The Wide Disparity of Pricing for Healthcare Services is Just a Taste of the Problems Yet to Come

This past week, ABC News reported on the practice of the Northside Hospital System in Atlanta of charging outrageous prices for their services. They cited the bill of one patient where they did a line by line analysis of charges. What they found were many examples of line items for which the patient was charged exorbitant prices for things that the hospital could purchase through its suppliers for a tiny fraction of the cost. One of the most glaring examples was a pill for which the patient was charged several hundred dollars in spite of the fact that the hospital could purchase it for less than a nickel.

Hospitals across the country engage in such pricing strategies, to one degree or another, in order to make up for losses as a result of low reimbursement rates by health insurance, managed care companies, Medicare, and Medicaid and also as the result of the cost of doing business in a dysfunctional system.

This practice is considered a strategy of necessity by providers of many healthcare services simply because that is the way the fee-for-service, zero-sum billing game has evolved. Payers establish reimbursement rates that enable them to stay in business, which means making a profit. And, do not be confused by hospitals that claim to be not-for-profit for even these providers must be able make money if they want to stay in business. The only differences are the uses of the profits and the bank accounts into which the dollars must inevitably be deposited.

Every billable medical or hospital procedure results in high-stakes competition to determine where those dollars will end up. Health insurance, managed care companies and other payers set reimbursement rates and also make providers jump through hoops as part of the claims processing strategy to look for any reason to justify denial of the claim. This forces providers to develop coding and billing strategies to optimize their revenue generation and also requires them to file and refile claims. It is a zero-sum game in which there are winners and losers in the competition for each and every healthcare dollar, not counting the patients who almost always are losers in the billing game.

What charges are not reimbursed by the various third-party payers are then billed to patients. Some of the money is eventually collected and much of it must be written off. Families burdened by outrageous medical and hospital bills is the single greatest cause for most of our nation’s personal bankruptcies. The write-offs necessitate new and more innovative charging and billing strategies. It is a vicious circle that drives up the cost of care enormously. Although we have seen some improvement, in recent years, in the rate of increase of aggregate healthcare costs, for at least two full generation the rates of increase have been substantially higher than the Consumer Price Index (CPI). There have been many years when the rate of increase has been double- or triple the rate of the CPI. Higher costs require providers to increase prices, which requires insurers to increase premiums on a merry-go-round that is anything but merry to the patients.

When we think about the number of healthcare dollars that never end up in the hands of providers of actual medical, hospital, or ancillary care, it can be a staggering amount. The insurance, managed care, and government payers always underestimate the percentage of dollars that are allocated to the administration process relative to those spent on direct care to patients. That cost is not just the cost of doing business for the private and public payers (which for the private payers must include profits) it also includes every dollar spent by providers for the purpose of coding, billing, claims processing, and management of receivables.

It truly is an outrageous process but it is the inevitable companion to the practice of fee-for-service (FFS) medicine in a market driven by health insurers and other third-party payers and processors.

The process is so complex that, in spite of claims on the part of health insurance and managed companies to the contrary, there is no accountability. Incompetent and inefficient providers pay no penalty for their poor performance and both the best and the worst providers survive no matter what the level of patient satisfaction.

Free market forces, in the true sense of the concept simply do not function in healthcare.

The biggest problems in healthcare in America, whether speaking of quality, cost, or access are the inevitable outcomes of a system driven by health insurance, Managed, care and other third-party providers; both public or private.

That Obamacare or, more correctly, the Affordable Care Act, (or more appropriately the Affordable Health Insurance Act) commits us to a health-insurance driven market is a recipe for continuing and escalating disaster. The motivation of Obama and the members of congress who finally chose to act was admirable if misguided. We have tried to fix a system driven by forces that even our smartest people seem unable to comprehend with a solution that can only aggravate an already tragic reality.

It is, truly, a national embarrassment that so many citizens of what we consider to be the richest and most powerful nation in the history of the world must deal with illness and injury of themselves and their families without access to what we also describe as the highest quality healthcare on the planet.

What makes the situation most ludicrous is that it is our stubbornness and our prejudices that keep us from embracing a solution that will provide comprehensive healthcare and prescription drugs to every single American man, woman, and child, without relying on socialized medicine, at a cost that will save the American people trillions of dollars.

My book, Radical Surgery: Reconstructing the American Health Care System, lays out a healthcare plan that will give us everything we need, at a reasonable cost, without any of the things that the American people seem to fear, pathologically.

Don’t believe me? Check it out!

Are Free Market Forces Good for Healthcare?

Contrary to popular belief, the problems with the American Health Care System are not the result of market forces run amok. In fact, just the opposite is true. The American health care system languishes because the forces of the free market are unable to exert their influence. Imagine, if you will, how our free market system would look if it functioned like our health care system.

Imagine that you are sitting at home, watching television, and something feels out of sync. You can’t put your finger on what it is you are feeling but it is nagging at you and keeping you out of sorts. After a few days, the problem seems to be worsening and you are really beginning to worry. Finally, you pick up the phone and place a call to your local retail professional and make an appointment.

On the appointed day you arrive at your local mall or shopping center and you describe your symptoms to your retail professional. Your retail professional listens intently, asks a few questions, and then diagnoses your problem and offers a treatment protocol to make you feel better. Your retail professional tells you that the problem is that your home entertainment system is not meeting your minimum daily requirements. As a solution, your retail professional tells you that what you need is a new home entertainment system with state-of-the-art technology.

Now, it just so happens that you retail professional has the perfect home entertainment system to sell to you and guess what? It’s covered by your retail insurance policy. In checking your benefits it turns out that you’ve already satisfied your deductible so your insurance is going to cover eighty percent of the total cost of your new system.

What your retail professional may not explain to you is that your home entertainment system exceeds the usual and customary charges for such items so the insurance is not going cover your retail professional’s full cost. She’s not worried, however, because there are a number of accessories she can sell to you that are covered and these will more than make up for the difference.

I know this sounds a little silly, but think about how our free market economy would work if the merchants with whom we do business would decide for us what we need and how much we are going to pay, and that we would be happy to accept their decisions without question because our insurance is going to pay for the merchandise, anyway. This is exactly how the healthcare system works today and we wonder why costs continue to rise at or above the rate of the Consumer Price Index.
The problem with the American health care system is not that doctors make too much money, the problem is that the incentives in healtcare reward the wrong behavior. The problem is not that health insurance companies, managed care, Medicare or Medicaid absorb huge chunks of our health care dollar, the problem is that these entities exist at all.

Think about it for a moment. If we really want to provide universal health care what value do health insurance, managed care, Medicare and Medicaid contribute? Don’t these entities exist to restrict access to care to only those who are eligible for coverage? Don’t these entities exist to limit care to only those services that are covered by our schedule of benefits and for which we have paid?

If we want to provide comprehensive health care to all Americans we have to change the way we think about our health care system. There is a solution but it resides outside the boundaries of conventional thinking.

Visit my website and check out my book, Radical Surgery: Reconstructing the American Health Care System. In fact, tell all of your friends about it.

ObamaCare Approval Rating Continues to Fall

Over the last few months there have seen and heard numerous reports that the public’s approval rating for ObamaCare, more appropriately referred to as the Affordable Care Act, has been falling steadily and now rests well below forty percent.

This should come as no surprise. Attempting to fix the American healthcare system by relying on the health insurance industry is like trying to fix Congress by making it easier for people to get re-elected.

The best we can say about the Affordable Care Act is that it was a nice try but one that was doomed to fail because its design was driven more by political considerations than by an understanding of how the healthcare system actually works. All ObamaCare really accomplished was to add another layer of complexity to a system that was already unimaginably complicated.

Until we are ready to acknowledge that health insurance is one of the biggest reasons why our healthcare system fails and, of course, that human beings actually deserve medical care when they are ill or injured, our tinkering with the healthcare system will only make it worse.
Focus on health insurance, if you will. Imagine for just a moment that we all could agree that there ought to be a way to see that all men, women, and children have access to health care when they need it.

Now, think about what health insurance actually does. The health insurance industry restricts access to care to only those people who are covered by a health insurance policy and it limits care to only those services that are specifically covered by that policy.
Assuming, again, that we want everyone to have access to healthcare, why would we be willing to pay the health insurance industry hundreds of billions of dollars to restrict care to a special few individuals and to limit care to only services that have been specifically identified?

And, yes, I’ve heard the argument that we over-estimate the amount of money siphoned off by the health insurance industry. Just the opposite is true. We grossly underestimate the degree to which the health insurance industry contributes to the rising cost of healthcare. The cost of health insurance is not just the result of that portion of our premium dollars that are retained by the health insurance industry after payment of claims to providers.

The cost of health insurance also includes every dollar that is spent by doctors, hospitals, nursing homes, out-patient surgery centers, rehab facilities, lab and imaging centers, home health care providers, and hospice providers to manage the process of filing insurance claims and fighting to get the paid what they are rightly owed.

We could also add the expenditures by employers as they manage the process of selecting health insurance or managed care providers, managing the enrollment process, and mediating grievances when their employees are unfairly reimbursed for care.

And, we could factor in how much the health insurance industry pays to influence legislators. And then, of course, there is Medicare and Medicaid.

If we could recoup every healthcare dollar expended by people like you and me, and also by our employers, that does not end up in the hands of actual providers of care we could afford to provide comprehensive healthcare and prescription drugs to every American man, woman, and child.

And, if you want “to hear the rest of the story,” as Paul Harvey used to say, take a look at my book, Radical Surgery: Reconstructing the American Health Care System Continue reading

Welcome to The Leader (Thinking Exponentially: Leadership, Education, and the American Dream)

Thinking Exponentially: Leadership, Education, and the American Dream is a blog by Mel Hawkins, a writer and retired leadership consultant.

The mission of this new blog, which will be replace The Positive Leadership Blog and the Reconstructhealthcare Blog,  is to encourage its readers to think exponentially (outside the box) about the challenges facing the U.S. in this new Twenty-first Century. The blog will focus on the issue that the number of Americans who have lost faith in our democracy and who no longer believe in the American Dream has placed our nation in the greatest jeopardy we have faced since the Civil War, almost 150 years ago. Articles on positive leadership, education, healthcare, and the American Dream will be offered.

Literally tens of millions of Americans have lost their hope and faith in the American dream and no longer believe that they have control over their lives and destinies. These American men and women are becoming disenfranchised and they are disengaging from active participation as productive citizens at a time when our nation can least afford it.

Liberals argue that it is unconscionable to cut these people off. They push to find new sources of revenue in order to continue to support the poor and the disadvantaged. They suggest that such revenue must inevitably come from the increased taxation of affluent Americans. Under this leadership, federal spending continues to rise.

Conservatives counter that we need to shut these men, women, and families off because the nation can no longer afford to leverage our children’s future in order to care for the dependent. These men and women campaign against any and all tax increases, preferring instead to make drastic cuts in such programs as unemployment compensation, Medicaid, Medicare, and Social Security. That most Medicare and Social Security benefits flow to Americans over 65 years of age who have labored over their lifetimes to earn such benefits is nothing short of tragic.

Sadly, neither the liberal nor the conservative strategies of the past will work in the Twenty-first Century. They are as outmoded, today, as the horse and buggy were a century ago.

When Governor Romney, during his 2012 candidacy for the presidency, suggested that 49 percent of Americans are dependent on the government, he was referring not only to the disenfranchised but also to that segment of the population that hovers treacherously close to the line that separates the hopeful from the hopeless.  What does it say about a society that is perfectly willing to write off virtually half of its people as not worthy of our concern and attention?

How can we possibly think we can compete effectively with the China and the other players in the international economic arena if we are literally dragging half of the American people along behind us?

What we need, instead, is to find a way to re-engage the disengaged. We need to get them off welfare and into decent paying jobs with which they can support their families. We need to re-sell the American dream to these Americans so that they will not only strive to achieve the dream for themselves but will also encourage their children to pursue it. We need these mothers and fathers to teach their children the importance of an education so that those youngsters arrive at school with both a motivation to learn and with parents who are prepared to stand behind both their children and their teachers.

We need to find a real solution to the problems of access to quality medical care rather than the well-intentioned but impossible Affordable Care Act.

Even though China, Europe, India, Japan, and other Asian rim nations are challenging us on every front, economically, educationally, and politically, our enemy is not the people of other nations. Our enemy resides within our own hearts and minds, and we must find solutions in those same hearts and minds. Our problems as a nation flow from our prejudices and our fundamental assumptions about the universe and mankind’s place therein. Our enemy exists within our unwillingness to embrace our diversity whether measured by the color of our skin, the languages of our cultural heritage, by our religious faiths, or by our view of the universe. We must challenge one another to embrace our diversity. That diversity is and has long been our nation’s greatest strength.

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Subscribe to this blog,

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Read the books by this author that lay the foundation for a strategic plan,

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It is not our futures we are talking about. We are talking about the futures of our children, our grandchildren, and our children’s grandchildren.

None of us can accomplish much by ourselves but if we come together there is nothing on this Earth that can stop us.