Managing those Medical Costs

By Marshall Loeb

The boss runs from home to the office almost every day, his hair flopping in the Tennessee breeze, his loping strides covering ten miles between 6:30 and 8 a.m. He confesses an addiction to LSD--long, slow distances. It began during the Viet Nam War, when Air Force brass threatened to dump him as flight surgeon because he weighed a puffy 220. Now he is down to 168. He is 41 years old, and he ran the Boston Marathon for the first time last year, then repeated this year. He wants to do all the big marathons. Last month it was London, this month it will be New York, next Hawaii. Health is his business, and, if they meet set minimums, he pays his employees an extra 4-c- for every mile that they ride on a bike, 16-c- for every mile they run, 64-c- for every mile they swim. The boss gets a special bonus. Says Dr. Thomas Frist Jr.: "Every time I run, I put my mind to developing one new idea."

The idea that has made Frist many millions was to bring modern management to hospitals/Only eleven years ago, he joined with his physician father and a local venture capitalist to take over a hospital back home in Nashville. They standardized procedures in what was a cottage industry, benefited from mass buying, brought in everything from simple cost controls to sophisticated equipment. Today the Hospital Corporation of America, of which Frist is president, owns or manages 130 hospitals in the U.S. plus eleven others in Saudi Arabia, Panama and Australia. Revenues this year will exceed $1 billion.

On this run to riches, Tom Frist has also acquired a lot of ideas for reducing inflation in medical costs. Perhaps, he says, the Government should cut back its funding for educating doctors. The U.S. is training too many of them, and the oversupply leads to too much unnecessary testing and surgery. On the other hand, tae trend to concentrating all medical specialties in just one hospital in a region is unwise because it creates costly monopolies. "If just one hospital offers open-heart surgery, for example, doctors practicing there can earn $500,000, $600,000, even $700,000 a year."

Yet it is also unwise to set federal ceilings on medical costs because hospitals will compensate by skimping. "The first year, they tighten up on small expenses; the second year, they cut some educational programs; the third and fourth years, they do away with certain services, like ambulatory care and obstetrics; the fifth and sixth years, the_y start trimming quality, maybe buying lesser brands of equipment." The same downward spiral afflicts countries that adopt national medical insurance, Frist believes. "Hospitals and doctors have to compete against other popular programs for Government money> and they often lose out. So medical care deteriorates, as it has in Britain, Canada and other countries."

Frist's prescription for holding down medical costs is to avoid overusing hospitals. "We're trying to get a handle on why the average hospital stay in Virginia is 1% days and in Utah only five days." He speaks of offering economic incentives for patients either to stay out of hospitals unless absolutely necessary or to get out of them as soon as possible. A close relative of Frist's had a gall bladder operation, completely covered by Medicare. Seven days later he was supposed to go home, but he just wanted to stay in the hospital a while longer--and he did. Says Frist: "I guarantee you that if he had been paying part of his own bill, he would have been out of the hospital a day or two earlier." Another relative had a much more serious lower back operation. But he is a surgeon himself, and he had to return to work or else his income would dry up. Three days after the operation, he was discharged from the hospital; after eight days, he was standing up performing surgery.

Why, Frist asks, should the Government pay for the health care of his own father, a wealthy physician and businessman, just because he is over 65? "He can perfectly well afford it himself. We could save billions of dollars simply by cutting off Medicare for the affluent people who do not need the coverage. We could save still more money by having people, except the poor, pay at least a portion of their hospital bills." This kind of surgery may seem radical but is probably needed. In the corning battles over national medical insurance, legislators might do well to consult Tom Frist

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