Conscious Choice: A Doctor Runs the Gamut of Healthcare

November 2001

A Doctor Runs the Gamut of Healthcare

by Ross Thompson

Dr. David Edelberg has been on a virtual roller coaster of healthcare since he first hung out his shingle in 1974. He started in a one-man office, soon partnered with a friend from medical school, and together they eventually built a fifty-doctor medical group over which he then presided as medical director for the next nineteen years.

By the time he’d finished that phase of his career, an HMO ruled the practice he had developed. Mired in a managed-care system which struck him as "an incredibly dysfunctional way to do healthcare," Edelberg decided he was ready for a change.

One morning while making hospital rounds, he received a philosophic jolt which ultimately guided him along the direction he would take. "Sitting with a stack of patient charts, I started examining what was really behind each person’s hospital stay," he recalls. "I realized that every single patient was suffering the consequences of a totally preventable illness. Had the medical profession been doing its job right, focusing its efforts on disease prevention, getting people to change their unhealthy lifestyles, not one of those folks would be in the hospital that day. I decided then and there that in the future, my goal would be to keep people out of hospitals, off operating tables — and to use as few drugs as I could."

To Edelberg, this experience in the early 1990s exposed fundamental flaws in a conventional medicine/managed-care model that paid minimal attention to a patient’s lifestyle and how to change it. He began to think about a different model, one that focused on wellness and prevention, and integrating the emotional and physical issues in a person’s life. "About this time, patients were telling me about alternative practitioners, and how‘wellness’ was the by-word among this group. I’d hear‘My back is better because of my chiropractor,’ or‘My herbalist saved my life,’" he says.

"But understand that in my conventional medical training, all alternative medicine was quackery, without exception. Chiropractors, homeopaths, naturopaths, all interchangeably deluded and basically fraudulent. Acupuncture was called‘quackupuncture,’ and using herbs was regarded as medieval at best. Vitamins? We were taught the American diet was plenty healthful without‘em. In other words, doctors were taught that all alternative medicine was just sheer, unadulterated bullshit. But in come my patients every day, telling me they’re doing better using alternative therapies. And here’s the kicker: they’re paying for it out of their own pockets. No insurance company will cover what the American Medical Association regards as fraudulent, but the patients don’t care. They just want to get well.

"Well, this shift to alternative therapies really interested me so I began really studying the stuff. I made phone calls to the various alternative practitioners who were seeing my patients, introduced myself, and visited their offices."

Edelberg then reduced his work as medical director and internist and devoted a year to creating a healthcare center that would combine conventional and alternative medicine. He started by running ads to attract interested practitioners. "I had something like ninety practitioners contact me within thirty days — eight or nine chiropractors, half a dozen or more massage therapists, homeopaths, naturopaths, fields that I had never heard of at the time, words that were totally new to me — reiki, shiatsu, Feldenkrais, and Rolfing," he recalls.

"I sent out all sorts of information packets and then began interviewing. I just wanted to see how these guys felt about conventional doctors. A big question for me was, would I hire them as part of my medical group — remember, I was a medical director and I had been interviewing health- care professionals for twenty years.

"The alternative practitioners that responded to my ad did so for a variety of reasons. But the main one was they always wanted to work with an M.D. They knew that their own particular field worked well but they also believed that combining it with conventional medicine would be doubly beneficial for patients. And, you know, they were absolutely right."

Access to insurance billing was another issue that intrigued alternative practitioners. "Some of them thought financial success would be theirs if only they could bill insurance for their services. I repeatedly tried to explain that they didn’t really want insurance, that insurance is what’s bringing down the medical profession," Edelberg says.

"After a few months, I had a lot of practitioners, probably too many, considering I was entering a field I didn’t know too much about. And at the same time, I had to find a location for the center, and believe me, there isn’t anything quite so boring as endlessly checking out pieces of empty commercial real estate. About two months before opening, I met Kirk Moulton, who was in acupuncture school. Kirk agreed to come on board to help build the center in exchange for some equity. In terms of energy and creativity, teaming with Kirk was probably the best decision I made to get the center up and running."

Edelberg and Moulton opened the Chicago Holistic Center on January 15, 1993. With the help of a well-timed article in the Sunday Chicago Tribune Magazine (it appeared the day before the center opened), the venture was an immediate success. "We connected the phones on Monday morning and literally booked the first month’s patients within a week. We knew we were on to something big," says Edelberg.

Four months into the Center’s first year, business was helped further by a series on alternative medicine that aired on PBS television. It featured Dr. David M. Eisenberg, now director of the Center for Alternative Medicine Research and Education at Beth Israel Deaconess Medical Center. The program followed Eisenberg as he toured China and explored the world of alternative medicine. Shortly thereafter Eisenberg published a study in the New England Journal of Medicine that reported how millions of Americans were spending their own pocket money on alternative healthcare.

Everyone sensed a market. "And that," says David Edelberg, "is when the antennae of the venture capital people came up."

Pay to Play

As long and expensive as conventional medical training is, it’s nothing compared to the $70 million education Edelberg received watching venture capitalists try to build a nationwide chain of integrative healthcare centers based on his model.

"Kirk and I had always planned to open other clinics but simply didn’t have the capital," says Edelberg. "In fact, the original name of the corporation was American Holistic Centers, anticipating our dreams of more than one center, well beyond Chicago. We grew so fast that in less than six months at Fullerton and Ashland, we knew our space was too small. So we accepted a great deal on space at 990 Fullerton, a sublease from Grant Hospital. The hospital also agreed to create the very first department of alternative medicine within a hospital system. This event got a day’s worth of airplay on CNN and suddenly I was being asked to speak at national conferences on integrating alternative medicine into the healthcare system."

The center was teeming with patients, but problems with the business model began to appear — problems based on the reluctance of health insurance companies to pay for unconventional treatments.

Edelberg still believes the original business model of the center was sound. He explains, "In our business model, all the practitioners, including the doctor, were paid by a percentage of the practitioner’s collections. That means that the center’s payroll is fairly low, limited to administrative staff and nurse. Remember,‘collect’ is the key word here. You can’t reimburse anyone based on the amount they‘bill’ because in the current system, if you bill an insurance company for‘X’ dollars, the company slashes that amount and pays you‘Y’ dollars instead. Doctors are well aware of this, and it’s the reason their incomes have been in a tailspin during the past decade.

"But, believe me, the alternative practitioners were shocked to discover that on the rare occasions when an insurance company paid them, they’d receive a fraction of the amount due to them. Practitioners who had joined the center for access to insurance billing soon wished they’d never heard of the word‘insurance.’ The irony is that many alternative practitioners still believe the reason doctors earn so much money is because of this access to insurance. They don’t know that doctors would give their eye-teeth for a payment-at-the-time-of-service medical practice," Edelberg says.

When the center finally gave up trying to bill insurance companies and shifted to payment at time of services for uncovered treatment, the practitioners actually started making money. In some cases, they reached incomes that are very close to that of primary care physicians. "Interestingly, chiropractors and internists make almost equal incomes," Edelberg notes. He cites his staff acupuncturist, Mari Stecker, as a practitioner whose income is not that much different from that of a salaried primary care doctor over at Northwestern. Another benefit to payment at time of services is not having to wait for the insurance companies to process forms to get your money. "Mari will see ten patients in a day and the money is there at five o’clock. I see patients, my money shows up next June," says Edelberg.

Using their business model, Edelberg and Moulton experimented with opening additional clinics. They first tried to franchise the concept at a storefront in Evanston, then opened a small Loop office near the Board of Trade. They also opened a clinic in Littleton, Colorado, years before that Denver suburb became famous for other reasons. The franchise idea was eventually abandoned, ties were amicably severed, and the Evanston group went their own way.

With three profitable centers up and running and a freshly written business plan for expansion, Moulton began to contact various venture capital groups with an interest in healthcare investments. They found a group that sensed this integration of conventional and alternative medicine was going to be the direction of healthcare in the coming years and their clinics were folded into a new company, named American WholeHealth (AWH).

Investors started pumping tens of millions of dollars into American WholeHealth, hoping to create a national chain of centers, the first ever integration of conventional and alternative medicine. With plenty of cash in their coffers, the new management team began to purchase well-established practices as "anchors" and move them into lavishly outfitted "holistic" centers. Centers were opened in Denver; Bethesda, Maryland; Arlington, Virginia; Boston; and more were added in Chicago.

But as the centers started operating, things started going wrong. Although there were a lot of blaming fingers pointed, at the real heart was the mistaken notion that primary care medicine, with or without alternative practitioners, could actually be a profitable enterprise. In many cases, primary care medical offices are the loss leaders of hospital systems and exist just to provide referrals to the highly profitable specialists or to fill hospital beds.

"The major error with American WholeHealth was to create mega-offices more suitable to cosmetic surgeons and hope that primary care doctors and alternative practitioners could support them profitably," says Edelberg. "Each of the alternative practices they acquired had done well individually by keeping its overhead down. If you triple the overhead by doing a fancy build-out, adding a huge staff, a breathtaking rent, and corporate headquarters to support, it’s silly to think the practitioner can simply work harder to pay for it all.

"When I moved over to 990 Fullerton from Fullerton and Ashland, I got the space as a sublease and by taking it‘as-is’ really got quite a bargain. In came the MBAs, God love them, and they decided to remodel the whole place. Their build-out, which we called the‘Starship Enterprise,’ came close to a million dollars. Totally out of proportion to what the practitioners could ever hope to generate."

Diversify, Spin Off Losses

As American WholeHealth was struggling with its money-losing health centers the dot-com boom was hitting its stride. After acquiring an insurance company in Wisconsin that provided alternative medicine insurance, the directors of AWH turned their attention to e-commerce.

With an additional $20 million investment from Whole Foods Market, they launched an alternative health information site named WholeHealthMD.com. "They rented a full floor in lower Manhattan, hired teams of writers, and with a sea of iMacs the whole place was very colorful when you walked in," Edelberg recalls. For about a year Edelberg spent his early morning hours writing much of the site’s medical content, then would put in a full day seeing patients.

Edelberg got a glimpse of dot-com insanity during a meeting between WholeHealthMD and DrKoop.com, the former-surgeon-general-branded conventional healthcare information Web site. "We were to be the alternative medicine information suppliers to DrKoop.com, and that sounded fine," he says. "After the meeting with the Koop people, I asked‘How much will they pay us?’ The American WholeHealth management team looked surprised at my question.‘No, we pay them. They get traffic from AOL and it can flow to us,’ they said. And, strangely enough, they thought that $300,000 a month was a reasonable price. I was speechless."

After he recovered himself, Edelberg asked, "So, are we counting on people to hit AOL, go to Dr. Koop, read Dr. Koop, go to us for alternative medicine, and navigate through our site to buy their vitamins?" Yes, that was the general idea. He did a quick calculation and figured that based on the overhead, the cost of the DrKoop.com contract plus the Manhattan office, the Web site would have to sell 7,000 bottles of vitamins a day, day in, day out. "That’s dot-com for you. No one had any sense of reality," Edelberg says. WholeHealthMD is still running and remains a very popular alternative medicine site, if not a particularly profitable one.

But the real success of AWH is the Wisconsin insurance company, American WholeHealth Networks, which the company had acquired a few years earlier. In the end, under a new management team, AWH is finally in the black, but only because it got out of the integrative health care center business.

"The Board of Directors voted to close the clinics early in 2000. Most of the physicians and alternative practitioners bought their practices back although some of the extremely unprofitable practices were simply returned," Edelberg says. "I myself decided to break up the big center on Fullerton into individually owned offices which work independently although not competitively. Without subletting some of the Fullerton space, the rent was too prohibitive to keep it going successfully. Things were getting too stressful and were not a lot of fun. Honestly, I was tired of working fourteen-hour days."

Regroup and Reflect

Edelberg has no regrets about his adventure. "I think it was a wonderful education," he says. "When I talk to the other American WholeHealth doctors around the country who worked in the other fifteen centers, they’re certainly not embittered, or angry or anything. They feel they’ve earned a sort of honorary MBA.

"As a practitioner myself, I immensely enjoyed these eight years because it really honed my clinical skills in determining how alternative medicine can help someone. I’ve been surrounded by alternative practitioners every day for nine years, have edited three books on alternative medicine, and still write for the Web site. I lost some money in the process, but not enough to cause any major heartbreak."

Edelberg is currently co-owner of WholeHealth Chicago with chiropractor Paul Rubin. They’ve downsized to a total of eight practitioners. Edelberg says it’s by far the best practice arrangement he’s ever had, with a controllable size, lower overhead, and best of all, a group of co-workers who regard each other as part of a family. "By keeping the center small, we really know our patients well," he says. "On some days, we bring in donuts in the morning — which isn’t so healthy, but who’s perfect? And whoever’s in the lobby has donuts, tea, and coffee with us. It’s very informal. I prefer my patients to call me by my first name — so do Paul and Mari. When you really get to know your patients and their biography, you can ask about their kids, home repairs, job stress — because you know them as human beings."

Dr. David Edelberg can be reached at WholeHealth Chicago, 773-296-6700.

Recommend this page to a friend

Top Ten pages recommended to friends: