AMERICAN HEALTHCARE IS OUTRAGEOUSLY COMPLEX
In America, healthcare is basically a fight amongst many companies, and you just happen to be the scapegoat in the middle to profit off of.
Hello Professionally Curious One!
This isn’t about AI, that was last week’s piece. This isn’t about Crypto, that’s also last week’s piece. It’s about….Healthcare! 🏥🏥🏥
My Professional Curiosity Agenda is focused on sharing different things that keep me curious, or infuriated - I mean it can be both.
Would you like to know the complexities about American Healthcare System?
You know, that industry whose US GDP grew 5% in 20 years, up from 13.3% in 2000 to 18.3% in 2021. That industry which is ironically always seeming like its on a lifeline. Let me explain why it’s so complicated.
There are too many parties involved.
Just how many?
I’ve some visual aids that I was able to recall and recreate that explains the complexity and stupidity of it all. It might surprise to see that even at the simplest model, it’s still too complicated. It’s like our healthcare industry did a reverse space-x where instead of in-sourcing cost, we out-sourced cost but it egregiously backfired.
Stay healthy.
In Case You Missed It
Sections You Can Skim To:
A Medical Encounter is a Dance of 3 Parties
A Hospital is 3 Kids Masquerading as 1 Guy in a Trenchcoat
Cold War Between Too Many Companies
A Medical Encounter is a Dance of 3 Parties
TL;DR: It’s kind of a Mexican Standoff, except you don’t matter as much as you think you do.
Anytime you go to your doctor, there are at minimum 3 parties involved.
You, the private citizen
The Medical Center (or clinic, or your doctor)
Your Insurance
Focus on the word minimum, as each party represented is a monolithic entity, meaning there is significantly a lot more depth to each one - you included. The reality is that there actually 5 to 9 companies involved. What impacts you will depend on the level of integration and cooperation between those companies.
Your relationship to healthcare will be extremely wild and varied because it will depend on your relationship to many separate components of it.
A Hospital is 3 Kids Masquerading as 1 Guy in a Trenchcoat
TL;DR: Multiply entities involved, and that’s just on the patient care side.
Fun title aside, there are quite a few parties here.
Every medical center, clinic, or doctor’s office, is usually at minimum 3 distinctly different entities. We aren’t going to consider pharmacy, or specialists, or anyone else for now but they are present somewhere. Your employer is too (unless you’re in California benefitting from CoveredCA.)
There’s the Physician Groups, a group of independently organized doctors who provided the direct skilled labor and knowledge to take care of you. Unless employed directly by the hospital, your doctor is essential a contractor or consultant to said hospital.
Then there’s the Medical Center, the hospital that is responsible for the facility, operations, support staff, and any on-site lab. One could say Medical Centers partner with Physicians Groups, but now a days its Medical Centers acquiring Physicians Groups. By the end of 2020, 7 out of 10 doctors are employed by hospitals or their corporate entities behind said hospitals.
If they are a Non-Profit, there is a Foundation that is behind the hospital system which helps attract donors to help grow and cover costs, and also provide all the benefits that come from structuring itself as a non-profit. Just to be clear, Medical Centers alone are already revenue bearing - the foundation simply adds additional streams. If they are a for-profit, then there is a Private Equity or a larger parent corporation that owns the system.
And that’s before we considered acquired entities, or hospitals that are subsidiaries (children) of another company.
Here’s a diagram of that in case you ever wondered what that look like - don’t know when I’d be using it…
Want to point out that Tenet is actually a for-profit healthcare system. I don’t recommend going there.
Agreements Between the Hospitals and Insurance
TL;DR: I want to be in the room where it happens (the deals, not the operating table.)
Whenever you go to the doctor, there’s the medical care (the reason you are there) and then there’s the financial care (what your insurance is supposed to help you on).
This is how insurance companies work in America:
Insurance negotiate with a healthcare system on a per medical procedure basis
How much of a discount the insurance company will get for doing business with the hospital
How much the insurance company will pay the hospital for each procedure based on the discounted rate
What the insurance company will not cover, which means what you will cover
Have you ever gone to a hotel and on the back of the front door, there’s the “charge rate” of the hotel room? Something like $700 to $1200 per night, but you are getting that sweet Residence Inn for $129? There’s a lot of that going around.
For every $1 a hospital will charge to the insurance, a hospital can expect to be paid $0.10 to $0.20. This is agreed-upon at a per procedure level, so the paid amount can vary. Since this is contractually driven, the pay structure can change between the agreement of the insurance (health plan) and the healthcare system.
Let’s say you go to a hospital and only get 1 procedure, that’s it.
A hospital will send a bill at gross charges of $1,000 for your visit to your insurance.
Your insurance has a contract agreement with your hospital, which allows it to get a 80% reduction on the cost for that one procedure. So $1,000 is now $200.
Your insurance has told you they will cover 75%.
Out-of-pocket cost to you is $50. Cost to the insurance company is $150. Cash earned by hospital is $200.
However rising costs incurred by the hospital, plus the need for profits by insurance investors, has created what amounts to be a cold-war in pricing. Everyone in this complex system is finding ways to cut cost, increases price, and find loopholes.
Cold War Between Too Many Companies
TL;DR: It’s a fight amongst many companies, and you just happen to be the scapegoat in the middle to profit off of.
The American Healthcare System is essentially a cold-war between too many companies. You just happen to be caught in the middle getting presumably the worst end of the stick each time.
I could argue that you are simply the product of the healthcare system in the same way that Facebook or TikTok are free - again you are the product. The Healthcare System needs to make money off of you. The financial systems need to make money off you and the hospital.
You as an individual have essentially no say in this matter, so you are at the mercy of what the medical system and the insurance companies agree on.
Good luck everyone!
Note: Kaiser doesn’t fall into issue as they are what you call a vertically integrated system, which means they are their own healthcare system and their own insurance.
Note1: If you are a California Resident, Great News! Beginning January 1, 2022, California passed the No Surprises Act (which works in conjunction with the Federal Equivalent) which forbids surprise expense from healthcare and insurance companies. California actually had this in play since 2017, but insurance lobbied so well to remove jurisdiction from California citing health plans were a “federal matter” and can only be regulated by Department of Labor.
Note2: There’s a reader here that’s all about FSAs. I should get him to say something about that more.
Note3: Yes I have a list of hospitals companies that “if I get shot there, please take me somewhere else”. 100% it’s always the For-Profit system that gives issue, but that doesn’t put non-profit systems off the hook either.
America...ugh...