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Paulus discusses state of healthcare in WNC


By Leslee Kulba-Ron Paulus, president and CEO of Mission Health was the invited speaker at a Leadership Asheville forum held at the Osher Lifelong Learning Institute at UNCA Wednesday. The subject was Mission’s goals for expansion in light of Obamacare.

Speaking of healthcare in America in general, Paulus argued, “We spend too much and don’t get enough in return.” Using the most recent data available (2011), he showed a scatter plot of life expectancy at birth vs. per capita healthcare expenditures of OECD nations and asked, “Which dot do you think we are?” After a few guesses, he expanded the graph to show the outlying US. Although the country has near-median life expectancy among OECD nations, it was spending $8000 per capita per year, whereas the next closest nations only spent $4000-something.

Is it our nation’s great investment in research and development driving up costs? No. According to Research!America, that only accounts for about 3-4 percent of the total. Is it rich people from other countries coming here for elective surgery? Probably not. Analyses of the OECD data have considered a number of variables, including lobbying, administrative overhead (14 percent of all US healthcare expenditures), malpractice insurance, defensive medicine, overutilization by cost-insensitive populations, and proliferation of technology; and they have concluded the main culprit is pricing.

In a report published by the Commonwealth Fund, David Squires reported average hospital spending per discharged patient was $18,142 in the US, $13,483 in Canada, and $5072 in Germany. Costs for prescription medications in the US ran 30 percent higher than those in Canada and Germany, and more than double those for other OECD nations. Average salaries for primary care physicians were $186,582 in the US, $159,532 in the UK, and $92,844 in Austria. Orthopedic physicians, the brunt of amicable ribbing that night, earn on average $442,450 in the US, $324,138 in the UK, and $154,380 in France.

According to Squires, “Were the US to spend the same share of GDP on healthcare as the Netherlands – the country spending the next-largest share of GDP – savings for the nation as a whole would have been $750 billion in 2009 alone. Were the US to spend the same share of GDP as Japan, savings would have totaled $1.25 trillion – an amount larger than the US defense budget.

Already, the federal government picks up the cost of about half of medical expenditures in the US. OECD nations with socialized medicine pay for 60-85 percent of costs. Slicing things another way, entitlement spending on Medicare, Medicaid, and CHIP consumes 21 percent of the federal budget. In 2012, the US spent $2.8 trillion, or 17.9 percent of GDP on healthcare. The Kaiser Family Foundation projects that percentage will rise to 19.8 percent by 2021.

It was the day before Halloween, so Paulus showed the audience something very frightening. “I play scary music in the background and make my kids look at it and say, ‘It’s your problem, not mine,’” he said. It was a screenshot from It read $17,072,723,511,458, but it is $0.1 trillion higher at the time of this writing.

Not only is government running on borrowed money, its obligations to entitlement recipients were, like Ponzi schemes, sold as thriving on ever-increasing numbers of payees with ever-increasing incomes. Paulus said if ever there was an argument in support of increased immigration, this was it. In 1965, Medicare had 4.5 workers per recipient. A 2012 report from the Medicare Trustees projected that number would be down to 2.3 by 2030. A slide Paulus presented read, “Workers’ contributions to Medicare aren’t set aside for their own retirement – they pay for current beneficiaries.” Tightening the thumbscrews on the federal government, as well as anybody trying to run a hospital anywhere but into the ground, AARP projects by 2050 the population of persons 65 and older will double, and that of persons 85 and older will triple.

Local Issues –

Paulus explained he wants to work at Mission because he enjoys the challenges and the opportunities. Although there is admittedly more to healthcare than keeping people alive, he showed how Western North Carolina fared with the rest of the state in terms of the top-ten causes of death. The number of fatalities in WNC was above-average in all categories except motor vehicle injuries. Deaths from chronic lower respiratory disease and heart disease were 50 percent higher in WNC; deaths from Alzheimer’s disease were 60 percent higher. Although it is not a leading cause of death in the state, WNC suicides also run 30 to 40 percent higher.

Adding to these challenges, about 20 percent of persons living in the eighteen west-most counties are uninsured. In Buncombe County, that number is closer to 24 percent. According to a CDC survey administered in 2010, 18.7 percent of WNC residents said they could not afford to see a doctor, and 42.7 percent said they could not afford to fill prescriptions. Lots of folks opt out of mandatory screenings as well.

Paulus was not particularly pleased with the direction the state legislature was heading. North Carolina was one of 25 states to opt out of Medicaid expansion thus far. Conservative leaders, like Pennsylvania’s Governor Tom Corbett, argued the debate over Medicaid expansion represented a choice of expanding a highly ineffective program for political expediency vs. taking a stance for morality and economics.

Expanding Medicaid to cover the hospital visits of working single adults earning up to $15,856, or families of three earning up to $26,951 was supposed to make Obamacare more affordable. As Becki Gray from the John Locke Foundation explains, the plan was to lower Obamacare premiums by transferring the costs for healthcare for lower-income consumers, who would have been eligible for subsidies from the exchanges, onto the books of another federal agency. A nationwide infusion of $952 billion from new debt, new taxes, or inflation in exchange for a mere $76 billion match from the state was supposed to make this look good to those who can ignore the national debt that is closer to $76 trillion when considering unfunded liabilities. The federal funds, in turn, were supposed to multiply as they trickled through the economy.

But Paulus needs to keep the hospital up and running. Medicaid, he said, only pays a fraction of the cost of treatment. Mission is a nonprofit, but it cannot subsist solely upon income from the government and insurers. What money it makes is reinvested in hospital upgrades and community wellness programs for keeping people out of the hospital. Accepting government money is therefore to his short-term advantage.

Certificates of Need (CONs) played a significant part in the debate over Obamacare. CONs were included in discussions about government regulations driving up the cost of healthcare, such as prohibitions on buying insurance against state lines. Certificates of need restrict the number of high-tech devices hospitals may acquire, as well as the extent to which hospitals may expand. Free marketeers recycled the worn-out arguments about regulation necessarily introducing inefficiencies

It’s a valid argument, as long as other government regulations and incentives aren’t otherwise skewing the playing field. Putting things in context, Paulus told how CONs prevented private practitioners from setting up operations across from the hospital and electing to only treat patients who can fully cover costs, thus siphoning their contributions from the hospital’s potential income. To illustrate his predicament, Paulus reiterated an analogy of a restaurant owner who let people have all the food they wanted for whatever fraction of the bill they wanted to pay.

Another challenge was efforts afoot to make hospitals pay sales taxes, a proposition that could cost Mission eight digits a year. During the last legislative session, the house prevented the senate-approved measure from becoming law. Senate Majority Leader Phil Berger argued there was something disingenuous about the way hospitals were organized as nonprofits while they saved up millions of dollars in reserves and paid their executives million-dollar salaries.

Making Obamacare Affordable –

As for Obamacare, Paulus regretted the demagoguery that dominates discussions. He played a clip from Jimmy Kimmel asking men on the street if they preferred Obamacare or the Affordable Care Act. All interviewees aired staunchly defended the latter. Paulus argued most people will say they don’t like Obamacare, but they like what’s in it. In terms of projected dollars, because of Obamacare and the state’s refusal to expand Medicaid, Mission will have to make $228 million in cuts over the next ten years.

To show how efficiencies could be realized, Paulus shared some demographics. 14 percent of Medicare beneficiaries suffer six or more chronic conditions, consuming 46 percent of Medicare spending. There is truth to the rumor that the un- and underinsured use the emergency room more than others. They also tend to avoid screenings, thus foregoing low-cost preventive maintenance in lieu of surgery.

Compounding this situation is poor communications among hospital staff. He presented data from a 2008 study conducted for the Commonwealth Fund in which 1004 randomly-selected adults discharged from US hospitals were interviewed. Overall 47 percent of those interviewed reported a breakdown in communications at some level, among physicians, staff, and/or the patient. The number rose to 55 percent when three or more physicians were involved.

Paulus then showed a number of slides of a number of variables trending for the better since he became president and CEO of Mission. Graphs plotted anything from subjective patient satisfaction to a number of problems contracted in the ICU. Paulus told the audience, “You don’t want to go to the ICU. . . . There are too many openings in the body, and there’s too much technology.” Back in September, Mission was recognized by Johns Hopkins Medicine as one of the top-ten large-sized hospitals for pain management and medication reconciliation.

“This one gives me a shiver, but it’s a good shiver,” said Paulus as he mentioned mortality rates. When Paulus came on board, Mission was among the top 16 percent of hospitals for survival rates. To that, he said he had always considered average to be abject failure. Staff intentionally developed strategies to reduce the hospital’s mortality rate, and at the latest count, 550 more patients had survived care than did in 2010. The chances of dying at Mission are 40 percent lower than in the average hospital.

Paulus asked the audience to imagine a futuristic healthcare system with free preventive care, 25 percent of physicians’ consultations conducted over the phone, keying data once into a universal database, and “your needs are not only met, they are anticipated.” He then announced, “I was in a system like this, and had to come back to the real world. I had all this. It does exist.” Before coming to Mission, Paulus was Executive Vice President of Clinical Operations as well as Chief Innovation Officer for Geisinger Health System in Pennsylvania. The enterprise included two hospitals and over 800 group practices. Kaiser Permanente in California utilizes similar technology.

Asheville needed a paradigm shift. Paulus illustrated how audio entertainment had shifted from the gramophone to chip-sized devices. He pointed out a number of defects in the current system, among which were a focus on inputs (treatments) rather than outputs (well people), profits rather than right-sizing of care, silo mentality rather than a holistic approach, and reliance on hearsay rather than a centralized database with the latest information.

Paulus’ claims are supported by a 2011 report published by the Urban Institute. The authors compiled the results of a number of studies confirming the belief that targeting chronic populations with coordinated care with an emphasis on preventive maintenance could improve patient outcomes by around 20 to 25 percent and reduce Medicaid/Medicare costs by a few percentage points as well.

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