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How to Fix Healthcare: First Gradually, Then Suddenly

Philip Betbeze, for HealthLeaders Media, August 15, 2014

We're in the "gradually" phase right now. The "suddenly" part will be upon us before we know it.


Trotter

Imagine you built a lemonade stand at which you could sell all the lemonade you could make for a dollar a cup. Wouldn't you do everything you could to produce as absolutely many cups of lemonade as possible?

If you were economically rational, you would. There would theoretically be no limit to your revenue, and by selling each cup of lemonade you simply add to your profit ad infinitum. While the way healthcare is bought and paid for is infinitely more complex than how lemonade is sold, for years, it has operated on a very similar economic model to my theoretical lemonade stand. (Sometimes you have to give the lemonade away for free, for example.)

Economic theory holds little sway in such a business, which is one reason why healthcare is on a crash course to try to inject the right incentives and measures into how decisions are made about healthcare services for individuals.

Now things are changing, but fee-for-service is still the dominant pay mechanism for health plans, government payers, and hospitals and health systems to this day. Many geographical regions seem to have plenty of pilot-type projects going on, but relatively few have gone further, at least up to now.

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2 comments on "How to Fix Healthcare: First Gradually, Then Suddenly"


Lynn McVey (9/10/2014 at 2:40 PM)
Phil - First I want to say I'm a big fan. I cannot help but read everything you write, so thank you. I kind of agree with this comment of yours, "such an economic model is unsustainable[INVALID]it requires a buyer that is as irrational as the seller is rational." Like the law industry, medicine created a language only insiders understand. Medicine also took control of our health out of our hands. Why can't I get a mammogram when I want one without a doctor's permission? So I believe Americans have been taught to believe our healthcare [INVALID]em is too valuable and too complicated for Americans to understand, so maybe we are not irrational as much as we've been duped? Thanks again, Phil.

Bob Sigmond (8/20/2014 at 12:34 PM)
Here is a simple idea for providers and provider organizations to SUDDENLY get rid of any direct involvement with any fees for service. Enter into a contract with a single collaborative third party payer which would [1] take over the provider organization's entire pricing, billing and collection functions and the provider staff involved, [2] guarantee to pay for all patient services provided by the provider organization in a single monthly check. The single monthly check would be based on the annual income in collaborative annual budgets of the provider organization, reflecting a collaborative long range strategic plan to achieve the Triple Goal: improved quality and access and reduced expenditures. The advantage for the collaborating provider organization are significant: [1] no more worry about operating deficits, [2] no more direct involvement with any fees for service and the financial marketplace, [3] no more unpleasant interaction with difficult third party payers or unpleasant patients concerned about their bill, and [4] assistance from their collaborative third party payer in incorporating many feasible initiatives in the strategic plan and annual budgets to achieve the Triple Goal. The advantages for the collaborating third party payer is also significant: [1] a new key role for the organization [collecting all of the provider income] during a period in which competitive insurance is going to become less and less important, and [2] the significant potential for savings in the cost of collections, as a much more rational and effective collection effort is developed. Of course, the contract between the single payer and the provider organization must be carefully worked out in advance to assure an effective trusting relationship between the two contracting parties. For examples, [1] the two parties should meet each month to review the monthly budget reports to consider adjustments in the budget or specific management changes to assure an ongoing balanced relationship between income and expense. Also, there should be agreement on handling of operating surpluses or deficits at the end of the budget year. For other third party payers, Medicare and Medicaid, and for individual patients and any other source of provider operating income, there is no change at all, as they make payments to the organization that their provider organization has designated to handle billing and collections. That organization has every incentive to rationalize the billing and collection processes that have been so badly handled by most provider organizations, with most charges reflecting at least a 100% mark-up for aspirins, etc. For more information, please contact me by phone, mail or on the internet. Regards, Bob Sigmond Email: bob@sigmond.us Phone: 215-561-5730 Web site: sigmondpapers.org or .com Mail: The Watermark, Apt 1803, 2 Franklintown Blvd, Philadelphia, Pa 19103