Dick thank you for your generous introduction.

There are many people who have influenced my life. Before I begin, I would like to acknowledge one very special person, my wife Jane.

This picture of Jane was taken on Valentine’s Day 45 years ago, at old Fort McHenry in Baltimore, when she agreed to become my wife. She has been a constant supporter, confidant, critic, and my best friend. She is the rock upon which our family was founded. She is a super-mom and an even greater grandmother. Jane, thank you for always being there for us.

More than thirty years ago, I attended the initial meeting of this organization in the Khorassan Room of the Chase Park Plaza Hotel. When I subsequently became a member a few years later, it never occurred to me that one day I might have the opportunity to serve the Society as Secretary, let alone as President. Thank you very much for this privilege and honor.

Since our specialty has experienced an eventful year, I felt it would be appropriate for us to review these events, how they have been addressed, and where we currently stand.

In his book "Only the Paranoid Survive" sub-titled "How to Exploit the Crisis Points That Challenge Every Company and Career", Andrew S. Grove, President and CEO of Intel Corporation detailed his company’s problems with a defective microprocessor.

In relating this experience he suggested how others might respond to crises which he labeled "inflection points". He pointed out …. "that a strategic inflection point is a time in the life of a business when its fundamentals are about to change. This can mean an opportunity to rise to new heights. But it may just as likely signal the beginning of the end." He goes on to say "A strategic inflection point can be deadly when unattended to. Companies that begin a decline as a result of its changes rarely recover their previous greatness."

The computer industry and cardiothoracic surgery have many features in common as shown on this slide. Each has experienced rapid change, external pressures, and competition from within and without. Other features common to both are rapid technological advances, and a self-imposed urgency to excel. Education, technological facility, and outstanding judgement are essential characteristics of both.

Grove developed a "Six Forces Diagram" to illustrate those forces which determine the competitiveness of an organization as shown here. He based this upon the prior work of Harvard Professor Michael Porter.

I have modified Grove’s system and have identified at least eight forces impacting our specialty as illustrated on this slide. Although shown as a separate force, our patients will not be addressed separately, but as they are involved with the other forces.

I need not tell you that change in funding for delivery of health care has been a major force affecting our specialty this past year. Since others have reviewed this on numerous occasions, I will address only the highlights. This topic just as appropriately might have been considered under regulation. I recommend that you read Bob Wilbur’s excellent review published in the June 1997 issue of the Annals of Thoracic Surgery for a more complete discussion.

In 1989 Congress directed HCFA to develop a resource-based method for physician payment, the initiation of RBRVS. Shown here is the final HCFA equation.

At that time HCFA ignored the findings of the Society sponsored Abt study which indicated that the work value of most of our procedure codes had been undervalued by HCFA. Shown here are two examples.

As an example, the RVU distribution for triple coronary bypass is shown here. Practice expense was calculated on historical charges. In 1994 Congress instructed HCFA to extend the RBRVS system to the determination of practice expense, and for this to become effective by January 1998.

Shown here is the reimbursement for two representative cardiothoracic surgical procedures. In the first column are those that were in effect in 1997; in the next column are those that were made public on January 22, 1997; in the third column was the final HCFA proposal published in the Federal Register on June 18, 1997. The last column lists the actual reimbursement for these procedures in 1998. The improvement over the proposed January 1997 reduction has been accomplished by intense efforts by the membership and at considerable expense. These efforts have been detailed on many occasions. A timetable of these actions is available on our web site, I urge you to become familiar with it.

These efforts this past year are only one engagement in a long campaign. More specific information will be presented during a Key Contact Meeting scheduled to follow the business meeting this afternoon. I strongly urge you all to attend.

This year funding for research and education has been overshadowed by reimbursement issues but it is just as important. Reimbursement reduction for clinical activity has eliminated clinical income, as a funding source for these activities. In the past this has been a significant source. Funding from government and voluntary agencies continues to erode. The Thoracic Surgery Foundation for Research and Education is attempting to fill this void and deserves our support.

One additional funding source for these activities that frequently has been eschewed by our organizations is industry. Industry has been willing to support research and education efforts as illustrated earlier today. Our destinies are related intimately and will become even more so in the future. Cooperative efforts should be pursued, as they will benefit both of us. The Alley-Sheridan fund of the Thoracic Surgery Foundation for Research and Education is another example of industrial support.

Previously, we have been the world leader in device and materials development but our regulatory processes have markedly impeded this. Decisions are often delayed perhaps in the interest of self-preservation. The appropriateness of this attitude may be affirmed when we observe that prior decisions, later judged to be inappropriate, frequently are rewarded by career annihilation. Economics, politics, and emotion often play a significant role in this re-review process. Liability risk, attendant to the development of new therapeutic techniques and materials should be controlled while continuing to preserve public safety. Tort reform is long overdue.

HCFA plans to affect medical specialty education. For example, they proposed that by influencing payment for post-graduate medical training in the New York State teaching institutions the number of specialists could be reduced. At that time Medicare was estimated to be paying more than $7 billion annually nation-wide to support post-graduate medical education. In contrast to many other specialties the number of practicing thoracic surgeons has remained relatively constant. The American Board of Thoracic Surgery and the Residency Review Committee for Thoracic Surgery have assured their quality.

The recent decision restricting private contracts between physicians and Medicare patients denies Medicare patients the freedom of choice that is available to those not covered by Medicare.

This decision is being challenged in the courts. Economic realities dictate that private contracting for medical care would occur infrequently. Physicians have in the past and will in the future provide medical care regardless of ability to pay. The specious argument that private contracting would create a two-tiered Medicare system ignores the basic principle of denial of freedom of choice to Medicare patients by economic regulation.

Cost containment, is highly sought in healthcare delivery. However, this opportunity has been denied to physicians attempting to develop systems to accomplish this by the U.S. Supreme Court or the Federal Trade Commission. One example is prohibition of medical societies in Maricopa and Pima Counties of Arizona in 1982 by the U.S. Supreme Court from creating a medical foundation that would have set maximum but not minimum fees. Justice Powell noted in the dissenting opinion, "Medical services differ from the typical service or a commercial product at issue in an antitrust case". This view recently has been echoed by Victor Fuchs who stated "No country does or will treat health care like an ordinary commodity, subject to the interplay of supply and demand in market fashion". He continues, "Neither competition nor government regulation can deal adequately with the complexity of medical care."

Another example of regulation is the recent audit of billing practices of teaching physicians conducted under the PATH or Physicians at Teaching Hospitals by the Office of the Inspector General of HHS. The American Association of Medical Colleges and the American Medical Association have filed a joint lawsuit contending that it was unfair to require teaching institutions to be accountable retroactively for standards not well defined or clear at that time.

These next few slides illustrate other examples of regulation that are not governmental.

-ARROW SLIDE Non-specialty Medical Care- #23

There is a widely held belief that healthcare in our county can be carried out cheaper by non-specialists and other allied health practitioners without loss of effectiveness. There is evidence to the contrary which supports the superiority of specialty over non-specialty care.

Patients with acute myocardial infarction hospitalized by cardiologists have a 12% better one-year survival than that of similar patients treated by primary care physicians. In a recent study of patients in SC with lung cancer undergoing resection, the operative mortality achieved by board certified thoracic surgeons was less than that by surgeons not board certified in thoracic surgery.

Generalists may lack the knowledge and insight of specialists. This study indicates that generalists have significant misperception of cardiovascular risk, its prevention and treatment.

One large HMO has realized that the cost of care of many illnesses is less when directed by physicians specializing in an illness.

The thesis that a single physician directing the overall care of a patient has merit. It can avoid potentially conflicting advice, which may be confusing to patients. Fragmented care delivered by focusing on a single system or disease process to the exclusion of its effect upon the whole patient should be avoided. Specialists are capable of delivering organized compassionate care.

The fundamental principle which Francis Peabody stated simply yet so eloquently seventy years ago still pertains – "the secret of the care of a patient is in caring for the patient".

Logically, prevention should reduce the cost of health care, but some advocates of prevention programs acknowledge that the financial benefits may be overrated.

Control or elimination of risk factors such as lowering cholesterol or cessation of smoking should be important components in the overall management of patients, but specialty care will still be needed for those who develop serious illness.

It has been reported that one-third of our population has tried alternative therapy which until recently usually had not been funded by third party payers. In 1990 the cost was estimated to be $13.7 billion.

Not all alternative therapy advice is obtained from health care providers.

The emergence of alternative care as a force has occurred because conventional medical care has failed to satisfy patients’ needs, be they real or perceived.

As we have learned through the Internet and its chat rooms, patients and their families are becoming more knowledgeable. They are eager for education and explanations of their problems.

They are also interested in influencing decisions made by legislation, regulation, and payers that affect their care or that of their loved ones. Lung Volume Reduction Surgery is one such example.

Information will be addressed by two components

The Society’s database currently includes information on 1.2 million patients from more than 540 participating groups. Mechanisms have been developed to achieve internal reporting consistency. An expert oversight panel of nationally recognized statistical experts, knowledgeable in data acquisition and analysis evaluated the Society’s system. The vendor contract renewal process, regarding warehousing, analyzing, and reporting is underway.

The Society and the American College of Cardiology have been approached by HCFA to develop a database of cardiovascular interventions. A Definitions Sub-committee chaired by Bruce Ferguson has accomplished the initial step, the development of common definitions. Negotiations are underway to proceed further.

The Database Committee has been cooperating with California, Ohio, and other states to assist them in developing databases patterned after the Society’s system, a system that has been employed effectively by Minnesota thoracic surgeons for their state.

It is important to realize that a database is not an end in itself, but rather a means to an end. In the future the increased demand for longitudinal data will require identification of entered data to allow comparison. Because the database is so important to our specialty’s future, we have planned a special database panel presentation at the beginning of tomorrow morning’s plenary session addressing the future promise of databases to assist us in our everyday management of patients. I encourage you all to attend this important session.

-ARROW SLIDE Internet- #38

A few years ago Bob Replogle recognized the potential of the Internet as a communication system of incalculable value to our specialty.

Starting with the development of the Society’s web page, this activity has expanded rapidly to serve the world-wide thoracic community, through the development of CTSNet which was born just one year ago.

Currently CTSNet contains web pages of ten worldwide cardiothoracic surgical organizations with web pages in various developmental stages from five additional organizations. Peter Greene was recruited as web site editor. Tom Ferguson, Editor of Annals, recognizing the importance of this new medium especially to electronic publishing has been important in supporting the Internet and placing the Annals of Thoracic Surgery on the website.

It still remains disappointing that less than one-half of our active membership is able to access the web. We continue providing computer boot camps to educate our members in this skill.

-ARROW SLIDE New Technology– #43

Thoracic surgeons continue to evaluate new or modified procedures and techniques. The ad hoc Committee on New Technology Assessment, a joint effort of the Society and the American Association for Thoracic Surgery was created for this purpose. Fuchs has suggested that we must "tame but not destroy technologic changes because such change is the most important force behind the escalation of health care expenditures". Cassell in his essay, "The Sorcerer’s Broom" has addressed the positive and negative effects of technological advances upon health care.

-ARROW SLIDE Modus Operandi- #44

There have been marked changes in the Society’s activities over the past eight years. Some of these changes are listed on the following slide.

-SLIDE INCREASE- #45

Only a modest dues increase, last raised in 1993 and essentially no increase in our Chicago office personnel, but a 100-fold increase in total expenses have accompanied these increased activities. What has been accomplished without raising the dues has been made possible by annual meeting income. It is unknown how this will be affected in the future by changes in the economy and different methods of communication, which will be employed by patients, membership, and industry. It is possible that income from this source will decrease. The planned on-going government related activities for the coming year and beyond will require continued financial commitment. An Ad hoc Management Evaluation Committee chaired by Jerry Rainer has been evaluating the human and financial resources necessary to continue to accomplish the Society’s goals in the future.

During these turbulent times, we have learned very powerful and often painful lessons. While others had been promoting their contrary views to our detriment, we have devoted our efforts to taking care of patients, improving their care and enhancing the quality of their lives. Clearly this alone is no longer sufficient to document our worth as a specialty.

These new challenges confronting us are as great as any clinical ones we have faced before. Ours is a great and intellectually stimulating specialty with creative, talented, tireless, and undaunted practitioners. If we are to succeed in addressing these new challenges, it is essential for us all to acquire the necessary new skills. We must become as facile with them as we have with video assisted thoracic surgery, microvascular techniques and immunosuppression. I believe we will have a hybrid healthcare system for the immediate future. Its heterogenous character will make solving its multiple problems even more difficult. Addressing these issues will require our collective wisdom. We all must become involved in the solutions to these problems. If we do, I am confident, we will resolve them for the benefit of our patients and those who come after us.

Thank you for your attention and again thank you for the honor of serving as your President this past year.