Mitch’s Blog

There, I’ve said it. The federal government, and, for me, the New York state government, is wrong on healthcare. Not totally, but they’re both further off than many people know.

Here’s the main issue. Both governments think that the way to fix healthcare is to reduce funds and close hospitals. Now, I will acknowledge that costs have skyrocketed. Our population over the age of 65 has increased much faster and greater than anyone ever thought possible, which is a good thing if you ask me.

However, there isn’t enough coming back in to the government so that they can continue paying higher and higher rates, because the cost of healthcare has gotten steeper. It costs a lot of money to test drugs so they can be sold as pharmaceuticals, and those companies have a very short life of profits for themselves before they lose their exclusive right. That, plus some of the things they come up with are for a relatively small group of people, so they can’t make their costs up in numbers like with something like aspirin, as an example.

Also, the cost of technology that makes things such as surgery not only go smoother, but in some cases eliminates it, isn’t cheap in researching either. Many exploratory surgeries have been eliminated with scopes and camera pills, but all of that still costs money. Knee surgeries that can be done in a couple of hours and have the patient back home before dinner, replacing long stays in a hospital, shows amazing progress, but it doesn’t always reduce initial costs.

But let’s look at the other side. In New York, many private physicians won’t see Medicaid patients because New York state will only pay around $15 for an office visit. As a point of reference, hospitals, for close to 20 years by now, still only get reimbursed $9 for a regular two view x-ray, but the costs for providing those have easily gone up. What else in America has stayed the same cost since 1987?

Also, there are studies, like the Berger Commission, that determine that struggling hospitals or hospitals in some remote areas don’t need to be there, and that will save money for the government. That’s illogical, though, because those patients have to go somewhere, so they’ll just go to another facility that’s probably struggling monetarily and have to pay them instead. Where’s all the savings?

Here’s my point. Hospitals are struggling; insurance companies are not. Not to pick on one in particular, but let’s look at Excellus Blue Cross. For 2005, it’s net income was around $197 million; in 2006, it was $151 million. Their reserves, cash they’re sitting on, is $1.1 billion. If they took just half of one year’s worth of net income and spread it around the hospitals that they actually contract with, all the hospitals in the area would be living life very well, and there wouldn’t need to be any conversation on whether one had to close or not. And that’s only the Blues; think about how nice life might be if some of the HMOs let go of their profits also.

That wouldn’t solve the Medicare and Medicaid issues, since both are more social than healthcare related, but it would be a good start. If governmental leaders can figure out a way to get insurance companies to make sure they’re being fair in their reimbursements, then we can have a legitimate discussion on curbing healthcare costs.

By now, most people in New York state know about the Berger Commission and it’s series of recommendations for hospital and nursing home closings, mergers, and the like.

Well, now word is getting out that almost none of the hospitals that the people who were entrusted to make these decisions about were actually visited. Instead, the commission took numbers and statistics and, for the most part, made their recommendations off that.

Suddenly, this takes on a different look and feel, one that’s already generating bad press and bad feelings across the state. Sure, it’s always valid to take statistics into account when making critical decisions. Not doing so would be totally irresponsible.

However, healthcare is a totally different animal than retail, and has to be handled much differently. For instance, every hospital in this state, and in most states across the country, must have an emergency room and provide emergency services, even though almost every single emergency room in the country loses money, some lots of money. How many businesses are forced to continue carrying product that isn’t selling, or purchasing services that aren’t in their best interests?

Healthcare is also more community directed, as opposed to regular industry. Sure, closing a factory might have a major impact on the economy of a community, but closing a healthcare facility basically means that some people are going to have to go through hoops to figure out where to go for their healthcare needs, often much further. For instance, without mentioning names, one hospital I worked for, which is now closed, meant people who used that hospital had to now decide, based on which side of the facility they lived on, whether to go 45 minutes to either Rochester or Oswego, 40 minutes to Syracuse, or 35 minutes to Newark or Geneva for healthcare, whereas they only had a 10 minute ride before, and, living in the snowbelt region, who knows what the ramifications were for those who might have been injured somewhere in the middle, and whether they might have survived with a facility much closer (if anyone has been paying attention, the snowbelt area has been hammered particularly heavy the last few weeks).

As I stated in a previous past, it’s never easy to make decisions as to whether a medical facility should be closed. Usually these types of decisions involve a lot of emotions and struggle, and no one takes it lightly. Making such an important decision sight unseen seems cowardly, and seems to bring less credibility and fairness to the overall process. Healthcare has never been all about money, no matter what people believe.

Well, it finally came. The Commission on Health Care Facilities in the 21st Century finally finished their report on health care facilities in New York state, and it wasn’t pretty. Literally, the report is almost 250 pages long. Figuratively, it’s created a major firestorm in the state, including my own area of the state fairly directly.

In their own news release, they talk about how the reductions: 4,200 hospital beds, closure of 9 hospitals, 50 restructurings, and reducing nursing home beds by 3,000. This is expected to save the state around $1.5 billion dollars annually and save Medicaid around $806 million annually.

My first thought when I heard the news about the report was “Wow”! My second thought was “this isn’t going to be pretty”. My third thought was “this isn’t going to pass”. The first two thoughts have already come to pass; the third one is still to be determined. The scariest thing about this last one is that, if the state congress doesn’t decide to reject the report, and instead does absolutely nothing, this goes into effect as if it had been passed; that stinks. It could let every politician in the state off the hook and allow them to later say they were totally against it, but couldn’t get the political leadership of the state to consider it.

And that’s unfortunate because it really does need to be addressed. A few of the closings on the report do make sense, especially the ones in the New York City area. Some of those hospitals have been in financial trouble for a long time, and there is a glut of hospitals in that area, though it’s hard to say that when there are 8 million people in the area. But health care has changed, and there’s more need for outpatient services than there are for inpatient beds. Many hospitals didn’t keep up with that reality in the 90’s, and they’re paying for it now.

But some of the rest,… well, one of the small hospitals locally is on the list to be closed, but what the commission didn’t take into account is that they’re well placed for when the bad winter weather comes. In the winter, it really could be the determination between life and death. Another decision involves two hospitals, one actually run by the state, and they’re talking about merging these two mega-hospitals, reducing the number of beds, and moving the state facility into public hands (oh yeah; New York state doesn’t allow private hospitals, which is why selling them to a hospital system is out of the question). One of the best reasons for having state run teaching hospitals is that they can afford to try out new technologies and train doctors on their uses; take that away, make it a bottom line proposition only, and most hospitals aren’t going to pursue them.

Yeah, I know it’s a tough decision for a commission like this to put together recommendations with its main purpose being financial. The federal government went through this same thing a couple of years ago when it looked at closing VA Hospitals around the country and put some of them on the chopping block. Communities went crazy, and with good reason. The savings that either state or federal government may enjoy is a major hit on the economies of every community that has one of those hospitals, as the hospitals are usually the biggest employer in the area.

We’ll know by the end of the year which direction this has gone in, but the protests have already begun.

Diagnosis codes, for billing and coding purposes, are known as ICD-9 codes. That stands for International Classification of Diseases, 9th revision. We’ve been using these codes for decades now, adding and modifying as needed.

There’s a new version that’s ready to bust out, the 10th revision. Many other countries have already adopted this classification system, where the numbers are a little different, but the coding is more accurate because, after all, we’ve learned a lot more over the years.

However, here in the United States, we’re not ready for it yet. Why not? Because the government can’t figure out how it wants the electronic billing format to look and work. Just so you know, the implementation of this format was supposed to occur in 2003, a byproduct of the Health Insurance Portability and Accounting Act of 1997. Now, it’s been estimated that we won’t be ready to implement this standard until 2010 at the earliest.

The United States is supposed to be a leader on things like this in the world. It’s embarrassing that we’re falling so far behind. What the government should do is hire consulting experts and just let them go at it. I know some people who would have had this thing done already. Most people have no idea what any of this stuff means, even in healthcare circles. I only know that we’re falling behind the rest of the world, and that can never be a good thing.

In healthcare these days, the big talk seems to be towards the concept of what’s known as pricing transparency. Basically, this says that hospitals should be posting their prices for services such as x-rays, lab tests, surgeries, etc.

There is a good reason and history why this wasn’t done in the past. For one, hospitals were afraid of being sued for price fixing, or collusion as the official title. In meetings where members of more than one facility were together, there was great caution on the types of conversations that could be held, because no one wanted to be accused of this.

Two, hospitals don’t get paid the same thing by an insurance carrier. As a for instance, let’s look at Medicare. Each year, hospitals do what’s called a cost report for their major payers, one of which is Medicare. Both sides get together, with the hospital trying to show Medicare what the hospitals costs were, based on many parameters. When each side finally agrees with the numbers, Medicare makes a determination as to what percentage that hospital will get paid for the following fiscal year. So, based on costs, one hospital might be getting 35% of Medicare’s reimbursement, while another hospital down the street might be getting 55%. This same type of formula goes on with other insurance companies also. What this means is that, for the exact same service, one hospital might have to charge more because their costs are higher than the hospital down the street.

Now, for hospitals that are the only one in their market, it may not make much of an impact. For a hospital I did a consulting assignment for in North Dakota, the next closest hospital to them was over 90 minutes away; in one direction, the next closest hospital was 3 hours away. If they posted their prices, it’s unlikely their consumers would decide to drive much further just to shop for a lower price. However, if there are multiple hospitals within 15 or 20 minutes of each other, I could see where that might cause some issues. Even here in Syracuse, where there are 4 major hospitals, I could see where they might worry about posting their prices online because there are a number of hospitals within 30 minutes of Syracuse where patients could possibly find lower prices.

Finally, there’s the issue of physicians being associated with certain hospitals. There’s no benefit to a hospital in posting their prices if, because of contractual obligations, that patient’s physician doesn’t have privileges at that facility. I can just imagine the contract battles that could come up because a physician’s group wants the hospital they’re presently affiliating with to drop their prices because the physician’s are losing business, or the physicians are tired of hearing from their patients how they could be getting the same services for less money elsewhere.

I guess I’m against this whole idea for those reasons, and many more. Those in healthcare will understand; those outside of healthcare probably won’t. I’ll just say this; if those looking for always cheaper services are willing to take some steps backwards in technology and medical advances, by all means go for it. But you’ll be losing cancer centers, dialysis centers, and many other services that not only help extend patient lives, but drive up hospital costs.

There’s a New York state organization that calls itself the New York State Health Accountability Foundation. What they do is rank services provided by hospitals throughout the state and publish the statistics online for all to see.

This isn’t a bad idea, because I believe that if certain facilities are providing bad services, or at least the physicians they contract with provide bad services, we all should know about them. I often hear that one hospital is good at this, while another is good at that, and now this group has put together some pretty interesting statistics.

However, there are some statistics that have to be looked at harder than others, some which the regular consumer might not understand. I found out about this group through a news story that spoke on the different prices hospitals throughout central New York charge for similar services. The misconception by most consumers is that hospitals work just like department stores. Well, in a small way they do. If a department store is in a mall, as opposed to a standalone building, they may have to price their items based on how much rent they’re paying and where they’re located.

Hospitals are no different when it comes to pricing. Hospitals have to start with the basic premise of making sure their charges are higher than what they might be paid from insurance companies such as Medicare and Medicaid. Next, hospitals have to make sure their charges are at least on par with their costs, and this is where hospitals aren’t the same. The costs are drastically different between a hospital with 500 beds versus a hospital with 100 beds. Larger hospitals have more employees; it costs more to regulate the temperature; they usually offer more services, and all that equipment costs money; the more services, the more regulations, the more it costs; the agreements with physicians to provide services costs more, and there are more physicians to deal with. On and on and on.

What I’ve had to learn is how the costs of a facility in a certain area, based on size and services offered, can drastically change your perspective on hospital pricing. I remember a conversation with a director at a hospital in Philadelphia 3 years ago, where I was saying that I’d never seen a hospital bill higher than $500,000, and she stated that her facility regularly had inpatient bills over $1 million dollars. There’s a big difference in costs between Syracuse and Pittsburgh, just as there are between Syracuse and Fulton, NY.

So, take some of the statistics you might find on this page with an open mind. In healthcare, you’re not always comparing apples to apples.

Last week, at a poker table, I was one seat away from an older gentleman who I’ve played poker with in the past. At some point the topic got around to healthcare, and this gentleman complained that he’d had an aneurysm, spend only one night in the hospital, and the bill came to aorund $39,000. I told him he was lucky on many fronts, and that a bill that low was actually pretty lucky.

I find that there are misconceptions about healthcare and the fees that, in some cases, aren’t in line with reality, and in other cases I can fully comprehend. A comparison of his procedure in the central New York area as opposed to being in the metropolitan New York area is at least 4 to 1, possibly more. But that’s not really the point.

In the past, having an aneurysm would have been a multiple day stay in the hospital; based on today’s rates, you’re possibly talking $40,000 right there just to lay in a hospital bed. In the past, he wouldn’t have had some of the equipment we have today, which means an operation of the sort he had to have would have been more dangerous, with less chance of success. In the past, he wouldn’t have been given the types of medications we have today, which would have meant the possibility of more complications and less chance of success.

Let’s talk about having an operation to begin with. Before anything begins, one has to do pre-admission testing, which will end up on the same bill as your operation; that’s law. Next, the room has to be cleaned, which means sterilized, and there are specific procedures that must be adhered to. You don’t just pull out the Spic and Span to do the job; it’s quite thorough. Next, there are fixed costs that aren’t allowed to show up on your hospital bill; sheets, gowns, gloves, needles, syringes, poles, bags, swabs, etc. That stuff adds up, but there’s more. Equipment can’t be charged for, only procedures, so many dollars are built into trying to recoup the cost of purchasing and maintaining hospital equipment. And of course we have lights, recording equipment, documentation equipment, computers, and, top of the list, all the people who have to be in the room, such as nurses, whose services can’t be separately charged.

Next we have supplies that will “possibly” be used in a patient. Each doctor has their favorites on items they choose, and in some cases the prices can vary drastically. Take pacemakers; the price of pacemakers can run from a couple thousand up to close to $100,000, depending on maker, type, etc. But you can’t go into an operation with only one. If the item that’s put into a body turns out to be defective, the hospital eats the cost of the item; yeah, sometimes you can return items, but not always. There are some items where the hospital can legally bill you for their usage, even if they really weren’t able to use it, such as screws during a knee operation, but not every supply item, especially big ticket items, are allowed to follow that same rule.

And , after the operation, you get wheeled into a waiting area, where hospitals capture the cost but will never get reimbursed for the time. Therefore, whether you take thirty minutes or two hours to come out of anesthesia, and this is if there aren’t any complications, the hospital will not ever be paid. Yet, nurses must monitor you with all sorts of equipment, and of course the time.

Finally, at least a month after you’ve been discharged and your bill has been paid (if the hospital is lucky to get paid in a month by your insurance company), if the hospital gets paid at least 40% for what was charged for your operation, it’s lucky. Sometimes the payment rate is only 10% of what the hospitals costs were; the overall total of the operation, in most cases, is meaningless. Those are negotiated rates, and hospitals are getting killed most of the time.

That’s just something else to think about. Now, if you happen to not have insurance, which means you’re a self pay patient, well, you might have a complaint; but nationwide hospitals are changing the rules for you also, thanks to a recent legal ruling in Oregon; so, life is about to get better for you also. But give your hospitals some space; they’re doing what they need to do, for the most part, in order to survive.

(originally published November 10th, 2005)

I went to a seminar yesterday presented by a speaker from Seattle, Judy Veasie, who’s also the editor for the healthcare receivables newsletter for Aspen Press; they’ve printed a number of articles written by yours truly. I was proud because I got her here, and she was very good. The overall presentation was on how medical entities can get paid sooner from insurance companies, and some of the tricks of the trade that she’s discovered over the years.

One thing she said I had never thought about before, but it’s something every consumer who has a health insurance plan through an employer should consider. She stated that her organization keeps track of how insurances pay and who the employers are, and when they start having continuing difficulties they contact the employer to let them know how the insurance company is, or isn’t, paying on their claims. Each year, employers get with health insurance plans to try to find plans that take care of their employees, and when they hear continuing bad reports on their insurance policies, they tend to bring that information back to the insurance companies as complaints.

Another part of this is that employees need to go to the human resource departments to complain when it seems their insurances aren’t covering their bills without problems. Many people seem to think that, whenever claims aren’t getting paid, that the hospital, or physicians, are the ones at fault. Sure, sometimes that’s the case, but not always.

Insurance companies will find interesting ways to not pay claims, and many times, they’re invoking some reasons that are patient related, and not always true. Some examples of this are: the claims weren’t coded correctly; we’ve requested additional information from the patient/guarantor; in processing because the premiums haven’t been paid by the employer. Not that these may not be legitimate, but every once in awhile an insurance company gets called on a lie that some customer service representative has stated; our speaker told about not only recording phone conversations, but having the patient being a part of the call so the patient could hear what the insurance company said first, then dispute it right then and there and have a customer service representative attempt to do a quick about face.

Patients who have employer based insurance do have some powers they may not have known about. I’ve just given away a nice secret.

(originally published July 12th, 2005)

I’m always reading stories on how much healthcare costs are spiraling out of control, and how hospital charges are astronomical. I’m not necessarily going to debate this one, but I am going to briefly justify why hospitals might charge as they do, and what usually happens.

Most hospitals in the country are losing money; those are the facts. Hospitals lose money for two main reasons. One, mismanagement; two, because of lousy reimbursements from insurance companies.

Mismanagement can take on many factors, from bad budgeting to not keeping up with what’s going on in today’s world to bad charging practices to paying too much in expenses and physicians and nurses and unions and whatever, etc.

When it comes to getting paid by insurance companies, most hospitals rely on the reimbursements from very few payers (sometimes spelled as “payors”) for the bulk of their cash. Those insurance companies are Medicare, Medicaid, Blue Cross, and whatever the largest HMOs are in that particular area. Most of these folks pay on what’s known as a fee schedule, which means that they’ve somehow predetermined how much they’re going to pay the hospital for the service that’s being provided. Some of these insurance companies will pay the hospital a percentage of what the hospital charges.

Hospitals have a few ways of setting their charges, but the main intention is to make sure they cover their costs, and then make a bit of profit on top of that. Just for clarification, you have for profit and non profit hospitals. Each is trying to make a profit, but the difference is that non profits put the profit back into the facility, whereas for profits put the money into the pockets of its investors.

In either case, hospitals almost never get paid what they bill out; sometimes, what they get back is as little as 25% of what they bill out. We all read about people without insurance and how they bare the brunt of hospital charging, and to a degree it’s true, because they don’t get the upfront discounts that insurance companies get. However, every person has the opportunity to apply for some kind of hospital charity care, which many do and receive, and in at least 50% of the cases people get discounts that drastically reduce what they have to pay, and in some cases they get the entire claim written off. Every hospital has postings that tell people how to try to obtain charity care, and hospitals write off millions each year.

So, if hospitals are writing off so much, they have only a few ways to try to recoup some cash. Prices will often rise so that they can maximize how much cash they’ll get from those insurance companies they’ve contracted with to pay a percentage rate. Insurance companies that don’t have contracts with hospitals end up paying more, or passing more of the costs on to their subscribers, and unless the patient qualifies for a nice discount, which many patients who have some kind of insurance don’t usually do, the hospital will end up getting more money from this combination than any other combination of hospital billing.

Is it fair? Well, probably not. Then again, hospitals are expensive propositions. Physicians don’t come cheap, and who’d want to go to a cheap doctor? Malpractice rates are skyrocketing because of all the lawsuits, some deserved, some frivolous. Expenses are growing, and technology is better, but more costly. Did anyone mention the cost of pharmaceuticals?

Gone are the days where hospitals are making mega profits, no matter what the thoughts of the many might be. Oh, the stories I could tell! But that’ll be for another day.

(originally published April 21st, 2005)

Early this morning, I had to take my wife to the emergency room. The process that had to be performed eventually worked, and she was fine. However, having to go through such a process as the family member as opposed to being a patient or working in the emergency room is a terrible position to be in.

Though time gets away from you, and minutes can seem like hours, it’s hard to keep your composure when your loved one is going through any kind of distress. Now, because I’m like I am, I know precisely the time that my wife had to go through each stage of the process, and in her case it was hours a couple of times. When we got to the emergency room, it was 10 minutes before she was seen by triage. It was 5 minutes after that when she was seen by the registration person. It was 10 minutes after that before she was finally called back to a patient room.

It was another hour and forty minutes before a physician finally came to see her. This is the hospital my wife works for, so this proves that employees do not step to the front of the line. During this initial period, I had to fight my frustrations that no one had come to see her. As an assistant supervisor of emergency room at this same facility about 17 years earlier, and having been over other registration personnel at other facilities, you learn that during the evening emergency rooms usually have less personnel on hand. And those personnel will see patients based on criteria rather than first come, first serve, which is true during the day also, but seems to be magnified at times when it’s in the evening because there’s fewer physicians on hand also.

Knowing this doesn’t make the process any less stressful for the family member or the patient, for whom distress seems to intensify 10 times over based on time. Me being me, I tried to help kill the time by reading to my wife and telling her a few jokes, trying to keep her talking to she wouldn’t notice the time all that much, which was hard since the clock was directly in front of her. And when the physician finally did show, and that ended up producing a series of adventures during the rest of our time there, I treated him, and the specialist who eventually had to come in, with courtesy as well, just glad both were trying their best to alleviate the worries and affliction my wife was going through.

When it comes to healthcare, customer service needs to be a two-way street. Family members need to realize that often there are other patients whose needs may be more critical than the needs of their loved ones. They also need to realize the stress physicians can be under in emergency situations. Healthcare personnel, on the other hand, need to be vigilant themselves as to the needs of their patients and their family members. Whereas I was trying to keep my wife’s mind off her difficulties as much as possible, during that hour and 40 minutes the nurse only came to the room once to see how she was doing; I’m thinking that wasn’t the best customer service in the world. Still, everything ended up fine in the long run, and that was the most important thing in the world.