In Episode 472, Stacey Richter speaks with Dr. Eric Bricker about the impactful strategies hospital systems use to maximize revenue from high-cost patients. They explore the financial complexities and contracting tactics that enable hospitals to profit significantly from a small percentage of high-cost claimants.
Key points include the negotiation of provider stop-loss contract provisions, strategic adjustment of charge masters, and the intentional steerage of patients to high-revenue service lines. This episode highlights the intricacies of hospital finance and the hidden mechanisms that drive healthcare costs for self-insured employers and other plan sponsors.
We could have 0.5% to 1% of total plan members costing upwards of 40% of total plan dollars. And I bring this up just to highlight the magnitude of the money here. In that show from last week, we take the issue of high-cost claimants from the standpoint of the plan sponsor.
Today, however, we’re gonna be looking at this from the standpoint of the hospital system. If we were to come up with a motto for the show today with Dr. Eric Bricker, it’s that all costs are somebody else’s revenue. And when it’s revenue and profit of the magnitude that we’re talking about with many high-cost claimants, it starts to be less of an accidental “Oh, wow! How did that CABG patient wind up in our clinic? What are the odds?” and more of a “Whoever is not steering patients is letting someone else with a big profit incentive lock down that steerage in deeply embedded ways.”
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05:06 From a hospital revenue perspective, where do high-cost claimants fall?
08:45 How do hospitals structure their stop-loss provisions so that they ensure they’re always maximizing their revenue?
12:15 How hospitals acquire providers to steer as many patients as possible through specific service lines.
20:21 Why do carriers let hospitals get away with these rates and stop-loss negotiations?
21:06 How do Medicare Adv
Mark as Played
Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
(00:00):
Episode 472, "The Well Honed Three-prongHospital Playbook to Maximize
Revenue From High Cost Claimants".
I'm gonna call this a companion to thehigh cost claimant episode from last week.
Today I am speaking with Dr. Eric Bricker.
(00:26):
American Healthcare entrepreneurs andExecutives You Want To Know, Talking.
Relentlessly Seeking Value.
So let's continue themes from priorepisodes, most particularly the episode
from last week with Dr. ChristineHale, which was also about high cost
claimants and just the impact that theyhave on the wallets of self-insured
(00:49):
employers and any other plan sponsor.
We could have 0.5 to 1% of totalplan members costing upwards
of 40% of total plan dollars.
And I bring this up just to highlightthe magnitude of the money here.
In that show from last week, we takethe issue of high cost claimants from
the standpoint of the plan sponsor.
(01:12):
Today, however, we're gonnabe looking at this from the
standpoint of the hospital system.
If I were gonna come up with amotto for the show today with
Dr. Eric Bricker, it's that allcosts are somebody else's revenue.
And when it's revenue and profit of themagnitude that we're talking about with
many high cost claimants, it starts tobe less of an accidental, oh wow, how did
(01:35):
that CABG patient wind up in our clinic?
What are the odds.
And more of a whoever is not steeringpatients is letting someone else with
a big profit incentive lock down thatsteerage in deeply embedded ways.
But before I get too much further,let me tell you how this show came
to be, and frankly, it's beginningto get a little repetitive.
But in my defense, Cora Opsahl workslike a block for me, and apparently
(01:58):
we are both not opposed to happy hour.
So Cora started telling me that rightnow you have some pretty astute plan
sponsors who know a thing or twoabout the magnitude of hospital spend.
Total hospital costs are usuallyaround half of most total plan spend.
So sure you have plan sponsors doingdirect contracts or really scrutinizing
(02:18):
underlying hospital charges.
Except in contract negotiations withplan sponsors either doing direct deals
or doing hospital RFPs through theircarrier, or just even negotiating with
carriers and looking at the underlyinghospital costs, hospital charges two
plan sponsors in the aggregate can go up,while hospitals are still able to say,
(02:40):
I'm gonna be net, net 0% increase acrossthe board, or even I'm gonna do a decrease
they are able to show lower prices.
Wait, what?
Yep, that's happening.
I was like, seriously,how are they doing this.
Cora said, You should get Dr. EricBricker back on the pod to explain exactly
how hospitals are going about this.
Dr. Bricker did a video about it, whichI will link to in the show notes, but
(03:03):
the show that you're about to heardigs in hard on the playbook as well.
But I'm getting ahead of myself.
So anyway, after I talked to Cora,I firm up a plan with Dr. Bricker to
make a return appearance . And wouldn'tyou know it that exact same day?
Kurt Christie messages me and says, youshould have Dr. Bricker come back on
the pod and talk about how hospitalsprofit from high cost claimants.
(03:23):
So yeah, love it when a plan comestogether, especially because so many
of you in our tribe have at variouspoints asked for a return appearance of
the one and the only Dr Eric Bricker.
So here you have it.
You'll need to listen to the show toget to the bottom of the well honed at
this point, contracting strategy thatsome big consolidated hospitals, Centers
of Excellence, if you will, deploy tomaximize revenue from high cost claimants.
(03:47):
It's like a three-pronged playbookfrom what I have been gathering, but
yeah, if you are on the hook to pay forhospital claims, do be aware of this.
It is material.
Slight spoiler alert, but the playbookhas to do with how hospitals negotiate
with plan sponsors on their providerstop loss contract provisions.
It also has to do with how theychoose to consolidate and how
(04:08):
they engineer their charge master.
Sounds boring, but it's really notif you are on the hook for millions
and millions of dollars as a result.
Okay, so do I really need tointroduce Dr. Eric Bricker?
Dr. Bricker began as an internist.
He also worked in hospital finance.
Then he started one of the veryfirst, actually healthcare navigation
companies and also kind of out ofnecessity, one of the first get
(04:30):
serious about transparency initiatives.
Dr. Bricker says, when you help1.8 million people navigate the
US Health System for 11 years,you'll learn a thing or two.
So after he sold Compass ProfessionalHealth Services, he decided he'd use
what he knew to help set people straight.
And yeah, go to Dr. Bricker'sYouTube, channel AhealthcareZ for
sure if you want to learn anythingabout the A to Z of healthcare.
(04:54):
My name is Stacey Richter,and this podcast is sponsored
by Aventria Health Group.
Back by popular demand.
Dr. Eric Bricker, welcometo Relentless Health Value.
Well, Stacey and all your listeners,thank you so much for having me back.
What I wanna talk to you today about arehigh cost claimants, and we recently had
Dr. Christine Hale on the pod talkingabout this from the plan sponsor side.
(05:16):
But I wanted to dig in onthe hospital side today.
That's right.
And so from a hospital revenueperspective, hospitals in some
ways are very much like casinosin that casino revenue and casino
profits are heavily driven by thehigh rollers or whatever, sometimes
referred to as the whales, right?
So you walk into a casino, you mightsee a whole bunch of people playing
(05:38):
slot machines or sitting at a $5blackjack table, like that's not
where the casino makes its money.
The casino makes its money on thesehigh, you know, a very small number of
gamblers that gamble, huge sums of money.
And then they lose that money andthat's where they make all their
revenue and all their profits.
So everybody else is kind of like, uh,window dressing for the high rollers.
And so in the world of healthcare,it's actually very similar where
(05:59):
hospital systems make gobs of revenueand their profit margin off of
these incredibly expensive patients.
Whereas a lot of the other things,whether it's the office visits or
the minor procedures, like that's notreally where they're making their money.
They're making their money offof the, the patients who are sort
of the equivalent of the whales.
And that correspondsactually with plan sponsors.
Who, you know, like you talk to almostanybody and they will say it's not like.
(06:24):
20% costs 80%.
You know, it's not the Pareto principle,it's like 0.5 to 1% are 30 or 40% of
total plan costs I've heard, or 5% ofmembers are 50% of total plan costs.
You you hear numbers like this.
That's right.
And I've had hospital executivessay that, look, in order for them
(06:44):
to hit their revenue numbers forthe month, they basically needed
like one or two whales a month.
And if they couldn't get those oneor two whales, there was no way
they were gonna hit their numbers.
And if they had three or four whales,they would totally blow through their
numbers and they would do great.
So it was, it was all driven by thosehandful of, now we're talking, a
patient stay in excess of a hundredthousand, 200,000, half a million
(07:06):
dollars, a million dollar hospital stay.
So this is where the stories come in.
Okay.
Is that the hospital systems specificallydesign their contracts with the insurance
carriers for certain types of whales.
You can think of it like certaintypes of card games, right?
So one casino might specializein craps and another casino
specializes in blackjack.
And so what they do is they negotiatewhat is referred to as a provider,
(07:31):
stop-loss, contract provision.
And what that does is when the hospitalcontracts with the insurance carrier,
they say, look, you can pay us afixed case rate of let's say, $40,000
for a coronary artery bypass graft.
But as soon as our billed charges arein excess of $200,000, then you're just
gonna pay us 70% of billed charges.
(07:53):
You're just gonna get a30% off of billed charges.
Okay, so let me, let mejust stop you there and just
make sure that I understand.
First of all, we're talking providerstop-loss, which has nothing to
do with plan, sponsor stop-loss.
This is a whole other thing.
That's right.
And it's more of a contractingprovision, it sounds like,
The hospital system gettingsome assurances from carriers,
(08:16):
whoever they're contracting with.
And basically what they're saying is, okay, so say we're doing a procedure
or a DRG, um, whatever it is, and thenormal bill charge is 40k, but sometimes
things go horribly wrong with patients.
So we, the hospital system needto ensure we're not, like, things
(08:36):
aren't going horribly wrong andwe're still getting this only 40k.
I gotta pause you right there.
Because there's a secondpart to the strategy.
And the second part to the strategyis for the specific types of services
where the hospital has negotiated thatstop-loss contract to say, Hey, as
soon as we, you know, go past $200,000of billed charges, then we start
(08:59):
getting paid 70% of billed chargesinstead of the $40,000 allowed amount.
They then specifically structure theircharge master for that particular
service so that every time they performthat service, they blow through the
stop-loss amount and they get paidthe 70% of billed charges every time.
So the hospital doesn'tlike just occasionally enact
(09:21):
the stop loss provision.
They always enact the stop loss provision.
So it's not like theCABG went horribly wrong.
The CABG went perfectly normal,but they structured their charge
master so that they're nevergetting paid 40 grand for that.
Instead, they're gonna be paid 140grand, which is 70% at 200 grand.
So it is definitely a two step process.
(09:42):
That's right.
So it's those two things combined.
It's the stop-loss provision.
And then it's also thechanging of the charge master.
Now is there, there's a third part.
Let me just recap beforewe get to number three.
Go for it.
Recap.
So here's the hospital playbook tomake sure the hospital has casino
whales that are very profitable, evenif there's a tough plan sponsored
negotiator trying to hold the line onhow much can be billed for any given DRG.
(10:06):
So playbook, step one is, negotiate thestop loss provision with carriers or
whoever happens to be negotiating with.
Come up with a cap for that particularDRG service line item, whatever it is.
But then go back to the shopafter that provision gets inked.
Now it is in that hospital system's,very much financial best interest to
(10:30):
ensure that that cap gets breachedearly and often as possible, right?
Like, I mean, it is inarguable that thereis now a financial incentive to hit that
stop-loss threshold as often as possible.
So if you've got finance peepsin the room, there's all kinds
of different ways that to makesure that that's gonna happen.
(10:51):
Like one is to switch around thecharge master so that the charges
that a crew to that code are higher.
Like you can mess around with the waythe finances work, so that, as you said,
it happens often enough, every time.
Significant percentage is not anaccident, that cap is breached.
(11:14):
At that point, as you justsaid, the charges revert to 70%
of build charges or whatever.
And because the charge mastersare higher in that, it's pretty
easy to consider or understand howthe charges get high really fast.
So now you've got hundreds ofthousands of dollars of billed
charges that a plan sponsor orcarrier is paying a percentage of.
(11:34):
That's right, and more specifically inthe numbers that I used in that example,
I literally have talked to the head ofbenefits for a major self-funded employer.
Where they had $800,000 CABGs.
So I, I used 140,000 as theallowed amount in my example,
and they had an $800,000 CABG.
Did not have complications becauseof, of the, of what I just described.
(11:57):
Yeah.
That's kind of incontrovertible thatif you have kind of a normal, I mean,
it would be one thing if there was allkinds of things going horribly awry.
But it sort of speaks for itself whenyou look at the clinical case and it's
pretty normal and yet it costs the kindof dollars that we're talking about here.
That's right.
And the third piece is then the hospitalknows that they have that contract
(12:21):
and the hospital knows they have thecharge master structured in that way.
So then they create steerage of patientswith, in this case, cardiovascular
issues to their hospital system.
And they do that by, what some hospitalshave done is they've actually gone
out and they've bought the majority ofcardiology practices in that community.
(12:42):
Now, they didn't buy ENT practices.
They didn't buy OBGYN practices.
They specifically boughtthe cardiology practices.
Because, they wanted the cardiologypatients so that if a patient needed
to have a CABG, that they had it there.
And then they would also have eitherrelationships with primary care groups or
they would actually own the primary caregroups so that when the patients were seen
in primary care, they were referred to thehospital's cardiologist who then referred
(13:06):
them over to the hospital's cardiacsurgeon, who then performed the CABG.
So that whole mechanism ofsteerage is very intentional.
So I, I sort of jokingly say if anemployer doesn't steer their patients,
doesn't steer their plan members, theirplan members will be steered and they
will be specifically steered by thestrategies of the hospital system.
And I definitely wanna circle backon, on what you just said, that
(13:29):
someone's gonna steer your patients.
That's exactly right.
And someone's gonna steer the members.
That is a, is a really important point.
And everything I just describedis just for one hospital system
in a particular metropolitan area.
Now you go across town to anotherhospital system and they have not
targeted cardiovascular servicesand CABGs and aortic valve repairs
(13:51):
like this hospital A has done.
Instead, hospital B is like, you knowwhat, we're really gonna hang our hat
on trauma and we're gonna negotiatesuper high reimbursement rates on all
trauma related services, whether it'sinpatient trauma, surgery, or even just
activating the trauma code in the ER.
And as a result of that, we are goingto build super gorgeous ERs that
(14:14):
are well lit. And you can almosttell this because the sign and the
location of the emergency room on thehospital will be front and center.
It'll be huge.
It'll be gorgeous.
They'll have like, you know,figurative chandeliers hanging down.
Right.
And then they also form relationshipswith all of the municipality, ambulance,
fire departments for, so that theambulance drivers take their people there.
(14:35):
And then they'll also form relationshipswith other ambulance, private
ambulance companies as well too.
And they'll designate themselves a levelone trauma center so that they can get
all of that in so that when they dohave the traumas that that trauma's
gonna, again, similar to that $800,000CABG, instead, this hospital B is going
to have an $800,000 trauma situation.
(14:56):
Okay, so we got a 1, 2, 3 punchhere from a strategic perspective.
You know, first get the stop-lossprovision with local, whoever you're
negotiating with, carriers plan sponsors.
Step two, tinker around with yourcharge master, tinker around with
build charges so that it becomesas streamlined as possible to
(15:16):
exceed the stop-loss provision cap.
Then thirdly, all right,well now you got the.
I, I mean, there's a reason they call itthe cash lab, the cardiac cash lab, right?
So like now, and I, I don't mean to becynical, but that's a thing out there.
So you know, like now you'vegot the me mechanism in place.
Now you can strategically acquirelocal indie providers or stand
(15:40):
up out whatever you're gonna doto steer as much as possible.
Like you become the center ofexcellence for like whatever it is.
I guess this is kind of the underbellyof, of a center of excellence so that
you can get as many patients as possibleto run through that service line where
that stop-loss provision is in effect.
(16:00):
This is a very thoughtful approach thatdoes it sound like require a lot of
coordination and kind of thought, butif you can put the whole thing into
place, then you've basically set up avery well run financial plan here that
sounds like is often very successful.
(16:23):
And hospital systems hireoutside consulting firms to tell
them exactly how to do this.
Yeah, it sounds like somethingthat a consulting firm would
be, would have a playbook for.
And there's very big name consultingfirms that make a lot of money in
fees showing hospitals how to do this.
Yeah, and and to your point, you're gonnahave hospitals in the same area who, for
whatever reason, they choose whateverservice line or DRG or whatever it is,
(16:47):
they're thoughtfully picking something.
It's probably gonna be different.
It behooves someone interested in,in making as much profit or money off
of this as possible to pick somethingdifferent than the other local hospital.
The other dynamic that is important toto keep in mind is that this is all done
in a way that is hidden from employers.
(17:10):
And the reason the way that it'shidden, is because the insurance
carrier then turns around and theyhave to tell employers in their
area what the quote unquote averagenetwork discount is that they have.
And they'll be like, Look, we get a 50%discount, or one of the numbers that's
(17:31):
frequently quoted is this RAND study thatsaid that the commercial allowed amounts
are approximately 240% of Medicare.
Right after you take the discountoff of bill charges, you get the
allowed amount, and that allowedamount is about 240% of Medicare.
Now, the problem is, is that thatstudy and that, that statistic
(17:52):
is based upon the average allowedamounts in the marketplace, not
the average, based on the volume ofpatients going through those prices.
So what I just described with the $800,000CABG, that's like 1200% of Medicare.
It's more, it's even more than that.
But, it's offset by all these otherservices like dermatology and ENT
(18:17):
and labor and delivery that might beset much lower at only like a hundred
percent of Medicare or 50% of Medicare.
And so if you were to average,well, it's, it's only one.
There's only one CABG price, and we'vegot a whole bunch of maternity and
pediatric and ENT prices over here.
So when you average it all out,it's only 240% of Medicare.
(18:38):
But what they don't say is that they'vedriven so much volume through that
astronomically high that the actualamount paid is not 240% of Medicare.
It's closer to 400 or 500% of Medicare.
So understanding what you're sayingthere, no one's looking at the volume
of patients that are hitting anygiven code when they're saying 200,
(18:58):
it it's, it's an aggregate number.
Correct.
And it's just like if you can have7,000 maternity codes or derm codes
or whatever, like there's a lot ofcodes in those code books, so you can
have thousands of codes elsewhere.
This CABG code is one code.
So it could be, like you said,thousands of percentage points over
(19:23):
Medicare, but because it's only onecode, it gets averaged out by all
of those thousands of other codes.
That's exactly right.
Got it.
I can certainly see why this isn'tsomething that a carrier would wanna
be underlining with an employer.
They do not give theircustomers that level of detail.
Well, I, I can see like A, if you letthe hospital do this, a carrier can
(19:46):
claim to have lowered the percentageover Medicare or whatever because what
is actually going on is really unclear.
So you could have plan sponsors whoare like, oh, well thank you because
there's a missing piece of this equation.
But also like a lot of times, as weknow, some carriers who have Medicare
advantage lines are using commerciallines as their negotiating leverage.
(20:09):
So if you let this go at the negotiatingtable, then that also could probably
enable a carrier so inclined to geta lower Medicare advantage rate.
This is a super important point, Stacey.
So all of the machinations that Ijust described, employers, rightly
so come back to me and say, but thecarriers are so big and powerful.
(20:34):
Why do they let thehospitals get away with this?
Like, I won't name carriers.
But look, they have such huge,dominant places in the marketplace.
Why don't they use that market power todemand better rates from the hospitals?
Or why don't they prohibit thehospitals from negotiating these
stop-loss contracts provisions at all?
(20:55):
They don't have to accept them.
Why don't they just say no?
And the reason why is because those samecarriers also have a completely separate
business that is Medicare Advantage.
And Medicare Advantagereimbursements to hospitals are
only right about at Medicare, okay?
So you've got commercial insurance that's,you know, 2, 3, 4, 5 times Medicare.
(21:17):
Whereas Blue Cross United, Cigna, Aetnaare really only paying the hospital like
the equivalent of the Medicare rates.
And so those hospital systems arelike, look, that is super low.
The only way that we're evergoing to accept Medicare for
your Medicare Advantage membersis if you give us super high
reimbursement on the commercial folks.
(21:37):
And the carriers are more than happyto do that because you gotta remember,
over 60% of commercially insured livesin America are self-funded, so the
carriers are not taking risk on it.
So they essentially are sacrificingthe self-funded plans and the
self-funded budgets, so that theycan maintain super low reimbursement
(21:58):
on their Medicare Advantage side.
What should a benefitconsultant be doing here?
You know, and maybe it's the, thesame thing that a plan sponsor
should be doing, and I have a coupleof more questions for you, but
like, this is obviously a loophole.
We like to think that carriersand and hospital systems are on
opposite sides of the table and thecarrier is fighting the good fight.
(22:20):
But there is certainly cases where there'ssome things going on where the carrier
and and the hospital system are aligned.
Let's just say.
Knowing this, because this is news wecan use, how do I think this through
as I'm contemplating my carriercontracts maybe, and or what should I
(22:42):
be expecting of my benefit consultant?
It's a great question and so really yourhealthcare costs as an employer are, as
you said earlier in our conversation, arereally driven by the high cost claimants.
So it's like, what?
What are you gonna do aboutyour high cost claimants?
So if you're an employer sponsoredhealth plan, it's like you wake up in the
morning, what's the first thing you needto think about your high cost claimants?
You're eating lunch.
(23:03):
What should you think aboutyour high cost claimants?
You're going to bed at night, what shouldyou think about your high cost claimants?
Okay, so fine.
If you know that you have an existingnetwork that is going to just shellac you
on your high cost claimants, this is wheresome employers are saying like, look,
we're gonna move to direct contracting.
And we're gonna take certain servicesand listen, this is what Walmart has
(23:23):
been doing for over 20 years, okay?
This is, this is not a new thing.
And believe me, if there's anemployer out there that understands
healthcare, it's Walmart.
Okay?
I've spoken to those people, like theyknow what they're doing and, and they
have been working with direct contracts.
Now, the key to direct contractingis there's, there's several keys.
Well, first key is one, you have todo it for elective services, right?
You're not gonna do directcontracting for appendicitis, right?
(23:46):
Because what are you gonna do?
Put 'em on a plane and, andget 'em over to the direct
contract for the appendectomy?
No, you can't do that.
And so that's where it needs to be forelective services, and that's where they
have traditionally focused on electiveorthopedics as the low hanging fruit.
So the, the major areas are for OrthoSpine, which also includes a neurosurgery
spine, and then for your total kneeand your total hip implants, because
(24:07):
those are almost never in emergencies.
The other big area is then withcancer care, and so that's where
Walmart also has direct contractsrelated to cancer care as well.
Now the step before that, thatalso needs to happen is, is that
there needs to be steerage by theemployer into those direct contracts.
(24:28):
Just circling back, this is why you weresaying earlier like, if a plan sponsor
isn't making the effort to steer theirpatients, someone else is gonna do it.
There's a lot of financialvested interests afoot here.
A lot of them.
So everybody else has andunderstands what the opportunities
(24:49):
are relative to steering patients.
And if a plan sponsor isn't havingsome sort of action plan, then
as you said before, patients aregonna get steered just not by you.
That's right.
And really the number onesteerage mechanism for patients,
of course is their doctor.
And so that's where employers thathave direct contracts have historically
not done as well as they could withthem because all they did was use
(25:13):
the pre-cert process to be like,oh, we see you're getting a prior
authorization for a, a knee replacement.
If you change doctors from Dr. Jonesand you go over here to our direct
contracted doctor, then it'll bezero out-of-pocket cost for you.
And that actually had a lot of frictionwith the patients because it's like, well,
I already saw this orthopedist and I likedhim or her, and I already have kind of
the inertia of going in that direction.
(25:33):
So even if you're offering me zero outof pocket cost surgery, like I don't
know if I really wanna do it because thetrain's kind of already left the station.
And so that's where the employers thathave put in onsite near site clinics
and use direct primary care, use thoseprimary care physicians to then steer the
members before they even need the surgery.
(25:54):
Does, does a primary care physicianknow if you need spine surgery or not?
No.
They don't know.
They're like, well, you probably needto be evaluated by a neurosurgery spine
person or an orthopedic spine person.
Let's at least refer you to thatdoctor for evaluation that's already
part of the direct contract agreement.
So that if you do actually needthe surgery, you've already been
(26:15):
set in the direction of morecost effective care as opposed to
trying to change things mid-course.
And I would direct anyone to listento the Matt McQuide episode from a
few weeks ago because he talks aboutexactly this, that what it boils down
to, primary care and the decimation ofprimary care in this country is, and
(26:36):
what is happening right now is, is, iskind of a direct consequence of this.
It's all about trust andit's all about relationships.
And making sure that that trust andrelationship has been set up prior
to the moment in time when someoneneeds a lot of help trying to navigate
the healthcare marketplace and getthe right care at the right time.
There's a lot of talk about,well, patients won't engage.
(26:57):
Yeah.
Because if they won't engage withsomeone, they have no idea who they are.
It's just this phone call from someunknown entity trying to get them
to, they already have a relationshipas you just mentioned, you know,
with someone somewhere, right?
So you're trying to trump an existingrelationship, like this just random
person that came out of nowhere.
So the point that Matt McQuide made,and I think, Dr. Scott Conard has been
(27:19):
saying this for a long time as well, yousay this all the time, you have to get
these trusted relationships set up inadvance so that when the moment in time
where it really matters happens, thatpatient has someone that they know, they
like, they trust and for good reason.
Right, I'm saying authenticallyso that they can get help in
this really critical moment.
(27:40):
And, and the point that you'remaking is it could be MSK,
neuro MSK, it could be oncology.
Those are really critical points in timeif you don't have the primary care doc
hooked up and patients in the know aheadof time, like you lost your steering
opportunity and again, that patient'sgonna get steered by someone else.
(28:01):
Yeah, and this is not some liketheoretical exercise again.
John Torinus in "The CompanyThat Solved Healthcare".
He wrote a book exactly how his,his company like did exactly this
and they kept their healthcarecost trend flat for nine years.
And Purdue University also doesa lot of what we are discussing
in this, and they have kept theirhealthcare cost trend at 1%.
(28:24):
This is not some sort of theoreticalexercise, like there are real
employers that have done this inthe past and are doing it now.
Yeah, and if you listen to theshow with Dr. Christine Hale,
she talks about some strategies.
For steerage and just, you know, withthese high cost claimants, there's
usually not that many of them, butas you said at the top of the show,
they are really, really costly.
(28:45):
So there's many things that can evenbe done at the individual level there.
What I will say though is Dr. RobertPearl was on the show a while back,
and one of the things that he wastalking about is the importance.
If there's subspecialists with veryuncommon things like surgeons get
better, the more volume there is.
(29:07):
So if you've got CABGs all over town,then what that does is it splits
the volume amongst surgeons, right?
So you wind up getting uh, lower qualityor lower outcomes because nobody then has
the volume to get really, really good.
How would you address theclinical consideration here?
(29:28):
Yeah, so there the issue becomes whatis going to be the reimbursement for
that concentration of specialists, andthere's a couple of ways to do that.
Because if you, if you essentially cornerthe market for any particular service
because you're a center of excellence.
(29:49):
Then by definition you are goingto charge through the roof.
There's no way that a hospitalsystem is going to become a center
of excellence and not dramaticallyincrease their prices for it.
That will happen.
That happens at MD AndersonCancer Center, hugely expensive.
Memorial Sloan Kettering, hugelyexpensive for cancer care.
Cleveland Clinic, hugely expensivefor, for cardiovascular care.
(30:12):
Okay, so that's what has happened.
What's the alternative?
The alternative is either one.
It is price controls.
Which, guess what?
We have one state in Americathat actually does that, and
that is the state of Maryland.
So like where I did my residency atHopkins, Hopkins World Famous, right?
Probably has the best ophthalmologyand urology and some of the other best
(30:33):
departments, uh, rheumatology, right?
Hopkins cannot jack theirrates through the roof.
By law they're not allowed to because thestate of Maryland regulates their prices.
Okay.
But that's the onlystate where it happens.
So if the alternative then is, is that allhospital systems have huge fixed costs.
So really, regardless of how manysurgeries that hospital does, like
(30:56):
their costs are actually prettystable because they have to pay
for all the equipment and all thesalaries for people like that's fixed.
So they really want volume, and so whatyou need to do is you need to have a hand
in delivering volume to that facility.
Delivering volume to that facilitythat's not connected to horse trading
(31:17):
with Medicare Advantage, that'sthe secret weapon that employers
have, is that employers don't have aMedicare Advantage book of business
that they're trying to protect.
So they can go in to the ClevelandClinic and be like, you're the
best places for CABGs around.
We'd love you to do our CABGs.
And, you know, we know thatyour provider stop loss is
giving you 70% of bill charges.
(31:38):
We'll give you 200% of Medicare,we'll give you 170% of Medicare.
And the Cleveland Clinic will takeit because you know what, it's
almost twice as much as Medicare.
And so if you as an employer takeadvantage of the fact that you're not
associated with Medicare Advantage,then you can actually get better
rates than a center of excellencewould be willing to give you.
I think the point that you're makingor, what I would add to it is first
(32:01):
of all, it's one thing to do somethingopenly, and it's another thing to
do it under the cover of darkness.
So, so like, even if you look atsome of these hospital transparency
reports, these things aren't obvious.
So it's like really done underthe, the cover of darkness, like
the sunlight has not gotten here.
And I think it's one thing if youhave a hospital system who's right
(32:23):
up front, like, Hey, we're a centerof excellence at CABGs and we're
gonna be charging you 800 grand.
Just saying.
Right, like it's one thing if thatthis is a choice that plan sponsors are
making and choosing to do this becausethey understand what the cost is.
And it's another thing, if there's thesefinancial machinations, you only figure
it out after you've got an $800,000 bill.
(32:44):
So if we're talking about nonprofithospitals here, trying to operate for
the benefit of the community or whatever,like philosophically, these conversations
are distasteful I'm gonna say.
When again, these things are clearlynot being done transparently.
Oh yeah.
Stacey incredibly important point.
(33:04):
Listen, healthcare is hugely deceptive.
I mean, I, I have a, I have a, awhole separate, AhealthcareZ video
where I run through literally 32examples of healthcare deception.
We will link to it in the show notes.
But at the end of the day, deceptionis a good business practice.
If you're trying to maximizerevenue and profit, then like,
deception is a tool to do that.
Okay, let me give you an example.
Like the casino whales, theynever publicized that those
(33:26):
whales are losing gobs of money.
You never see a whale walkingaround publicizing that.
They just lost like amillion dollars, right?
It's kept on the hush hush becausethey want more whales to come.
And if that whale ever publicized howmuch he or she lost at the casino, then
the other whales wouldn't go there.
That's why you eitherhave to do two things.
You either have to do price settingor you have to have competition.
Otherwise, listen, we're all human.
(33:46):
Like, I'm not passing judgment on them.
So we've done this with other industriesin the past, okay, this isn't rocket
science, it just needs to be done again.
And things like your podcast here are,super helpful in spurring that on.
Well, likewise, same with the videos.
And, and I feel like there's a bigdifference between if, if it's a
for-profit entity, and the productis handbags or some consumer optional
(34:08):
good, like that is sort of one thing.
But if we're talking about nonprofitorganizations with $2.5 billion trust
funds serving the community aroundthem, that's the social contract there,
then I, I don't know, what do I know?
Dr. Eric Bricker, is there anythingI neglected to ask you in here?
I would just like to say, Stacey, thatthat the answer to that question about
(34:29):
what do you know is, is that you know awhole heck of a lot, and so I appreciate
you having me on, and I thoroughlyenjoy listening to your other podcast
with all your fantastic, uh, guests.
And so, uh, it's been a real pleasureand thank you for everybody, for,
uh, for tuning in and listening.
And we will link to Dr. EricBricker's excellent videos where I
(34:49):
learn a whole lot in the show notes.
Although I am going to stronglysuspect that most of our
listeners are very familiar.
Dr. Eric Bricker, thank you so much forbeing on Relentless Health Value today.
Thank you, Stacey.
Hi, this is Tom Nash, oneof the RHV team members.
You might recognize my voicefrom the podcast intro.
If you love the show and youwanna show us your support.
Please follow us on yourfavorite podcast app.
(35:11):
Sign up for the newsletter,or maybe consider making a
small donation in the tip jar.
Thanks so much for listening.
Episode 472, "The Well Honed Three-prongHospital Playbook to Maximize
Revenue From High Cost Claimants".
I'm gonna call this a companion to thehigh cost claimant episode from last week.
Today I am speaking with Dr. Eric Bricker.
(00:26):
American Healthcare entrepreneurs andExecutives You Want To Know, Talking.
Relentlessly Seeking Value.
So let's continue themes from priorepisodes, most particularly the episode
from last week with Dr. ChristineHale, which was also about high cost
claimants and just the impact that theyhave on the wallets of self-insured
(00:49):
employers and any other plan sponsor.
We could have 0.5 to 1% of totalplan members costing upwards
of 40% of total plan dollars.
And I bring this up just to highlightthe magnitude of the money here.
In that show from last week, we takethe issue of high cost claimants from
the standpoint of the plan sponsor.
(01:12):
Today, however, we're gonnabe looking at this from the
standpoint of the hospital system.
If I were gonna come up with amotto for the show today with
Dr. Eric Bricker, it's that allcosts are somebody else's revenue.
And when it's revenue and profit of themagnitude that we're talking about with
many high cost claimants, it starts tobe less of an accidental, oh wow, how did
(01:35):
that CABG patient wind up in our clinic?
What are the odds.
And more of a whoever is not steeringpatients is letting someone else with
a big profit incentive lock down thatsteerage in deeply embedded ways.
But before I get too much further,let me tell you how this show came
to be, and frankly, it's beginningto get a little repetitive.
But in my defense, Cora Opsahl workslike a block for me, and apparently
(01:58):
we are both not opposed to happy hour.
So Cora started telling me that rightnow you have some pretty astute plan
sponsors who know a thing or twoabout the magnitude of hospital spend.
Total hospital costs are usuallyaround half of most total plan spend.
So sure you have plan sponsors doingdirect contracts or really scrutinizing
(02:18):
underlying hospital charges.
Except in contract negotiations withplan sponsors either doing direct deals
or doing hospital RFPs through theircarrier, or just even negotiating with
carriers and looking at the underlyinghospital costs, hospital charges two
plan sponsors in the aggregate can go up,while hospitals are still able to say,
(02:40):
I'm gonna be net, net 0% increase acrossthe board, or even I'm gonna do a decrease
they are able to show lower prices.
Wait, what?
Yep, that's happening.
I was like, seriously,how are they doing this.
Cora said, You should get Dr. EricBricker back on the pod to explain exactly
how hospitals are going about this.
Dr. Bricker did a video about it, whichI will link to in the show notes, but
(03:03):
the show that you're about to heardigs in hard on the playbook as well.
But I'm getting ahead of myself.
So anyway, after I talked to Cora,I firm up a plan with Dr. Bricker to
make a return appearance . And wouldn'tyou know it that exact same day?
Kurt Christie messages me and says, youshould have Dr. Bricker come back on
the pod and talk about how hospitalsprofit from high cost claimants.
(03:23):
So yeah, love it when a plan comestogether, especially because so many
of you in our tribe have at variouspoints asked for a return appearance of
the one and the only Dr Eric Bricker.
So here you have it.
You'll need to listen to the show toget to the bottom of the well honed at
this point, contracting strategy thatsome big consolidated hospitals, Centers
of Excellence, if you will, deploy tomaximize revenue from high cost claimants.
(03:47):
It's like a three-pronged playbookfrom what I have been gathering, but
yeah, if you are on the hook to pay forhospital claims, do be aware of this.
It is material.
Slight spoiler alert, but the playbookhas to do with how hospitals negotiate
with plan sponsors on their providerstop loss contract provisions.
It also has to do with how theychoose to consolidate and how
(04:08):
they engineer their charge master.
Sounds boring, but it's really notif you are on the hook for millions
and millions of dollars as a result.
Okay, so do I really need tointroduce Dr. Eric Bricker?
Dr. Bricker began as an internist.
He also worked in hospital finance.
Then he started one of the veryfirst, actually healthcare navigation
companies and also kind of out ofnecessity, one of the first get
(04:30):
serious about transparency initiatives.
Dr. Bricker says, when you help1.8 million people navigate the
US Health System for 11 years,you'll learn a thing or two.
So after he sold Compass ProfessionalHealth Services, he decided he'd use
what he knew to help set people straight.
And yeah, go to Dr. Bricker'sYouTube, channel AhealthcareZ for
sure if you want to learn anythingabout the A to Z of healthcare.
(04:54):
My name is Stacey Richter,and this podcast is sponsored
by Aventria Health Group.
Back by popular demand.
Dr. Eric Bricker, welcometo Relentless Health Value.
Well, Stacey and all your listeners,thank you so much for having me back.
What I wanna talk to you today about arehigh cost claimants, and we recently had
Dr. Christine Hale on the pod talkingabout this from the plan sponsor side.
(05:16):
But I wanted to dig in onthe hospital side today.
That's right.
And so from a hospital revenueperspective, hospitals in some
ways are very much like casinosin that casino revenue and casino
profits are heavily driven by thehigh rollers or whatever, sometimes
referred to as the whales, right?
So you walk into a casino, you mightsee a whole bunch of people playing
(05:38):
slot machines or sitting at a $5blackjack table, like that's not
where the casino makes its money.
The casino makes its money on thesehigh, you know, a very small number of
gamblers that gamble, huge sums of money.
And then they lose that money andthat's where they make all their
revenue and all their profits.
So everybody else is kind of like, uh,window dressing for the high rollers.
And so in the world of healthcare,it's actually very similar where
(05:59):
hospital systems make gobs of revenueand their profit margin off of
these incredibly expensive patients.
Whereas a lot of the other things,whether it's the office visits or
the minor procedures, like that's notreally where they're making their money.
They're making their money offof the, the patients who are sort
of the equivalent of the whales.
And that correspondsactually with plan sponsors.
Who, you know, like you talk to almostanybody and they will say it's not like.
(06:24):
20% costs 80%.
You know, it's not the Pareto principle,it's like 0.5 to 1% are 30 or 40% of
total plan costs I've heard, or 5% ofmembers are 50% of total plan costs.
You you hear numbers like this.
That's right.
And I've had hospital executivessay that, look, in order for them
(06:44):
to hit their revenue numbers forthe month, they basically needed
like one or two whales a month.
And if they couldn't get those oneor two whales, there was no way
they were gonna hit their numbers.
And if they had three or four whales,they would totally blow through their
numbers and they would do great.
So it was, it was all driven by thosehandful of, now we're talking, a
patient stay in excess of a hundredthousand, 200,000, half a million
(07:06):
dollars, a million dollar hospital stay.
So this is where the stories come in.
Okay.
Is that the hospital systems specificallydesign their contracts with the insurance
carriers for certain types of whales.
You can think of it like certaintypes of card games, right?
So one casino might specializein craps and another casino
specializes in blackjack.
And so what they do is they negotiatewhat is referred to as a provider,
(07:31):
stop-loss, contract provision.
And what that does is when the hospitalcontracts with the insurance carrier,
they say, look, you can pay us afixed case rate of let's say, $40,000
for a coronary artery bypass graft.
But as soon as our billed charges arein excess of $200,000, then you're just
gonna pay us 70% of billed charges.
(07:53):
You're just gonna get a30% off of billed charges.
Okay, so let me, let mejust stop you there and just
make sure that I understand.
First of all, we're talking providerstop-loss, which has nothing to
do with plan, sponsor stop-loss.
This is a whole other thing.
That's right.
And it's more of a contractingprovision, it sounds like,
The hospital system gettingsome assurances from carriers,
(08:16):
whoever they're contracting with.
And basically what they're saying is, okay, so say we're doing a procedure
or a DRG, um, whatever it is, and thenormal bill charge is 40k, but sometimes
things go horribly wrong with patients.
So we, the hospital system needto ensure we're not, like, things
(08:36):
aren't going horribly wrong andwe're still getting this only 40k.
I gotta pause you right there.
Because there's a secondpart to the strategy.
And the second part to the strategyis for the specific types of services
where the hospital has negotiated thatstop-loss contract to say, Hey, as
soon as we, you know, go past $200,000of billed charges, then we start
(08:59):
getting paid 70% of billed chargesinstead of the $40,000 allowed amount.
They then specifically structure theircharge master for that particular
service so that every time they performthat service, they blow through the
stop-loss amount and they get paidthe 70% of billed charges every time.
So the hospital doesn'tlike just occasionally enact
(09:21):
the stop loss provision.
They always enact the stop loss provision.
So it's not like theCABG went horribly wrong.
The CABG went perfectly normal,but they structured their charge
master so that they're nevergetting paid 40 grand for that.
Instead, they're gonna be paid 140grand, which is 70% at 200 grand.
So it is definitely a two step process.
(09:42):
That's right.
So it's those two things combined.
It's the stop-loss provision.
And then it's also thechanging of the charge master.
Now is there, there's a third part.
Let me just recap beforewe get to number three.
Go for it.
Recap.
So here's the hospital playbook tomake sure the hospital has casino
whales that are very profitable, evenif there's a tough plan sponsored
negotiator trying to hold the line onhow much can be billed for any given DRG.
(10:06):
So playbook, step one is, negotiate thestop loss provision with carriers or
whoever happens to be negotiating with.
Come up with a cap for that particularDRG service line item, whatever it is.
But then go back to the shopafter that provision gets inked.
Now it is in that hospital system's,very much financial best interest to
(10:30):
ensure that that cap gets breachedearly and often as possible, right?
Like, I mean, it is inarguable that thereis now a financial incentive to hit that
stop-loss threshold as often as possible.
So if you've got finance peepsin the room, there's all kinds
of different ways that to makesure that that's gonna happen.
(10:51):
Like one is to switch around thecharge master so that the charges
that a crew to that code are higher.
Like you can mess around with the waythe finances work, so that, as you said,
it happens often enough, every time.
Significant percentage is not anaccident, that cap is breached.
(11:14):
At that point, as you justsaid, the charges revert to 70%
of build charges or whatever.
And because the charge mastersare higher in that, it's pretty
easy to consider or understand howthe charges get high really fast.
So now you've got hundreds ofthousands of dollars of billed
charges that a plan sponsor orcarrier is paying a percentage of.
(11:34):
That's right, and more specifically inthe numbers that I used in that example,
I literally have talked to the head ofbenefits for a major self-funded employer.
Where they had $800,000 CABGs.
So I, I used 140,000 as theallowed amount in my example,
and they had an $800,000 CABG.
Did not have complications becauseof, of the, of what I just described.
(11:57):
Yeah.
That's kind of incontrovertible thatif you have kind of a normal, I mean,
it would be one thing if there was allkinds of things going horribly awry.
But it sort of speaks for itself whenyou look at the clinical case and it's
pretty normal and yet it costs the kindof dollars that we're talking about here.
That's right.
And the third piece is then the hospitalknows that they have that contract
(12:21):
and the hospital knows they have thecharge master structured in that way.
So then they create steerage of patientswith, in this case, cardiovascular
issues to their hospital system.
And they do that by, what some hospitalshave done is they've actually gone
out and they've bought the majority ofcardiology practices in that community.
(12:42):
Now, they didn't buy ENT practices.
They didn't buy OBGYN practices.
They specifically boughtthe cardiology practices.
Because, they wanted the cardiologypatients so that if a patient needed
to have a CABG, that they had it there.
And then they would also have eitherrelationships with primary care groups or
they would actually own the primary caregroups so that when the patients were seen
in primary care, they were referred to thehospital's cardiologist who then referred
(13:06):
them over to the hospital's cardiacsurgeon, who then performed the CABG.
So that whole mechanism ofsteerage is very intentional.
So I, I sort of jokingly say if anemployer doesn't steer their patients,
doesn't steer their plan members, theirplan members will be steered and they
will be specifically steered by thestrategies of the hospital system.
And I definitely wanna circle backon, on what you just said, that
(13:29):
someone's gonna steer your patients.
That's exactly right.
And someone's gonna steer the members.
That is a, is a really important point.
And everything I just describedis just for one hospital system
in a particular metropolitan area.
Now you go across town to anotherhospital system and they have not
targeted cardiovascular servicesand CABGs and aortic valve repairs
(13:51):
like this hospital A has done.
Instead, hospital B is like, you knowwhat, we're really gonna hang our hat
on trauma and we're gonna negotiatesuper high reimbursement rates on all
trauma related services, whether it'sinpatient trauma, surgery, or even just
activating the trauma code in the ER.
And as a result of that, we are goingto build super gorgeous ERs that
(14:14):
are well lit. And you can almosttell this because the sign and the
location of the emergency room on thehospital will be front and center.
It'll be huge.
It'll be gorgeous.
They'll have like, you know,figurative chandeliers hanging down.
Right.
And then they also form relationshipswith all of the municipality, ambulance,
fire departments for, so that theambulance drivers take their people there.
(14:35):
And then they'll also form relationshipswith other ambulance, private
ambulance companies as well too.
And they'll designate themselves a levelone trauma center so that they can get
all of that in so that when they dohave the traumas that that trauma's
gonna, again, similar to that $800,000CABG, instead, this hospital B is going
to have an $800,000 trauma situation.
(14:56):
Okay, so we got a 1, 2, 3 punchhere from a strategic perspective.
You know, first get the stop-lossprovision with local, whoever you're
negotiating with, carriers plan sponsors.
Step two, tinker around with yourcharge master, tinker around with
build charges so that it becomesas streamlined as possible to
(15:16):
exceed the stop-loss provision cap.
Then thirdly, all right,well now you got the.
I, I mean, there's a reason they call itthe cash lab, the cardiac cash lab, right?
So like now, and I, I don't mean to becynical, but that's a thing out there.
So you know, like now you'vegot the me mechanism in place.
Now you can strategically acquirelocal indie providers or stand
(15:40):
up out whatever you're gonna doto steer as much as possible.
Like you become the center ofexcellence for like whatever it is.
I guess this is kind of the underbellyof, of a center of excellence so that
you can get as many patients as possibleto run through that service line where
that stop-loss provision is in effect.
(16:00):
This is a very thoughtful approach thatdoes it sound like require a lot of
coordination and kind of thought, butif you can put the whole thing into
place, then you've basically set up avery well run financial plan here that
sounds like is often very successful.
(16:23):
And hospital systems hireoutside consulting firms to tell
them exactly how to do this.
Yeah, it sounds like somethingthat a consulting firm would
be, would have a playbook for.
And there's very big name consultingfirms that make a lot of money in
fees showing hospitals how to do this.
Yeah, and and to your point, you're gonnahave hospitals in the same area who, for
whatever reason, they choose whateverservice line or DRG or whatever it is,
(16:47):
they're thoughtfully picking something.
It's probably gonna be different.
It behooves someone interested in,in making as much profit or money off
of this as possible to pick somethingdifferent than the other local hospital.
The other dynamic that is important toto keep in mind is that this is all done
in a way that is hidden from employers.
(17:10):
And the reason the way that it'shidden, is because the insurance
carrier then turns around and theyhave to tell employers in their
area what the quote unquote averagenetwork discount is that they have.
And they'll be like, Look, we get a 50%discount, or one of the numbers that's
(17:31):
frequently quoted is this RAND study thatsaid that the commercial allowed amounts
are approximately 240% of Medicare.
Right after you take the discountoff of bill charges, you get the
allowed amount, and that allowedamount is about 240% of Medicare.
Now, the problem is, is that thatstudy and that, that statistic
(17:52):
is based upon the average allowedamounts in the marketplace, not
the average, based on the volume ofpatients going through those prices.
So what I just described with the $800,000CABG, that's like 1200% of Medicare.
It's more, it's even more than that.
But, it's offset by all these otherservices like dermatology and ENT
(18:17):
and labor and delivery that might beset much lower at only like a hundred
percent of Medicare or 50% of Medicare.
And so if you were to average,well, it's, it's only one.
There's only one CABG price, and we'vegot a whole bunch of maternity and
pediatric and ENT prices over here.
So when you average it all out,it's only 240% of Medicare.
(18:38):
But what they don't say is that they'vedriven so much volume through that
astronomically high that the actualamount paid is not 240% of Medicare.
It's closer to 400 or 500% of Medicare.
So understanding what you're sayingthere, no one's looking at the volume
of patients that are hitting anygiven code when they're saying 200,
(18:58):
it it's, it's an aggregate number.
Correct.
And it's just like if you can have7,000 maternity codes or derm codes
or whatever, like there's a lot ofcodes in those code books, so you can
have thousands of codes elsewhere.
This CABG code is one code.
So it could be, like you said,thousands of percentage points over
(19:23):
Medicare, but because it's only onecode, it gets averaged out by all
of those thousands of other codes.
That's exactly right.
Got it.
I can certainly see why this isn'tsomething that a carrier would wanna
be underlining with an employer.
They do not give theircustomers that level of detail.
Well, I, I can see like A, if you letthe hospital do this, a carrier can
(19:46):
claim to have lowered the percentageover Medicare or whatever because what
is actually going on is really unclear.
So you could have plan sponsors whoare like, oh, well thank you because
there's a missing piece of this equation.
But also like a lot of times, as weknow, some carriers who have Medicare
advantage lines are using commerciallines as their negotiating leverage.
(20:09):
So if you let this go at the negotiatingtable, then that also could probably
enable a carrier so inclined to geta lower Medicare advantage rate.
This is a super important point, Stacey.
So all of the machinations that Ijust described, employers, rightly
so come back to me and say, but thecarriers are so big and powerful.
(20:34):
Why do they let thehospitals get away with this?
Like, I won't name carriers.
But look, they have such huge,dominant places in the marketplace.
Why don't they use that market power todemand better rates from the hospitals?
Or why don't they prohibit thehospitals from negotiating these
stop-loss contracts provisions at all?
(20:55):
They don't have to accept them.
Why don't they just say no?
And the reason why is because those samecarriers also have a completely separate
business that is Medicare Advantage.
And Medicare Advantagereimbursements to hospitals are
only right about at Medicare, okay?
So you've got commercial insurance that's,you know, 2, 3, 4, 5 times Medicare.
(21:17):
Whereas Blue Cross United, Cigna, Aetnaare really only paying the hospital like
the equivalent of the Medicare rates.
And so those hospital systems arelike, look, that is super low.
The only way that we're evergoing to accept Medicare for
your Medicare Advantage membersis if you give us super high
reimbursement on the commercial folks.
(21:37):
And the carriers are more than happyto do that because you gotta remember,
over 60% of commercially insured livesin America are self-funded, so the
carriers are not taking risk on it.
So they essentially are sacrificingthe self-funded plans and the
self-funded budgets, so that theycan maintain super low reimbursement
(21:58):
on their Medicare Advantage side.
What should a benefitconsultant be doing here?
You know, and maybe it's the, thesame thing that a plan sponsor
should be doing, and I have a coupleof more questions for you, but
like, this is obviously a loophole.
We like to think that carriersand and hospital systems are on
opposite sides of the table and thecarrier is fighting the good fight.
(22:20):
But there is certainly cases where there'ssome things going on where the carrier
and and the hospital system are aligned.
Let's just say.
Knowing this, because this is news wecan use, how do I think this through
as I'm contemplating my carriercontracts maybe, and or what should I
(22:42):
be expecting of my benefit consultant?
It's a great question and so really yourhealthcare costs as an employer are, as
you said earlier in our conversation, arereally driven by the high cost claimants.
So it's like, what?
What are you gonna do aboutyour high cost claimants?
So if you're an employer sponsoredhealth plan, it's like you wake up in the
morning, what's the first thing you needto think about your high cost claimants?
You're eating lunch.
(23:03):
What should you think aboutyour high cost claimants?
You're going to bed at night, what shouldyou think about your high cost claimants?
Okay, so fine.
If you know that you have an existingnetwork that is going to just shellac you
on your high cost claimants, this is wheresome employers are saying like, look,
we're gonna move to direct contracting.
And we're gonna take certain servicesand listen, this is what Walmart has
(23:23):
been doing for over 20 years, okay?
This is, this is not a new thing.
And believe me, if there's anemployer out there that understands
healthcare, it's Walmart.
Okay?
I've spoken to those people, like theyknow what they're doing and, and they
have been working with direct contracts.
Now, the key to direct contractingis there's, there's several keys.
Well, first key is one, you have todo it for elective services, right?
You're not gonna do directcontracting for appendicitis, right?
(23:46):
Because what are you gonna do?
Put 'em on a plane and, andget 'em over to the direct
contract for the appendectomy?
No, you can't do that.
And so that's where it needs to be forelective services, and that's where they
have traditionally focused on electiveorthopedics as the low hanging fruit.
So the, the major areas are for OrthoSpine, which also includes a neurosurgery
spine, and then for your total kneeand your total hip implants, because
(24:07):
those are almost never in emergencies.
The other big area is then withcancer care, and so that's where
Walmart also has direct contractsrelated to cancer care as well.
Now the step before that, thatalso needs to happen is, is that
there needs to be steerage by theemployer into those direct contracts.
(24:28):
Just circling back, this is why you weresaying earlier like, if a plan sponsor
isn't making the effort to steer theirpatients, someone else is gonna do it.
There's a lot of financialvested interests afoot here.
A lot of them.
So everybody else has andunderstands what the opportunities
(24:49):
are relative to steering patients.
And if a plan sponsor isn't havingsome sort of action plan, then
as you said before, patients aregonna get steered just not by you.
That's right.
And really the number onesteerage mechanism for patients,
of course is their doctor.
And so that's where employers thathave direct contracts have historically
not done as well as they could withthem because all they did was use
(25:13):
the pre-cert process to be like,oh, we see you're getting a prior
authorization for a, a knee replacement.
If you change doctors from Dr. Jonesand you go over here to our direct
contracted doctor, then it'll bezero out-of-pocket cost for you.
And that actually had a lot of frictionwith the patients because it's like, well,
I already saw this orthopedist and I likedhim or her, and I already have kind of
the inertia of going in that direction.
(25:33):
So even if you're offering me zero outof pocket cost surgery, like I don't
know if I really wanna do it because thetrain's kind of already left the station.
And so that's where the employers thathave put in onsite near site clinics
and use direct primary care, use thoseprimary care physicians to then steer the
members before they even need the surgery.
(25:54):
Does, does a primary care physicianknow if you need spine surgery or not?
No.
They don't know.
They're like, well, you probably needto be evaluated by a neurosurgery spine
person or an orthopedic spine person.
Let's at least refer you to thatdoctor for evaluation that's already
part of the direct contract agreement.
So that if you do actually needthe surgery, you've already been
(26:15):
set in the direction of morecost effective care as opposed to
trying to change things mid-course.
And I would direct anyone to listento the Matt McQuide episode from a
few weeks ago because he talks aboutexactly this, that what it boils down
to, primary care and the decimation ofprimary care in this country is, and
(26:36):
what is happening right now is, is, iskind of a direct consequence of this.
It's all about trust andit's all about relationships.
And making sure that that trust andrelationship has been set up prior
to the moment in time when someoneneeds a lot of help trying to navigate
the healthcare marketplace and getthe right care at the right time.
There's a lot of talk about,well, patients won't engage.
(26:57):
Yeah.
Because if they won't engage withsomeone, they have no idea who they are.
It's just this phone call from someunknown entity trying to get them
to, they already have a relationshipas you just mentioned, you know,
with someone somewhere, right?
So you're trying to trump an existingrelationship, like this just random
person that came out of nowhere.
So the point that Matt McQuide made,and I think, Dr. Scott Conard has been
(27:19):
saying this for a long time as well, yousay this all the time, you have to get
these trusted relationships set up inadvance so that when the moment in time
where it really matters happens, thatpatient has someone that they know, they
like, they trust and for good reason.
Right, I'm saying authenticallyso that they can get help in
this really critical moment.
(27:40):
And, and the point that you'remaking is it could be MSK,
neuro MSK, it could be oncology.
Those are really critical points in timeif you don't have the primary care doc
hooked up and patients in the know aheadof time, like you lost your steering
opportunity and again, that patient'sgonna get steered by someone else.
(28:01):
Yeah, and this is not some liketheoretical exercise again.
John Torinus in "The CompanyThat Solved Healthcare".
He wrote a book exactly how his,his company like did exactly this
and they kept their healthcarecost trend flat for nine years.
And Purdue University also doesa lot of what we are discussing
in this, and they have kept theirhealthcare cost trend at 1%.
(28:24):
This is not some sort of theoreticalexercise, like there are real
employers that have done this inthe past and are doing it now.
Yeah, and if you listen to theshow with Dr. Christine Hale,
she talks about some strategies.
For steerage and just, you know, withthese high cost claimants, there's
usually not that many of them, butas you said at the top of the show,
they are really, really costly.
(28:45):
So there's many things that can evenbe done at the individual level there.
What I will say though is Dr. RobertPearl was on the show a while back,
and one of the things that he wastalking about is the importance.
If there's subspecialists with veryuncommon things like surgeons get
better, the more volume there is.
(29:07):
So if you've got CABGs all over town,then what that does is it splits
the volume amongst surgeons, right?
So you wind up getting uh, lower qualityor lower outcomes because nobody then has
the volume to get really, really good.
How would you address theclinical consideration here?
(29:28):
Yeah, so there the issue becomes whatis going to be the reimbursement for
that concentration of specialists, andthere's a couple of ways to do that.
Because if you, if you essentially cornerthe market for any particular service
because you're a center of excellence.
(29:49):
Then by definition you are goingto charge through the roof.
There's no way that a hospitalsystem is going to become a center
of excellence and not dramaticallyincrease their prices for it.
That will happen.
That happens at MD AndersonCancer Center, hugely expensive.
Memorial Sloan Kettering, hugelyexpensive for cancer care.
Cleveland Clinic, hugely expensivefor, for cardiovascular care.
(30:12):
Okay, so that's what has happened.
What's the alternative?
The alternative is either one.
It is price controls.
Which, guess what?
We have one state in Americathat actually does that, and
that is the state of Maryland.
So like where I did my residency atHopkins, Hopkins World Famous, right?
Probably has the best ophthalmologyand urology and some of the other best
(30:33):
departments, uh, rheumatology, right?
Hopkins cannot jack theirrates through the roof.
By law they're not allowed to because thestate of Maryland regulates their prices.
Okay.
But that's the onlystate where it happens.
So if the alternative then is, is that allhospital systems have huge fixed costs.
So really, regardless of how manysurgeries that hospital does, like
(30:56):
their costs are actually prettystable because they have to pay
for all the equipment and all thesalaries for people like that's fixed.
So they really want volume, and so whatyou need to do is you need to have a hand
in delivering volume to that facility.
Delivering volume to that facilitythat's not connected to horse trading
(31:17):
with Medicare Advantage, that'sthe secret weapon that employers
have, is that employers don't have aMedicare Advantage book of business
that they're trying to protect.
So they can go in to the ClevelandClinic and be like, you're the
best places for CABGs around.
We'd love you to do our CABGs.
And, you know, we know thatyour provider stop loss is
giving you 70% of bill charges.
(31:38):
We'll give you 200% of Medicare,we'll give you 170% of Medicare.
And the Cleveland Clinic will takeit because you know what, it's
almost twice as much as Medicare.
And so if you as an employer takeadvantage of the fact that you're not
associated with Medicare Advantage,then you can actually get better
rates than a center of excellencewould be willing to give you.
I think the point that you're makingor, what I would add to it is first
(32:01):
of all, it's one thing to do somethingopenly, and it's another thing to
do it under the cover of darkness.
So, so like, even if you look atsome of these hospital transparency
reports, these things aren't obvious.
So it's like really done underthe, the cover of darkness, like
the sunlight has not gotten here.
And I think it's one thing if youhave a hospital system who's right
(32:23):
up front, like, Hey, we're a centerof excellence at CABGs and we're
gonna be charging you 800 grand.
Just saying.
Right, like it's one thing if thatthis is a choice that plan sponsors are
making and choosing to do this becausethey understand what the cost is.
And it's another thing, if there's thesefinancial machinations, you only figure
it out after you've got an $800,000 bill.
(32:44):
So if we're talking about nonprofithospitals here, trying to operate for
the benefit of the community or whatever,like philosophically, these conversations
are distasteful I'm gonna say.
When again, these things are clearlynot being done transparently.
Oh yeah.
Stacey incredibly important point.
(33:04):
Listen, healthcare is hugely deceptive.
I mean, I, I have a, I have a, awhole separate, AhealthcareZ video
where I run through literally 32examples of healthcare deception.
We will link to it in the show notes.
But at the end of the day, deceptionis a good business practice.
If you're trying to maximizerevenue and profit, then like,
deception is a tool to do that.
Okay, let me give you an example.
Like the casino whales, theynever publicized that those
(33:26):
whales are losing gobs of money.
You never see a whale walkingaround publicizing that.
They just lost like amillion dollars, right?
It's kept on the hush hush becausethey want more whales to come.
And if that whale ever publicized howmuch he or she lost at the casino, then
the other whales wouldn't go there.
That's why you eitherhave to do two things.
You either have to do price settingor you have to have competition.
Otherwise, listen, we're all human.
(33:46):
Like, I'm not passing judgment on them.
So we've done this with other industriesin the past, okay, this isn't rocket
science, it just needs to be done again.
And things like your podcast here are,super helpful in spurring that on.
Well, likewise, same with the videos.
And, and I feel like there's a bigdifference between if, if it's a
for-profit entity, and the productis handbags or some consumer optional
(34:08):
good, like that is sort of one thing.
But if we're talking about nonprofitorganizations with $2.5 billion trust
funds serving the community aroundthem, that's the social contract there,
then I, I don't know, what do I know?
Dr. Eric Bricker, is there anythingI neglected to ask you in here?
I would just like to say, Stacey, thatthat the answer to that question about
(34:29):
what do you know is, is that you know awhole heck of a lot, and so I appreciate
you having me on, and I thoroughlyenjoy listening to your other podcast
with all your fantastic, uh, guests.
And so, uh, it's been a real pleasureand thank you for everybody, for,
uh, for tuning in and listening.
And we will link to Dr. EricBricker's excellent videos where I
(34:49):
learn a whole lot in the show notes.
Although I am going to stronglysuspect that most of our
listeners are very familiar.
Dr. Eric Bricker, thank you so much forbeing on Relentless Health Value today.
Thank you, Stacey.
Hi, this is Tom Nash, oneof the RHV team members.
You might recognize my voicefrom the podcast intro.
If you love the show and youwanna show us your support.
Please follow us on yourfavorite podcast app.
(35:11):
Sign up for the newsletter,or maybe consider making a
small donation in the tip jar.
Thanks so much for listening.
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