The Crisis in Health Care: Costs, Choices, and Strategies.

In this column, members of the College's Vantage Council review books that they have identified as being of interest and value to the medical management profession. Reviews from other sources are included in Physician Executive as space permits.

Dean C. Coddington, David J. Keen, Keith D. Moore, and Richard L. Clark. The Crisis in Health Care: Costs, Choices, and Strategies. San Francisco, Calif.: Jossey-Bass Publishers, 1990. 304 pages. $32.95.

"The U.S. health care system is fragile, is in disequilibrium and is destabilized." Its survival past the mid-1990s is doubtful, because "policy pressures for change are once again about to collide with todays market-driven environment."

In The Crisis in Health Care: Costs, Choices and Strategies, the authors, experienced financial analysts of real-world markets and competition, scrutinize the forces driving physician and hospital costs and health plan expenditures and propose responses for physicians, hospitals, and payers. In clear nontechnical prose, they handle the three interrelated phenomena creating the crisis: the relentless increase in health care costs, the growing numbers of uninsured persons, and the growing destabilization of the system because of cost shifting. Theire graceful, disciplined style makes interesting reading throughout.

Part One--The Two Worlds of Health Care:

Providers and Payers

Market-Driven Health Care

Rather than the intended cost containment, further cost increases have evolved out of the market-driven strategies of the 1980s.

* Medicare's prospective payment of hospitals "is generally considered to be a success."

* HMOs and PPOs are estimated to now cover 34 percent of the population.

* PPOs have been the biggest disappointment among health plan strategies.

* Many physician strategies increase health care costs; "few are intended to reduce cost escalation."

Pressures for Change: Destabilizing Factors

* In the 1980s, health care costs increased on the average "more than twice the overall rate of inflation."

* Over the past two years, "private payers have experienced 25 to 50 percent annual increases in their health plan premiums."

* The large and growing pool of uninsured "will exceed forty million in the early 1990s."

* "Cost shifting is an extremely important factor leading to the destabilization of the U.S. health care system, and one that is likely to grow in importance over the next few years." It is the principal cause of the large increases in health plan premiums in recent years.

An entire chapter of the book is devoted to cost shifting.

Part Two--Putting the Pieces Together: Key Factors

Affecting Health Care Costs

* Why physician costs keep rising.

* What influences hospital costs.

* Why the cost of health plans continues to skyrocket.

* How cost shifting destabilizes the health care system.

The authors present "A New Perspective on Health Care Costs" in which they conclude, "The present health care system does not have the right incentive structure in place and is too fragmented to be able to contain costs."

Part Three--Restructuring the Health Care System:

Managing the Transition to a New Payment System

"Four scenarios of payment systems of the future" are discussed in detail--a continuation od the present competitive model, including intensified competition; universal access, with employers continuing to be dominant in health plan coverage for employees; consumer choice with including universal access; and "a single-payer system at either state or federal level." The authors then attempt to answer three questions:

* What are the strategic implications of each of the scenarios for payers, health plans, physicians, and hospitals?

* What unique opportunities will emerge as a result of major changes in the health care system?

* What should health plan managers, physicians, and hospital administrators and boards be doing today in order to survive and prosper in the future?

Their answers, in a highly readable tour de force filling two-fifths of the volume, offer strategies for payers, physicians, and hospitals under each scenario. Flexibility and advance preparation are emphasized. The rationale for their proposals is rooted in their findings, summarized at the end of the volume as 10 health care myths and 10 economic realities.

Myths for the 1990s

1. Managed care, as we know it today, can survive in the 1990s.

2. The U.S. health care system is arrogant and unresponsive to change.

3. Medical technology changes and an oversupply of hospital beds are the primary factors behind the runaway growth in health insurance premiums.

4. The widely heralded physician surplus of 1990 did not occur.

5. Most future health care will be delivered in the home or in an outpatient setting.

6. The six-year health insurance underwriting cycle means future premium increases will moderate.

7. Aided by new marketing approaches, PPOs and IPA-model HMOs will grow more rapidly than staff- or group-model HMOs.

8. Given incentives, consumers will become cost-effective purchasers of health care.

9. After the current turmoil, the health care industry will boom.

10. The U.S. cannot afford universal coverage.

Realities for the 1990s

1. Cost shifting will continue to destabilize health care delivery until the system changes.

2. The aging of the population will become an increasingly important factor in driving up health care costs.

3. A more integrated health care delivery system, encompassing a continuum of care, will continue to evolve.

4. Data on the practice of health care will become more readily available, and it will be used to reduce payments for certain medical specialities, technologies, and procedures.

5. Hospital conversions and closings will be more frequent than over the past six years.

6. Patients will become more involved in cost contianment, and the U.S. health care system will become multitiered.

7. Physicians and hospitals will work more closely together; physicians will learn how to function within organizations.

8. There will be increasing balkanization in health care.

9. Sooner or later, the U.S. must develop a new national health care policy.

10. The two worlds, buyers and sellers, are on a collision course, but the results may be beneficial for health care in the U.S.

"The good news," the authors write, "is that the collision of these two worlds will force a change. In our view, incremental change is the least desirable for the future scenarios."

Anyone interested in U.S. health care policy can profit from reading this book. Its focus is, after all, the destabilization of one-eighth of the U.S. economy.