Blog

There is a Wall Street Journal article that has been making the rounds on the internet last week. The article cites a few cases where payers (whether large self-insured employers or insurance companies) tried to exclude certain individual providers from some plans and were stymied by the terms of seemingly unrelated contracts. For example, Walmart ask to remove the 5% of providers with the worse quality scores from its networks, and found that it was unable to do so. The article attributes the inability for payers to selectively modify specific networks to the market dominance that health systems often enjoy, allowing them to force clauses that prohibit such modifications. As long as the payers contract with those health systems (and the payers often cannot avoid doing so), the payers are obligated to include all individual clinicians in all plans.

There is a Wall Street Journal article that has been making the rounds on the internet last week. The article cites a few cases where payers (whether large self-insured employers or insurance companies) tried to exclude certain individual providers from some plans and were stymied by the terms of seemingly unrelated contracts. For example, Walmart ask to remove the 5% of providers with the worse quality scores from its networks, and found that it was unable to do so. The article attributes the inability for payers to selectively modify specific networks to the market dominance that health systems often enjoy, allowing them to force clauses that prohibit such modifications. As long as the payers contract with those health systems (and the payers often cannot avoid doing so), the payers are obligated to include all individual clinicians in all plans.

Interestingly, the providers will frame this as consumer choice, saying that patients should have access to the full range of providers within a health system. What that response omits is what happens if patients want to achieve lower monthly premiums by having a restricted network? Where is patient choice in that case?

Dr. Jose Baselga made news recently when media reported that he failed to disclose millions of dollars of income that he had received from companies. As the chief medical officer of a prestigious cancer center, and as a prominent researcher, Dr. Baselga was in the position to influence treatment guidelines.

Dr. Jose Baselga made news recently when media reported that he failed to disclose millions of dollars of income that he had received from companies. As the chief medical officer of a prestigious cancer center, and as a prominent researcher, Dr. Baselga was in the position to influence treatment guidelines.

The New York Times published an opinion piece that explains why conflicts of interest can be detrimental to scientific understanding and the health of society. Apparently, policy changed in the 1980s, opening up opportunities for researchers to earn additional income through royalties, and that policy change has made researchers far more vulnerable to the influence of companies. The opinion piece cited a study that shows that studies whose conclusions about antidepressants were negative often were not published or were spun to convey a more positive outcome. We believe that transparency and disclosure are helpful, although a lack of enforcement might make current policies inadequate.

Healthcare practices in California have been consolidating into fewer and fewer health systems that are larger and larger. Kaiser Health News reported on a study which found that the percentage of physicians that practiced in settings owned by hospitals increased from 24 percent in 2010 to 39 percent in 2016. The effect is more pronounced among the specialists, where the percentage rose from 20 percent to 54 percent over that same time period.

Healthcare practices in California have been consolidating into fewer and fewer health systems that are larger and larger. Kaiser Health News reported on a study which found that the percentage of physicians that practiced in settings owned by hospitals increased from 24 percent in 2010 to 39 percent in 2016. The effect is more pronounced among the specialists, where the percentage rose from 20 percent to 54 percent over that same time period.

The primary concern about consolidation in any industry is the undermining of competitive dynamics. The article includes a chart which shows that higher concentration of providers is correlated with higher insurance premiums. In areas that are dominated by large networks, insurance companies have a difficult time declining to work with the large networks, which can set higher prices. The article mentions the acquisition of smaller practices by hospitals as a strategy of countering declining inpatient admissions.

NPR reported on a survey showing that most respondents have been surprised by a medical bill that they expected would be paid by insurance. The survey had only 1,002 respondents, but if representative, that would represent a very large number of Americans who have been surprised by medical bills.

NPR reported on a survey showing that most respondents have been surprised by a medical bill that they expected would be paid by insurance. The survey had only 1,002 respondents, but if representative, that would represent a very large number of Americans who have been surprised by medical bills.

Surprise medical bills could happen because a doctor who was thought to be in-network might not have actually been, or an out-of-network provider was involved, or insurance not covering a type of treatment that it was thought to cover, or presumably a host of other reasons. Needless to say, such surprise medical bills make consumer transparency significantly more difficult. For elective or non-urgent procedures, it would be nice if patients could easily call up the provider office and get an accurate quote for how much the services would cost before committing to the procedure. Better yet, it would be even nicer if providers published their prices in machine-readable format (or via a centralized repository) so that consumers could easily compare prices.

The Wall Street Journal published a piece on a hospital's investigation into its prices. They had been raising prices annually and they priced knee-replacement surgery at an average of more than $50,000 in 2016. When the hospital investigated, they found their costs to be close to $10,000.

The Wall Street Journal published a piece on a hospital's investigation into its prices. They had been raising prices annually and they priced knee-replacement surgery at an average of more than $50,000 in 2016. When the hospital investigated, they found their costs to be close to $10,000.

It's unclear if the cited costs were only variable costs (e.g. personnel time), or if it included an allocation of fixed costs for such as the hospital building and administrative overhead. It is interesting that the hospital operated for so many years without knowing the costs of its procedures. The disconnect between prices and costs suggests that the hospital probably operated in a non-competitive market and was therefore able to raise prices without much effective resistance.

As the cost of healthcare grows more quickly than inflation, businesses will increasingly be forced to reckon with it. The article talked about the hospital being approached by an employer group to lower its prices, and that the two were able to come to an agreement.