I just finished my third year as a panelist on a healthcare policy day for a local leadership training group. I continue to be impressed that they bring me back. Each year I’m teamed with an insurance professional, hospital administrator, payor or pharma executive. The panels view of the the healthcare market, the problems and solutions couldn’t be farther apart. The debates are lively and the audience of 40+ people come from all backgrounds and political philosophies.
I represent the independent medical doctor and their unique challenges in American healthcare. As insurance companies merge, hospitals get ever larger and piles of regulations come out of Washington DC, it’s the small family doctor that is getting squeezed. The consequences of less and less competition for healthcare services comes more concentrated power. With more buying power comes higher prices. Basic economics.
The boogie man in healthcare in the 1990’s was the evil insurance companies and their HMO’s. Today, the hospitals have taken up the mantle of Goliath and they are merging and buying their way to market dominance, city by city. As the hospital grows, their ability to dictate every higher prices from insurance companies grows as well. Through the Affordable Care Act, insurance companies have been turned into highly regulated utilities similar to your local electric or gas company. The government dictates who the insurance company must take, what they can rate their policies on and how much of the premiums have to be spent on services. In highly regulated markets, the bigger survive because they can afford the layers and layers of systems and people to manage the complexity. The losers are independent doctor groups and in the case of banking and finance, the local community banks.
A great synopsis of where we today can be found by Joe Flower, appearing in Medium:
A few facts, the old-fashioned non-alternative kind:
- Cost: Healthcare in the U.S., the whole system, costs us something like $3.4 trillion per year. Yes, that’s “trillion” with a “T”. If U.S. healthcare were a country on its own it would be the fifth largest economy in the world.
- Waste: About a third of that is wasted on tests and procedures and devices that we really don’t need, that don’t help, that even hurt us. That’s the conservative estimate in a number of expert analyses, and based on the opinions of doctors about their own specialties. Some analyses say more: Some say half. Even that conservative estimate (one third) is a big wow: over $1.2 trillion per year, something like twice the entire U.S. military budget, thrown away on waste.
- Prices: The prices are nuts. It’s not just pharmaceuticals. Across the board, from devices to procedures, hospital room charges to implants to diagnostic tests, the prices actually paid in the U.S. are three, five, 10 times what they are in other medically advanced countries like France, Germany, and the U.K.
- Value: Unlike any other business, prices in healthcare bear no relation to value. If you pay $50,000 for a car, chances are very good that you’ll get a nicer car than if you pay $15,000. If you pay $2200 or $4500 for an MRI, there is pretty much no chance that you will get a better MRI than if you paid $730 or $420. (Yes, these are real prices, all from the same local market.)
- Variation: Unlike any other business, prices in healthcare bear no relation to the producer’s cost. None. How can you tell? I mean, besides the $600 price tag on a 69-cent bottle of sterile water with a teaspoon of salt that’s labeled “saline therapeutics” on the medical bill? (Yes, those are real prices, too.) You can tell because of the insane variation. The price for your pill, procedure or test may well be three, five, even 12 times the price paid in some other city across the country, in some other institution across town, even for the person across the hall. Try that in any other business. Better yet, call me: I have a 10-year-old Ford F-150 to sell you for $75,000.
- Inefficiency: We do healthcare in the most inefficient way possible, waiting until people show up in the Emergency Department with their diabetes, heart problem, or emphysema completely out of control, where treatment will cost 10 times as much as it would if we had gotten to them first to help them avoid a serious health crisis. (And no, that’s not part of the 1/3 that is waste. That’s on top of it.)
So who’s the chump here? We’re paying ridiculous prices for things we don’t necessarily need delivered in the most inefficient way possible.