by faithgibson on January 8, 2021

original file name 13-in MacAir

TAG – diamond-n-rough! Dr. JWW Economic History of Hospitals

The set-up – background events that precipitated the breakdown in the normal relationship btw the usual providers of hospital care and usual population of hospital users – i.e. patients


These ‘problems’ started in the most unlikely of places – the historic and life-altering invention of extraordinary advances in the biological sciences in the late 19th and early 20th century, that in turn gave rise to what we now call ‘modern’ or science-based practice of medicine.


As the story unfolds, an unlikely of list of characters is brought together in a way that sparks an intense conflict of interest between the four major players:


  • The historic but outdated model of small privately-owned hospitals that constituted over 90% of all hospitals in the US in the late 19th and very early 20th century
  • Organized medicine’s historic and vociferous rejection of any type of tax-based national health insurance to finance a system of general hospitals under any circumstance!
  • The sickest of the sick – ill and injured hospital patients who would eventually be billed for their care (whether they could pay it or not)
  • Administrators of the new (or newly renovated) and technologically-enriched 20th century hospitals who were in hock up to their collective eyeballs for all these capital-intensive purchases of expensive medical equipment, and desperately needed the number of discharged patients in the “paying customer” column be significantly more that the indigent, unemployed, disabled and terminally ill or injured hospital patients who ran up quite a tab due to the severity of their medical conditions, and now could not settle their account because they were either dead, broke, or dead-broke


However, Dr. J Whitridge Williams saw the economic dilemma of the ‘modern’ American hospital from his own unique place in history. The four decades from 1890s to 1920s was a boom era as America was industrializing itself at a fever-pitch and American industries galloped turned out an impressive number of scientific and technological advances and producing new technologies in the fields of communication, transportation, entertainment and labor-saving devices for the ‘little woman’. The year 1908 was particularly remarkable as Henry Ford’s new factories turned out hundreds of Model-T Fords, the Wright Brothers sustained heavier-than-air flight for 2½ hour and an American naval ship {insert name ship & confirm political motive} circumnavigated the world in a show of military prowess. [Smithsonian Magazine centennial article on 1908]


Radio, silent movies, telephones, washing machines and vacuum cleaners had all been invented and the general standard of living was quickly improving. A high level of public excitement accompanied the industry (better description) and inventiveness, as newspapers reported a mood of hopefulness and belief that even greater changes were just around the corner.


Dr. Williams also had his own professional perspective on the economic aspects of American hospitals. During the period in question, he was both Dean of Johns Hopkins School of Medicine (one of the most prestigious in the US) and an active member of several professional organizations including the AMA. He was at home in high society and used to rubbing shoulders with the uber-rich philanthropists of his day – Rockefeller, Vanderbilt, Morgan and Carnegie.

Before our scientific understanding of bacteriology, before we had x-ray technologies to diagnosis disease and injury, the best that doctors and old system hospitals could do was set broken bones, perform certain simple surgeries and/or provide palliative care until Mother Nature either healed the patient or they died their illness. The idea of ‘curing’ human disease was associated with miracles and answered prayers, not doctors or hospitals.


All changed quickly and dramatically during the late 1800s and early 20th century. The most important and far-reaching discovery was Louis Pasteur’s germ theory of infectious disease in 1881 and the harnessing of radiological energy by Professor Wilhelm Roentgen, who invented the x-ray machine in December of 1895. Like striking oil, the scientific fervor of this period resulted in a gush of new discoveries in chemistry, physics and the modern biological sciences that introduced many new fields of medical practice and technological inventions.


As a result, undreamed of new capacities to diagnose, effectively treat and even cure painful chronic conditions and formally fatal diseases gave us the great miracle we still describe as ‘modern medicine’. Patients and historians rightly see this as an enormous blessing for humankind, but it also had a huge displacement factor created a profound economic dilemma for hospitals.


Historically, hospitals were simply places that provided ‘hospitality’ – charity institutions run by a religious order (or the government) to provide care to the poor and homeless who also had the misfortune of being sick. During the thousands of years that proceeded the therapeutic ability of modern medicine, the only care available was custodial (ex. institutions for the mentally or physically disabled) or palliative services similar to contemporary hospice care, nursing homes.


As places of ‘hospitality’, they were labor-intensive with an unskilled staff who job was to provide a dry bed, clean linens, regular meals, someone to change bandages and empty bedpans.


Medical hotels for the indigent were never meant to be money-making venture, since it was obviously that sick people make lousy paying customers.

At the turn of the 20th century in the US, thousands of tiny 2-to-10 beds privately owned hospitals housed in old mansions dotted the landscape in towns and cities across America. But these ‘boutique’ facilities often were not really a ‘system’ but simply a happenstance. Local doctors saw the medical hospitality business as an opportunity to increase their income by providing ‘accommodations’ to patients who could pay for these additional services.

However, these were not  ‘full-service’ institutions, they no emergency rooms or specialized technology (x-rays, laboratory services, etc) and like any the hospitality of any hotel,  they available to those who didn’t have funds to pay the daily room rate.


However, life on this side of the medical science divide created a paradigm shift in the role of hospitals. The classic system of hospitals as charity institutions run by the religious orders or the state, and the new market-based business model that we in the US have depended on since the early 1900s.


Dr. JW Williams realized that seismic shift of science and technology was making profoundly reshaping the practice of medicine. The new capital-intensive, technologically-enriched hospital system was orders-of-magnitude more effective. But there was a downside — the cost of doing business was also dramatically increased compared to the simple hospitality provided by 19th century hospitals. This leap forward into new scientific abilities and miracles cures had also created in a miniature Tsunami in new, ‘must have’ medical equipment technologies that were too expensive for any individual doctor to purchase.


Before the Great Divide, the 19th century system of small specialty hospitals and doctors’ offices was the ‘happening place’ when it came to medical care. Now these small-potato enterprises had been priced out of the market, as only hospitals who enjoyed an ‘economy of scale’ (a large and income-generating patient census) were able to borrow the money needed for the long list of large capital outlays.


Suddenly every hospital had to have laboratories equipped with microscopes and sterilizers, and radiology departments with one (or more) expensive x-ray machines, lead aprons, and oceans of photographic film, operating rooms equipped with special OR tables and high-intensity lights, and autoclaves for their surgical instruments. New medical services may have needed new buildings to house them. The main hospital building might have been remodeled to include more operating rooms and other specialty areas such as recovery rooms and a central supply department. Of course, a trained staff also had to be hired to run these department and provide these new services.


Simply put, the miracles of modern medicine didn’t come cheap! 


By 1910, hospitals of all kinds — big charitable institutions, medium-sized teaching hospitals run by universities and small for-profit hospitals — were all bleeding red ink. In a short 15 or so years, the opportunities and associated demands of ‘medical science’ catapulted hospitals from medical hotels whose biggest expensive was purchase of new-fangled, roll-up hospital beds, into the fast lane of an incredibly capital-intensive enterprise.


In addition to the purchase of expensive equipment, hospitals had begun to promote themselves as able to cures disease (rather than just hotels with medical room service). This introduced the unwelcome burden of legal liability for bad outcomes and adverse events.


Lacking a tax-supported national system as existed in many parts of Europe, the technologically-rich hospital business in the US was forced to look to their patients, which by definition are people that are sick, injured, crazy or infected w/ communicable diseases like TB.


It became increasingly clear that hospitals could no more depend on the seriously ill or injured to pay for their care than prisons can expect their inmates to reimburse the costs of their incarceration. The conclusion was inescapable — with a tax base, there were just not enough sick people (as paying customers) to support 20th century ‘modern’ medicine. Hospital administrators had to figure out how to market their services to healthy people who could afford to pay for them.


The perfect answer and perfect choice was hospital-based maternity care for the general population, which is to say, a healthy demographic. This as a source of staple patronage allowed hospitals in the US to be run a business model, which was a necessity since the organized medicine in America was opposed to any form of a national healthcare system.


…. and the market-based business model that we have depended on in the US since the early 1900s.


 that has never been publicly acknowledge or become part of the national discourse about the economic of hospital services.


After years of medical training in the large public hospitals of Europe, Dr. JW Williams was intimately familiar with the comprehensive system in European countries that provided free hospital services to all its citizens. Dr. JW Williams certainly appreciated the benefits of a large, well-run, well-staffed and stocked hospital and coordinated clinic system. Johns Hopkins had copied this model when setting up its services.


Nonetheless Dr. Williams, along with all his colleagues at the AMA, completely rejected the economic and political model used by public hospitals in Europe. Almost without exception, they were ridge bureaucracies run by minions of the Crown and staffed by doctors who were salaried employees of the State.


As mere employees, a bright, hard-working, innovative physician with superior clinical skills and leading-edge ideas was paid no more than a slacker – a plodding, unimaginative or lazy physician. He knew that American doctors saw medicine as an entrepreneurial adventure and would not tolerate anything that impinged on their freedom to set the terms of their practice.. This included the private ownership of hospitals as one of the medical profession’s main sources of economic advancement.


Likewise he was only too aware that the United States didn’t really have a general hospital system. Instead we had thousands of tiny doctor-owned 2-to-10 bed hospitals, a model left over from the 19th century. For these small specialty hospitals, the cost of new scientific equipment was prohibitive, so these ‘one-man-shows’ would never be able to meet the economic challenge of 20th century scientific medicine.


As a successful and influential man who already ‘lived large’, Dr. JW Williams dreamed of a new national system that would be able to provide all Americans the same high-quality scientific medicine as John Hopkins already was providing to the population of Baltimore.


That required establishing a national system of full-service general hospitals that were able to “… provide laboratory, x-ray and other services necessary to provide for a well-equipped surgery department”. For the first time, the fruits of modern medical science and medical equipment and technologies that enabled it to work its magic, would become available coast to coast in every large and small communities.


As if such a massive undertaking was not a tall enough order by itself, this new comprehensive system had to consisted privately-owned hospitals that were able to pay their own way, since any government funding would be seen as slippery slide into the dreaded ‘socialized medicine’. Instead, each of these new facilities would have to depend on private sources — contributions from philanthropists) and by having a business model that included a very significant number of ‘paying customers’, which would make this entire system as self-sustaining as the large medical institutions of Europe but without going over the dark side of nationalized, tax-based care.


Dr. Willams’ book identifies the four large problems – huge boulders! – in the area of politics, ecomonomic and sociology and public relations.


Dr Williams recognized the unique problem created by the new capital-intensive hospital system associated the new fields and capacities of medical science introduced at the end of the 19th and the first decades of the 20th century: The very people that most need and benefit from capital intensive hospital services – the ill, injured, disabled – i.e., sick people – were the most unlikely demographic to be able to pay these bills. This observation is so simple it’s almost insulting, but it was a unique insight in 1910. Nearly a hundred years later, the American public and national policy makers have yet to acknowledge these realities or make these issues part of the public discourse on effective, affordable healthcare.


Dr. J. Whitridge Williams envisioned a national system of independent community hospitals supported locally by the patronage of those who used its services. Ideally, these local hospitals – a minimum of one in each country — were to include fully functional surgery and x-ray departments, as well as laboratory services. In Dr. Williams’ vivid imagination, every country would have one or more community hospitals, which he expect to become as ubiquitous as schools and libraries.


To accomplish this, hospital patronage had to be expanded from its classic but nonetheless economically restrictive demographic of the seriously ill and injured. What was needed was a healthier population for whom hospitalization was ‘elective’. Under the social and political circumstances of the time which eliminated any nationalized from of healthcare, this was the only dependable way to meet the hospital’s overhead – staff salaries and running expenses. Equally important, it meant they could afford capital-intensive expenditures, such as x-ray machines, microscopes and autoclaves, and also be able to remodel or expand their facility as science and technology evolved.


In 1914, it was startlingly clear to Dr. J Whitridge Williams that the scientific discoveries of Pasteur (germ theory), Lister (surgical sterility), Roentgen (x-ray machine) and Morton (discovered anesthetic properties of ether) had forever ended the pre-scientific, thousand year-old model of hospitals as places of low-cost, low-tech custodial or palliative care.


This forever changed the basis of care as provided by physicians and hospitals. The classic practice of medicine was based in and revolved around the trained mind, powers of observation and the skilled hands of the physician as a diagnostician and a healer. These attributes were not location-specific but inseparately accompanied the physician wherever he was and wherever he went – doctor’s office, patient’s home, the battlefield. There was very little that a hospital could provide that could not as well be accomplished by the doctor in a variety of other settings.


However, the scientifically-based medicine expanded the practice of physicians to a whole new order of magnitude that built on but did not stop a trained mind, good eyesight and a talented touch. The efficacy of these attributes now depended on things — specialized equipment and medical devices and all manor of technologies which in our day includes computers and robotic surgery


This forever reconfigured the professional life of physicians and role and status of hospitals by inventing the new category we describe as an ‘acute care’ institution – one technologically equipped and staffed by those trained to use these life-saving technologies


The 19th century the role of hospitals as places of ‘hospitality’ – medical hotels that provided nursing services — had suddenly catapulted by the breakthroughs in medical science