Henry Ford CEO says higher pay is only way to attract primary-care doctors

Nancy Schlichting, chief executive officer of the Henry Ford Health System, which handles $4.2 billion in revenues, says there are no easy answers in addressing the projected shortage of physicians in Michigan, particularly primary care physicians.

Health care economics also likely will dictate the end of small, independent community hospitals, she said. Those hospitals will become part of larger systems and will offer more limited services than they do now.

But big hospital systems, such as the 23,000-employee Henry Ford Health System, face their own challenges in providing care profitably in a cost-conscious environment, Schlichting said in an interview with Bridge Magazine. The interview was conducted on Wednesday, the day before the U.S. Supreme Court was expected to rule on the constitutionality of the Affordable Care Act.

Bridge: Michigan’s population is aging. Will this result in a population shift to the urban/suburban corridor in southern Michigan and to other areas where regional medical centers are located?

A: It’s an interesting question. Often, as people age, they don’t want to move. I’m not sure there will be a significant shift. People also have access to regional health care systems in places such as Saginaw, Midland, Jackson and Traverse City. There’s a good cross section of very fine health-care centers around the state.

People also aren’t very good about planning for their future needs. As long as they’re doing OK, they like to stay where they are.

Bridge: Cheboygan Memorial Hospital closed temporarily while it was negotiating a sale to Flint-based McLaren Health Care. Crittenden Hospital in Rochester appears to be having financial difficulties. What is the future for independent, community hospitals?

A: I think it’s going to be very challenging. Hospitals of all sizes are being challenged in the new world of health care. The emphasis is on managing care and keeping people out of hospitals. We’re building community health centers as an alternative to expensive care in emergency rooms.

Everything is working against growth in hospitals. Small hospitals have that pressure, plus the added problem of not having size and economies of scale. Scale matters. We recently closed the Warren campus of Henry Ford Macomb. In my mind, that was very much related to scale. And hospitals must become part of larger systems to survive.

Bridge: New medical schools are popping up in Michigan, but the federal government caps residency slots, causing a bottleneck in medical education. How can this be solved?

A: Not easily. The federal government frankly doesn’t want to pay for medical education. We have a trillion-dollar federal budget deficit. Medicare is the largest part of that and the federal government pays for graduate physician training through the Medicare budget.

The federal government can’t afford to do it. I do not anticipate any expansion of the residency program.

Bridge: The state faces a shortage of primary care physicians. How can we ensure an adequate supply of these positions?

A: The number of residency slots is not the major part of the issue. Just because you might be able to get more residency slots doesn’t mean you will have more primary care physicians.

If you have significant debt -- and many students graduate with more than $200,00 in loans -- you’re going to choose a specialty that will allow you to make enough money to pay back that debt. We are not paying new primary care physicians enough when they are already in a difficult financial position.

(Editor's note: According to the federal Bureau of Labor Statistics, "In 2010, physicians practicing primary care received total median annual compensation of $202,392, and physicians practicing in medical specialties received total median annual compensation of $356,885.")

Bridge: We often look at health care as only a cost, not as a source of economic growth. How do we turn that around?

A: I think we have to realize it is both. We have to do a better job of managing health-care costs. It’s the responsibility of every American. A big reason for high health-care costs is that we don’t take very good care of ourselves. Many chronic diseases are a result of poor lifestyle choices.

I also think that health care has become an enormous part of the economy. Much of that is positive. Health care typically is the largest employer in the community. There is an incredible amount of talent and capital in health care that can be used in a very positive way.

We have to worry about costs and also focus on the opportunities to convert the incredible desire we have in this country to extend life into the positives that it creates for our country.

My sense is people underestimate the talent and positive economic strengths of the health care industry.

Bridge: Can Detroit create an "eds and meds" economy like Pittsburgh has done?

A: If you look at jobs in the city of Detroit, the number of jobs in health care and education is enormous. In places like Boston, Philadelphia, New York, Cleveland and Pittsburgh, health care is among the largest employers. It brings stability in the urban space.

Cities everywhere are struggling. We are the stabilizers. We’re not going to move. I think we are a very vital part of the urban economy.

Bridge: We keep hearing that health care will undergo massive changes in coming years. Discuss some of them.

A: There are many. I think we’re seeing a tidal wave.

The first wave involves insurance coverage. Employers are cutting back on coverage. Consumers are paying more for coverage that employers provide and some have simply lost insurance.

In the second wave, the provider systems are undergoing substantial change. That’s driven by changes in the way we get paid. The focus is on improving the health of populations and managing tighter budgets.

 Most of the small, independent hospitals are joining larger systems. Doctors are joining hospitals in record numbers. I think there will be very few small physicians practices in the future.

There is a greater focus on a continuum of service, moving the center of gravity from the hospital to the home. There will be enormous changes in health care delivery.

Bridge: The Affordable Care Act is highly controversial, but it seems that major hospital system CEOs generally like it. Why is that?

A: The American Hospital Association came out in favor of the Affordable Care Act. If you are in an urban market or in areas with a high percentage of uncompensated care, you are very much in favor of the law.

There are a lot of good things in the act. It expands health-care coverage through an expansion of Medicaid and subsidizes coverage through state health exchanges. Young adults who are between the end of schooling and entering the job market are covered under their parents’ health insurance plans. It eliminates barriers to obtaining insurance coverage because of pre-existing conditions.

The law limits the profits insurance companies can earn on providing care. I think that’s a good thing. Overall, I think the law is a step in the right direction. It’s not perfect. There are substantial problems yet to be solved in addressing health care.

Bridge: What happens if the Supreme Court strikes down a part or all of the Affordable Care Act? Do you have a contingency plan in the event the court rules the law is unconstitutional?

A: We don’t have a contingency plan. We always manage with a long-term vision. We’re focused on reducing costs and doing the right thing for our community and our employees. That’s what we’re here for.

If the Supreme Court does strike down the law, I think work will begin pretty quickly on another reform plan. There are many challenges ahead in health care that must be addressed.