ANNOUNCER: Tonight on FRONTLINE: There is a new battle for the soul of America's doctors.

Dr. MARTY SOLOMON: Every month, we see how deep in the red we are.

ANNOUNCER: A war between caring and costs.

Dr. MARTY SOLOMON: I don't care how much you fool yourself. It has to affect the way you make decisions.

ANNOUNCER: Will we be the casualties?

Dr. MARTY SOLOMON: In the moral, real world, we don't have a choice. We have to provide the care, but we can't go on doing that forever for everybody.

HEDRICK SMITH, Correspondent: And from the perspective of the patient?

ANNOUNCER: Correspondent Hedrick Smith examines the conflict that is pitting doctor against doctor.

Dr. MARTY SOLOMON: From the perspective of the patient they may not be getting necessarily the best care.

ANNOUNCER: Tonight on FRONTLINE, Dr. Solomon's Dilemma.

HEDRICK SMITH: [voice-over] Boston, 6:00 AM. Inside one of Harvard's famed teaching hospitals, the Beth Israel Deaconess Medical Center, in the cardiac intensive care unit, Sam Armstrong is fighting for his life. Dr. Marty Solomon is his primary care physician.

Dr. MARTY SOLOMON: [to patient] Hey, Sam. Good morning. How're you doing this morning?

He's been in the hospital now something in excess of six weeks, in the intensive care unit for just about the entire stay, requiring very, very complex medical care.

So far it looks as if the infection's coming under control. Your heart seems to be working okay. The wound is looking better.

HEDRICK SMITH: But patient care is not the only thing on Solomon's mind.

Dr. MARTY SOLOMON: I'm sure this hospitalization is well in excess of $150,000 already. We're not going to get reimbursed for that total amount. The hospital's not going to get reimbursed for the total amount. His care is going to be, basically, a loser. People are going to lose money on caring for him.

In the moral, real world, we don't have a choice. We have to provide the care, but we can't go on doing that forever for everybody. I'm very conflicted in providing the care that I know the patient needs, and yet I know that I'm losing money when I see this patient. And if I have more patients like this, as I do, then I'm losing more and more money.

And there comes a point at which I can no longer afford to do it because I can't- I can't do anything.

HEDRICK SMITH: Dr. Solomon's dilemma epitomizes a new phase of managed care, one that is fueling a furious debate among doctors about the very soul of medicine and eroding the precious bond of trust between doctors and patients.

[on-camera] Good evening. I'm Hedrick Smith.

For a decade, American health care has been the story of employers and HMOs telling doctors to cut costs. Tonight a new story at the frontier of health care: doctors rebelling and taking power back from HMOs.

The teaching hospitals around Harvard Medical School are taking a lead in this bold initiative. Their idea is that with doctors back in control, patients will get better care and hospitals will make enough money to survive.

But there's a catch. Taking control means assuming financial risk. The more care they give, the more it costs them directly. So the sickest patients become not just people in need but money losers. This conflict of interest now pits doctor versus doctor, and patients are caught in the middle.

[voice-over] It's no accident that this debate rages fiercely in Boston. For decades Boston has been one of the world's great medical Meccas. Some of the finest hospital and research facilities anywhere on Earth are here, crowded around Harvard Medical School in a remarkable area called Longwood. And yet even in this Mecca something is wrong. Everyone - hospitals, health plans, and doctors like Marty Solomon - are in crisis over money.

Marty Solomon has been practicing primary care medicine for over 20 years.

Dr. MARTY SOLOMON: This is where I grew up. From the time I was 5 years old, this is where I used to walk to school, go to the stores, playground- I used to play baseball down there.

And the thing that is neat about practicing around here is I now take care of people who were the elders when I was a kid, like the policeman who used to stand on the corner there when I used to walk to school, and the guy who ran the pharmacy that used to be over here. They're all patients of mine now. It's really neat.

HEDRICK SMITH: Such nostalgia is a luxury. Though Solomon is regularly named one of Boston's top primary care physicians, he is a driven man. After pre-dawn visits to his patients in the hospital, Solomon opens his office. It is the last quiet moment of his day.

Dr. MARTY SOLOMON: Open your mouth wide.

MALE PATIENT: Aaahhh.

Dr. MARTY SOLOMON: Okay, now swallow.

HEDRICK SMITH: Over the next 10 hours he will see about 35 patients.

MALE PATIENT: This August I got a case of jock itch I couldn't believe!

Dr. MARTY SOLOMON: Hold your breath.

Just lift your chin up.

FEMALE PATIENT: Which one?

HEDRICK SMITH: Every day he gets about 100 phone calls and answers 50 emails. One weekend a month he's on call.

Dr. MARTY SOLOMON: [on the phone] You don't have to work on her for an hour to bring her back if she should arrest.]

HEDRICK SMITH: Like many other doctors, Solomon is increasingly dissatisfied with his work.

Dr. MARTY SOLOMON: The worst experiences I've had in my professional career have been within the past few years, dealing with patients on issues of managed care, where we're trying to control costs.

Dr. MARTY SOLOMON: If you go out of the network we have to pay it, actually, and we have to pay it out of our resources.

It's really been heartbreaking.

I'm tired of sending them people. They give them three injections, and they end up with no relief.

HEDRICK SMITH: Marty Solomon and his colleagues are in a bind. Trained to care for patients no matter what the cost, they're now being told they must watch the bottom line.

Dr. JAMES REINERTSEN, CEO, CareGroup Healthcare System: Doctors today are talking about money because money is the crisis that we're facing. It's the "no margin, no mission" issue. The pressures they're getting on dollars come from payers, they come from administrators, they come from their department chairs. They come from everywhere.

HEDRICK SMITH: And they come from each other.

Dr. SUSAN FRANKL: [physicians' meeting] There's an issue about one of your patients, Dr. Katz.

HEDRICK SMITH: Doctors in Boston are being organized in small groups - called pods - to make them focus on the cost of the care they give.

Dr. KATZ: He got sick enough to come to the hospital, and they sent him to St. E's. We have to get the details.

HEDRICK SMITH: In this meeting, one doctor is being singled out because one of his patients was sent to a competing hospital. This will be costly to his medical group.

Dr. KATZ: And I found out because the wife, who I also take care of, was in my office for an unrelated problem and said, "Did you know my husband was"- and I had egg on my face. I had no idea.

Dr. MARTY SOLOMON: We have to be certain that there is some notification on that record, such that when a patient goes to the emergency room, there are people there know that they must call us for permission.

HEDRICK SMITH: The one forcing them to focus on the bottom line is Dr. Jim Reinertsen, CEO of the CareGroup hospital network.

Dr. JAMES REINERTSEN: We need to get into the black by next fall. We need to achieve a sense of operational discipline that we have not had before.

Dr. MARTY SOLOMON: So there's lots of things going on at the pod level that we-

HEDRICK SMITH: Solomon and his pod, in essence, work for Jim Reinertsen because they've all sold their practices to CareGroup. CareGroup is a network of seven hospitals, 3,000 doctors and 400,000 patients. Last year it delivered $1 billion worth of health care - and lost $100 million.

Reinertsen's point man in the drive to control costs is medical efficiency expert, Dr. Kim Saal.

Dr. KIM SAAL, CareGroup Medical Director: I see my role as one to promote change, to constantly force change in the system. It is changing behavior of patients. It's changing behavior of physicians. And that's a tough road to go down.

HEDRICK SMITH: A part-time cardiologist, Saal is CareGroup's full-time medical director. The key to saving money, Saal believes, is reining in doctors.

Dr. KIM SAAL: I think that doctors control 80 percent of health care costs with their pens. Therefore, I think it is critical that the doctor has some responsibility for that cost incurred.

HEDRICK SMITH: In effect, Saal has taken on the role traditionally played by HMOs.

Dr. KIM SAAL: Doctors' first response was, "We really appreciate that it has shifted from the health plans giving the guidance to now doctors giving guidance." Over the two years that I've had this job, all of a sudden now I'm looked at as the health plan. They're no longer very appreciative of it.

HEDRICK SMITH: [on-camera] Maybe they're right. You really do have the killer job.

Dr. KIM SAAL: People ask me what do I do, and I tell them what my job is. They all stare at me and say to me, "Why would you ever take that job?" Very often, I think they are right.

HEDRICK SMITH: [voice-over] To focus doctors on costs, Saal and his aides must transform patient care into data.

Dr. KIM SAAL: If you cannot measure it, you cannot manage it. So the first thing we do is develop standards by which we can measure care.

HEDRICK SMITH: Every day in the hospital, every pill, every test, every shot is transformed into a dollar figure and passed along to the individual doctors. Saal uses these numbers to prod physicians into changing their behavior.

At his fingertips, Saal has data collected by health plans that tell him how doctors practice medicine and how much they're spending. He sat down with me and focused on the numbers for Dr. Solomon's Pod 11.

Dr. KIM SAAL: And here you can see that Dr. Solomon is spending more money for radiology services than the average physician in the system. And we can now analyze that further to see that, indeed, he spends, on average, $2 more than his pod of physicians. Over time, his costs over the past year have gone from about $10 a month per patient, to now over $12 per month per patient.

HEDRICK SMITH: [on-camera] So if your whole system was like Solomon, you'd be spending $12 million more on radiology than you are now?

Dr. KIM SAAL: Correct.

HEDRICK SMITH: [voice-over] Those numbers take on special urgency when your team is losing $100 million a year.

[on-camera] So when you say the pressures are dramatic today- what, I mean, "Guys, we got to bring it down, immediately"?

Dr. KIM SAAL: "Guys, we've got to bring it down over time." We have to show the trends are not going in the direction of this pharmacy cost, but going in the opposite direction."

HEDRICK SMITH: And it's got to happen sooner rather than later.

Dr. KIM SAAL: Absolutely. It does.

HEDRICK SMITH: One of the things that we see in the new medicine is a tremendous focus on data, performance data, report cards. What do you, as a pod leader, get from the higher-ups?

Dr. MARTY SOLOMON: Well, we get very detailed reports. I should have a few here in the drawer. Let's see. Pharmacy costs- this is the amount of money that is being spent per patient. We know exactly per patient. This next graph down here looks at how effective we've been at trying to reduce the number of days people stay in the hospital.

Then here's another one looking at admissions out of CareGroup. We can then break them down, actually, by physician and by patient. For example, office visits, in-patient visits, in-patient and out-patient surgery, all broken down by cost, interestingly, by cost per unit. You notice this is the insurance company's term, not "cost per patient" but "cost per unit" and-

HEDRICK SMITH: They're not people any more.

Dr. MARTY SOLOMON: No, they're units.

DOCTOR: [pod meeting] Once again, these are PCP-specific reports. Take yours, and pass the others along, as always.

HEDRICK SMITH: [voice-over] These figures are passed out at Pod 11 meetings and studied by the group.

Dr. JAMES REINERTSEN: Doctors spent many, many years getting very good report cards, and they want to get good report cards. And their behaviors change rather rapidly when they realize that their colleagues are doing better than they are.

Dr. MARTY SOLOMON: [to patient] Now I want you to take some deep breaths.

HEDRICK SMITH: [on-camera] Can you be that statistical and that abstract about something as unpredictable as medical care?

Dr. MARTY SOLOMON: I don't- you know, I can't. I just deliver the best care I can and hope we do it right and try and be conscious of all these factors, but you just can't think about it all the time. You can't worry whether the care that you're giving is going to throw these figures off.

But unfortunately, what they're telling us is that we do have to worry about it. So every time I write a prescription, every time I order a test, every time I send a patient to the emergency room or refer them to another doctor, this is somewhere in the back of my mind. "How is that going to look on the figures next month?"

Even if I don't want it to, I know that next month I'm going to sit down with the other doctors in the group, and we're going to look at these figures. And everybody's going to say, "Well," you know, "what can we do to make this better?" And what we can do is, do less of what we're doing.

Dr. KIM SAAL: We are rationalizing health care. I'm not sure patients want to hear that. I'm not sure doctors want to hear that. But we need to make a decision. We don't have an open checkbook. [www.pbs.org: Read more of the interviews]

HEDRICK SMITH: [voice-over] Some doctors in Pod 11, like Bill Goldberg, are uneasy with this approach.

Dr. BILL GOLDBERG, Pod 11 Doctor: So they have everything analyzed- my prescription costs, my radiology costs, surgical costs, OB-GYN costs.

HEDRICK SMITH: [on-camera] How do you feel about this grading system, being graded? Does it ever get personal?

Dr. BILL GOLDBERG: Yeah.

HEDRICK SMITH: It does?

Dr. BILL GOLDBERG: I think it does, yeah.

HEDRICK SMITH: In what way?

Dr. BILL GOLDBERG: You know, basically, you know, there's a sense that you're naked. You know, there are 10 physicians who are showing per patient, per month, what they pay for pharmacy cost, for what they pay for X-rays, for what they pay to the surgeons, what they pay for birth control pills.

So it's a certain personal- because you're sharing some stuff that I don't think, you know, it's always that comfortable to share.

HEDRICK SMITH: You're naked in front of whom?

Dr. BILL GOLDBERG: Your colleagues.

HEDRICK SMITH: [voice-over] Other Pod 11 doctors, like hospital board member Jeffrey Bass, like getting the numbers.

Dr. JEFFREY BASS, Pod 11 Doctor: If there are patients who are getting a lot of physical therapy visits, if my utilization of X-rays for a given problem is higher than the average for our overall physician group, if my use of medications is higher, that is information that I can take back and say, "Well," you know, "if I'm doing this more than others, maybe it can be done differently, and maybe it can be done better." I don't think it's bad information for me.

HEDRICK SMITH: [on-camera] Do you keep it handy? Do you keep a file?

Dr. JEFFREY BASS: I do.

HEDRICK SMITH: Now, do you keep those numbers? Do you have the tables-

Dr. BILL GOLDBERG: Actually, I don't keep them.

HEDRICK SMITH: You don't keep them.

Dr. BILL GOLDBERG: I don't keep them. I read them, I study them, I see where- and I throw them away.

HEDRICK SMITH: [voice-over] But Dr. Goldberg can't discard the message-

Dr. MARTY SOLOMON: [pod meeting] Those numbers are actually pretty good.

HEDRICK SMITH: -"Think dollars and cents."

Dr. MARTY SOLOMON: We know that we're really in a hole. Everybody's salary and contract is on the line. And the numbers are shown to us on a regular basis. Every month, we see how deep in the red we are.

HEDRICK SMITH: Pod 11's struggle with red ink is a microcosm of the larger battle for economic survival at CareGroup and at almost every medical institution in Boston. Dr. Philip Boulter is medical director at Tufts Health Plan, which lost $41 million last year.

Dr. PHILIP BOULTER, Chief Medical Officer, Tufts Health Plan: I'm not sure anybody knows what is really wrong in this marketplace. It's known for its high quality of the medical facilities. It's a bastion of medical education. It has the highest cost. And yet over the past - and I would just say the past several years - the hospitals, the physicians and the health plans, all the segments of this population are now losing money.

HEDRICK SMITH: Including the largest health plan, Harvard Pilgrim, which plunged into state receivership in 1999, and CareGroup's rival hospital network, a Goliath called Partners, which ran $47 million in the red last year.

CareGroup lost roughly twice that much, trapped between lower payments from employers and the government and higher costs for the expensive new cures that patients demand.

Dr. JAMES REINERTSEN: Federal cuts in payment, decreased rates of payment in managed care contracts, and rapidly rising costs for new, exciting technologies like pharmaceuticals and other things- that's the triple threat that we have faced and has caused the red ink in the Boston market.

HEDRICK SMITH: Three years ago, CareGroup thought it saw a way out by taking on the risk of controlling costs in return for a larger share of premium income from the HMOs. But the money hemorrhage continued, prompting health care executives like Reinertsen to call for a radical overhaul.

Dr. JAMES REINERTSEN: Right now, this system is producing $5 million monthly losses. It's perfectly designed to do that. And we're going to have to change almost every aspect of this system if we're going to get to break even and above.

HEDRICK SMITH: CareGroup's flagship hospital, Beth Israel Deaconess, has already endured six years of cutbacks and layoffs. And in late 1999, its president, Dr. Herb Kressel, agonized over the impact of still more cuts.

Dr. HERB KRESSEL, Pres., Beth Israel Deaconess: My toughest problem is to be able to sustain the caring relationship in an era of rapidly declining revenues and resources. There is this argument health care is a business and it is appropriate that we respond to the business imperatives. But people obtaining health care are not just obtaining a product, no matter how we call it. They're seeking a relationship with caring that helps them get through very, very difficult times.

HEDRICK SMITH: Losing sight of patients is the major worry of many veteran physicians like Dr. Tom Delbanco, the hospital's chief of general medicine. [www.pbs.org: More on cost vs. care]

Dr. TOM DELBANCO, Chief of General Medicine: I'm terrified by all the forces that are buffeting us these days. If we forget what we're really about, if we forget to keep our eye on that ball, which is the doctor-patient, the clinician-patient, that individual unique relationship, we're going to be sunk.

HEDRICK SMITH: In the new health care model, time is money- time in the hospital, time on the operating table, time in the doctor's office. The combination of managed care and advanced technology has cut the length of hospital stays by 25 percent nationwide in the last decade.

But as the painful story of Steve Bookbinder illustrates, this emphasis on time drives the lives of both hospital and patient. Steve had a premium health plan with special benefits, but even so he was put on the hospital's efficiency treadmill.

STEVE BOOKBINDER: I was in good physical shape. And I'd never smoked or drank or, you know, done anything really excessive.

HEDRICK SMITH: At 52, Steve needed a special test of his heart, a cardiac catheterization. Years ago, this procedure involved several days in the hospital. His cardiologist, Dr. Julian Aroesty, remembers that time.

Dr. JULIAN AROESTY, Cardiologist: Those were the halcyon days of medicine when everybody was insured, when you thought about delivering the very best care you could and didn't think too much about what it cost to do so.

HEDRICK SMITH: It was also the time when insurers paid for each day in the hospital, so there was little incentive to move patients out quickly.

Dr. JULIAN AROESTY: Now we want things done - putting this in quotes - "efficiently."

HEDRICK SMITH: "Efficiently" because today hospitals negotiate flat - or "capitated" - rates with health plans, in this case, about $500 for a catheterization. So now it's in the hospital's financial interest to move the patient out quickly. [www.pbs.org: How does capitation work?]

Dr. JULIAN AROESTY: I think for patients it is a different kind of experience, and one that's a little bit more frightening.

HEDRICK SMITH: The medical team works rapidly. a tube is inserted up the groin and into the heart.

Dr. JULIAN AROESTY: Steve, you're going to get a hot feeling now. It will go from your head to your toes, last for just a couple of seconds and then pass off. I'll let you know when it's coming.

Hot feeling coming. Inject.

HEDRICK SMITH: They inject dye into the bloodstream to check how well the heart is pumping blood.

Dr. JULIAN AROESTY: Breathe.

Remember that the news that they're going to get is either "You're fine," or that "You have something that needs to be taken care of, and we have taken care of it or you need a heart operation."

Steve, we're all done.

HEDRICK SMITH: For Bookbinder, the news is not good.

Dr. JULIAN AROESTY: The amount of territory in jeopardy is fairly large. And that's the thing that sort of bothers us the most. So best treated by an operation, I think.

STEVE BOOKBINDER: Okay, which means bypass.

Dr. JULIAN AROESTY: Bypass.

STEVE BOOKBINDER: Wow.

HEDRICK SMITH: Back in the room, Bookbinder and his wife, Susan, absorb the news and prepare to go home.

STEVE BOOKBINDER: I've never been hospitalized, except once before. And I went quickly home and I adjusted, even though I didn't feel completely safe. And I guess I'll go home this time and adjust, even though I may not feel completely safe.

HEDRICK SMITH: [on-camera] Do you have a feeling that maybe the health system is throwing too much on you, the family, too soon?

SUSAN BOOKBINDER: I feel like we have to assimilate things very fast, and that's what causes this emotion in me. And I feel, like, "Okay. If I have to, I have to." And I know I react physically to it, definitely. "Whoa! This is really too much."

Dr. JULIAN AROESTY: Is it safer to keep the patient in another day, or is it just as safe to send them home the same day? Well, yes, it is just the same to send them home the same day from the standpoint of safety. So a same-day admission, same-day discharge after a catheterization is equally safe. But is it equally good medical care? Probably not.

HEDRICK SMITH: [voice-over] Four days after the test, Steve undergoes open-heart surgery like this. For a quadruple bypass and all associated care for the next 90 days, the hospital normally receives a flat or capitated fee of $30,000, getting the same amount of money whether the patient stays in the hospital five days or ten days after surgery.

Steve is out in three.

STEVE BOOKBINDER: I was operated on last Tuesday afternoon, and I was discharged on Friday afternoon at about 2:00 o'clock.

HEDRICK SMITH: [on-camera] So you were in the hospital for 72 hours?

STEVE BOOKBINDER: Yeah. I was under the knife at this point a week ago.

HEDRICK SMITH: Wow. It's amazing. Doesn't that amaze you a little bit?

STEVE BOOKBINDER: Yeah, it does.

HEDRICK SMITH: Can we look and see what- what they did to you?

STEVE BOOKBINDER: Sure. Well here's what the leg looks like. I mean, I can-

HEDRICK SMITH: [voice-over] Steve is glad to be home-

STEVE BOOKBINDER: This is what my chest looks like.

HEDRICK SMITH: -but uneasy about the speed of his release.

STEVE BOOKBINDER: Well, my concern is that the health system might take my experience of being in the hospital for three nights and doing well, you know, on the fourth day, outside the hospital and say, "Well, that works for everybody else, and therefore the model for quadruple bypasses ought to be three nights in the hospital." That I'd be worried about.

HEDRICK SMITH: In fact, Bookbinder is the model. His swift, three-day hospital stint matches medical guidelines adopted by Bookbinder's health insurer, Tufts. These guidelines are used as yardsticks nationwide as health plans shift the financial risk for care to hospitals. Instead of hospitals being paid - as they used to be - for each service they provide, they now gamble on providing total care within the guidelines and making a profit.

Under the guidelines, for instance, the length of stay in the hospital for an appendectomy should be one day. Caesarean section? Two days. Coronary bypass? Three days.

Dr. Frank Sellke, the surgeon who operated on Bookbinder, is comfortable with this approach.

Dr. FRANK SELLKE, Cardiothoracic Surgeon: We always try to increase the efficiency. For each individual patient, it doesn't really matter if you go home on the third or fourth or the fifth post-operative day. But if you do a thousand heart operations, like we do at this institution, whether you send a patient home one day earlier can have a tremendous effect on the- the financial health of the institution.

HEDRICK SMITH: The day after we saw Bookbinder on his treadmill, the guidelines suddenly went out the window.

SUSAN BOOKBINDER: At 3:00 o'clock in the morning, I noticed that he wasn't in bed. And I went to find him, and he said he had this heaviness in his heart, and he was on the phone with the doctor. He just felt this real heaviness on his heart. And Dr. Aroesty said, "I want you to come to the emergency room." It came up that it was staph.

HEDRICK SMITH: Back in the hospital, Steve had to have his chest reopened to deal with a staph infection. He and his wife, Susan, were in uncharted territory.

SUSAN BOOKBINDER: And they all say, "Oh, yeah. We've seen this. We've seen- it's- you're going to be okay." But it's- somehow, there's something about it that doesn't- is not quite as reassuring. They're all doing their job, and they're doing it right. But you, as a patient, just don't really know what's happening.

HEDRICK SMITH: Bookbinder's infection meant three more weeks in the hospital.

Dr. FRANK SELLKE, Cardiothoracic Surgeon: He probably became a money loser after he went back to the operating room for treatment of his complication because the operating room costs are significant, and the hospital is not reimbursed that much for the operation. If everything goes well, they do very well, but if there's a major complication, they tend to lose money.

HEDRICK SMITH: Risa Dinman-Lavelle represents in this risk-based environment another kind of complication for a teaching hospital.

RISA DINMAN-LAVELLE: I can't get out of the chair!

HEDRICK SMITH: Pregnant with her third child, she has type one diabetes.

RISA DINMAN-LAVELLE: It means monitoring my sugars a lot, testing my blood, taking my insulin, seeing the doctor. I mean, everything revolves around the diabetes.

HEDRICK SMITH: A generation ago, most women with diabetes were counseled against getting pregnant. The stress put on blood sugar levels during pregnancy can result in frequently premature and malformed babies and hasten the onset of kidney, heart and vascular problems in the mothers.

PHYSICIAN: How've you been doing the last two weeks?

RISA DINMAN-LAVELLE: Okay, but I've definitely had some changes.

HEDRICK SMITH: But specialty clinics like the Joslin Diabetes Center, part of CareGroup, pioneered the technology and the team approach to helping diabetic women deliver healthy babies.

PHYSICIAN: Okay. Good. You're getting most of your kicks here?

RISA DINMAN-LAVELLE: I'm getting it everywhere.

HEDRICK SMITH: Doctors, nurse educators, ophthalmologists, nutritionists and other special care givers all help diabetics maintain their blood sugar levels throughout the pregnancy. The hospital gets paid at the same rate as a normal pregnancy, about $1,500, but its costs can be four or five times that much.

Dr. ALAN MOSES: Diabetes is an expensive disease.

HEDRICK SMITH: Dr. Alan Moses, chief medical officer of Joslin.

Dr. ALAN MOSES: In order to effectively treat a patient with diabetes, you have to understand the patient, and I think what's been removed from the practice of medicine is the interaction between- the meaningful quality interaction between patient and physician.

HEDRICK SMITH: In the last decade, the time a patient actually sees a doctor has been cut to an average of seven minutes, according to some studies. The Joslin Center needs much more time.

Dr. ALAN MOSES: I don't think it's possible to effectively care for a patient with diabetes in seven to ten minutes. You can, in fact, do a better job meeting the financial needs of the practice by seeing patients more quickly. But I don't think you've really addressed the major issue, which is how do you effectively take care of the patient.

HEDRICK SMITH: [on-camera] So you can take care of the bottom line but not the patient?

Dr. ALAN MOSES: Right. I think that's the battle that we're facing.

RISA DINMAN-LAVELLE: We're just getting bigger by the day here!

HEDRICK SMITH: [voice-over] Risa returns to her medical team 30 times during her pregnancy, spending about an hour each visit.

RISA DINMAN-LAVELLE: The Joslin gives such incredible care. And you have to be proactive being diabetic. You can't wait for the problems to happen. And that's why I go there.

This is a disease that you have to think 20 years down the road. It's- right now I'm in great shape, I'm in great health, but 20 years down the road will be affected by what I do now. So for me, I want to be healthy, and I want to live as long as I can.

HEDRICK SMITH: High quality, pro-active care with lots of patient education may prolong life, but it puts Joslin in a financial hole.

[on-camera] So are you losing money on patient care?

Dr. ALAN MOSES: Sure.

HEDRICK SMITH: Much?

Dr. ALAN MOSES: Sure.

HEDRICK SMITH: [voice-over] Joslin loses nearly $5 million a year on patient care. Its losses were a major issue three years ago, when hospitals were choosing up sides in Boston's merger wars. The doctors at the newly formed CareGroup faced the difficult decision of what to do about Joslin.

Dr. TOM DELBANCO, Chief of General Medicine: The Joslin Clinic was an interesting example of how we think these days. Here is a world-famous place taking good care of very sick people and advancing knowledge about diabetes. Should we join with them? Well, we suddenly found ourselves sounding like businessmen. What are the up, down dollar implications?

HEDRICK SMITH: Within CareGroup, administrators such as then vice president Andrew Brotman had to rethink their traditional relationship with Joslin.

ANDREW BROTMAN, Former VP, CareGroup: So the debate within CareGroup and between CareGroup and the Joslin became, "Of course we want to take care of people with diabetes. Of course we want to find a cure. Of course we want to train physicians to be able to do this and work together. But on the other hand, if the economics dramatically change, we can go bankrupt on this. We will lose extraordinary amounts of money because our patient population will be sicker, and therefore it can bring the system down.

HEDRICK SMITH: [on-camera] Too many sick people?

ANDREW BROTMAN: Too many sick people.

HEDRICK SMITH: First time in my life I've actually heard doctors- not accountants, not journalists, not politicians, but doctors talking about too many sick people. How do you respond to that?

Dr. ALAN MOSES: I think we have this perversity in our system because we're here to help sick people. I mean that should be our mission. We're here to improve the quality of their lives, to decrease the impact of diabetes on their lives, to decrease the complications that are associated with diabetes. If we can't do that, I'm not sure why we should be here at all.

HEDRICK SMITH: [voice-over] And so Risa's baby girl - all 10 pounds, 13 ounces- contributed to red ink at both Joslin and Beth Israel Deaconess.

The time squeeze is especially tough on leading academic hospitals like CareGroup's Beth Israel Deaconess because their mission makes them inherently inefficient. They take care of the most challenging and costly patients. They perform very expensive research, which takes time away from care. And they must teach the next generation of doctors, a task that is enormously time-consuming.

Until now, academic hospitals have always been protected from the marketplace because society valued their contribution. But in just three years, Congress has cut funds to teaching hospitals by $2.2 billion. And Beth Israel president Dr. Herb Kressel sees the academic mission in jeopardy.

[on-camera] I mean, your finance committee meets every month trying to figure out which of the components aren't delivering to the bottom line.

Dr. HERB KRESSEL, Pres., Beth Israel Deaconess: Correct. And there are enormous pressures to react on a purely economic model.

HEDRICK SMITH: Meaning?

Dr. HERB KRESSEL: Meaning why do we offer services that may not be profitable?

Dr. KIM SAAL: The finance committee needs to look at every part of our business, be it the Joslin Clinic, be it a large physician practice, be it our cardiac surgical, be it psychiatry, pediatrics, etc., dental clinics. Which parts of the business should we continue in? Which parts of the business should we excel in? And which parts of the business should we get out of?

HEDRICK SMITH: What do you have to balance off? The survival of an institution itself?

Dr. HERB KRESSEL: Yes. The survival of the institution. If we don't generate the funds required to carry out the mission, the institution doesn't exist. So the problem that I have to face is what services do we stop doing that enable us to carry out a good portion of the mission? And that's not a very welcome thought.

HEDRICK SMITH: [voice-over] But Jim Reinertsen, the head of CareGroup, believes there's still waste to be cut from the system.

Dr. JAMES REINERTSEN: I hear a lot from nurses and from doctors and pharmacists, "We can't go any faster. We can't cut any more or we will- we will start hurting quality." And when I hear that, I listen to what they're saying, and I'll often ask them a question that goes something like this. "Well, tell me"-

[to nurse] -what could we do to take away parts of your day that you regard as a waste of your time?

Oh, yeah! [laughs] The answer will come back, "Let me tell you about"- and they'll start to tell you about something that's a complete waste of time.

HEDRICK SMITH: Hospitals are notoriously inefficient. Orders are copied out by hand. Forms must be filled out in duplicate and triplicate. But when we went with Dr. Reinertsen to visit a floor, this nurse expressed concern not about paperwork, but about her patient load.

NURSE: Well, it's difficult to say because I don't think it's so much that I waste time doing things that aren't important, more so that I spend a lot of time doing a lot of things that are important for a number of patients.

PATIENT: They don't have the time anymore.

HEDRICK SMITH: This patient echoed the nurse's worry.

PATIENT: Well, there have been a lot of changes since I first started coming here because of all the merging and the cutbacks. And I think the cutbacks in the nursing staff have been difficult.

Dr. JAMES REINERTSEN: People are reacting to fear of what might be the new way and hanging on to the old way. We have to jar the organization out of its complacency and say, "We have an urgent problem. We have to address it. We have to be resolute about it. We have to move through this very quickly."

The biggest problem is making sure that we maintain- we establish and maintain a sense of urgency without going all the way over into a state of panic.

HEDRICK SMITH: Marty Solomon senses the urgency of the times and feels a loss.

Dr. MARTY SOLOMON: We've gone from the Mecca of medicine to a medical Beirut, and it's really a tragedy. I think it's really destroyed medical care here.

HEDRICK SMITH: No longer protected from financial risk, doctors in Boston and elsewhere are being asked to save money, patient by patient. And increasingly, the incentives take aim on their personal incomes.

Dr. TOM DELBANCO, Chief of General Medicine: When I was young, if I did more and more things to you, I got paid more. Now, as I'm older, if I do less and less things for you, I may get paid more. Both of those extremes are crazy.

HEDRICK SMITH: The financial risk taken on by Boston hospitals is being passed down to the doctors through the pods. Saving money for the system means saving money for themselves. CareGroup medical director Kim Saal explains.

Dr. KIM SAAL: Financially, they are incentivized together. So at the end of the year, if they're in surplus, they share in that surplus. If they're in deficit, they share in that deficit.

HEDRICK SMITH: [on-camera] So the pods are really organized as a system of local financial accountability.

Dr. KIM SAAL: Absolutely correct.

HEDRICK SMITH: That's what it is.

Dr. KIM SAAL: That's exactly what it is.

HEDRICK SMITH: Yeah.

[voice-over] For the doctors in Pod 11 - whose salaries run from $120,000 to $300,000 a year - the best way to protect their pay is to limit their patients' choice. So when patients see specialists outside of CareGroup, it raises a red flag.

PHYSICIAN: [pod meeting] Dr. Goldberg, you had a patient that went to Metro West for derm, and I was wondering if this was because of an access problem or-

HEDRICK SMITH: So today it falls to the doctors - not the HMOs - to keep patients within their system.

Dr. MARTY SOLOMON: It's very hard to convince patients to stay within the system.

HEDRICK SMITH: [on-camera] So why should they stay within the system?

Dr. MARTY SOLOMON: Well, they should because that's the way their insurance plan is written.

HEDRICK SMITH: No, their insurance plan lets them go, doesn't it?

Dr. MARTY SOLOMON: No, it only lets them go if we allow them to go. That's the catch.

HEDRICK SMITH: [voice-over] Dr. Philip Boulter of Tufts Health Plan admits that his HMO sells the idea of choice to attract customers.

Dr. PHILIP BOULTER, HMO Chief Medical Officer: We sell a product that says you can go anywhere within Tufts Health Plan, and that may be to this academic institution or quite a different one.

Dr. MARTY SOLOMON: The insurance company doesn't care because they don't pay for it. I do.

Dr. PHILIP BOULTER: And patient gets caught in the middle. And worse, the physician/patient relationship gets challenged under those circumstances. Are you really serving my best interest as a patient doctor, or in fact, are you looking out for your best interest? And that is a big challenge.

HEDRICK SMITH: Patients going to doctors out of the CareGroup network are a constant topic at pod meetings.

Dr. SUSAN FRANKL: [pod meeting] People showing up to doctors for specialty care, and you say, "Oh, you have to call first."

KATZ: Out of network?

Dr. SUSAN FRANKL: Out of network. And you know, "I didn't know. I didn't realize."

Dr. BILL GOLDBERG, Pod 11 Doctor: Then they call the insurer, and the insurer says, "No, your doctor's telling you the wrong information. You can go to the other doctor." And that's what happens over and over again.

Dr. KATZ: Do you have a general approach, anybody?

Dr. MARTY SOLOMON: Well, my approach is that if it's truly an urgent problem and there's no way that I can deal with it that day, and they sort of talk me into believing that they didn't know it was the rules, I say, "This visit. No subsequent visits. Follow-up visits will be within our provider group." You can say no. It's okay.

HEDRICK SMITH: But saying no carries a price, as Solomon has learned.

Dr. MARTY SOLOMON: A perfect example is a patient of mine, a very painful story about a patient of mine, a young woman with a gynecologic malignancy who had done a lot of research on her own. And she found that there was a group here in Boston at a different provider group hospital that had a lot of experience treating this particular malignancy.

HEDRICK SMITH: In the days of cooperation between hospitals, Solomon would have gladly sent her wherever she wanted to go. But not now.

Dr. MARTY SOLOMON: That would be coming right out of our budget, a very substantial amount of money.

HEDRICK SMITH: [on-camera] So your hospital's paying the other hospital?

Dr. MARTY SOLOMON: Our hospital's paying the other hospital, I'm paying the other physician. That's coming out of our pocket to pay for this. But she did the research, and she thought this was where she should go. And I understood that. But I also understood that I could not allow her to go there.

HEDRICK SMITH: So what'd she say to you about money? I mean, did she accuse you of making a decision for money reasons?

Dr. MARTY SOLOMON: Well, she said, "So you're not letting me do this because of money." Well, my response to that, usually, when people say that is, "Of course! What do you think it is," you know? "If it was just medical care, I'd let you go wherever you want, but this is a contract, and I'm not in the business of subsidizing your care." [www.pbs.org: Should your care cost your doctor?]

HEDRICK SMITH: [voice-over] Eventually, his patient jumped to a primary care physician at Brigham and Women's hospital, bitterly ending a 14-year relationship with Solomon. And to Solomon, losing a patient isn't even the biggest problem.

[on-camera] Can you honestly say that you could go from a system where you could pick any doctor in any institution anywhere, and now you've got to stay within the team, that doesn't affect, at least in a few cases, the quality of care?

Dr. MARTY SOLOMON: I'm sure it affects the quality of care. I'm certain it affects the quality of care.

HEDRICK SMITH: Negatively?

Dr. MARTY SOLOMON: Absolutely.

HEDRICK SMITH: And from the perspective of the individual patient?

Dr. MARTY SOLOMON: And from the perspective of the patient, they may not be getting necessarily the best care. Absolutely.

HEDRICK SMITH: And what's your reaction to that?

Dr. MARTY SOLOMON: I think it stinks.

HEDRICK SMITH: [voice-over] Dr. Solomon has another problem - old people.

JOHN HUMPHRYS, Son: Did you get your medication before you came over?

HEDRICK SMITH: Lillian Humphrys is 84.

JOHN HUMPHRYS: Does your leg still hurt?

LILLIAN HUMPHRYS: My leg still pains.

HEDRICK SMITH: Like many seniors, she suffers from a number of conditions- colon cancer, heart disease, mild dementia. Her son, John, and her daughter, Beverly, have taken on the increasing burdens of her care. One step was to sign her up for a Medicare HMO called Secure Horizons.

BEVERLY BUTLER, Daughter: So I thought, "Well, this should be a good plan for her," very easy to take care of. Her primary care physician was in there. She could go to the doctor's office for $5, be over and done with. I thought it should work perfectly fine for her.

HEDRICK SMITH: But most patients don't understand the financial terms that physicians accept under these plans. Many, like Secure Horizons, represent the most extreme form of financial risk for the doctors. It is called "global capitation," meaning patient care is paid for out of a pool of money that goes to the pod.

Dr. MARTY SOLOMON: If the hospital is going to make a commitment to continuing in Secure Horizons, then we'd like them to protect us.

HEDRICK SMITH: The doctors are totally - or globally - responsible for all costs of care. Any money left over is paid out to the doctors. That idea attracted Pod 11.

Dr. MARTY SOLOMON: There were plans involved in globally capitated contracts around the country that were raking in millions of dollars.

HEDRICK SMITH: So Solomon and his pod signed up for Secure Horizons.

Dr. JEFFREY BASS, Pod 11 Doctor: At first we did pretty well. Maybe it was luck. Maybe it was skill. But we did fairly well at first.

HEDRICK SMITH: But many practices run into trouble with Medicare HMOs, according to Andrew Brotman.

ANDREW BROTMAN, Former VP, CareGroup: As the population ages, as the patients get sicker, as more and more people come in to managed Medicare and have more and more medical problems and as the rates come down, they find that what they were doing two or three years ago is no longer successful.

HEDRICK SMITH: In fact, at rival Brigham and Women's Hospital, doctors were losing so much money that they dropped the plan, leaving hundreds of seniors scrambling for care.

Dr. MARTY SOLOMON: Well, I was appalled when they did it. I just- I think most of us in Boston were appalled when they did it.

HEDRICK SMITH: But now Solomon and his Pod 11 mates face the same grim financial prognosis.

Dr. JEFFREY BASS: Despite our best efforts now, we're starting to lose the financial war.

HEDRICK SMITH: During the six months we followed Solomon, Lillian Humphrys was in and out of the hospital three times. Each time, Solomon was caught between the family's demands to keep her in and his pod's economic squeeze.

Lillian Humphrys brings $5,000 in premiums each year to Pod 11, but four days in the hospital consumes that money. Any more and she means red ink.

During one of Mrs. Humphrys' prolonged stints in the hospital, Solomon pleaded with the hospital staff to discharge her to a rehab center or assisted living.

Dr. MARTY SOLOMON: [on the phone] I can't keep her in the hospital any longer. She's in a globally capitated plan, which means that we're paying for every day in the hospital out of our budget and she doesn't need to be there.

HEDRICK SMITH: Over the past year, John Humphrys has become increasingly frustrated with her care.

JOHN HUMPHRYS: And we would come in, and she'd be in the emergency room for three or four hours, and they didn't want to admit her. Dr. Solomon had said to us, on some of these times we were taking her in and I'm complaining to him that she should be hospitalized, "Why is she coming home so early?" he's, you know, specifically said if it wasn't for Secure Horizons, she'd be in the hospital.

HEDRICK SMITH: Some weeks later, Lillian was hospitalized once again.

Dr. MARTY SOLOMON: I've already lost money on this patient. Anything I do for this patient now is money that is going to be subtracted from us.

HEDRICK SMITH: Pod 11 has many more patients like Lillian driving the group into the red on Secure Horizons. Dr. Susan Frankl delivers the bad news.

Dr. SUSAN FRANKL: [pod meeting] We are in deficit by a fair amount. We will not only have to- you know, it will be as though we provided completely free care for all of these patients, and then in addition, paid out.

Dr. MARTY SOLOMON: We will have to pay out-

Dr. SUSAN FRANKL: That's right.

PHYSICIAN: We should not be providing insurance. We are providing service as physicians to care for these patients. It's not up to us to- you know, to bail out somebody who got dreadfully ill. It wasn't our fault. We're trying to take care of the patient. So why should we be penalized for it?

HEDRICK SMITH: [on-camera] At the end of the year, what's that mean?

Dr. MARTY SOLOMON: Well, it means that if we continue to lose money beyond what's coming in, we actually have to give money back to the insurance company.

HEDRICK SMITH: You write them a check?

Dr. MARTY SOLOMON: We write them a check. We physicians write checks that go back to the insurance company.

HEDRICK SMITH: And it comes out of your back pocket?

Dr. MARTY SOLOMON: Out of our pocket.

HEDRICK SMITH: [voice-over] In the end, Pod 11's doctors did have to pay money to the insurance company.

ANDREW BROTMAN, Former VP, CareGroup: And many of them will walk away from these contracts and basically say, "We are not going to do this anymore. We can't do this anymore. It's too much of an economic risk to our whole practice."

Dr. JEFFREY BASS, Pod 11 Doctor: There's no company in the world that can generate a product, lose money and stay in business.

HEDRICK SMITH: [on-camera] So what do you do?

Dr. JEFFREY BASS: At a certain point, you turn to the patient and say, you know, "We've done the best we can for you. Unfortunately, it's been difficult to take care of you under this health plan because we've lost money. And we've made a group decision, albeit a very difficult one, but we've made a group decision that maybe we need to withdraw from the plan."

BEVERLY BUTLER: I feel it's become very impersonal. I think the patient is a number for most doctors. Yes, they want to help when they can, but you're still a number to them. I don't think it's the old- the doctor of the years ago. Not today. It's business today.

HEDRICK SMITH: [voice-over] A business that makes doctors like Marty Solomon very uncomfortable.

Dr. MARTY SOLOMON: I don't think it's a good strategy for doctors to be involved in the financial aspect of care at all except to understand what the costs are in an effort to keep the costs down. Once we are put at risk, there's no way you can deny that that's going to affect the way you're going to make decisions. I don't care how much you fool yourself. At some level, it has to affect the way you make decisions. And we should be making decisions solely based on what's best for the patient.

HEDRICK SMITH: Hospital CEO Herb Kressel was also troubled by the threat to the mission of care that he saw in the relentless pressure to cut costs.

Dr. HERB KRESSEL, Pres., Beth Israel Deaconess: I think the point is we're in danger of going too far. We're just starting to see people reaching a limit. We're seeing hospitals closing. We're seeing people not able to fulfill the mission, or a thing that I think we find an awful thought, abandoning the mission.

HEDRICK SMITH: Soon after I interviewed Kressel, the board of trustees, dissatisfied with the pace of change under his stewardship, asked for his resignation. Jim Reinertsen took direct control of Beth Israel Deaconess, as well as CareGroup.

Dr. ANDREW BROTMAN: His marching orders from the board are to restore a balanced budget within a year.

HEDRICK SMITH: [on-camera] But that means cutting some mission. I mean-

Dr. ANDREW BROTMAN: That means cutting some mission. That means perhaps not doing things that have been done for decades, even though they're good things. That means decreasing support to things like teaching, research and education.

Dr. JAMES REINERTSEN: There's no question but what things are different and that there are many people grieving for what used to be. And perhaps the best advice I've had to people who- who perseverate in that kind of grieving is, "Get over it." It's already happened. We need to start building the new institution. We can't go back to the old.

HEDRICK SMITH: [voice-over] This battle over the fate of medicine can leave patients and their families feeling more like numbers than individuals in need- the unpredictable, the elderly and the dying.

After 67 days in Beth Israel, Sam Armstrong lost the fight for his life. The final hospital bill totaled $619,000. And for 1999, Armstrong appears as number 3 on Martin Solomon's list of most expensive patients.

A FRONTLINE coproduction with

Hedrick Smith Productions, Inc.

in association with

South Carolina Educational TV

Copyright 2000 HEDRICK SMITH PRODUCTIONS, INC.

AND

WGBH EDUCATIONAL FOUNDATION

ALL RIGHTS RESERVED

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