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Challenges and opportunities

October 18, 2007

Healthcare Manufacturers Marketing Council Fall Conference
Omni Hotel Chicago
Chicago, IL

Joseph M. Heyman, MD
American Medical Association

Good morning, everyone.

It is a pleasure to be here representing the American Medical Association. I want to thank Charlie Higgins, your Executive Director, for putting together this agenda and inviting me to speak today. And also to Madeline Sandy who made everything so convenient for me.Without question, the work physicians do on a daily basis could not take place without the work you do on a daily basis.

I’m a gynecologist and my most recent “major” experience with your innovation has been this wonderful treatment for heavy bleeding. It involves no hormones and has saved thousands of women from a hysterectomy with a 90 second endometrial ablation. Most of us physicians are not always aware of some of the up-and-coming and revolutionary things your industry does.

A quick internet search tells me of just a few of the “firsts” and “new applications” from the medical device industry. These caught my eye:

  • Artificial cervical discs to help treat cervical degenerative disc disease, one of the most common causes of neck and arm pain.
  • Absorbable sutures derived from a new class of biopolymers and recombinant DNA technology giving increased strength and flexibility.
  • Devices to help quantify Regional Brain Atrophy in Patients with Neurodegenerative Disorders by feeding an MRI into a scanner.

And I even read about a device called GLUCOBOY – a glucose meter that can be inserted into a Nintendo GAMEBOY and help with diabetes management and control. What a great way to get kids involved in their success.


Of course I have to offer the disclaimer that the AMA does not endorse or recommend any of these devices. I want to underscore the theme that you heard from this morning’s session, “change in the marketplace.” I agree that it is human nature to resist change, but the changes happening around us – in your industry and in mine – require us to be aware of how we can harness those forces to help us adapt and grow.

Similarly, health care policy also needs to be informed by the new conditions and forces at work. The term “health care” is so much in the news these days, from Washington and the state capitals, to Wall Street and Main Street, that one would have to be deaf, blind and in a cave somewhere to miss it.

There are, in all these reports and analyses, two common denominators: First, a loud public cry for action. And, second, a babble of ideology, rhetoric and political posturing. At the root of it all, however, is genuine concern. And there is genuine understanding that the current state of affairs is not sustainable and needs attention. Health care expenditures in this country are at nearly 2 trillion dollars. That’s more than the GDP of Russia and India combined. Just our health care expenditures are more than the entire national expenses of Canada.

So, we have a lot to talk about today. will be discussing the current political situation for the AMA on a number of key issues –Issues for the AMA – issues that the AMA has worked on to the ebb and flow of Congressional activity for years. But rather than provide a laundry list of how the AMA is approaching these matters, I want to try and put them in the context of our current strategic direction: What we at the AMA believe needs to happen now – and what we are doing about it.I want to discuss what some of the emerging trends look like to us as we prepare for the future. And finally, I want to leave sufficient time to answer your questions.

Today, the U.S. Congress is going to vote to try to override the President’s veto of bipartisan legislation to protect the health of America's low-income children. The AMA believes the Children’s Health Insurance Program – known more commonly as “CHIP” – is vital to protect low-income children whose parents work hard, but aren't able to afford health insurance. For children to get a good start in life, they need access to the medical care that this program makes possible. CHIP is an excellent example of a public-private partnership with a full 77 percent of children in the program getting their coverage through private health plans. The number of uninsured children has increased by nearly one million over the past year, and action must be taken to reverse this trend.

The AMA has lobbied aggressively in support of this legislation. We were deeply disappointed when the President exercised his veto. The AMA strongly urges members of Congress from both political parties to stand on the side of America's parents and children by voting to override the veto. We know that there’s even more that needs to be done. Covering America’s uninsured children is vital to our nation’s health. But overall, there are 47 million uninsured Americans.

47 million uninsured Americans is not just a statistic. It is a national tragedy.

That is why the AMA only a few weeks ago, launched a national campaign to educate the public, to influence policy-makers, to get a solution passed. To translate policy into action. Ours is a multi-year, multi-million dollar campaign. We’re reaching out to voters and candidates on the ground in the key primary states. We’re reaching out to key community and business groups such as Rotary Clubs and Chambers of Commerce. We’re reaching out to groups like you – those who understand that the best health care in the world doesn’t mean much if you don’t have access to it.

There are 47 million uninsured: one in seven Americans who need the candidates to step up and make a difference. In a few minutes, I’m going to share with you how the AMA sees the consequences of so many without insurance. I’m also going to suggest that you, next November, go into that voting booth with one important question in the front of your mind: Where does my candidate stand on the health care issues facing our nation? To understand how we got to where we are today, let’s briefly look at the past.

Health insurance really took hold during World War Two. Employers were allowed to deduct premiums. It was a way to get around freezes in wages, giving employees a benefit. Later, individuals were no longer taxed on the value of employer-provided health care. Health insurance became rooted into the daily lives of workers and families. Our nation has also led the way in many dimensions of health care innovation, and technical advances. Most of the technology used today was developed here. You know this better than most. A century ago, life expectancy was 47. Today, it’s over 78. A century ago, only the very rich could afford the best of medicine. Today, those of us with insurance expect and get the best care, when we need it, when we want it.

Technology – when used appropriately – has clearly been a major benefit for helping our patients. But what about those without insurance? It’s a national disgrace that the richest country on earth has 47 million of its citizens without health insurance! The best technology and medical innovation in the world cannot help those who cannot afford to see a physician. Who cannot afford to fill a prescription. Who cannot afford the preventive care necessary to ensure chronic – and treatable conditions – do not become acute.

The national dialogue in the past few years has clearly shifted. The debate today is not about whether all Americans should have health insurance, but how we get there. Who are we really talking about? Who are the “uninsured”? There’s no other way to put it – the 47 million uninsured Americans are our friends and neighbors who are living sicker and dying younger. They are 18,000 fellow citizens who die needlessly each year according to the Institute of Medicine. Four out of 5 uninsured are in families that have at least one employed person. If you’ve ever been uninsured, you can sympathize. Being uninsured produces a level of stress and insecurity like no other economic condition. And the economics are one more staggering component of the problem.

Did you know that the United States spends nearly 100 billion dollars to provide uninsured patients with health services? Physicians routinely contribute 20 billion dollars more in charity care. And we write off another 20 billion more bad debt. But the condition persists. A lack of insurance coverage reduces productivity, contributes to higher premiums and costs, negatively affects the health of employees, hurts the company bottom line, and impacts employers and employees, alike. Why is this happening?

$100 Billion in tax subsidies to employed individuals are distributed regressively -- with those who need it least receiving the most assistance. Between 2000 and 2006, premiums for employer-sponsored health insurance increased 78 percent. I doubt your income increased 78 percent. Employers able to offer insurance decreased from 69 percent to 61 percent. Less than half (48 percent) of small-sized businesses (3-9 workers) offered health insurance. New figures from the Gallup organization demonstrate the importance of being able to offer health insurance.

Eight in 10 small-business owners believe that having an adequate health insurance program would help their companies attract the best qualified employees (84 percent), reduce the likelihood that their employees would leave (83 percent), and would make employees more loyal to their companies (81 percent). In addition, two-thirds (66 percent) of small-business owners believe having adequate health insurance would make their employees more productive.

Sometimes, it comes down to this: You can’t offer what you can’t afford. But sometimes we have to ask whether we’re truly saving money.

Cost of care for the uninsured adds to the premium cost of all the rest of us by an extra 922 dollars for family coverage and 341 dollars for individual coverage. The economics of health care are staggering, and sobering. New and more technology -- with hospitals competing with new specialty facilities -- wanting the latest equipment for every area of health care. I know firsthand that much of the modern equipment helps us improve diagnoses and treatments, but I also know that it is very expensive.

Often, simply taking a complete history and physical is all that’s needed to understand someone’s medical condition. Expensive tests and procedures may only serve to confirm what our training and experience already told us. Sometimes, doctors do the tests to protect themselves – defensive medicine. And that costs the country between 34 and 56 billion dollars per year.

I remember attending grand rounds in a Boston teaching hospital not too long ago. A well-known chief obstetrician-gynecologist was asked why a specific test was ordered -- when we knew the probable outcome. His answer: “it never hurts to have too much information -- only too little.”

More people taking more prescription drugs with more prescription drugs available. More of us living longer, with a fast rising baby boomer population. As we age, chronic illnesses and acute care becomes more expensive. Given all of these staggering and sobering figures, it is clear those policymakers’ sound bites and policy theory need to be replaced by concrete steps and definitive action.

Voters must demand that their candidates have a plan and the political will and determination to accomplish it. My patients want my best diagnosis and treatment. The AMA wants the same thing from our candidates. We’ll even go a step further. We’ll provide some clear steps of our own.

AMA research and experience provides us with insight on a possible solution. And we’re ready to join others in taking a leadership role to finally get something done. Briefly, the AMA Plan involves three C’s:

  • Cash: Each person can purchase their own health insurance coverage and it would be portable with assistance for those who need it -- inversely related to income;
  • Choice: Patients could choose their own doctor, their own hospital and the coverage they want and can afford;
  • and Change: The AMA is working to change the environment, eliminate insurance company interference and regulatory/legislative meddling that impacts physicians’ ability to provide care, and employers’ ability to provide affordable insurance options.


The AMA plan relies on common sense -- and a partnership between government and private enterprise. We want to combine what’s best about private insurance with government’s historic assistance to those who need it most. What would the AMA like you to do?

If we put our collective efforts toward making this issue the top issue for the candidates, they will have no choice but to confront it with concrete ideas and workable solutions. We want to enlist your help in making sure the candidates and the voters remember that when it comes to health care, we want concrete steps – not news conference sound bites. When you go into the voting booth, we want you to vote with these questions in mind: Where do the candidates stand on the issue of the uninsured? Do they have the political will to finally work on a cure for our ailing health system?

It’s up to us to focus this great nation to directly confront the tragedy of the uninsured, instead of going about as if it’s “business as usual.”

So, now let’s leave the present and look at what’s in front of us – what’s coming down the road. For all our shortcomings, and there are many, American medicine remains the envy of the world, the pattern for the world, indelible and unmistakable testimony to the balance we’ve achieved between public and private medicine, research, development, therapy and care. And, while many are willing to put U.S. health care on the critical list, the AMA is not. We do however, see the trends and see that our nation needs to make some decisions.

There are four trends I will comment on – demographics … technology … the major determinants of health … and public expectations. These are what we identify as driving forces. These driving forces underlay much of what is going on in the environment that physicians and the AMA will face over the next 10 to 20 years. We’ve all heard about the baby-boom generation. The first boomers will reach 65 in 2010. By 2030, 70 million Americans will be 65 or over – increasing the number of seniors to 20 percent of the U.S. population. While that is a very large group, we do not want to get so focused on the 20 percent that we neglect or disenfranchise the remaining 80 percent.

That said, we must not underestimate the impact this cohort will have on physician practices. The 65 and older group is a medically intensive group whose annual physician office visits are projected to more than double, to well over 400 million, by 2030. But how about after the baby boom generation? Fertility data shows that fertility rates dropped substantially during the era of “zero population growth” in the mid-1950s and continued to decline until the early 1970s. Since then, it has remained relatively constant.

What this means is that in the post- baby boom generation, there is going to be a significant reduction in the number of elderly. The health system that is now gearing up to deal with the rapid surge of elderly may well have overcapacity, especially in those service sectors targeted at seniors. This is an issue the AMA will examine closely as we consider long term health system design. It is never too early to start thinking about it.

Another driving trend that is often overlooked is the mix of determinants of health. One half of the factors determining our health status can be tied to environmental factors, genetics and whether we have access to health care. We’re working on the access to care part. There’s only so much we can do about genetics. Environmental factors can be controlled to a certain extent. The other half of the factors that affect our health status is our behavior.

Now, I’m the last person who should be lecturing others on the dangers lurking beneath a Big Mac container or a bucket of KFC, but as we plan for the future, we must keep in mind how our behaviors affect the demand for physicians’ services, the kinds of services that will be needed, and the role of physicians in pursuing the broader goal of improving the health of the population.

We all know that excessive fat and sugar in our diets is unhealthy. We know that a lack of sleep and exercise is not good. What you might not be as aware of, however, is what these unhealthy decisions actually cost. Our unhealthy behaviors cost our nation hundreds of billions of dollars. An informal review from a variety of studies underscores my point:

  • Violence takes 445 billion dollars a year out of the economy. [“World Report on Violence and Health,” World Health Organization, 2004]
  • Alcohol and other drug abuse - 246 billion dollars. [National Institutes of health, 2004]
  • Traffic and work-related accidents - 321 billion dollars. [National Center for Statistics and Analysis, 2005; Safety Culture at Work, International Labor Organization, May 2003]
  • Tobacco - 202 billion dollars. [Campaign for Tobacco-Free Kids, Jan. 4, 2007]
  • Obesity - 102 billion dollars a year. [Centers for Disease Control, Third National Health and Nutrition Examination, 2005]
  • And I found no comparable estimate for suicide or for teen pregnancy and STDs but the costs would be in the billions of dollars, as well.

It all adds up to 1 and a third trillion dollars [$1.316 trillion]. And that doesn’t begin to include the heartache and disruption to so many lives.


What is the solution?

It starts with awareness – with personal responsibility – with making changes that we can live with. It’s not easy, but if we don’t, the health and economic consequences are massive. In addition, as the U.S. population continues to grow older, the incidence of chronic disease will increase. If we combine the effects of the wrong personal behaviors with aging and chronic illness, we could counterbalance the breakthroughs in pharmacology, pharmacogenetics, and the medical device industry that has helped treat, and sometimes even eradicate some diseases.

The current health care infrastructure -- designed to treat acute illness -- needs to evolve to more effectively treat chronic illness and address personal behaviors associated with poor health -- not an easy task. Medicare is yet another area where the economics are massive, and the implications for inaction severe. According to the Congressional Budget Office, without congressional action, Medicare physician payment rates will be reduced 10 percent in 2008. The 2007 Medicare Trustees report predicts total cuts of about 40 percent by 2016. Congress must take action this year to replace the cuts with positive updates based on practice cost increases.

Most physicians – and perhaps some of you – are small business owners. We see our costs increase each year. But there is little we can do about the money coming in -- when it comes to serving our nation’s elderly because the Medicare payment system is based on a formula that by any reasonable accounting, is flawed. Severely flawed.

Let me share with you some of the effects – the tangible real-life consequences of using this payment formula. It has kept average 2007 Medicare physician payment rates about the same as they were in 2001 – while at the same time the cost of running a medical practice has increased nearly 20 percent. It prevents physicians from making needed investments in staff and health information technology to support quality measurement – It punishes physicians for participating in initiatives that encourage greater use of preventive care in order to reduce hospitalizations – It has led to a severe shortfalls in Medicare’s budget for physician services that have driven Congress to enact short-term interventions with funding methods that have increased both the duration of cuts, as well as the cost of a long-term solution – If this weren’t enough, just a few weeks ago, the Medicare premium announcement once again underscored the urgent need for Congressional action.

While seniors’ Part B premiums will increase next year, that up tick comes solely from the growth of Medicare Advantage Plans. We believe it is just plain wrong for all Medicare patients to subsidize overpayments to private insurance companies, while only one in five Medicare patients participates in a private Medicare plan. Medicare patients’ premiums are rising, yet the government is cutting payments to the doctors who care for them. This is short-sighted government policy, and Congress needs to restore some sense into the system by stopping Medicare physician payment cuts. The outcome could not be clearer.

Over the next two years, the government will slash Medicare physician payments 15 percent, and 60 percent of physicians say they will be forced to limit the number of new Medicare patients they can treat when the first Medicare cut occurs next year. We are deeply concerned about seniors finding a doctor.

So Congress must take action to level the playing field between payments to Medicare Advantage and traditional Medicare. America’s seniors – and the baby boomers soon to reach age 65 – are relying on congressional action to stop Medicare cuts to physicians and ensure seniors have access to a doctor when they need one. I’ve spent some time talking about some of our greatest needs. Certainly, political action for the uninsured children, their parents, and the elderly is critical.

As the nation’s largest organization of physicians, the AMA must also seriously consider how various environmental factors will affect the demand for physicians’ services – not just today, but tomorrow and in the years to come. And we do recognize that insuring everybody will create some new challenges. Already in Massachusetts with its new plan only starting to take effect -- as 100,000 people who have had to wait until now to seek care try to find it, access is becoming a problem.

We need to start thinking about a new series of issues for our profession that comes from making health care a universal possession. These include issues about increasing demand for both quality and quantity, changing case mix, cost pressures, and educational needs, although numerical estimates of demand are very difficult to calculate, most health policy analysts agree that -- even without universal coverage -- the demand for health care services will exceed the supply of physicians over the next several decades.

Now I will discuss some “emerging challenges” based on an AMA look at trends in the health care environment. These are areas that are important to consider as we engage in planning for the future. Some of these are just on the edge of the radar screen, while others have been there for some time. Let’s talk briefly about the “health care team.”

I have a feeling that different people have different ideas about what is a “health care team”. With any of the possible definitions, however, when we look at pressures affecting the workforce, I think you will agree that the “health care team” will be a rapidly changing body. There are workforce shortages involving both physicians and other health professionals.

In 2004, there were approximately 885 thousand physicians. Primary care physicians comprise one third (33.5 percent) of the total number of physicians. However, this percentage has been slowly declining – it was 40 percent in 1970.

The nursing shortage is especially acute. In 2000, 30 states were estimated to have nurse shortages. By 2020, 44 states and the District of Columbia are projected to have shortages. In addition, roles have been changing. Super-specialization, the evolving hospitalist phenomenon, and continuing scope of practice changes are creating new roles for some health professionals and crowding out others.

Add to this -- 1. the changing mix of acute and chronic care; and 2. the intense pressure to reduce cost, and change is inevitable! The question is “where are we are going”, and “how will we get there?” Are we getting there by accident? Or, will there be leadership to guide us. Can the health care team of the future be “designed” through conscious thought and action, or will it be shaped entirely by the interaction of environmental forces?

The AMA is considering these issues because they will affect the ways physicians practice medicine, and we will be called upon to influence the outcome. Another “emerging challenge” relates to the fundamental nature of health delivery itself. That is, where people go to receive medical care is undergoing a fundamental change. The traditional ‘sites of care’ have been outpatient care and inpatient care. We tend to automatically think about these as the physician’s office and the hospital. That was how care was organized when I was in training and throughout most of my practice experience.

Five years ago, many of you went either to the physician’s office or the hospital. But where are you going now? Retail clinics are a growing phenomenon. There are specialty hospitals, free-standing imaging centers, concierge practices and off-shore treatment facilities, as well as orthopedic, cardiology, and gastroenterology groups doing more and more procedures in their own facilities rather than in the hospital. These new practice sites evolve with some coming and others going -- but the trend is for more and more of them -- and each requires a different mix of professional staff.

We see several market forces at work: Increased demand for care; two worker families with limited time and less flexible schedules; physician shortages by specialty and geographic area; increased waiting times and increased availability of alternative sites of care; and without question, the high cost of care, particularly in emergency departments and urgent care clinics.

In addition to these emerging staffed-sites of care, there is a growing use of home monitoring and telemedicine. Home monitoring and telemedicine can – in appropriate circumstances – improve access to care, improve efficiency, and reduce costs. The AMA has called on the Centers for Medicare and Medicaid Services to fund demonstrations to evaluate physician care delivered using this technology. Telemedicine is an option for some rural areas. In South Mississippi and several parts of Louisiana, which even today are still coping with recovery from Hurricanes Katrina and Rita, children’s mental health care has been called a “domestic crisis.”

Some estimates suggest that more than 80,000 children are in families still displaced from Katrina—and about a third are showing behavioral, social or academic problems. Student suicide is a particular concern. Some local projects include equipping specially designed school buses with video monitoring equipment to try and ease the physician shortage and provide relief through telemedicine.

Diabetes monitoring for the elderly and for residents in rural or some urban areas show promise. While these new technologies are a wonderful addition to our armamentarium, they are not a panacea for the systemic issues that cause a lack of access in the first place. Some entrepreneurs might someday consider video kiosks at your local mall – or within your local pharmacy. Maybe even entire hospitals will become virtual centers with video screens, robots, microphones, and slots to insert blood and urine samples as well as your debit or credit card.

There are likely as many possible uses as there are creative minds -- and I don’t doubt for a second that those minds in this nation – and in this audience – already are at work. But as you think of “what’s next,” let me raise a few issues that bear consideration – and that the AMA is closely watching. These pressures and market forces are more than just another passing blip on the health care radar screen. They have implications across a broad array of very important concerns.

Continuity of care and quality of care must be preserved. Patient confidentiality and proper supervision by physicians must be assured. The impact of how insurance handles these new delivery approaches is a critical factor, and obviously affects physician reimbursement. The very nature of physicians’ practices and their career paths are fundamentally affected.

How will telemedicine, home monitoring and receiving care at multiple sites affect the ability to track patients’ records? An electronic medical record is one answer. And what are the unintended consequences of this type of paradigm shift. Does Wal-Mart really want more sick people browsing their stores infecting customers? Do we really want to replace the human interaction of a doctor-patient relationship with a two-dimensional screen? Will electronic records necessarily solve continuity of care issues if patients receive care at multiple sites? Not if patients don’t inform their physicians or update their own personal health records? The answer is not a simple “yes” or “no”.

The last challenge I want to touch on is globalization. We are all aware of it, including how it has begun to affect health care and the delivery of medical services. I want to draw your attention to four factors that we believe already impact health care and will continue to play a role. Those four factors are cross border health delivery; globalization and trade; pandemics and disasters; and global climate change.

However, global impact, while substantial, is much less prominent in health than in a number of other sectors, especially business. We think the medical sector will be able to learn from the experience of the business sector as globalization continues to evolve. We believe that global factors will become increasingly important in health care, and will eventually affect physicians’ practices more directly than they do currently.

In closing, I want to leave you with two hopes and a challenge.

First, I hope that by the end of the day the Congress will have overridden the President’s veto and low-income children will have increased access to health care.

Second, I hope that our relationship will continue in the days and years to come. You do incredible work that helps us physicians help our patients.

And my challenge is that as health care continues to evolve – as it continues to present us with both difficult challenges and rewarding opportunities to make a difference – that we always operate with our patients’ best interests in mind.

Thank you for your attention and hospitality today. I would be happy to try to answer any questions you have.