August 16, 2004

Vanishing Philadelphia ob/gyns?

While I am in total agreement with you about the madness of the Philadelphia medical malpractice and medical liability insurance climate (May 20), you should be very careful about attributing developments in the Philadelphia medical marketplace entirely, or even mainly, to the malpractice climate. Many other trends are at work in this marketplace:

1. The region is and has been for some time over-doctored and over-hospitaled. For example, there are five academic medical centers in Philadelphia. Until a few years ago there were six; two merged. The city has been losing population for fifty years and the region is not growing. Many of the OB department closings you cite represent larger retrenchments and consolidations. For example, the owner of MCP, for-profit Tenet Health Care Systems, is currently trying to close that money-losing facility. Toward that end it has been cutting a number of acute care services. The OB services previously provided at MCP have been shifted to Roxborough and Hahnemann, two other Tenet hospitals. Episcopal, Methodist and Elkins Park have been acquired by large academic health systems, which have reduced many acute care services at those facilities while providing those services at other hospitals in their systems. One reason that OB programs are largely concentrated in teaching hospitals is that the teaching hospitals have been acquiring the community hospitals and consolidating their specialty services like OB at the parent institution. Certainly the loss of these community hospital OB departments represents an inconvenience to some local residents and providers. Whether it represents a decline in the availability and quality of OB services is another question, and your data do not answer it.

2. In addition to oversupply, the medical marketplace in the Philadelphia region faces a highly concentrated medical insurance market. Two providers, Aetna and Blue Cross, dominate the market and have used their market power to drive down reimbursement rates. The statement that liability costs approach 2/3 of reimbursement levels represents both high liability costs and low reimbursement levels resulting from oversupply and a concentrated insurance market. Philadelphia is a buyer's market for medical services.

3. The large number of physicians who are employees of health care systems, rather than independent practitioners, reflects another economic development. In the '80s and into the '90s, in addition to acquiring other hospitals, the academic medical centers acquired physician practices at an amazing rate. There was a theory that this was necessary to secure the stream of patients from these practices to the parent institution. No doubt it seemed like a good idea at the time, though it is hard to see why. All in all, the trend caused huge losses to the academic medical centers, who overpaid for practices of dubious value. In any event, it increased the percentage of employed physicians generally, not just in OB.

There is much anecdotal evidence that medical liability costs reduce the availability of OB services in underserved rural areas, where practitioners cannot generate the volume necessary to cover insurance expenses. It would be interesting to know whether this phenomenon could occur in a major metropolitan area or if, as I suspect, it is accelerating the trend toward consolidation of these services in high-volume medical centers. The source you quote does not address this question.

Keep up the good work. -- James Ingram, Philadelphia, PA

Posted by Walter Olson at August 16, 2004 12:39 AM

i'm not sure the claim that "Philadelphia has been losing population for years" is accurate, as James Ingram writes. i lived in Philly from 1974 - 1979. the population was about 1.2 million, as I recall. I saw a reference to Philadelphia this week that claimed the population was about 1.5 million. it seems to be growing, not shrinking.

Posted by: charlie sykes at August 20, 2004 02:44 PM