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| HEALTHCARE
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Part Three: New Ideas, Private Solutions-- Acute
Care, Specialties and Diagnostics
Editor's Note: In
part two we moved our focus from the inherent problems in our current health
"insurance" system that cause inflation on the insurance side and the
service side, to strategies for restructuring the healthcare delivery system on
the primary level, by eliminating the processing of health insurance from
provider operations.
Here in part three we will explore how the more intensive modalities of
healthcare can also benefit from similar restructuring. Eliminating
"insurance" processing from operations at this level allows dramatic
changes in budgeting, accounting, pricing, and billing for healthcare which
will reduce the cost immediately and hold future increases more in line with
overall inflation.
An Accounting Revolution
A few years ago I needed a medical procedure
that was not covered by my health insurance. This procedure was minor
outpatient surgery. It was going to cost $10,000 to have it done in Chicago.
But I had heard of people without insurance going to Canada because self-pay
costs were much lower. So I checked.Before we go any further, this is not going to
be a tome in defense of socialized medicine. It is going to be an argument for
the implementation of accounting and budgeting systems used in Canadian
hospitals. I called the University of Toronto Hospital and
asked how much they would charge to do my procedure. Their answer
surprised me. They didn't know how much. They don't budget that way. They don't
bill that way. They budget holistically, operationally, not on a fee for
service basis, not even on a package fee for service. They truly didn't know
how much to charge for one procedure in the abstract. Eventually they
gave me a price. I'm not sure if they actually figured out the true cost or
just tried to ballpark it. The price they gave me was less than one fourth the
cost of the same procedure in the States. At a leading Canadian hospital, with the head of
the department performing the procedure, all inclusive, my bill was 2,500 Canadian
dollars, back when the Loonie was worth only about three-fourths of the
U.S. dollar. And I made them earn every Canadian penny. I had a reaction to the
anesthetic. I had to stay till I could keep food down. The entire crew ended up
having to earn overtime to take care of me. And still, just $2,500 Canadian.
About two thousand U.S. dollars at the time. Throw in a hundred dollars for one
night in a Best Western, three hundred dollars for my wife and me to fly to
Buffalo, and another hundred dollars for two days of a rental car, and we're
back up to $2,500 in U.S. currencyThat experience had a lasting impression on me.
I realized what the third party payor system has done to the cost of healthcare
in the United States. Here hospitals and clinics charge for literally every
tablet, every band-aid, every injection, every minute in surgery, every hand on
deck. Individually. Separately.
Imagine how many separate billable activities,
units of time, chargeable supplies, medications, consultations, procedures, etc
etc etc there are for every patient day in every medical center, and how many
clerks, data processors, computers, software programs, reams of paper, file
drawers, etc etc etc are required, if you break everything down to the smallest
divisible detail, to track document each one. Now add the number of clerks,
supervisors, managers, administrators that are required to oversee all of this,
and then add a similar amount of resources required at the health "insurance"
company to analyze every bill, review every item, apply every convoluted rule
to every charge to determine what is eligible and what is ineligible, what the
reasonable and customary charge is, what the negotiated charge is for providers
in network or out of network, apply deductibles, etc.
In the same way that we propose liberating the
primary care physician from the burden of processing insurance, we propose
providers of more specialized, acute, and/or intensive modalities of care take
the same approach.Again, there is a benefit to all parties involved (except
perhaps the health insurers) if there is no buffer between the consumer and the
insurance company.
Let consumers file their own insurance claims or
hire a processing company to file on their behalf, but get the providers out of
the middle.When the provider bills the insurance company, if they want to get
paid, they are hostage to the insurance company's demands. They must submit to
the aforementioned methods of accounting and billing. If the insurance
companies deal directly with the consumer, the consumer suddenly gets the upper
hand. They can demand that insurance companies simplify the claims process,
stop delaying claims, remove obstacles, etc, or go to another company that
will. The free market will quickly produce more consumer friendly health
insurance carriers, and will quickly kill off companies that continue to insist
on business as usual.
Getting the hospital, the diagnostic center, the
clinic out of the middle allows providers to streamline operations and
processes. It allows for an end to itemized, fee for service billing and allows
for holistic, comprehensive budgeting. Clinics can then bill for simple units
of care rather than having to track every touch, tablet and tube.But how would this work? It's very simple. It
would work like any other business. Expenses would be budgeted by category but
not by individual piece or procedure. For example, it would be relatively
simple to figure out the amount of Tylenol dispensed in a given day, week, or
month for the entire hospital and create a line item in the budget for Tylenol,
without having to break down which patients used how much Tylenol and billing
each patient for each tablet. The hospital would know how much overall operations
for basic inpatient care costs per day and could create a per diem charge per
bed by breaking down the average daily cost of operations divided by the
average daily census. More specialized services such as diagnostics, surgery,
therapy, etc. could be billed separately but again, would be billed based on
the average per patient cost of utilizing a particular hospital department,
over and above the daily cost of operations on an inpatient nursing unit.
A typical hospital bill using this system would look like something like this:
- Three days basic inpatient care @ $X per day = $3X
- One unit of surgical care (one procedure, all
inclusive including medicatons, anesthesia, supplies, doctor's compensation,
basic usage of the surgical suite, etc.) @ $Y per unit = Y
- Two units of physical therapy (unit=one daily
physical therapy encounter all inclusive of department costs for one day
divided by the number of patients they are able to accommodate per day) @ $Z per
unit = $2Z
- Total bill for three days of inpatient care, one
surgical procedure and two days of post operative physical therapy = 3X+Y+2Z.
Instead of the patient going home with five
pages of itemized costs, the patient goes home with one page, with three
charges.
As radical and efficient as this simple change
would be, the reforms don't end there. The next area of focus is the efficiency
of utilization of facilities, equipment, staff, etc. We will address this issue
in with a dual focus.
- Maximizing utilization of specialized programs
such as cardiac care, orthopedics, cancer care (oncology) etc. by implementing
geographical concentration strategies for locating and allocating specialized
services.
- Restoring the Emergency Room to emergencies only
while creating a new alternative to the Emergency Department that will provide
routine care with extended hours for those who would normally use the Emergency
Room doctor as their "family physician.
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| Utilization Strategies
The accounting revolution is the first step of overhauling
what we might call the more "major medical" treatments and providers.
The next step is consolidation. Why is it necessary for every hospital in a
metro area to duplicate many or all of the services of every other hospital.
Why is there not one hospital per so many people for obstetrics and gynecology,
one hospital for cardiac care, one hospital for orhopoedics, etc?
We are not advocating a government dictated consolidation or allocation of services. We are
advocating a voluntary restructuring of the service delivery system which will
increase the efficiency of each hospital, clinic, and diagnostic center.
For instance, the standard of efficiency for one MRI machine would be how many
patients can be scanned by this machine in a 24 hour day, and how many machines
can one technician operate concurrently? Just suppose that one technician can
operate two MRI scanners concurrently, and each scanner can accommodate 30
patients per day. Then that diagnostic center could conduct 60 MRI's per day,
operating around the clock using two machines and one technician per shift or a
total of three technicians per day, at a rate of one technician per twenty patients per day. The cost of the MRI per patient would be much less than
it would be at the outpatient diagnostic center that has one machine and sees
ten patients per day.
The advantage of locating these facilities in acute care hospitals is that
there are always inpatients who need scans, and unless for emergencies, those
scans can be conducted between the hours of ten PM and five AM, since the
patients are in the hospital overnight anyway, while outpatient scans can be
conducted from five AM to ten PM.
The
result is that by consolidating services, equipment, and staff in centers that
work three shifts, medical procedures become less expensive. There are fewer
facilities within an easy commute of a given population but that is the only
trade off for much lower cost care, without compromising at all on the quality
of care provided.
But would this work? Of course! The market would reward the facilities that
practice the greatest efficiency. On the other hand, there would likely be some
demand for all facilities and procedures to be available within a short drive of home for
certain segments of the population. Those for whom comfort and convenience trump cost, will be more than willing to
pay extra for such close to home service. Such service would likely be offered as part of a more upscale overall service.
The free market tends to reward efficiency in
the mass market and convenience, amenities, and over the top personal care in the niche
markets. There is room for both, and as long as the consumer understands the
choices and the costs involved, the consumer is free to choose the type and
location of care that meets their highest priority needs.
| | Ending Emergency Room Abuse
Abuse of the Emergency Room is another major source
of healthcare inflation. Younger, healthier people, and people new to a
community who haven't taken the time to find a new primary care practice, and
the uninsured or government "insured" patients tend to substitute the
emergency room for a relationship with a primary care physician. The result is
extreme inefficiency. Emergency Departments are forced to increase staffing
levels to accommodate high levels of patient traffic even though a large
portion of those who use the ER do not require this level of care. Laws
requiring Emergency Rooms to see everyone who presents regardless of severity
of illness have created this problem.
The solution, again, is not rocket science. It is to allow emergency
departments to turn away non emergent patients. Let emergency rooms be
emergency rooms. Period. Those who do not require emergency care can go
elsewhere, where the minor care they require can be provided more efficiently.
To compensate for the proposed restrictions on emergency room use, a network of
quick care minor care centers could be established. These centers could be
located in pharmacies, supermarkets, strip malls, medical office
buildings, even hospitals and can be staffed by nurse practitioners and
physicians' assistants. Such centers would compliment independent primary care
practices geared toward mass-markets minimal cost models as described in part
two as the $26 option, and the boutique style practice with fewer patients and
more physician face-time with patients as described in part two as the $55
option.
If people know where they can go to get affordable quick care, they will not
have difficulty adapting to leaving the emergency room for this alternative. If
they are required to pay for care prior to receiving service, patients will be
less likely to over-utilize the system. And if the all-inclusive cost of a
doctor or clinic visit is as low as $26, all but the indigent should be able to
afford the fee at the time of service. There would be an outcry, no doubt, but
the cost of a clinic visit would be no more than a carton of cigarettes, which
many of the same people routinely purchase.
As a result even emergency room care will cost less because staffing levels can
be reduced and only those who require this level of care will be utilizing the
facility. -jwh-
Next, part four: Getting back to insurance basics for health
insurance, as well as other options.
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