Healthcare Consumerism: NY Times Article on Prescription Costs

Reporter Elizabeth Rosenthal had another great article in the New York Times with the headline: Paying Till It Hurts: The Soaring Cost of a Simple Breath. 

This article explains why the cost of prescription medications in the US are so high.  Here are some highlight stats from the article:

  • Cost of Pulmicort inhaler for Asthma in the US: $175  In Great Britain: $20
  • Cost of Rhinocort nasal spray for Allergies in the US: $250  In Europe: $7
  • Number of Asthma Deaths in US: 3,300 per year
  • Cost of Asthma in the US: $56 B per year
  • Medication accounts for 10% of the US $2.7 Trillion spend on healthcare
  • Average cost increase for brand-name prescription medication in 2012: 25%
  • Amount pharmaceutical industry spent lobbying the Federal Government: $250M (more than the defense industry)
  • Cost of Xolair infusion medication for Asthma: $1,500 per treatment (so expensive and not more effective that the British Government banned its use)

As people are empowered, nudged or forced to be better healthcare consumers because of high-deductible health plans, consumer directed health plans, rising copays and out-of-pocket expenses—they need to learn how to better navigate the world of prescription medications.  In a small attempt to help in that process, below is a 5-min video that we filmed at Compass Professional Health Services to try and educate consumers:

Population Health Management: 50% of Cancer Deaths are Avoidable

According to the American Cancer Society, over 50% of cancer deaths are avoidable—this fact is not new.  Smoking and obesity are significant risk factors for cancer—this fact is also not new.  Preventive screening rates for cancer are abysmal.  Usually less than 30%—this final fact is not new either, but not well-known.

Employees and their family members are not getting their appropriate cancer screenings and as a result, (1) cancers are being diagnosed later, (2) people suffer greater complications and (3) survival rates are lower than if the cancer had been caught earlier.

Counter intuitively, the key to raising preventive screening rates in your employee population is NOT ONLY to trumpet the importance of cancer screening, but also to REMOVE THE BARRIERS that prevent people from obtaining the appropriate tests.

Below are some of the most common BARRIERS to preventive screening:

  1. Don’t want to take the time
  2. Don’t know what it is going to cost (it actually costs $0 out-of-pocket as a result of Health Reform)
  3. Fear of the test
  4. Don’t know where or how to start

Notice that all these BARRIERS relate to education and logistics—all things well within the power of the employer to influence:

  1.  Employers can provide tools and services to minimize the amount of time it takes to find, schedule and obtain the preventive screening
  2. Employers can use their soapbox to educate employees on their $0 out-of-pocket costs for preventive screening
  3. Employers can guide employees to resources that dispel many of the myths about these tests
  4. Employers can give employees one central contact point to coordinate their screenings

Employer’s pay for worker’s comp claims—and those same employers put in place work site safety programs to prevent injuries in the first place.

Employers pay for surgery and chemotherapy for cancer—and those same employers should think about putting in place programs to prevent cancer as well.

Click on the link below to see how Compass helps healthcare consumers navigate the healthcare system.

Health Affairs Report: 25% of Total Hospital Costs Go To Admin

There is an excellent article in the September 2014 issue of Health Affairs entitled, “A Comparison of Hospital Administrative Costs in Eight Nations: US Costs Exceed All Others by Far.”

The article by David U. Himmelstein from Harvard and the City University of New York el al. describes a study he and his team of researchers performed on hospital administrative costs in various countries.

The US had the highest hospital administrative costs—25.3% of total hospital costs went to administration.  That is compared to 15.5% in England and 12.4% in Canada.  So Canadian hospitals spend LESS than HALF as much on administration than US hospitals.

An even more revealing statistic is that as a percent of national GDP, US hospital administration costs are 1.43%–that’s equal to $667 for every woman, man and child in America per year.  For comparison, a family of 4 with two cars that spends $40 per car per week on gas, spends $1,040 per person per year on gasoline.  So unbeknown to this example family of 4, they are paying the equivalent of 64% of their gas budget on hospital administration.  Now they are not paying directly for it, but they are INDIRECTLY paying for it in the form of their (1) insurance premiums, (2) state taxes, (3) federal income taxes, (4) Medicare taxes and (5) healthcare out-of-pocket costs (copays, coinsurance, deductible, etc.).

Another interesting statistic from the study is that hospital administrative costs in Maryland are the same as the national average—about 25%.  What is unique about Maryland is that it is the ONLY state to have state regulated prices and reimbursements for hospitals.  Maryland sets the rates that insurance companies pay hospitals for services across the state.  So if hospital administrative costs are excessive in America (which they appear to be in comparison to other countries), then it appears that state price controls—as in what is done in Maryland—are not an effective means of reducing hospital administrative waste.

Finally, the authors note that this type of comparison of hospital administrative among countries has NEVER been done before.  So this is a first.

What does this mean for employee benefits professionals and healthcare consumers?

  • Much media attention has been paid to insurance company administrative expense—and now there is beginning to be more attention paid to Hospital administrative expense as well.
  • There is a ‘hidden tax’ of high hospital administration costs that all Americans end up having to pay.
  • Obamacare, healthcare consumerism, price-transparency, ACOs and other trends in healthcare may reduce this hospital administrative cost over time, as there may be room for greater efficiency.

To learn more about how insurance carriers and hospitals negotiate their rates (in all other 49 states other than Maryland), click on the 5 min video by me below:

Doctor Magazine Report: Healthcare Price-Transparency—Docs Like?

There is an interesting article by Lisa Zamosky from an August 2014 issue of Medical Economics magazine entitled, “The challenges of healthcare price transparency.”

Medical Economics magazine has physicians—mainly primary care doctors—as its main audience.  It is helpful to see how physicians view healthcare price-transparency.  The overall gist of the article is that healthcare price-transparency has become a movement with patients (i.e. healthcare consumers) demanding to know in advance what a medical test or procedure will cost.  Physicians will need to be able to provide this information to keep their customers (i.e. patients) happy and coming back.  Most doctors have NO training in discussing costs with their patients—so most do not know how to do it.

Some more innovative physicians already post prices for their medical procedures to alert patients in advance and actually drive more patients to their clinic.  The idea being that patients will prefer to go to a doctor where they know the price in advance as opposed to another doctor where the price is unknown—and potentially very high.

The underlying push for healthcare price-transparency by healthcare consumers comes from the growth of high-deductible health plans, which require more out-of-pocket spending by healthcare consumers.   More out-of-pocket cost translates into greater healthcare consumer desire to know the price and seek out the best value.  According to the article the West Health Policy Center estimates that healthcare price-transparency could save more than $100B over the next 10 years.

What does this mean for employee benefits professionals and healthcare consumers

  • Doctors do NOT view healthcare price-transparency as a flash-in-the-pan or a fad.  They think it is real and it is here to stay.
  • Some ‘early-adopting’ doctors are adapting their practices to be more accommodating to the price-transparency demands of their patients—but most have not.
  • Healthcare Price-Transparency is somewhat of a ‘Chicken-and-Egg’ problem—do doctors provide the prices first (Chicken) or do consumers demand the prices first (Egg)?  It appears the Eggs—consumers—have taken the lead, but it is possible that the two will then spiral forward: more doctors will provide prices, which will lead more consumers expecting to be given prices, which will then lead to more and more doctors providing prices.

Perhaps a new industry standard is in the works.  I am biased, but this may be the case.

To learn more about how doctor’s and insurance carriers negotiate their prices, click on the link below.

Case Study: 2,000 Member Group Saves $2.1M with Price-Transparency + EE Accountability + Elite Provider Steerage

I wanted to take a moment to share an employer best-practices experience with you.  Compass was approached by a large, regional trucking company to help control their employee health plan costs and improve the health of their employee population.  Compass partnered with the employer and their benefit consultant to create 3-pronged approach:

#1 Price-Transparency and Provider Quality information to empower employees to be value-seeking healthcare consumers.

#2 Employee Accountability Requirements for biometric testing, health risk assessment completion and preventive screening compliance—i.e. if you the employee completes these tasks then he or she avoids a higher premium contribution in the subsequent plan year.

#3 Define a third-tier narrow network of elite primary care providers (within their existing network) who are already providing ‘Medical Homes’ for patients so that each employee has a medical home for centralized diagnosis, treatment and management of their care—i.e. find everyone a PCP and find them a really good one.

The results: A decreased in plan PEPM costs from $553 to $431, translating into an annual savings of $2.1M—and the employees loved the support and healthcare guidance to boot.

Click below to view this 2-page Case Study.

Compass CEO and CMO Featured in Price-Transparency Magazine Article

Compass Professional Health Services was recently featured in the October 2014 edition of D Magazine. The article discusses how Compass Professional Health Services supports employers and employees with price and quality transparency to navigate the healthcare system with confidence. Click Here for the D Magazine article on Price-Transparency.

To learn more about Price-Transparency in the News, click on the 5- min video below by me.

Elisabeth Rosenthal at NY Times Does it Again–Egregious Doctor Billing Practices

New York Times reporter Elisabeth Rosenthal has written another eye-opening article in this past Sunday’s edition. The article entitled, “After Surgery, Surprise $117,000 Medical Bill from Doctor He Didn’t Know,” documents the duplicitous billing habits of some physicians who act as ‘assistants.’

In surgery or in a procedure, a doctor may use another doctor to ‘help out’ or ‘assist.’  That additional doctor will often bill for the full surgery or procedure as well and to make matters worse—that ‘assisting’ physician could be out-of-network, resulting in charges of tens-of-thousands of dollars.  Often, a doctor may use a physician’s assistant to work alongside him or her during a procedure (holding back retractors, doing some of the suturing, etc), however, often the fees for a physician’s assistant will be included in the overall surgeon’s fee.  Using another doctor to assist rather than a less expensive physician’s assist seems to have become more commonplace.

I will tell you in Compass’ experience, we have even encountered out-of-network physician’s assistants trying to recoup excess fees from our members.  Five years ago, Compass had a member who was being billed an additional $25,000 by an out-of-network physician’s assistant for a breast cancer surgery.  Compass fought those charges, arguing that the physician’s assistant should have been paid as part of the overall surgeon’s  fees.  When Compass contacted the surgeon, his office claimed that they did not even know that the physician’s assistant was charging extra—and they were pretty upset about it and contacted the physician’s assistant directly themselves as well.

The article by Elisabeth Rosenthal goes on to discuss ‘consults’ by doctors, physical therapists and occupational therapists who see patients during their stay.  Many of these consults are very short, add little value and according to the article, sometimes the operating surgeon doesn’t even want them, but they are encouraged by the hospital.  However, these consults—again often by out-of-network doctors—result in additional bills and fees that amount to thousands of dollars.

What does this mean for healthcare consumers and employee benefits professionals?

  • Being a passive patient in a hospital can result in excess visits by doctors and other healthcare providers that could end up being very expensive and wasteful.
  • ‘Speaking up,’ asking questions and questioning the utility of consultations is not unwarranted and ASK if the provider is in-network and if they are not, complain to the head doctor, the hospital and the insurance company.  As the article points out, you can fight and/or prevent these charges.
  • If you are an employee benefits professional, analyze your claims data for the number and cost of ‘assistants’ and consultations during hospitalizations.  You will be able to identify providers who are the ‘worst offenders’ and then steer employees away from these providers to more ‘rational’ ones.

To learn more about the disconnect between cost and quality in healthcare, click on the link below:

Hospital Mergers Blocked by Federal Government

The New York Times has an interesting article in its September 18th, 2014 issue by Robert Pear entitled, “F.T.C. Wary of Mergers by Hospitals.”

In summary, the article describes how the Federal Trade Commission (F.T.C) has blocked the mergers of hospitals in three separate instances—once in Rockford, IL, once in Toledo, OH and once in Albany, GA.—and the merger of a hospital and large physician group in Idaho.  The F.T.C. has claimed these hospitals have broken anti-trust laws.  Here are some other points from the article:

  • Hospital mergers can result in prices rising by as much as 40% to 50% because of increased bargaining power with insurers and limited competition
  • Hospitals claim that their motivation for merging is to better coordinate care in response to mandates by the Affordable Care Act (ACA, Obamacare)
  • The F.T.C. believes that care can be coordinated better without hospitals having to merge and that ‘compliance’ with the Affordable Care Act does not allow hospitals to break anti-trust law.

It is unknown if these four blocked healthcare provider mergers will be enough of a deterrent to stop or slow down other provider mergers.

Consolidation is typically a sign of industry distress.  When the insurance industry was under pressure in the 1980s and 1990s—there was consolidation.  In the pharmaceutical industry with many blockbuster brand name medications coming off patent and becoming generic—there is consolidation.  In the airline industry with rising jet fuel prices and fierce competition to lower fares—there is consolidation.  When times are good and the money is flowing, companies want to make it on their own.  But when times get tight, companies tend to ‘circle the wagons.’

This is just my opinion—and I could be wrong—but this provider consolidation is not bad per se.  In many ways, healthcare has been and still is a cottage industry.  Healthcare is very complex and the vertical and horizontal integration of healthcare may lead to more effective delivery of those services.  Think large, integrated grocery store chain vs. mom-and-pop corner grocery store: more choices, superior selection, better hours, clean, convenient.  The key is that consumers still have a choice and they can vote with their feet so that there is not consolidation for the sake of abuse of the customer, but rather to better serve the customer.

The ‘voting-with-your-feet’ part keeps things honest.

Now some people will say, ‘You cannot shop for healthcare.  It’s too complicated.  The stakes are too high.”  I would beg to differ.  We shop for things that are complicated with high stakes in other aspects of our lives.

We shop for homes.  I don’t know anything about home construction.  It’s the largest purchase I will ever make. We shop for accounting services.  I don’t know tax law.  If it is done incorrectly, I could go to jail. We shop for A/C repairs.  I don’t know how an air conditioner works.  In Texas in the summer, a non-functioning air conditioner makes your house almost uninhabitable.

So my humble opinion would be that Consolidation + Choice = Better Healthcare.

As in most things, the key is striking the right balance.

To learn how to give employees Choice in healthcare with Compass, click on the 5-min video below.

Great Stats on Malpractice and Defensive Medicine

There is an informative article in the August 2014 issue of the Cleveland Clinic Journal of Medicine entitled, “ Better care is the best defense : High-value clinical practice vs. defensive medicine.”  This article by Lois Snyder Sulmasy and Seven Weinberger contains some interesting statistic around malpractice lawsuits:

  • 69% of surveyed Neurosurgeons agree with the statement, “I view every patient as a potential lawsuit.”
  • $210B of the $765B of annual healthcare WASTE is thought to be from unnecessary tests and procedures—that’s 8% of total healthcare spending.
  • Of those unnecessary tests and procedures, 76% of doctors says that fear of malpractice lawsuits is the major cause of that wasteful care.
  • 72% of surveyed Neurosurgeons said they ordered imaging tests (e.g. MRIs, CT scans) “solely to minimize the risk of a lawsuit.”


  • Only 5% of malpractice claims go to trial and 90% of those claims are won by the physician.
  • For Internists and Internal Medicine Sub-Specialists (e.g. gastroenterologists, cardiologists), only 2.7% of malpractice claims go to trial.

So, if defensive medicine is a major driver of unnecessary tests and procedures that amount to 8% of healthcare spending in America—and similarly 8% of an employer’s health plan…what should be done about it?

The article provides some useful insights here as well:

  • The actual cause of lawsuits is typically patient dissatisfaction with ‘physician communication and interpersonal skills.’
  • 79% of surveyed physicians strongly or moderately agree with the statement, ‘physicians should adhere to clinical guidelines that discourage the use of interventions that have a small proven advantage over standard interventions but cost much more.’

Some potential takeaways from those insights are: (1) physicians can more effectively practice ‘defensive medicine’ by communicating better with their patients than by ordering more tests—sounds like constructive defensive medicine to me—and (2) increased promotion of clinical guidelines and adherence to those guidelines may be the ‘security blanket’ doctors need to NOT order tests for the sake of protecting themselves.

What does this mean for employee benefits professionals and healthcare consumers?

  • A significant minority (8%) of what is spent by healthcare consumers and by employer-sponsored health plans on healthcare is WASTE generated by defensive medicine practiced by doctors scared of lawsuits.
  • A way to fix that problem is for employers to steer employees to doctors that follow clinical guidelines—these doctors have already figured out how to effectively treat their patients AND not be sued.

Click on the link below to learn how Compass helps people specifically with primary care physicians.

Healthcare Price-Transparency: Healthcare Vocabulary Word of the Day—Iatrogenesis

Iatrogenesis is a harmful effect or result from a medical test, procedure or treatment.  Iatrogenesis is a big problem in American healthcare.  The Institute of Medicine Report ‘To Err is Human’ stated that at least 44,000 people die every year in hospitals from medical errors that could have been prevented.  Click here to access the report:
To Err is Human: Building a Safer Health System

Even if there are no errors in medical care, just care itself can be potentially hazardous.  In the case of CT scans, the x-ray radiation from the scan itself may increase the risk of cancer.  In response to this increased risk, the Food and Drug Administration has issued the ‘Initiative to Reduce Unnecessary Radiation Exposure from Medical Imaging.’  This initiative reports that exposure to x-ray radiation has doubled in America in the last 20 years specifically because of medical imaging.  It goes on to report that 67 million CT scans were performed in the U.S. in 2006 and one study suggests that 29,000 future cancers could be related to CT scans performed in 2007.  Click here to read the full FDA report:
Radiation-Emitting Products

Iatrogenesis has been around since the beginning of medicine itself.  That is why a central line from the Hippocratic Oath in Ancient Greece is “First Do No Harm.”

So what is a healthcare consumer to do to avoid Iatrogenesis?

  • Ask your doctor if the test, procedure or medication is really necessary
  • Get a second opinion from another physician
  • Do your homework—look online yourself.  The Mayo Clinic has excellent information on the internet.  Just type into your search engine (Google, Yahoo, etc) whatever your medical issue is and then ‘, Mayo Clinic’ and you will get loads of information from one of the best medical systems in America on the subject.
  • Don’t Overreact and not seek medical care at all—it is important to still be rational in the face of iatrogenesis

When it comes to medical care—often Less is More.

To learn how Compass helps employees better navigate the healthcare system to avoid iatrogenesis (and financial iatrogenesis), click on the link below.