As politicians and public health officials at the federal and state level dithered and bickered early in the coronavirus crisis, it left individual health-care systems to try to respond to the pandemic. Yet the reality of our public-private health-care model created a fundamental problem: Our hospitals' financial existence depends on maintaining near-maximal capacity of patients and procedures.
Nowhere was this more obvious than in the slow decision to postpone elective medical interventions - pre-scheduled procedures that are often nonetheless serious, ranging from removing a cancerous growth to removing a pesky gallbladder causing repeat inflammation.
In mid-March, a month and a half after the first diagnosis of covid-19 in the United States, Surgeon General Jerome Adams urged specialists to reschedule elective procedures when possible and medically safe.
Yet, initially, this suggestion provoked backlash from powerful groups that represent hospitals and medical colleges, because the revenue from such procedures is critical for their financial survival.
Now, many hospitals face a budget crisis that reveals the extent to which their business model is structured to reward high-cost surgeries over the very type of routine care that COVID-19 is demanding.
Rapid transformation in medical knowledge and practice in the late 19th century, advances in bacteriology, antiseptic technique and anesthesia all set the stage for a rapid growth in surgery.
A reliance on inpatient stays for scheduled surgeries helped create the hospital system we have today in which hospitals are meccas of medical innovation and knowledge.
This fueled a steady rise in the cost of medical care, but also disparities in payment across the medical profession. Primary-care physicians cried foul that their work was poorly compensated in comparison to that of their surgical colleagues.
Some physicians experimented with different models for payment, such as a monthly fee or subscription for medical services. Yet this provoked an outcry from their more mainstream colleagues, because mainstream physicians felt that such an approach would erode income, professional standing and professional independence. They saw "group practices" as an experiment in socialism and expelled these doctors from professional societies for their experimentation. In fact, the leading medical societies were so ruthless in their pursuit of dissenters that they ran afoul of legal norms, and in 1943, the Supreme Court upheld a conviction of the American Medical Association (AMA) on antitrust violations.
Instead, the medical establishment overwhelmingly preferred a fee-for-service model in which physicians were paid for the services they provided, ensuring both financial and professional independence.
The 1965 passage of Medicare and Medicaid offered an opportunity to rethink the financing of medicine. Yet the AMA ensured that this opportunity would be squandered, successfully lobbying to enshrine the fee-for-service model within Medicare, allowing doctors to charge "usual, customary and reasonable" fees for their services. Unsurprisingly, with a government agency committed to paying whatever doctors might charge, physician charges skyrocketed, while hospitals, which would now be reimbursed for their expenditures, predictably spent more money on care.
The result: rising health-care expenditures in the 1970s and new discussions about cost control that had champions on both sides of the political aisle.
The AMA, however, fought relentlessly against these efforts.
The Health Maintenance Organization (HMO) Act of 1973, sponsored by Sen. Edward Kennedy, D-Mass., and signed into law by President Richard Nixon, held enormous promise to reshape the medical payment structure. HMOs were organizations that provided comprehensive health services for a fixed fee - conceptually similar to the group practices of the earlier decades. Rather than paying for medical care by volume, a set annual price was designed to encourage efficiency and cost savings - at the expense of patient care and physician autonomy, critics countered. But the AMA lobbied tirelessly and relentlessly to limit its scope, producing a narrow bill, which helped guarantee the failure of HMOs, and their enduring unpopularity.
As the problem of skyrocketing medical costs persisted in the late 1970s and onward, more successful measures to rein in costs were implemented. These changes focused both on how hospitals were compensated for the care they provided and how physicians could bill for their services.
Today, hospitals are most often paid based on how much the care of a certain disease in a certain patient should ideally cost. Physicians' labor is compensated by a complex system that takes into account time, effort and complexity and attempts to assign a discrete value to each component. This system overcompensates surgical and other procedural interventions in comparison with nonsurgical intellectual labor, even that demanded by the care of critically ill patients in hospitals. This structure enshrines more than a century of financial incentives to reward procedural volume and incentivize interventions.
At its core, the American health-care system still relies on volume for financial solvency - providing a strong incentive for physicians and hospitals to maximize the number of procedures performed.
But the pandemic has also revealed that a health-care system that prioritizes volume - specifically of procedures - is structurally incapable of sustainably responding and adapting to such an unprecedented challenge. As the dust settles and practices reopen and procedures are rescheduled, it is important to consider the often invisible structures of our health-care system, and how we might restructure them to create a more adaptive system less based on volume and the political battles of the 20th century.