Stanley Feld M.D.,FACP,MACE

The primary stakeholders in the healthcare system are patients and physicians. The incentives for patients and physicians to save money are non existent. The secondary stakeholders have taken advantage of non existent incentives to create a healthcare system that generates ever increasing costs.

Patients and physicians are the only stakeholders that can control costs. They initiate the use of the healthcare system’s resources. 

Healthcare costs for medical procedures such as an MRI or CT scan have been found to vary by as much as 683% in the same town, depending on which physicians patients choose, according to a study by Change: Healthcare.

The implication is that individual physicians are responsible for the differences. Most physicians do not own MRIs, CAT scanners or PET scanners. Secondary stakeholders own the equipment. They price the procedures and profit from the equipment, not the physicians.

"There's been a barrage of studies that show differences from region to region," said Christopher Parks, founder of Change:healthcare. "That makes sense — California's more expensive than Alabama. But this 683% is within a 20-mile radius in your own town." 

This finding illustrates several dysfunctional issues in the healthcare system.  President Obama’s Healthcare Reform Act is causing these issues to surface as secondary stakeholders are beginning to adjust to the upcoming changes.

For a pelvic CT scan, they found that within one town in the Southwest, a person could pay as little as $230 for the procedure, or as a much as $1,800. For a brain MRI in a town in the Northeast, a person could pay $1,540 — or $3,500. 

The social contract in medicine is between patients and physicians.  Patients should choose physicians and physicians should care for the patients the best they can with integrated healthcare team approaches. Physicians should be the captains of this team approach. 

Patients should be at the center of medical care and be educated to make wise medical decisions.

Physicians should be the coaches and advisors to patients on how to make wise decisions and attain better health.

In the beginning, patients’ employers provided first dollar healthcare insurance coverage. Patients were not at any financial risk. There was no need for patients to care about medical costs. The healthcare costs were their employer’s problem. 

Healthcare insurance companies enjoyed this setup. The more they paid out in benefits the higher they could raise the insurance premiums. Premium increases resulted in higher profits. It worked until employers said stop.

The insurance companies take 40-60 cents out of every healthcare dollar. Medicare and Medicaid outsource administrative services to the healthcare insurance industry. The healthcare insurance industry also takes 40 to 60 cents out of every Medicare and Medicaid dollar.

In anticipation of a reduction in government reimbursement for Medicare and Medicaid, the healthcare insurance industry has raised private insurance premiums, decreased covered illnesses, increased deductibles and increased co-pays.  

The Healthcare insurance industry is also moving toward  "reference-based pricing."

These changes have increased the liability of consumers for out of pocket expenses as opposed to having first dollar coverage. 

Medicare has different allowable fees for procedures in different regions. Medicare pays 80% of the allowable fee after a patient meets his deductible. Providers are only allowed to bill patients 20%.  By law balanced billing is illegal. It does not matter what providers charge for a procedure. Providers cannot bill patients for the balance of beyond the allowable fee. The Medicare fee is the most the provider can receive for a procedure.

“The Medicare Balanced Billing Program works to protect Medicare beneficiaries from being billed by healthcare practitioners for amounts beyond those approved by Medicare. The program investigates and takes action against those practitioner who violate the law.

Many providers are refusing to accept Medicare payment as Medicare reimbursement decreases. These providers can charge patients their fee. It is the patient’s responsibility to know if providers accept Medicare reimbursement. If providers do not accept Medicare, patients should understand their liability for the fee. Patients are liable for the total bill.   

Providers also contract with private healthcare companies. Some providers try to get the highest fee possible for the procedure. Private insurance companies pay different amounts depending on their need to build physician networks. This results in the wide spread in price in the same area. When providers are under contract with private insurers they cannot collect more than the contract price for a procedure. 

"It was eye-opening," said Howard McClure, CEO of Change:healthcare.

McClure said health plans are moving toward "reference-based pricing," in which they look at the average price of a procedure for a region, then say that's all they'll reimburse. But if a patient does not know how much a procedure costs, he or she gets stuck with the remainder of the bill if it goes above that average price.

"It helps the small business," McClure said, "but the consumer's left out in the cold."

Healthcare insurance coverage is changing with “reference-based pricing.”  Consumers are getting stuck with the retail price for procedures. The healthcare industry is using this to keep premiums down for business and compete for employer business.

Only consumers owning their healthcare dollars can stop this. President Obama cannot unless he controls the entire system and dictates prices. It never works because people figure out how to get around restrictions.     

Patients are led to believe that physicians are sending patients to higher priced providers for procedures because physicians will make more money.

Most physicians do not know the prices patients are charged for referred procedures.

Most physicians do not own MRIs, CAT scans or Pet Scanners. It is against the law to receive kickbacks.

It is essential that providers make their fee transparent to all providers and consumers.  Then consumers can choose wisely and create price competition.

Consumers must drive this process to create competitive pricing. Third party payment does not work.

 Consumer driven healthcare using the ideal Medical Saving Account will make it happen. It is the only model that makes economic sense.

 Consumers would start caring about the price of services when making healthcare decisions.

The challenge is to teach consumers to change their mentality toward healthcare costs and force providers through competition to be accountable for these costs.   

This will never happen under President Obama’s administration.  His goal is to empower the government and not consumers. Under President Obama’s administration the healthcare system will become more dysfunctional and further increase the deficit to unsustainable levels.

The opinions expressed in the blog “Repairing The Healthcare System” are, mine and mine alone.