There is a trend slowly creeping across the healthcare industry… a trend not many people are noticing amidst the turmoil created by the new healthcare legislation. Somebody thinks they know how to reduce rapidly increasing healthcare costs better than anyone else, so they are quietly purchasing doctors and hospitals everywhere. Who might this be you ask? …Insurance companies!
Common sense would say if you cut out 3rd party payers, you would reduce the cost of health care simply by eliminating administrative costs; however, insurance companies are saying health care costs are increasing because doctors are ordering too many tests, name brand prescriptions and implants, (Gamble). They are solving this “problem” by purchasing and managing physicians groups and hospitals. “According to a Kaiser Health News report, four of the five largest health insurers have increased physician holdings in the past year. The same report said the strategy has stirred little controversy largely because few people know about it.”
Payers are acting aggressively to control costs in some marketplaces, calling hospitals out for high-cost care, devising new methods to reduce spending and leaving consumers in the crossfire. In January, Blue Cross Blue Shield of Massachusetts launched its Blue Cross Hospital Choice plan, which limits the use of 15 higher-cost hospitals. Employers that sign up for the plan receive a reduced premium increase, but BCBS members face extra charges if they go to high-cost hospitals, which include prestigious organizations such as Brigham and Women’s Hospital, Massachusetts General Hospital and Dana Farber Cancer Institute. “So consumers are being told, ‘You can still go wherever you want, but if you go to this particular hospital, your out-of-pocket costs will be much higher,'” says Mr. Woodson. “Some consumers will be caught between brand perception, quality and marketplace power.” (Gamble)
Gamble also brings up another interesting point in that insurers could potentially gain control of entire health systems by influencing referrals in markets where primary care physicians are already in high demand. Not to mention, physicians would be working for somebody that is interested in minimizing costs, not patients’ best interests. Luckily, there is a light at the end of this tunnel…it had been
tried once before in a trial-run Mr. Schwab called, “an unbelievable failure.” Humana attempted to manage 76 hospitals across the country despite industry experts predicting “the dual structure would likely lead to internal conflicts and weakened profits,” and bond raters said, “it alienated physicians, who would not refer patients to Humana hospitals if they objected to certain managed-care practices,” (Gamble). Galen Health Care is the spin-off company Humana created to divide up hospital operations in 1993.
Every politician and big employer is pointing to healthcare as one of the major reasons the country is going bankrupt,” says Mr. Schwab. “Insurance companies believe they can bring efficiencies to the table, and the integration of insurer and delivery system can bring a 20-30 percent reduction to the cost structure,” (Gamble).
By cutting 3rd party payers out of the equation, MediBid has shown the free market system can save patients, on average, 30% more than the Healthcare Bluebook’s advertised cash prices. Dr. Qamar says, “There are a lot of inflated costs because of insurance. If you can promise a physician you’ll pay cash up front, then physicians can give big discounts. It’s estimated that up to 35-40% of overhead costs in a private practice come from insurance-centric systems. “ Check out MediBlog’s post, “How to Fix Health Care: Lasik Surgery For The Medical Debate,” to see how free market principles have worked to decrease Lasik surgery costs for consumers, and at the same time increase quality.
*How would you feel if you found out insurance your insurance company, an entity that would prefer to keep healthcare costs down to maximize their own profits, owns the doctors and hospitals you are receiving care from?
*As a doctor or hospital, how do you think this would influence your ability to care for patients?
*Do you think this should or should not be legal? Why?
You can read the full articles here:
M. Gamble. “The Quiet Takeover: Insurers Buying Physicians and Hospitals”. Becker’s Hospital Review: Business & Legal Issues for Health System Leadership. 11 July 2011. Web. 25 July 2011. <This is a link>
C. Weaver. “Managed Care Enters The Exam Room As Insurers Buy Doctor Groups”. Kaiser Health News. 1 July 2011. Web. 25 July 2011. <This is a link>