Who Runs The Hospitals?

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Steward Medical Group is starting to fold. This is one of those news noshes that initially surprised me, but then, really didn’t. I used to work for Steward a few years ago, when they expanded out of Connecticut by buying a handful of hospitals in Ohio including the one I worked for. When I looked into the details of why SMG was now having money troubles it started to make sense: corporate types were putting short-term profitability over patient care and looking after their staff? Yeah, that sounded familiar. Probably a good thing for me in the long run that the pandemic made SMG close down my clinic and cut me loose.

But looking at their money woes brings to light a topic I’ve been pondering writing on for some time: Who really does run the hospitals? Now I’m talking about the big multi-facility organizations like SMG. Or Community Health Systems, or Cleveland Clinic. I’m sure everyone knows there are MBA’s in the upper echelons, but it may surprise folks to find out that the doctors definitely do not run the show.

Most hospitals are businesses. Even the non-profit ones. The only difference is what happens to any excess funds. But doctors, by and large, are businessmen only second, and they don’t have the skills to run a large health care system. Especially when the money isn’t coming in directly from patients in a cash-on-the-barrelhead arrangement but by circuitous routes from private and government insurers who require copays and pre-authorizations, and local, state and federal incentive programs to promote one politicized health goal or another. This can be further complicated by the new ‘Accountable Care Organization’ payment models initially adopted by groups like Steward and now becoming part of the Medicaid/Medicare landscape. In these models, money is allotted in an insurer’s budget for each of their patients, depending on their specific mix of diagnoses in a kind of ‘worst case scenario, this is what we’ll spend’ projection. Then, if that patient’s budget is not spent (meaning they were kept healthier than expected) the saved money is split between the insurer and the patient’s care team at some agreed-upon percentage. This isn’t a bad idea on the face of it, because it incentivizes preventative health measures and that old adage about an ounce of prevention is very true. ACO’s actually pay hospital systems to take care of folks in the clinics and keep them out of the inpatient floors. But even from its early days back in the mid 2010’s I worried about the long-term sustainability: as years go by and the system works, people theoretically become healthier and their required budgets naturally shrink, which means it gets harder and harder to save any money, until the hospital is just breaking even… if that. And then they close Northside in Youngstown entirely.

So the top tier of decision makers are MBA’s. With all the money coming in from insurers, they also have a really strong (if not necessarily direct) say in operations. And government money always has strings attached. Not that those strings aren’t justified (the government is spending our money after all), but it does mean they have their finger in the pie right along with everyone else. The doctors are there, somewhere, but not where their hands are on the purse strings. Just look up the organizational chart for your favorite facility: there’s usually a ‘Medical Director’. They’re the doctor in charge of other doctors, but the doctors are really little more than highly-trained production workers, making the medical director a shift foreman (I can’t even say he’s a union boss – though sometimes the nurses and support staff have those). Doctors see the people who’s insurers pay the bills. It’s almost like we’re the exotic dancers at the strip club – we have a skill people pay to take advantage of. We can complain about how the way things are done impact care, but it’s up to the hospital leadership to decide if they want to listen. And as I mentioned in my post here, quite often the suit-and-tie gang have their own ideas.

As a matter of fact, it was one of Steward’s hallmarks that impressed me the most when they bought my hospital, that they were actually run by doctors. But then I guess their current state tells you how that worked out.

If you have a hard time visualizing doctors as line workers (or exotic dancers for that matter), let me tell you how the hospitals were staffed in the Navy: All leadership positions were Medical Service Corps, not Medical Corps. The hospital CO, XO, and each department chief. The doctors were needed to see patients, so the admin jobs were MSC officers. We were really in the trenches, not for the same reason at the top end as civilian hospitals, but for the same reason on our end. We had to make things happen in a very real sense.

The answer to the question of who runs hospitals, really, is pretty much everyone except the doctors. It’s the folks with the money, just like everywhere else. And lest you think letting the government run them is the solution, let me just point out that they’re the biggest offenders of all. I don’t have a good solution to this, not yet. But my basic stance on pretty much everything has always been decentralization of power. But I’ll have to address that on another day.