Skip to content

Healthcare, factory-style?

December 11, 2017

With repeal and replace of the ACA sure to be a hot topic in 2018, it is time to consider just what it could be replaced with, and why.

They say sex sells, and nothing is sexy about the coming revolution in healthcare models, such as mergers and reimbursement. That means no screaming headlines.

The Aetna-CVS merger has made it to the evening news, but less nationally reported are the myriad of hospital mergers occurring in regional markets.

Until yesterday, when the Wall Street Journal highlighted what is touted to be the largest merger to date.

Is bigger always better?

Unsubstantiated claims of improved care and lowered costs aside, is creating a mega-care health factory a good idea?

No one denies that for all the money we spend on healthcare, we aren’t getting the best bang for the buck. That has created a number of macro-solutions, like mergers and changes to how services are reimbursed.

As reported upon in this must-read 5/27/16  LA Times article by Michael Hiltzik, hospitals are merging into ever-larger monolithic entities at an alarming rate.

The article reports that in 2015 alone “…112 hospital mergers were reported nationwide…” but the expected economies of scale have either not been forthcoming, or have not been passed on to consumers. Patients also report feeling more like specimens than human beings in these large healthcare conglomerates.

In part this is being attributed to the recent emphasis on pay-for-performance (P4P) payment models  being instituted by both insurers and the Federal government,  the popularity of which was a selling point for the ACAm or Obamacare.

That model is based upon the idea that payment should be scaled to outcomes of treatment, rather than just quantity of procedures performed.

P4P  has been heralded as a replacement for the fee-for-service payment system which many people feel is at the heart of our overly expensive healthcare industry.

In theory it’s a good idea, but like most theories, the validation is in the results. The results of these mergers and changes to payment models are so far proving more detrimental to the quality of care than beneficial.

Anecdotally, Medicare patients and doctors who treat them are noticing ever-shrinking payments, often coupled to adjustments tied to quality.

Providers say “quality” means curing the patient, or at least substantially improving their condition so that they use less healthcare.

Unrealistic goals may worsen outcomes.

For instance, one diabetic Medicare recipient has seen the share paid to her provider shrink by 50% over the last year.  At first the physician absorbed the shortages, but she recently received a letter stating that the office would now be billing for some of the shortages. Hardly a surprise since the physician is being paid $20.50 on a fairly reasonable $75.00 office visit fee, and other previously paid charges are not being reimbursed at all.

When she began to ask questions, it appears that the provider’s payments are being docked for “quality reporting deficiencies”. She has been unable to ascertain what reporting her provider is or is not doing.

It does appear on the surface that because her underlying condition has not improved, her physician is being penalized with lower reimbursements under the Physician Value Modifier Program and/or the Physician Quality Reporting System, both of which are explained in this CED report.

Given that she has had diabetes since childhood, it is unlikely that it is going to improve now.

However, because she has had good medical care, she has not suffered from some of the more drastic complications like gangrene or blindness. She cannot afford to pay the additional charges, and the provider can’t work for free,  so whether that will continue to be the case in the future is problematic.

It seems obvious that further studies of the efficacy of P4P needs to be conducted at some length.

According to the above-referenced report by the Committee for Economic Development such studies as have been done to date have not proven that simply restricting payment and requiring optimum outcomes in every circumstance is the answer.

No one disputes that for the average cost of over $8700 per person spent in the U.S. our world ranking is below that of other countries who say they spend less than half that figure to achieve the same or better results.

Medicare itself may be partially to blame for that. Medicare is divided into four “parts” or plans:

  1. Medicare Part A is inpatient hospital coverage, plus skilled nursing, hospice, and home health care. This is the only coverage included in basic Medicare.
  2. Medicare Part B is for doctor visits and preventive services like screening tests, at approximately $138/month, plus a small annual deductible. It is supposed to pay 80% of the charges.
  3. Medicare Part C is the part that covers Medicare Advantage plans which are managed care  (PPO or HMO providers) provided by private companies. The typical cost is from $55 to well over $200 per month.
  4. Medicare Part D is drug coverage, and can also be purchased as a stand-alone benefit in lieu of Part C. Costs range from about $25.00 a month and up, depending on the plan’s private company administrator and the drugs covered.

Critics of Medicare feel that some Part C benefits such as routine dental and vision care should be a basic plan benefit, since the former can adversely affect nutrition and the latter can prevent accidents as well as allowing patients to read prescription labels accurately. Also not routinely covered is hearing care.

Currently access to some of those services might be available to people qualifying for Medicaid, but that adds yet another complicated system to the patchwork quilt of healthcare access.

But how does that affect “regular” health insurance?

Insurers aren’t stupid. They see that providers, while they may use ordinary insurance to defray the cost of serving the Medicare and Medicaid population, can be forced into taking a lot less. Thus the rate of reimbursement for private insurance or ACA policies has been going down as well.

That works for providers because the remaining balance owed can be collected from the patients themselves.

Some of the so-called “cadillac” plans that used to be available paid as much as 90% of covered costs. They cost more, but they also provided a lot more. Now it is rare to see a plan that covers more than 80% of the costs, with some of the more affordable bronze ACA plans down as low as 70%.

We all have heard about the gargantuan deductibles that effectively stop patients from even going to the doctor. Previously it was possible to purchase quite reasonably priced plans with deductibles as low as $500-1000 per person or $3,000 to $5,000 for an entire family.

Many people felt that the protracted fight over repeal and replace earlier this year didn’t allow for the investigation of actual improvements.

Hopefully, that will not be the case now that the immediate need to produce “tangible legislative results” will be  assuaged by passage of the tax cuts bill, assuming that does come to pass.

However, that assumes some modicum of common sense on the part of Congress, and that’s always an iffy bet.

From → op-ed

Leave a Comment

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: