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.
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.
This question is asked by millions of people each day. Whether getting their car repaired, home repaired or getting a simple haircut. This basic question allows the consumer to sort out a number of options before them. Are this person's services going to fit within my budget or what I have in my bank account? If not, I need to check around and see if someone who performs like services is able to offer those services more cost effectively. It is the way we do business today...except for healthcare. There is an exception to this rule and it is for procedures that typical not covered by health insurance plans such as plastic surgery. I was driving into work and listening to the radio when an ad came on for LASIK surgery. This facility is located in Dallas, TX and is a leader in this type of procedure. What was interesting about this ad was this statement, "We will beat any price in the metroplex." Hmm...I wasn't listening to an ad for an electronics store or a big box retailer. I was listening to an ad for a very sophisticated procedure on the eyes.
Let's think about this for a minute, do you hear ads for maternity care based on cost...come to our hospital to deliver your baby and we will beat any prices in the metroplex. We will even throw in 12 months of free baby check-ups and a lifetime supply of portrait sittings at any Sears photo studio. No we don't hear these ads because most people aren't paying for this care out of their own pocket. In these examples of LASIK or plastic surgery the consumer is paying for the procedure themselves. Price competition occurs and a decision about whether a procedure is truly necessary happens. It's interesting to note that in 2009, Americans received 18 percent fewer plastic-surgeries. The recession is likely to blame but all indications are the cost of surgeries have come down as well. In one report, I read that LASIK surgery charges have come down nearly 50% (refer to my comment about the radio ad). Competition entered the market along with consumers having "skin in the game" AND an understanding before the procedure is performed what the charge will be. Transparency is a beautiful thing.
Yes most people have a deductible and coinsurance to pay but the consumer has no idea what the provider is going to charge. Why, because there is no reason to ask. Once the consumer signs the paper work of the provider allowing surgery to take place, a copy of your insurance card and driver's license is taken and you are told what you owe for your deductible or coinsurance. Outside of this, you are completely removed from the interaction of the provider with your insurance company. You have no idea what the total charges will be for the procedure because someone else is paying the majority of the charges. It's like going to restaurant and paying $10 to enter the establishment. Once seated, you are given a menu with a listing of all the entrees and dessert but with no prices listed. Someone else is picking up the tab so you just order off the menu or select what the waiter suggests (not asking of course what the selection costs) and enjoy.
NCN believes that consumers need to know and understand what the charges are for procedures and more importantly what the true costs are for procedures. We must start working from a "cost plus acceptable margin" verses just reviewing what people charge. Even though just getting a handle on what people charge is a good first step. "Well beat any price" will become more in more prevalent as consumers take greater control of their healthcare dollars. Until then, costs will continue to go up, premiums will continue to rise and more and more people will wish they asked "What will this cost?"