I recently saw a patient who received a bill for an outpatient procedure for $333. The Medicare allowable reimbursement for the procedure was $180. I have seen other medical bills where the healthcare provider was charging patients more than 10 times the amount they expected to receive from Medicare or any insurance company.
one of my patients had an unexpected medical complication which necessitated a
visit to an emergency room. He received a huge bill for the services provided.
When I subsequently saw him in my office (for poorly controlled diabetes) he
told me he could not attend future office visits because he had so many
outstanding medical bills and he could not risk incurring any additional
medical expenses. While I offered to see him at no cost, he declined, stating
the financial risk was too high.
patient is required to pay the entire medical bill if they
poor quality insurance
a bureaucratic “referral problem”
an out-of-network provider, which means they have no contractural relationship with the healthcare provider/institution, as might result from an emergency room visit or an unexpected hospitalization.
physicians and other healthcare providers usually do not know what they are
going to get paid for any given service as they contract with many insurance
companies, each of which has a different contracted payment rate. Healthcare
providers and institutions typically set their fee schedule at a multiple of
what they expect to get paid from the most lucrative payer so as to ensure they
capture all the potential revenue. In the process, they create an economically
irrational fee schedule which is neither reflective of a competitive
marketplace nor reflective of the actual cost of the services provided.
The system is unstable. We are already seeing the precursor waves of massive and multiple disturbances to come. Disruption at key leverage points, new entrants, shifting public awareness and serious political competition cast omens and signs of a highly changed future.
So what’s the frequency? What are the smart bets for a strategic chief financial officer at a payer or provider facing such a bumpy ride? They are radically different from today’s dominant consensus strategies. In this five-part series, Joe Flower lays out the argument, the nature of the instability, and the best-bet strategies.
There are five ways that both healthcare providers and payers can cooperate while they compete to bring the highest value forward to the customer.
Align incentives in the contracts: Healthcare providers must be able to provide performance guarantees that give at least some of the bottom-line risk to them. Work with third-party companies that can actually audit organizations’ abilities to give performance guarantees consistently over time.
Eschew embiggening: Size per se is not a safe harbor from risk. There are few economies of scale in healthcare. Concentration within a given market can be essential to success in offering a true range of services, well supported, at a lower price, customized to the regional population, the provider mix, the state laws, and the local economy. But local concentration is not the same thing as size per se.
And size does not help the customer. There just are no examples in the history of healthcare in which size alone has returned greater value to the patient, the consumer, or the buyer, whether lower cost, greater reliability, or higher quality.
Expand the definition: Widen the “medical services” that you fund and offer to include services such as functional medicine, chiropractic, acupuncture, and various other modalities that have been shown to be highly effective at far lower cost. There absolutely are ways to do this within licensing requirements.
Integrate behavioral health: Find ways to fund behavioral health and addiction treatment. Integrate behavioral health directly into the patient experience, triaging at the door to the Emergency Department and in every primary encounter. Find local innovators that can help pre-empt costly crises. Partner with community health, housing, and nutrition advocates. Helping people change their habits, manage their lives, and get beyond their addictions is far less expensive than fixing them over and over.
Retrain clinicians: Physicians and other clinicians are heavily trained to create and document reimbursable events. If you change the economics so that the system finds ROI in promoting health, preventing disease, managing population health, producing cures and reducing suffering as efficiently as possible, those very same clinicians will need to be retrained. Most of them will be deeply grateful, because they, like you, genuinely want to bring real value to the customer. In fact, if you do this you could end the physician shortage and the nurse shortage. People will flock back to do what they became a doctor or a nurse to do: Help people.
When you left the story your hero had just arranged for Best Buy to attempt delivery on Tuesday afternoon last week. I was in SF for the “can’t miss” Rock Health Summit. I was waiting at the apartment when I got about 4 calls from the same random number in 3 minutes but when I answered no one was there. I called back, no answer. Then I got a voicemail saying the delivery team was outside. I ran outside! No they weren’t! At that point I gave up and had lunch. But then for now the 5th time I called Best Buy and lined up a new delivery. I stressed about 10 times that the delivery team could NOT leave next time without seeing me. There may have been some shouting…..
Monday was the next available day for delivery and it was day that Best Buy was going to finally get it right. I got an email saying they’d be there at 1.30pm
I was across town in a meeting at 12.30 and noticed 4 missed calls from the same number. Being of a very suspicious nature, I called the number, and yes it’s the delivery team. They were outside the apartment, and they were 60 mins early! Thankfully the delivery crew agreed to wait, and I went over to meet them. So at 6th time of asking, the crew was there, the equipment was there, I was there, and we all went into the apartment.
Picture, if you will, a healthcare sector that costs less, whose share of the national economy is more like it is in other advanced economies—let’s imagine 9% or 10% rather than 18% or 19%.
A big part of this drop is a vast reduction in overtreatment because non-fee-for-service payment systems are far less likely to pay for things that don’t help the patient. Another part of this drop is the greater efficiency of every procedure and process as providers get better at knowing their true costs and cutting out waste. The third major factor is that new payment systems and business models actually drive toward true value for the buyers and healthcare consumers. This includes giving a return on the investment for prevention, population health management, and building healthier communities. This incentive would reduce the large percentage of healthcare costs due to preventable and manageable diseases, trauma, and addictions.
Picture, if you
will, a healthcare sector in which prices are real, known, and reliable.
Price outliers that today may be two, three, five times the industry median
have rapidly disappeared. Prices for comparable procedures have normalized in a
narrower range well below today’s median prices. Most prices are bundled, a
single price for an entire procedure or process, in ways that can be compared
across the entire industry. Prices are guaranteed. There are no circumstances
under which a healthcare provider can decide after the fact how much to charge,
or a health insurer can decide after the fact that the procedure was not
covered, or that the unconscious heart attack victim should have been taken to
a different emergency department farther away.
well-informed, savvy healthcare consumer, with active support and incentives
from their employers and payors, who is far more willing and eager to find out what their choices are and exercise that
choice. They want the same level of service, quality, and financial choices
they get from almost every other industry. And as their financial burden
increases, so do their demands.
Picture a reversing
of consolidation, ending a providers’ ability to demand full-network
contracting with opaque price agreements—and encouraging new market entrants
capable of facilitating a yeasty market for competition. Picture growing
disintermediation and decentralization of healthcare, with buyers increasingly
able to act like real customers, picking and choosing particular services based
on price and quality.
industry whose processes are as revolutionized by new technologies
as the news industry has been, or gaming, or energy. Picture a healthcare
industry in which you simply cannot compete using yesterday’s technologies—not
just clinical technologies but data, communications, and transaction
After 3 days at the Health 2.0 conference, everyone is agreed with Jane Sarasohn-Kahn that more consumer choice and better transparency and an “Amazon like shopping experience” would improve health care. In fact in her wonderful book, HealthConsuming, Jane talks a lot about the dark side of putting this much pressure on consumers, but I just had an experience that revealed what might go wrong. Bear with me, this does get back to health care…
The short answer is that BestBuy‘s home appliance service delivery and fulfillment seriously sucks. It has gone off the rails in a massively bad way. You’d think they’d have a multi-platform CRM that worked but it’s a disaster
The story. The washer in an apartment I used to live in but now rent out broke after 9 years–fair enough. And I spent a long time on a customer IM chat with Best Buy figuring out if there was an available washer that would stack under the still working dryer (which was stacked on top of it). But the answer was no.
So in the same IM chat the Best Buy agent suggests a replacement washer and dryer, and all the stuff required to put it in, and added installation and delivery. And he gets me a page where I can fill in my details, credit card and buy it all, then return to the chat to set a delivery date. Pretty snazzy BUT apparently the agent forgot to add removing the old ones to the order (even though most of the conversation was about the old ones!) Remember that for later…
An official of a health system in North Carolina sent an email to
the entire board of the North Carolina State Health Plan calling them a bunch
of “sorry SOBs” who would “burn in hell” after they
“bankrupt every hospital in the state.”
Wow. He sounds rather upset. He sounds angry and afraid. He
sounds surprised, gobsmacked, face-palming.
Bless his heart. I get it, I really do. Well, I get the fear and
pain. Here’s what I don’t get: the surprise, the tone of, “This came out
of nowhere! Why didn’t anyone tell us this was coming?”
Brother, we did. We have been. As loudly as we can. For years.
Two things to notice here:
What is he so upset about? Under State Treasurer
Dale Folwell’s leadership, the State Health Plan has pegged its payments to
hospitals and other medical providers in the state to a range of roughly 200%
of Medicare payments (with special help for rural hospitals and other
exceptions). In an industry that routinely says that Medicare covers 90% of
their costs, this actually sounds rather generous.
What is the State Health Plan? It’s not a payer,
that is, an insurer. It’s a buyer. Buyers play under a different set of rules
and incentives than an insurer.
We Need Legal Assaults On The Greediest Providers!
When a patient is hospitalized, or diagnosed with a deadly disease, they often have no choice about the cost of their treatment.
They are legally helpless, and vulnerable to price gouging.
Medicare offers decent protection — i.e. limits on balance billing, and no patient liability if a claim is denied.
But under age 65, it is a Wild West — especially for emergency care, and drugs and devices. The more they charge, the more they make. Even good health insurance does not offer complete financial insulation.
We need more legal protection of patients. In some cases we need price controls.
‘Charging what the market will bear’ is inadequate, even childish, when ‘the market’ consists of desperate patients. Where contracts are impossible and there is no chance for informed financial consent, government can and should step in.
This series describes the new laws that we need. Very little is required in tax dollars….but we do require a strong will to protect.
Amazon has quietly put together a syndicate including Berkshire Hathaway and JP Morgan to provide better and more affordable health care for their combined 1.2 million workers.
The joint effort, called Haven, makes sense because many companies of size today are self-insured to provide health care at lower costs. But this is different. Jeff Bezos, Jamie Dimon and Warren Buffett seem to be personally involved in the development of Haven. So, what could they possibility have up their sleeves?
At the same time, many Democrats running for president are promising single payer health care (Medicare For All) as the solution to controlling costs and providing quality health care for everyone. Republicans argue that this is socialism and will result in unacceptable increases in taxes that will ruin our economy.
While politicians debate, Amazon’s real objective may be to create a health care payer to rival all payers with tens of millions of Amazon Prime Members as health plan members.
With Amazon’s buying power, scale and capabilities, the ecommerce giant could create a health payer offering that could render the need for a single payer system moot.
A massive lawsuit filed in May by 44 states accuses 20 major drug makers of colluding for years to inflate prices on more than 100 generic drugs, including those to treat H.I.V., cancer and depression. If true, the alleged behavior is not just a violation of antitrust law, but also a betrayal of the government policies that created and defended the entire generic drug industry.
Most prescriptions in the U.S. today — 9 in 10 — are filled with generics, which are just as safe and effective as their brand-name equivalent. And yet generics account for only 22 percent of U.S. prescription drug spending. These prices are so low because of competition between makers of different versions of the same generic drug. The more competing generic alternatives, the lower the price, theoretically right down to the marginal cost of manufacturing the pill.
This success is the result of decades of careful federal and state policymaking, all geared towards introducing competition in prescription drug markets. The entire generic industry has its origins in the Hatch-Waxman Act of 1984. Prior to Hatch-Waxman, a company that wanted to sell a competing version of a drug whose patents had expired had to conduct lengthy and expensive clinical trials to get approval from the U.S. Food and Drug Administration. Hatch-Waxman established a quicker, less-expensive path to FDA approval that leans on the scientific research supporting the already approved brand-name drugs.
Hatch-Waxman also created incentives for generic drug makers to challenge drug patents that prevent competition. Successful challengers win a 180-day period of exclusivity during which their generic is the only one allowed to compete with the brand-name drug. The floodgates open and additional competition pushes prices down further after the 180-day period.
In this two-part series, we examine several common misconceptions
made by health tech start-up companies in working with Health Systems and
offers advice on how to recognize and address each. From approaching systems
with a solution-first mentality to not understanding the context in which
health systems work, we look to provide constructive criticisms meant to
support more effective partnerships between health systems and digital tech
and Reactions from the Industry
Understand the Current System Environment We Are Working In: In some cases,
technology solutions are barricading healthcare systems inside. In other
cases, they are allowing us to seamlessly interact with other systems. Typically, large healthcare systems have a
combination of both. For outside solutions to be effective,
start-ups need to be intimately familiar with the existing (and on-the-horizon)
systems that healthcare organizations are using or contemplating. Rarely
will a solution not have to interact with existing software solutions – and
this goes well beyond just the EMR.
Have an Integration Plan: A
stand-alone solution, which doesn’t tie to one or more of the healthcare
institutions key systems of record (SoR) or systems of engagement (SoE) is a
useless solution. Your solution should be able to stand alone in the first few
weeks, as users begin to use it and get familiar with its capabilities.
However, as soon as value is realized
(not necessarily achieved), it’s crucial that your solution support either SMART on FHIR, FHIR,
HL7v2.x, or all of the above. If you don’t have a believable integration story
fully worked out, you’re not ready to launch into the health system market. Go
back and do your homework.
Having a Clinician Is Nice, But Not Enough: The physician, nurse, or other clinician on your team helps credibility but we also understand the incentives associated with selling solutions, and this takes away from the altruism you think we will blindly swallow. And they are rarely businessmen or women who understand both the complexities of solving a problem that isn’t theirs and starting, let alone, running a company. Pair an MD with an MBA? Now we’re talking.