Tag: the business of healthcare

When Retiree Benefits and Obamacare Collide

Jun 7, 2013• 16

By David M. Walker

Oct. 1, 2013 is a focus of increasing anxiety in this country. That’s the date when enrollments begin for the federally run health insurance exchanges, created under the Affordable Care Act (ACA). No one really knows what to expect, but it could be far worse than advertised —and for a reason that has more to do with the federal deficit than health care.

What’s anticipated is unsettling enough. President Obama speaks of inevitable “glitches and bumps” in the implementation. Senate Finance Committee Chairman Max Baucus (D-Mont.) sees the possibility of “a huge train wreck” if the public isn’t adequately educated and prepared. Supporters of the ACA, especially Democrats in the Congress, are nervous about taking the blame if the exchanges don’t unfold as intended.

All these worries are legitimate. The American people, already burdened by a numbingly complex, inefficient and inequitable tax system, now wonder if an increasingly government-run health care system will follow suit. Many are concerned that some employers will dump their current health care plans and pay the relatively modest fine. There’s also worry that young people will opt out of the exchanges (preferring to pay the small penalty), leaving the exchanges with a disproportionately older and sicker pool. Then there’s the very real uncertainty surrounding the ACA’s ultimate cost — illustrated by the impact of Medicare alone, which the Office of the Chief Actuary of Medicare estimates could cost cost $10 trillion more than claimed.

Amid all these concerns and speculations, almost no attention is being paid to the opportunity that the ACA’s insurance exchanges could represent for state and local governments’ retiree health care programs. It’s time to think about it because the consequences could be far-reaching.

States in a deep hole

We already know that many state and local governments are in a financial hole that keeps getting deeper. A newly released report by the U.S. Government Accountability Office (GAO) makes clear that, absent significant reforms, the fiscal picture for most state and local governments will steadily worsen through 2060. A main cause, in addition to Medicaid, is the cost of health care for state and local government retirees. These largely unfunded obligations are similar to the pressures on the federal government to fulfill its unrealistic Medicare promises.

Doctors and the Means of Production

May 7, 2013• 15

By John Schumann, MD

It was bound to happen.

By “it,” I mean that the small group of speciality hospitals (usually orthopedic or cardiology-focused) across that country that are owned by doctors were going to have their “See! We Told ‘ya so!” moment.

Doctor-owned hospitals: How many are there? Two hundred and thirty-eight of them in the whole country (out of more than five thousand)–somewhere between four and five percent of the total in the U.S. (numbers courtesy TA Henry from this excellent piece).

What are the issues?

ObamaCare effectively bans doctors from owning hospitals in the U.S.
Those already in existence are grandfathered in under the law.
We know that doctor-owned hospitals have higher average costs–hence the rationale for banning them under a law with the intent of “bending the cost curve.”

Cue the iron-o-meter:

In the most recent Medicare data (December 2012 report on “value-based purchasing“), doctor-owned hospitals did well in terms of achieving quality milestones.

How well?

Really well. Physician-owned hospitals took nine out of the top ten spots in the country. And in spite of their low relative number, forty-eight out of the top one hundred.

A Tale of Two Births

Apr 19, 2013• 48

By David Overton

I have two sons, both healthy happy boys, both brought into this world in very different ways. I work in healthcare and like many readers of THCB, the business of healthcare is often viewed through the business lens. When we become the healthcare consumer, and are knee deep in the conundrum that is our healthcare system, the perspective changes dramatically.

Ezra was born in a major medical center, under the supervison of state of the art OB/GYNs, with all of the greatest technology, and under the care of the best nurses. My wife wanted a “natural birth”, so natural that I affectionately describe it as a “granola birth”. We were active duty military at the time so our choices were limited. She hired a birth doula, read Ina May’s “Guide to Childbirth”, chose to see a Women’s Health Nurse Practitioner for her wellness visits, and was adamant that she did not want an epidural.

As we approached 40 weeks the adventure began. At 36 weeks she could no longer see the NP, she had to now see the OB/GYN. The OB/GYN began to make reference to not allowing us to go past 40 weeks, it would “endanger the child”. My wife began to feel very uncomfortable and that she was slowly losing control of the experience she wanted to have. At the 40 week visit, the OB/GYN gave a very stern warning that an “induction was now necessary for the safety of the baby” regardless of there being no indication that Ezra’s wellbeing was compromised. We resisted as much as possible (with the help of no beds in the maternity ward) but at 41 weeks and 2 days, doctors’ orders brought us into the hospital for an induction.

Why Surgical Complications May Actually Hurt Profits Despite What You’ve Just Read

Apr 17, 2013• 4

By Eli Perencevich, MD

There’s a high-profile and important paper in JAMA this week by Sunil Eappen and colleagues. The study looked at surgical discharges during 2010 from a single 12-hospital system and came to the conclusion that admissions that include a surgical complication were associated with a higher profit (defined as the contribution margin) than admissions without complications. The authors conclude that this creates a disincentive for hospitals preventing surgical complications since they might see reduced profits as a result. This is a very provocative finding and it’s getting a lot of well-placed media attention, as you might expect. There is an important caveat with the study that I would like to highlight.

In the study, the authors report that admissions with surgical complications result in $39,000 higher “profits” if the care is reimbursed via a private payer and $1800 if Medicare is the payer. However, as Dr. Reinhardt correctly noted in the editorial,

“Allocating profit and loss is exquisitely sensitive to the many assumptions made in economic modeling and must be performed carefully to provide useful evidence about the financial ramifications of surgical complications and other services.“

His concern dealt mostly with how the authors allocated fixed costs in their calculations. My concern has to do with what the authors assumed happens to an empty bed once a patient is discharged in a US hospital.

Doctors: We Can’t Leave It to Business to Educate Us

Apr 5, 2013• 9

By Leslie Kernisan, MD

Recently I came across yet another media article with suggestions as to how digital health products can gain more widespread adoption. The writer notes that “we can learn a lot from the pharma and healthcare industries,” and goes on to discuss the importance of engaging the doctor.

This article, like many I read, doesn’t acknowledge the downsides of using pharma’s tactics.

I have to assume that this is because from a business perspective, there aren’t a lot of downsides to pharma’s tactics. Pharma, along with many other healthcare industry players (hospitals, insurance companies, device manufacturers) has overall been extremely successful from a business standpoint.

So if the intent is to help digital health companies succeed as businesses, then by all means one should encourage them to copy pharma’s tactics.

But as we know, what works for business has often not worked well for serving the needs of individual patients, or to society from a health services and public health perspective.