Matthew Holt

So will the public option hurt hospitals? Not in the Ozarks

I've had this sitting in my inbox a while, but I thought that with the Senate bill out it was time to have a bit of weekend fun with it. The topic is the fear that a public option/government-run health plan/Hitler-ization of America (delete where applicable) will of necessity put all those worthy private health plans out of business. And worse because it will impose government's lower pay rates on providers, it'll also put them out of business, or at least into a position equivalent to that of Ukrainian peasants working on a collectivized farm.

Everywhere you go in the hospital world you hear complaints that Medicare pays less than private payers, and that the private insurance business is the only thing keeping providers alive.

Everywhere but Orark mountains of southwest Missouri and Northeast Arkansas.

Paul Taylor is the CEO of a tiny hospital system there called Ozarks Community Hospital. It's basically a safety net hospital and it only gets about 5% of its business from the leading commercial insurer, Blues of Missouri–part of Wellpoint. And does Wellpoint pay more for its patients than Medicare?

Err…no

Stats

In fact this chart shows that it pays less than half in many cases. I thoroughly recommend you read Pauls blog piece on the topic from which I lifted that chart. It's an entertaining, detailed and sensible read.

But what he's saying is that a public option will be better for hospitals serving lower-income populations than a simple expansion of private insurance.

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G BrutusMD as HELLEric NovackLisa Lindelljd Recent comment authors
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G Brutus
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G Brutus

nope, just a new way for the insurance companies to get even richer……. no ones addressing the problem which stems from the bloody companies who own the senate/congress. 30% of the $ will still be spent on adverting/promotion/overhead, 10% will still be spent trying to GET OUT OF PAYING ligetimate claims, just like it is today…. all i want is to pay 300-400 a month for REAL insurance that covers everything, not much to i think..
have fun
Ben

MD as HELL
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MD as HELL

We have had all the major healthcare technologies for about the last ten years. MRI, PET, you name it. So the cost increase per patient now compared to the same patient then is due to what? Regulation. Deminished value of the dollar. Cost shifting. Accountability. Shifting standards of care. The addition of 50 million new covered users will partly erase cost shifting, but hugely increase the cost of regulatory and accountability measures. New standards of care will continue to push the costs of failing to have tort reform. Accountability alone is a huge piece of the overhead. I’d say 25%.… Read more »

Paul Taylor
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Paul Taylor

Eric: As I said in the article, the chart refers only to outpatient procedures: surgeries and scopes. If the only services we provided were outpatient procedures for Medicare and BCBS patients, your conclusion would be absolutely correct. The complete picture is more complicated. Our health system has two hospitals and a dozen physician clinics employing about 50 providers. We employ a large number of primary care physicians relative to the size of the hospitals. That said, you are not far off the mark. There have been two chapter 11 bankruptcies since we opened in 2000. If you are really interested,… Read more »

Eric Novack
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Eric Novack

Please correct me if I am reading the chart wrong, but it appears that the only difference, given the data provided, is that the hospital will go bankrupt more slowly if a higher percentage of payments are Medicare than BCBS.
If I am reading correctly, the conclusion we should draw is what, exactly?
It looks a lot like either way, the hospital will be merely ‘rearranging the deck chairs on the Titanic’.

jd
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jd

Dan, you misunderstand my point. Almost everywhere in the nation, Medicare rates are at or below the cost of doing business for hospitals. But the reason that they are below the cost of doing business is that our medical system is a bloated, inefficient mess. Western European and Japanese standards of living are very close to the US standard of living (maybe 10% difference, depending on what things one finds most salient and making allowances for different population density), yet the cost of health care, including hospital care, in those countries is about half as much as here. Our hospitals… Read more »

Lisa Lindell
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I read it.

Dan Urbach, MD
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BTW, I see no comments other than mine on the blog referred to by this post. Is nobody reading it?

Dan Urbach, MD
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JD,
In New York, perhaps, Medicare rates are not too low. In Oregon, they simply do not support a primary care practice. I assume you and readers know there is a big geographic variation in Medicare reimbursement.

jd
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jd

Paul, I have limited experience with non-profit Blues, though I know a bit about non-profits and for-profits in New York state, including Empire BCBS before and after it was purchased by WellPoint. To my knowledge, the non-profits behave pretty much the same as the for-profits when it comes to price negotations with providers. A small independent hospital in a region with one or two dominant systems is going to get lower rates. As you know, this is why small independent hospitals have joined larger systems by the hundreds across the country. Finally, Medicare rates are not too low. They would… Read more »

jd
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jd

“Small independent hospitals, in areas dominated by big ones in particular, don’t have a prayer. This is just another aspect of the “free market” in health care. A public plan would probably not engage in this sort of practice. Medicare doesn’t.” Margalit, true about small independent hospitals, but we have to be careful in predicting what a new public payer would do. If it uses Medicare-like rates, then it would have the same for everyone. However, if a public payer survives, it will probably have to negotiate rates, and in that case it will be forced to do exactly the… Read more »

Paul Taylor
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Paul Taylor

Dan: Thank you for your post. I would point out a couple of things. First, Blue Cross Blue Shield of Oregon is one of the nonprofit Blues. We are dealing with a different animal than you are in Portland. As I point out in my article, Blue Cross Blue Shield in our market is part of Wellpoint: the largest conglomeration of for-profit Blues in the country. Second, you are a private practice physician. In any given market, the commercial payers may find it advantageous to pay physicians relatively better or worse than it pays hospitals relative to Medicare rates. Our… Read more »

Margalit Gur-Arie
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Margalit Gur-Arie

First of all Dr. Taylor makes me so proud to be a Missourian 🙂 I think though that Dr. Taylor knows that his hospital is the “odd man out”, at least in his area which is dominated by Mercy Health Systems, a very large non-profit organization with hospitals in 5 states. Their flagship hospital in St. Louis is one of the best in town and we have no shortage of excellent hospitals here. I am pretty sure that Wellpoint is paying Mercy significantly more than they pay Dr. Taylor’s hospital and definitely more than Medicare. Since fee schedules are negotiated… Read more »

Dan Urbach, MD
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Thank you for this post. Here is the comment I left on his blog: This is very interesting! I am an internist in Portland, Oregon, in private practice. It is no myth in our part of the country that Medicare pays far, far less than private insurance. It’s an easily verifiable fact that a substantially higher percentage of patients paying Medicare rates would put us out of business. Last year, my average collections on non-government plans put together was 86% of charges. Blue Cross Blue Shield fell in at 89.7%. Medicare was 51%, which is well below cost of overhead.… Read more »