Turtles and Tortoises

Turtle vs. tortoise.  Quick, what’s the difference?

Turtles spend most of their time in the water; tortoises on land.

There is a relatively long list of two things that seem the same, so much so that many of us use the words interchangeably, but have some meaningful differences.

Alligators and crocodiles

Cement and concrete

Champagne and sparkling wine

Ethnicity and nationality

Mugs and cups

It would make for a great casual dinner conversation.  Give a pair of words and note the thing that makes them different.  Or a drinking game if you live in a fraternity where everything is a drinking game.

My favorite couplet:  Great Britain vs the United Kingdom.  The latter contains Northern Ireland while the former does not.

Understanding the nuances between words that look like synonyms, but aren’t quite the same, will come in handy as the discussion around universal healthcare heats up with the coming political season.  It might not matter much if you know whether your road is solid (cement) or includes stone, rock and sand as well (concrete), but it may matter a lot what someone actually has in mind when they advocate for a ‘single payer system.’

The Medicare for All Act of 2019 (HR 1384) making its way through the House – not going anywhere in this Senate – is one such animal.  It is a single payer proposal, but a specific form of such.  And the details matter.  This proposal is radical, even by global standards, for a single payer model.

It is funded at a fixed amount allocated by Congress, has no role for private insurance nor any regional governance.  Further, it has no patient cost sharing – no participation in the premium, no co-pay, no deductible, no co-insurance.  It also has a very broad scope of coverage, including dental, vision and long-term care benefits.

It probably should be renamed ‘Medicaid for All’ because, but for everything being controlled at the federal level, it functions more like Medicaid than Medicare.  But that label doesn’t play as well in the marketing campaign, does it?

I’ll call my sparkling wine ‘champagne’ even if it was not made in that specific region of France because it just sounds better.

Canada, the idea that comes to mind for most people when you say, ‘single payer’ – maybe because it is the one other country most people can find on a map – does not have a single national insurance system.  Provincial governments receive per capita grants that they administer within the federal rules.

The Commonwealth Fund did an analysis of the ‘single payer system’ in 12 high-income countries.  There is variation across several dimensions – policy setting, administration, benefits coverage, and patient cost sharing.

Yes, they are all far more government driven than we are currently, but as with ‘ethnicity’ vs. ‘nationality,’ at times the subtle differences matter a lot.  Just a little tip in case you want to press in a little deeper in coming days as this idea gets tossed around.

The Easy (Blue) Answer

Imagine I want to buy your house.  And pretend you want to sell it to me.  We sit down and discuss the price, but you just want more than I want to pay.  We can’t reach a deal. 

So, I go over to your next-door neighbors.  We sit down over an iced tea and talk turkey.  Maybe they are more motivated than you, maybe they are ready to move, but regardless of why, they agree to a much lower price.

Fine, you say, buy their house.

But I want your house; I just want it at their price.  Their house is in the same neighborhood and pretty similar to yours. Since you are being unreasonable, I should be able to just negotiate terms with them and then get your house for that price, right?

That is effectively how the Blue Cross Blue Shield plans would like to solve the thorny surprise billing issue. 

Their association, which represents 36 independent BCBS companies covering almost one in three Americans, recently sent a letter to Congress asking them to establish a benchmark for what out-of-network provides would be paid.  The answer, they pose, is simple – if someone is OON, they get paid Medicare or the in-network rate, whichever is higher.

How thoughtful that they threw in that last part.

They want the government to develop this ‘methodology’ so it is fair and standard (again, how nice), but that sort of glosses over the most salient input to the fair and unbiased methodology – which is the in-network rates THEY happen to have negotiated. 

Like a wolf wearing a wool coat, this is price-fixing dressed up in a thin disguise.  Take out the 117 million people covered by Medicare and Medicaid and the Blues have about half of everyone who remains…and a far greater percentage in many markets.  When you have that big a share, you set the market price.  The Feds, in this model, are just running the spreadsheet.

As we’ve discussed many times, this issue needs to be solved, is gaining political traction, and is complex and messy.  Which is why simplistic, one-sided solutions aren’t the answer.

How about an employer association propose that if they don’t like the premium increases offered to them by their carrier, they can just force the carrier to agree to pricing some other insurer offered them? 

Or that I can buy your house at the price I negotiated with your neighbor?

Same idea.

Eating My Cake

Last week, we took a look at a recent RAND study that showed hospital pricing for commercial insurers to be, on average, 2x what Medicare pays for inpatient services and 3x on the rapidly growing outpatient business. 

And that got me thinking about my grandmother’s chocolate cake and the first meeting between my wife and my brother.  No, I have no idea how the neurons in my brain are organized.

We had been dating long enough that it was time to take Justine to her first extended family gathering.  When it was time for dessert, she, as the guest of honor, was ushered to the front of the line.  There was Mammaw’s famous cake with the more famous fudge icing.  It would change your life.  She took the knife and started cutting out the first corner.

Which was when she first got introduced to the depths of the redneck in my brother Chris.  With all the burly bravado he could muster (he has perfected this mode), he stepped in, took the knife out of her hand and pronounced that she might soon be the newest member of the family, but she had not yet earned a corner of the cake.  See, the fudge was a little thicker in the corners, so those had long ago been claimed by various family members, of which he was one.  She was not about to take what belonged to him.

That is a bit of how physicians must think about the hospital pricing levels revealed by this study.  There is only so much cake and when they use their monopoly pricing power to take more than they should, they are taking it from someone else…and that includes your practice. 

I want to challenge you to not just read this as another data point, another statistic.  I want you to think very intentionally about the strategic opportunity this represents. 

First, note the sub-title in the RAND report: ‘Findings from an Employer-Led Transparency Initiative.’ The people behind this are the employers who pay most of the bill for over half of all Americans.  They are fed up and looking for better answers.  Get their issues firmly fixed in your mind, let this drive your thinking.

Second, you now have a very clear target for your business case.  Your services – your professional fees, your ancillary services, your ASC – compete directly with the hospital’s outpatient business.  If you can’t deliver your services at a material discount to these high hospital prices and still make good money, you’ve got big problems. That should be easy enough.

Third, and this is where docs struggle, you have to go tell your story to everyone that matters – the commercial payers who sit in the middle, the brokers and consultants who advise the employers, the employers themselves.  Yes, inertia and incumbent power are against you. But you have a better story, a story the employers want to hear.

You are effectively giving them back a corner of their own cake.

Big Flashlight

Lumens are the standard measure for light brightness and a typical flashlight can range from just a few lumens for one of those mini, key-chain gadgets to around 1,000 for a really good light.  Get into the kind emergency responders use and you’re talking up to 3,000 lumens. 

Then there is the Torch, which claims to be the world’s most powerful flashlight, weighing in at 4,100 lumens.  The company’s website shows a video of someone setting paper on fire with the beam.  Another shows a lady scrambling eggs with the thing.  A multi-functional camping tool.

It also sounds like the recent RAND report on hospital pricing.  It is shining a really bright light into some dark places.  Things may get scrambled or even set on fire.

RAND got their hands on a big ‘ol pile of commercial claims paid to hospitals between 2015 and 2017.  These were not Medicare claims or charges, but the amounts actually paid to hospitals by commercial payers for both impatient and outpatient services.  Most of the data came from self-funded employers who pay their own claims; some came from the All Payer Claims Databases mandated by Colorado and Indiana; a few payers participated by sharing their numbers. 

In all, the study had claims for 330,000 inpatient stays and 14.2 million line items for outpatient services.  These represented $13.0 billion in allowed amounts – $6.3 billion inpatient and $6.6 billion for outpatient – across 1,598 hospitals in 25 states. The RAND folks then also repriced every one of these claims as if it had been paid by Medicare, creating a very robust comparative data set.

Stop and understand that this kind of information – actual negotiated and paid prices by commercial payers – has been shrouded in more secrecy than the Coca-Cola formula.  RAND is shining its mega-lumen data into a dark corner.

The study found that hospitals in the study were paid, on average, 241% of Medicare rates in 2017, up from 236% in 2015.

[Pause for you to confirm your commercial rates as a multiple of Medicare.  Yep, no where close to 2.4x, are they?]

Another recent study put the average rate in 2012 at about 175% of Medicare.  Now we’re at 241%?  Man, those reform strategies to control cost are spectacular, aren’t they?  Failures, that is.

To rub salt in the wound, while the impatient rates were right at 2 times Medicare, hospital outpatient rates were almost 3 times Medicare (293%).  And where is volume moving? To the outpatient setting.

There is more to unpack here, so we’ll come back to it next week.  In the meantime, I’ll just let you soak over the Memorial Day weekend in the fact that while your payers have told you that you are being unrealistic, demanding and petulant asking for that highly unreasonable 125% or 130% of Medicare, the hospitals are being told, ‘300% and not a penny more…until next year…we’ll give you more then.’

Yeah, this stinks.  Enjoy your holiday.

Making General Groves Proud

With apologies to Nobel Prize winner Richard Feynman, most physicists are not known for their writing skills.  After all, these are the kids who picked time in a lab over reading Shakespeare.  Though Feynman’s personal website has a section alongside his textbooks and scientific publications for his ‘popular works,’ he holds no candle to fellow physicist Henry DeWolf Smyth when it comes to writing for the general public.

Smyth’s one big hit was released August 12, 1945 and people gobbled it up.  ‘Atomic Energy for Military Purposes’ just sounds like a ‘can’t put it down’ page-turner, doesn’t it?  Well, the US had just dropped two nuclear bombs on Hiroshima and Nagasaki the week before.  Smyth’s report was the official story of the incredibly secret Manhattan Project.

One of the amazing things about the project was the government’s ability to keep such a massive venture from becoming exposed.  That was mostly due to the relentless, paranoid secrecy of Smyth’s boss, General Leslie R. Groves, the man in charge of all Army activities related to the Manhattan Project.   A lack of cell phones and no TMZ website helped, but Groves took intelligence secrecy to new heights to keep the existence of Manhattan, much less the full scope of its work, from virtually any outside knowledge.

Hospitals and payers must have studied his tactics.  For sure, they must have his famous sign from the Los Alamos lab (What you see here, what you do here, what you hear here – when you leave here, let it stay here.) hanging in their offices.

You see, the prices negotiated between payers and hospitals have forever been as closely guarded secrets as Robert Oppenheimer’s lab in the desert north of Santa Fe.  If we had been able to keep patient health data as closeted as they have been able to keep the prices actually paid to hospitals, we’d never have needed HIPAA.

But, the Trumpsters are proposing to blow that wide open. 

As of this past January, hospitals have been required to post their retail pricing.  People know that is a waste of time because almost no one pays what is on the charge master. 

That appears to have been just a distracting opening bit to soften them up, a favorite negotiating tactic of the President.  In March, the Department of Health and Human Services published a proposed rule requiring an additional disclosure, the one that matters – the price actually paid by commercial payers, the negotiated contract rates.

Public comments were due last week, though an extension has been requested.  Of course, the incumbent stakeholders – hospitals and payers – are forecasting calamity of Biblical proportions if such proprietary trade secrets were made public. Prepare for a locust swarm, they warn.

But as we are seeing, price transparency is a consistent lever the President and his team are bringing up against healthcare costs (hello, pharma industry).   If this sticks, and I would not bet against it, physicians are likely not far behind.  Might be worth thinking about.

Three Little Wishes

Our last post touched on the progressive idea of ‘Medicare for All’ running through some of the Democratic presidential candidates.  Then last week, President Trump’s Department of Justice has formally asked an appeals court to toss the Affordable Care Act – lock, stock and barrel. 

There you go…about all you need to know about healthcare politics this far ahead of the election calendar. 

Right now, more real people care about the politics of ‘Game of Thrones,’ don’t they?  Who will rule in the end…Cersei Lannister or Daenerys Targaryen? Or does Jon Snow end up on the Iron Throne?

Side note…our politics would be more fun if the candidates skipped the ads and debates and instead just battled it out on flying dragons.  If you don’t get the reference, you are one of the 412 people in the country not up on GoT.  Good for you.  You have a life.

Speaking of real people, recently the Kaiser Family Foundation asked a bunch of them what their priorities were for healthcare policy.  Three pretty straightforward desires came to the top of their list.

First, the folks want the government to do something to lower and control drug costs.  Given what has happened over the past several years, it is no surprise this one is atop the list.   As they say in the south, ‘pigs get fat and hogs get slaughtered.’  Whatever happens, and it seems something will even before the election, the pharma industry brought it on themselves.

Right behind that issue was the runner-up – continue the insurance protection for people with pre-existing conditions.  I long ago got out of the prediction business, but this is such a popular idea that it is hard to see any acceptable policy proposal from either side getting far without some version of this provision.

Third, people want the surprise billing (out-of-network providers) issue fixed.  Yes, this is a complex issue; yes, many of the proposed solutions carry more unintended consequences than you can imagine, but this was a poll, and this is what the people want.  Someone else can figure out the how of it all.

Those are not easy, for sure, but that is the list. 

I get that politicians looking for donations and momentum and soundbites like big, bold ideas that get their faithful all worked into a lather.  But the bulk of the folks aren’t too excited about the ‘blow it all up’ or ‘take over everything’ ideas from either side.  Just these three wishes and they’re good.