This is the Healthcare Marketplace Specialization, Healthcare Marketplace Overview. I'm Steve Parente and this is module 2.1.3, Physician Market Evolution. So this is a picture from one of my favorite comics growing up as a kid, the Rocky and Bullwinkle Show. And here we have, for those who have seen this in movies recently, Mr. Peabody and his boy Sherman. And they have a special technology, the Way back Machine, where they can go back in time and see what actually happens. We're going to do this a little bit through the magic of slides and voice, but to convey the same idea, that it's important to look back on a market and just see as we talked about the initial markets in module one where this market has evolved. One thing I made point of is that I always put the provider market as the first market in the course to discuss because the providers, and particularly the physicians, really set the tone for American health policy. There is a very distinct history in terms of what they did that really makes America different from most the rest of the world, and I think it's really important to acknowledge that. We don't talk about it very much anymore, might not be very maybe, correct, I think maybe politically isn't an appropriate word for this. Probably the best way to is certain parties would like to forget their past in terms of how they acted so strategically, yet it was pretty brilliant in terms of what they did and to achieve their aims back at the time. By the way, Rocky and Bullwinkle is a Minnesota product and if you're curious, you can see it on Nick at Nite or the reimagined 2014 film, which is okay, good for kids. So one book that, if you're ever interested in reading a great book, I recommend this book. Paul Star Had a book in 1982 called the Social Transformation of American Medicine. He won a Pulitzer price for it while he was a professor at Harvard. He later is now at Princeton as a professor there. He talks a lot about this concept of escaping from the corporation and he's talking about the physicians who are escaping from the corporation. The question is what corporations would the people be escaping from? And the corporations we're really talking about are attempts from the different organizations to hire physicians to work for them In remote places. Railroads were doing this, shipyards were doing this and essentially to put them under salary. And what physicians while they were gaining enough power and skills were doing and saying, well that's great, we like the money but we want to be free entrepreneurs. We don't necessarily want to be working for anyone. The lasting effects of this escape is that physicians have really demanded a level of Independence, of autonomy, that only very recently has been threatened. And one could argue that one of the things that are no longer an issue say for physicians is that they have achieved a certain level of professional independence and income that they really don't have to fight as hard as they did previously and in many cases are free agents to go work for or set up their own institution. So what were the doctors resisting, really? They didn't want to work for the company, and the company is, I mentioned, some of them are railroads. Another, the idea being that may not be obvious but railroads back in the 1900s were the largest firms in the United States. The Pennsylvania Railroad alone had over 500,000 employees, just a ridiculous amount of people that were basically in moving all goods. Remember, this is a world before really cars, before long distance phones Most communities were tied by dirt roads and tracks, and so lots of little towns had little railroad stations and all these things had to operate. But actually hooking up the cars was very dangerous and limbs were lost very easily, and that's why, essentially, most of these companies had physicians around to do this sort of work. Another type of thing was consumer clubs. The idea being that different organizations, say, that we're community based would essentially license or get preferred privileges from physicians to take their members in or to charge at certain rates. So an example from back then might be the Lions or the Elks or these groups in the local community. They would actually organize and get physicians to be part of their benefit package. Another way consumer clubs will work today would be labor unions that would negotiate certain rates working with different providers in terms of how they would be reimbursed. And then private group practice, the idea that being if you have a group practice, a group, a set of physicians, the American Medical Association, which is the largest medical lobby, still is, for these physicians would be losing out on revenue. They're getting revenue basically on dues paying members, one due per member. Well, if you have a group practice maybe you don't necessarily have to all want to pay your dues for each of the individual physicians. And the lodge practice that we're talking about again was sort of an illustration of these consumer clubs. Where essentially there would be a practice that would established just to service a certain group of members. Again this would essentially restrict the autonomy that physicians were experiencing in this period of history. So one really great story is the Mayo Clinic. And the Mayo Clinic, believe it or not, as much as everyone loves it today, was not really well loved by the American Medical Association. It's really the point of origin for one of the best group practices organized in America today. Really, the Mayo Clinic, what you have to realize, is a giant medical group practice that just happens to own hospitals. It's very impressive. It networked with the biggest employer of the day for patients which, you guessed it, the railroads. And why? Because a lot of surgery needed to be done for folks that were maimed and basically the Mayo brothers promised to take care of folks with great surgical skill. They were known for their skill, their invention, and their low mortality rates, great statistics. They were really good at diagnosing, they were also very selective as they added new doctors to their practice. They had diagnostic innovations and inventions that were on par with their surgical inventions. Great ideas in the sense of saying if we don't know what's really wrong with you, we're not going to do something very aggressive with you. So when it started, it was in the 1880s, it was Dad, and then William and Charles Mayo getting things going in Rochester, Minnesota. 1903, they hired one new surgeon. But by 1914 they kind of got better at this and figuring out how they were going to brand themselves, they had 17 doctors. And amazingly on the cusp of the Great Depression, by 1929, 386 physicians and dentists, really amazing. Other changes that occurred in this market is that younger physicians that were involved in the Medical Corp in World War I, even though the US was only involved in World War I really for two years, admired the integration of services. Meaning that you would actually put together different specialties together and allow them to organize and economize some of their services to get better patient outcomes. So in essence it's working with surgeons, working with primary care physicians, working with cardiologists, working with pathologists. Actually paved the way for saying maybe we should do this when we get home. Also there was the appeal of salaried work for young physicians and created a gradual acceptance of working for a corporation as they matured. This actually played a large part into the group practice work that actually happened more on the west coast than the east coast. And the Flexner report, which came out in 1910, and we described as little bit in background and history. This report basically really choked medical school supply and made existing doctors much more valuable. That increased their salaries, but it also put pressure on the older doctors to make sure that they were up on the science that the Flexner report requires you to do. Now, what the Flexner report basically said was, you couldn't just attend medical school for say, six months and say, hey I'm a doctor, give me a certificate. You needed to basically do what people do today. Four years of college first, and then four years of med school. Prior to the Flexner report really requiring that, that was not the standard. And what they were using as the standard was my alma mater, Johns Hopkins University, which really was actually copying the model of great rigidity and rigor from German and British institutions. So if we think about all the major things happening in this market just 100 year span of time, the Flexner report really limits the supply of physicians. That enables a monopoly behavior to go on there. The Great Depression reduces revenues for physicians and hospitals because it's a cash paying business. 1930s we see private health insurance viewed more favorably, as a means to support physician salaries. We see private group practices and prepaid group practices, meaning you pay the practice ahead of time to take care of you for the year, start to take off and aid physician salaries and become more accepting. In the 1940s, we see World War II and Antibiotics. This is an earthquake to many major physicians because it provided the emphasis on science. Flexner talked about it, but now, you really needed to know biology, biochemistry, and it provided incentive either for retraining, or in many cases, retirement for a new wave of physicians. And we get to 1950s, it's the heyday fee-for-service medicine. Basically, private insurances takes off, you're getting paid whatever you bill, within reason, but this does increase essentially incentives for healthcare costs to go up. Medicare and Medicaid come on in 1960s, Medicare for the elderly, Medicaid for the poor. And they basically just take on the working fee-for-service insurance structure. This then accelerates medical cost inflation. By the 1970s we see managed care experiments that put physicians in charge of overall purse strings, mostly because the managed care revolution was really driven by physicians. Many of them in Minnesota, actually one person to do a Google search on just to see his history, he's still alive, brilliant guy. Paul Elwood started a group called Interstudy, but he really was the person who coined the term health maintenance organization, later got it passed into law. And then we get to 1980s, we try inpatient cost containment with DRGs. We're going to talk a little more about that later. By the time we get to the 1990s, now, Medicare, as well as the private insurers are putting physicians on fee schedules. They're losing certain autonomy, there's salary reductions, there's a lot less economic freedom for physicians. But understand that they're still making more than almost any major group in census data reported with the exception of 747 pilots in the 1990s, but even that's been now threatened. This concludes this module on the trajectory and history of the medical marketplace and provider market.
