What if They Had Had to Pay?

What if They Had Had to Pay?

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A true story, with changes made to protect privacy.  An 89-year-old man with dementia, a heart condition, and other serious medical conditions fell in his Arizona apartment and broke his hip.  His children, wanting the best possible care, arranged for him to be air-lifted to New York.  There, the orthopaedic surgeon advised them that the chance of their father surviving hip surgery was very low, but he would do as the family wished.  The man’s three children could not agree.  Two would have avoided the surgery, but a third felt very strongly that everything that could be done for the father should be done.  The other siblings, out of guilt and respect for the third, acceded.  The surgery took place, and the father spent three days in the ICU before his heart gave out.

Here’s the terrible and hard-hearted question I pose:  If the costs of this procedure and hospitalization had not been covered by Medicare, would the man’s children have proceeded along the chosen path?  I am guessing not.  I don’t know the total bill incurred, but it was certainly in the range of tens of thousands of dollars.

In the US, we don’t have a good societal process for making these decisions.  In the United Kingdom, though, they do, as reported by Bob Wachter in a recent blog post.  Here are some excerpts:

[D]uring my six months on sabbatical in London, when I asked British physicians or hospital administrators who have spent time in the US about their main impression of our healthcare system, I nearly always heard some version of, “You people don’t know how to say no to anything.”

In the UK, they have built an organization that makes these tough decisions: the National Institute for Health and Clinical Excellence (NICE). I was lucky enough to spend several hours with its leaders last week in the organization’s London headquarters. NICE is awesome, not just for what it does, but for what its existence says about the maturity of the British political system when it comes to healthcare.

I asked Sir Michael [Sir Michael Rawlins, NICE’s founding chairman] what it was about the culture of the British people and the NHS that allowed NICE to function, when America has such problems saying, and accepting, a forthright “no.”

“The man on the street gets it,” he replied. “They know that there is a finite amount of money. And politicians get it as well — they know that someone is going to have to make these tough decisions, and they’d rather it be us than them.”

Imagine that.

Bob concludes:

Decisions over setting limits are invariably wrenching, but our failure to create a transparent way to make these decisions just means that rationing occurs implicitly  and haphazardly.

Ultimately, silly season will end, our society will come to grips with the need to choose, and we will begin looking for a method of making these thorny decisions. When that day comes, it’s nice to know that we have a model to learn from.

Paul Levy is the former President and CEO of Beth Israel Deconess Medical Center in Boston. For the past five years he blogged about his experiences in an online journal, Running a Hospital. He now writes as an advocate for patient-centered care, eliminating preventable harm, transparency of clinical outcomes, and front-line driven process improvement at Not Running a Hospital.

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44 Comments on "What if They Had Had to Pay?"


Guest
Oct 14, 2014

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Guest
retired RN
Feb 10, 2012

I’m retired after 46 years experience in acute care hospitals. I started before
any medicare/medicaid and very few hospitals outside of teaching hospitals
had ICUs.

There are several elephants in the room:

1. EMTALA is the first big elephant–EVERY hospital has unpaid, unrecoverable costs–even small single community hospitals with no ER.
EMTALA requires every hospital that gets ANY federal funds to treat ALL
emergency patients. We even take care of dialysis patients who are brought over by family when dialysis is direly needed–there is only paid
dialysis in Mexico. We also get trauma patients who are delivered by
Mexican ambulance/cab. The Mexican consulate refuses transfer back to
Mexico unless the patient can go in a cab. American ambulances/cabs are NOT allowed in Mexico. We also have to freely treat Mexicans from train jumping accidents, local shootings/stabbings because unless they under arrest they will not be paid for, so they are rarely under arrest.

2. All covered patients (except wealthy foreigners) do not pay their own
bills (medicare, medicaid, private insurance, incarcerated persons, vets,etc.)
They pay some sort of co-pay/co-insurance(except medicaid.) In my county
on the Tex/Mex border, 5000 babies are delivered yearly mostly to Mexicans
who are here illegally(never deported) or women in labor who cross in a taxi
to have their babies here. All illegal newborns are citizens so all hospitals
apply for SS numbers and then get reimbursed months later by medicaid for
only the newborn’s care. This also happens in all large costal cities. The new U.S. citizen babies also qualify for SSI and SNAP. Don’t even ask if
the patient is in some vegetative state–if the family won’t sign papers at the
consulate to accept financial responsibility in Mexico, we are stuck (baby or
adult.)

3. Families of medicaid patients always want everything done for their
family member, even if they are terminal, have a living will, or just one of
one family member wants everything done. Likewise medicare Hispanic
patients and their families. Families and doctors can appeal to every hos-
pital’s medical ethic commitee. All hospitals are required to have them,
to provide information on request and to respond when requested to do so.

Additional notes: My county has a population of 450,000 population with
four hospitals and 80% Hispanic population. In my 35 years here, we’ve
had two organ donors from Mexican-Americans. In my four county border
area we have 1,000,000+ population 80%plus Hispanic population and we
can’t even maintain our own blood bank needs in the counties with 12
hospitals–only two less than 200 beds.

So you can see that answers to questions about solving health care costs
are multi-dimensional and basically unaffordrable under even slightly reduced circumstances.

Just for everyone’s information: Fed Gov rules require all hospital to enquire
of everyone about living wills and all hospitals are required to have state-
appropriate forms available to everyone.

EVERONE should discuss end-of-life care under whatever circumstances
with parents, siblings, and adult children. Elderly parents don’t always die
first.

Guest
Greg Park
Jan 12, 2012

Gentlemen,

The discussion to date regarding healthcare pricing has been excellent, but it represents one half of the conversation. The other half is the 10,000lb elephant that everyone wants to ignore.

Deep seated emotions, especially fear, are the most hard to change. Death for many is their greatest fear.

In our society death is the ultimate ending. It is the worst, and coincidentally last, event we endure. Even for those with “faith”, death is an event that is tremendously feared and avoided.

Right, who wants to die? No one of course, but is death truely the worst event in life? No. Ask any man that has endured poverty, torture or forced captivity their impressions of death.

There is no dignity in spending millions of dollars for a few months of life. Even if you can pay this fee out of pocket, what does that say to the man whose life is cut short because they can’t afford care above the norm?

Given the choice between 3 months of extended life or passing that money to something greater, I would choose the later. However, I am healthy now and I can’t speak to my state of mind when confronted with death.

Where does the conversation about how we approach death occur? Typically in the last moments of our life. I remember my Father in his 50’s wanting to talk to us about him not being around any more. We all turned the other way. We didn’t want to hear of this! Just shut-up dad.

Ok, I have rambled enough on an emotional topic.

Guest
SJ Motew, MD
Jan 11, 2012

150% of Medicare, guaranteed for all my patients…..count me in!

Guest
Jan 11, 2012

To Nate Ogden —

I know that some bloggers consider you a pain in posterior, and sometimes I do too…..but your post this morning about the repulsive prices posted by hospitals for not-so-major surgeries , and the almost-as-repulsive prices paid by some PPO insurers, was terrific!

All prior disagreements are profoundly forgiven! at least by me.

What if we had a President who actually understood health care price gouging?

He or she would go on camera, hold up a bloated hospital bill, and put a cigarette lighter to it.

He would add a comment on the salaries paid to administrators, doctors, and RN’s at the hospital which sent the bill.

He or she would then announce that no hospital bill can exceed 150% of Medicare.

Any bill larger than that could be ignored by insurers and patients as illegal price gouging.

I grant you that after the visceral pleasure this would bring to us policy wonks,
there would be some tough consequences.

Expensive hospitals in Boston, New York, LA, etc might start layoffs.

Some hospital bonds would go into default.

We would have to confront the fact that as a nation, we have propped up hospital employment and propped up the construction industry mainly through price gouging. (see Michael Mandel)

The president who spilled the beans in this way would certainly get no contributions from the medical industrial complex.

But this is a one term hero!!!!

Bob Hertz, The Health Care Crusade

Guest
Nate Ogden
Jan 11, 2012

As much as I would love to see this solved tomorrow on a national level I have set my goals much lower.

If the attorney general of any State(s) would apply the usery or current consumer protection laws we could accomplish the end result pretty quick and possibly without the need for new legislation.

That and a positive judgement in State CA v Multiplan(PHCS) & Sutter Health could also put an end to the PPO BS real quick

Guest
steve
Jan 11, 2012

Using big government to control prices? Consumer protection laws? :-)

Steve

Guest
Barry Carol
Jan 11, 2012

“Unfortunately, true costing of medical care lacks standardization and consistency. As allocation of admin, plant, personnel etc. gets better, maybe someday we can see true costs.”

If payers, especially CMS, are going to treat hospitals as heavily regulated utilities, it could require allocation of indirect costs to individual clinical departments to be done in a consistent manner whereas right now, everyone does it somewhat differently. Regulators, at least within a state, require consistent cost allocation approaches for electric and gas utilities. There is no reason why hospitals couldn’t be required to do it in a consistent manner as well.

An efficiently run hospital should be able to receive a reimbursement rate sufficient to cover its costs, including capital costs and a reasonable profit / surplus even if they’re non-profit entities. Doctors are in the best position to determine what care is and isn’t appropriate given society’s limited resources. The rest of us need to back them up with safe harbor protection from lawsuits if they follow evidence based guidelines where they exist. We, especially the elderly, also need to execute a living will or advance directive and the information should be stored on an electronic registry so it’s available to doctors and hospitals when needed. If I were a patient facing an end of life situation, I would like to get the care that I want and not get the care that I don’t want and ensure that my family members know just what those preferences are.

Guest
sr
Jan 11, 2012

As much as the discussion over economics and rationing is important for us to have in this country, I hope I’m not the only one who is concerned about the poor patient who probably spent his last days either unconscious (if he’s lucky) or uncomfortable in an unpleasant setting with a tube down his nose or mouth and his extremities restrained. And his family also didn’t have a good experience, with children squabbling over how best to care for their father. Family relationships are often complicated – it’s not good for patients or their families for long-standing conflict and guilt to be brought into life and death decision-making. This wouldn’t be a good outcome if the surgery didn’t have any cost associated with it – in the end, it did not benefit the patient and that’s the tragedy.

Guest
SJ Motew, MD
Jan 11, 2012

Although not directly related to the original posting here, which to my interpretation is where the responsibility sits for determining appropriate utilization of limited resources, Nate is right on the money with the last post. Unfortunately, true costing of medical care lacks standardization and consistency. As allocation of admin, plant, personnel etc. gets better, maybe someday we can see true costs.

From the perspective of the provider, you betcha that a cost + 50% would be acceptable. What we are really looking at is good old cost-shifting. Charge-masters are nothing but numbers, no one pays this except the rare (and unfortunate) self-pay who is taken advantage of. Audit programs like Nate discussed are great, but few and far between.

Personally I would love to have cost+50% (or 25% or 10%) from all payers including Medicaid and self-pay. As a matter of fact (back to the physician compensation discussion) the fairest way to pay providers might be a time-based activity driven costing mechanism. The fact that a carpal tunnel procedure gets reimbursed more than an aneurysm repair is preposterous when taking into account procedural time, on call, bedside care etc. My point being no one really knows what many of the things we do really ‘costs’.

Guest
Nate Ogden
Jan 11, 2012

cost of inpatient care doesn’t really matter either, that’s not the problem, its billed charges of inpatient or any hospital care.

Problem with Hospital charges is Administrator/CEO hubris, thinking they can get away with charging what they do, and our system that has allowed it.

Two recent examples;

Outpatient Endoscopic polypectomy

Billed Charges $20,512.09
PPO Allowed $11,987.00 42% “discount” most people would look at that number and think they got a great deal.
Medicare Allowable $879.11

Luckily this client has a plan that limits UCR to hospitals cost plus a 12% markup. We paid them $1,205.82

According to the hospital it cost them $1,076.62 to deliver this care. I would have no problem paying them this amount plus 50%. What goes to make ujp that $1,076 is meaningless, the problem with our system is we are billed $20,000 and most plan pay $12,000.

Scoliosis Surgery

Hospital billed $307,604.80
PPO Allowed $246,083.84
Medicare Allowable $70,449.74

Again this client did our audit program so we paid $120,844.86.

When the cost to the consumer has no relation to the cost of the provider to deliver the service any discussions of providers cost are meaningless. If we reduced provider cost 10% does anyone think they would reduce their charge master 10%? Even if they did reduce their charge master 10% their billed fees are still 3-4 times out of line.

We just got a 20 day ICU bill in and I wish it was 100K. Billed charges for the third admit in a month, $653,770.99. Total claims on this person over 1 million. He was admited to a hospital, transfered to a prestegious hospital to have a valve put in, non FDA approved use, picked up an infection and was readmitted to the first hospital where they treated then infectiona nd replaced the non FDA approved valve that didn’t work with an apporved one that did. Now they are looking to the healthplan and the 60 co-workers to reimburse them. What did they possibly do that cost them anywhere close to 1,000,000 in 30 days?

Guest
Jan 11, 2012

Wow, Nate! Remind me again, why are we opposed to price controls, like Maryland has in place? Or are we not opposed?

Guest
Nate Ogden
Jan 11, 2012

Price controls don’t work, see Greece and the article I posted on the collapse of their pharmacies. We have price contols on Milk and other staples and they don’t lead to efficient markets. Great way for politicians to extract money but not so good for the public.

Guest
steve
Jan 11, 2012

Work well in Japan and most other OECD countries. Those are usually prices negotiated by the providers with the state.

Steve

Guest
rbaer
Jan 11, 2012

As I said above: overcompensation does TRIGGER procedures that involve costly hospitalizations and device use.

Guest
SJ Motew, MD
Jan 11, 2012

rbaer, southern

Without reopening the baseless physician reimbursement differential argument, physician fees are NOT the main driver of costs for inpatient care….by a long shot. While decreasing surgeon reimbursement might drop utilization in the short-term, the cost drivers remain devices, drugs and days (length of stay).

For example, complex ruptured aortic aneurysm repair with endograft , my reimbursement about $1000…compared to device: $25000, 10-20 days hospital stay with ICU care $80-100k…now of course this is all bundled into DRG, but with complexities still drives actual cost to payer to $20-30k range minimum.

Guest
southern doc
Jan 11, 2012

Agree that physician surgical fees do not contribute significantly to costs during the last year of life. But diagnostic and treatment procedures do (along with drugs and equipment). The same downward pressure needs to be applied to these that has already been applied to physicians’ fees.

Guest
rbaer
Jan 11, 2012

That’s arguable (I believe I read estimates of about 3%, which still is substantial money) but overcompensation does TRIGGER procedures that involve costly hospitalizations and device use.

Guest
southern doc
Jan 11, 2012

That’s why there’s a “heart center” on every corner. A small amount of the money from unnecessary stenting is going to the docs, but the hospitals that collect the bulk of the payments are raking it in hand over fist.

Guest
Nate Ogden
Jan 11, 2012

global budgets and public insurers and health all look great on paper, this is how they turn out once implemented though;

http://www.bloomberg.com/news/2012-01-10/greek-crisis-has-pharmacists-pleading-for-aspirin-as-drug-supply-dries-up.html

For all the faults with our system at least we can delivery asprin effectivly

Guest
Jan 11, 2012

Your comments take us right back to the difficulty of having a complex and graded fee schedule.

The hospitals who do high-priced procedures probably make a lot of money.
ICU beds probably make a lot of money.

My own little goal has been to challenge the graded fee schedule. According to Joseph White in Competing Solutions, the Germans controlled hospital costs by paying flat per diems. If the nation’s hospitals exceeded the budget toward the end of a fiscal year, all reimbursements were reduced to 10% or 20% of normal.

At some point America will get real about cost control and gouge some sacred cows. Not sure when, though.

Guest
rbaer
Jan 11, 2012

It’s simply that the current fee schedule favors procedures/surgery – doctors as well as hospitals earn quite well.

Make e.g. back surgery paid roughly as well as an office visit with a surgeon (some adjustment for intensity/risk of care and expertise is needed), and all that unnecessary back surgery will go away. That does not mean that you won’t be able to find a surgeon to treat your clearly needed cauda equina syndrome, or appedicitis, for that matter.

A great share of systemic medical problems would disappear by making reasonable and gradual adjustments to the medicare fee schedule. This problem by the way exists in Germany too, they also have money making procedures that are felt to be overutilized.

Guest
southern doc
Jan 11, 2012

Exactly! The problem isn’t fee for service, it’s the distortions in our FFS schedule that we refuse to correct.

Guest
Barry Carol
Jan 10, 2012

Bob –

I don’t have any clinical experience either. I’m a recently retired finance guy who covered the managed care insurers, drug retailers and PBM’s as part of my responsibilities.

In a recent Brookings Institution primer on the premium support model for Medicare, it stated that approximately 25% of Medicare’s costs are for care in the last year of life. I note that we often can’t tell ahead of time that a particular patient will die within a year of getting care, but end of life care, much of which is in fact wasteful, futile or otherwise inappropriate, is a big deal.

For hospitals, the most profitable parts of inpatient care are surgical procedures and cancer treatment. They don’t make much if any money on trauma, psychiatric care, OBGYN and low acuity medical (as opposed to surgical) cases. If there weren’t as many inappropriate procedures being done, the hospital wouldn’t have to hire or contract with as many surgeons, it wouldn’t need as many operating rooms and ICU beds, it wouldn’t need as many OR nurses and techs, or it could handle more patients for whom the procedures really were necessary and appropriate without expanding capacity at huge capital cost.

I don’t know about the VA but I doubt that many non-VA hospitals have lots of highly skilled and well paid personnel just standing around drawing a salary waiting for patients to come in. As for the very expensive drugs, if they’re not cost-effective based on QALY metrics or some other appropriate standard, we shouldn’t pay for them at all or we at least shouldn’t pay any more than we pay for less costly established treatments.

Guest
MD as HELL
Jan 10, 2012

Where does the $30 million come from? Will that go up or down next year? Will it be like the military and get cut if you don’t spend it? Who gets to hold the money, the CEO or the Chief of Staff? How much will be allowed for Profit? Who pays for care out of your home area? What about the cocaine addict on dialysis? What about all the discretionary care like schoolo health and disability money? Who gets to say no?

Guest
Jan 10, 2012

I appreciate the comments by Barry and Paul. I have run an insurance agency but I certainly have never run a hospital or a clinic, so I may in fact have idealized global budgets.

Barry’s post does lead me to ask the following question:

Other than the use of overpriced drugs, why is any particular patient more expensive than another?

My father was tremendously weak in his last month in the hospital, and needed a lot of nurses— but they were already on the payroll at the VA.

The 89 year old in Paul’s example needed hip surgery, which is labor-intensive — but if the surgeons and assistants are already on the payroll, why would he be an expensive patient?

Where I am going with this is a long-time suspicion I have had that if we controlled the prices of drugs with no substitutes, we could give hospitals a flat per diem and not worry about them running out of money at the end of the year.

Any potential for cost control in Medicare has been sabotaged by having a graded fee schedule that is easy to manipulate. (See George Halvorson’s
1996 book Strong Medicine for some pungent descriptions of upcoding.)

I have wanted to be the analyst to say that the emporer has no clothes in terms of what makes an expensive patient. (once we control drug costs)

I certainly welcome any corrections though because I have no clinical experience.

Guest
steve
Jan 11, 2012

Many physicians are not on the payroll. Medical devices are very expensive. At present, a hospital bills for everything, even if their docs are employed. On a global budget, people then aim to work less for the same amount of money. What we do at my hospital then, is to incentivize docs to do enough cases, but that leads back to the same problem.

Steve