The Crisis of Appropriateness and Building a Competent Healthcare Marketplace


The Crisis of Appropriateness and Building a Competent Healthcare Marketplace

 

What happens when good people inherit a bad system?

According to Dr. Marty Makary, speaking at the 31st Annual Tennessee Bar Association Health Law Forum in Nashville, you end up with… today’s healthcare landscape. Specifically, incredible efforts to care for sick patients and run hospitals, juxtaposed on incomprehensible healthcare costs and those same hospitals taking people to court for unpaid bills.

Makary is a Professor and surgeon at Johns Hopkins, and the author of Unaccountable and The Price We Pay, among other books. He was joined on stage by Professor Larry Van Horn of Vanderbilt University to discuss price transparency and healthcare quality.

The conversation was underpinned by two foundational assumptions, both explicitly stated:

  1. Hospital administrators are well-intentioned. They are good people who inherited a fragmented, complex, and generally ill-constructed system.
  2. Despite what we see on the political news, there is broad consensus around what people see as the key problems in US healthcare today.

As a result of these two things, and despite concern about numerous issues ranging from individual hospitals to the federal government, Makary and Van Horn were optimistic about the opportunity for providers to change the way they operate and align on a better system of care.

Pricing

Areas of broad consensus include rejection of secret pricing and kickbacks. Van Horn, as the economist concerned about the market, pointed out that almost one-fifth of the US economy is built on people buying a product without knowing the price. That’s antithetical to how our market is supposed to work, he said. Furthermore, there’s a massive gap between the actual price of healthcare services and how the market values those services. In fact, according to Van Horn, commercial prices are around 40 percent higher than what organizations are willing to offer as the cash price. In other instances, there’s a 400 percent difference between the highest and lowest network contract. It’s all wildly distorted economics.

Makary, as a surgeon concerned with the personal side of healthcare, added that it’s nonsensical to obscure prices. What if travel websites didn’t list prices and only charged users after their flight landed? Price gouging would be rampant. Not only that, but people wouldn’t want to use those products. Which is exactly what is happening in healthcare: people are avoiding care because they’re worried about the cost or fear of the potential cost.

But both speakers see movement in the right direction. Van Horn spoke about current efforts by the federal government to force price transparency and help individuals understand what their financial responsibility will be. He also highlighted reform of the Stark laws and kickback regulations to reduce barriers to healthcare innovation from providers and other healthcare organizations.

It’s not just government-mandated change, either. Makary pointed out progress in the realm of providers voluntarily posting real prices – not just a spreadsheet of their chargemaster. He noted that just a few years ago people mocked the Surgery Center of Oklahoma for making their prices public so people could see the cost in advance of a procedure. Now, there’s less mockery as more providers are jumping on the bandwagon after realizing that they are losing (or are about to lose) business because of opaque pricing.

Furthermore, the brick wall of payer-provider contracts – and the Byzantine billing that comes from it – is finally cracking. Van Horn noted that providers are realizing net collections on much lower cash prices are higher than those run through the Rube Goldberg machine of payers and providers (our words, not his). Imagine: tell people what they should expect, give them a fair price and a reasonable opportunity to pay it, and providers will actually, you know, get paid.

Quality

Quality metrics, believes Makary, are measuring the wrong thing. Today, he said, quality science is built on what happens AFTER a procedure. For example, the rate of infection following knee replacement is a fraction of a percent. Looks pretty good, doesn’t it? Only problem is that around 20 percent of knee replacements are unnecessary, he said.

We wouldn’t applaud a mechanic for replacing a perfectly good timing belt and not breaking anything else in the process, and we wouldn’t celebrate a chef who brought us the trout when we ordered the pasta special, no matter how perfectly it was cooked. Why is that same thing ok in healthcare? (Again, those are our analogies, not Makary’s.)

Makary noted that because medicine is an art, some variation between providers is inevitable. His greater concern is with finding a solution to what he called “the crisis of appropriateness.” Prescriptions have doubled in the past five years, from around 2.5 billion to 5 billion. We aren’t twice as sick, he said, we just don’t have a grasp on appropriate care.

Looking to the future

As we noted above, both speakers are optimistic about the future. Both were realistic and blunt, their assessments rooted in reams of (often depressing) data about the way things work. However, numerous pieces of the puzzle are falling into place in concert, creating an environment primed for dramatic improvement. Some of those pieces include:

  • Federal efforts to promote transparency and innovation.
  • Changes driven by employer-sponsored care; for example, direct contracting.
  • Generational shifts as Millennials enter medicine and bring their ideas around social justice to bear on the healthcare system (Makary said this can change the way the industry approaches charity care).
  • Entrepreneurial efforts from companies like MDSave and Healthcare Bluebook to create price transparency and new payment options.

“This is the opportunity, right now, to create a competent marketplace,” said Makary. “And we’re seeing disruptors doing it. It’s not theoretical anymore, it’s actually happening.”

David Shifrin
dshifrin@jarrardinc.com