AHA Annual Meeting Remarks

American Hospital Association, Annual Meeting
Remarks by Thomas J. Donohue
President & CEO, U.S. Chamber of Commerce
Washington, DC

May 2, 2006

Thank you, Dick. There are two important Dick Davidsons in my life. One of them is the chairman of Union Pacific Railroad, on whose board I serve, and the other is this Dick Davidson, someone who has really advanced the dialogue between hospitals and the employer community on how to improve health care quality, expand access, and lower costs.

The Chamber and AHA work together on several health care initiatives and coalitions, including the Hospital Quality Alliance and the Partnership for Prevention, among others.

This cooperation between us is essential, because let me tell you, the answers to the challenges we face in health care aren't going to come from Capitol Hill.

Congress can help on the fringes but isn't prepared to pursue a comprehensive solution. Given the current political environment, we shouldn't expect that to change over the next few years – at least not until after the 2008 elections.

And maybe that's not such a bad thing. Because if we leave it up to Congress to save the system, we risk shifting more control of the private sector health care system away from employers, providers, and consumers and into the hands of government bureaucrats.

I heard someone on a news program recently ask, "if health care costs have been rising for many years, what's different about now – in 2006 – than in preceding years."

The answer is that we're getting closer to a tipping point…to a point where American businesses no longer view health care expenses as simply a cost of business, but as something that puts them at a significant competitive disadvantage in the global marketplace.

General Motors spends about $1,500 on employee health care for every vehicle it produces – more than it spends on steel.

By comparison, Toyota, which has very low retiree costs for its U.S. operations, is estimated to spend about $200 on employee health care per vehicle.

Starbucks spends more on health care than on coffee beans.

In this type of environment, businesses are asking questions they never before considered: Is there is a future for the employer-sponsored health care system? Should we scrap the system and start all over with something else?

To be honest, I think many companies relish the idea of getting out of health care altogether. Were it not for the stiff competition for workers, more of them might decide to get out.

If that were to happen, what would fill the void? Would we move to socialized medicine, with heavy regulation and rationed care, like what you see in Canada and Europe? If so, God help us all. We would have far bigger problems than we have now.

The current system, even with all of its flaws, is the best one we've been able to come up with.

So instead of trashing it, we need to be thinking about how we can improve it to control costs, expand access, and improve quality.

Many employers are changing the way they look at health care spending. They're figuring out that it's smart to make an upfront investment in their employees' health instead of paying a lot on the back end in hospital, lab, and physician costs when employees get sick.

More companies are introducing wellness and prevention programs that include disease management programs, free or discounted gym memberships, smoking cessation programs, and health assessments.

At the Chamber of Commerce, we recently got rid of the employee smoking room and put a gym in its place. We also make available to our employees, at no charge, a trainer who can advise them on diet and exercise programs.

We also bring in a physician once a week to consult with employees. Our people go to him for any number of reasons – to ask about treatment options, recommendations for a specialist, or a second opinion.

Wellness and prevention are having a noticeable impact on the bottom line. Motorola gets nearly $4 of return on every $1 of investment in its wellness programs.

Johnson and Johnson averages $225 in health care savings per employee per year with its programs.

And Pitney Bowes' prevention and wellness programs have produced $200 million in cost savings.

We're beginning to discover which programs work best and which don't in the workplace, and we're spreading this information throughout the business community.

In fact, last month the Chamber and the AHA co-hosted a forum on private sector-driven cost and quality initiatives that included presentations on corporate wellness and prevention programs.

There's something else employers are doing to control costs – giving more control, more choices, more freedom – and more responsibility – to employees.

Look at the increasing popularity of Health Savings Accounts. In just two years, 3 million people have signed up for HSAs. These individuals are much more sensitive to the cost of health care because they're paying out of their own pocket.

On the other hand, consumers with traditional types of employer-sponsored coverage have little appreciation or understanding of the cost of health care – and that's part of the problem.

They visit their doctor or fill a prescription and make a $15 co-payment, but don't have any knowledge of the actual cost of the treatment or medication they just received. Why? Because a third party – the insurer or employer – pays the bill.

With consumer-driven health, individuals are more likely to shop around for health care services—carefully weighing both price and quality—and use health care more wisely.

This is what the market is demanding. It rejected the restrictive managed care solutions that were in vogue during the 1990s.

Sure, HMOs may have slowed the rate of health care inflation, but they left consumers feeling boxed in, with little choice of providers and treatment options.

American consumers are smart – if they have information, they will use it wisely to make the best possible decisions on their health.

Hospitals, like employers, need to be more responsive to these market realities by providing more accessible, reliable, and easy-to-understand data on cost and quality.

Show me an industry other than health care where customers have little or no access to information on price and quality.

Let's compare shopping for health care to, say, shopping for an airline ticket. You can go on any number of travel Web sites, type in where you want to go, at what time and date, and up pop dozens of choices.

You can fly direct during peak hours or days and pay more. Or you can make a connection and fly during off peak days or hours and pay less. You can pay more for first class, or save by flying coach.

We need to move in that direction with health care. Hospitals have a choice: they can either voluntarily develop and make available more detailed information on cost and quality, or run the risk of having the federal government impose it on them – and I don't think that's what any of us want.

No matter how we get there, it's going to require greater investment in information technology to better track outcomes, store medical records, and handle administrative tasks.

U.S. industries such as retail, shipping, and banking have successfully made the transition to the electronic age, yet health care is stuck in a paper-based system.

Some senior Chamber managers and I took a tour of FedEx in Memphis last week. What an incredibly efficient operation that is.

Everyday, it makes more than 6 million shipments in more than 220 countries and territories and operates 677 aircraft and more than 70,000 motorized vehicles. You know how they do it? With information technology.

FedEx invests $1 billion a year in information technology every year, which enables it to know exactly where every single one of its packages is at any given moment in time.

Imagine the impact that level of efficiency could have on the delivery of health care. We could lower greatly administrative costs, prevent errors, head off duplicative testing, and track health outcomes – all of which would bring down the overall cost of care.

I've said that the private sector must be the driver of health care change – but government can and must help on the fringes.

It should start by passing medical liability reform. The health care industry – and hospitals in particular – are a cash cow for the trial bar.

Hospitals are seen as having deep pockets, and juries don't have much sympathy for them. Hospitals lose more than half of malpractice suits filed against them – doctors lose only one-third.

And the trial bar is getting more and more creative in how they attack hospitals and get around state medical liability reforms.

They're suing on the basis of corporate negligence, and they're going after nonprofits with allegations that those hospitals are overcharging the poor while providing discounts to other patients – never mind that nonprofit hospitals spend tens of billions of dollars in free care every year.

All of this is causing medical liability premiums to go through the roof. In 2002, 44% of the nation's hospitals had their rates hiked by more than 50%. How can hospitals attract or retain physicians and continue to offer high-risk services in this type of environment?

Many of them simply aren't. They're shutting down maternity wards and operating rooms or killing plans to open them.

Doctors, too, are in the cross-hairs. On any given day, there are more than 125,000 medical liability lawsuits in progress against America's 700,000 doctors – and this is forcing some doctors to get out of the profession or move somewhere with a more favorable legal climate.

One of the worst states is Illinois. Southern Illinois' only neurosurgeon left the state a few years ago, and large swaths of northern Illinois have had to make do without a Level 1 Trauma Center for the past few years.

Women living in Carbondale, Illinois, have had to drive more than 20 miles to have their babies delivered.

The pharmaceutical industry…it's also under fire in a big way. Take what's happening to Merck, for example. It could face up to $50 billion in liability by the time litigation over Vioxx is all said and done.

Some physicians stop prescribing drugs that are the target of lawsuits – even when no harm has been proven - and patients stop taking drugs that are the target of litigation without consulting with their physicians. This has major health consequences.

If I'm the CEO of a drug company, I'm going to think twice about taking a blockbuster new drug to market – and that would be unfortunate for tens of millions of people who depend on pharmaceutical breakthroughs to expand the length and improve the quality of their life.

Look, there is always going to be some risk involved with a new drug. If we filled Yankee Stadium with heart disease patients, and told them that 60% of them would see significant improvement in their condition by taking a drug, that the remaining 40% or so would see some improvement, but that 8 of them would die, I'm willing to bet that everyone in that stadium would sign up to take the drug.

Congress needs to get serious about this problem and pass medical liability reform that caps non-economic damages and restricts the ability to bring a lawsuit to within a reasonable period of time from the occurrence of the injury.

While they're at it, they should provide a level purchasing playing field for small businesses, which are feeling the brunt of all the cost shifting that's going on.

Hospitals provided $45 billion in uncompensated care last year and are getting squeezed by Medicare and Medicaid reimbursement rates that don't cover the cost of providing care.

To whom are they going to shift those costs? Certainly not the big employers, who have the leverage to say, "no way." Instead it's the little guy who feels the impact.

That's why more small businesses are dropping coverage for their employees. That's why more than 50% of the uninsured are employees of small businesses or dependent on someone who is. It's a problem.

Congress needs to pass legislation that would permit small and mid-size businesses to band together across state lines to purchase health insurance. It would give them the same bargaining power that large companies and labor union plans have, resulting in more affordable rates and better service.

We have to make sure that Congress sticks to free market principles and not mandates, as Maryland, with its "Wal-mart" bill, has done recently and others are proposing to do.

Ladies and gentlemen, we're coming up fast on the tipping point, and if the private sector doesn't take quicker action to control costs, improve quality, and expand access, we're inviting Congress and state governments to take action that we may not like.

Take, for example, the new Massachusetts law requiring every person to have health insurance. I'm not saying it's a bad idea or a good idea – it's one heck of an interesting idea, and we're watching it closely.

It could turn out to reduce health care costs, or it could amount to a government takeover in disguise because so many people will need financial assistance in order to purchase coverage.

The point is that there is an air of desperation around the country surrounding health care costs and access, and the private sector has the opportunity – and the obligation - to lead the national discourse and offer solutions that will benefit all of the stakeholders.

There's hard work ahead and tough choices to be made, but if we do the hard work now we can build a health care system that is cost-effective, market-based, information and consumer-driven – and that will not only improve the welfare of our people, but spur our economy and enhance our international competitiveness.

I invite you to join the AHA and the Chamber in doing what is right and what is necessary to meet this goal.

Thank you very much.