Perverse Incentives

I think the WSJ misses the mark with this article. I have said many times that robust price and quality transparency tools would go a long way toward making healthcare more efficient by rewarding the most cost-effective providers and penalizing the inefficient. For expensive hospitalizations, Medicare moved toward package pricing in the early 1980′s with its DRG system. Private insurers pay for the vast majority of inpatient hospital procedures on either a case rate or per diem basis with special provisions for outlier cases.

For the patient, however, whether he has a high deductible health plan or not, it is still maddeningly difficult to find out the price (at contract rates) of anything ahead of time. I’ve heard from insurers that hospitals are reluctant to allow disclosure of this data. Employers tell me that insurers are the problem. There are often confidentiality agreements that prohibit disclosure. How willing are doctors to allow public disclosure of their contract rates for services, tests and procedures that are performed in the doctor’s office or a facility he owns?

Several of my colleagues go to doctors who don’t take any insurance. The employee submits a claim to the insurer and whatever it pays, it pays. Doctors could offer electronic or phone consultations, but state clearly up front that those services are not covered by insurance. They could post their price per unit of time but may wave the charge depending on circumstances. Once the patient’s credit card information is on file, billing would be a breeze.

When doctors refer patients to specialists, hospitals, imaging centers, labs, etc., they usually have no idea what any of them charge. If they did, they could make more cost-effective referrals. Where is the AMA and the rest of the doctor lobby on price and quality transparency? If you want the healthcare system to be more efficient and cost-effective, try becoming part of the solution instead of a major league obstacle to one.

(non physician) Just my opinion – managed health care does not work – for many reasons. Perhaps to some I am stating the obvious.

“The individual physician has virtually no opportunity to offer a different bundle of services for a different price. As a result, very little entrepreneurship is possible.”

BINGO. I don’t have a solution but one would think that a better “business” model would even the playing field. We are left holding the bag for a dysfunctional system that no longer works for Doctors or their customers.

Last November, I was scheduled for Carpal Tunnel -Fat Flap surgery. I had to go for the pre-op blood work and chest x-ray. I paid nearly $400.00 for the Doc to say my lungs are clear. For some reason my PPO didn’t pickup as much of the cost for ‘that’ x-ray. The hospital bill (OR ) – the original bill – was $8000.00 – I paid around $200.00. Baffles the mind.

My hand surgeon, who is excellent, didn’t get much for his time. For his skill, I would have paid the full amount. (bet that is something you Doctor’s don’t hear often)

Keep up the great blogging.

Thinking radically I would echo some common themes of this blog. First, I feel we have more than enough money n the system, the problem is distortions between those paying and those receiving funds for service.

My first action would be to allow the US government to negotiate drug prices. This will become the de facto price for a drug and published.

I would eliminate DTC television ads to slow demand. Drug companies would be limited to one drug rep per practice to cut down on intrusions and drug reps would be limited to pens, literature, and samples. Drug companies could not repatent existing drugs i.e. Nexium, nor could they mix two existing OTC drugs to gain a patent. This will force innovation, and yes it is working in Europe.

On the hospital side they would be forced to produce a single pricing list for all procedures based on their current best price. This price would be available to everyone, no more suggest retail with a different markdown for each consumer. This should produce transparency.

Non-profits would be forced to open their books, including executive compensation. Excess funds, not earmarked for capital improvements, would have to used to eliminate the debt of those unable to pay. This should cut down on excessive executive pay and allow the community to see just how the hospital is spending their untaxed dollars.

Legally, all claims against a doctor, not paid by insurance, would first be reviewed by a panel composed of an attorney, judge, and doctor, all with malpractice experience. Their finding could be appealed. This should cut down on frivolous suits, give doctors a cleared picture of the process and potential outcomes.

The lowest reimbursement for a doctor will be used to calculate a new rate based on a 24 patient day versus 32. While this should result in an increase in income and better lifestyle, doctors will be held to this by the insurance companies. Doctors will then need to welcome PA’s and NP’s into their practices in order to provide coverage for their patient base. Doctors will be allowed to participate in the profits of the practice as a whole. Nurses are trained to care, doctors are trained to treat. We need a little more caring in the system, and more timely access.

While far from complete, this is where I would start in my program to cut cost and provide transparency to the medical system If you are going to dream, dream big. If there was a magic bullet, someone would have already thought of it.

Steve Lucas