A Simple Plan to Reform Healthcare
Published by Ted Almon October 18th, 2006 in Articles.
I have been reading about some primary care physicians who are now charging a retainer for their patients to be part of what they are calling a "concierge" medical practice. In return, the patients get near-immediate, full-time access to the physician and a more thorough examination upon their visits.

I decided that sounded good to me. Now if only I could convince my long-time physician to start a practice like that. Let's call him Charlie (because that is his name) and follow me on a hypothetical meeting with him (note: my company sells medical equipment).

Charles is a wonderful PCP, and I would not consider leaving him after all these years. But I also hold no illusion that he cares any more about me than any of his other patients, even those with inadequate or even no health insurance coverage. After all, in order for him to achieve the lifestyle he appears to have, he could have as many as 3,000 patients.

And even though I am perfectly happy with the service he provides now, and I am in good health and very seldom call outside my regular check-ups, why would I not want to be part of a more exclusive, say 500-to 600-patient group?

I can afford the $1,500 or so it would cost beyond my current outlay, and if my health status ever takes a turn for the worse, it could come in handy. How is it different from flying first class, staying on the concierge floor at my favorite hotels, or hiring a driver to take me to special events?

More puzzling, however, is why Charles will not do it. The math seems simple to me, and the lifestyle choice should be an even bigger no-brainer. I decided to ask him.

"Health care is not like the car you drive," he told me. "Everyone should be entitled to the best I can provide. If I open a boutique for successful guys like you, what will become of all my other patients? There are already too few young doctors entering my field. Is it fair to send them all the poor people?"

"The whole system needs to be changed," he went on. " You can't just put a Band-Aid on it, making sure the affluent have access until you figure out what to do about everyone else."

I felt admonished. In business, your can always get what you are willing to pay for. What's wrong with that?

Then Charles became more reflective. "You know...concierge medicine might actually serve both our purpose in a perverse way." Now, more animated and engaged, he went on.

I have been involved for more than 20 years in the debate over how to rein in health care costs. You know that, as an employer, you have been in many of those same discussions. You want lower - or at least more stable premiums, and I want fair reimbursement. And essentially we agree about what needs to be done. It's the most frustrating thing I've ever tried to do.

I had to concur. Never in business have I encountered a problem so resistant to agreeable consensus.

I offered that health care reform follows Sinclair's Principle.

He furrowed his brow so I explained the novelist's maxim: It is difficult to get a man to understand something when his salary depends on his not understanding it.

I went on.

"Thousands of completely independent entrepreneurs - none of them connected to the rest of the provider network- all duplicating back-office overhead that could be consolidated and automated in a lager practice."

"There is plenty of blame to go around. All of the obvious waste and inefficiency ends up as income for someone, and that guy will fight to make sure that part of the system doesn't get reformed."

"Well hell!" he stormed. "At least you and I do something essential to the care of the patient. What about those insurance companies and broker guys, and my favorites, the administrators, those working in health care who have nothing to do with patient care who are coding, denying and suspending claims, negotiating contracts, conducting reimbursement audits, all of it. The reimbursement system is a quagmire of unproductive activity and cost."

Now he was on a roll.

"You see," he said, "this is why I say no incremental fixes are possible. We need a master plan at least for Rhode Island. But what would it take to make that happen?"

"A crisis!" we both spurted.

"And what could precipitate a true crisis?" he asked. "I mean hordes of people marching on the State House? How about a broad adoption of ..." He paused. "Yeah, concierge medicine. Thousands of people being dumped by their doctors because they can't afford the retainer. That might just do it."

And so I am back to joining a concierge medical practice, but for very different reasons than I had at first. Now I see it as a precipitating cause for a war that needs to be fought. Funny how sometimes spending just a little more money can end up saving a whole lot more.

Ted Almon
President/CEO
Claflin Co.

Published by Ted Almon October 18th, 2006 in Articles. 0 Comments
The very public dispute between Landmark Medical Center and Blue Cross & Blue Shield of Rhode Island is the most recently exposed symptom of an underlying disease afflicting our health care system - a dysfunctional reimbursement process.

In fact, while this malady has gone largely undetected, it is now in an advanced and intractable stage. Unless treated by radical reform, it is certain to be fatal to at least the most vulnerable appendage of the system's body, the community hospitals.

Lacking the market leverage of the larger networks of teaching hospitals and affiliates, our community hospitals have fallen prey to a perverse form of wage discrimination, and often are paid substantially less by insurers than the network hospitals with which they compete for the same services and procedures. Eventually they will exhaust their reserves covering the widening gap between revenue and fixed operating costs.

Many in the community, including Gov. Donald L. Carcieri, have expressed support for Landmark and our community hospitals. But even if superficial pressure should persuade Blue Cross to relent, it will only treat this overt outbreak and not the underlying disease. Having done volunteer fundraising for several of our community hospitals, I believe these institutions are an important part of the fabric of the communities they serve.

At some point this unsavory situation will repeat itself with the other community hospitals, as evidenced by recent news items involving financial difficulties at Westerly and Roger Williams hospitals. If the answer lies purely in the present payment system and market forces, all of these institutions will need to affiliate or be absorbed by a larger system to gain some pricing power in the game.

Perhaps that is the answer, but the obvious implications for consumers of this transition to a sellers' market may be somewhat daunting considering the already stratospheric cost of coverage. Something must be done to address the underlying cost of providing the care itself, and hospital costs are the single largest component of that expense.

So it seems we have a choice between alternative strategies. If we stay the course of a competitive hospital model, the inevitable consolidation into several powerful networks is likely to accelerate. These dominant providers will exercise their monopoly power over payers to demand adequate reimbursement now being denied to community hospitals, and the added cost will inevitably be passed along to consumers and businesses.

It is important to note that our existing hospital networks are competing in a game which does not have reducing costs as an element of its mission. They manage their expenses aggressively, but for the purpose of maximizing net margins. They are equally assiduous in growing their top lines, which translates for consumers into costs, the same as any other business. This reality is unlikely to change anytime soon.

The alternative option is a much more regulated model one might find akin to a utility, with private providers governed by an authority representing the interests of the community. Such a body would presumably be charged to preserve the existence of our fundamental institutions while streamlining the services (hence the costs thereof) they provide to minimize redundancy, inefficient administration and the marketing costs associated with competing.

In the governor's health care platform, one might interpret the stated concept of "centers of excellence" in just such a way. Such organizations would disperse services and programs according to the needs of the population, not the economic needs of the hospitals themselves. In exchange, their economic viability would be assured.

Eventually, in either model, there could be a consolidation of many ancillary and administrative/back office costs that would dramatically trim the bloated present model.

Most notable perhaps would be the process of reimbursement, which now absorbs a shocking share of these non-value-added activities. The ridiculous cat-and-mouse game hospital providers now endure to negotiate rates and collect receivables should be an early victim of the reform effort.

Change of this magnitude never is painless, but the luxury of inaction and indecision has passed us by. Landmark says it cannot survive unless Blue Cross pays more. Why should Blue Cross be mandated to settle with one provider but not its competitors? The situation is a conundrum - but perhaps with an unexpected benefit if it causes us to fix a system now that has been broken for a long time.

Published 10/07/2006
Issue 21-26 of the Providence Business News