The Money’s in the Wrong Place. How to Fund Primary Care – The Health Care Blog

By MATTHEW HOLT

I was invited on the Health Tech Talk Show by Kat McDavitt and Lisa Bari and I kinda ranted (go to 37.16 here) about why we don’t have primary care, and where we should find the money to fix it. I finally got around to writing it up. It’s a rant but a rant with a point!

We’re spending way too much money on stuff that is the wrong thing.

30 years ago, I was taught that we were going to have universal health care reform. And then we were going to have capitated at-risk entities. then below that, you have all these tech enabled services, which are going to make all this stuff work and it’s all going to be great, right?  

Go back, read your Advisory Board Company reports from 1994. It says all this.

But (deep breath here) — partly as a consequence of Obamacare & partly as a consequence of inertia in the system, and a lot because most people in health care actually work in public utilities or semi-public utilities because half the money comes from the government — instead of that, what we’ve got is this whole series of massive predominantly non-profit organizations which have made a fortune in the last decades. And they’ve stuck it all in hedge funds on and now a bunch of them literally run actual hedge funds.

Ascension runs a hedge fund. They’ve got, depending who you believe, somewhere between 18 billion and 40 billion in their hedge fund. But even teeny guys are at it. There’s a hospital system in New Jersey called RWJ Barnabas. It’s around a 20 hospital system, with about $6 billion in revenue, and more than $2.5 billion in investments. I went and looked at their 990 (the tax form non-profits have to file). In a system like that–not a big player in the national scheme–how many people would you guess make more than a million dollars a year?

They actually put it on their 990 and they hope no one reads it, and no one does. The answer is 28 people – and another 14 make more than $750K a year. I don’t know who the 28^th person is but they must be doing really important stuff to be paid a million dollars a year. Their executive compensation is more than the payroll of the Oakland A’s.

On the one hand, you have these organizations which are professing to be the health system serving the community, with their mission statements and all the worthy people on their boards, and on the other they literally paying millions to their management teams.

Go look at any one of these small regional hospital systems. The 990s are stuffed with people who, if they’re not making a million, they’re making $750,000. The CEOs are all making $2m up to $10 million in some cases more. But it also goes down a long way. It’s like the 1980s scene with Michael Douglas as Gordon Gecko in Wall Street criticizing all the 35 vice presidents in whatever that company was all making $200K a year.

Meanwhile, these are the same organizations that appear in the news frequently for setting debt collectors onto their incredibly poor patients who owe them thousands or sometimes just hundreds of dollars. In one case ProPublica dug up it was their own employees who owed them for hospital bills they couldn’t pay and their employer was docking their wages — from $12 an hour employees.

Now despite the ACA hoping to change American health care, these hospital systems make all their money not by doing primary care, but by running their high intensity services — cardiology, neurology, orthopedics, general surgery and all the rest of it. They recruit superstar surgeons who keep the cash tills running—even if they came from doing quasi-fraudulent care down the street. And they’ve spent the last decade growing.

I used to think – and this was the intent of the ACOs under the ACA –that this would be sorted out by capitation and value-based care, but it just hasn’t happened. Hospital systems spent the last couple of decades growing by buying primary care doctors, running their practices at a loss and capturing all their referrals for the expensive procedural stuff. In fact there’s a term for this—they call it preventing leakage.

I’ve been looking at this for a while, and then the real crowning thing that pissed me off, the cherry on top of the sundae if you will, was the answer as to why do they have all this money in reserves, or in their hedge funds? Why does a small health system have $2 billion plus sitting in the stock market or sitting in cash? You know why? Well, presumably it’s there for a rainy day, right? When something bad happens, they have money and they can sustain themselves, to run their mission.

Well we had a rainy day starting in March, 2020. Inpatient and elective care got shut down under Covid and they all started losing massive amounts. What happened? They said, now we need a bailout. That was a huge part of the CARES Act.

The only two organizations I respected at that time were for-profit chain HCA and Kaiser Permanente who were given bailout money but  gave it back because they said they didn’t need it. But many more were like Commonspirit with 140 hospitals across the country, which got $1.5 billion. Hundreds of millions went to hundreds of these individual systems.

I haven’t done this scientifically, but we know that in their “reserves” Ascension has got $40 billion, UPMC has got $12bn, Kaiser’s got a ton as well. A medium sized systems like that RWJBarnabas in New Jersey’s has $2.5 billion, and one in Minnesota called Essentia, which I’d never heard of until last week, has more than $600 million in its reserves. There is probably $250 to $350 billion sitting out there on the balance sheets of every non-profit hospital in America. And if you chuck in the health plans, it’s probably way more. There’s likely an Apple or Google size cash mountain sitting out there

If you started American health care from scratch what would you do? You would give everybody primary care. If you look at the people who actually have been moving the needle on controlling hypertension and managing diabetes, it’s all people with a primary care approach, who spend a lot more money on primary care than on later stage specialty care for the people who already are sick.

I heard a great talk from Bob Matthews who works with an inner-city medical group with a mostly low income African America population, helping them manage hypertension. The best at doing this in the state of California is of course Kaiser where 70% of people with hypertension are within official guidelines and are “under control”. The state average is below 40%. But with this tough population Matthews’ group was at 94%. We know how to do it properly, but we don’t spend any money on it.

So how much do we spend on FQHCs which are basically primary care for poor people. I asked ChatGPT and the answer is $38 billion.

If my guess is correct there’s $300 plus billion in these hospital reserves sitting there not doing anything other than buying Nvidia stock and yet it costs only $38 billion a year to run the FQHCs. You could add another $38 billion a year for probably ten years just by confiscating all the reserves and the hedge funds of the rich systems–which they don’t seem to be doing anything with!

I understand that this is America. You will see no finer example of regulatory capture than the AHA and every single hospital in every single congressional district making sure that there is no such thing as a real assault on their balance sheet. And if things go in the least wrong, you know, they have all these employees and they’re very important for the local economy and yada, yada. And changing that is unbelievably difficult in America.

Bu at some point it’ll have to change.

Bob Matthews, who I mentioned earlier, is from a company called MediSync, which supports a bunch of primary care groups. They essentially use intelligent machines, telling the doctors which drugs the people with hypertension should be on and how they should be treated, and help the primary care docs match the patients to the guidelines. If you actually do that, you have a much better chance of actually helping people avoid the problems of hypertension, diabetes et al. There’s a bunch of stuff you have to do. It requires proper patient outreach and yada, yada, yada. It’s not easy, but you can do it. And we have failed to do it because more than half the people in this country don’t have access to a primary care doctor.

I remember at Health 2.0 years ago I asked Marcus Osborn why Walmart got into health care delivery. He said that they surveyed Walmart shoppers, asking how many of them had a primary care doctor? And about 60% of them said they have one, 40% said they didn’t have one. Then they asked the 60% what the name of their primary care doctor was, and half of them didn’t know it. So not much of a relationship there! So at that point they said, hang on, perhaps we should be investing in primary care. And that’s why Walmart, Walgreens, CVS et al are now in the primary care business — because they think there’s an opportunity because the current incumbents have done it so poorly.

And why would the current incumbent big health systems bother to do what Bob Matthew’s groups did? Because all they’re interested in is getting the expensive people into their facilities to do expensive stuff to them in order to generate money, which then ends up in their hedge fund.

This is so screwed up.

We’re spending so much more than anybody else. We do need hospital systems. We do need intensive inpatient stuff. We need to figure out how to fix cancer. But we need to do less of it and we need to pay less for all the stuff we’re doing. We’re spending way too much, when we’re paying 10 times what everybody else in the world is paying for drugs. They call it the free market. But there isn’t one. There’s price fixing and price setting.

Every other country does price setting. And we do price fixing by the companies who make Ozempic and Humira, and stents and hospital beds and then of course by the systems that provide all these services.

We shouldn’t be putting up with this. And expecting a free market approach to get it right means that we’re relying on people who haven’t figured it out for years. Like employers.

Healthcare is a regulated market. Our primary payer is the fricking federal government, it’s not the free market. I’m trying to connect the fact we need to spend money in places it’s not being spent while there’s this obvious source of money sitting there being managed by hedge fund guys.

Literally, the former CEO of Ascension actually moved over to the hedge fund and is paying himself like $12 million bucks a year to manage the investment. I mean, good luck to him. No one’s stopping him. But at some point, we’ve got to say, why do we allow this?

Because technically half the money in hospitals comes from the government. At least 50% of their activity is a public utility. If RWJBarnabas was a pure government organization would there be 28 employees making a million bucks a year? I sincerely doubt it.

So let’s have a real evaluation of what money is available and lets take it from the organizations that shouldn’t have it and put it in the place where it’s needed.

Matthew Holt is the publisher of The Health Care Blog