When Your Hospital Doctor Doesn’t Work for the Hospital

Increasingly, for-profit companies are delivering clinical healthcare services, raising issues about goals, costs, and quality. Understanding the business decisions that ultimately affect patients is critical, and one major financial decision facing hospitals across the country is the decision to outsource clinical and non-clinical services. Outsourcing in healthcare is an issue I’ve been able to study and write about in “The High Stakes of Outsourcing in Healthcare” published in the November issue of Mayo Clinic Proceedings. To probe further beyond our paper, I interviewed a hospital CEO about his experience with outsourcing healthcare functions, asking him about when outsourcing is appropriate as well as its risks and benefits. Outsourcing in healthcare is a hot-button issue and such conversations can quickly spark controversy. To pave the way for total candor, the CEO and I agreed to keep his name anonymous. I’ll refer to him as “Chuck.”

Chuck has had significant experience in outsourcing hospital services, including cleaning, food, and physician services that include emergency medicine, radiology, and pathology. Our conversation began by discussing the outsourcing of patient-facing services, such as emergency room care. Most patients are unaware that half of ER doctors in the U.S. don’t actually work for the hospital, but rather they work for a contract management group that staffs the hospital’s emergency department. Chuck discussed how physician groups are often contracted for their expertise; however, patients don’t always benefit from these arrangements. Chuck said, “When you go to the ER, the hospital will charge you for your CT scan or your X-ray, but you’ll also get a bill from your ER doctor who works for a separate company. And, your scan was probably read by a radiologist, so you’ll get a radiology bill, too. Multiple groups billing the patient can lead to higher costs for the patient, particularly if one of the outside clinicians is out of the patient’s insurance network.” Hospitals tell physician group contractors to maintain insurance contracts with the hospital’s same group of insurers, but this doesn’t always happen, and resulting out-of-network bills contribute to the surprise medical billing we’ve seen across the country.

I asked Chuck about one of the findings in our research which was that although outsourcing companies may bring in “expertise,” they don’t always deliver on quality. He said that he hasn’t seen this as often with physician services as he does with non-patient facing services, such as hospital cleaning and food services. In our paper, my co-authors and I discuss a study showing that hospitals that outsource their cleaning services report significantly higher hospital acquired infection rates. When I asked for Chuck’s experience with outsourcing cleaning services, he echoed many of the findings in our research, saying, “When you talk about cleaning services, you have to ask: how does a third party profit off of this business when it’s not a business our hospital wants to be in? And that’s where you see inferior benefits for employees, you may see compression of wages… and with some of these service providers, I’ve seen relatively high turnover, in part because they may not have as rigorous pre-employee screening as we do. With all of this, you very well could be getting a lower-quality employee.”

Chuck’s discussion of the different outsourcing contract structures that hospitals enter into was fascinating. He explained the two most common, yet competing, outsourcing arrangements. The most commonly used contract is called a Profit & Loss Contract. That’s where the contractor says something like, “Let me sign a 5-year deal with your hospital to do all your housekeeping services. And I’m going to do that whole deal for $1 million.” Let’s say that $1 million contract breaks down as follows: $850,000 in wages, $50,000 in supplies, and $100,000 in management fees (profit). With such an agreement, Chuck says, “For the contractor to preserve its margin of $100,000, it will inevitably have to cut back on some other piece of the pie if costs are higher than expected (e.g. due to wage inflation over the 5-year period) or the contractor just wants to beef up their profit margin. And the way I’ve seen it most commonly play out is that as the contract progresses from year one to year five, you start to see suppression of the number of employees in order to cut back on wage spending. This is why at the beginning of the contract period, the contractor may provide 40 cleaning staff, but by the end of the contract period, there are only 32 staff. My hospital hasn’t changed in size over those 5 years, but now there are fewer cleaning staff… that’s where you start seeing quality issues. With Profit & Loss Contracts, there tends to be growing dissatisfaction with time.”

The second type of contract is the Management-Fee Contract (also known as a Cost-Plus Contract). In the same scenario, rather than signing a 5-year deal for a fixed amount of money, the contractor comes to the hospital and says, “I’m going to provide your hospital with 40 cleaning staff because that’s what I think it takes to provide high quality service. I’m going to take a management fee of $100,000, and I will bill your hospital for all the operating costs.” In this model, the supply and wage costs are passed down to the hospital. Chuck says that with this model, “as the contractor gives its staff wage increases, they don’t have to cut back on labor to preserve their profits because their profits are guaranteed and were made transparent through the stated management fee.” The hospital covers all of the costs of wages and other operating expenses. In this scenario, Chuck says that “the hospital may pay a little more each year compared to the Profit & Loss Contract, but the quality of service is maintained over time.” Chuck says that he likes the Management Fee structure, but it is the rarity and not the norm.

The decision to outsource hospital services is not one to be taken lightly, and when outsourcing is appropriate, hospitals should employ a contract arrangement that prioritizes patients over profit. Additionally, patients often don’t know of all the external financial relationships doctors have, and if you have to visit the ER, it may be worth asking if your work-up will involve doctors out of your network. Because the last thing we all want is a big bill and an unhappy surprise.

*I spoke with a hospital CEO about the risks of outsourcing in healthcare and how some patients can get an unaffordable, surprise bill from their hospital.*

When the Cards are Stacked Against You: A Conversation with Pediatrician, Professor, and Entrepreneur Dr. Michael Hole

Qualities of life that most of us take for granted—clean air and water, a safe environment, access to healthy foods, and others—are the same qualities that deeply affect the health of low-income Americans. And when you’re a kid, you have little control over the quality of air you get to breathe or the foods you are given to eat. But it’s this exact environment that can shape your future. For the 1 in 7 children born into poverty each year in America, the wealthiest nation on Earth, the cards are stacked against them at no fault of their own. I had the privilege of speaking with Dr. Michael Hole—a pediatrician, health policy professor at UT Austin, and entrepreneur—about the work he is doing to lift children and families out of poverty. In 2016, Dr. Hole was named in Forbes’ “30 under 30,” and in 2019, Presidents Bill Clinton and George W. Bush named Dr. Hole a Presidential Leadership Scholar.

If you’re in New York City, and you were to walk from the Upper East Side to East Harlem just a few blocks away, your short trip would cover a difference in life expectancy of 18 years. Same city, different world. The life expectancy across these two neighborhoods is not particularly unique. Similar and more drastic trends can be found in other major cities across the country, including Washington D.C., Chicago, and New Orleans. It’s a perfect example of how much your environment affects your health, and it’s these vulnerable populations that Dr. Hole treats. The families that Dr. Hole cares for are almost always without insurance, almost always experiencing poverty, and are often experiencing homelessness. When I asked Dr. Hole about social determinants of health, such as environment and income, he said, “Too many of my patients’ families face impossible decisions, like using their limited cash to fill a prescription or buy groceries. So much of my work is about connecting families to community resources and finding ways to get more money in their pockets so they can meet all their basic needs.” He included that although doctors have to know how to diagnose and treat diseases, “medical school curricula should include training in community engagement and how to form strategic partnerships with local service agencies tackling problems like hunger and homelessness. Only a fraction of people’s health is determined by the medical care they receive, so future physicians, regardless of specialty, must be equipped with the skills and networks they’ll need to address poverty and other social ills impacting their patients’ health.”

Dr. Hole has gone far beyond writing prescriptions to help his patients. He co-founded StreetCred, a national nonprofit helping low-income families file taxes, claim refunds, set up savings accounts, and build budgets, credit, and wealth while they wait in a trusted, frequent space: hospitals and clinics. Since its founding in 2016, StreetCred has put over $8.5 million in tax credits in the pockets of low-income families. Integrating tax-preparation with healthcare may appear opaque, but Dr. Hole shared how the two are interrelated, saying “When you have children, you come to the doctor’s office a lot, especially when they are little, even when they’re healthy. And the doctor’s office is a place you trust. Doctors ask about sensitive topics all the time: sex, drugs, mental health. So it’s a place to have hard conversations about finances, too—and to connect people with financial resources. Money matters to people’s health, and as such, I’m on a mission to make sure America’s health systems act like it.”

Dr. Hole discussed how important it is for low-income families to take advantage of the Earned Income Tax Credit (EITC). The EITC is the nation’s largest federal anti-poverty program, and it provides tax credits to low-income families based primarily on their income and the number of children they support. This money can be invaluable to low-income families, and as Dr. Hole says, “The program is well-studied. We know that when low-income families get this money, good things happen for their health, children’s education, and their future financial outcomes. For example, pregnant women who receive the EITC deliver babies with higher birth weights. Mothers who get the money have less stress, and children in families who receive the EITC graduate high school at higher rates. These are remarkably good things, but the EITC goes largely unclaimed. 20% of the families who are eligible for it do not take advantage of it every year.” StreetCred ensures more families get the money they need.

In talking about the impact of StreetCred, Dr. Hole shared that their very first ‘client’ was a “grandmother with a toddler who used the extra money to buy him a winter coat, which was a luxury in her mind.” Millions of children are lifted out of poverty every year thanks to the EITC, and it’s critical to ensure low-income families know the credit exists and know how to take advantage of it. Dr. Hole concluded by saying, “At the core of nearly any social problem—food insecurity, housing insecurity, etc.—is financial insecurity. As such, StreetCred is addressing social issues at their core. And that’s important because wealth is health.”

Like the earned income tax credit, the Supplemental Nutrition Assistance Program (SNAP) is a lifeline for low-income families and a critical program for lifting children out of poverty. SNAP provides money for food to low-income families, and the children impacted by SNAP are significantly more likely to graduate high school and experience far better health outcomes, including lower rates of obesity later in life. About 17% of children live in households that receive SNAP benefits. In the realm of food insecurity, I asked Dr. Hole about a service called Good Apple, for which he serves as the Founding Advisor. Good Apple is focused on fighting food insecurity, and the organization partners with farmers, food pantries, transportation companies, philanthropists, nonprofits, medical clinics, and universities to deliver healthy foods, such as fresh fruits and vegetables, directly to the doorsteps of families facing food insecurity. Dr. Hole told me that “Food shortage isn’t the problem. We have food banks, food pantries, government programs like SNAP, and a whole host of other food services available to people facing food insecurity. But that doesn’t mean people have easy access to those services and places. Transportation is a huge barrier, and it got even worse amid the COVID-19 pandemic when traveling in public meant increased risk of infection. What’s worse: federal programs don’t subsidize food delivery services. So, while you and I can order groceries online and have them delivered to our doorsteps—that’s a big privilege. Good Apple is working to close that gap.”

A kid’s health is impacted by where they live, what they are fed, how much income their parents earn, the color of their skin, and several other social factors. We know that multiple, compounding social problems early in life can lead to really poor health outcomes later in life. Many of the federal programs currently in place, such as SNAP, are contentious, and proposed government programs like universal basic income instantly create debate. Welfare legislation can look expensive upfront, but as Dr. Hole says, early investments in children’s health can “save our very expensive healthcare system a lot of money.” It’s important for us to dive deep into the best strategies to lift American children out of poverty because investing in our children’s health is investing in the future of America.

Healthcare as a Human Right: A Conversation with Obama-nominated CMS Administrator Dr. Donald Berwick

The Covid-19 pandemic has exposed several areas of improvement for our healthcare system, with many hospitalized patients confused and concerned about whether or not their health insurance plan covers their treatment. The pandemic has led many to reiterate their belief that our healthcare system is fundamentally broken. Because healthcare is not available to every citizen as a human right in our country, politicians have been quick to speak about how our largely-capitalistic healthcare system fails amid a crisis. I had the honor of speaking with Dr. Donald Berwick about our nation’s healthcare system, and why he firmly believes that healthcare is a human right. In 2005, Dr. Berwick was appointed “Honorary Knight Commander of the British Empire” by Queen Elizabeth II for his work with Britain’s healthcare system. Nominated by President Obama in 2010, Dr. Berwick served as the Administrator of the Centers for Medicare and Medicaid Services (CMS) where he managed an over $800 billion budget and managed health insurance for over 100 million Americans. Most recently, Dr. Berwick worked with Senator Elizabeth Warren in crafting her healthcare plan during her 2020 presidential campaign. Dr. Berwick is one of our nation’s leaders on healthcare, and he made clear that “no healthcare system will truly work in America until we make the promise to guarantee every citizen health coverage.”

The debate on healthcare as a human right is incredibly divisive, yet many may not be aware of what healthcare could look like if we made it available to all Americans. When I asked Dr. Berwick to share why he believes healthcare is a human right, he began by saying that “as a compassionate society, we all realize that there are some things that we need to do together in order to protect each other and ourselves. That’s why we have firefighters, publicly funded roads, and public education for children. It’s better when we have equal access to some things, and that’s partly because each one of us individually cannot produce the service or item ourselves. Take clean air as an example. We need a social contract that says we will together produce clean air. We will make it a right for people so that when we breathe, we can feel safe. The same is true for healthcare. Most of the time, illnesses that we contract are not a result of things we chose. We may have engaged in behaviors that increase the risk of certain illnesses, but we don’t know who is going to fall sick next, and we can’t assume that everyone will have the ability to fund their own care.” Dr. Berwick’s point on the financial capability of most Americans is true, with over half of Americans having less than $1,000 in savings. The economic hardship experienced by millions of American families explains why medical expenses are tied to over 65% of all personal bankruptcies: most families simply don’t have a comfortable financial safety net if a family member falls ill.

I asked Dr. Berwick about his thoughts on those who say that we all have a personal responsibility to manage our own situations, to which Dr. Berwick replied by saying “Even if you only care about your own economic situation, you would still want healthcare available to everyone as a right because other people’s illnesses affect you. We can see that very clearly right now during this pandemic, but it’s also true for circumstances outside of this emergency. When people’s health deteriorates, total costs for society go up. And if we make healthcare a right, we can offer people an opportunity to stay healthy and have their diseases treated earlier so that problems such as heart attacks don’t arise later. Then, total costs for society would go down.”

In every developed country, healthcare is a human right… except the United States. When I asked Dr. Berwick about how our current capitalistic system would compare to a single-payer system, in which the government finances all care, he said that “The system we have now is a crazy quilt of different financing systems—numerous private insurance companies, government insurers, and even some state programs—the complexity of billing, payments, and record-keeping drives administrative costs way up.” Administrative costs in the U.S. are indeed absurd, with over $300 billion in administrative waste spent each year. That’s right–$300 billion. And don’t be fooled about where this money comes from… Dr. Berwick says that “every single nickel we spend on healthcare is coming out of the pockets of workers— there is no other source. The money is coming out of workers’ wages-as companies put money towards healthcare premiums instead of their employees’ wages… it’s coming out of the taxes they pay… and it’s coming out of their out-of-pocket expenses, which are steadily rising.” He followed this up with saying, “So, whenever we say we spend $300 billion on administrative costs, remember that every nickel is coming from workers. Instead, if we take a single-payer approach, you can take all the money we spend on healthcare—through employer contributions, tax contributions, out-of-pocket expenses—and create a healthcare system that costs far less than the one we have today. It’s simpler, more responsible, less wasteful, more proactive… and that lowers costs.”

A traditional Medicare-for-all plan would essentially dissolve very powerful private insurance companies. In one of my previous articles, I spoke with the former CEO of Blue Cross Blue Shield of North Carolina, Dr. Patrick Conway, who spoke on the idea of having a “Medicare-Advantage-For-All” plan. Medicare Advantage is a public-private partnership in which Medicare pays for a healthcare plan, which is administered through private insurance companies. It is considered by some to be the “middle ground” between upholding private insurance and embracing a single-payer healthcare plan. When I asked Dr. Berwick about whether he believes a Medicare-Advantage-For-All program would work well, he said that from what we have seen of the program so far, “it’s a mixed bag.” He continued by saying, “It’s still private insurance, and remember, those private companies are taking profits—the government is not taking a profit—and that’s added costs. So to me, Medicare Advantage does not seem like the most favorable way to tackle the challenge of getting everyone covered.”

Dr. Berwick began working in Washington D.C. just 4 months after the Affordable Care Act (Obamacare) passed in March of 2010, so I took this opportunity to ask him about an interesting discrepancy within the Republican Party in which many Republican voters who obtain health coverage through Obamacare also chant alongside President Trump’s promise to “Repeal and Replace” Obamacare. Dr. Berwick responded by saying that “President Trump has not come up with any effective alternative to the Affordable Care Act. During Trump’s tenure thus far, millions of Americans have already lost their health insurance… If voters think that taking the Affordable Care Act away is a good thing, then they have to explain how over 20 million Americans are going to get the care they need. What happens to prevention benefits? Obamacare expanded prevention benefits to everyone—not just Medicare and Medicaid beneficiaries—so do you want to say goodbye to that? I think that as people became more familiar with the Affordable Care Act, they started to see the benefits. The bill is not perfect, but it is a big step forward for our country”

It’s important to note that about half of us already receive healthcare through government-financed or government-provided care, such as Medicaid (70 million), Medicare (44 million), Tricare (10 million), Veterans Health Administration (9 million), and the Indian Health Service (2 million). As Dr. Berwick says, “The government is already involved in your care in ways that you like. Do you really want Medicare to disappear? Don’t you want to offer our military veterans a promise of receiving healthcare? Be skeptical about this idea that the government is inept or can’t help you.” Despite its drawbacks, a government-funded healthcare system would likely be cheaper and more compassionate. For our extraordinary expenditure on healthcare, we must ask ourselves how much value we are really receiving in return. As the debate continues, however, Dr. Berwick reminded me that “we are one country… and we must make important decisions on how willing we are to be united as one country” on vital issues such as providing healthcare to all Americans.

I had the privilege of speaking with Dr. Donald Berwick, the former Administrator of the Centers for Medicare and Medicaid Services, about how he believes our nation can change healthcare for the better.

The Mayo Clinic Approach to Healing Healthcare

The power of volunteerism and compassion among healthcare workers is evident right now more than ever before. Healthcare workers are showing us the heart of America, and after this COVID-19 crisis resolves, we as a nation will stand taller. The Mayo Clinic, one of the most revered health systems in the world, is working at the front lines of this pandemic through extensive research efforts and preparing their hospitals to accommodate a surge in patients. But Mayo Clinic’s preparedness in this situation is the result of an over 150-year history of building a culture ingrained in employees. So, what makes the Mayo Clinic a symbol of hope to the 1.2 million patients who are treated at their hospitals and clinics each year? I spoke with Dr. Leonard Berry, a distinguished professor of Marketing at Texas A&M and co-author of Management Lessons from Mayo Clinic, to learn more. Dr. Berry’s book, coauthored with Kent Seltman who served as Mayo Clinic’s first marketing director, has sold more than half a million copies worldwide, and the book has been described as “a landmark” in the healthcare field by former Administrator of the Centers for Medicare and Medicaid Services Dr. Donald Berwick. Out of the innumerable positive qualities Mayo Clinic possesses, I want to discuss three that I believe are key to their success: Mayo Clinic’s high-quality doctors, its culture of medical teamwork, and its welcoming environment.

Healthcare is not a want-service, it is a need-service. We all need healthcare, and as Dr. Berry says, “the most important consumer decision you will ever make is choosing your doctor.” Only in the medical field does a patient need to trust their healthcare provider with their most personal and intimate information. From his study of the Mayo Clinic, Dr. Berry identified characteristics of Mayo doctors that help instill such a high level of physician-trust within each of their patients. Dr. Berry found that the ideal physician embraces the following qualities:

Confidence — the physician’s assured manner generates trust
Empathy — the physician is able to genuinely understand what a patient is feeling both physically and emotionally and is able to communicate this empathy
Humane — the physician has a deep level of care for the patient and is not rushed
Personal — the physician treats the patient as an individual rather than as “just another patient”
Forthright — the physician clearly explains the situation with a patient without beating around the bush
Respectful — the physician listens to the patient’s wishes intently
Thorough — the physician explains everything and follows up with a patient’s health

Dr. Berry explains how many Mayo physicians possess most, if not all, of these qualities as do outstanding doctors elsewhere. At Mayo Clinic, doctors hold each other accountable. He says, “the currency at Mayo Clinic is clinical excellence, and employees set a very high standard for one another.”

Mayo Clinic is guided by the principle of “the needs of the patient come first,” and this is clear in its compensation structure. Mayo doctors are paid by salary. While most doctors around the country are financially incentivized to perform more medical care, this is not the case at Mayo. At Mayo, a physician never has a financial incentive to do an unneeded test or procedure—or a financial disincentive to lend a helping hand to another physician. At Mayo, medicine is a cooperative science, and multiple doctors pool their knowledge and work together to treat a single patient. Dr. Berry explains how more care is not necessarily better care, and can harm the patient while resulting in waste. Dr. Berry summarizes this by saying that “those who need to bask in the starlight of personal recognition or wealth are not a good fit at Mayo and need to work elsewhere.”

I asked Dr. Berry what gives Mayo its competitive advantage among the 6,000+ hospitals in the US, and he discussed how all their medical services are provided “under one umbrella.” Mayo Clinic houses virtually every specialty in medicine, and this is fruitful for both patients and physicians. Often, if a patient has three medical issues, they have to visit four different doctors at four different facilities. At Mayo, patients receive a highly connected, coordinated care plan.

No one wants to be at the hospital, and Mayo Clinic knows this, which is why they have created a hospital environment in which the healing begins as soon as you walk in. Their buildings emphasize natural light, mute noise, and minimize the impression of crowding, just to name a few. Keeping the noise level to a minimum is a top priority, as noise is a significant patient stressor. Dr. Berry says many may not realize that moving a portable x-ray machine near a patient room creates the same level of noise as driving a motorcycle right outside the room. For kids, Mayo has embedded animal tracks in the carpet, guiding their young patients to their rooms. They even have water fountains as low as 18 inches so that not even toddlers feel left out! As Dr. Berry says, “Mayo Clinic is really good at majoring in minors… because the little things add up.”

Whether there is a public health crisis that shakes the world or a personal health crisis that shakes your world, the Mayo Clinic will always be a symbol of hope. The compassionate culture ingrained in Mayo has created a hospital where employees want to finish the job rather than look at the clock. Stories of exceptional gentleness by Mayo employees are numerous, and each one shows us what is possible when the needs of the patient always come first. To conclude this article, I would like to share one story Dr. Berry includes in his book, describing a 91-year-old woman’s visit to the emergency room after suffering a fall. The elder woman came into the ER with her daughter, a Mayo employee, and they were seen by Dr. Luis Haro. As Dr. Haro examined her, he asked if the woman could stand up and take a few steps. As she took a few steps, she bumped into Dr. Haro. With her wit, she said, “Well, I suppose we could waltz.” To which Dr. Haro replied with “Yes, we could” before taking her into his arms and waltzing a few steps. In her letter to Mayo describing the story, the patient’s daughter says, “My mother was absolutely enchanted as she loves to dance, and I started to cry. The sight of this tiny fragile old woman being waltzed around the room by this most handsome young man was just too much… this is the caliber of doctor we have here, someone whose medical expertise is a given but whose compassion and kindness are extraordinary.”