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[Music] hello this is dr eric bricker and thank you for watching a healthcare z today we're going to be discussing hospital cross subsidization so it's a well-known fact that medicare and medicaid under reimburse hospital systems for the care they provide and that hospital systems then have commercial insurance patients then overpay for the care that they provide to them and so that's where you get the cross subsidization from right so you're subsidizing the underpayment by medicare and medicaid by having the commercial insurance overpay and that's just how hospital finance in america works okay now let's get into some specific numbers these statistics are actually from the american hospital association themselves and i will leave the links in the show notes and so you can see here that medicare and medicaid underpay by 13 okay well how much care is actually provided by medicare medicaid well total hospital expense 60 percent came in from medicare and medicaid patients okay so 60 percent of the hospitals told businesses for medicare and medicaid all right now there's medicare medicaid there's commercial insurance but then there's also just non-payment there's a lot of patients that come in that just don't pay at all that's uncompensated care and that totaled 38 billion okay now if we want to figure that out as a percentage we need to know total hospital expense well that's reported by the american hospital association up so total hospital expense was 900 billion okay so uncomplicated care is 38 billion divided by the 900 billion that gets you 4.2 percent so in other words the hospital is and gets 60 of their business for medicare medicaid and 4.2 percent of their business for people that just don't pay at all okay great now hospitals still make money they still have a profit margin even non-profit hospitals still have a profit margin what is that profit margin that was reported by the american hospital association as well it was 7.7 percent so knowing what their expense is and knowing what their profit margin is you can then solve for okay what was total hospital revenue and that was 975 billion dollars okay now let's break it down by medicare and medicaid in terms of specific dollar amounts okay so that means that 540 billion dollars of hospital revenue was from excuse me of hospital care was from medicare and medicaid and that hospital revenue from medicare and medicaid was only 470 billion right because medicare medicaid under compensate for the care so they only paid 470 billion for the 540 billion of care that was provided for them okay now that means that commercial insurance revenue for those hospitals was 505 billion right because you got 975 billion total you're only getting 470 billion from medicare medicaid uncompensated care they're not getting paid anything so that gives you the 505 billion of revenue now how much care are those hospital systems providing for what the expense for that 505 billion well it's only 36 percent of care right because we know sixty percent of care is from medicare and medicaid we know four percent of care is uncompensated so that means that 36 percent of care 36 of expense is from commercially insured patients okay great that's 322 billion dollars now then doing the math on the 505 billion of revenue and the 322 billion of expense that means the punch line is commercial insurance overpaid by 57 now all these numbers are approximations right because the fact that medicare and medicaid both under compensate by 13 somewhat of a coincidence the fact that the care from medicare medicaid is 60 it's a very round number maybe it's 58 maybe it's 62. okay but the point is is that medicare and medicaid underpay and commercial insurance which is really employers in america with their premiums or if they're self-funded they're actually paying off the paid the claims themselves so employers and employees in america overpay by 57 to make up for the fact that medicare and medicaid and uncompensated care underpays the hospitals and that's my point for today thank you for watching a healthcare z [Music] hello this is dr eric bricker and thank you for watching a healthcare z today we're going to be discussing hospital accounting now this might be the most boring topic ever but i promise you if you stay with me till the end it will become fascinating okay fact number one most hospitals do not do cost accounting what does that mean most hospitals do not actually know what it costs them internally to deliver a carpal tunnel release surgery to deliver a gallbladder surgery to deliver an mri to deliver 30 minutes of time spent in the emergency room okay so there was a fascinating article about this from the new york times in 2015 that i will put in the show notes and as far as i'm concerned this article should be like front page news like every day for every healthcare publication it's that big of a deal okay however this article is about the university of utah health care system which went through an exercise where they actually figured out how much all of their care actually cost them internally and guess what they found out an er visit cost 82 cents a minute and time in the operating room for an orthopedic surgery cost 12 dollars a minute so they actually knew literally what everything in their hospital actually caught them what cost them what's that called normal what what most normal businesses do that's what we did at our company it's what the automobile industry does if any of you watching this video run a business you probably know how much it costs you to do various parts of your own business okay that's a good business practice that is quote-unquote highly innovative in healthcare okay fascinating this was such a huge deal that michael porter who is probably one of the most famous business school professors in america or even in the world from harvard university went to the university of utah healthcare system to research this and he said look this is amazing this is the equivalent of like michael jordan saying that you are good at basketball okay this is a huge deal all right so now as a result of this let me go back a point here as a result of knowing their costs guess what the university of utah healthcare system was able to do they were actually able to lower their costs so their cost went down about half a percentage point whereas comparable academic medical centers in their part of the country actually went up by 2.9 percent and that makes sense right if you're going to control costs and bring costs down you actually have to know what your costs are so the if the vast majority of hospitals in america don't know what their costs are then they're going to have a really hard time bringing those costs down okay so that is like a basic fundamental that really everyone needs to understand now i have my own theory uh point number four as to why at the university of utah is there something in the water do they have something especially um especially smart people there look i'm sure they do have a lot of smart people there but here's what utah also has it also has the inter-mountain health care system and intermountain is like the major competing health care system for the university of utah now utah is a unique state in that it has about five million people and they're heavily concentrated as you can imagine in the salt lake city area somewhat in uh in provo as well and so they've got most of their people kind of in one place and they really only have two hospital major hospital systems for those people all right what does intermountain healthcare have it runs its own health plan you buy intermountain healthcare insurance in utah and what means that the universe that intermittent healthcare is collecting premium and delivering care what does that mean intermountain healthcare is taking on risk and as a result of that they have created amazing care pathways they have protocols they have been trumpeted by both democratic and republican administrations i mean they are just known as the best of the best in america when it comes to running a health care system and the university of utah has to compete with that okay so i this is my own theory but they had to up their game in cost accounting in order to compete with intermountain okay guess what other uh healthcare system in america is thought of as one of the most innovative healthcare systems in america it's the geyser healthcare system on the eastern side of pennsylvania in a completely separate part of the country what does geysinger have in common with intermountain healthcare it also runs a health plan it collects premium it takes on risk and it provides care so that is a big deal and that's why cost accounting is a big deal and that is why and that really gets to the root of so many issues in health care and that is it's the incentives look when you're incentivized to be a more prudent steward of your health care resources because you're taking on risk guess what happens tons of innovation tons of increased uh clinical improvement tons of increased safety tons of increased outcomes and so necessity is the mother invention and so that is the punchline that i would like to leave you with today and thank you for watching a health care c [Music] hello this is dr eric bricker and thank you for watching a healthcare z today we're going to be discussing complex patients from the hospital perspective and i wrote down hcc up here because on the employer broker benefit consultant commercial insurance side they're oftentimes referred to as high cost claimants okay but for a doctor in a hospital they are never called a high cost claimant okay they're either called a person or a patient or sue or john i mean these are people and they have names and they have lives and so i think it's very important for everyone that works in healthcare to kind of understand what's going on with these very complex patients and the reason that we're talking about complex patients is because of point number one which is the 80 20 rule or what's called the 550 rule right so for most commercial insurance plans and employers eighty percent of their costs come from twenty percent of their uh employees uh plan members and the 550 rule is just a more concentrated version of that right where five percent of the employees or the plan members drive fifty percent of the costs okay well the reverse is true on the hospital side right of the hospital's expenses it stratifies right eighty percent of the hospital's expenses are spent on twenty percent of the patients and it stratifies even more right where about fifty percent of the uh hospitals expenses are spent on the five percent of the most complicated patients okay and similar to commercially insured patients they typically fall into several categories and those are ortho cardiac and cancer now i also wrote up here icu as well because there's a lot of cases of what's sepsis which is a systemic infection that causes you to be unconscious and have very low blood pressure and also uh what's called ards or acute respiratory syndrome which is essentially lung failure okay and these typically happen in the next point they typically happen in the elderly right because at the end of the day that's really who uses the most health care services are the elderly okay and who's their payer it's medicare or a medicare advantage plan right so the vast majority like when i was at the hospital i used to be a hospitalist like the vast majority of the people in the hospital are older i mean that's just the way it is right anybody's ever been to a hospital it's like most of the people that are older right and so and these are just personal tragedies and the reason i say personal tragedies is because well they're in the hospital because they themselves or and or their families like they want them to live they want them to get better they want reduction in pain they want improved breathing they want less suffering and the reason that they have they're so complex is because that's not happening they're not getting better a lot of times they're getting worse like they are so you know sometimes the decision needs to be okay well you know hospice is a better place for you because it's really um there's really nothing more that we can do or maybe it's in the person's advanced directive what have you and that's totally fine but the point is is that these by and large are very you know they're just tragedies okay so let's look at those tragedies in more clinical detail okay so in the orthopedic site oftentimes it's either going to be a joint replacement uh knee replacement or a hip replacement or one of the biggest things is a fall and a fractured hip that happens all the time okay that is like 10 times more common than the actual knee or hip replacement it's actually the the and the actual pinning of the hip is a very brief procedure however it's the medical complications that then turn into a tragedy so one pe stands for pulmonary embolism so this is where the person gets a blood clot in their leg which then travels through their heart to their lungs and causes them to potentially die of essentially lung failure and deoxygen deoxygenation from the pulmonary embolism so next is diarrhea a lot of times because of the anesthesia or just because of being hospitalized or a lot of times these people were already in a nursing home environment they might just have a very sensitive gi tract or even a gi tract infection which just causes them you know not to be graphic just has diffuse diarrhea that causes dehydration and really electrolyte imbalances right so that's where their potassium and their sodium and really their kidney function can be dramatically impacted by this excessive diarrhea and then also delirium so with the the pain medication there um with the anesthesia with a whole bunch of things it can cause and these people oftentimes have some level of dementia um it causes them to become much worse so they have what's called altered mental status so they're just confused i had one guy who literally thought that his call light on the bed was a fishing rod and he was fishing with his call light and like it was not funny like it was like this guy was like crazy delirious and what happens is that that might not go away for weeks or months and oftentimes their mental status it has a hard time coming back to where it was before okay so again these are tragedies these people are in the hospital for weeks or months at a time okay next for cardiac so this is often in the form of either an actual heart attack or um oftentimes a person will have narrow arteries in the vast majority of cases the person gets cardiac catheterization and stent okay so most people are not taken to bypass they're really given a stent what happens when you get a stent or multiple stents is that you put on very powerful blood thinners what then happens there's oftentimes a lot of bleeding there can be bleeding at the site where they did the catheterization which is the groin or the arm oftentimes these people have very small ulcers or lesions in their stomach or their intestines and those start bleeding and so there you're you have a very hard problem because you want to take them off the blood thinners so that they stop bleeding but if you do that then you might risk re-clotting the blocked artery that was opened with the stent and so these people get massive blood transfusion sometimes they have complications from the transfusions like volume overload and pulmonary failure okay so tragedy okay a lot of times too they'll have respiratory failure as well again because the fluid status of these cardiac patients is oftentimes very tenuous and if they get too much fluid that fluid goes into their lungs they get something called pulmonary edema and they even can go into respiratory failure from that where they might have to get cpap or even be intubated and you kick them off the uh the ventilator so again these are personal tragedies where these people might end up in the cardiac icu for weeks or months at a time okay next up for cancer typically cancer cancer is put into two main categories and those are those are liquid tumors like leukemia lymphoma and then solid tumors like breast cancer or colon cancer okay so the chemotherapy and the radiation associated with cancer treatment it dramatically lowers the immune system so these people are very prone to getting all sorts of weird infections really bad like fungal and yeast infections uh even or bad bacterial infections and so those infections can just be devastating and again end up in the icu or just hospitalized for weeks or months at a time also there's bleeding right because a lot of times the chemotherapy knocks down your platelet clamp incredibly low and so these people have a lot of bleeding from low platelets and then their bone marrow is also so depleted from the chemotherapy that they have a hard time creating new red blood cells so again transfusion transfusion transfusion weeks months in the hospital and then they also oftentimes get gi and sometimes gu or urinary tract blockages as well so the actual solid tumor especially in the case of colon cancer is actually blocking the ability of food and fluid to pass through your gi tract which is just awful you get incredibly bloated because your stomach actually produces more than a liter of fluid just on its own every day and so if your gi tract gets blocked and even if you don't eat or drink anything you still generate all this fluid that gets backed up and again weeks or months in the hospital trying to recover from that and this is the frequent course of what happens to these patients okay they're in the hospital they they get better enough to no longer need to be in the hospital and then they are almost never discharged to home right they go to a sniff a skilled nursing facility which is which is essentially a nursing home okay and then what happens they frequently bounce back they get readmitted to the hospital sometimes within a day sometimes within a week sometimes within two weeks and the rule for reimbursement in medicare is if they're if they come back into the hospital oftentimes it's within about 30 days the hospital does not get paid again for that hospitalization medicare changed the rules decades ago to save a look to say if you're hospitalized for x problem you get discharged from the hospital and you come back for the same problem we as medicare are not going to pay you again for that readmission and so sometimes these people will bounce back and then go back to the sniff and then bounce back and then go back to this and that only happened like seven or eight times and the hospital is not getting paid for every one of those hospitalizations and so these are very complex patients they are absolute tragedies for the people and frankly they put the hospital at tremendous financial risk because there's no way they're going to get paid enough by medicare to cover that complexity and that is one of the reasons why the hospital has to overcharge commercial insurance is to make up for this now there are other ways to think about this there are other strategies that other hospital systems has used have used that's another conversation for another day but thank you for watching a healthcare z hello this is dr eric bricker and thank you for watching a healthcare z today we're going to be discussing charge capture and the story of sepsis so first off charge capture is the translation of the chart or the medical record into billing codes and by the chart of the medical record i mean literally and especially in the case of inpatient stays there's literally a paper chart like this thick people still write in it even though hospitals have electronic medical records there are still like daily notes that are taken by hand and when that is done for that person's stay then it goes to the medical records department where literally coders will read what the doctor has written and they will translate that into the billing codes and there's very specific rules for what words need to be in the chart in order to have certain billing codes and that's important because those billing codes then roll up for what are referred to as diagnosis related groups or drgs and it's drg codes that are used for inpatient stays and it's really the basis not only for medicare reimbursement but commercial insurance companies use drgs for uh reimbursement as well okay now what does that have to do with sepsis so sepsis is a systemic infection typically from a bacteria but it could be fungal or viral as well and by systemic i mean it does things like it gives you a fever it changes your temperature it might change your blood pressure it might drop your blood pressure very low sometimes people need to be in the intensive care unit because their blood pressure is so low that they need to be given tons of fluids and special medications okay so you might have like a minor skin infection or even like a bladder infection and that historically was not considered sepsis because you wouldn't have these dramatic systemic bodily effects okay now in 2005 there were 518 thousand impatient stays for sepsis across all age groups and then in 2014 there were 1.5 million it tripled now to put that in even greater context overall inpatient stays in america went down by about six percent during that period of time and all other causes of inpatient stays went down like heart attack pneumonia all went down the only other category that went up was mental health and it did not go up it did not triple the way that sepsis did so this is very odd and very unique and oh by the way i'll leave the link in the show notes to all the sources okay now that's fine but what about like commercially aged people commercial insurance stage people why is something we care about on this channel okay in 2005 for 18 to 44 year olds sepsis was not even in the top five for diagnostic categories for inpatient stays in 2014 it was number three with over 189 000 in patients days in 2005 for 45 to 64 year olds so older commercially insured folks again sepsis was not even in the top five for reasons for impatient stay but in 2014 it was number two there were 441 000 inpatient stays almost a half a million inpatient stays for something that wasn't even in the top five a few years prior so what happened what happened what happened was the reimbursement for sepsis change reimbursement for sepsis is became higher than for other infections and this happened because of the creation of what we're referred to as the msdrg or the medical severity diagnosis related groups that happened in 2007 and so this is where because i was practicing at the hospital at this time we were literally coached by the case managers by the hospital administration to change the way that we used specific words in the chart so that medical records could then use this sepsis code so you might look at the data here and be like oh there's an epidemic of sepsis going on here in america and in fact that is not the case really the utis and the other infections could they have gone up sure they could have gone up i don't think they tripled and in fact in the sources i will leave you uh quotes from you know some of the world's foremost experts in this like peter provos from johns hopkins who i've heard speak on multiple occasions and they say yes it's because of up coding and so my point for today is is one when you're looking at the medical claims data be aware of medical coding and then two also note that changes in reimbursement dramatically change the way that charge capture occurs and thank you for watching a healthcare z [Music] hello thank you for watching a healthcare z and today's topic is a recent rand study on hospital prices now you'll notice that i have ditched the tie today because i was actually asked by a viewer to do so so just know that look i'm responsive to you people okay first up the rant study which came out it was on the 11th of may of 2019 said that commercial insurance pays hospitals on average 247 per 241 percent of what medicare pays now that's on average so the other one of the other points that the rand study made was that that amount was highly variable by hospital so they said at the low end there were some hospitals that got that charged commercial insurance about 150 percent and this is after the discount's been applied so this is the quote unquote allowed amount of the true price all the way up to 400 percent so it was not only was it on average 241 but it actually was highly variable okay and this is super important because we've known for a long time that commercial insurance plans pay uh hospitals much more than medicare pays them and we're not going to get into the debate today over whether or not medicare is adequate compensation or is too low and therefore hospitals have to overcharge commercial insurance in order to make up for the fact that medicare's not paying enough like that's actually not the topic for today the topic for today is is to say okay well let's look at this data in more detail and see what we as employers can take from it okay so one is that the outpatient services were 293 percent of medicare for commercial insurance and the inpatient services were 204 percent in other words the out on a relative basis outpatient services are much more expensive than inpatient services and that's important because the majority of services at a hospital these days are actually done on an outpatient basis and especially for commercial insurance uh employers in other words for folks that are you know not on medicare under the age of 65 a lot of their surgeries are done on an outpatient basis as well so it's just important to know that just because something is quote unquote outpatient doesn't make it less expensive in fact it actually might make it even more expensive okay next there's a challenge with this particular study as it relates to the basket of services that they looked at right because anytime you're looking at prices you can't just look at prices across the board you have to look at prices for the basket of what's provided at that particular hospital and you also need to look at the basket of what people would actually consume and oh by the way that's exactly what the government does when they're calculating inflation as part of um cpi uh they're actually looking at a particular basket and they weight that basket okay so we'll talk about that in more detail so specifically for this rand study they looked at er services cath lab endoscopy labor delivery laparoscopic surgery laparoscopic surgeries cts and mris orthopedics mental health circulation and respiratory so there are some major holes in the data by hospital and by hospital system and let's look at two specific hospital systems here in dallas fort worth that i'm very familiar with and this is where the great thing about the rand study is that they actually published the data by hospital and you can download it on an excel spreadsheet and i highly encourage all of you to do this i'll leave a link in the show notes because you can actually run a ton of analyses yourself on this excel spreadsheet okay so at baylor south uh baylor scott and white their average for inpatient and outpatient was 255 percent of medicare now what did they analyze for that they analyzed two thousand seven thousand eight hundred and eighty claims which totaled 15.6 million dollars and i will tell you that baylor scott in white is huge it is enormous so how enormous is it their total revenue uh in the last six months of 2018 was 4.9 billion so if you annualize that to 9.8 billion and then we've talked about this before but commercial insurance generally makes up about 40 percent of a hospital's revenue with medicare and medicaid self-paid and the other sources of revenue so you just take that total revenue 9.8 billion you multiply it by 0.4 you get 3.9 billion okay well if you divide the 15.6 million by 3.9 billion that means of the costs and the prices assessed for the baylor scott and white healthcare system by this rand study they only looked at 0.4 percent of the claims cost okay in terms of sample size i'm just going to go out on a limb and say that's too low so i think that the rand study does a great job of saying look in aggregate and this supports something that we've known for a long time but i think at the individual hospital system level it's just not big enough sample size okay let's look at another dallas fort worth hospital system that i'm also very familiar with and that's texas health resources okay where they looked at 7 112 claims totaling 18.2 million dollars total revenue for texas health resources was 3.5 billion for nine months so in order to annualize it it gets us up to 4.7 billion for a 12-month period of time multiply that by 0.4 and that gets you 1.9 billion dollars of commercial insurance reimbursement so again you divide the 18.2 million by the 1.9 billion and that's only 0.96 of all healthcare uh commercial insurance healthcare costs for texas resources were analyzed by rayon again i would say that's too low and they found that texas health resources was quote unquote more relatively expensive it was 294 percent of medicare versus ban it was 255 medicare now my point is i don't think you can say that i think i think you don't know like because the basket is not necessarily representative of what baylor overall produces and this basket is also not representative of what an employer buys it's also not weighted by what baylor produces and it's not weighted by what the employer buys so bailor might actually be much higher than 255 percent of medicare or it might be lower and likewise texas health resources might be much higher than 294 percent of medicare or it might be much lower and so and that's the whole reason why going back to the example with inflation and the cpi that's why the cpi basket exists and that's why it's weighted and so all i'm saying today is is that don't draw conclusions by specific hospital system based upon this study but on an aggregate level it is very helpful and that's my point for today thank you for watching a healthcare seat [Music] this is dr eric bricker and thank you for watching a healthcare z today we're going to be discussing all or nothing hospital contracts so it has been reported in the new side axios and in other places as well that when insurance carriers contract with major hospital systems that major hospital system says look you have to take all of our doctors as in network or none of them so it's all or nothing why is that important we talked at a previous video about how physician skill falls along a bell-shaped curve just like it does for anybody else in any other profession or even like playing sports right and so here you have the number of physicians on the y-axis and the number of the amount of skill on the x-axis and it follows a bell-shaped curve right so you have the the low-skill physicians downhill and the high-skilled physicians up here and i think if you talk to most physicians they would agree to a certain extent there is a bell-shaped curve okay how does that matter to employer health plans so walmart the largest private employer in america wanted to get rid of these guys they wanted the bottom five percent of the physicians out of their carrier networks they wanted them out and guess what happened the carriers said no they said that their contracts forbid this from happening so as every other employer in america that is smaller than walmart how in the world are they supposed to go to their carrier and ask for them to create like client-specific networks or take certain doctors out of the networks when walkmart can't even do it okay now i want to contrast that with a different story and that is the story of the allegheny county school system and where is allegheny county pennsylvania it's pittsburgh so with the pittsburgh public school system okay what did they do they identified they did the opposite instead wanted to take the bottom five percent out they identified the top providers in their area associated with one particular hospital system okay they said look these folks have the highest skill therefore we're going to create a plan where for seeing that particular those particular providers there is no deductible and the plan pays at 100 for the other in-network physicians there was a deductible and then the plan paid 80 and then there was your typical out-of-network benefits okay great so in other words there were three tiers but instead of getting rid of the bottom five percent they instead incentivized through plan design going to the top physicians okay great what happened here's the punch line their cost went from 241 million down to 233 million a decrease of eight million dollars now yeah it's only like two or three percent but the point is is that it didn't go to trend it didn't stay flat it actually went down and so i think this drives home a couple of points one is is that it's probably not likely that the carrier's contracts are going to allow for this type of steerage so just know that when you get into the weeds of the contracts it might not be possible because within a particular health system there are going to be good doctors and not so good doctors and so you're you're not going to want a whole health system and that's what you're going to want to do is you're going to really want those best providers that are in there so that's number one number two is allegheny county is similar to john tornis and the company that solved healthcare with serograph and that look all of their employees were concentrated in one place which to a certain extent makes it easier to identify these high let's call them five percenters in their particular area so if you're an employer that has a more distributed employee population which frankly at the end of the day unless you're like a municipality or school system frankly your employees are probably going to be spread out more across the country it's going to make it more challenging to identify those top physicians now again i will tell you that the company where i used to work compass actually does this but i'll just leave it at that and say that look the bottom line is is that when you are working to decrease health plan costs higher quality is almost invariably lower cost higher skilled physicians is almost invariably lower cost and there are things that you can do at the employer level at the brokerage but at the benefit consultant level to affect change in regards to that and thank you for watching a healthcare z [Music] hello this is dr eric bricker and thank you for watching a healthcare z today's topic is carriers are contractually bound to do no steerage now what does that mean so to start off with hospitals provide an in-network discount to an insurance carrier network they say hey we've got our bill charges of x and we'll reduce that amount to like one-half of x and the insurance carrier says oh great but then the hospital says however that includes all the docs within our hospital system and as you know hospital systems have become larger and larger from consolidation so this could be like thousands of doctors and that means all of their facilities so it's not just one hospital it's not just two hospitals sometimes it's like over a dozen hospitals sometimes it's dozens of hospitals so to start off with we need to understand at a basic level that in the world of ppo contracts that that discount is given to the insurance carrier and the insurance carrier has to agree that they got they got to take the whole kit and caboodle at that hospital system okay what are the ramifications of that so this is a quote from 2018 when the blue cross blue shield of texas president dr paul heym was speaking to a very large employer group here in dallas fort worth and he said that look our challenge with negotiating with hospitals has less to do with reimbursement rates and has less to do with the actual dollar amounts themselves and it has more to do with the desire to direct patients in other words the insurance carriers didn't like their end of the deal of having to take all the docs and all the facilities because let's just say from a quality perspective i mean look they got the data and they know that some of those doctors are not the type of doctors that they would want to have in their network and they've got some facilities that whether it be from infection rates or complication rates or readmission rates or whatever like look i really don't want people necessarily go in that facility and for a carrier the easiest thing to do to not have people go to those facilities or go to those doctors is make them out of network okay so if the carrier could pick and choose which doctors and hospitals that they could steer their members to within a healthcare a hospital system then the president of blue cross blue shield would have never said this quote okay example number two sutter health which is the huge hospital system in the san francisco bay area recently settled an anti-trust case with the state of california so the state of california when actually look you have anti-competitive practices and it was mainly around the fact sutter's contracting practices had this all or none these all or none no steerage terms okay so in other words there was no opportunity for in-network or outworks or out-of-network steerage for the insurance carriers in the san francisco bay area you either had to take all the summer physicians and all the foots under facilities or you needed to hit the highway okay and guess what they settled the terms this literally just happened several days ago the terms are not completely revealed but the point is they were going to get they were going to be they were being sued for 2.7 billion okay center has 13 billion dollars of revenue a year okay these are substantial sums of money again because of the same issue of not being able to steer so the point is is that within a ppo contract there's really this game of cat and mouse because i've been in many meetings where the carrier representatives talks about oh how they can identify high quality facilities and doctors etc etc but just know that for a lot of their contracts with the major hospital systems that they're contractually prevented from doing steerage okay now but you can't do it at the employer level the biggest example again is walmart where just recently walmart came out with the fact that they have a new benefit for their employees where they're going to provide quality scores for physicians in the specialties of primary care cardiology gastroenterology endocrinology obgyn oncology orthopedics and pulmonology okay walmart the largest employer in america if their carriers could already do this for them then why in the world is walmart having to do it themselves the reason is is because you can do this at the employer level but the carriers are contractually bound in their ppo net contracts to not do this okay and i'm sure there's some exceptions yadda yadda but overall that's the case now that can be confusing but that is a super important point for everyone here to understand so thank you for watching a healthcare z [Music] hello this is dr eric bricker and thank you for watching a healthcare z today we're going to be discussing the hidden war for patients and dollars so before we get started we have to talk about two euphemisms that are used on the hospital business side that first one is service line so for a hospital a service line is a clinical department so a service line might be ob gyn or cancer or orthopedics okay youth was number two profitable payer mix so hospitals receive payment from a variety of payers right so you have commercially insured patients medicare medicaid self-pay which is the uninsured folks and so a profitable payer mix is a payments with more commercially insured patients because those are the ones that the hospital can actually make a profit on and fewer medicare medicaid and self-insured patients because those are the folks that they make less of they lose money on okay so with that there are departments within a hospital system they're either business development or their marketing or their physician liaison sometimes they're called the strategy department and they are specifically focused on how to increase patient flow through the profitable service lines and there's actually a fantastic demonstration of this on youtube it's actually a video from the university of massachusetts healthcare system where they specifically talk about how they do this okay so what happened is that the university of massachusetts wanted to increase their referrals but they had a problem and that problem was is that one of their cardiothoracic surgeon left for a competing hospital so this story is pretty confusing so i actually drew it down here sort of like x's and o's for a football game okay so here you have umass and typically a major hospital system they might have one or two or maybe three cardio thoracic surgeons and one of the major procedures that cardiothoracic surgeons do are coronary artery bypass grafts or cabbages okay so here you have two let's say umass has two cardiothoracic surgeons okay cardiothoracic surgeon two leaves to go to a competitor hospital okay why is that a problem that cardiothoracic surgeon receives its patients or his or her patients from typically from cardiologists okay and so there you have the cardiologist as the c's and there you have the patients as the pt and here you have who their insurance is so c for commercial insurance and m for medicare okay so here's the problem when that cardio thoracic surgeon leaves he takes all of his re referral relationships from those cardiologists with him and those cardiologists take the all their patient relationships with them as well to the competitor so guess what the university of massachusetts did they specifically identified and targeted those cardiologists that were referring to that particular cardiothoracic surgeon and they formed relationships with them so that they would begin referring patients to their cardiothoracic surgeon that they still had and oh by the way in the video it talks about how they targeted not only that cardiothoracic surgery program but also orthopedics and cancer isn't that interesting cardiothoracics cancer and orthopedics those are the same three diagnostic categories that are the top three costs for employee health plans okay that is not necessarily a coincidence so the point here is that patient flow and which doctors patients see and which hospitals that they go to it's not just some sort of like random act of nature that there actually is planning and strategy and data and software and analytics and programs and campaigns behind that now i'm not saying that's morally wrong i'm just saying it's happening and so for all of us who work in employee benefits and with employee sponsored health plans again we need to know that if we as employer health plan sponsors are not actively thinking about what's going on within the hospitals then we are not really doing our health plans the best service that we could and that's my point for today thank you for watching a healthcare z [Music] hello this is dr eric bricker and thank you for watching a healthcare z today's topic is profit pool consultants and decreasing healthcare costs so it's based off of a research report from mckenzie and company which many of you are familiar with but it's essentially one of the smartest management consulting firms known as the leader in the world it has 127 offices worldwide it is 27 000 employees they make 10 billion dollars of revenue per year and they work in industries from technology to retail to transportation to of course health care as well now the most recent report on health care that they've published is called the evolution of healthcare provider profit pools say that 10 times fast okay but this is a fantastic research report i will leave a link to it in the show notes i encourage you to read it they make a very interesting point they say that 55 of future healthcare profit pools and they're saying through 2021 so they're basically looking at 2017 through 2021 are saying our non-hospital non-hospital that's interesting what do they mean by that they mean that 34 of the 55 percent in other words 34 of the profit growth for health care providers will come in the form of onsite clinics telehealth primary care providers behavioral health retail pt and ot which is occupational therapy and physical therapy home health inventory surgery centers and dialysis okay isn't that interesting the largest areas of provider profit growth are in areas that are meant to decrease healthcare costs right so onsite telehealth using primary care behavior all these things are meant to reduce the use of expensive hospital-based services or prevent people from ever needing them in the first place likewise ptot is an alternative to like expensive orthopedic surgeries home health is a cheaper location and by asc they mean non-hospital-owned asc's independent ases and by dialysis i think they mean dialysis centers that are independent and not part of like davita and fresenius and in other words they're more you know cost effective more reasonable contract rates with insurance carriers okay so now let's look at the opposite end of the spectrum where do they think there is going to be the least amount of growth of profit from providers i think it's going to be in freestanding ers imaging lab ambulance chiropractor skilled nursing facilities and long-term acute care facilities are known as ltx isn't that interesting because freestanding ers and imaging those were the two sort of huge cash cows really put the past like five ten years where the hospital systems and really push down on making a lot and also independent uh facilities really push down making a lot of money there so to a certain extent they've kind of burned out it's been a little excessive but there's an important warning of course they don't they don't phrase it as a warning they phrase it as an opportunity but there is a very important warning at the bottom of this report and it says that all of these areas of high profit growth create an opportunity for acquisition by the hospitals okay so the whole point of the whole value proposition of these providers and their ability to you know make profits and grow revenue is based upon the fact that they're going to decrease utilization or decrease price or both to create higher value health care okay if these agents are bought by a hospital that essentially negates that value proposition because as i said in the previous video and even in this research report it says it creates a referral opportunity it creates a referral opportunity as i said in the previous video to feed the beast and i'll give you a specific example of that so at compass we had a major client with like in excess of 10 000 employees that had a huge facility that had an on-site clinic and they had had it for years and that on-site clinic was actually a huge cost driver they looked at people that were going down outside clinic uh and it turned out that they ended up driving huge costs for their employee health plan why was that because the on-site clinic was actually owned by the local hospital system and so they were driving patient volume from that on-site clinic to the hospital for surgeries for lab for imaging so the key here is that if these are going to be profit centers that have a value proposition of higher quality more cost effective care then to a certain extent they need to remain separate from the hospital and if you see them connected to the hospital then that might need to be a warning sign that that is actually going to be increasing employer and patient health care costs and not decreasing it and that's my point for today thank you for watching a health care z [Music] hello this is dr eric bricker and thank you for watching a healthcare z today we're going to be discussing certificate of need or what is referred to as c-o-n now certificate of need is where there is regulation of hospital beds and hospital construction by the state so isn't that interesting that there is actually state regulation over the expansion and the construction of new hospitals well why in the world does that exist well it was created about 40 plus years ago in an attempt to control health care costs the idea being is that well if you had more hospital beds and more hospitals that they would induce in other words would be supplier induced demand of healthcare services and so healthcare costs would be higher but if you look at i won't summarize all the research here but at the end of the day at the end of that it's kind of mad like maybe it did maybe it didn't maybe certificate need actually even increase the cost of health care it's really not clear okay so let's break it down specifically by state so there are 35 states that have certificate of need laws it doesn't really divide itself by conservative versus liberal states so you can see the liberal state of massachusetts and the conservative state of alabama both have certificate of need laws which you would think would be more of a of a you know liberal democratic initiative for regulation okay now on the opposite side you have 15 states that do not have certificate in need and you have the liberal state of california and the more conservative state of texas that do not have these laws and you think of more like you know free enterprise and less regulation as being more of a conservative or republican thing right so this whole certificate of need uh law thing doesn't necessarily correlate with sort of red state blue state stuff okay now let's look at it in terms of commercial insurance health care costs by state and let's look at the 10 most in the 10 least expensive states so the 10 most expensive states for health care are new hampshire pennsylvania connecticut new jersey west virginia new york illinois d.c massachusetts and alaska okay so you can see that two of those high cost states they don't have any certificate i need and eight of those 10 alcohol kids they do have a certificate of need so here the certificate in need was supposed to lower health care costs and the majority of them have that law and you're talking 21 000 per family per year again for commercial insurance okay now for low-cost states the 10 lowest cost states are north dakota idaho new mexico utah iowa mississippi tennessee hawaii arkansas and alabama okay again you kind of see that four of the lowest cost states have no certificate of need laws so you can like build hospitals expand it as much as you want it's not breaking the bank in these states uh likewise in these low-cost states you might say okay well maybe that's if you're going to need laws like super effective because it's keeping costs down in iowa and hawaii and tennessee and places like that okay but at the end of the day again and oh by the way the family health care cost there is eighteen thousand dollars per family per year okay so it's like seventeen percent more three thousand dollars more per family per year in these high cost states versus these low cost states so again i think the most important word on this entire slide is like meh so what's the point the point is is that we all need to be very careful when we think about regulation as a solution to the health care cost problem maybe it is a solution maybe it's not a solution maybe the best intended solutions around costs do not have their intended consequence and that's my point for today thank you for watching a healthcare seat [Music] hello this is dr eric bricker and thank you for watching a healthcare z today we're going to be discussing hospital charity care programs or sometimes they're referred to as financial assistance programs okay so not-for-profit hospitals in america are required by the irs to provide what's called community benefit because these not-for-profit hospitals oftentimes don't have to pay any federal state or local tax in order to qualify for that they have to provide this community benefit of which charity care or in other words free care for people that qualify is an important part of that okay now there are various eligibility requirements so every hospital has different eligibility requirements i'm just going to use these as a real-life example of a local hospital and their eligibility requirements okay so for this particular hospital system you have to be a u.s citizen and you have to live locally in a county where they have a hospital or if you are if you had emergency services you don't necessarily have to live in one of those counties in other words you could be visiting your grandma and you could be from a different state and you would still qualify but it would have to be for emergency care now they do make another exception which is to say that look if you live outside one of those counties and it's a non-emergency service and there's just no doctors or hospitals that can treat you for your particular condition or disease then you might still be able to qualify okay so those are basic requirements next it has to be that within a certain amount of time right so it can't be it has to be either within the date that it's scheduled or within 365 days of when you received a bill so you can't go back two years three years four years so time to a certain extent is of the essence in terms of application okay next is the financial eligibility and this is where you need to be able to provide documentation to prove these things but all that aside if you're indigent in other words if you make less than 200 percent of the federal poverty limit which is 51 000 for a family of four then you will qualify to have your hospital bill paid for now you could have insurance okay and it would be the remaining balance after insurance is paid and it would still pay for it um if you made life if your family made less than 200 of the federal poverty limit guess what 28 of american households make less than fifty one thousand dollars uh make less than two hundred percent of the fpl okay so that's a lot of people so if you're an employer you probably have some employees that fit into this situation okay so let's say you make more than two hundred percent of the fpl well you can qualify for what's referred to as medically indigent as well where if you make less than 500 of the federal poverty level and the amount you owe is greater than 5 of your annual income then you would also qualify so let's run the numbers on that okay so a family of four 500 of the federal property limit is 129 000 so that's for a family for a family for that's 75 of households in america in other words that's the majority of americans actually fall into that category and would potentially be eligible okay now five percent of a year's income let's just say let's round it to a hundred and thirty thousand so five percent would be six thousand five hundred dollars that means even if you have insurance um if you had an out-of-pocket responsibility in excess of six thousand five hundred dollars then that would be covered at a hundred percent by the hospital's charity care program so in other words if you let's say you had a high deductible plan with a 5 000 deductible and 20 coinsurance it's very easy to have an orthopedic surgery or even to have a variety of outcasting outpatient tests and procedures done where that total bill adds up to in excess of six thousand five hundred dollars so what's some practical information that you can you that you can do here okay so the way you get started in this process is to ask for the hospital's financial counselor and every hospital i've ever worked in has a financial counselor and you can either contact them by phone sometimes you can do a web inquiry but if the information is not posted on the hospital's website about their charity care program then what you want to do is you want to call the hospital and ask to speak to a financial counselor to see if you qualify and that's my point for today thank you for watching a healthcare scene hello this is dr eric bricker and thank you for watching a health care z today's topic is hospitals must survive but how and to start off we need to review some basics of hospital finance and this actually comes from a previous a health care z video did that's called hospital cross subsidization and here we have medicare and medicaid and commercial insurance revenue and expense so let me briefly go over this okay so medicare and medicaid provide hospitals in aggregate in america they pay them about 470 billion dollars now these hospitals actually it costs them the expense to take care of all those medicare medicaid folks is 540 billion dollars so in other words these hospitals lose money on their medicare or medicaid patients now the majority that's actually medicare it's not medicaid right so in other words the hospitals are underpaid by medicare medicaid by on average 15 all right and i have sources to these in the previous show notes okay next up so then commercial insurance they pay in aggregate u.s hospitals 505 billion dollars and the expense for taking care of all those commercially insured patients with blue cross united cigna et cetera et cetera is 322 billion dollars so in other words the commercial insurance overpays by 57 percent and then the hospitals then use this overpayment to cross-subsidize the underpayment by medicare and medicaid okay this is well-established this is not a new fact however there's an excellent article from the harvard business review from 2017 from uh two gentlemen actually from a hospital consulting firm called navigant that pointed out an excellent point which i'm sure all of you know as well that the government money situation for hospital is going to get worse because there is a three percent increase in medicare enrollees every year for the next decade and that only that goes down to like a two and a half percent increase per year to the point that the 55 million people that are on medicare today will increase to 81.5 million by the year 2030. okay so in other words all of this underpayment to the hospitals is going to increase because the number of medicare patients that they're going to have is going to increase so it's only going to get worse and so what is going to happen what has been happening what can continue to happen is that the cross subsidization required from commercial insurance to make up for this underpayment is going to increase it's going to get worse essentially i'm going to be kind of harsh here the hospitals are addicted to commercial insurance payments they're addicted to this relationship now it doesn't have to be that way and in fact employers are actually to a certain extent we're enabling this behavior and to a certain extent the insurance carriers are enabling this behavior we're letting this happen so i'm not pointing a finger at hospitals i'm saying look we've got to do two things we have to one stop enabling this behavior and then two offer an alternative we can't just stop the enablement and just say figure it out for them for yourself hospitals because you got to survive hospitals are not the enemy they have to survive they have to survive in a different way but they need to survive and so the authors of this harvard review review our harvard business review article outline four ways the hospitals can do that so number one there's actually a five to fifteen percent expense reduction opportunity in care and administration by using analytics to decrease waste hospitals are again not to be over critical are cesspools of waste and if they actually use their data the way most corporations do to analyze that waste and there's a five to fifteen percent reduction expense opportunity for that calculated by them okay next up uh there's an opportunity to decrease the corporate service expenses what do i mean by corporate service expenses i mean legal compliance hr and i.t oh by the way hr is the health benefits for the employees themselves because health care for people that work at hospitals is expensive okay so those corporate services are actually 15 of a hospital's overall expenses and it's been rising at 10 per year that's the second opportunity third opportunity the supply chain for a hospital so hospital supplies make up about 15 to 20 whether that's drug supply surgical supplies etc 15 to 20 of a hospital's overall expenses now it's incredibly balkanized because the physicians show favoritism to specific vendors which if you watch my previous video on physician distributors sometimes the physicians have partial or complete ownership of those vendors so they're remunerating themselves through this disparate supply chain relationship that over charges for or up charges for various supplies okay that can be streamlined that can be streamlined and fourth and final is there's a high degree of variation in the way patients are cared for where per this article there is a two to three times difference in the amount of money it takes to treat a controlled patient in other words a patient with the same degree of illness etc etc across different doctors within the same hospital so whether it be like heart failure or diabetes or an infection etc there's a huge degree of variation by doctor and so that is where that can be addressed through standardized protocols whether it be physician protocols or nursing protocols we use a ton of protocols at hopkins they were great they were designed by the physicians they were awesome oh by the way geysinger and intermittent healthcare they use a large degree of protocols it's not bad cookbook medicine there are clinically justified reasons to go off the protocol but the point is that you start with the protocol and then you make the conscious decision to go off of it you don't start in this nebulous a protocol world okay so the point is is that we and oh by the way there's an expression for this in healthcare it's called feeding the beast okay feeding the large health care system we all know we need to stop feeding the beast and here are some viable alternatives that we can do instead and thank you for watching a healthcare z [Music] you