Alexis de Toqueville once observed that a key feature of American government was the decentralized character of administration. “Written laws exist in America,” he wrote, “and one sees the daily execution of them; but although everything moves regularly, the mover can nowhere be discovered. The hand which directs the social machine is invisible.”1 Toqueville could easily have been describing the state of affairs in the health-care industry before the advent of government regulation and corporate reorganization during the 1970s and 1980s.
Under the old regime, physicians were virtually immune from outside scrutiny. Doctors policed their own by means of local institutions they controlled. The hand that regulated the health-care industry, as well as the quality and provision of medical services, was invisible. Under the new regime, physicians were accountable to employers or third-party payers of medical services, such as HMOs or government agencies. External scrutiny became the norm, rather than the exception. Dependent on the professional monopoly for support, the framework for self-regulation eroded, giving way to government and corporate oversight. Inexorably, the visible hand of corporate management replaced the invisible hand of professional self-regulation.2
The emergence of modern state medical boards in the 1980s was but one of a series of events that reflected the decline of the former self-governing professional order. Government subsidization of health care through enactment of the Medicare and Medicaid programs in the 1960s enhanced access to medical services and attracted commercial investors who reaped profits from health-care facilities and new technology. During the 1970s and 1980s costs of health care increased as well as complaints for medical malpractice. The former strained the ability of government and employers to balance budgets and satisfy expenses; the latter led to crises in the availability and affordability of medical malpractice insurance. While efforts to contain costs through prospective payment, utilization review, and market competition altered traditional means of financing and delivering medical services, efforts to curb lawsuits for malpractice focused attention on the lack of medical discipline.
Public pressures to contain costs and improve quality politicized the disciplinary process. Application of federal antitrust to the medical field undercut private means of enforcing professional norms and values and of adjusting complaints that patients filed against their physicians. Grievance committees of state and local medical societies and peer review committees of community hospitals operated at their peril in the absence of “state action immunity” or statutory protection. The medical profession’s model for resolving complaints, which emphasized collegiality, informality, and confidentiality, became impractical for expediting cases, satisfying requirements of due process, and disclosing information on physician performance.
State governments, courts, consumers, and the press further widened the scope of conflict over medical discipline. Responding to crises in medical malpractice, states placed consumers on board panels, curtailed the authority of medical societies to select physician members, and gained oversight of board operations through budgetary practices and reporting procedures. As in other sectors of the economy, consumers organized to protect their interests and pressed boards to resolve complaints for incompetence and professional misconduct. In the event that boards ignored their concerns, courts, the media, and law enforcement agencies offered alternative means of achieving satisfaction.
But boards would not respond overnight. Organized medicine resisted external oversight, as physicians did any threat to their professional autonomy. State governments had neither the resources nor the scientific basis to mount an attack; the best they could do was impose medical discipline through layers of bureaucracy.
For boards to advance, physicians had to reconcile their interests with those of a pluralist society. The unrelenting demands of new stakeholders challenged traditional mechanisms for resolving disputes. Drastic improvements in case management were needed to satisfy the public’s interest in efficiency and neutrality. Physicians in the 1980s were more willing to change board practices and procedures. Unlike their colleagues from earlier generations, they regularly assimilated practices from the business community, including the formalization of professional controls. Unlike their colleagues from earlier generations, they did not resist centralized management and reporting so long as resources and funds flowed in their direction.
The modern state medical board that emerged in the late 1980s and early 1990s reflected the long-standing struggle among contending forces seeking to privatize and socialize conflict. Physicians comprised a majority of each board but delegated much of their authority over routine matters to an operating core consisting of investigators, administrators, and case managers. Lawyers, medical consultants, and hearing officers rounded out the picture, giving boards the ability to resolve difficult and complex cases through settlement agreements or adjudication. Physicians remained in charge, but they shared authority with government bureaucrats, and their principal theater of operation was in the public, not the private, sector.
Since the 1970s, state medical boards had narrowed the gap between the profession they protected and the public they served. But few outside the medical community and the consumer organizations that monitored their performance proclaimed their social worth. The conquering heroes of corporate medicine and the prognosticators of medicine’s future viewed boards as irrelevant, at best, or as obstacles to a fully integrated health-care system, at worst.
THE ECONOMIC MODEL AND PROFESSIONAL ACCOUNTABILITY
According to health analyst Mark Peterson, 1994 was a watershed year for the nation’s health-care industry.3 A political cartoon appearing in the New York Times on Sunday, November 26, 1996, crystallized the situation: two years after the defeat of the Clinton plan, most consumers, including the fictional characters Harry and Louise who had been featured in television ads against the plan, were in an HMO. The accompanying editorial indicated that where politicians failed, private industry succeeded in cutting costs by closing hospitals and by restricting consumers’ right to choose their physician. The failure of the Clinton plan did not reflect support for the old status quo. Rather, Peterson claimed that federal inaction “unleashed a private sector initiative that literally transformed the status of patients, the physician-patient relationship, interactions among different types of providers, the meaning and role of insurance, and the very structure of health delivery and financing institutions.”4 What did the success of corporate medicine mean for state medical boards? Who would police managed-care organizations?
Corporate integration of the health-care industry created multiple levels of accountability, from managed-care plans to institutional providers to individual physicians.5 Traditional means used to regulate physician behavior, such as licensure, peer review, and malpractice litigation, were inadequate to gauge the performance of the emerging corporate sector. Efforts to monitor individual performance failed to account for institutional performance; efforts to achieve the best outcomes for individual patients led to large disparities in diagnosis and treatment.6
Just as state medical boards struggled for years to devise a proper formula to evaluate physicians’ performance, so corporate providers searched for appropriate criteria to judge their own performance.
The essential difference was that HMOs had not taken the Hippocratic Oath. Proponents of managed care viewed the provision of medical services from the standpoint of enrolled populations, not individual patients.7 Free to follow their own path, proponents supported a different model of medicine that rested on “systematic, replicable, statistical research,” rather than “internalized, intuitive professional judgments.”8 Science-based medicine, they asserted, could provide sufficient criteria for choosing among health plans, physicians, and treatment regimens. Accumulating data on medical outcomes in large patient populations supported the development of practice profiles or report cards that allowed comparison among managed-care organizations.9
But there was more to evaluating medical practice than furnishing information to consumers about different health plans. Science-based medicine laid the foundation for a corporate culture that regulated physician performance.10 Just as codes of ethics and disciplinary rules were tools of the professional order, so treatment protocols and practice guidelines were tools of the new corporate regime. According to health economist Alain Enthoven, a high-quality organization “monitors physicians’ performance with accurate data on clinical outcomes and patient satisfaction. It develops ways to help physicians improve. It adjusts physicians’ tasks to their current competencies. And it is able and willing to take corrective action if performance turns poor or physicians become impaired.”11
This corporate environment that Enthoven described eschewed a role for outsiders, particularly government. Claiming that governments worked by “coercion and punishment,” Enthoven asserted that they hindered quality improvement and the ability of managed-care organizations to adjust to market demands. Governments’ role, he stated, was to aid in developing appropriate criteria for quality assessment and performance and to report these results to purchasers and consumers of medical services.12 The federal government, a strong supporter of efforts to control costs, basically adopted the approach of Enthoven and of other economists. Not only did the Agency for Health Care Policy and Research pursue medical outcomes to advance treatment protocols, but peer review organizations shifted their focus from discipline to quality improvement. According to Mark R. Yessian, Regional Inspector General for Evaluation and Inspection, in the Boston office of the US Department of Health & Human Services Office of the Inspector General, the move toward continuous quality improvement was the reason PROs sanctioned so few physicians.13 Unless health-care fraud was at issue, the federal government rarely took punitive action.
In truth, the roots of continuous quality improvement (CQI) lay outside the health-care industry. For years, Japanese and some American manufacturers had applied the technique to increase productivity among their workers. The idea, in essence, was that efforts to improve work processes rather than solve problems would promote teamwork and unity. Searching for outliers, or bad apples, was counterproductive. Fear of discovery encouraged workers to defend themselves, as opposed to taking corrective action.14 To many physicians, this approach was enticing. They welcomed collegial efforts to enhance performance.15 But CQI operated within an institutional, not a professional, framework. It stressed the solving of problems through an interdisciplinary perspective and was a significant “departure from the culture of fee-for-service solo practice.”16 CQI was further proof that the new corporate culture reduced the ability of professions to protect their turf.
Corporate medicine and the economic model that it promoted threatened to dismantle the existing regulatory structure that included state medical boards. Boards were now out of step in that they punished physicians for a variety of transgressions. The doyens of CQI suggested that some government regulation was necessary, but they limited it to the most serious offenders, not those who required monitoring and education to improve their performance.17 Efforts of boards to regulate the quality of medical care through disciplinary actions seemed at cross-purposes with the approach of CQI. Restricting the role of government in policing the emerging health care system made boards gatekeepers and little more.
Corporate leaders also opposed attempts by boards to monitor the utilization review activities of HMOs. Although state laws gave boards the power to regulate the practice of medicine, HMOs argued that boards had no authority over their internal affairs. This assertion had far-reaching implications, particularly since efforts to standardize medical practice through treatment protocols and similar procedures fragmented responsibility for patient care. By requiring approval of treatment decisions before providing insurance coverage, HMOs could override examining physicians. If managed-care organizations successfully prevented boards from scrutinizing patient-care decisions of their medical personnel, then the future of state medical boards in the emerging health-care system appeared rather dim.
Another problem for boards was growing emphasis on technology, teamwork, and use of paraprofessional workers to reduce costs and promote quality. Some physicians, like Lawrence Weed, recognized these trends and called for sweeping changes in the nature of medical decision making. Weed observed that the practice of medicine had become so complex that it had outpaced the capacity of individual physicians to integrate new information and to manage a diverse patient population. Specialization, he argued, was not the answer because specialists often overlooked diagnostic and management options outside their narrow fields. The failure of physicians to rely on external aids and involve their patients in treatment decisions, according to Weed, had contributed to excessive costs for medical care and to an epidemic of medical injury.18
The Pew Health Profession’s Commission echoed Weed’s call for the reform of medical practice. Among its recommendations were the “redesign” of the workforce to favor primary care, downsizing or “rightsizing” the health-care professions, and revising the tools of professional accountability. These market-driven changes that the commission envisioned struck at the heart of professional sovereignty. As part of the old power structure, state medical boards fared poorly in the commission’s analysis. Although limitations on scope of practice were of primary concern, the commission also reaffirmed the perception that physician-controlled boards were “largely unaccountable to the public they served.”19
The Pew Commission’s assertion foretold the uphill battle boards faced for credibility in the new corporate order. Boards were rarely, if ever, mentioned by those searching for ways to hold managed-care organizations accountable for poor performance.20 Many, of course, justifiably believed that the focus of boards on physician licensure and discipline made them poor candidates for policing institutional providers.21 But those who argued that boards were unsuited to the task because of lapses in performance or adherence to outmoded norms and ethics overlooked the progress that boards had made over the past fifteen years and their legitimate role in regulating medical practice, however conceived. Public concerns about organized medicine when it controlled health care now applied to corporate medicine. As Schattschneider keenly observed, “organization is itself a mobilization of bias in preparation for action.”22 Proponents of corporate medicine were also capable of creating a self-governing order that served their interests.
BUILDING A NEW REGULATORY FRAMEWORK
Corporate domination of American medicine was a gradual process that began long before the appearance of powerful HMOs in the 1980s and 1990s. Changes in American society predisposed the development of institutions that supported for-profit medicine, just as they did those that bolstered the medical profession. Paul Starr’s study of organized medicine demonstrated that cultural authority was “antecedent to action.”23 Medical schools, hospitals, medical societies, and medical boards did not appear overnight. Broad social, economic, and political forces preceded them, including industrialization, urbanization, and specialization. Physicians’ claim to superior knowledge and expertise sustained institutions that converted cultural authority into professional dominance.
The rise of corporate medicine also rested on broad currents in American society that undermined the professional order. Some called it the “deprofessionalization,” others the “proletarianization,” of the medical workforce. Marie Haug, the principal proponent of deprofessionalization, pointed to trends that had reduced the “knowledge gap” between physicians and consumers, such as rising levels of education, greater availability of information through use of computers, increasing complexity of medical practice, and a growing number of paraprofessional workers. Individual physicians no longer monopolized a specific body of knowledge, Haug asserted. Consumers collaborated with physicians in their care and treatment.24
Proponents of the proletarianization thesis also identified societal trends supporting their position that capitalist expansion had caused a decline in professional autonomy.25 These trends included corporate consolidation of the health-care industry, increased numbers of salaried physicians working in large organizations, and the rise of intermediaries who dictated the terms of the doctor-patient relationship. Managed-care organizations embodied these trends, bolstering the notion that large organizations, not consumers, were the central players in the emerging system.
However characterized, corporate medicine gained a foothold because government and physicians failed to control costs.26 During the 1970s policy makers turned to market competition as the mechanism for containing costs and allocating services. They also reversed prior trends through deregulation of highly regulated industries. Deregulation typically involved relaxation of government standards, making it more profitable for companies to compete. This was the case in transportation where economists claimed laws stifled market competition, but not in health care where the medical profession regulated entry, price, and delivery of services. To overcome the institutional and legal barriers that medicine had erected, the federal government passed laws to protect the development of corporate medicine and authorized federal agencies to break up the medical monopoly. Whereas the former self-governing order opposed lay control over professional judgment, commercial exploitation of medical practice, and conflicting professional loyalties, the emerging regulatory framework encouraged managerial oversight, market competition, and integration of insurance and provider systems.
Managed-care organizations benefited from the widening scope of conflict in health care. Behind the shift in power from providers to payers of medical services was a corresponding shift from local to national and from decentralized to centralized controls. Pressures to increase profits as well as reduce costs fueled the effort. As Mark Peterson observed, “a decentralized system with myriad local- or state-based carriers and providers is being supplanted by giant regional and national enterprises in search of a profit.”27 Many predicted continued integration of group practices, insurers, hospitals, and HMOs, and some even suggested that only a handful of conglomerates eventually would assume control of the entire system.28
If true, this had serious implications for the future regulation of the practice of medicine. Because HMOs created financial incentives to underserve, the dilemma for physicians was potentially profound. Physicians’ fiduciary duty to their patients conflicted with the financial arrangements that managed care imposed. Providers and payers did not play by the same rules. Efforts by HMOs to retain premium dollars gave rise to multiple compensation schemes, including capitation, pay withholds, bonuses, and penalties, that forced physicians to share in the risk of treating sick patients. According to Deborah Stone, many physicians resented sick patients because of the drain on their income.29 Although the economic model looked attractive on paper, market-based incentives skewed relations among physicians and their patients. Physicians required guidance in discerning conflicts of interest, and consumers required protection from the excesses of managed care. Science-based medicine and quality improvement were welcome additions, but oversight of managed-care plans was needed to correct the imbalance.30
THE PLACE OF BOARDS IN THE NEW CORPORATE ORDER
This study has viewed the struggle for power in American medicine as largely the attempt by special interests to capture the regulatory apparatus of government.31 So long as organized medicine dominated the health-care industry, government worked to its benefit. Courts, legislatures, and state medical boards largely sanctioned the policies of the medical profession. As political scientist Corinne Gilb observed when writing in the 1960s, “government, for the stronger professional associations, is a continuum, a matter of continual interaction between private and public governments.”32 Boards were part of this continuum.
Those who controlled the regulatory apparatus often succeeded in keeping conflict private. For weaker interests to prevail, they had to politicize the struggle by widening the scope of conflict. In the case of state medical boards, consumer groups, the media, and malpractice insurers persuaded courts, state agencies, and state legislatures to enhance medical discipline for public protection. But it took much more to alter old patterns. The changing contours of medical discipline reflected an ideological struggle between the profession of medicine and the business of medicine. In this power struggle, government took center stage because of the enormous costs of health care. Government’s solution to the problem of rising costs, market competition in the health-care sector, precipitated the entry of new forces, as well as the realignment of old ones.
Corporate integration of the health-care industry had distinct advantages over traditional fee-for-service medicine, among them better coordination of medical services, the development of practice guidelines, enhanced accountability, and cost savings. There was no turning back. Recognizing the situation, physicians responded through closer oversight of their colleagues. Medical groups collected information on practice patterns of individual physicians.33 Hospitals and professional associations incorporated IPPs, formal peer review, and continuous quality improvement. The AMA expanded existing databases and formulated new ones to increase physician accountability.34 The bureaucratization of medical practice, characterized by hierarchy, formality, and standardized procedures, occurred at all levels in all professional institutions.
State medical boards, for their part, sought to survive by improving case management and reporting procedures. For a market-oriented approach to succeed, consumers needed reliable information based on quality and cost to aid in choosing among providers. Boards were key to quality control: they were the primary mechanisms for disciplining physicians for substandard care, drug abuse, sexual misconduct, and a variety of other offenses. Moreover, they were the only ones responsible for telling the public about it. No other entity seemed interested in ridding the medical profession of the poor practitioners. As James Winn, executive vice president of the Federation of State Medical Boards, observed, “corporations aren’t very good about exposing themselves to potential litigation or bad publicity. If they’ve got a bad doctor, they’re going to quietly show him the door. They’re not going to tell the medical boards about it.”35
Attempts to reform the disciplinary process by consolidating state licensing boards, as the Pew Commission suggested, would likely fail in the current climate and in the foreseeable future. State medical societies, a potent force in state politics, have historically resisted measures designed to upset the status quo. State medical boards are also in a better position to protect their power base and membership. Their staffs have grown considerably during the 1960s, they have established regional and national alliances, and they have become information centers for government, consumers, hospitals, and managed-care entities. Indeed, state medical boards have distanced themselves from other licensing boards. Most are self-funded entities, able to function on their own. Tying them to other government agencies might rekindle old budgetary constraints.
For several reasons, boards’ overall responsibility for public protection is expanding, not contracting, in a managed-care environment. Responsibility for health policy and planning devolved to the states after Congress failed to enact the Clinton administration’s proposed model for health-care reform.36 Now more than ever, states need boards to police the practice of medicine. While old problems persist, new ones emerge. The conversion to for-profit medicine has increased opportunities for fraud and abuse. Reliance on low-cost providers has led to some questionable medical practices. Financial incentives to underutilize medical services have raised concerns about substandard care.
In 1994 the General Accounting Office estimated that as much as 10 percent of total health-care costs were lost to fraud and abuse each year.37 Federal efforts to curtail the problem led to the enactment of laws prohibiting physicians from soliciting, offering, or receiving kickbacks, bribes, or rebates as well as those prohibiting physicians from referring patients to ancillary health-care facilities in which they had an ownership interest.38 Passage of the Health Insurance Portability and Accountability Act in 1996 expanded federal oversight in this area.39 The new law called for closer coordination among federal, state, and local authorities and the formation of another federal database to track fraud and abuse activities. The amount and type of information that federal authorities required from state medical boards under the new law was greater than in the past.40
For-profit medicine also advanced trends toward alternative care. To be sure, conventional medicine did not have all the answers. Many patients who suffered from chronic pain or disease turned to alternative therapies when conventional ones failed. As in the past, nonphysician providers, such as chiropractors, promised relief from some symptoms. But unlike in the past, alternative therapies received support from the new status quo. In 1996 Oxford Health Plans, a major HMO, offered coverage for nontraditional care, including acupuncture, chiropractic, and naturopathy. Maintaining customer satisfaction was a reason for an expanded list of providers, but some HMOs viewed alternative medicine as an opportunity for cost savings on conventional care. Boards monitored these developments closely, poised to take action should physicians venture too far.41
Few of these activities were particularly controversial. The architects of the emerging order agreed that it would be a mistake to abandon surveillance and discipline of “the truly avaricious and the dangerously incompetent.”42 But boards were not content to stand on the sidelines, disciplining the castoffs from managed-care organizations. Inspired by their leaders, many signaled their intentions to become central players in the quality assurance debate.43 Regulating the utilization review activities of HMOs as in Arizona was one example; monitoring quality assurance programs of hospitals and other health-care facilities as in Massachusetts was another. Some also suggested that boards promote policies to bolster the status of salaried physicians.44
Boards faced many obstacles in these new endeavors, including the capacity for such initiatives. According to Mark Yessian, identifying patterns of substandard care “is the most difficult challenge, for it pushes boards into new directions involving the extensive examination of medical records, the use of statistical sampling and analysis, and the interpretation of evolving medical practice guidelines.”45 HMOs viewed boards as infringing on their decisions. Others suggested that boards were not right for the job because they focused on individuals, not integrated systems.46 At the heart of the matter was the struggle for control of the evolving regulatory structure. Managed care sought to keep boards at bay. Boards sought to expand their authority.
If not boards, then who? What other state agencies existed to curb the abuses of managed care? The answer was that there really were none, despite all the rhetoric. State insurance departments seemed likely candidates because they regulated the insurance industry, but studies showed that their ability to monitor quality was quite limited.47 Faced with a consumer backlash against managed care, thirty-seven states passed protective legislation in 1996, ranging from minimum hospital stays for maternity patients to specific quality assurance standards.48 Although few health care experts supported such legislation, arguing that these laws stifled growth and creativity in the private sector, the size and scale of the undertaking signaled widespread discontent.49 For many Americans, doctor-patient relationships and community hospitals symbolized a health-care system devoted to compassion and altruism.50 They perceived that managed-care organizations undermined these core values and institutions.
State medical boards offered an effective check on the emerging health care industry. Although many dismissed boards as candidates for public protection because of their past and continuing affiliation with organized medicine, protecting the public required balancing norms and values of business and of profession. One way to achieve this balance was to secure a role for the medical profession in the ongoing struggle. Boards provided the medical profession with an important voice in the governing process.
For many years political scientists have debated the extent to which responsiveness to political authority should supersede the norms and ethics of professionals working for American government. Fueling the debate were political initiatives, such as those in the area of family planning and abortion, that compromised professional ideals. Although politicians often voiced their concern that bureaucrats threatened majority will, others expressed the belief that, in certain instances, professional standards and values should have priority. As political scientist Francis Rourke proclaimed, “The public itself benefits from having professionals within bureaucracy speak out strongly against policies that violate the ethical or technical canons of their own calling, since these canons are often designed to advance and protect the public interest, and are not solely intended to protect the interests of the professional groups themselves.”51
Just as professional values acted as checks on political authority, so they also protected the public from the excesses of managed care. Efforts by HMOs to maximize profits by introducing incentives to underutilize medical services tested the allegiance of physicians to their patients. Disciplinary rules and professional ethics governing doctor-patient relations potentially conflicted with corporate norms of behavior. Whether corporate enterprise develops adequate mechanisms to ensure quality in the face of economic incentives to cut costs and maximize profits remains to be seen. The current challenge to state medical boards is maintaining professional accountability within a diffused corporate hierarchy driven by multiprofessionals and profit motives.
Reprinted with permission from the book State Medical Boards and the Politics of Public Protection by Carl F. Ameringer (1999, The Johns Hopkins University Press).