Image Courtesy of SqueakyMarmot on Flickr

“If you knew what the price of items were at Wal-Mart before you went into the store to buy them, it would put Wal-Mart out of business.”

That has to be one of the single most insane statements ever written.Yet that’s exactly what many doctors and hospitals would have you believe about healthcare. If you knew the price before you went into the doctors office or hospital, it would put the healthcare provider out of business.

Excuse me?

No. It would not. In fact, it might make the patient consider whether they needed that service or not. It might make them question if they really need all 8 prescriptions.It might make the provider find ways to offer the procedure more cost effectively as John Stossel so elegantly pointed out about Lasik eye surgery.

When someone hesitates to tell you the price of an item, why do they do it?

4 Reasons Why People Hesitate to Tell you the Price:

• They are ashamed at having to charge that much
• They do not believe the product is worth the cost
• They prefer you make an emotional commitment to purchase before knowing the price
• They simply do not know the price (the fallback reason in healthcare)

Fortunately, rational thought does occasionally prevail. The recent post from KevinMD.com points out (from the physician’s perspective – no less) that price transparency won’t effect health care costs.

It won’t adversely impact the cost of healthcare. It will force providers to be more cost effective and up front about their costs. It will force consumers to be more selective and engaged in the purchasing decision.

But will knowing the price put healthcare providers out of business? Not likely. In fact, knowing the price seems to be working wonders for Wal-Mart and…oh…just about every other business model in the U.S.

Image from Mike Moreu

As long as we’re herding cats on healthcare reform, let’s ask a critical question…What is the timing for the changes being made for healthcare reform? Not “when will it get passed” but rather “when will the changes, whatever they end up being, go into effect”?

Logistically, it’s a nightmare.

Healthcare Reform Will NOT be here by January 2010

Employee populations have already been underwritten for 2010. Rates have already been set. Policies are already in place. Open enrollment has already begun. Surely no one would jump in front of that rolling momentum even though the government has the authority to do so. It takes a full year to do all that needs to be done for a health plan when it is business as usual.

[cats like big balls of yarn, and this is a BIG one]

Imagine the implications of just two details…

1. Insurers Have to Cover Pre-existing Conditions
2. Insurers Cannot Drop Clients with Extreme Expenses.

In short, the very business practices on which insurers, doctors, hospitals and every company that provides health insurance have built their business are undermined. Wow!

[think two wild feral cats left to their own devices in the barnyard]

Insurance companies would be SCRAMBLING…

• to change rates.
• to underwrite to new standards.
• to negotiate new provider agreements
• to develop new policies.
• to train people on the changes.
• to print new materials.
• to engage countless attorneys to understand and interpret changes.

[think of the crazy old cat lady with 72 cats in her one-bedroom 650 square foot apartment]

At the same time, employers would be scrambling to understand and reevaluate their business model as their health plan costs changed. They would be looking to alter their plan in an effort to control their rates and protect their business. They would be struggling to educate their employees. And struggling to meet a bottom line with new rules on one of their single largest line item expenses – health insurance.

[think of the animal shelter stuck with the crazy cat lady's 72 cats - what the hell do we do with these?]

Docs and hospitals and other care providers are little better off. They would have new rules on what is or is not covered. They would be left to figure out how much they could expect in income on those “Good Samaritan” services they had been providing for “free”. They would have new systems and rules to evaluate. Their very business model would shift.

[think of the vet trying to provide services out of the goodness of their heart, but faced with the financial implications of having to spay ALL 72 cats]

Cats would be living with dogs. And January 2010 would be here.

A Similar but Not Related Video that Conveys my Thoughts on This…

As of April 1 in Illinois, they have taken step 1 in protecting the uninsured. A new law caps uninsured patient bills at cost +35%.

Hooray! A good first step!

Now don’t rest on your laurels, Illinois.

Cost plus is great if you can understand the “costs” portion, but most patients do not. Step 2 is to root out the inefficiencies and poor procedures.

For example, it’s reasonable to charge someone an amount for a service well done and efficiently. But for the patient who gets 5 nurses at bedside, 3 specialists and the whole battery of tests to determine that he has a splinter, cost plus is not effective. Cost plus just rewards the hospital with an amount they can pursue aggressively and justifiably in collections. The patient may still be exposed to inefficiencies like improper diagnosis, inappropriate treatment and inefficient practices.

Step 1 is easy. Now for the hard part. Step 2 – improve the standard of care.

Still, congrats to you Illinois!

Thursday’s Healthpopuli post caught my eye – Hospitals’ fiscal health is eroding. More than 50% of hospitals had a negative margin in Q4 2008. Sounds like the hospitals need wellness and disease management programs to address their ailing health just like patients are getting.

The main reason cited in Healthpopuli for the poor fiscal health is that admissions are down. Another oft-cited factor is the proliferation of HDHP (High Deductible Health Plans) where consumers are left with the first $1500, $2000 or even as much as $5000 of their healthcare expenses within a given year. 

It’s easy to place the blame on fewer people coming through the doors, but who knows, maybe we’re getting healthier or just using better judgement about what constitutes a needed procedure. Maybe our wellness and DM programs are working. Insurance companies and self-insured employers should be jumping for joy at the news because that SHOULD translate to lower healthcare expenses for them in the form of fewer claims – at least in the short term. Hospital should be taking a collective sigh of relief that they can finally slow down on adding yet another massive capital building project to meet the ever-increasing demand. That might save them some of their cash and get them closer to being profitable again.

It’s easy to place the blame on consumers not paying their bills, but perhaps it’s an opportunity for hospitals to take a good hard look at their processes and procedures and address ineffiencies. In reporting a negative earnings period, one hospital identified five reasons they were unprofitable, and there is no small amount of irony in the fact that they attributed $200K of their $1.6M shortfall to overruns in their self-insured health plan for the hospital as an employer.

With the average deductible rate topping $1000 for the first time in history and 20% of employers saying they are considering dropping their healthcare plan, it looks as if simply raising the rates at the hospital is not going to be a solution. Demand is already down. Payment is already off. Raising rates will only further stifle demand and higher rates will only result in increased non-payment. Blood will not flow from a stone no matter how deep you cut it.

Just as a physician must not allow themselves to treat the symptom, but instead identify the disease, hospitals find themselves in the same position. The health system as a whole is diseased – from patient, to insurer, to provider to government. As patients, we are being forced to take more responsibility through increased share of the burden of the costs, wellness and disease managemet programs. Insurers have work to do as well (that’s another post). Governement is studying where they need to go. Hospitals need to begin to look at what they can do in terms of equivalent wellness and disease management programs for their facilities. They need to trim the fat. They need to be more efficient. They need to proactively seek out better long-term solutions instead of resorting to quick fixes as the insurance company all too often forces them to do.

The poor fiscal health of hospitals is not the cause, it is the symptom. Time to get the diagnosis right, start treating the disease and not fixate on the symptoms.

And no sooner than I hit the publish button on this post, Jen McCabe Gorman tweets EXACTLY what I’m talking here on Henry Ford Clinic.

So it would appear that I’m not the only one less than thrilled about the balance billing practices of some hospitals:

Here’s what the WSJ had to say.