Health Perspectives Vol. II No. 5 September-October 1975 (Pub. 3/76)


Most people who have enough resources are loath to question the value of what they buy if they really want or need it. There are of course exceptions. And the same holds true for political entities. When the money is there it is spent with perhaps a few points put aside for that elusive and unpredictable rainy day.

But when the money seems about to run out or there is a sense that a cursory review shows the price has no relationship to the value (or price) a set of reactions move into action. At home it might mean less spending. In the body politic it means find someone to blame.

In the extreme in both situations reflecting the micro- and the macro-economic analyses the reaction is more severe: economic disruption follows. For individuals and corporations this could mean bankruptcy. In the public sector it means a political fight.

This issue of Health Perspectives sought to analyze the impact of seeming endless and significant increases in medical and hospital expenses for the private and public sectors. It focused though on hospitals which by all reports and studies remained the biggest piece of the expenditure pie. By today’s standard the total hospital, per day and stay expenses are pittances of those seen in the late 1990s and continuing forward. What hurt most was the fact that all efforts to control expenses (and costs) to the date of publication failed to supply solutions.

America stilled lived with certain myths that it had the greatest medical care in the world and that expense should not deter using all available avenues to extend life. The favorite avenue led to the local hospital. And that road was designed in days past based on various methods to compensate hospitals. Medicare as described above to reach support from the hospitals wrote in a reimbursement method based on costs of each hospital (with some regional factors tossed in to ensure that economic errors continued). Others proposed or used negotiated rates later to become known as discount rates. Yet others sought expansion of the prospective reimbursement methodology. This issue tried to decipher these methods and included a statement read into the record by Donald Rubin, Executive Secretary, Hospital and Medical Care Committee, New York City Central Labor Committee, AFL-CIO.

While we analyzed the few methodology trees we all missed the significance of the forest with perhaps the one voice of Donald Rubin who summarized the mess this way. “All providers could be considered the equivalent of mice. When you build a better mice trap you at the same time create a better mouse.” Translated this meant that any efforts to control costs and expenses were doomed to fail because whatever controls were put in place the providers (in this case hospitals) would quickly find a way to survive by circumventing those controls.

What Donald was really saying and is not clearly understood is that the only way to reduce hospital costs (but not necessarily total medical and hospitals costs) was to keep people out of hospitals.

The issue discussed the relationship of costs to quality and mentions the role of the medical doctors in this equation. On page 5 the issue includes a list of CCAHS recommendations to control costs. On page 6 Silvia Law provided another view of prospective reimbursement.

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