Entrepreneurs Taking Advantage Of The Healthcare System. Part 1

Stanley Feld M.D.,FACP,MACE

There are oceans of information and data describing our options in the healthcare system. Neither the consumer nor agents for the consumer (typically Human Resource officers) have had an easy time distinguishing between good and bad information. Health insurance companies have large departments that “craft” its message to the media and for the sale of its healthcare insurance products. The goal is to increase the number of healthcare insurance policies it sells. They also have entire departments that negotiate them through the maze of rules and regulations. They also have multiple prices for multiple customers. All of the above increase the healthcare insurances companies’ inefficiency and overhead leading to an increase in premium pricing. All of these actions are entrepreneurial.

There are many rules and regulations imposed by government bureaucracy that distracts physicians from their duty of delivering medical care. The easiest thing for physicians to do is do their job the best they can. Physicians cannot fix our broken healthcare system. Our medical care system is not broken. It is inefficient in delivering care for chronic diseases. Physicians can and do deliver excellent medical care. We lack systems and motivation to deliver excellent preventative care. Preventative care goes beyond the annual physical examination. It is essential that the healthcare system create incentives to develop systems to deliver continuing care for chronic disease. This includes the patient being activity responsible for the self management of his chronic disease. This concept can be understood by reviewing the AACE’s “Management of Diabetes Mellitus A System of Intensive Self Management .”

Organized medicine has been dormant and ineffective in creating innovative ideas in order to teach physicians how to develop systems of care for chronic diseases. The government and insurance industry have been uninterested in supporting the development of these systems of care because I believe they do not have an understanding of its importance to the long term cost of healthcare. The attitude prevails despite the fact that we know that ninety percent of the healthcare system’s cost are spent on the complications of chronic diseases. If you are a company interested only in short term results, I can understand the attitude toward long term reduction of chronic disease complications. It would be an entrepreneurial activity to develop systems of care for chronic diseases that would teach physicians how to care for chronic disease. Additionally the incentives to execute that care would have to be provided.
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The healthcare system as opposed to the medical care systemis extremely complex. The multiple small “political steps” taken over time to help repair the healthcare system have not generated effective change. As Nietzsche said, “sometimes small steps make the situation worse’.

It seems that everything that is done to improve the healthcare system ends up harming it even more. A recent example is the windfall profits provided by a defective DRG payment system for hospital systems. It took a couple of years for the hospital systems to figure at the loopholes in the DRG system. Once they did, hospitals’ profits soared. This was entrepreneurial on the part of the hospital systems.

CMS recognizes the defect and wants to implement a new DRG system based on hospital system costs rather than hospital system charges. This change implies true price transparency. Price transparency should be available to the consumer to choose the hospital. Price transparency should not be developed into a form of fovernment price controls. If a hospital experiences more overhead or delivery costs they should charge more. However, if they were forced by competition to become more efficient they would be able to reduce their prices. The result would be a decrease in cost. Hospital systems should make the cost of a band aid clear. It is simply wrong to charge $11 for a five cent item. However, hospital systems’ lobbyists successfully fought for a one year delay in the implementation of a new DRG payment formula based on cost and not charges.

I suspect Dr. Mark McCellan resigned as director of CMS out of political frustration. He was not interested in price controls. He was interested in accurate pricing. It is one thing for the government to know what to do. It is another thing to get it through the tangled way our government bureaucracy does business. To me, the only way to reduce the obscene hospital fees is by knowing the hospital costs for the service or item and not accepting the grossly inflated price and then negotiating a discounted price.

Hospitals should be paid on a cost plus basis in relationship to the average hospital cost per disease in the state or county. Allowances should be made for variation in overhead in different parts of the country. This methodology would force the hospital systems to become more efficient and be competitive. They would be forced to learn how to increase their profit margin as prices would decrease.

The present payment system encourages hospitals to be less efficient and incur higher fees and more costs. It would force hospitals to be entrepreneurial for the benefit of all the stakeholders and not simply themselves. I would guess implementing a new system will be delayed even longer than one year, especially with the change in administration in the next year. Hospital systems are not interested in real price transparency. They will fight it. I believe they are blindly encouraging government price controls. Price controls historically make things worse in every area of our economy.

If we as consumers do not force the secondary stakeholders to get smart we will end up with a single party payer system. Hillary Clinton’s new healthcare plan is heading us in that direction. Her 2007 words are crafted differently than her 1993 plan. Her 2007 healthcare plan will evolve to a single party payer plan. She has changed her direct approach. She has gotten her strategy from organizations like the Commonwealth Fund who are advocates of a single party payer being the only solution to our healthcare systems problems.
A full discussion of Mrs. Clinton’s plan will follow shortly.

I believe the government wants to help the people. What is the reason government initiatives misfire? They misfire because of the inefficiencies in hierarchical bureaucracies. The hierarchical bureaucracy is imbedded in all of our government agencies and in our body politic. Governmental decisions are influenced by vested interest’s lobbying and not by common sense.

There are a lot of very smart people in America. We have figured out the solutions to many problems in the past. Winston Churchill said “the American government always does the right thing after they have tried everything else. He might be right. “

The public can overcome the archaic bureaucratic structure of our government. We need an entrepreneur to step forward, recognize the patterns, be innovative, make the repair, and profit from his innovation. The repair will be driven by our knowledge based economy. The healthcare system can to be a healthcare system for the public good without price controls that do not work, single party payer systems that do not work and government restrictions on access to care that does not work.

We as consumers must become concerned enough and disturbed enough at the present healthcare system to generate the will to act in a constructive way to improve the system to the advantage of everyone. We have an excellent medical care system. We have a dysfunctional healthcare system. I believe the American consumer is getting there. We have at least forced a change in Hillary Clinton’s rhetoric but not in her policy. The solution in a free market system is to construct a system that will function for the consumers’ benefit and not the vested interests’ benefit.