The Healthcare Bubble

It appears we live in the age of the “bubble”. The current recession was the result of the collapse of the Housing Market bubble. We know about the Credit bubble in Europe with forecasts of countries defaulting. Then there is the periodic Energy bubble here at home, which surfaces every time there is an increase in Mid-East turmoil. It seems we continually go from one economic bubble to the next, but what about the “Healthcare Bubble”?

Recently my son, who is a college student, sent me an article published in Forbes entitled “The Dumbest Idea In The World: Maximizing Shareholder Value” by Steven Denning. This is an essay on how the American capitalist system is being threatened by the practice of executives manipulating corporate performance expectations on Wall Street, in an effort to maximize the value of their companies’ stock. It is a rather intricate discussion, but the conclusion is that over the last 40 years the focus of CEOs has shifted from their products, customers and employees, to pleasing their shareholders with higher stock prices. This is in large part because top level executive compensation is tied directly to the value of the company’s stock.

As I read through this article I couldn’t help but draw a comparison to what has been going on in the healthcare arena over that same period of time. But, instead of shareholders, the priority parties in healthcare are often referred to as “stakeholders”. They include payers (public and private), hospitals and other facilities, regulatory and certifying entities, pharmaceutical companies, medical device manufacturers, a myriad of management companies and numerous other minor players. Oh wait! I almost forgot, there is another stakeholder group known simply as providers. Each of these entities has contributed in one way or another, and often in combination, to a progressive shift away from what has traditionally been a very personal and individual service, to a “system” where healthcare is now doled out as a commodity, largely to the benefit of the stakeholders.

Jack Welch, the former CEO of General Electric, was once the darling of Wall Street because he was the undisputed king of playing the game of maximizing shareholder value. But after his retirement he apparently saw the light. In a 2009 interview he said, “On the face of it, maximizing shareholder value is the dumbest idea in the world. Shareholder value is a result, not a strategy…” I’d like to paraphrase that statement for healthcare; On the face of it, stakeholders managing individual’s healthcare is the dumbest idea in the world. Stakeholder value is a result, not a strategy.

The movement away from the patient as the center of healthcare has been gradual, but it took a major leap forward with the passage of federal healthcare reform in 2010. The Patient Protection and Affordable Care Act is precisely the opposite of what its name implies. It does little to protect patients, is far from affordable and is more about controlling costs than it is about providing care. The true effect of “Obamacare” is to homogenize the delivery of care, with the various stakeholders lead by thousands of unelected bureaucrats, ultimately determining the who, what, when, where and how healthcare services are provided. Moreover, all this is done under the guise of quality improvement and cost effectiveness. The fact the entire federal government, including Congress, and now countless special interest groups have been exempted from this law should provide ample proof of the undesirable nature of such a system.

While CEOs are, by definition, the ultimate decision makers in America’s corporate world, it is the physician who has traditionally held that role in healthcare, but that is changing rapidly. Over the years America’s physicians, the “Chief Health Officers” for their patients, have allowed themselves to be progressively manipulated by the other stakeholders, who’s strategies and tactics have included various financial incentives, regulatory mandates, credentialing guidelines and the most recent trend, physician employment.

An obvious comparison can be made between the corporate CEO who is compensated based on the value of their company’s stock and a physician whose compensation may be based on the profitability of his or her practices to the hospital or insurance company that employs them. Likewise, if the customer suffers when a company fails to respond to their needs, it is the patient who will suffer when their physician’s incentives are misaligned. To date, the only thing that has stood between the patient and stakeholder mandated rationing of care has been the moral and ethical compass of the physician. Now even that is under constant attack by some stakeholders who view the Hippocratic Oath as an inconvenient or outdated philosophy.

The ultimate impact of shifting incentives and conflicting priorities has been the creation of a practice environment where many established physicians feel trapped. On the one hand they can hold to their traditional values and focus exclusively on their patients’ needs and risk financial ruin, or they can compromise those values and learn to play the stakeholder game. Most are struggling in an attempt to do both, but with little success. Many older physicians are opting out of healthcare altogether, while others are simply focusing their practices on services that are outside mainstream medicine. The supply of young physicians, who are in large measure being trained as “shift-workers”, is insufficient to fill the gap created by early retirements and career changes within the older guard. The result is a growing “Healthcare Bubble” where demand for services will soon outstrip supply.

Not surprisingly, one quick-fix being pushed by various stakeholders is a broad expansion in the scope of practice of various paramedical personnel. There is rarely any mention of the level of competence required to safely remove your appendix or manage your high blood pressure.

Many of my physician colleagues have expressed a defeatist attitude, suggesting that changing the healthcare system is impossible. Again, borrowing from Denning’s article, which quotes Vince Lombardi: “We would accomplish many more things if we did not think of them as impossible.”

Clearly, the first step in getting back to patient centered healthcare is the total repeal of Obamacare. This will only happen if the majority of the population demands it, and that is precisely what the next Presidential election is all about. Should Mr. Obama win another term in the White House, there will be virtually no chance that his version of healthcare reform will ever be repealed. If that happens, the Healthcare Bubble is very likely to burst within just a few years. Healthcare will indeed be “free” to all American’s, but will they be able to find it?



The opinions expressed herein are my own and do not necessarily reflect or represent the policies or opinions of any medical organization or group.

Check out my web site at

Leave a Reply

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>