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Sharon Caskey Hayes • Jun 20, 2008 at 12:00 AM

At Wellmont corporate offices last week, Wellmont CEO Dr. Richard Salluzzo discussed his time in Kingsport and his views on the national health care issue. Salluzzo will leave the region in July to become president and CEO of Cape Cod Healthcare Inc. in Hyannis, Mass. David Grace photo.


The cost of health care continues to rise. More and more Americans are joining the ranks of the uninsured. And hospitals across the country are facing deficits and eventual closure.

Now Wellmont’s outgoing CEO — a doctor and administrator who transformed the Kingsport-based health system in just a few short years — is offering some parting thoughts on how to cure the nation’s ailing health care system.

Dr. Richard Salluzzo’s suggestion: a form of universal health care.

Curing health care

At his office in Kingsport last week, Salluzzo — who joined Wellmont in 2004 and recently took a job in Cape Cod — painted a bleak picture of the health care system in America.

“I think we’re going to see 10 to 30 percent of hospitals close if there is no change in the system,” said Salluzzo. “Something’s got to give.”

The problem, he said, is cost. In comparison with other nations around the globe with formal health care systems, the U.S. ranks virtually last in everything from patient satisfaction to health care outcomes.

But we’re at the top of the charts when it comes to cost of health care and the number of people who are uninsured.

Meanwhile, America spends 16.5 percent of its gross national product on health care, vs. 8 percent in all those other countries, Salluzzo said.

And that translates into higher costs throughout the economy. For instance, Salluzzo said, about $2,000 in health care costs for auto workers is built into the price of every American-made car and truck. That compares with $200 to $300 in health care costs built into Japanese-made vehicles, he said.

“I watch CNN and I see the economy is the No. 1 issue on everybody’s mind and health care is a distant second. But the truth is — the economic woes that we have are to some extent dictated by our health care system,” Salluzzo said. “People are making a disconnect there when there’s really a direct connection.”

In the meantime, patients aren’t happy. Doctors aren’t happy. Administrators aren’t happy.

“Actually more than 50 percent of doctors and hospital administrators are favorably pre-disposed to a single-payer system,” Salluzzo said.

A single-payer plan

A single-payer system, sometimes called universal health care, is a national health insurance plan in which a single public or quasi-public agency organizes health financing. Under a single-payer system, all Americans would be covered for all medically necessary services. And physicians would be paid fee-for-service according to a negotiated formula or receive a salary from a hospital or group practice.

Based on a cost-plus system, all hospitals would receive a fixed modest profit above operating expenses. Operating expenses would be tightly regulated by a strict certificate of need (CON) process.

Salluzzo said single-payer systems operate well in other countries, such as Canada, Sweden and the United Kingdom.

In Sweden, for instance, a not-for-profit insurance company operates the country’s health care system. In Canada, the government is in charge.

Salluzzo said he’s heard talk that Canadians despise their health care system, and often cross the border into the United States for treatment. He said it’s untrue.

“I used to practice in northern New York. We didn’t get any Canadians down for health care. They came down to buy stuff, but they didn’t come for health care. That’s just a myth,” Salluzzo said.

Instead, he said, studies show that Canadians are happy with their health care, their outcomes are as good if not better than those in the U.S., and the country spends just 7 percent of its gross national product on health care — vs. 16.5 percent of GNP spent in the U.S.

Salluzzo took issue with the Bush administration’s view of the subject.

“The Bush administration says we don’t want government mucking up health care like it mucks up everything else. But in all reality, the government funds 70 to 80 percent of health care already between Medicare and Medicaid. So we already are a government-run system that’s badly run. The idea that they could muck up the other 30 percent is kind of silly,” Salluzzo said.

He said the government’s Plan D Medicare Program is a “Band-aid” which government officials deemed as a substantial change.

“They don’t really get it,” Salluzzo said. “We have a $70 trillion Medicare deficit. It’s not sustainable.”

He said that most economists believe that once the nation spends 20 percent of its gross national product on health care, “the economy will grind to a halt.”

“We won’t have enough money to invest in education, infrastructure and all the other things we need,” Salluzzo said.

“So we’ve got this crisis that’s very much like (Hurricane) Katrina. We had a computer model and we knew as a government what would happen when the levees broke. But it had to happen before we reacted to it. And then we didn’t react in a very brisk way.

“So the question is — do we have to have 30 to 40 percent of our hospitals close before we react?”

He said 70 percent of hospitals in Tennessee are losing money on operations today. In the meantime, the number of Medicare enrollees is on the rise and will continue to increase as the baby boomers age.

“So not only do you have a $70 trillion dollar deficit in Medicare, it’s going to get worse fast,” Salluzzo said.

He said one of the big problems with the nation’s health care system is reimbursements. He said the government reimburses providers for treatment of Medicare patients based on a state-by-state formula. And some states get more money to care for those patients than others.

For instance, he said, the state of Virginia is ranked third in the amount its providers get in reimbursements, while Tennessee is ranked about 30th. As a result, a health system in Roanoke may get $7,000 per Medicare patient, while providers in Tennessee get $5,000.

“But there’s no reason for that,” Salluzzo said. “The truth is, the cost of taking care of that patient is the same here as it is there.”

He said the government bases its reimbursement rates on per capita income and other economic issues. But those reimbursement rates should be based on how sick patients are. Salluzzo noted that areas with greater per capita income often have healthier populations, whereas those with lesser income levels often produce sicker people.

“The incidence of smoking, obesity, diabetes 2, heart disease, etc., is higher here in the Tri-Cities than in Roanoke, so if you went in and risk-adjusted every patient, you should never see (a Roanoke health system) getting $7,000 and us getting $5,000,” Salluzzo said.

“The present system is flawed because the Medicare payment isn’t based on how sick patients are,” he said.

Salluzzo suggested that the increase in surgery centers and other outpatient clinics which compete with hospitals have also led to rising health care costs by increasing availability, and hence, consumption of health care. He said a study in the New England Journal about six months ago showed that 80 percent of stents inserted in heart patients were unnecessary. A single-payer universal system would help prevent unnecessary procedures, he said.

And to be effective, a single-payer system should include a strict certificate of need (CON) process, which would shrink the number of outpatient centers, decreasing overcapacity, and ultimately decreasing consumption and costs, Salluzzo said.

Of all the proposed single-payer systems, Salluzzo said he would favor a cost-plus plan, tied with a strict CON process and parameters to measure excellence in various areas, such as the number of full-time equivalent employees, supply expenses, safety standards, etc.

Such a system would remove various expenses from a provider’s budget, such as marketing and public relations funding, which would be unnecessary because providers would no longer be competing with one another, Salluzzo said.

Ironically, Wellmont in recent years has lobbied to get a certificate of need for a new hospital in Washington County, which would compete with Mountain States Health Alliance. That CON was denied by the state, squashing Wellmont’s plan to build the new hospital.

“It’s true in our present system we need to compete, and we need to do it aggressively,” Salluzzo said.

But a competing hospital would be unnecessary in the proposed single-payer system, he said.

He said the nation’s health care costs are driven by duplication of services, tort issues, the lack of a strong CON process, and a misaligned reimbursement system.

And the nation’s health care system is facing yet another crisis — a shortage of physicians.

Salluzzo predicted this country will face a shortfall of 200,000 physicians by 2015. Right now, that number stands at about 100,000, he said.

“So it’s the perfect storm — an aging population of baby boomers who are going to consume more health care dollars than ever, a $70 trillion dollar deficit with Medicare, an unrealistic cost structure, and a shortage of physicians,” Salluzzo said.

He said he’s talked with Washington politicians, and they “don’t really know much.”

“They don’t know anything about health care,” Salluzzo said. “If they spent as much time going to Sweden and the United Kingdom as they do going to Iraq, maybe they’d learn something,” he said.

He said Sen. Hillary Clinton’s 1993 health care plan “wasn’t far off base” from what he believes the nation needs.

“But the country wasn’t ready then,” he said.

“Well it is now. More than 50 percent of the CEOs and doctors would embrace it. They’re tired of it. They’re tired of all the paperwork. They’re tired of all the nonsense,” he said.

So unless something changes, Salluzzo said, “the bigger picture is sort of grim for health care.”

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