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
Redistribution Not Innovation is Needed: Health Insurance, Not Medical Care, was the Primary Driver of Cost in 2022. Where's the Outrage?
Critical to solving our nation's healthcare crisis is to align money with value. Did health insurance produce 10% more value for our healthcare system than providers in 2022?
If not maybe we should focus on a simple fix like requiring health insurance plans to take on more actuarial risk, e.g., first-dollar coverage. This simple redistribution of funds would go much further to help patients and providers in the short run than unproven altruistic concepts like Hospitals at Home, addressing SDOH, and other "innovative" concepts whose ROI remains a mystery.
But innovation is cool and sells books and magazine articles regardless of whether the innovation actually works remember patient-centered medical homes, oncology care models, Next Gen ACOs, and Bundled Payments for Care Improvement....?
P.S. Please share the graph with your local employers.
~ So it goes. n8 Follow Nathan Kaufman on LinkedIn 11/2022
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
...Focusing On the Right Strategies!
While Succeeding In The Healthcare Industry Is Hard, It Does Not Help If You Are Not Focusing On the Right Strategies!
According to a recent survey, there is still too much focus by health systems on 'shiny objects' and not enough on back-to-basics, especially developing positive relationships with physicians and the local workforce. At least that's my humble opinion -- So it goes n8
What say you??
~So it goes. n8 Follow Nathan Kaufman on LinkedIn 9/2022
Lessons That Can Be Learned
Every healthcare company has issues/problems but there are usually lessons that can be learned from high performers. Here are my personal observations:
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Manage your portfolio of facilities – exit markets where you are weak
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FOCUS on hospital operations and revenue cycle excellence
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Rates still matter
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Balance corporate and local control
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Don’t get distracted by the latest fads stick to the basics
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Manage by results, not by process
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Measure what matters
~ So it goes. n8 Follow Nathan Kaufman on LinkedIn 3/2023
Evidence Humana is Exiting Commercial Market
More Evidence Why Humana is Exiting the Commercial Insurance Market and Why Health Systems Should Not Become "Payviders."
KFF just came out with a study showing declining GROSS margins in both the group and individual insurance markets.
The latest data from the CMS MLR Database extracted by our PI Squared analyzer shows:
1. The net profitability of fully insured commercial health plans covering 67 million Americans declined to almost zero.
2. Prescription drug rebates are the only reason that fully insured health plans are profitable. Without the significant contribution from drug rebates, commercial health plans are losers. BEWARE OF HEALTH INSURANCE COMPANIES WANTING TO OFFLOAD MEDICAL RISK AND RETAIN THE PHARMACY RISK UNDER THE GUISE OF COLLABORATION.
3. Prescription drug rebates have grown from 15% of Gross to 24% in just four years, no wonder Congress is so interested in PBMs.
For those novices who want to play in the Medicare Advantage space, there are lessons to be learned from Oxford Health, Bright Health, and Clover Health. Check out their projections vs. their actual performance.
~So it goes. n8 Follow Nathan Kaufman on LinkedIn 3/2023
United Healthcare...In Protracted Termination Fight
United Healthcare and some of their larger for-profit peers have the critical mass to withstand the impact of a protracted termination fight with even the largest health system which, by the way, may be their new negotiating strategy.
+ The Big 6 profits soared from $16.9 billion in 2010 to $60.7 billion in 2021.
+ Less than one in every ten dollars of national health care spending flowed through the Big 6 insurers in 2010; today the number has risen to almost one of every four dollars.
~ So it goes. n8 Follow Nathan Kaufman on LinkedIn 6/2023
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
...Lack of Focus on BASIC HOSPITAL OPERATIONS
The fact that multiple studies show that one in four hospital patients experienced an adverse event demonstrates a lack of focus on BASIC HOSPITAL OPERATIONS.
In addition to gross underfunding by government and commercial payers, the industry has been distracted by shiny objects like value-based care, population health, and ACOs, all of which have depleted resources from our primary mission of providing safe, effective, quality care to hospitalized patients (many of whom who have had to suffer the indignity of being 'boarded' in the EDs due to ineffective discharge planning).
P.S. And no surprise one large system is losing billions, when their leader said: "we should shoot to where the puck is going" (a misquote of Wayne Gretzky) the actual quote is "I SKATE to where the puck is going to be, not where it’s been" --- following the metaphor, shooting is not always the best strategy when one receives the puck. You have to deeply understand each market to be successful - one size does not fit all.
P.P.S. Operating a hospital is exceptionally hard, especially today with the labor shortage and the demands for huge stipends by hospital-based physicians. Really good operators are underappreciated by the public, politicians, academicians, and in many systems by the corporate executives and need people in the foxhole helping them, not standing on the sidelines criticizing them thinking they can do better. Bad operators need to be exposed and replaced.
~ So it goes. n8 Follow Nathan Kaufman on LinkedIn 01/2022
Only Those Ignorant of Healthcare Economics...
Only those ignorant of healthcare economics (or not interested in the facts) would consider Medicare a reasonable benchmark for physician compensation; Here’s why:
Fee schedules for Medicare and Medicaid, which combined represent over half of the visits for most physician practices (excluding peds and OB/Gyn), have not even come close to keeping up with the cost of operating a practice, never mind general inflation.
Commercial payers shadow price at 110-120% of Medicare for most practices knowing that physicians do not have the balance sheet to sustain a long out-of-network battle.
The government and commercial payers have rendered independent practice financially unsustainable for most specialties and forced physicians to give up their precious independence and seek the financial shelter of employment or affiliation from health systems, corporations, and PE firms.
Benchmarking anesthesiologists to Medicare would reduce their median income by 60%., from the $450,000s to under $200,000, i.e., less than a CRNA's salary.
This is about controlling the narrative. It is in the best interest of the insurance companies and their surrogate academicians and politicians to continue promoting the percentage of Medicare fallacy. Hopefully, this chart will help you change the narrative.
~So it goes. n8 Follow Nathan Kaufman on LinkedIn 01/2022
CMS Should be Ashamed...
CMS should be ashamed for only improving the physician fee schedule from -4% to -2% while they alleged and continue to allow MA plans to generate record profits from overpayments linked to inaccurate risk scoring.
On average, Medicare pays physicians 20%-40% less than commercial payers for their services. If hospital-based physicians like anesthesiologists and hospitalists only treated Medicare patients, their income would be less than $180K per year if they just saw Medicare patients.
I recently had surgery and apologized to the anesthesiologist for how he was being treated by my payer, Medicare.
~ So it goes. n8 Follow Nathan Kaufman on LinkedIn 12/2022
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