03 Mar “My Hypocrisy Knows No Bounds…”?

The movie Tombstone holds a special place in my memories for various reasons and the title of this post is one of my favorite lines by the character of Doc Holliday in the movie.

But I do not intent to talk about Tombstone here, not today. On my mind is the hypocrisy of another kind that is just as deadly as the one Doc Holliday eluded to. It has to do with the out-of-control cost of healthcare in this country.

I have puzzled over the root cause of the escalating costs of healthcare in the US for a while now. Being a person of finance and engineering, I firmly believe in following the numbers – the money trail in this case. I am here to confess that the root cause of the runaway costs of healthcare in the US eluded me up until this week. I was of the opinion, well studied as it may have been, that big pharmaceutical companies, healthcare insurance payers, and hospital inefficiencies were the reason. However, I have now learned that something far more nefarious than mere management incompetence at the hospitals or recovering R&D costs by the pharmaceutical is at play in this realm.

An article by Consumer Reports brings this issues into focus very clearly: http://www.consumerreports.org/cro/magazine/2014/11/it-is-time-to-get-mad-about-the-outrageous-cost-of-health-care/index.htm

I now understand the deeper and far more malicious reason behind the mad scramble by hospitals to buy out private physician practices across the country. It is not just about a “footprint” nor is it about “referrals to hospital-owned labs and facilities” (both of which contribute to the top-line and the bottom-line for the hospitals), it is really about creating a bargaining position for the purpose of – get ready for this – increasing the prices that healthcare insurers have to pay for services rendered at and through the hospitals! These prices are ultimately borne by the insured and increasingly more so as the burden shifts to the consumer of healthcare services. May this also be the reason that over 80% of the hospitals are barely breaking even: they are falling on their own knives as patients fail to pay their hefty bills that are bloated by the hospitals’ negotiated rates for procedures? (Please keep in mind that a loss on the books of a hospital does not necessarily mean a loss to the shareholders as losses can be buried in one legal entity while another “related” entity remains profitable to deliver returns to the shareholders).

The more the hospitals consolidate their negotiating power through mergers and acquisitions (of other hospitals) and by buying out independent physician practices, the higher the costs of healthcare will be to the patients. This will be the case whether we use volume-based or value-based compensation models. In my studied opinion, both models put undue focus on physician providers who are in fact one of the casualties of this war-for-profits being waged by investor-backed hospitals and other profit-oriented organization models pretending to be focused on lowering the cost of healthcare in this country.

I would welcome feedback from colleagues in the hospital management arena on my assertions in this post, based on facts supported by data. I sincerely hope that I do not have to borrow another line from Doc Holliday that may be pertinent here: “Why Johnny Ringo, you look like somebody just walked over your grave”.

I have no issue with profit making. I believe in the free enterprise and competitive markets. However, I also suffer from this incurable affliction called a conscience. I cannot make money at the expense of a sick old person or a child born with a crippling condition or the servicemen and servicewomen that give their lives for this country. They and we all deserve some basic dignities. One of these dignities is reasonably affordable healthcare. Consolidating power for the purpose of negotiating higher prices with healthcare insurance payers that then drive up the cost of healthcare for us all is evil at best.