When Sister Irene Kraus, a Catholic nun who became the first woman Chair of the American Hospital Association, coined the phrase “no margin, no mission” in the 1980s, she unwittingly provided a tagline for the “non-clinician MBAs (suits)” in healthcare to use and undermine the fundamental purpose and mission of physicians (whitecoats). Over time, this dynamic has led healthcare leadership to focus more on “the margin” than “the mission.” This transition has displaced from center stage the quality of and access to healthcare services for patients — a costly mistake.
With nearly twenty cents of every dollar of the U.S. gross domestic product (GDP) spent on medical care, the migration of MBAs into the healthcare arena has predictably occurred. Mergers, acquisitions, consolidations and the involvement of other financial entities in medicine have all grown exponentially. Vertical alignment and integration of private insurance companies with pharmacies (and their benefits managers), skilled nursing facilities and health systems have led to huge entities with scalability, market dominance and valuation of more than $500 billion (e.g., UnitedHealthcare), making it very difficult for smaller hospitals and independently practicing physician groups to compete and survive.
Many of these entities have incorporated free-market-type strategies into their business models to gain market share — resulting in financial distress for many smaller, critical-access hospitals and physician practices that must ultimately sell or declare bankruptcy. Many of these displaced physicians then have little choice but to either reluctantly become employees of the larger entities or move their families and give up ties and commitments to their communities.
Companies like Optum Health, a subsidiary of UnitedHealthcare, employs nearly 90,000 physicians, which is almost 10% of the U.S. physician workforce. Once employed, physicians are often positioned to work as if they are assembly-line workers, which can diminish their sense of purpose and autonomy, inflict moral injury and lead to burnout. In these scenarios, patients also experience fewer choices and less healthcare access. This dynamic can exacerbate the disparities and financial strain for patients in affected communities. Indeed, nearly 75% of Americans with health insurance between the ages of 20 and 65 cannot afford to pay their medical bills, and medical debt now exceeds all other personal debt in the U.S.
This transition has displaced from center stage the quality of and access to healthcare services for patients — a costly mistake.
Meanwhile, from 1975–2010, the number of administrators (suits) in the U.S. healthcare system increased by 3,200%, as compared to the 150% physician and population growth. In addition, many hospital CEOs and other C-suite members are making more than $5–10 million per year. It is not unheard of for some administrators to extract dollars for their own benefit rather than investing some of those dollars into patient-centered care. One glaring example involved the CEO of a large system being paid more than $4 million even though the health system was in the process of declaring bankruptcy.
Why does this dynamic matter to you, your patients and our healthcare system? As the costs for medical care continue to strain the U.S. economy, administrative activities in medicine now account for about 25% of all healthcare costs (e.g., almost 5% of the entire U.S. GDP). This expense is about 500% more per capita than 10 other wealthy countries and more than the costs of physicians and clinics. Yet, the Medicare Physician Fee Schedule has actually decreased by 29% over the past 23 years when adjusted for inflation. During the same period, hospital outpatient and inpatient reimbursem*nt from Medicare has increased by more than 75%, and the Medicare Economic Index (a measure of practice cost inflation) also increased more than 50%.
As illustrated above, using free-market productivity models for physicians and health systems has resulted in the healthcare system “ignoring universal access, siphoning health-care resources into the pockets of investors and executives, and stripping away patient-physician autonomy as it subverts the ethical value of caring for the individual,” as written by Steven D. Pearson, James Sabin and Ezekiel J. Emanuel in “No Margin, No Mission: Health Care Organizations and the Quest for Ethical Excellence.” Further, though the U.S. spends 500% more on administrative functions and over 200% more for healthcare compared to 10 other wealthy countries, the U.S healthcare system does not perform nearly as well as these countries when it comes to healthcare metrics such as infant and maternal mortality rates per live births, avoidable deaths, mortality rates from assault and overall life expectancy.
Healthcare is not driven by a supply-and-demand business model where patients, as buyers, can freely choose where they want to take their business. Unlike a traditional free-market model, patients often do not know what they need, have difficulty in assessing their options and are controlled by third-party payers and governmental and legislative rules on where they can seek care. In addition, physicians, pharmacies and health systems are often not paid directly by patients. Medicare and private payers control market prices, determine allocation of resources and add to the many inefficiencies in accessing and paying for healthcare services (e.g., prior authorization, the No Surprises Act). Navigating healthcare and payment for medical services is so complex and opaque, buyers/patients cannot make educated decisions about their choices. For that matter, most physicians do not fully understand the processes or options.
All physicians, including those with MBAs, must come together and embrace the clinical and mission-driven roots from which we grew and do the right thing. We must leverage our moral values, understand the implications of our choices and become more engaged in healthcare leadership. As we begin to have more seats at the table, we must inculcate our mission-based servant leadership values and have the courage to hold administrators and each other accountable to supporting patient-centered, quality medical care — ever emphasizing that compensation plans for physicians based on RVU production only feed into the margin-over-mission conundrum. If physicians are expected to produce above the 50th percentile of benchmarks to be paid at the 50th percentile of benchmarks, by statistical definition year-over-year, physicians will need to increase their productivity annually. At a time when physician burnout and suicide rates are remarkably high and healthcare workforce shortages continue to increase, we must push back against the suits for our own well-being and for the benefit of our patients. Until the healthcare payment system is radically changed, the free-market productivity models do not work for providers.
Most physicians choose the medical profession for the “why.”
It is the “why” that drives them — they want to make a difference. To make that difference, we must make sure the margin does NOT subvert our mission and work to influence the systems to recalibrate how they set priorities. Ultimately, we need to embrace the reality that having a lot of money does not equal happiness. As Malcolm Gladwell writes in “Outliers: The Story of Success,” “Three things — autonomy, complexity, and a connection between effort and reward — are, most people agree, the three qualities that work has to have if it is to be satisfying. It is not how much money we make that ultimately makes us happy. It’s whether our work fulfills us; that's worth more to most of us than money.”
