I have written the past about the slow adoption rate for innovative technology and solutions in the healthcare payer space. Not much has changed in the way healthcare payers interact with healthcare providers. This will change and it must change. We are starting to see some signs of the “paralysis by analysis” walls are starting to crumble in healthcare. It is an evolutionary process and yet outside the healthcare payer space we see a technology revolution occurring.
For example, today I read in the Wall Street Journal that Amazon announced E-book sales outpaced hardcover sales. A few years ago no one thought it possible and yet it just happened. The ease and convenience of reading a book just got easier. Oh I forgot to mention that Amazon reduced their rate of the Kindle device and of course e-books are cheaper. We don’t see a reduction in healthcare charges whenever new technology is applied. In fact, prices traditionally go up.
If healthcare payers and providers are going to remain an integral part of the future landscape of healthcare delivery they must adopt technology that will continually improve outcomes while reducing the charges for services. Today the providers are still asking for things to be faxed, forms filled out on paper and photocopied, doctors who still handwrite prescriptions that nobody can read.
iphone, ipad, Kindle, Fax…(oops). So long fax. The “paralysis from analysis” wall is about to tumble.
In the July issue of Managed Healthcare Executive there was an interview with Karen Davis, President of the Commonwealth Fund, a private foundation based in New York that supports research on improvements in healthcare. In this interview I was struck by her comments relating to payment innovations. She is quoted in this article “But the bigger issue is whether the public and private sector can work together on payment…Some states may be willing to use their convening skills to bring different parties together to identify a payment model that is more rational instead of having so many different ways of paying. It’s consuming so much in administrative costs.”
I wholeheartedly agree with her assessment. With the recent passage of PPACA all eyes are focused on providing access to 32 million uninsured/underinsured people. However, there has been no attention to developing a rational payment approach to support this added burden on states and individual employers. For years, we have operated on a payment methodology created by Medicare which today is broken, or a system based on contracts based on discounts in return for volume that is no longer advantageous to employers. What do we do? Our current system is not sustainable. Anyone in the business realizes this and we need to change this quickly.
A rational payment process is needed and will be central to the success of a sustainable healthcare system. Since 2001 we have worked on ways to bring rationality to an irrational payment world. The spotlight of the sustainability of healthcare will be squarely on this word “rational reimbursement.”
Recently the President convened a group of insurance executives and business owners to the White House to discuss the current state of healthcare and to reinforce his desire to provide healthcare to more Americans. In a recent post on June 22
nd by Inside Health Reform stated:
"All sides in Monday's meeting involving President Barack Obama, health insurance executives and state regulators agreed that more needs to be done to confront rising health care costs, including addressing pharmaceutical costs, but the conversation did not produce concrete plans, participants said. One participant said the president balanced promises to hold insurers accountable for their rates with acknowledgments that some cost drivers are outside of their control."
Now reality is starting to hit. Renewal rates for 2010 are starting to surface, and again we will be facing double-digit increases. We can yell and scream at the insurance companies for increasing their rates but if we step back and see the big picture the insurance companies are in a no win situation. If providers continue to increase their billing rates the insurance companies have to increase rates to cover the increase in billing costs. When this happens guess who gets the blame - the insurance company, not the healthcare provider.
If we are going to truly have health reform we need to have the employer, payer AND provider at the table to discuss what a RATIONAL reimbursement should look like. Until we establish a rational reimbursement approach, we will never "bend the curve" in healthcare. We will continue to view insurance companies as the evil empire while increases in healthcare charges go unchecked.
As NCN we believe you must have a rational reimbursement that is fully transparent to the provider, patient and payer. Until this is fully adopted there will be more meetings with the president at the White House scolding the insurance carriers who have little control on cost drivers.
Over the last few months, I've been commenting about the recently-passed healthcare reform bill and the impact that it could potentially have in the market. I'd like to step back now on this post and share just what NCN has been doing over the last few years to address the bills that are coming in today, and what we are doing today to solve the escalating costs of healthcare. We recently received a bill for $196,597 for a particular facility in Texas. Once we received it, we utilized our cost-based methodology to reprice the claim:
- compare the claim to national cost databases
- benchmark against like claims and facilities
- adjust for severity
- add an appropriate margin for the provider
The claim was repriced to $72,000, and the facility agreed to accept this amount. When I saw this, I immediately said "what could I buy for $124,597?" Listed below are a few items:
- Starter home in the Texas market
- Fund a non-profit and its administrative staff for a year
- iPads for the whole freshman class at a small liberal arts college
- 13,000 pairs of shoes for needy children
- 35,714 gallons of milk
I'm being somewhat facetious about what you could do with this money, but I think it highlights again how irrational our healthcare system is today. To take a bill of $196,597, look at benchmarks, severity adjust, and work with the facility to have them negotiate down to $72,000, there is something wrong within the system. In order to bend the curve on cost increases, we must get back to a rational approach of how to look at facility charges.
At NCN, we are passionate about looking at things from a cost-up perspective and allowing an adequate margin for that provider to make money and deliver the necessary care. It does not make sense at all to look at things from a billed charge basis. As we've shown above, billed charges are irrelevant in the discussion. We firmly believe that any claim that comes in today should never be viewed from a billed charge basis. Charges are irrelevant, inflated and have no correlation to actually what it's costing to deliver care. Nothing will change until we look at things from what they're costing, and building a margin that is acceptable to the provider, to the payer and to the consumer. Only then will we ever be successful in truly having healthcare reform. In all other areas of commerce in the United State this is true, except for healthcare. That must change.