HCNC Blog

From Prisoner to Customer to Sophisticated Consumer

The coronavirus is providing us with a great opportunity to understand why it is so important for each person to have a healthcare plan. We have all been exposed to a rare opportunity to view how healthcare providers run the “business of healthcare.” We are also witnessing the oftentimes recalcitrant behavior of healthcare patients and the potential hazards of these actions.

Since 1983, the federal government changed the reimbursement formula for how healthcare providers were paid by Medicare from a reimbursement model to a prospective payment model. The most dramatic and observable impact of this new legislation was dropping hospital occupancy from around 80% to 63% in just 3 years. This change set in motion numerous responses and reactions by the healthcare system that continue to evolve today and more importantly have been exposed by the pandemic. On the downside, this over capacity has led to the closure of many hospitals, the consolidation of many more and the creation of mega-multi-hospital systems. There would also be a physician glut of specialists and simultaneously a shortage of primary care physicians. A nursing shortage was also becoming a concern and the emergence of what would be called a “healthcare customer” vs. a healthcare patient. This all created a massive change in healthcare terminology. Customer satisfaction became a thing, patients would become guests, guest relationship training became in vogue,  amenities like valet parking, escort services, hotel quality bed linen and towels, concierge level floors were all part of a hospital’s  marketing approach to the new healthcare customer.

Here’s the shocking surprise to this story. The implementation of the new Medicare payment methodology was a cost-control initiative. In 1986, the US spent $458 billion or 10.9% of the gross national product (GNP) on healthcare. By 2019, this number escalated to an estimated $3.6 trillion and with the pandemic $4.0 trillion is certainly within range for 2020. To put this in personal terms, according to the Milliman Medical Index the average cost for a family of four covered by an employer-sponsored, preferred provider organization plan was $28,166 in 2018. Using some over-simplistic ratio analysis a comparative number in 1986 would be approximately $3,600. This is an inflation factor of 782%. This unintended consequence resulted in the passage of what has become known as Obamacare in March 2010. The official name, The Patient Protection and Affordable Care Act, was the most extensive healthcare legislation since the aforementioned change in the Medicare payment methodology. The focus of the legislation was on the uninsured, improving quality and again the holy grail of controlling healthcare costs. This has continued to be a very challenging political issue and we will not discuss all of the continuing issues this has created.

Ironically, healthcare in the US is still broken as evidenced by the current chaos being caused by the pandemic. It’s become evident that $3.6 trillion isn’t enough to handle a crisis. Healthcare will be a major issue in the 2020 presidential race. As an industry, the focus continues to largely be internal with massive doses of superficial rhetoric surrounding quality, patient safety and customer satisfaction.

A little discussed factor underlying the healthcare system is that it’s the most financially driven industry in America. As of now, Congress has allocated $175 billion in aid to hospital and healthcare providers as a result of the pandemic. A further example of how “economics” drive healthcare was included in the Affordable Care Act. In a little publicized program initiated in 2014 and called, The Hospital-Acquired Condition Reduction Program, CMS began reducing Medicare payments based on the performance on 6 quality measures. This is one of the few public data bases reflecting a hospital’s quality performance and was created by a financial incentive program. Buyer beware!

With this background, we are introducing an initiative to create a class of sophisticated healthcare consumers. As is being illustrated everyday during the current medical crisis, decisions people make about medical care can have life and death consequences.

Let’s get started.

Our first recommendation is “Document Your Family’s Health History.”

Find an App, get a three-ring binder or start a journal. Anytime a person goes to a physician’s office for the the first time they will be asked to complete a medical history template. This information is the critical first step to any physician’s diagnostic process. Go on-line and there are numerous examples and tools to assist in this process. With chronic conditions being important mortality factors in the current coronavirus environment, knowing what family members have what conditions are critical. Decisions regarding genetic testing also are a consideration in today’s environment. If you’re quarantined, it’s a great opportunity to complete this project.

Next, we’ll focus on primary care physician selection.



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