Relevant and even prescient commentary on news, politics and the economy.

Hospital Consolidation and ACO’s

Jason Shafrin over at the Healthcare Economist points to this recent paper over at the RWJF. Interestingly the authors find that hospital consolidation increases prices and could decrease quality. Something that many of us have considered in the past.

In concentrated markets, the effects were even more pronounced with price increases over 20% noted.

Competition was noted to increase quality under an “administered” pricing system, ala the NHS in the UK. The evidence for competition increasing quality in a market system was much more mixed.

I have thought this for some time, and have even wrote about the concepts of leverage in the past. For example, I have cited a BNET article before. When one examines the the health markets in Milwaukee and Chicago, which are both midwestern cities, and geographically close to each other, one finds higher prices in Milwaukee, with providers not accepting less than 200% of Medicare. Which does not seem intuitive, as there is far more market competition in the health insurance industry there. In Chicago, one insurer, BC-BS, is rather dominant and prices are lower, with providers accepting 112% of Medicare on average. It would seem to make sense that increasing the leverage of the hospitals and providers through the mechanism of consolidation will increase prices. The same thing happens in Milwaukee, which has no dominant insurer, and therefore is unable to exert leverage over the hospital systems in Milwaukee.

The ACO models as proscribed by the ACA will increase consolidation. By developing an accountable model of care delivery, providers will attempt to consolidate to increase quality and minimize risk exposure in the sense of decreasing reimbursements.

The problem with the RWJF paper, as it rightly notes, is that the study does not really examine integrated health care systems. When you look at consolidation with true vertical and horizontal integration, it is my belief that quality improves even in the absence of competition. True integration in the case of Mayo Clinic and Kaiser also lowers prices.

In essence, I don’t think the problem is consolidation…..I think the problem is consolidation in the absence of integration.

Tags: , , , Comments (3) | |

Repeal the ACA and Lower Costs for Citizens

by Run75441

Repeal the ACA and Lower Costs for Citizens…

clip_image001
Chicken Little, Courtesy of “EW.Com Entertainment Weekly”

What presidential candidate Romney has vowed to repeal is showing more benefit than harm in driving down the cost of healthcare for individuals, groups, and commercial insurance. If repealed by Romney, the results could cost more than leaving it in place.

The most recent projections of the CBO and JCT reflect a decrease in the insurance cost coverage provision of the ACA over the 11-year period 2012-2022, a decrease of ~$86 billion from the initial projection of $1.252 trillion to $1.1.68 trillion. The projected decrease does not include other aspects of the ACA which in the aggregate will drive the reduction in healthcare cost further. http://www.cbo.gov/publication/43473 , July 24, 2012.

In the same report, the CBO addresses a letter from House Speaker Boehner asking about the benefits of repealing the ACA. Speaker of the House Boehner and he House Republicans have floated a bill which would repeal the ACA. In a separate CBO letter to John Boehner, the CBO estimates the repeal would reduce outlays by ~$890 billion and revenues by $1 trillion. Over the same period 2012 – 2021, the repeal would increase deficits by ~$109 billion. This estimate does not include the hidden costs of people not being insured if the ACA is repealed.

Over at Maggie Mahar’s Health Beat, Maggie touches upon the decreasing cost of healthcare Breaking The Curve of Healthcare Inflation and what the intent is of the ACA:



“- The ACA told insurers that they would no longer be able to shun the sick by refusing to cover those suffering from pre-existing conditions. They also won’t be allowed to cap how much they will pay out to a desperately ill patient over the course of a year –or a lifetime.”


“- insurance companies selling policies to individuals and small companies will have to reimburse for all of the “essential benefits” outlined in the ACA–benefits that are not now covered by most policies and if they hope to stay in business, they will have to find a way to ”manage” the cost of care–but they won’t be able to do it by denying needed care.”


“providers too will be under pressure. A growing number will no longer be paid ‘fees for service that rewarding them for ‘volume’ or for ‘doing more.’ Bonuses will depend on better outcomes, and keeping patients out of the hospital–which means doing a better job of managing chronic illnesses.”


But, what of the overall program results?

– “From 2000 through 2009, Medicare’s outlays climbed by an average of 9.7 percent a year. By contrast, since the beginning of 2010, Medicare spending has been rising by less than 4 percent a year.” It is now ~2.5%.

– “Zeke Emanuel (an oncologist and former special adviser for health policy to White House OMB director Peter Orszag) to Maggie: providers are ‘anticipating the Affordable Care Act kicking in. They can’t wait until the end of 2013: They have to act today. Everywhere I go, ‘Emanuel, added, ‘medical schools and hospitals are asking me, How can we cut our costs by 10 to 15 percent?'”


– “Rather than have Medicare set prices for lab tests and medical devices we should put all such purchases out for competitive bidding. ‘In 2011,’ he (Peter Orzag) pointed out, ‘bidding reduced Medicare spending on wheel chairs and other equipment by more than 40 percent.'”


And for the average person, what are and what were the paybacks? Exploring Maggie’s article further, this chart can be found on the US Department of Health detailing the amounts of rebates in total, by state, and by Healthcare Insurance Company. “The 80/20 Rule” http://www.healthcare.gov/law/resources/reports/mlr-rebates06212012a.html

clip_image003

To take this a step further and look up your own insurance company, a pivot table at the Healthcare.gov site will allow you to look up insurance companies by state and what the average rebate is if called for from the application of the MLR. Your Insurance Company and Cost of Coverage

 How successful the MLR has been can be measured by the impact of the MLR in measuring administrative costs of insurance companies against benefits, providing rebates to citizens, and giving states the ability to review requests for insurance increases through greater access to information. There are fewer double digit increases requested, more decreases in insurance rate requested, and reversals in rates at the state level due to greater information provided to states. 2012 Progress Report: Health Reform is Opening the Insurance Market and Protecting Consumer


Early on, the ACA is having a tremendous impact on controlling and reducing costs providing better value for the money and reducing the inflationary impact of the overall healthcare industry.

Tags: , , , , Comments (0) | |

Medical Billing and Insurance Companies

by Mike Kimel

Medical Billing and Insurance Companies

Steve Lopez at the LA Times reports on  the bizarre calculus of emergency room charges:

Debbie Cassettari had outpatient foot surgery to remove a bone spur. She arrived at the surgery center at 8 a.m., left at 12:30 p.m., and the bill came to $37,000, not counting doctor fees. In recovery now from sticker shock, she’s waiting for her insurance company to do the tango with the clinic and figure out who owes what to whom. Gary Larson has a $5,000 deductible insurance plan, but has found that his medical bills are cheaper if he claims he’s uninsured and pays cash. Using that strategy, an MRI scan of his shoulder cost him $350. His brother-in-law went to a nearby clinic for an MRI scan of his shoulder, was billed $13,000, and had to come up with $2,500. Kaiser member Robert Merrilees had a colonoscopy at an affiliated surgery center, which charged $7,500. His co-pay was $15, Kaiser picked up $470, the rest of the bill “just went away.” Merrillees was left scratching his head over the crazy math in medical billing.

The article goes on:

Ella’s father, John Moser, had a $5,000 deductible plan withCigna, and had taken Ella to the hospital to rule out appendicitis. Nothing serious was diagnosed, and Ella went home to a quick recovery. Her dad got a bill for nearly $5,000 from the hospital, as well as bills for $540 from a pathologist and $309 from the doctor who treated her. Like Moser, lots of patients are surprised to get separate bills like that, unaware that a hospital’s doctors can be independent contractors. It’s like going to a Laker game, paying $150 for a ticket, and later getting an additional $75 bill in the mail from Kobe Bryant.


I especially liked this:

“It’s outrageous,” Schwarzman said. “I don’t know where they’re coming up with these numbers. Are they picking them out of a hat?”

So who is this Schwarzman fellow? It turns out he is

Dr. Phil Schwarzman, medical director of the emergency department at Providence St. Joseph Medical Center

What is evident from the article, not to mention anyone who has dealt with health care services any time in the last few decades, is that medical bills make no sense at all. Having health insurance doesn’t always help, either. Sometimes the bill for a procedure is lower for someone with health insurance, sometimes it is higher. So it is hard for a patient to make an informed decision. But you’d think things would be different for insurance companies.

You’d think insurance companies would not willingly tolerate when they are the ones being handed a crazy bill. After all, they a) have information that patients don’t, b) have market power that patients don’t, and c) have a monetary incentive not to overpay. But it seems that even insurance companies don’t operate the way a buyer in Econ 101 would operate.

I’ll give you two examples from my own life:

 1. When I was in my early twenties I got a bill from a hospital. I couldn’t remember having been to the hospital in the recent past. If memory serves, I had gotten a routine eye exam at the hospital a year or two earlier, but that was about it. As I went through the bill, my memory wasn’t jogged at all. I was able to determine that the bill had been rather significant for a simple grad student, and fortunately my insurance had paid for the bulk of it. Sadly, there had been one procedure which hadn’t been covered. But what the heck was an “epidural?” I finally learned, when I called the hospital to find out, that apparently I had been billed for delivering a child. And my insurance paid for the procedure… except the epidural, of course. Given that a guy doesn’t have the, er, internal plumbing to deliver a child, presumably a good insurance policy would have sprung for the epidural too.

Alternatively, they might have been tipped off by my gender that the whole thing never happened and disputed the bill. I don’t know if they ever did. I just know that the hospital decided I probably didn’t have an epidural and rescinded the charge for what they had wanted to bill me.

 2. There was a point in my life I was getting headaches. Fortunately, it turns out I had a deficiency of either magnesium or placebos – a nurse practitioner I saw about the problem told me to take some magnesium pills, and since then I haven’t had any problems with headaches.

But what was interesting was that the insurance company happily paid for a bill from the doctor’s office which indicated I had been seen by a doctor, not a nurse practitioner. The rate for seeing a doctor is much higher. I only had to pay the co-pay, so it made no difference to me, financially, but my wife is a stickler for this kind of thing and called the insurance company several times trying to inform they had been ripped off. She spoke to a number of people, but the charge was never disputed.

  Anyway, that’s all I got. Discuss.

Tags: Comments (36) | |