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Are Research Hospitals Headed for Critical List? : Official Says Facilities Such as His Cancer Center Are Being Stung by Competition From HMOs

March 19, 1995| G. Peter Shostak is an administrator at USC/Kenneth Norris Jr. Cancer Center and Hospital in East Los Angeles. The hospital, which opened in 1983, has an active medical staff of about 100 physicians and an average daily caseload of 40 inpatients and 100 outpatients. It is one of eight hospitals nationally to be designated as a regional comprehensive cancer center by the National Cancer Institute. USC/Norris treats all types of cancer patients, but specializes in urological, gynecological and gastrointestinal cancers, as well as cancers related to the AIDS virus. Shostak was interviewed by Karen E. Klein.

Given what I know to have occurred in our laboratories, I am optimistic that we can find the cause of--if not the cure for--cancer in our lifetimes. For the first time in history, we are looking inside the genetic makeup of the cell and seeing how cancer begins: when a genetic mistake occurs. For the first time, we can actually see what's happening at the earliest levels.

But I am also fearful, because just at this moment, just when one can almost become excited that we're really going to get to the bottom of these 200 disease processes we call cancer, the world has decided that the only important thing about health care is how much it costs.

In our rush to reduce expenses, I believe we have put at risk the future health of our country. That makes me sick.

When cost becomes the first priority, the ability of hospitals like ours to do clinical research and experimental trials is strangled. And instead of handing our children a future free from cancer, we'll hand them a future full of cancer, which we could have eradicated if we had been able to keep up the pace of our research.

What has happened is that managed health care systems--the health maintenance organizations that are such a dominant segment of the marketplace in Southern California--are purely focused on price. Because of that focus, providers of service are being forced to compete first and foremost on a price basis.

This automatically puts at a disadvantage the teaching and research hospitals of our country that have typically borne the extra costs associated with clinical research and medical education. That kind of research and education is not something any of us can afford to lose.

Let me get personal for a moment. My wife, Myra, is a cancer survivor. She celebrated her 11th year free from cancer on March 5. At the time Myra was treated in 1984, the experimental treatment regimen she was placed on was less than 5 years old. That new approach was available to her only because there was clinical research on breast cancer under way.

Eleven years later, we are convinced that given Myra's diagnosis, she probably would not have survived the first year without that treatment.

But 11 years later, many teaching and research hospitals are lucky to fund new equipment and fortunate to be able to give their employees a raise. There is certainly no longer room to help bear the significant cost of conducting clinical research.

In the good old days, which were not that long ago, we were able to do cost-shifting in hospitals like ours. We took funds derived from the care of patients who had indemnity insurance like Blue Cross and used those funds to pay for the care of patients who couldn't pay for their own care and to supplement the cost of medical education and research. That's the way it was done.

There were also major benefactors who gave large amounts of money and drug companies who helped pay for clinical research while they developed their products. The federal government has in the past provided supplemental funding to hospitals that took care of a disproportionate share of poor people and did medical education and research. But all those funds are being ratcheted down.

You see, in health maintenance organizations, the policyholder trades away freedom of choice and options in return for a lower-cost health insurance program. Under indemnity insurance, patients were able to choose their own physicians and hospitals. In most health maintenance organizations, the patient has chosen or been assigned to a managed care gatekeeper who controls the patient's access to the rest of the health care delivery system.

So where one would go for health care would be controlled by his insurance policy, and that policy is negotiated by the employer based on price. The physician or group who can provide health care at the lowest price gets the contract. Normally, the individual policyholder has nothing to do with that negotiation.

Hospitals like ours, which have the added expenses of funding research and providing care to indigent patients, simply cannot compete in an arena focused solely on price.

This kind of managed care system came to California in the 1980s, and it has spread across the country. It has been successful in controlling the escalation of health care costs mainly because it is an efficient means of delivering the primary level of health care.

But we are concerned that people who need to be referred to the next level of care are sometimes not getting there in a timely fashion. It sometimes takes too long to get a patient referred to a specialist because the gatekeeper wants to exhaust all the tests and options on the primary level.

What's happening is that the gatekeeper wants to keep the patient at the primary level because, depending on the financial structure of the program, there may be financial incentives for the HMO to keep the patient at a level where they can control the costs.

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