Never Good Enough: Health Care Workers and the False Promise of Job Training

2. Restructuring the New York Way

2 Restructuring the New York Way In the mid-1990s, health policy analysts proclaimed the U.S. hospital was an “institution...being shaken at its core foundations.”An influential 1995 report by the Pew Health Professions Commission predicted the closure of “as many as half of the nation’s hospitals and loss of perhaps 60% of hospital beds” and the “massive expansion of primary care in ambulatory and community settings.” Surviving hospitals would be those that merged with other hospitals or health systems and expanded into non–acute care services such as home care and outpatient clinics. The health policy analysts saw a silver lining, suggesting that amid the rubble, competition and restructuring would forge a new breed of hospital, capable of providing an “integrated, clinical continuum of care” and “cost, quality, and outcome data for purposes of accountability”never before possible. The Pew Commission recommended hospitals “rightsize” the workforce and predicted a looming surplus of 100,000 to 150,000 physicians and 200,000 to 300,000 nurses. It advocated the “consolidation of many of the over 200 allied health professions into multi-skilled professionals” and the “fundamental 60 Never Good Enough alteration of the health professional schools.”1 Such predictions were grounded in the assumption that managed care would play an increasing role in U.S. health care, and, less probably, that it would produce radical changes in the health care system. Classic fee-for-service insurance, now nearly moribund, pays for health careservicesonanarm’s-length,indemnitybasisandplayslittleroleinshaping how health care services are delivered. Managed care plans, by contrast, play roles in both the financing and delivery of services. They attempt to reduce the gap between how care is delivered and how it is paid for, through tactics such as limiting patient access to physicians and hospitals contracted with the health plan, controlling access to specialists through primary care physicians, making providers share in the financial risk of caring for patients, and reviewing physicians’ clinical decisions. Some of the first managed care plans were health maintenance organizations (HMOs), which often employ medical staff directly, own their own clinics and hospitals, and were conceived as more effective ways of regulating health care services and limiting the professional power and market forces that foster costly, high-tech care at the expense of more basic and essential preventive services. Today, however, many managed care plans have been reduced largely to vehicles for cutting costs, limiting access to care, and introducing greater competition and market mechanisms into the health care system. A comprehensive study of health care in the San Francisco Bay area showed that “the era of managerial control and market mechanisms” began there in 1983, when the federal Medicare program, the single largest payer for health care services in the United States, adopted a defining feature of managed care health plans—it began to pay hospitals flat rates for treating patients based on their diagnosis, rather than the services they actually used. By the mid-1990s, in New York too, “general business ideologies and practices—for example, an emphasis on product lines, cost centers, and strategic planning” became “widely accepted as normal ways of thinking about conducting healthcare.”2 In 1994 employer health care costs declined for the first time in a decade,3 a decline many assumed was a result of managed care and market forces. Therefore, when Governor George Pataki, a Republican devoted to cutting budgets and taxes, took office in January 1995, he quickly took steps to accelerate the expansion of managed care and market mechanisms in Restructuring the New York Way 61 New York’s health care sector. The two main reforms he initiated were the deregulation of payment rates to hospitals and the mandatory enrollment of Medicaid recipients—the government health care program for the indigent and poor—into managed care plans, which would manage and coordinate care and be reimbursed by the state. In terms of deregulation, the New York State legislature passed the Health Care Reform Act (HCRA) in 1996, which ended state-regulated rate-setting for hospitals beginning in 1997 and thereby required hospitals to bargain with insurers, including the growing number of commercial managed care plans, for payment rates instead. This, it was hoped, would force hospitals to compete for favorable contracts with insurers and restructure their operations to provide the best services at the lowest cost. In terms of the Medicaid program, the largest single expenditure...