February 21, 2020
Dear Interested Readers,
Surprise Medical Bills, Another Price Some Must Pay To Have Choice?
Dr. Elisabeth Rosenthal has a remarkable ability to explain complex issues. Her healthcare credentials are as impressive as her journalistic accomplishments. After graduating from Stanford, she earned a Master’s Degree in English at Cambridge University before earning her medical degree from Harvard Medical School in 1986. She completed a residency at The New York Hospital-Cornell Medical Center and then worked in the emergency department at New York Hospital as she became a medical writer for the New York Times. As a medical writer for the Times she covered a variety of important issues including the ACA and the SARS epidemic. In 2016 she left the New York Times to become the Editor In Chief of the Kaiser Health News, which is one of my favorite sources of healthcare information.
In my opinion, her 2017 book, An American Sickness: How Healthcare Became Big Business and How You Can Take It Back, which was a Washington Post “notable book of the year” and a New York Times best-seller, is the best explanation of the realities of healthcare as a business that I have read. I have offered it as a resource to many people who have echoed President Trump’s frustration when he said, “It’s an unbelievably complex subject, nobody knew that health care could be so complicated.” Rosenthal’s book was written as an explanation of healthcare costs, the origins of our frustrations with care, and how the business works to the detriment of many patients while earning huge profits for many of those who control the system.
I read Dr. Rosenthal’s book after I had retired .I wish that it has been available as a resource during my years of medical leadership. I did not learn anything reading the book that I did not already know, because I had carried the responsibility for the financial health of an organization and understood how we got paid and how the business worked. The value that I saw in the book beyond the great information it provided to explain the “black box” of cost, was that it was a great resource for healthcare professionals who had never needed to really understand how our industry works. That ignorance still persists for many. I consider it a luxury that none of us can really afford. To explain my point, let me take you back to an earlier time.
One of the things that I discovered about healthcare finance that really surprised me back in the early eighties as I moved into governance and then assumed a position on the management team of Harvard Community Health Plan was that the majority of our physicians, and even a higher percentage of our other employees, did not know how we got paid, and did not much care about the business of the business. I developed the somewhat cynical concept that it was a “convenient” lack of knowledge. Our employed physicians and other professionals operated with an implicit understanding that it was management’s responsibility to balance the books, not theirs. They had no interest in developing an understanding of how their performance translated into whether we were “fiscally healthy” or not. Since our operational costs and producing a margin that allowed us to continue to exist were not their direct responsibility, they were free to structure their professional roles around a philosophy of practice autonomy that had little or no regard for efficiency, sustainability, or overall clinical effectiveness.
The cost of the care they provided was not an issue that concerned them, nor did it concern most of their patients. At that time, most of our patients enjoyed extensive benefits from their employers that covered most, if not all of the cost of the care they received. Since our staff were employed in a large system that provided their offices, did the contracting with suppliers and payers, assured our compliance with regulations, maintained the support staff, provided the necessary IT infrastructure, paid their malpractice, provided generous vacation time and time off for continuing education, provided benefits that included a generous retirement plan, and totally covered the health care for themselves and their families. The rich benefit package came with an income pegged to the “market” that allowed us to hire and retain and exceptional professional group. it was a pretty good gig. Ignorance of how all of this was possible was a freeing concept. We [I started out with the same mindset.] never needed to be concerned about burnout when we controlled our own pace of practice; when no one was measuring our productivity; when patient satisfaction or the quality of our care was the responsibility of a manager. Ignorance was bliss. It was a fun time to practice.
Even as I was enjoying the largess of our system that did not need to try very hard to be the low cost provider in our market, something told me it would not last forever. I should add that we were a good system, we had the highest measured quality in a market dominated by academic practices. Just a little bit of focus on quality, clinical innovation, and a focus on contacting went a long way when none of your competitors paid much attention at all to the same points. Our managers were able to fill their end of the “implicit” contact with the professional staff, and everyone was relatively happy.
In the eighties, I was well aware of the fact that my friends who were in solo practice or small groups knew the nuts and bolts of their economic realities, and were motivated to make sure that they responded to their patients in a way that ensured that they would be loyal to them for years and years, but we lived in a different world. When the world began to change to a more hostile environment, I was foolish enough to think that we could change our ways by educating our staff into an awareness of their role in controlling the cost of care. We organized “teach ins” on subjects like “How We Get Paid” and tried to “negotiate” a new explicit contract between management and the professional staff that emphasized the sort of partnership and division of responsibilities necessary to make our operating expenses begin to fall.
I felt our cost structure was important as an ethical issue as well as a practical issue. The cost of care was becoming a burden for our patients, employers, and taxpayers, as well as the fact that as costs continued to rise, we could anticipate that the external world put more pressure on reimbursement, and our own well being and mission would be threatened. Down through time, being a prophet that preaches doom and destruction unless there is change and transformation has never been an activity associated with a long professional life. Those messages of inconvenient truths are never applauded by the status quo. Don’t take my word for it, just ask Al Gore.
It was wonderful to practice in the seventies and eighties. Operational efficiency and a focus on clinical effectiveness and quality were discussed, but it really was not necessary to do much about what we might know in theory because we all expected that we would be able to for annual increases in payment to cover our costs and perpetuate the system. We would build our budget, and discover a ten percent increase in costs which we would cover by asking for an increase in revenue from our corporate customers since we were both an insurance company and a practice. In other practices the process was much the same. All practices and hospital would build their budgets, then ask the insurance companies for more. The insurers would ask employers for what was needed to provide more resources, and I assume a little extra for themselves. The employers would grumble a bit, but then pony up, and everybody would be happy again until the next year.
When managed care collapsed in the late nineties, and discussions of cost reduction efforts became close to socially unacceptable, expense increases settled into annual double digit exercises in gluttony. It was a shame that the party could not last forever. Crossing the Quality Chasm came out in 2001 and announced that we, and I mean all of healthcare as we, weren’t as good as we wanted to think, and that we were becoming an unjustifiable drag on the economy. You could look at the last twenty years as a collective exercise in trying to push back against the realities of our dysfunction and come up with alternative explanations for our failure. Simultaneously, we have gone through a series of industry maneuvers that bordered on alchemy to try to avoid the responsibilities for the cost of the care we provide. We have have not been able to dispel our customers concerns so many of us have spent twenty years trying to find ways to live on declining annual increases in revenue without out ever having to change.
We have tried a lot of things. We have paid attention to contracting. We have sought effective mergers. We have worked on our revenue cycles. We have tried small experiments in finance like bundled payments, or if you prefer ‘”alternative payment models.” Some states, like Massachusetts and Maryland have tried to pass laws that slow the growth in medical costs. We have cut programs that did not generate adequate revenue whether patients needed those programs or not. All of these efforts have been resisted, misunderstood, or improperly implemented. Often we have just ignored the necessity to change and have declared all attempts at improvement to be failures, as we continued to do what we have always done, but at a faster pace to generate more revenue by pumping up the utilization of our services when we could not ask for more payment. In a way it has been a bit like global warming. Most of us believe it’s real. None of us really know what to do, and since the pace of the process is unchecked, we are beginning to shift from strategies to prevent it toward strategies of how to live with it.
What is the current impact of the cost experience in healthcare? At a micro level the downstream effect is individual burnout with the potential for patient harm. At the macro level there has been a gradual change process that for a while has been like the boiling of the proverbial frog. But now that metaphor is falling apart, because the “frog,” and here the frog can be either the provider (individual professionals or institutions) or the patient, since both have figured out that they are getting “boiled.” What was once “insurance” has become more like a service contract where the employer is paying more, but covering a smaller percentage of the cost, and the patient has experienced significant increases in payroll deductions for coverage, and enormous additional out of pocket costs for many services that were once “covered” entirely. If you still want to call it insurance, the cost of the insurance is being shifted to patients and providers because the employer and the public payers are saying that they are reaching the limit of what they can pay.
In this process of cost shifting to patients other “ripples” to the “insurance” coverage of care have also emerged. One of the most despicable new realities of healthcare costs to arise from this dysfunctional state which many continue to deny, just as they deny the heat and rising water levels, is the entity “surprises medical bills.” Out of network charges have been a source of patient anger and frustration for years in closely managed closed systems of care. Now patients are extremely upset when they think that they are “in network” and yet discover a charge that is coming from a provider that they had no chance of avoiding. This brings us back to Elisabeth Rosenthal. This last week she had a short op ed piece in the New York Times that demonstrates once again that she is a great explainer of what is complicated and dysfunctional in our crazy business of healthcare. The piece is entitled “Who’s Profiting From Your Outrageous Medical Bills? The same people who should be fixing them.”
She is writing in part because there are two conflicting pieces of legislation, each with some bipartisan support in the House, that seek to address the issue of “surprise” medical bills. It’s anybody’s guess as to whether either bill has a chance in the Senate, or would ever be signed by the president. It is also true that last June the president signed a confusing executive order that was designed to address the problem of surprise medical bills as the issue relates to billing for Medicaid and Medicare. She begins her piece by reviewing the current state:
Every politician condemns the phenomenon of “surprise” medical bills. This week, two committees in the House are marking up new surprise billing legislation. One of the few policy proposals President Trump brought up in this year’s State of the Union address was his 2019 executive order targeting them. In the Democratic debates, candidates have railed against such medical bills, and during commercial breaks, back-to-back ads from groups representing doctors and insurers proclaimed how much the health care sector also abhors this uniquely American form of patient extortion.
I think her intent is to warn us that those ads are self serving, and that Trump’s measure amounts to not much improvement. Now she is going to make sure that the reader understands the problem even if they have been so luck as to not have experience it yet.
Patients, of course, hate surprise bills most of all. Typical scenarios: A patient having a heart attack is taken by ambulance to the nearest hospital and gets hit with a bill of over $100,000 because that hospital wasn’t in his insurance network. A patient selects an in-network provider for a minor procedure, like a colonoscopy, only to be billed thousands for the out-of-network anesthesiologist and pathologist who participated.
And yet, no one with authority in Washington has done much of anything about it.
If you like real life horror stories with a happy ending, let me bring to your attention to another NYT Op Ed page piece from this week written by Jennifer Finney Boylan that is entitled “My $145,000 Surprise Medical Bill: What my brief glimpse into the financial abyss taught me about the American health care system.”
Getting back to Dr. Rosenthal’s piece, we are ready for her explanation of why there is conflict over solutions and why the problem exists at all. You guessed it, I am sure. The problem exists because it is making money for the people who have instigated it, and the controversy arises as they seek to advocate for a “solution” that is not a solution and protects their revenue. She continues with the assumption that you have just asked, “Why does this craziness exist?” Her answer:
Here’s why: Major sectors of the health industry have helped to invent this toxic phenomenon, and none of them want to solve it if it means their particular income stream takes a hit. And they have allies in the capital.
That explains why President Trump’s executive order, issued last year, hasn’t resulted in real change. Why bipartisan congressional legislation supported by both the House Energy and Commerce Committee and the Senate Health Committee to shield Americans from surprise medical bills has gone nowhere. And why surprise billing provisions were left out of the end-of-year spending bill in December, which did include major tax relief for many parts of the health care industry.
Surprise bills are just the latest weapons in a decades-long war between the players in the health care industry over who gets to keep the fortunes generated each year from patient illness — $3.6 trillion in 2018.
I think she has included a small exaggeration. Bernie Sander would tell you that the industry made a lot of money last year, but not $3.6 trillion. Billions and billions, but not trillions. Remember a trillion is a thousand billions. I think $3.6 trillion was the total cost of care. The fortunes made, were the margins on that expense. But let’s not quibble, and let her continue:
Here’s how they came to be:
Forty years ago, when many insurers were nonprofit entities and being a doctor wasn’t seen as a particularly good entree into the 1 percent, billed rates were far lower than they are today, and insurers mostly just paid them. Premiums were low or paid by an employer. Patients paid little or nothing in co-payments or deductibles.
That’s when a more entrepreneurial streak kicked in. Think about the opportunities: If someone is paying you whatever you ask, why not ask for more?
Now she is telling you the same story that I gave you, just in case you are a millenial and were either in diapers or just a concept yet to become a reality when the process started “forty years ago.” She continues with more background information:
Commercial insurers as well as Blue Cross Blue Shield Plans, some of which had converted to for-profit status by 2000, began to push back on escalating fees from providers, demanding discounts.
Hospitals and doctors argued about who got to keep different streams of revenue they were paid. Doctors began to form their own companies and built their own outpatient surgery centers to capture payments for themselves.
So today your hospital and doctor and insurer — all claiming to coordinate care for your health — are often in a three-way competition for your money.
I am sure that there are some who had a role in the story of how we got where we are who would take offense at her condensed “origin story” of the problem and her accusation about their role. A more charitable explanation might be that it was an example of “institutional evil.” Institutional evil is a term I like for the reality that many problems, or evils, have their origin in systems complexity. Institutional evil emerges when every player operates ethically out of self interest. Each player can do what seems ethical to them, and is a noble exercise of their fiduciary responsibility, and the collective outcome is bad. Some organizations were not seeking to get really rich, they were just putting their own institutional interests first, ahead of the patient and the community that would be paying. You know the justification. It’s “no margin, no mission.” She builds the picture:
As the battle for revenue has heated up, each side has added new weapons to capture more: Hospitals added facility fees and infusion charges. Insurers levied ever-rising co-payments and deductibles. Most important they limited the networks of providers to those that would accept the rates they were willing to pay.
Surprise bills are the latest tactic: When providers decided that an insurer’s contracted payment offerings were too meager, they stopped participating in the insurer’s network; either they walked away or the insurer left them out. In some cases, physicians decided not to participate in any networks at all. That way, they could charge whatever they wanted when they got involved in patient care and bill the patient directly. For their part, insurers didn’t really care if those practitioners demanding more money left.
You can understand this evolution. It’s good business. We incent managers for the quarterly success of their responsibilities. There are entrepreneurial physicians who accept the risks inherent in building a lab, an urgent care outlet, or providing emergency services or anesthesia. Are they doing anything wrong to try to maximize the value of their enterprise? Are we not a country built on the principles of capitalism? Would you want to get care from a socialist? I once had the epiphany in my organization that today’s brainy solutions were tomorrow’s “wicked” problems. She continues:
And, for a time, all sides were basically fine with this arrangement.
But as the scope and the scale of surprise bills has grown in the past five years, more people have experienced these costly, unpleasant surprises. With accumulating bad publicity, they have become impossible to ignore. It was hard to defend a patient stuck with over $500,000 in surprise bills for 14 weeks of dialysis. Or the $10,000 bill from the out-of-network pediatrician who tends to newborns in intensive care. How about the counties where no ambulance companies participate in insurance, so every ambulance ride costs hundreds or even thousands of dollars?
These practices are an obvious outrage. But no one in the health care sector wants to unilaterally make the type of big concessions that would change them. Insurers want to pay a fixed rate. Doctors and hospitals prefer what they call “baseball- style arbitration,” where a reasonable charge is determined by mediation. Both camps have lined up sympathetic politicians for their point of view.
So by now she has given us enough information to realize that collectively we have a problem with “what is.” But did we not know that already? It’s obvious from listening to the Democratic presidential debates that Bernie Sanders and Elizabeth Warren are being vilified for pointing out that we have a system that is so misaligned with the principles of good care that the delivery of even marginal care will continue to come at higher and higher costs, and for that reason we are past the possibility of improvement through incremental change. They are suggesting that we need to tear down the old structure and build a new one on a foundation of healthcare provided through universal access that does not have commercial insurance, or an ability to pay as a barrier to care. They contend that the ultimate “expense” to the community will returned through the benefits of a healthier community. They are in touch with the reality that most people can’t pay more, and are avoiding care they need, even when “covered” because of the out of pocket expenses of their “insurance.” If the average consumer of healthcare is really “satisfied” with their employer based insurance, it means they don’t mind paying more than $14,000 a year for that satisfaction, plus they accept being vulnerable to “surprise” bills if they actually do get sick.
It amazes me that some on the Democratic debate stage don’t seem to understand, or spend a lot of effort trying to deny, that if your taxes go up by a few thousand a year, but your medical expenses go down by over ten thousand a year for a product that has a better benefit package, the net change is positive for you. What can Dr. Rosenthal say? Unfortunately, not much. Again it’s like global warming, we must live with the the wisdom or lack thereof, of our politicians who like many healthcare providers are more interested in their own concerns, and what’s good for “business,” rather than providing a patient and community centric solution.
So, nothing has changed at the federal level, even though it’s hard to imagine another issue for which there is such widespread consensus. Two-thirds of Americans say they are worried about being able to afford an unexpected medical bill — more than any other household expense. Nearly eight in 10 Americans say they want federal legislation to protect patients against surprise bills.
States are passing their own surprise billing laws, though they lack power since much of insurance is regulated at a national level.
Now members of Congress have yet another chance to tackle this obvious injustice. Will they listen to hospitals, doctors, insurers? Or, in this election year, will they finally heed their voter-patients?
I keep asking myself two questions. First, what part of the problem do we, the providers of care, want to accept as arising from our actions? Second, is Stein’s Law really true? If something can’t go on forever, will it stop?
A Beautiful Ride Can Recharge Your “Batteries”
I am writing from Sayre, Pennsylvania where I am attending a board retreat. I have come here several times a year for the last nine years for meetings of the board of the Guthrie Clinic which is the largest provider of care in the Twin Tiers of New York and Pennsylvania. It has been a wonderful experience, and has given me a perspective on the challenges of providing healthcare in rural and small town America.
Before I retired to New Hampshire I would fly here. The trip was always a challenge. The area is serviced by Elmira Corning Regional Airport. You have two choices if you want to fly to the Elmira Corning Regional Airport. You can connect through Philadelphia on American Airlines, or you can connect through Detroit on Delta. In both situations you fly past your ultimate destination and then catch a regional flight back to it. Another option is to fly to Rochester and then drive back over a hundred miles. On multiple occasions, either because of delays in my first flight to either Detroit or Philadelphia, or cancelation of flights to Elmira I would encounter long delays. My batting average for a smooth trip as planned was “below the Mendoza line.” On one frustrating occasion I arrived at the airport after the rental car office was closed, which was a problem since the airport is almost thirty miles from Sayre.
When I retired to New Hampshire the problem got worse because I live fifty miles north of the Manchester Airport. It occurred to me that I would be driving eighty of the 300 miles between my home and the meeting. Why not drive the whole way and “control my own destiny?” I now look forward to coming to meetings for two reasons. First, I love the organization, and I am very proud of the care that it is providing to the Twin Tiers. Second, I love the drive!
My route crosses some of the most beautiful parts of Vermont as you might notice in today’s header. On a clear day the views take my breath away. After crossing Vermont, the second part of the trip is between the Troy/Albany Area and Binghamton, New York on I 88. That drive is more than a hundred miles of magnificent vistas. Interstate 88 is a gorgeous ride where one is often looking down long valleys and across seemingly endless rows of mountains. When you get to the end of I 88 in Binghamton, New York, near the real “endless mountains” of northeast Pennsylvania, you head west on I 86/US 17 for the last part of the trip through the valley which follows the Susquehanna toward the Chemung River. The Chemung joins the Susquehanna near Sayre.
The trip is different in each season. As you can see from today’s header, this trip was through beautiful winter scenes. The next trip will be through the light green foliage of early spring. In summer there will be darker greens and miles of cornfields. Next fall I will be treated to a dazzling spectacle of color. In any season it is a treat. Every now and then I have taken a side trip off I 88 to visit beautiful Cooperstown and the Baseball Hall of Fame, but the best part of the trip is that I know when I arrive, I will be participating in an organization that has embraced a process of continuous improvement in its efforts to serve a population that is spread across a very beautiful part of our country.
I am sure that there are beautiful roads to travel near you. I hope that you have an opportunity to be out and about this weekend, and that come Monday you will be back to whatever work you do with a sense of renewal and an opportunity to contribute in a meaningful way toward a brighter future for all Americans.
Be well, take good care of yourself, let me hear from you often, and don’t let anything keep you from doing the good that you can do every day,
Gene
