Robert (Robbie) Pearl, MD, the former Executive Director and CEO of the Permanente Medical Group is the author of a new must-read book on healthcare titled “Mistreated: Why We Think We’re Getting Good Health Care—and Why We’re Usually Wrong.” The book explores how terribly broken the U.S. healthcare system is and what needs to be done to fix it. The book starts with the story of his father, a dentist, a World War II hero, and a member of the Greatest Generation. After spending the evening reminiscing with Robbie and his brother Ron, also a doctor, his dad went home with Ron to spend the night. Early next morning, Ron found him on the living room floor, unconscious. Ron called 911 and arranged for his father to be admitted to the Stanford ICU. He was deathly ill with sepsis, an infection where bacteria enters the bloodstream and wreak havoc with many of the body’s organs.

Full of energy until his 60’s when he developed hemolytic anemia, Robbie’s dad eventually required removal of his spleen to maintain his red blood cell count. As every doctor knows, the danger is that splenectomy puts you at high risk for certain infections, including pneumococcus, the bacteria that often causes pneumonia. When his Dad’s blood cultures came back positive for pneumococcus, Robbie wondered how this could have happened. There is a vaccine against pneumococcus that everyone with a splenectomy is supposed to get. His dad had seen many doctors both in New York and Florida where he split his time. When Robbie called to check on his dad’s medical history, it turned out that each of his many doctors thought someone else had given him the pneumococcal vaccination. But no one had. So Robbie’s dad was now in the ICU at risk of dying of a preventable medical condition all because no one had a complete picture of his medical history. He joined the ranks of thousands and thousands of people who get sick or die from avoidable medical errors.

I had a chance to talk to Robbie about his book on my July 17, 2017 podcast for the American Journal of Managed Care. You can listen to the podcast here:

or through one of these podcast services:


When perception contradicts reality

There are many studies documenting the failures of the U.S. healthcare system. Just last week, the Commonwealth Fund published an article ranking the U.S. dead last in a report comparing the performance of the health systems of 11 different high-income countries. However, as Robbie says, if you ask your friends, they are likely to tell you that the U.S. has the best healthcare in the world. There is a striking contrast between what the facts show and people’s perception. And, he says, context shapes perception and perception shapes behavior. If you like your doctor and the front office staff, you may think you have the best healthcare in the world as long as you don’t get really sick. If you don’t know there is an alternative, you may believe it is ok to spend an hour in traffic to see a physician for 10 minutes. If you don’t know how much the care experience is improved when services are integrated instead of dispersed across multiple locations, you may not think twice about the inconvenience of seeing your doctor on one side of town, getting your blood drawn on the other, and picking up your drugs in yet another location.

Not only is our healthcare system inconvenient for patients, it is also producing mediocre to poor outcomes at a very high cost. As Dr. Pearl said during our interview:

“Healthcare costs are huge and are rising more rapidly than our ability to pay. Almost 1 in every 5 dollars that we spend on goods and services are spent on healthcare now and we are on a path to spend 1 in 3 in the future. At the federal level, the U.S. government spends 40% of its tax revenues on healthcare and there are 10,000 baby boomers becoming Medicare eligible every day which should put us on a path spend even more.”


So how did we get into this mess anyway?

In a chapter titled, “The Legacy Players”, Robbie points to four huge, powerful, multi-billion dollar industry sectors that played a role. All are doing extremely well—from their perspective and the perspective of their shareholders or stakeholders—and all have a vested interest in maintaining the status quo. These Legacy Players have a stranglehold on different aspects of the healthcare system, driving up costs and helping to make healthcare in the U.S. unaffordable and inaccessible. The four Players are:

1. Health insurers

These are the guys who pay for most of the care consumed by Americans, although, increasingly, they are sharing the pain with consumers in the form of high premiums, high deductibles, and larger and larger cost-shares via coinsurance and copays. There has been remarkable consolidation in the health insurance industry over the last couple of decades with only five mega-companies now dominating the commercial health insurance landscape. Attempts to consolidate even further, from five to three, thankfully have met with regulatory resistance. But even without further consolidation, the big five wield huge leverage over the delivery system—the parts of the health care system that actually deliver the care. However, despite their clout, health insurers have been pretty ineffective at containing costs despite implementing complex coverage rules, expensive and relatively ineffective care management programs, and excluding coverage for medical procedures, such as bariatric surgery for hard to control diabetes, that have well-documented returns on investment. In his book, Dr. Pearl says,

“It’s not that they don’t want to improve performance at the care delivery level. They just don’t know how. and when they’ve tried in the past, the results have been dismal.”

2. Hospitals

Here Robbie focuses on unnecessary variation in care processes that drive up costs as well as problems with patient safety. He writes that hospital staffing is skimpy on weekends for the benefit of staff, but at the expense of patients. He notes that although most people think hospitals are safe places to be, in fact, they are not. More than 700,000 people acquire hospital-acquired infections, 10% of those infections will prove deadly. He points out the correlation between high volume and better outcomes for certain types of procedures, such as cardiovascular surgery, but he told me that many hospitals are reluctant to shut down low volume programs because they are often high margin. Some hospitals in other parts of the world are leading the way in providing outstanding care. Dr. Pearl provides some examples in his book, such as the main hospital in Jonkoping, in southern Sweden, where both physicians and hospital administrators view health as a public service, or the one in the Cayman Islands, where Indian cardiac surgeon Devi Shetty is driving down costs and improving outcomes because he believes that if he can get costs down while maintaining very high quality, he can save more children. But in the U.S., I think it is fair to say that, by and large, hospitals have not shown that type of leadership.

3. Physician specialty societies

These are the organizations that are looking out for the interests of their members, particularly, issues related to their members’ income. Although they cloak themselves in a blanket of concern for patients, once again, perception is shaped by context. If dues paying members are advocates for a particular type of surgery, a specialty society is likely to advocate for that surgery even if the medical literature has documented little value. As an example, Dr. Pearl writes,

“When asked to identify the five biggest opportunities to reduce healthcare costs without compromising quality, the American Association of Orthopedic Surgeons made no mention of eliminating meniscus surgery. Compared to what they actually recommended, rethinking meniscus surgery would have had one hundred times the impact. Through the lens of people who are paid to maximize the income of orthopedic surgeons, the specialty association leaders simply couldn’t see what other experts in their field were able to identify so easily.”

4.  Drug and device companies

Dr. Pearl notes that the pharmaceutical industry “may be the most profitable industry that exists.” In the U.S., “drug companies benefit from long-term patent protections and regulations that prohibit the federal government from negotiating favorable pricing for Medicare patients.”

We pay more for drugs than anywhere else in the world. For example, Nexium, a drug for acid reflux costs $30 per month in Canada, $42 in the U.K., $58 in Spain, and $23 in the Netherlands. In the U.S., a month’s supply costs $305. Gleevac, a drug that treats a certain type of leukemia costs $989 per month in New Zealand and $1,141 in Canada, but the average monthly price in the U.S. is ~$8,500.

I was recently chatting with a pharmaceutical company executive who told me the problem for the U.S. is that the industry has to make almost all of its profit off the U.S. market. He said that’s because most other industrialized countries don’t just negotiate drug prices, they set them. He concluded by telling me, in no uncertain terms, that the American consumer is “getting screwed”.

The common defense of high drug prices is that the money is being used for research and development (R&D) to help bring new, potentially life-saving drugs to market. And, indeed, the industry has made spectacular advances, particularly in the field of oncology drugs. But all too often drug pricing has little to do with funding R&D and much more to do with corporate profits.

Dr. Pearl uses the example of Sofosbuvir, branded Sovaldi by Gilead the drug company that sells it. It is a relatively new drug that can cure Hepatitis C offering an alternative to older treatments that were less effective. A course of treatment is ~$84,000. If you have chronic Hepatitis C and good insurance, that may seem like a good deal. And indeed, there have been some pharmacoeconomic studies that suggest they may be “cost-effective,” but when you dive deeper into the story as detailed in Dr. Pearl’s book, you learn the following:

“Gilead didn’t research or develop Sovaldi. Rather, it simply bought the rights to it from another drug company for $11 billion, with absolute certainty that a handsome profit was in store. Pharmasset, the company that did the R&D, had planned to sell the drug at a total cost of treatment for around $30,000. But when Gilead realized it could charge whatever it wanted, the company affixed a price tag of $1,000 a pill, approximately $84,000 for a course of treatment. it is estimated that Gilead recouped its total investment in less than eighteen months, with revenues projected to reach $269 billion over the drug’s life span. That’s a 2,500 percent return on investment, essentially guaranteed and relatively risk-free.”

So, as we can see, from their perspective, these Legacy Players are doing just fine. It is highly unlikely that they are going to change unless someone forces them to. In fact, its almost certain that they will fight like the devil to maintain the status quo that benefits them so greatly.


So, how do we get out of the mess we’ve created?

In a chapter in Mistreated titled, “The Four Pillars of Transformation”, Dr. Pearl lays out his vision of the path we must take to transform American healthcare into a more ideal system. An exploration of each of these Pillars will be the subject of the second part of this story.



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