Lawsuits, entitlement costs threaten health care, former CEO says

Mike Schwab, former CEO of the Portland Clinic, outlines two problems with the U.S. health care system.

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Lawsuits clock in as No. 1.

Schwab, who retired in 2015, says litigation against doctors (e.g., ambulance-style advertisements calling on viewers with hip replacements to “sue now”) is out of control.schwabcolor 480xx1125 1500 38 0

“While I want to make sure the patient isn’t wronged, I also want to make sure there isn’t outrageous settlements that no one can afford,” Schwab says.

Medicaid and Medicare are the second challenge. Schwab says the entitlement programs struggle because they were established when lifespans were shorter.

“We’ve extended the life of people dramatically. This bubble is going to kill us,” he says. “It’s a little bit like PERS. How can you afford to keep paying out when it’s not coming in?”

Schwab got into the health care business in 1967, when he started working in hospital administration for the Air Force. He joined the Portland Clinic in 1973 and became CEO in 1995. (Schwab is the featured subject in our new Retirement View column, to debut in our June issue.)

When Schwab started working in health care, doctors and hospitals operated within a fee-for-service environment. Then HMOs came on the scene.

“Initially, it wasn’t terribly competitive, but it became so over the years,” he says. “Eventually it became big business.”

The HMOs fell out of favor, and some service providers — the Portland Clinic included — shifted back toward fee-for-service payments.

When the Affordable Care Act was approved, managed care became popular again.

“In any system, there are flaws,” Schwab says. “The problem is people kind of twist it and turn it in a way that benefits them.”

Now, Schwab says primary care doctors are in short supply, and nurse practitioners are picking up the slack. The professional consensus is that nurse practitioners are a cost effective way to provide high quality preventative health care. But Schwab disagrees. As budgets tighten, the quality of patient care will decline, he worries.

Interviewed before House Republicans passed the American Health Care Act, Schwab says he hopes the government and industry can come to agreement on cost-effective health care legislation. 

“If you’ve got too many changes, people throw up their hands and give up,” he says.