The Closure of Atlanta Medical Center is the Canary in the Coal Mine – Blaming the Health System for the Closure of the Hospital is Like Blaming the Canary for Failure in the Coal Mine.
Health systems need to be far more efficient and focused on the front lines rather than on the bureaucrats at the system office. But the tragedy of the closure of Atlanta Medical Center is the result of three primary factors:
1. Regardless of what ivory tower academicians and policy wonks say, hospitals and physicians receive insufficient reimbursement for treating Medicare, Medicaid, and Self-Pay patients. Even with the benefits of Tax-Exempt Status, the payments are woefully inadequate to cover the fully allocated costs. Hospitals with a high percentage of these patients will have to eliminate services, ration care and/or close unless their commercial rates include sufficient funds to subsidize the hospital for these patients.
2. Insurance companies made the unilateral decision not to provide first-dollar coverage. The theory was that by putting first dollar risk on the patient they would 'shop' for care. The data shows that rather than shopping, out-of-pocket costs served as a barrier to care, and many patients got sicker rather than sought care at the first sign. Increasing out-of-pocket costs have contributed to the record profits of the insurance companies since at least half of the commercial patients don't meet their deductible limits. That is the insurance company collects the premium but pays nothing out. Don't blame the providers for medical debt. Up to 65% of the hospitals are currently losing money, providers did not ask for this financial risk, but they have no choice but to collect it given their financial situation and the payers have the balance sheet to absorb it yet the payers keep increasing co-payments and deductibles thus enhancing their profitability.
3. Those of us that negotiate managed care contracts know that the goal of the insurance companies is to purchase care at the cheapest rate. There is little if any discussion of the sustainability of the provider network, nor is there discussion of outcomes, the total cost over the episode of care, diagnostic accuracy, appropriateness of treatment, care coordination, etc. If anything, they cite the semi-useless CMS indicators for a small-shared savings bonus. Just CHEAP. If the commercial rates do not consider the sustainability of the facility given its mix of government patients, the facility is likely to fail. (SOME CALL THIS COST SHIFTING; I CALL THIS A SUSTAINABILITY PAYMENT)
Atlanta Medical Center is just the beginning. The first step in solving a problem is recognizing its root cause.
So it goes n8 Follow Nathan Kaufman on LinkedIn 11/15/22
Anthem is Changing Its Name
Anthem is changing its name to Elevance Health (??) to improve its image. I am thinking of changing my name to Thomas Brady. Will that make me a better athlete?
So it goes. n8 Follow Nathan Kaufman on LinkedIn 4/6/2022
Opinions About Benchmarking Against Medicare Rates Are Where
the Rubber Meets the Sky - Let's Focus on the FACTS -
1. Medicare pays Anesthesiologist $120 per hour, after overhead, malpractice, and billing expenses they net ~$78 per hour, slightly less than a CRNA (and my plumber)... is a payment rate of 200+% of Medicare for these highly trained professionals wrong? (Note: Medicaid pays less) Hey Rand, any suggestions on how to subsidize the shortfall in Medicare payments to Anesthesiologists other than through commercial payments directly to the doctors which is almost impossible (see BCBSNC) or through the hospital?
2. Medicare pays imaging centers ~$260 for an MRI procedure (about the same for Medicaid) In today's economics, this barely covers the cost of the personnel and supplies but not the equipment and the professional services.
3. Medicare pays ASCs ~$8,500 for a joint replacement. After paying for the implant and other supplies, there is little left over to cover staffing and fixed costs (which are significant.)
4. Over the past two decades (2001-2021,) recommendations from the geniuses at MedPAC have resulted in the Medicare Physician Fee Schedule increasing by just 11%, while the cost of running an office practice increased by 39% (much due to insurance company bureaucracy.) If physicians in Medicare-dependent specialties stayed in private practice they would have had to take a significant reduction in compensation or spend less time with their patients.
5. MedPAC claims that the average Nonprofit hospital loses 10.1% treating Medicare patients. But excluded in this calculation is the cost of employing 301,600 physicians they forced out of private practice (see above) and the new hyperinflation in clinical staff salaries. (Soon the focus will shift from price to access due to staffing shortages!)
Currently, healthcare policy is being driven by academicians, politicians, researchers, policy experts, the Rand Corporation, researchers influenced by United Healthcare, etc. most of whom have little contact with those that deliver care. Healthcare policy will fail without the input from practicing doctors, nurses, chief operating officers, practice managers, and others who understand the unintended consequences of misinformed ideas developed far away from the bedside and physician offices.
PS: this is not to excuse the select health systems that are inefficient, lack strategic focus, do not engage with their physicians, etc.
So it goes -n8 Follow Nathan Kaufman on LinkedIn 3/6/2022
No Fake-onomics here, just the facts
WHAT DOES IT SAY ABOUT OUR NATION'S HEALTH SYSTEM WHEN, DURING A PANDEMIC, THE HOSPITALS AND PHYSICIANS THAT RISKED THEIR LIVES CARING FOR PATIENTS IN 2020 HAD DECLINING EARNINGS AND NEGATIVE OPERATING MARGINS WHILE THE TWO LARGEST COMPANIES THAT ARE ESSENTIALLY IN THE BUSINESS OF PROCESSING (DELAYING/DENYING/PAYING) CLAIMS, UNITED HEALTHCARE, AND ANTHEM, HAD RECORD OPERATING PROFITS $22.4 BILLION AND $6.36 BILLION?
Is this what we value? Just Sayin' n8
No Fake-onomics here, just the facts:
KaufmanHall National Hospital Flash Report
KaufmanHall Physician Flash Report
Anthem Reports Fourth Quarter and Full Year 2020 Results
UnitedHealth Group Reports Fourth Quarter and Full Year 2020 Results
Just Sayin' ...~N8 Follow Nathan Kaufman on LinkedIn 3/13/2021
Treat Your Docs Fairly...!
The growing disconnect between docs and health systems will grow even more if you listen to these knuckleheads.
I just read this in a blog:
A CMO from a Midwestern health system relayed.: “Our doctors were fully on board with the need to reduce salaries back in April, so we all took a 15 percent pay cut through the summer. Now that they’re busy again, they want to be bumped back to 100 percent. But the system’s financial picture hasn’t changed.” ...[the Blogger advised] Prescient systems will use this moment to work with their doctors to rethink practice and align compensation with the financial success of the system, WHAT THE HELL DOES THIS MEAN? CUT WASTE OUT OF THE SYSTEM WHY DEVALUE ONE OF YOUR MOST VALUABLE ASSETS - THE DOCS!
I was recently negotiating comp. for a world-renowned cardiac surgeon who, through his clinical and admin. skills doubled the volume at his hospital over the decade. The valuator, who probably is paid over $400/hr, suggested this doc be paid $275 for his medico-administrative time and also encouraged the hospital to put the 3 cardiac surgeons on pure productivity- 'share the risk' he said - (so what if they lose one doctor and the surgeons have to be on call every other night)
TREAT YOUR DOCS FAIRLY-Have people lost their minds?
Just Sayin' ...~N8 Follow Nathan Kaufman on LinkedIn 4/2020
Hey, Knuckleheads, Finish your Study
Hey, Knuckleheads! Finish Your Study: Hospitals Merged; quality didn’t improve!
1. Take a look at the rates paid by the payers prior to the merger and compare them to the market maybe they deserved more than a 7% increase.
2. Take a look at the financial condition of the hospitals that merged and see if they could have survived on their own.
3. Take a look at the CMS measures you used for quality. The literature shows they have limited, if any correlation to clinical quality, especially readmission rates which may have an inverse correlation to quality! Pretty weak - But you made headlines - Happy New Year!
Just Sayin' ...~N8 Follow Nathan Kaufman on LinkedIn 1/3/2020
Six Resolutions for 2020
I will limit my complaints about researchers who make ivory tower conclusions like $40 billion can be saved by eliminating ‘surprise billing’ by hospital-based physicians, when IN REALITY, those physicians will demand larger stipends from hospitals which will raise private insurance rates or force hospitals to cut back on services;
I will try not to criticize those health systems that judge themselves based on activity rather than results as they experience a financial crisis while bragging about their focus on "innovation" (Hubris);
I will continue to look for at least one example where a health plan has created value for patients and employers rather than for themselves and shareholders;
I will try to understand the ROI calculation used by capital starved healthcare providers who are investing in social determinants of health;
I will try to be more patient with people who fail to recognize that reducing hospital commercial prices will have huge consequences including the elimination of services, severe access issues, and a reduction in the supply of physicians; and
I will be more tolerant of hospital executives who don’t recognize that collaborating with practicing physicians is Job 1.
Happy New Year and Cheers - Just sayin’…~ n8 Follow Nathan Kaufman on LinkedIn 12/2019
Hey Ivory Tower Researchers - Put Down Your Clip Boards;
Try Running a Health System; See if you can Come Up
With a Better Pricing Model
According to CMS, the cost of running hospitals increases by 2.5% per year. Since 2014, the blended rate increase for health systems from all payers was about 1% per year:
A. 31% of gross revs. are from commercial payers averaging a 2.5% negotiated rate increase per year (if lucky;)
B. 21% of gross revs. are from Medicaid/self-pay that pays 65% of cost with no increase over the past five years; and
C. 48% of gross revs. are from Medicare that pays about 80% of cost averaging 1.5% increase per year.
And please stop with the “hospitals can breakeven on Medicare” nonsense! CMS overestimates health system margins using data from the HOSPITAL Medicare Cost Report which excludes essential costs HEALTH SYSTEMS incur including the cost burden of physician employment (necessitated in part by the stingy 0-1% annual increases in the Medicare Physician Fee Schedule over the past decade.)
As Steve Jobs noted, “people who make recommendations without the experience of actually working in that business are extremely limited because they never really get a full understanding of that business and its [pricing] complexities.”
Just sayin’…~ n8 Follow Nathan Kaufman on LinkedIn 9/23/19
The Killer B’s in Physician-Health System Collaboration
The primary job of health system executives is to take care of the people who take care of patients. If most of the practicing physicians answer “b” to any of the following three questions, it is time to rethink your culture and your leadership style:
1. Do most of the practicing physicians describe the management style of the health system towards doctors as:
a) participatory management through relationships and influence; or
b) “command and control;”
2. Who would the practicing physicians say has more control in the organization:
a) the physician leadership; or
b) HR and compliance?
3. While the practicing physicians and administration do not always agree, would you say that the practicing physicians believe that most of the senior system leadership:
a) care and seek out the opinions of practicing physicians and give their opinions a fair hearing; or
b) don’t know and/or discount what the practicing physicians think?
No amount of disruptive innovation, population health, value-based care, or blah blah blah can compensate for the under-performance caused by the Killer B’s.
Just sayin’…~ n8 Follow Nathan Kaufman on LinkedIn 9/9/19
North Carolina, a Leader in Healthcare Innovation?
C’mon Man – Premature Infatuation
Last week the industry was bubbling about NC HHS Secretary Cohen’s efforts to transform health care, encouraging hospitals to participate in NC Blue Cross’ Blue Premier, a program reimbursing health systems based on value vs FFS.
Here are the facts:
1. Per the CDC, NC has one of the highest cigarette use rates in the country and one of the lowest
2. Smoking-Attributable Healthcare Expenditures in NC are estimated to be well over $4 Billion.
3. North Carolina is one of the few states that have yet to expand Medicaid.
4. Retread ACO-like efforts, such as Blue Premier have not produced independent peer-reviewed
material benefits to consumers (self-promoted results maybe.)
a) Navigant found ACOs that received shared savings still lost money due to reduced
Medicare FFS revenue, i.e., the net benefit went to the payer.
b) HFMA et al. research found “penetration of value-based models is not yet having an
impact on curbing growth in total cost of care.”
NC officials should stop self-promoting and focus on:
1. Expanding Medicaid
2. Reducing tobacco use; and
3. Develop truly innovative win-win payer-provider collaborations that do more than recycle failed
Just sayin’…~ n8 Follow Nathan Kaufman on LinkedIn 9/2019
Last week the industry was bubbling about NC HHS Secretary Cohen’s efforts to transform health care,
Costs Health Systems Hundreds of Millions Health systems continue to lose millions following the advice of panacea peddlers promoting ‘magical thinking’ solutions using heartwarming stories and cool PowerPoint presentations. Quantitative analysis, a second opinion and due diligence would save these health systems a fortune by demonstrating that the “innovative” recommendations they embraced were not feasible. Examples of such recommendations include provider-based health plans, direct contracts, various loose affiliations, deep discounting in exchange for volume, etc. To protect from becoming prematurely infatuated with an idea or strategy, apply the infatuation test.
The Infatuation Test:
For a similar health system(s) that implemented this strategy:
Were the fully allocated financials positive after three years?
What is the ROI?
Did market share increase?
What is the measurable impact on patients?
What do practicing physicians think?
If we spend on this, what do we go without, and is the trade off worth it?
If the answers are positive, then embrace the idea, if not, then you may want to invest elsewhere. Remember, unlike the person with the cool PowerPoint, you have to live with the results.
Just sayin’…~ n8 Follow Nathan Kaufman on LinkedIn 8/2019
Who is the Fox and Who is the Chicken Coop?
United Health just made headlines that from 2013 to 2017 inpatient hospital prices grew by about 4.5% per year offset by a 5% reduction in utilization (sounds revenue neutral to me.) AND IF THOSE [EVIL] HOSPITALS HOLD DOWN THEIR PRICES, PRIVATELY INSURED INDIVIDUALS CAN SAVE BILLIONS.
Note: in 2017 Moody’s stated that the hospital industry had their worst financial year in a decade. (BTW If hospitals hold down prices as suggested, it is probable that services will be eliminated, and communities
will be under-served).
During this same period, when adjusted for increases in deductibles, insurance premiums also increased
by about 4.5%. Unlike hospitals, most health insurance companies recently reported record profits. Hmm…
What do hospitals do with most of their funds?
They maintain state of the art services,
Stay open 7/24,
Treat the indigent and grossly underfunded government patients,
Maintain a sufficient supply of physicians to meet the community need, etc.
And insurance companies like United...
If one is going to address the cost crisis, the problem is far more complex than per-unit pricing, it is counterproductive to puke on hospitals when we should be collaborating on new delivery models.
Just sayin’…~ n8 Follow Nathan Kaufman on LinkedIn 8/2019
New Rule: Every Time an Interview with a Health System Executive
is Published, Require a Footnote Summarizing Their System’s
3-Year Financial Performance
I recently read two interviews with health system executives chock full of advice. Then I realized that under both CEOs, their health systems’ performance deteriorated significantly. Given this context, I now view their advice in a whole different light, (like maybe one should do the opposite.) To ensure we are getting information from true achievers vs. ‘third basers’ (people who were hired on third base and think they hit a triple), I suggest that when a senior industry executive is interviewed or quoted, the article include a footnote summarizing their system’s performance trend.
Just sayin’…~ n8* Follow Nathan Kaufman on LinkedIn 8/2019
*n8 last worked as an executive in a health system in the mid-1980s. He now works in a small office in San Diego with his deaf Italian greyhound “Whiskey” who, by definition, does not listen to him.
Contrary to Ivory Tower 'Experts'
Contrary to ivory tower 'experts,' am I the only one who doesn't think anything MATERIAL has changed in the healthcare trenches? At a Becker's Hospital Round table an 'expert' said "We are at a really interesting turning point in the industry," ..We've been trying to reform healthcare forever, and it's resisted it forever. But it really does feel like this time is different." AM I WORKING IN A DIFFERENT HEALTHCARE SYSTEM??????
1) Most reimbursement is still FFS;
2) So-called value-based reimbursement has not improved cost nor outcomes for patients, but it has enriched the MCOs;
3) ACOs - 'Another Consultants Opportunity' - enough said;
4) population health - Just another consultants opportunity; and
5) PRACTICING physicians, who are kind of important to health care, are still committed to the TRIPLE GAIN (vs triple aim)- increasing their compensation, spending more time with patients, improving their lifestyle.
SO WHERE'S THIS TURNING POINT? WHAT'S DIFFERENT THIS TIME? I'm sure he had cool slides.
Just sayin’…~ n8 Follow Nathan Kaufman on LinkedIn 7/2019
It's the Doctors Stupid!
With all the hype about prices, disruptive innovation, scale, consumerism, etc. What is fact is that patients need an adequate supply of quality doctors in their community. Surveys from Merritt Hawkins, MGMA and AAMC show some startling statistics:
• In the next decade, 20% of physicians will reach retirement age.
• By 2036 the doctor shortage could be 121,000.
• A survey of final year residents shows: 66% received 51+ solicitations; 1% prefer rural markets. The vast majority want to be employed, 43% by hospitals.
• In ’18 comp. for new ED docs was up 40% to over $200K and cardiologists was up 21% to over $400K.
• In ’18 comp for all physicians was up 4.4% reflecting huge demand and limited supply Contrary to the conspiracy theories, economics are forcing independent practices (and hospitals) to consolidate.
Physicians who are not in an ancillary-rich subspecialty e.g., orthopedics, cannot afford to remain in private practice and many request an employment lifeline from their health system.
Hey, researchers, ask employers a real-life question: If paying your local health system less than its current multiple of Medicare means long waits for doctors, or your employees will have to travel for care, are you willing to pay the current rates?
Just sayin’…~ n8 Follow Nathan Kaufman on LinkedIn 6/2019
Thank You, Captain Obvious
Rand finds that hospital prices are 241% higher than Medicare and “If hospital prices paid by employers
and health plans ...were reduced to Medicare rates.... healthcare spending would have been reduced by approximately $7.7 billion, or 50%.”
How about this knuckleheads -- if the hospitals were paid ½ Medicare rates, then healthcare spending
would have been reduced by $15.4 billion!! Have you successfully run a hospital on just Medicare and Medicaid rates? Probably not; because it's impossible in most cases! So you can save billions but you put
the hospitals out of business. It must be nice to sit on the sidelines and make these overly simplistic hypothetical observations and conclusions while health systems struggle daily to survive dealing with thousands of regulations, grossly underfunded government reimbursement, escalating drug expenses, physician shortages, payer oligopolies, EMTALA etc., etc.
Meanwhile, the fundamental cost problem in our health system is not per unit prices, but the fact that 5%
of the population accounts for almost 55% of the healthcare costs requiring fundamental delivery system redesign – PS what about the 18 cents out of every dollar of the premium that the payers take for their services and profits?
Just sayin’…~ n8* Follow Nathan Kaufman on LinkedIn 5/2019