donā€™t know much about this period except that it didnā€™t last more than a decade at most, and I believe it was unable to raise the funds necessary to pay off debts incurred to fight the War of Independence. So we convened a constitutional convention to draft a better central government structure.
So you can see that the mindset of the founding fathers at that convention was to set up a government that would be just strong enough to manage defense against an enemy attack, with just enough taxation power to fund such a war. The rest was to be left to the states to manage as they liked. Even our ā€œcherishedā€ Bill of Rights was an afterthought, put in as the first 10 amendments to the constitution. Unlike other democracies, our Bill of Rights is all negative ā€“ spelling out what the federal government is NOT permitted to do to individual citizens or states.
Contrast that with the United Nations Declaration of Human Rights (1948), which spells out obligations of governments toward their citizens (and includes medical care as one such right). The U.S. signed the UN Declaration, but has never incorporated its principles into our laws, let alone our constitution. Other democracies have followed the UN Declaration in writing their constitutions and/or laws, which makes it MUCH easier to create and maintain a national health care system supported by general taxes of some sort.
Somehow Americans have to get beyond the myth of us all as rugged individualists and recognize that we are all in this together and need to share our resources enough to provide for all those who need support. We like to look down our noses at ā€œsocialistā€ Europe, assuming that all those nations are inferior to us, but actually, most of them are doing very well with good social infrastructures that are not bankrupting them.

Is health care a commodity?

Health care's new maverick

By Geoff Colvin
Fortune, August 13, 2012

What’s the future of American health care?

Dr. Ralph de la Torre, CEO of Steward Health Care System, may represent the answer. Steward, owned by the private equity firm Cerberus Capital Management, is a growing Massachusetts-based group of community hospitals, and industry analysts say de la Torre is one of the most dynamic and influential executives in the business. He’s consolidating hospitals, finding efficiencies, investing big in infotech, and creating a new model that he says won’t change much regardless of how Obamacare’s future plays out. De la Torre, 46, is the son of Cuban immigrants and became the chief of cardiac surgery at Harvard’s Beth Israel Deaconess Medical Center at age 38, then gave up practicing medicine to become a CEO.

You’ve hosted the President at your house for a Democratic fundraiser. Have you advised him on health care policy?

I always give my opinions, but they’re not always listened to by either side of the aisle. One of the harder realities is that health care reform is not about public health. That’s the mistake people make…

Health care reform is public finance. And when you get into public finance, it’s not about doing a study to guide policy; it’s about creating a business plan…

You’ve bought a lot of community hospitals, and it wouldn’t be surprising if you bought more. Is this consolidation trend going to become a nationwide phenomenon?

It has to. In deference to those who love the individual hospital, you have to look back at America and the trends in industries that have gone from being art to science, to being commodities. Health care is becoming a commodity. The car industry started off as an art, people hand-shaping the bodies, hand-building the engines. As it became a commodity and was all about making cars accessible to everybody, it became more about standardization. It’s not different from the banking industry and other industries as they’ve matured. Health care is finally maturing as an industry, and part of that maturation process is consolidation. It’s getting economies of scale and in many ways making it a commodity.

http://management.fortune.cnn.com/2012/08/02/steward-health-de-la-torre/

Merriam-Webster

Commodity:

: an economic good
: something useful or valued
: a good or service whose wide availability typically leads to smaller profit margins and diminishes the importance of factors other than price
: one that is subject to ready exchange or exploitation within a market

http://www.merriam-webster.com/dictionary/commodity

Comment:  

By Don McCanne, MD

Massachusetts has been leading the way in health care reform, even if in the wrong direction. Now, instead of reform heading in the direction of public health, we are seeing the commoditization of health care. Even Puck could see what fools these mortals be.

Additional comment by Sarah K. Weinberg:

Dear Don,

Americans seem to get stuck on the idea of health care as a privately traded commodity, and therefore, in general, something the government should not interfere with. The rest of the world (all of the industrialized nations and most of the less developed nations as well) views health care as an essential service that is a governmental obligation to provide for all its citizens. In my opinion, we will not get a universal health care system in the U.S. until we change our view of the role of government.
 
This particular American exceptionalism goes back to our founding fathers, who had just fought a nasty war to separate us from England. Much of the impetus for fighting for independence was unhappiness over excessive intrusion by the British crown in American life, especially in levying excessive (punitive?) taxes. Our first attempt at an independent government was a confederation with an extremely weak central government. I donā€™t know much about this period except that it didnā€™t last more than a decade at most, and I believe it was unable to raise the funds necessary to pay off debts incurred to fight the War of Independence. So we convened a constitutional convention to draft a better central government structure.
 
So you can see that the mindset of the founding fathers at that convention was to set up a government that would be just strong enough to manage defense against an enemy attack, with just enough taxation power to fund such a war. The rest was to be left to the states to manage as they liked. Even our ā€œcherishedā€ Bill of Rights was an afterthought, put in as the first 10 amendments to the constitution. Unlike other democracies, our Bill of Rights is all negative ā€“ spelling out what the federal government is NOT permitted to do to individual citizens or states.
 
Contrast that with the United Nations Declaration of Human Rights (1948), which spells out obligations of governments toward their citizens (and includes medical care as one such right). The U.S. signed the UN Declaration, but has never incorporated its principles into our laws, let alone our constitution. Other democracies have followed the UN Declaration in writing their constitutions and/or laws, which makes it MUCH easier to create and maintain a national health care system supported by general taxes of some sort.
 
Somehow Americans have to get beyond the myth of us all as rugged individualists and recognize that we are all in this together and need to share our resources enough to provide for all those who need support. We like to look down our noses at ā€œsocialistā€ Europe, assuming that all those nations are inferior to us, but actually, most of them are doing very well with good social infrastructures that are not bankrupting them.