Stanley Feld M.D.,FACP,MACE

1. Physicians and hospitals bill their retail prices with every claim form. They receive and accept Medicare prices as published. They have also negotiated deeply discounted prices with the insurance companies which they accept. An uninsured person, like Denise, has only seen the providers’ retail price. She could negotiate that fee before the service was rendered if she had a choice of provider. She could negotiate the price after service was performed if she knew the discount fees that the providers accepted. This is the best that she could do at the moment. Once everyone can buy insurance on a level playing field she will do much better. I will explain how, in my view, the medical savings account should be set up to be affordable to everyone, profitable to everyone, and driven by free market forces with freedom of choice for everyone. The model will lead to less people uninsured. It will also lead to a decrease in healthcare costs, because of a reduction in chronic disease complication rate.

2. In my blog, a Simple Solution to the Problem of Price Transparency some readers had the impression that I was advocating Price Control. I am a firm believer than Price Controls do not work. Price Controls in my view only create bigger problems.

The solution is competitive pricing. If a physician or hospital has a better product at a higher price, they will not lose their market share. One needs only to look at Neiman Marcus. If the product is similar the higher price product has a problem. The impartial web site will give that practice or hospital the opportunity to defend his price and in fact, prove its value to the consumer. They could publish their qualifications as well as medical and financial outcomes on the site and differentiate their value from the average.

In order to get that information, the providers will have to have a functioning electronic medical record (EMR). They could then have the opportunity to link medical and financial outcomes to cost and prove their value to those who want the superior product. Presently, there is little motivation for physicians or hospitals to have an electronic medical record. There is little incentive to buy one because presently there is no reward for having an EMR. The only incentive is a government mandate. However, mandates never seem to work. In addition, with the reimbursement declining it is difficult for a physicians or hospitals to understand the value of EMRs to be motivated to make the capital outlay necessary to purchase an electronic medical record. Many times these EMRs take years to install and function properly. Another barrier is the pain of converting to an EMR. The providers are tied also to a never ending costly service contract. The service from the EMR provider sometimes does not solve the problems that arise. In the past, many of us have spent large sums on the false promise of a significant payback. The false hope inhibits us from making an additional large investment that might not work well.

I will go into these problems and my proposed solution in the near future. Presently, one can start to see the depth and breadth of the problems the healthcare system has faced and the dysfunctional responses of stakeholders to the immediate problems. Their responses simply served to create greater problems for the healthcare system. The new problems generate further problems.

Stanley Feld M.D.,FACP,MACE

In the late 1980’s, business said, “enough is enough”. We cannot afford to pay 18% of our gross revenue toward healthcare benefits. The insurance industry responded by asking a simple question. “How much can you afford?” The answer was 12-13% of our gross revenue would be tolerable.

The insurance industry’s immediate response was “no problem!” Managed Care was instantly born. Managed care was the nice term. Managed Care suggested that care would be managed so that patients would be healthier and health care costs would be reduced. Costs would go down because by managing care, complications of chronic disease would be avoided. However, in reality, Managed Care was simply the insurance industry managing cost. The insurance industry knew it could negotiate at least a 33% discount from the price shifted fees of the previous decade of healthcare system dysfunction.

The insurance industry knew that physicians and hospitals were accepting more than a 50% discount on their base retail prices for Medicare payment from the government. The insurance industry was the outsourced carrier (adjudicator of claims, and Administrative Service Organization) for Medicare . Even if they reduced payment by 50%, physicians and hospitals would be getting more than the Medicare was paying.

The math was as follows: As an example, if the original fee for service was $100 the government reduced the fee to $50. Employers’ insurance was paying a price shifted fee of $150. A 50% reduction was a fee of $75 or $25 more than the Medicare payment. The insurance companies also understand how disorganized the medical profession was from a business point of view. If insurance companies could not get adequate price concessions from hospitals they were certain they could get it from physicians. They also knew that physicians were afraid to lose their patients. Physicians would accept reduced fees to maintain their patient load because their capacity to see patients was being reduced by increased Medicare patient load and decreased reimbursement. This also meant that physicians had to see more patients per day to maintain their revenue.

You can start to see how distorted the system had become.

The new games then began!

Stanley Feld M.D.,FACP,MACE

My last few blogs dealt with Price Transparency. These posts were meant to describe the problem as well as offer a solution to the problem.

Denise, as an uninsured patient, was thrown into a situation where she was at a tremendous price disadvantage. The solution presented would provide her with price ranges that she could negotiate. However, when you are ill, you do not want to be forced to negotiate the price of your own care. If there was a Universal Medical Saving Account available to everyone, sold by insurance companies without eligibility or tax restrictions, the fees would have already been negotiated for Denise. Her decision making would be simplified. She would decide whether the insurance company was allowing too little or too much to be paid for a service with her MSA money. She should have the opportunity to express her impression of the quality of the service. If she was displeased with the service, she should be able to choose another insurance company, physician or hospital.

These simple principles would create a competitive marketplace in favor of the patient. The impartial web site would permit other patients to judge the quality of their care. The provider could defend the quality of his care to others in this transparent marketplace. One can begin to see that a Consumer Driven Healthcare System (CDHCS) could be effective by market forces determining cost and price. It could also be a good deal for the patient. An effective CDHCS could encourage a system of patient responsibility for his care. In turn, it could increase adherence rates to treatment and reduce complication rates of chronic illness. The result would be a decreasing cost of care to the healthcare system. I will, in future blogs, discuss the system of Consumer Driven Healthcare that would work.

I mentioned that Dr David Westbrock was correct when he stated that the insurance industry has subverted the Medical Saving Account product which is key to the Consumer Driven Healthcare movement. They have substituted an alteration in the original system called the Health Saving Account. This alteration serves the insurance industries’ vested interest and not the patients’. In the long run, the HSA will serve as a false hope to the Repair of the Healthcare System.

Next, I will return to the evolution of steps that have distorted the Healthcare System. They are a threat to destroy our medical care system.

Stanley Feld MD,FACP,MACE

Kinky Friedman, are you listening?

The fees paid to all physicians and hospitals for services and procedures should be published on the Internet by an impartial body. Alongside the multiple wholesale fees should be the providers’ retail fee schedule. This would create a system of complete fee transparency. Insurance companies negotiate fees with each provider. The fees of one provider might be different than the fees of another vendor. The posting of these prices on the internet could be required by each State Insurance Board before an insurance company could obtain a license to sell health insurance in each state for each insurance product. This would result in a transparent range of fees from retail to wholesale per insurance company and per provider. Justification for the range of fees could be explained on the web site. Only then would the prices and fees be transparent to the consumer. The consumer (patient) would have adequate information to make a decision to pick the provider of his choice.

Medicare has published fees on the Internet. Price Transparency in Medicare is the goal. However, it has to be simplified. The fees are difficult to figure out.

This is a simple process. It would create competitive pricing among insurance carriers, and providers. The format could be the same as C/Net for electronics purchases. Patients could also add their critique of their care. In High Noon, J.F. Rischard suggests we are merely at the onset of solving problems through the use of the internet. The patients (consumer), along with a little help from the government, can precipitate this change.

Even if the governor of each state required this posting of the insurance industry, it would have little impact on the uninsured. However, Price Transparency is essential if Consumer Driven Healthcare is going to fulfill its promise. It would be a very important step in Repairing the Healthcare System. It would get patient participation in decision making about their care.

Dr. Westbrock mentioned that the insurance industry has subverted the HSA concept. He is correct. The Health Saving Account concept in its original form was called Medical Savings Accounts (MSA). The original concept was designed to motivate the patients to be a price conscious of their medical care purchases. Price Transparency would be the vehicle they would use to choose. More of this is the future.

Please consider Price Transparency in light of my earlier statements. Presently, the healthcare system is broken because all of the stakeholders’ incentives are misaligned. Everyone has adjusted to protect his own vested interest at the expense of the patient, the most important stakeholder. Everyone is in pain at the present time because of the systems dysfunction. Everyone can adjust if the heat goes up slowly. The price simply goes up. Everyone will talk about the problems but no one seems to fix them as they should be fixed. The goal of this blog is to inform the patients and future patients of the problems and empower the patients and future patients to act through their local and state governments to create the necessary alignment. The goal is to serve all of the stakeholders’ vested interest. However, the patients and future patients have to get a good deal rather than a raw deal.

Price transparency should be on an impartial web site. The web site should be available for everyone who chose to subscribe free of charge. The patient should have the ability to judge the services of the insurance company and physicians. Physicians, insurances companies and other stakeholders should have the ability to reply if they chose to. A web site such as CNet would be great for this endeavor. The technology is available.

This is not rocket science. Insurance companies, physicians and hospitals have a data base they could download to the impartial site. They could be compelled to participate by each state. It is time to level the playing field for the patient and physician.

Kinky Freidman could make one tenet of his healthcare policy. He would be wildly applauded. As the new governor of the State of Texas he could require the Texas State Board of Insurance to demand this data. The action is neither a Democratic Party nor Republican Party action. It is a common sense action

Kinky’s claim is he is not owned by anyone except common sense. This seems like common sense to me.

Go for it Kinky!

Remember Price Transparency is only going to solve part of the problem. The rest of the solutions to Repairing the Healthcare System will follow.

Stanley Feld M.D.,FACP,MACE

Last August Aetna triumphantly announced “the first program of its kind to let consumers find out what they can expect to pay at the doctor’s office before going in for a visit. This means for the first time, consumers can better gauge their out of pocket health care expenses by having online access to the actual discounted rates for up to 25 of the most common office-based services offered by their own primary care or specialist physician. Aetna will publish “actual discounted rates specific to their health plan for office visits, diagnostic tests and minor procedures.”

This does not help Denise at all with the fees she had experienced. She did not have Aetna insurance with the specific Aetna insurance plan that Aetna published fees for. Additionally, if she had access to the fees, she would be in no position to negotiate the fee with her vendor. How can the non insured get in a position to negotiate the fee? How did Aetna arrive at the fee to pay the vendor? Aetna announced this innovation in August 2005. Their goal was to try to capture the growing Health Savings Account Market in the Cincinnati area. The procedures and services were limited to the 25 most used by participating physicians. No expansion has occurred since August 2005, as far as I can tell. It does not apply to all their plans and one needs an identifying code and password to get the information published.

Is this price transparency? In my opinion, this is a smoke screen to appease a growing demand for price transparency. Some would say it is a great start. Aetna’s price transparency was announced in August 2005. It is now July 2006. We need price transparency for everyone. Their has to be built in negotiating power. The range of fee agreed on needs to be published. The reason for the range of fees needs to be understood by the consumer.

The AMA nailed it. However, their statement is so subtle that the main message can easily be missed. The AMA had a positive approach , “In support of consumer-directed healthcare and an end to the mystery of medical prices, the AMA today called on the health insurance industry to end efforts to conceal their pricing systems for medical services.”
The AMA goes on to say “ There is no legitimate rational behind health insurers refusal to provide their payment policies and actual costs to patients and physicians” It serves only as a means for the health insurance industry to avoid accountability.”

The key words in the preceding statement are the payment policies and actual costs of the insurance company. In other words, how does the insurance industry price their product to the consumer? How do they price their payments to the providers, the physicians and the hospitals? What are their actual costs in order to service the product they sell to the consumer? How do they calculate these costs? Do they calculate the cost by factoring in multimillion dollar salaries to executives? For patients and potential patients this is information it would be nice to know.

The AMA goes on to say “insurance industry does not provide patients with an entire picture of insurers pricing. Patients are being provided with incomplete and selective information” This is the information that would represent true price transparency.

I received this stunning note from a fellow endocrinologist, Dr David Westbrock from Columbus Ohio. Dr. Westbrock has run for congress twice to defend patients’ and physicians’ rights. He almost won the second time. You will hear more from Dr. Westbrock in the future. However, this was an immediate reply to the price transparency issue.

Stanley,

Dave Westbrock

Physicians as well as patients have problems with price transparency.
Next the Simple Solution to Price Transparency

Stanley Feld M.D.,FACP,MACE

Many of you were shocked at the discrimination of pricing Denise experienced. In fact, Denise was not aware of the wide pricing range until she experienced it. I think most readers are not aware of the range of pricing for procedures.

When a physician sends you for a test that you discover is overpriced compared to the same test at other facilities who do you get angry at? The answer is the physician. What does that do to the physician-patient relationship? The patient should not be angry at the physician because I think most physicians do not know the differences in pricing between facilities.

Denise’s letter is one of many examples of the broken Healthcare system. It illustrates unfair pricing to a primary stakeholder with no insurance. The average consumer (patient) would never know it unless he experiences it as Denise did. However, the mechanics of pricing is totally logical to me as I trace the causes of the dysfunctional Healthcare System.

For physicians, it is essential that the approach to a patient’s illness is not to put a patch on a symptom and hope it goes away. Our job is to find the underlying cause of the problem, and fix it. Only then will the symptoms be relieved. Treating the symptom works short term, but you usually end up with other symptoms, or complications that are worse in the long term. Sometimes, the complications of chronic disease are non repairable.

We can all understand Denise’s pain and frustration. Is the solution to treat the symptom? Not if we are going to have a long lasting effect. We must treat the source rather than the symptom in order to repair the Healthcare system. First, we must understand the historical sources of the problem.
I submit that price transparency is an important patch to treat a bad situation. Everyone has now jumped on the need for price transparency. Aetna has announced its prices will be transparent. The AMA has called for price transparency as has the government. In the past, physicians were told that “they said” price transparency was an antitrust violation. I will have more to say about “they” in the future.
Price transparency is essential, but it alone is not going to cure the problems of the Healthcare system. Multiple other defects must be understood and cured simultaneously. The changes must have enforceable teeth, and apply to all the stakeholders. Price transparency should be directed to the primary stakeholder, the patient. The other stakeholders’ vested interests will fall into line with a simplified cost effective system as a result. Unfortunately, the only one who can force this change is the consumer and the exercise of “People Power”.

Stanley Feld M.D.,FACP, MACE

Below is a comment made to my son, Brad Feld, on his blog, when he asked everyone following his blog to join his dad’s Posse.

Kinky Friedman is running for governor in Texas. We have our own Arnold Schwarzenegger and Jessie Ventura combined. Kinky Freidman is the Texas Jewish Cowboy Country Music Star and Author.

Denise ——- wrote

Dear Denise

You are now an official member of the Stanley Feld M.D. ,FACP, MACE Repairing the Healthcare System Posse. Enclosed is an official membership card. Your letter to Kinky is great. You hit the nail on the head. You are talking about transparency of prices. You are also talking about leveling the playing field for all patients, insured and the uninsured.
I think Kinky Friedman will listen. He might not know what to do. Through my Posse,I plan to tell him and every other elected official what needs to be done to Repair the Healthcare System

We need about 10,000 Texans sending Kinky this kind letter detailing their experience. If he responded appropriately he could get elected in Texas as Jessie and Arnold got elected in their States. I sent him your letter and a detailed explanation of the letter’s importance. His public relations people have not yet answered.

Wouldn’t it be fabulous if two people from Texas could start creating the Tipping Point that would Repair the Healthcare System.

I would like to request that you send this note to your entire email list and invite them to visit my blog and subscribe. They, too, need to be members of the Posse and learn what to do to Repair the Healthcare System. The time has passed when we can leave it to someone else to fix things for us. If the politicians want to be our surrogates, they should know what the we want them to do to earn our vote.

Stanley

A few days ago I received an email comment about my successful 43 years of marriage.  I answered the email in the comment section. However, I feel the answer deserves publishing in the main body of the blog. The answer can serve to illustrate the development of problems in the healthcare system and the Demise of the Patient-Patient Relationship.

Stanley

,

Wanted to let you know that I have been reading your blog from the start, keep up the good work! On a personal note, happy 43rd to you and Mrs. Feld. Whatever your secrets to a long and happy marriage, we should try and bottle that, we could all use some. Also, Happy Father’s Day!

Alan

Alan

Thanks for the comment.

The key to our successful marriage is mutual respect, mutual trust, and love.

Stanley

One can also look to this answer as a definition of the therapeutic effect of the Physician-Patient relationship. The therapeutic effect is a positive physician-patient relationship. In my opinion, the patient-physician relationship has been destroyed by the attempts of policy makers to fix the healthcare system. The actions catering to the facilitator stakeholders have only made the this relationship vanish.

Price controls do not work in any industry in my view. Intelligent people always seem to figure out how to get around price controls.

In medicine, the price controls imposed by Medicare in the early 1980’s, led to physicians seeing more patients in a less of time. Physician offices started to rely on physician extenders to relate to the patients as well leverage the physicians intellectual property. Physicians were forced to distant themselves from this important therapeutic effect. One of the most important healing factors in medicine, in my opinion, is a positive relationship with the patient. If physicians have no time to relate to the patient this all important effect erodes.

As a result of Medicare price controls, price shifting was occurring. The private insurance industry was happy because more money flowed through the system resulting in more profit. However, the insurance carrier started to delay payment and in many cases reduce payment to the physicians. Physicians did not notice the reduction in payment. Their financial information systems were not very efficient or effective.

Physicians noticed they were working harder, seeing more patients and taking home less money.

When they realized their fees were cut by the insurance companies, they were very angry at the insurance industry. The physicians’, then, billed the patient many months after the service was performed. Patients’ became angry at physicians and at the insurance companies. Physicians were angrier at insurance companies because patients became angry at the physicians. Employers were angry at the insurance companies and the physicians. Everyone is mistrusted, and everyone disrespects each other. The demise of the physician-patient relationship. In fact the demise of any relationship.

Hospital stayed very quiet as they steadily raised their rates. Hospital pricing is a topic of a future blog. The hospitals did not experience the firestorm the physician community experienced. The rate of increase of hospital rates were higher than physicians’ or insurance companies’. However, the hospitals had an advantage. Only 5% of patients are hospitalized. Ninety five percent(95%) of potential hospitalized patients have no idea of the fees charged in the hospital. In fact, at least 60% of physicians do not know what the hospitals charge. One has to be pretty sick to be put into the hospital in these days. If you leave the hospital with all the scary media news about hospital acquired infections, medication errors as well as such things as amputating the incorrect arm, the former hospitalized patient is grateful to be alive. They do not have the energy to complain. They simply pay the bill, if they can. If they can not they are usually more stressed by the hospital system pursuing the payment. This collection drill also stress the hospital system and is costly. The remaining 90% of us, thank god, so not experience hospitalization. We are able remain detached from the fees the hospital is charging and choose to ignore the problem.

The therapeutic effectiveness of the physician patient relationship deteriorated rapidly during this period of anger toward physicians. Patients expressed some of this anger by suing the physician.

Malpractice suits increased markedly. Media coverage of medical errors did not help. The fact that some of the media coverage was disinformation was immaterial. The excessive law suits served to increase the price of care. Premium cost had to be passed on somehow. The government should have taken action at that time, but did not do anything. The government should have set or define liability limits as well as rules to discourage frivolous law suits. Limits on liability would have acted as a deterrent to plaintiff attorneys who saw easy money.

The physician extender market was escalating. The insurance industry saw an opportunity to devalue physicians. They categorized physicians, nurse practitioners, and physician assistants as Healthcare Providers thus implying an equality of value and therefore an equality of fees.

The mounting distortions resulted in physicians adjusting to the distortions. They ordered more physician visits and more procedures. The increase in malpractice suits lead to more defensive medicine. The result was more testing and more expensive treatment to avoid a malpractice suits.  The increase in the delivery of medical care led to higher Medicare payments and private sector payments as well. As a result the total gross Medicare and private sector payment obligations increased markedly over the next few years.

The major take home point of these examples is that price controls do not work. Price controls simply distort a free market system even further.

Everyone was in pain. The patients, physicians, government, and employers are all suffering. The insurance industry was prospering, but they feared they were losing their customer, the employer and can not keep up with their crazy insurance billing and payment practices. The lawyers were prospering at the expense of cost effective medical care (defensive medicine). The major stakeholders, the patients and the physicians were suffering because of the quality of care, the cost of care and the access to care. Interesting enough the facilitator stakeholders were starting to suffer as well.

What came next was even a sharper blow than previous blows to the effectiveness of our healthcare system.

Stanley Feld M.D.,FACP,MACE

The following email was recieved. I feel it is important to post this email on the main page because some of you might not read the comments. I thank Walt for his comment.

First we need Patient Power and Political Power will follow!

Dr. Feld,  I believe you’re on the right path.  By getting a posse rounded up and engaged in the hunt for a solution through sharing of information, insights, and observations of constraints, we may be able to get the political ‘help’ needed to effect change.  Are you working with Newt’s group here in Atlanta (http://www.healthtransformation.net)?

Walt

Dear Walt

I know Newt and he knows me. I have presented my ideas on Disease Management to Newt when he was speaker of the house. His response was this is a "BIG IDEA" .

He was then at a Human Resource and Information Technology meeting at Delta Airlines a few years later, after he left congress, where I gave a presentation. He loved my presentation and summarized it for an hour. He then invited me to visit him at his office in Washington. We went over the presentation in great detail. It was still a BIG IDEA in his mind. He told me he has quoted me often. However, I have never had followup from him nor have never been able to make contact with him since.

I have sent him the blog information. However, I suspect he has a fortress of  people creating blockades between him and the ordinary people like me, and they do not know me.  This information has probably never gotten on his screen.

If you know him please direct him to the site. He is a nice guy. I am convinced the concepts I am presenting will excite him. He theoretically understands the problem about the dysfunction of the healthcare system in my view. 

I am trying to get to the main stakeholders, the patients and future patients, in mass to appeal to people like Newt.  Newt could help greatly if he became engaged in my effort.

However, it is going to take "People Power" to turn this boat around, and not simply talking about turning it around. Coming from one person, the "BIG IDEAS" that will be presented in this blog will have little impact, unless people understand the problem and act. Anyone involved personally in the healthcare system or has a relative involved has felt the pain of the dysfunction. I am convinced we have the power to fix it and align everyones incentives.  One can not be passive anymore and simply make judgements to disconnected sound bites.

I believe the media has failed us. They have not provided real information in systematically connected way. I also believe connecting people in a systematic way with the same vested interest, protecting our health, and fixing the healthcare system is the power of RSS and the blogosphere. 

If you can help, it will be greatly appreciated

Stanley Feld M.D.,MACE