Hospital Finance Explained: Billing, Insurance Payment, Prices, Revenue, Charity Care, Cost-Cutting

[Music]

hello this is dr eric bricker and thank

you for watching a healthcare z today

we're going to be discussing hospital

cross subsidization so it's a well-known

fact that medicare and medicaid under

reimburse hospital systems for the care

they provide and that hospital systems

then have commercial insurance patients

then overpay for the care that they

provide to them and so that's where you

get the cross subsidization from right

so you're subsidizing the underpayment

by medicare and medicaid by having the

commercial insurance overpay and that's

just how hospital finance in america

works okay now let's get into some

specific numbers these statistics are

actually from the american hospital

association themselves and i will leave

the links in the show notes and so you

can see here that medicare and medicaid

underpay by 13

okay well how much care is actually

provided by medicare medicaid well total

hospital expense

60 percent came in from medicare and

medicaid patients okay so 60 percent of

the hospitals told businesses for

medicare and medicaid all right now

there's medicare medicaid there's

commercial insurance but then there's

also just non-payment there's a lot of

patients that come in that just don't

pay at all that's uncompensated care and

that totaled 38 billion okay now if we

want to figure that out as a percentage

we need to know total hospital expense

well that's reported by the american

hospital association up so total

hospital expense was 900 billion okay so

uncomplicated care is 38 billion divided

by the 900 billion that gets you 4.2

percent so in other words the hospital

is and gets 60 of their business for

medicare medicaid and 4.2 percent of

their business for people that just

don't pay at all okay great now

hospitals still make money they still

have a profit margin even non-profit

hospitals still have a profit margin

what is that profit margin that was

reported by the american hospital

association as well it was 7.7 percent

so knowing what their expense is and

knowing what their profit margin is you

can then solve for okay what was total

hospital revenue and that was 975

billion dollars okay now let's break it

down by medicare and medicaid in terms

of specific dollar amounts okay so that

means that 540 billion dollars of

hospital revenue was from excuse me of

hospital care was from medicare and

medicaid and that hospital revenue from

medicare and medicaid was only 470

billion right because medicare medicaid

under compensate for the care so they

only paid 470 billion for the 540

billion of care that was provided for

them okay

now that means that commercial insurance

revenue for those hospitals was 505

billion right because you got 975

billion total you're only getting 470

billion from medicare medicaid

uncompensated care they're not getting

paid anything so that gives you the 505

billion of revenue now how much care are

those hospital systems providing for

what the expense for that 505 billion

well it's only 36 percent of care right

because we know sixty percent of care is

from medicare and medicaid we know four

percent of care is uncompensated so that

means that 36 percent of care 36 of

expense is from commercially insured

patients okay great that's 322 billion

dollars now then doing the math on the

505 billion of revenue and the 322

billion of expense that means the punch

line is commercial insurance overpaid by

57

now all these numbers are approximations

right because the fact that medicare and

medicaid both under compensate by 13

somewhat of a coincidence the fact that

the care from medicare medicaid is 60

it's a very round number maybe it's 58

maybe it's 62. okay but the point is

is that medicare and medicaid underpay

and commercial insurance which is really

employers in america with their premiums

or if they're self-funded they're

actually paying off the paid the claims

themselves so employers and employees in

america overpay by 57 to make up for the

fact that medicare and medicaid and

uncompensated care underpays the

hospitals and that's my point for today

thank you for watching a healthcare z

[Music]

hello this is dr eric bricker and thank

you for watching a healthcare z today

we're going to be discussing hospital

accounting

now this might be the most boring topic

ever

but i promise you if you stay with me

till the end it will become

fascinating

okay fact number one most hospitals do

not do

cost accounting what does that mean most

hospitals do not actually know what it

costs them internally to deliver a

carpal tunnel release surgery to deliver

a gallbladder surgery to deliver an mri

to deliver 30 minutes of time spent in

the emergency room okay so there was a

fascinating article about this from the

new york times in 2015 that i will put

in the show notes and as far as i'm

concerned this article should be like

front page news like every day for every

healthcare publication it's that big of

a deal okay however this article is

about the university of utah health care

system which

went through

an exercise where they actually figured

out how much

all of their care actually cost them

internally and guess what they found out

an er

visit cost 82 cents a minute and

time in the operating room for an

orthopedic surgery cost 12 dollars a

minute so they actually knew literally

what everything in their hospital

actually caught them what cost them

what's that called normal what what most

normal businesses do that's what we did

at our company it's what the automobile

industry does if any of you watching

this video run a business you probably

know how much it costs you to do various

parts of your own business okay that's a

good business practice that is

quote-unquote highly innovative in

healthcare okay fascinating this was

such a huge deal that michael porter who

is probably one of the most famous

business school professors in america or

even in the world from harvard

university went to the university of

utah healthcare system to

research this and he said look this is

amazing this is the equivalent of like

michael jordan saying that you are good

at basketball okay this is a huge deal

all right so

now as a result of this let me go back a

point here as a result of knowing their

costs guess what the university of utah

healthcare system was able to do they

were actually able to lower their costs

so their cost went down about half a

percentage point whereas comparable

academic medical centers in their part

of the country actually went up by 2.9

percent and that makes sense right if

you're going to control costs and bring

costs down you actually have to know

what your costs are

so the if the vast majority of hospitals

in america don't know what their costs

are then they're going to have a really

hard time bringing those costs down okay

so that is like a basic fundamental that

really everyone needs to understand now

i have my own theory uh point number

four as to why at the university of utah

is there something in the water do they

have something especially um

especially smart people there look i'm

sure they do have a lot of smart people

there but here's what utah also has it

also has the inter-mountain health care

system and intermountain is like the

major competing health care system for

the university of utah now utah is a

unique state in that it has about five

million people and they're heavily

concentrated as you can imagine in the

salt lake city area somewhat in uh in

provo as well and so they've got most of

their people kind of in one place and

they really only have two hospital major

hospital systems for those people all

right what does intermountain healthcare

have it runs its own health plan you buy

intermountain healthcare insurance in

utah

and what means that the universe that

intermittent healthcare is collecting

premium and delivering care what does

that mean intermountain healthcare is

taking on risk and as a result of that

they have created

amazing care pathways they have

protocols they have been trumpeted by

both democratic and republican

administrations i mean they are just

known as the best of the best in america

when it comes to running a health care

system and the university of utah has to

compete with that okay so i this is my

own theory but they had to up their game

in cost accounting in order to compete

with intermountain okay

guess what other uh healthcare system in

america is thought of as one of the most

innovative healthcare systems in america

it's the geyser healthcare system on the

eastern side of pennsylvania in a

completely separate part of the country

what does geysinger have in common with

intermountain healthcare it also runs a

health plan it collects premium it takes

on risk and it provides care

so

that is a big deal and that's why cost

accounting is a big deal and that is why

and that really gets to the root of so

many issues in health care and that is

it's the incentives look when you're

incentivized to be a more prudent

steward of your health care resources

because you're taking on risk guess what

happens

tons of innovation tons of increased uh

clinical improvement tons of increased

safety tons of increased outcomes

and so necessity is the mother invention

and so that is the punchline that i

would like to leave you with today and

thank you for watching a health care c

[Music]

hello this is dr eric bricker and thank

you for watching a healthcare z today

we're going to be discussing

complex patients from the hospital

perspective and i wrote down hcc up here

because on the employer broker benefit

consultant commercial insurance side

they're oftentimes referred to as high

cost claimants okay but for a doctor in

a hospital they are never called a high

cost claimant okay they're either called

a person or a patient or sue or john i

mean these are people and they have

names and they have lives

and so i think it's very important for

everyone that works in healthcare to

kind of understand

what's going on

with these very complex patients and the

reason that we're talking about complex

patients is because of point number one

which is the 80 20 rule or what's called

the 550 rule right so for most

commercial insurance plans and employers

eighty percent of their costs come from

twenty percent of their uh employees uh

plan members and the 550 rule is just a

more concentrated version of that right

where five percent of the employees or

the plan members drive fifty percent of

the costs okay well the reverse is true

on the hospital side right of the

hospital's expenses it stratifies right

eighty percent of the hospital's

expenses are spent on twenty percent of

the patients and it stratifies even more

right where about fifty percent of the

uh hospitals expenses are spent on the

five percent of the most complicated

patients okay and similar to

commercially insured patients they

typically fall into

several categories and those are ortho

cardiac and cancer now i also wrote up

here icu as well

because there's a lot of cases of what's

sepsis which is a systemic infection

that causes you to be unconscious and

have very low blood pressure and also uh

what's called ards or acute respiratory

syndrome which is essentially lung

failure okay and these typically happen

in the next point they typically happen

in the elderly right because at the end

of the day that's really who uses the

most health care services are the

elderly okay and who's their payer it's

medicare or a medicare advantage plan

right so the vast majority like when i

was at the hospital i used to be a

hospitalist like the vast majority of

the people in the hospital are older i

mean that's just the way it is right

anybody's ever been to a hospital it's

like most of the people that are older

right and so and these are just personal

tragedies and the reason i say personal

tragedies is because well they're in the

hospital because they themselves or and

or their families like they want them to

live they want them to get better they

want reduction in pain they want

improved breathing they want less

suffering and the reason that they have

they're so complex is because

that's not happening they're not getting

better a lot of times they're getting

worse like they are so you know

sometimes the decision needs to be okay

well you know hospice is a better place

for you because it's really um there's

really nothing more that we can do or

maybe it's in the person's advanced

directive what have you and that's

totally fine but the point is is that

these by and large are very you know

they're just tragedies okay so let's

look at those tragedies in more clinical

detail okay so in the orthopedic site

oftentimes it's either going to be a

joint replacement uh knee replacement or

a

hip replacement or one of the biggest

things is a fall and a fractured hip

that happens all the time okay that is

like 10 times more common than the

actual knee or hip replacement it's

actually the the and the actual pinning

of the hip is a very brief procedure

however it's the medical complications

that then turn into a tragedy so one pe

stands for pulmonary embolism so this is

where the person gets a blood clot in

their leg which then travels through

their heart to their lungs and causes

them to potentially die of essentially

lung failure and deoxygen deoxygenation

from the pulmonary embolism so next

is diarrhea a lot of times because of

the anesthesia or just because of being

hospitalized or a lot of times these

people were already in a nursing home

environment they might just have a very

sensitive gi tract or even a gi tract

infection which just causes them you

know not to be graphic just has diffuse

diarrhea that causes dehydration and

really electrolyte imbalances right so

that's where their potassium and their

sodium and really their kidney function

can be dramatically impacted by this

excessive diarrhea and then also

delirium so with the the pain medication

there um with the anesthesia with a

whole bunch of things it can cause and

these people oftentimes have some level

of dementia um it causes them to become

much worse so they have what's called

altered mental status so they're just

confused i had one guy who literally

thought that his call light on the bed

was a fishing rod and he was fishing

with his call light and like it was not

funny like it was like this guy was like

crazy delirious and what happens is that

that might not go away for weeks or

months and oftentimes their mental

status it has a hard time coming back to

where it was before okay so again these

are tragedies these people are in the

hospital for weeks or months at a time

okay next for cardiac so this is often

in the form of

either an actual heart attack or um

oftentimes a person will have narrow

arteries in the vast majority of cases

the person gets cardiac catheterization

and stent okay so most people are not

taken to bypass they're really given a

stent what happens when you get a stent

or multiple stents is that you put on

very powerful blood thinners what then

happens there's oftentimes a lot of

bleeding there can be bleeding at the

site where they did the catheterization

which is the groin or the arm oftentimes

these people have very small ulcers or

lesions in their stomach or their

intestines and those start bleeding and

so there you're

you have a very hard problem because

you want to take them off the blood

thinners so that they stop bleeding but

if you do that then you might risk

re-clotting the blocked artery that was

opened with the stent and so these

people

get massive blood transfusion sometimes

they have complications from the

transfusions like volume overload and

pulmonary failure okay so tragedy okay

a lot of times too they'll have

respiratory failure as well again

because the fluid status of these

cardiac patients is oftentimes very

tenuous and if they get too much fluid

that fluid goes into their lungs they

get something called pulmonary edema and

they even can go into respiratory

failure from that where they might have

to get

cpap or even be intubated and you kick

them off the uh the ventilator so again

these are personal tragedies where these

people might end up in the cardiac icu

for weeks or months at a time okay next

up for cancer

typically cancer cancer is put into two

main categories and those are those are

liquid tumors like leukemia lymphoma and

then solid tumors like breast cancer or

colon cancer okay so the chemotherapy

and the radiation associated with cancer

treatment it dramatically lowers the

immune system so these people are very

prone to getting all sorts of weird

infections really bad like fungal and

yeast infections uh even or bad

bacterial infections and so those

infections can just be devastating and

again end up in the icu or just

hospitalized for weeks or months at a

time also there's bleeding right because

a lot of times the chemotherapy knocks

down your platelet clamp incredibly low

and so these people have a lot of

bleeding from low platelets and then

their bone marrow is also so depleted

from the chemotherapy that they have a

hard time creating new red blood cells

so again transfusion transfusion

transfusion

weeks months in the hospital and then

they also oftentimes get gi and

sometimes gu or urinary tract blockages

as well so the actual solid tumor

especially in the case of colon cancer

is actually blocking the ability of food

and fluid to pass through your gi tract

which is just awful you get incredibly

bloated because your stomach actually

produces more than a liter of fluid just

on its own every day and so if your gi

tract gets blocked and even if you don't

eat or drink anything you still generate

all this fluid that gets backed up and

again weeks or months in the hospital

trying to recover from that and this is

the frequent course of what happens to

these patients okay they're in the

hospital they they get better enough to

no longer need to be in the hospital and

then they are almost never discharged to

home right they go to a sniff a skilled

nursing facility which is which is

essentially a nursing home okay and then

what happens they frequently bounce back

they get readmitted to the hospital

sometimes within a day sometimes within

a week sometimes within two weeks and

the rule for reimbursement in medicare

is if they're if they come back into the

hospital oftentimes it's within about 30

days the hospital does not get paid

again

for that hospitalization medicare

changed the rules decades ago to save a

look to say if you're hospitalized for x

problem you get discharged from the

hospital and you come back for the same

problem we as medicare are not going to

pay you again for that readmission and

so sometimes these people will bounce

back and then go back to the sniff and

then bounce back and then go back to

this and that only happened like seven

or eight times

and the hospital is not getting paid for

every one of those hospitalizations and

so these are very complex patients they

are absolute tragedies for the people

and frankly they put the hospital at

tremendous financial risk because

there's no way they're going to get paid

enough by medicare to cover that

complexity and that is one of the

reasons why the hospital

has to overcharge commercial insurance

is to make up for this now there are

other ways to think about this there are

other strategies that other hospital

systems has used have used that's

another conversation for another day but

thank you for watching a healthcare z

hello this is dr eric bricker and thank

you for watching a healthcare z today

we're going to be discussing charge

capture and the story of sepsis so first

off charge capture is the translation of

the chart or the medical record

into

billing codes and by the chart of the

medical record i mean literally and

especially in the case of inpatient

stays there's literally a paper chart

like this thick people still write in it

even though hospitals have electronic

medical records there are still like

daily notes that are taken by hand and

when that is done for that person's stay

then it goes to the medical records

department where literally coders will

read what the doctor has written and

they will translate that into the

billing codes and there's very specific

rules for what words need to be in the

chart in order to have certain billing

codes and that's important because those

billing codes then roll up for what are

referred to as diagnosis related groups

or drgs and it's drg codes that are used

for inpatient stays and it's really the

basis not only for medicare

reimbursement but commercial insurance

companies use drgs for uh reimbursement

as well okay now what does that have to

do with sepsis so sepsis is a systemic

infection typically from a bacteria but

it could be fungal or viral as well and

by systemic i mean it does things like

it gives you a fever it changes your

temperature it might change your blood

pressure it might drop your blood

pressure very low sometimes people need

to be in the intensive care unit because

their blood pressure is so low that they

need to be given tons of fluids and

special medications okay so you might

have like a minor skin infection or even

like a bladder infection and that

historically was not considered sepsis

because you wouldn't have these dramatic

systemic bodily

effects okay now in 2005 there were 518

thousand impatient stays for sepsis

across all age groups and then in 2014

there were 1.5 million it tripled now to

put that in even greater context overall

inpatient stays in america went down by

about six percent during that period of

time and all other causes of inpatient

stays went down like heart attack

pneumonia all went down the only other

category that went up was mental health

and it did not go up it did not triple

the way that sepsis did so this is very

odd and very unique and oh by the way

i'll leave the link in the show notes to

all the sources okay now that's fine but

what about like commercially aged people

commercial insurance stage people why is

something we care about on this channel

okay in 2005 for 18 to 44 year olds

sepsis was not even in the top five for

diagnostic categories for inpatient

stays in 2014 it was number three with

over 189 000 in patients days in 2005

for 45 to 64 year olds so older

commercially insured folks again sepsis

was not even in the top five for reasons

for impatient stay but in 2014 it was

number two there were 441 000 inpatient

stays almost a half a million inpatient

stays for something that wasn't even in

the top five a few years prior

so what happened what happened what

happened was the reimbursement for

sepsis change reimbursement for sepsis

is became higher than for other

infections and this happened because of

the creation of what we're referred to

as the msdrg or the medical severity

diagnosis related groups that happened

in 2007 and so this is where because i

was practicing at the hospital at this

time we were literally coached by

the

case managers by the hospital

administration to change the way that we

used specific words in the chart

so that medical records could then use

this sepsis code so you might look at

the data here and be like oh there's an

epidemic of sepsis going on here in

america and in fact that is not the case

really the utis and the other infections

could they have gone up sure they could

have gone up i don't think they tripled

and in fact in the sources i will leave

you uh quotes from

you know some of the world's foremost

experts in this like peter provos from

johns hopkins who i've heard speak on

multiple occasions and they say yes it's

because of up coding

and so my point for today is is one when

you're looking at the medical claims

data be aware of medical coding and then

two also note that changes in

reimbursement dramatically change the

way that charge capture occurs and thank

you for watching a healthcare z

[Music]

hello thank you for watching a

healthcare z and today's topic is a

recent rand study on hospital prices now

you'll notice that i have ditched the

tie today because i was actually asked

by a viewer to do so

so just know that look i'm responsive to

you people okay first up the rant study

which came out it was on the 11th of may

of 2019

said that commercial insurance pays

hospitals

on average

247 per 241 percent of what medicare

pays now that's on average so the other

one of the other points that the rand

study made

was that that amount was

highly variable by hospital so they said

at the low end there were some hospitals

that got

that charged commercial insurance about

150 percent and this is after the

discount's been applied so this is the

quote unquote allowed amount of the true

price all the way up to 400 percent so

it was not only was it on average 241

but it actually was highly variable okay

and this is super important because

we've known for a long time that

commercial insurance plans pay

uh hospitals much more than medicare

pays them and we're not going to get

into the debate today over whether or

not medicare is adequate compensation or

is too low and therefore hospitals have

to overcharge commercial insurance in

order to make up for the fact that

medicare's not paying enough like that's

actually not the topic for today the

topic for today is is to say okay well

let's look at this data in more detail

and see what we as employers can take

from it okay so one is that the

outpatient services were 293 percent of

medicare for commercial insurance and

the inpatient services were 204 percent

in other words the out

on a relative basis outpatient services

are much more expensive than inpatient

services and that's important because

the majority of services at a hospital

these days are actually done on an

outpatient basis and especially for

commercial insurance uh employers in

other words for folks that are you know

not on medicare under the age of 65 a

lot of their surgeries are done on an

outpatient basis as well so it's just

important to know that just because

something is quote unquote outpatient

doesn't make it less expensive in fact

it actually might make it even more

expensive okay next there's a challenge

with this particular study as it relates

to

the basket of services that they looked

at right because anytime you're looking

at prices you can't just look at prices

across the board you have to look at

prices for the basket of what's provided

at that particular hospital and you also

need to look at the basket of what

people would actually consume and oh by

the way that's exactly what the

government does when they're calculating

inflation as part of um cpi

uh they're actually looking at a

particular basket and they weight that

basket okay so we'll talk about that in

more detail so specifically for this

rand study they looked at er services

cath lab endoscopy labor delivery

laparoscopic surgery laparoscopic

surgeries cts and mris orthopedics

mental health circulation and

respiratory so

there are some major holes in the data

by hospital and by hospital system and

let's look at two specific hospital

systems here in dallas fort worth that

i'm very familiar with and this is where

the great thing about the rand study is

that they actually published the data by

hospital and you can download it on an

excel spreadsheet and i highly encourage

all of you to do this i'll leave a link

in the show notes because you can

actually run a ton of analyses yourself

on this excel spreadsheet okay so at

baylor south uh baylor scott and white

their average for inpatient and

outpatient was 255 percent of medicare

now

what did they analyze for that they

analyzed two thousand seven thousand

eight hundred and eighty claims which

totaled 15.6

million dollars and i will tell you that

baylor scott in white is

huge it is enormous

so how enormous is it their total

revenue uh in the last six months of

2018 was 4.9 billion so if you annualize

that to 9.8 billion and then we've

talked about this before but commercial

insurance generally makes up about 40

percent of a hospital's revenue with

medicare and medicaid self-paid and the

other sources of revenue so you just

take that total revenue 9.8 billion you

multiply it by 0.4 you get 3.9 billion

okay well if you divide the 15.6 million

by 3.9 billion that means of the costs

and the prices assessed for the baylor

scott and white healthcare system by

this rand study

they only looked at 0.4 percent

of the claims cost

okay in terms of sample size i'm just

going to go out on a limb and say that's

too low so i think that the rand study

does a great job of saying look in

aggregate and this supports something

that we've known for a long time but i

think at the individual hospital system

level

it's just not big enough sample size

okay let's look at another dallas fort

worth hospital system that i'm also very

familiar with and that's texas health

resources okay where they looked at 7

112 claims totaling 18.2 million dollars

total revenue for texas health resources

was 3.5 billion for nine months so in

order to annualize it it gets us up to

4.7 billion for a 12-month period of

time multiply that by 0.4 and that gets

you 1.9 billion dollars of commercial

insurance reimbursement so again you

divide the 18.2 million by the 1.9

billion and that's only 0.96

of all healthcare uh commercial

insurance healthcare costs for texas

resources were analyzed by rayon again i

would say that's too low and they found

that texas health resources was quote

unquote more relatively expensive it was

294 percent of medicare versus ban it

was 255 medicare now my point is

i don't think you can say that i think i

think you don't know like

because the basket is not necessarily

representative of what baylor overall

produces and this basket is also not

representative of what an employer buys

it's also not weighted by what baylor

produces and it's not weighted by what

the employer buys so bailor might

actually be much higher than 255 percent

of medicare or it might be lower and

likewise texas health resources might be

much higher than 294 percent of medicare

or it might be much lower

and so and that's the whole reason why

going back to the example with inflation

and the cpi that's why the cpi basket

exists

and that's why it's weighted and so

all i'm saying today is is that don't

draw conclusions by specific hospital

system based upon this study

but on an aggregate level it is very

helpful and that's my point for today

thank you for watching a healthcare seat

[Music]

this is dr eric bricker and thank you

for watching a healthcare z today we're

going to be discussing all or nothing

hospital contracts

so

it has been reported in the new side

axios and in other places as well

that when insurance carriers contract

with major hospital systems that major

hospital system says look you have to

take all of our doctors as in network or

none of them so it's all or nothing why

is that important we talked at a

previous video about how physician skill

falls along a bell-shaped curve just

like it does for anybody else in any

other profession or even like playing

sports right and so here you have the

number of physicians on the y-axis and

the number of the amount of skill on the

x-axis and it follows a bell-shaped

curve right so you have the the

low-skill physicians downhill and the

high-skilled physicians up here and i

think if you talk to most physicians

they would agree to a certain extent

there is a bell-shaped curve okay how

does that matter to employer health

plans so walmart the largest private

employer in america wanted to get rid of

these guys they wanted the bottom five

percent of the physicians out of their

carrier networks they wanted them out

and guess what happened the carriers

said no they said that their contracts

forbid this from happening

so

as every other employer in america that

is smaller than walmart how in the world

are they supposed to go to their carrier

and ask for them to create like

client-specific networks or take certain

doctors out of the networks when

walkmart can't even do it okay now i

want to contrast that with a different

story and that is the story of the

allegheny county school system and where

is allegheny county pennsylvania it's

pittsburgh so with the pittsburgh public

school system okay what did they do

they identified they did the opposite

instead wanted to take the bottom five

percent out they identified the top

providers in their area associated with

one particular hospital system okay they

said look these folks have the highest

skill therefore we're going to create a

plan where for seeing that particular

those particular providers there is no

deductible and the plan pays at 100

for the other in-network physicians

there was a deductible and then the plan

paid 80 and then there was your typical

out-of-network benefits okay great so in

other words there were three tiers but

instead of getting rid of the bottom

five percent they instead incentivized

through plan design going to the top

physicians okay great what happened

here's the punch line their cost went

from 241 million down to

233 million a decrease of eight million

dollars now yeah it's only like two or

three percent but the point is is that

it didn't go to trend it didn't stay

flat it actually went down and so i

think this drives home a couple of

points one is is that it's probably not

likely that the carrier's contracts are

going to allow for

this type of steerage so just know that

when you get into the weeds of the

contracts it might not be possible

because within a particular health

system there are going to be good

doctors and not so good doctors and so

you're you're not going to want a whole

health system and that's what you're

going to want to do is you're going to

really want those best providers that

are in there so that's number one number

two is allegheny county is similar to

john tornis and the company that solved

healthcare with serograph and that look

all of their employees were concentrated

in one place which to a certain extent

makes it easier to identify these high

let's call them five percenters in their

particular area so if you're an employer

that has a more distributed employee

population which frankly at the end of

the day unless you're like a

municipality or school system frankly

your employees are probably going to be

spread out more across the country it's

going to make it more challenging to

identify those top physicians now

again i will tell you that the company

where i used to work compass actually

does this but i'll just leave it at that

and say that look the bottom line is is

that when you are working to decrease

health plan costs higher quality is

almost invariably lower cost higher

skilled physicians is almost invariably

lower cost and there are things that you

can do at the employer level at the

brokerage but at the benefit consultant

level to affect change in regards to

that and thank you for watching a

healthcare z

[Music]

hello this is dr eric bricker and thank

you for watching a healthcare z today's

topic is

carriers are contractually bound

to do no steerage now what does that

mean so

to start off with hospitals provide an

in-network discount to an insurance

carrier network they say hey we've got

our bill charges of x and we'll reduce

that amount to like one-half of x and

the insurance carrier says oh great but

then the hospital says however

that includes all the docs within our

hospital system and as you know hospital

systems have become larger and larger

from consolidation so this could be like

thousands of doctors and that means all

of their facilities so it's not just one

hospital it's not just two hospitals

sometimes it's like over a dozen

hospitals sometimes it's dozens of

hospitals so

to start off with we need to understand

at a basic level that in the world of

ppo contracts that that discount is

given to the insurance carrier and the

insurance carrier has to agree

that they got they got to take the whole

kit and caboodle at that hospital system

okay what are the ramifications of that

so this is a quote from 2018 when the

blue cross blue shield of texas

president dr paul heym was speaking to a

very large employer group here in dallas

fort worth and he said

that look our challenge with negotiating

with hospitals has less to do with

reimbursement rates and has less to do

with the actual dollar amounts

themselves and it has more to do with

the desire to direct patients in other

words the insurance carriers didn't like

their end of the deal of having to take

all the docs and all the facilities

because let's just say from a quality

perspective i mean look they got the

data and they know that some of those

doctors are not the type of doctors that

they would want to have in their network

and they've got some facilities that

whether it be from infection rates or

complication rates or readmission rates

or whatever like look i really don't

want people necessarily go in that

facility and for a carrier the easiest

thing to do to not have people go to

those facilities or go to those doctors

is make them out of network okay so if

the carrier could pick and choose which

doctors and hospitals that they could

steer

their members to within a healthcare a

hospital system then the president of

blue cross blue shield would have never

said this quote okay example number two

sutter health which is the huge hospital

system in the san francisco bay area

recently settled

an anti-trust case with the state of

california so the state of california

when actually look you have

anti-competitive practices and it was

mainly around the fact

sutter's contracting practices had this

all or none these all or none no

steerage terms

okay so in other words

there was no opportunity for in-network

or outworks or out-of-network steerage

for the insurance carriers in the san

francisco bay area you either had to

take all the summer physicians and all

the foots under facilities or you needed

to hit the highway okay and guess what

they settled the terms this literally

just happened several days ago the terms

are not completely revealed but the

point is they were going to get they

were going to be

they were being sued for 2.7 billion

okay center has 13 billion dollars of

revenue a year okay these are

substantial sums of money again because

of the same issue of not being able to

steer so the point is is that within a

ppo

contract there's really this game of cat

and mouse because i've been in many

meetings where the carrier

representatives talks about oh how they

can identify high quality facilities and

doctors etc etc but just know that for a

lot of their contracts with the major

hospital systems that they're

contractually prevented from doing

steerage okay now but you can't do it at

the employer level the biggest example

again is walmart where just recently

walmart came out with the fact that they

have a new benefit for their employees

where they're going to provide

quality scores for physicians in the

specialties of primary care cardiology

gastroenterology endocrinology obgyn

oncology orthopedics and pulmonology

okay

walmart the largest employer in america

if their carriers could already do this

for them then why in the world is

walmart having to do it themselves the

reason is is because you can do this at

the employer level but the carriers are

contractually bound in their ppo net

contracts to not do this okay and i'm

sure there's some exceptions yadda yadda

but overall that's the case now that can

be confusing but that is a super

important point for everyone here to

understand so thank you for watching a

healthcare z

[Music]

hello this is dr eric bricker and thank

you for watching a healthcare z today

we're going to be discussing the hidden

war for patients and dollars so before

we get started we have to talk about two

euphemisms that are used on the hospital

business side that first one is service

line so for a hospital a service line is

a clinical department so a service line

might be ob gyn or cancer or orthopedics

okay youth was number two profitable

payer mix so hospitals receive payment

from a variety of payers right so you

have commercially insured patients

medicare medicaid self-pay which is the

uninsured folks and so a profitable

payer mix is a payments with more

commercially insured patients because

those are the ones that the hospital can

actually make a profit on and fewer

medicare medicaid and self-insured

patients because those are the folks

that they make less of they lose money

on okay so with that there are

departments within a hospital system

they're either business development or

their marketing or their physician

liaison sometimes they're called the

strategy department and they are

specifically focused on how to increase

patient flow through the profitable

service lines and there's actually a

fantastic demonstration of this on

youtube it's actually a video from the

university of massachusetts healthcare

system where they specifically talk

about how they do this okay so what

happened is that

the university of massachusetts wanted

to increase their referrals but they had

a problem and that problem was is that

one of their cardiothoracic surgeon

left for a competing hospital so this

story is pretty confusing so i actually

drew it down here sort of like x's and

o's for a football game okay so here you

have umass and typically a major

hospital system they might have one or

two or maybe three cardio thoracic

surgeons and one of the major procedures

that cardiothoracic surgeons do are

coronary artery bypass grafts or

cabbages okay so here you have two let's

say umass has two cardiothoracic

surgeons okay cardiothoracic surgeon two

leaves to go to a competitor hospital

okay why is that a problem that

cardiothoracic surgeon receives its

patients or his or her patients from

typically from cardiologists okay and so

there you have the cardiologist as the

c's and there you have the patients as

the pt and here you have who their

insurance is so c for commercial

insurance and m for medicare okay so

here's the problem when that cardio

thoracic surgeon leaves he takes all of

his re referral relationships from those

cardiologists with him and those

cardiologists take the all their patient

relationships with them as well to the

competitor so guess what the university

of massachusetts did they specifically

identified and targeted

those cardiologists that were referring

to that particular cardiothoracic

surgeon and they formed relationships

with them so that they would begin

referring patients to their

cardiothoracic surgeon that they still

had and oh by the way in the video it

talks about how they targeted not only

that cardiothoracic surgery program but

also orthopedics and cancer isn't that

interesting

cardiothoracics

cancer and orthopedics those are the

same three diagnostic categories that

are the top three

costs for employee health plans

okay that is not necessarily a

coincidence so the point here is that

patient flow and which doctors patients

see and which hospitals that they go to

it's not just some sort of like random

act of nature that there actually is

planning and strategy and data and

software and analytics and programs and

campaigns

behind that now i'm not saying that's

morally wrong i'm just saying it's

happening and so for all of us who work

in employee benefits and with employee

sponsored health plans again we need to

know that if we as employer health plan

sponsors are not actively thinking about

what's going on within the hospitals

then we are not really doing our health

plans the best service that we could and

that's my point for today thank you for

watching a healthcare z

[Music]

hello this is dr eric bricker and thank

you for watching a healthcare z today's

topic is

profit pool consultants and decreasing

healthcare costs so it's based off of a

research report from mckenzie and

company which many of you are familiar

with but it's essentially one of the

smartest management consulting firms

known as the leader in the world it has

127 offices worldwide it is 27 000

employees they make 10 billion dollars

of revenue per year and they work in

industries from technology to retail to

transportation to of course health care

as well now the most recent report on

health care that they've published is

called the evolution of healthcare

provider profit pools say that 10 times

fast okay but this is a fantastic

research report i will leave a link to

it in the show notes i encourage you to

read it they make a very interesting

point they say that 55

of future healthcare profit pools and

they're saying through 2021 so they're

basically looking at 2017 through 2021

are saying our non-hospital

non-hospital that's interesting what do

they mean by that they mean that 34

of the 55 percent in other words 34

of the profit growth for health care

providers

will come in the form of onsite clinics

telehealth primary care providers

behavioral health retail pt and ot which

is occupational therapy and physical

therapy home health inventory surgery

centers and dialysis okay isn't that

interesting the largest areas of

provider profit growth are in areas that

are meant to

decrease healthcare costs right so

onsite telehealth

using primary care behavior all these

things are meant to

reduce the use of expensive

hospital-based

services or prevent people from ever

needing them in the first place likewise

ptot is an alternative to like expensive

orthopedic surgeries home health is a

cheaper location and by asc they mean

non-hospital-owned asc's independent

ases and by dialysis i think they mean

dialysis centers that are independent

and not part of like davita and

fresenius and in other words they're

more you know cost effective more

reasonable contract rates with insurance

carriers okay so

now let's look at the opposite end of

the spectrum where do they think there

is going to be the least amount of

growth of profit from providers i think

it's going to be in freestanding ers

imaging lab ambulance chiropractor

skilled nursing facilities and long-term

acute care facilities are known as ltx

isn't that interesting because

freestanding ers and imaging those were

the two sort of huge cash cows really

put the past like five ten years where

the hospital systems and really push

down on making a lot and also

independent uh facilities really push

down making a lot of money there so to a

certain extent they've kind of burned

out it's been a little excessive

but

there's an important warning

of course they don't they don't phrase

it as a warning they phrase it as an

opportunity but there is a very

important warning at the bottom of this

report and it says

that

all of these areas of high profit growth

create an opportunity for acquisition by

the hospitals okay so the whole point of

the whole value proposition of these

providers and their ability to you know

make profits and grow revenue is based

upon the fact that they're going to

decrease utilization or decrease price

or both to create higher value health

care okay

if these agents are bought by a hospital

that essentially negates that value

proposition because as i said in the

previous video and even in this research

report it says it creates a referral

opportunity it creates a referral

opportunity as i said in the previous

video to feed the beast and i'll give

you a specific example of that so at

compass we had a major client with like

in excess of 10 000 employees that had a

huge facility that had an on-site clinic

and they had had it for years

and that on-site clinic was actually a

huge cost driver they looked at people

that were going down outside clinic uh

and it turned out that they ended up

driving huge costs for their employee

health plan why was that because the

on-site clinic was actually owned by

the local hospital system and so they

were driving patient volume from that

on-site clinic to the hospital for

surgeries for lab for imaging so the key

here is that if these are going to be

profit centers that have a value

proposition of higher quality more cost

effective care then to a certain extent

they need to remain separate from the

hospital and if you see them connected

to the hospital then that might need to

be a warning sign that that is actually

going to be increasing employer and

patient health care costs and not

decreasing it and that's my point for

today thank you for watching a health

care z

[Music]

hello this is dr eric bricker and thank

you for watching a healthcare z today

we're going to be discussing certificate

of need or what is referred to as c-o-n

now

certificate of need is where there is

regulation of hospital beds and hospital

construction by the state so isn't that

interesting that there is actually state

regulation over the expansion and the

construction of new hospitals well why

in the world does that exist well it was

created about 40 plus years ago in an

attempt to control health care costs the

idea being is that well if you had more

hospital beds and more hospitals that

they would induce in other words would

be supplier induced demand of healthcare

services and so healthcare costs would

be higher but if you look at i won't

summarize all the research here but at

the end of the day at the end of that

it's kind of mad like maybe it did maybe

it didn't maybe certificate need

actually even increase the cost of

health care it's really not clear okay

so let's break it down specifically by

state so there are 35 states that have

certificate of need laws it doesn't

really divide itself by conservative

versus liberal states so you can see the

liberal state of massachusetts and the

conservative state of alabama both have

certificate of need laws which you would

think would be more of a of a you know

liberal

democratic initiative for regulation

okay now on the opposite side you have

15 states that do not have certificate

in need and you have the liberal state

of california and the more conservative

state of texas that do not have these

laws and you think of more like you know

free enterprise and less regulation as

being more of a conservative or

republican thing right so this whole

certificate of need uh law thing doesn't

necessarily correlate with sort of red

state blue state stuff okay now let's

look at it in terms of

commercial insurance health care costs

by state and let's look at the 10 most

in the 10 least expensive states so the

10 most expensive states for health care

are new hampshire pennsylvania

connecticut new jersey west virginia new

york illinois d.c massachusetts and

alaska okay so you can see that two of

those high cost states they don't have

any certificate i need and eight of

those 10 alcohol kids they do have a

certificate of need so here the

certificate in need was supposed to

lower health care costs and the majority

of them have that law and you're talking

21 000 per family per year again for

commercial insurance okay now for

low-cost states the 10 lowest cost

states are north dakota idaho new mexico

utah iowa mississippi tennessee hawaii

arkansas and alabama okay again you kind

of see that four of the lowest cost

states have no certificate of need laws

so you can like build hospitals expand

it as much as you want it's not breaking

the bank in these states uh likewise in

these low-cost states you might say okay

well maybe that's if you're going to

need laws like super effective because

it's keeping costs down in iowa and

hawaii and tennessee and places like

that okay but at the end of the day

again

and oh by the way the family health care

cost there is eighteen thousand dollars

per family per year okay so it's like

seventeen percent more three thousand

dollars more per family per year in

these high cost states versus these low

cost states so again i think the most

important word on this entire slide

is like meh

so

what's the point the point is is that we

all need to be very careful when we

think about

regulation as a solution to the health

care cost problem maybe it is a solution

maybe it's not a solution maybe the best

intended solutions around costs do not

have their intended consequence and

that's my point for today thank you for

watching a healthcare seat

[Music]

hello this is dr eric bricker and thank

you for watching a healthcare z today

we're going to be discussing hospital

charity care programs or sometimes

they're referred to as financial

assistance programs okay so

not-for-profit hospitals in america are

required by the irs to provide what's

called community benefit because these

not-for-profit hospitals oftentimes

don't have to pay any federal state or

local tax in order to qualify for that

they have to provide this community

benefit of which charity care or in

other words free care for people that

qualify is an important part of that

okay now there are various eligibility

requirements so every hospital has

different eligibility requirements i'm

just going to use these as a real-life

example of a local hospital and their

eligibility requirements okay so for

this particular hospital system you have

to be a u.s citizen

and you have to live locally in a county

where they have a hospital or if you are

if you had emergency services you don't

necessarily have to live in one of those

counties in other words you could be

visiting your grandma and you could be

from a different state and you would

still qualify but it would have to be

for emergency care now they do make

another exception which is to say that

look if you live outside one of those

counties and it's a non-emergency

service and there's just no doctors or

hospitals that can treat you for your

particular condition or disease then you

might still be able to qualify okay so

those are basic requirements next it has

to be that within a certain amount of

time right so it can't be it has to be

either within the date that it's

scheduled or within 365 days of when you

received a bill so you can't go back two

years three years four years so time to

a certain extent is of the essence in

terms of application okay next is the

financial eligibility and this is where

you need to be able to provide

documentation to prove these things but

all that aside if you're indigent in

other words if you make less than 200

percent of the federal poverty limit

which is 51 000 for a family of four

then you will qualify to have your

hospital bill paid for now

you could have insurance okay and it

would be the remaining balance after

insurance is paid and it would still pay

for it um if you made life if your

family made less than 200 of the federal

poverty limit guess what 28

of american households make less than

fifty one thousand dollars uh make less

than two hundred percent of the fpl okay

so that's a lot of people so if you're

an employer you probably have some

employees that fit into this situation

okay so let's say you make more than two

hundred percent of the fpl well you can

qualify for what's referred to as

medically indigent as well where if you

make less than 500 of the federal

poverty level and the amount you owe is

greater than 5

of your annual income then you would

also qualify so let's run the numbers on

that okay so a family of four 500 of the

federal property limit is 129 000

so

that's for a family for a family for

that's 75 of households in america in

other words that's the majority of

americans actually fall into that

category and would potentially be

eligible okay now five percent of a

year's income let's just say let's round

it to a hundred and thirty thousand so

five percent would be six thousand five

hundred dollars that means even if you

have insurance

um if you had an out-of-pocket

responsibility in excess of six thousand

five hundred dollars then that would be

covered at a hundred percent by the

hospital's charity care program so in

other words if you let's say you had a

high deductible plan with a 5 000

deductible and 20 coinsurance it's very

easy to have an orthopedic surgery or

even to have a variety of outcasting

outpatient tests and procedures done

where that total bill adds up to in

excess of six thousand five hundred

dollars so

what's some practical information that

you can you that you can do here okay so

the way you get started in this process

is to ask for the hospital's financial

counselor and every hospital i've ever

worked in has a financial counselor and

you can either contact them by phone

sometimes you can do a web inquiry but

if the information is not posted on the

hospital's website about their charity

care program then what you want to do is

you want to call the hospital and ask to

speak to a financial counselor to see if

you qualify and that's my point for

today thank you for watching a

healthcare scene

hello this is dr eric bricker and thank

you for watching a health care z today's

topic is hospitals must survive

but how and to start off we need to

review some basics of hospital finance

and this actually comes from a previous

a health care z video did that's called

hospital cross subsidization and here we

have medicare and medicaid and

commercial insurance revenue and expense

so let me briefly go over this okay so

medicare and medicaid

provide hospitals in aggregate in

america they pay them about 470 billion

dollars now these hospitals

actually

it costs them the expense to take care

of all those medicare medicaid folks is

540 billion dollars so in other words

these hospitals lose money on their

medicare or medicaid patients now the

majority that's actually medicare it's

not medicaid right so in other words

the hospitals are underpaid by medicare

medicaid by on average 15

all right and i have sources to these in

the previous show notes okay next up so

then commercial insurance they pay in

aggregate u.s hospitals 505 billion

dollars and the expense for taking care

of all those commercially insured

patients with blue cross united cigna et

cetera et cetera is 322 billion dollars

so in other words the commercial

insurance overpays by 57 percent and

then the hospitals then use this

overpayment to cross-subsidize the

underpayment by medicare and medicaid

okay this is well-established this is

not a new fact however there's an

excellent article from the harvard

business review from 2017 from uh two

gentlemen actually from a hospital

consulting firm called navigant that

pointed out an excellent point which i'm

sure all of you know as well that the

government money situation for hospital

is going to get worse because there is a

three percent increase in medicare

enrollees every year for the next decade

and that only that goes down to like a

two and a half percent increase per year

to the point that the 55 million people

that are on medicare today will increase

to 81.5 million by the year 2030. okay

so in other words all of this

underpayment to the hospitals is going

to increase because the number of

medicare patients that they're going to

have is going to increase so it's only

going to get worse and so

what is going to happen what has been

happening what can continue to happen is

that the cross subsidization required

from commercial insurance to make up for

this underpayment is going to increase

it's going to get worse essentially i'm

going to be kind of harsh here the

hospitals are addicted to commercial

insurance

payments

they're addicted to this relationship

now

it doesn't have to be that way and in

fact employers

are actually to a certain extent we're

enabling this behavior

and to a certain extent the insurance

carriers are enabling this behavior

we're letting this happen so i'm not

pointing a finger at hospitals i'm

saying look we've got to do two things

we have to one stop enabling this

behavior and then two

offer an alternative we can't just stop

the enablement and just say figure it

out for them for yourself hospitals

because you got to survive hospitals are

not the enemy they have to survive they

have to survive in a different way but

they need to survive and so the authors

of this harvard review review our

harvard business review article

outline four ways the hospitals can do

that so number one there's actually a

five to fifteen percent expense

reduction opportunity

in care and administration by using

analytics to decrease waste hospitals

are again not to be over critical are

cesspools of waste and if they actually

use their data the way most corporations

do to analyze that waste and there's a

five to fifteen percent reduction

expense opportunity for that calculated

by them okay next up

uh there's an opportunity to decrease

the corporate service expenses what do i

mean by corporate service expenses i

mean legal compliance hr and i.t oh by

the way hr is the health benefits for

the employees themselves because health

care for people that work at hospitals

is expensive okay so those corporate

services are actually 15

of a hospital's overall expenses and

it's been rising at 10 per year

that's the second opportunity third

opportunity the supply chain for a

hospital so hospital supplies make up

about 15 to 20

whether that's drug supply surgical

supplies etc 15 to 20 of a hospital's

overall expenses now

it's incredibly balkanized because the

physicians show favoritism to specific

vendors which if you watch my previous

video on physician distributors

sometimes the physicians have partial or

complete ownership of those vendors so

they're remunerating themselves through

this disparate supply chain relationship

that over charges for or up charges for

various supplies okay that can be

streamlined that can be streamlined and

fourth and final is there's a high

degree of variation in the way patients

are cared for where per this article

there is a two to three times difference

in the amount of money it takes to treat

a

controlled patient in other words a

patient with the same degree of illness

etc etc across different doctors within

the same hospital so whether it be like

heart failure or diabetes or an

infection etc there's a huge degree of

variation by doctor and so that is where

that can be addressed through

standardized protocols whether it be

physician protocols or nursing protocols

we use a ton of protocols at hopkins

they were great they were designed by

the physicians they were awesome oh by

the way geysinger and intermittent

healthcare they use a large degree of

protocols it's not bad cookbook medicine

there are clinically justified reasons

to go off the protocol but the point is

that you start with the protocol and

then you make the conscious decision to

go off of it you don't start in this

nebulous a protocol world okay so the

point is is that we and oh by the way

there's an expression for this in

healthcare it's called feeding the beast

okay feeding the large health care

system we all know we need to stop

feeding the beast and here are some

viable alternatives that we can do

instead

and thank you for watching a healthcare

z

[Music]

you