Healthcare is most like a utility. It has a major effect on every person in your community and it is as important as water and electricity. It will be critical for many of us at some time in our lives. That is where the similarity ends. You can understand how much water and electricity will cost for your family. I have been part of the system for 40 years as an internal medicine doctor, and when I go to the hospital to have a procedure, I have no idea what it will cost. Unlike water and electricity, the costs differ depending on which facility you select and your insurance status. Most disturbingly, the price is highest for those people who don’t have health insurance.
Prices vary dramatically within the same city. In Dallas the price of knee surgeries there varied from $16,772 to $61,584. In Boston, hip replacement charges ranged from $17,910 to $73,987. Can you imagine? That would be like paying $20,000 for a car on one lot and $70,000 for the same car on another lot! Most patients and purchasers have no idea of how to deal with this issue. Employers do have a tool to protect themselves. Most larger employers are self-insured. That means they are responsible for all healthcare costs. They engage an insurance company to administer the claims for care. The “insurance companies” are administrators. They no longer provide insurance.
Your employer can engage the local hospital systems in direct contracting. This negotiating process gives the employer the opportunity to learn the pricing for a particular episode of care like a knee replacement. These are called bundled payments. They include everything that occurs in a knee replacement- hospital room, operating room, surgeon, anesthetist, etc. Patients should know that the best care is the least expensive care. The facilities that are efficient and prevent infections, blood clots, and readmissions, provide the least expensive care. If your employer points you to that lower cost, better care facility, they are doing you a great service.
This quote from Health Affairs helps you understand why many employers are ineffective in managing their healthcare costs:
“Many employers rely on a network of brokers, consultants, and third-party administrators to design and manage their health benefits. Unfortunately, these groups do not always work with the interests of employers in mind. Many benefits consultants and brokers accept commissions from vendor organizations they recommend to their employer clients, in addition to securing a flat fee from employer clients. Commissions may be cash or non-cash (for example, vacations and gifts). Until recently, many brokers and benefit consultants were not required to disclose these financial conflicts of interest. Thus, while employers assumed the recommendations provided were impartial, they may be biased due to inherent conflicts of interest.”
This is another example of the way that our current system is riddled with conflicts of interest. It does not serve patients well. As the Health Affairs article says:
“Health care costs are typically the second-highest employer expense after wages and benefits, and employers pay for rising health care costs by decreasing wages and benefits.”
These costs have such an impact on non-medical businesses that they should bring management of those costs in house. A Chief Medical Officer should join the C-suite to manage healthcare for the benefit of employees and the business at large. We can have better health at lower cost now. Let’s get started.
Nice post, Bill. We (CJRI) have been advocates of bundled payment models for total hip/knee and spine procedures for well over a decade now. We have predictable pricing with a warranty for related complications and readmissions. Naively, we thought the broker community and their contracted employers would have been banging at our doors to partner with us -- but not so fast. We've encountered obstacle after obstacle especially if the TPA is a BUCAH. Fortunately, there are companies such as Carrum Health that have cultivated the Center of Excellence model and scaled bundled payment arrangements. By the way, for your readership, the images associated with this piece are not those of a standard total knee arthroplasty but rather what is known as a "mega-hinged prosthesis" performed either for severe failure of a prior primary total knee arthroplasty or possibly a tumor resection. A standard total knee arthroplasty resurfaces and realigns the joint but in point of fact does not actually remove the knee joint as is depicted on these stock x-rays. Thank you.
Not only they are out of control crazy, but also, most of them, (99% of devices and 96% of prescription drugs) have NO evidence at all absolutely for their fraudulent claims of "safety and effectiveness" based on the preordained cherry-picked "evidence by the pay-to-play academic "experts" opinions to drive the narratives to deceive, and to plunder, These are the crimes of the century, perpetrated by the corrupt souls operating the Late Stage Sickness Seeking Profiteering American Medical Industrial Complex Kabuki Dance Theatrics!