Congress price fixing our "free market" healthcare

  • You are viewing Orangepower as a Guest. To start new threads, reply to posts, or participate in polls or contests - you must register. Registration is free and easy. Click Here to register.

steross

Bookface/Instagran legend
A/V Subscriber
Mar 31, 2004
26,959
32,189
1,743
oklahoma city
#21
If anyone really wants to get into the weeds of why this issue has gone from simmering for decades to a full blown war, here it is.
But, if you think that handing victory to the insurance companies is the best plan because the private equity companies that have purchased docs, it is basically ripping the meat out of the mouths of wolves and handing it to grizzly bears.
And, it isn't just Emcare. When I returned from Aus I was shocked to find the penetrance of these companies in Oklahoma. It is nearly every hospital. Which is why I am trying to work at the VA. I hate the bureaucracy, but I like veterans. I don't like gouging Oklahomans so that an exec can make $21.7 million a year completely off of doctor billings ("Envision" is the new name of "Emcare" as listed in the article below)

https://www.nytimes.com/2017/07/24/...XRva2L1hWFyx03KjILNrdBLp-tlZMDjpf4xTgQAbmGDy8

The Company Behind Many Surprise Emergency Room Bills
By Julie Creswell, Reed Abelson and Margot Sanger-Katz
July 24, 2017


Early last year, executives at a small hospital an hour north of Spokane, Wash., started using a company called EmCare to staff and run their emergency room. The hospital had been struggling to find doctors to work in its E.R., and turning to EmCare was something hundreds of other hospitals across the country had done.

That’s when the trouble began.

Before EmCare, about 6 percent of patient visits in the hospital’s emergency room were billed for the most complex, expensive level of care. After EmCare arrived, nearly 28 percent got the highest-level billing code.

On top of that, the hospital, Newport Hospital and Health Services, was getting calls from confused patients who had received surprisingly large bills from the emergency room doctors. Although the hospital had negotiated rates for its fees with many major health insurers, the EmCare physicians were not part of those networks and were sending high bills directly to the patients. For a patient needing care with the highest-level billing code, the hospital’s previous physicians had been charging $467; EmCare’s charged $1,649.

More at link

‘Like a Light Switch’
In several hospital emergency rooms, out-of-network rates for customers of one large insurer jumped to nearly 100 percent after EmCare took over. Below, the year before and the year after a switch.
Screen Shot 2019-07-16 at 10.59.56 PM.png
 

wrenhal

Territorial Marshal
Aug 11, 2011
8,057
3,777
743
49
#24
And, it isn't just Emcare.
The same thing has happened with PBMs and prescription meds. It is the result of Obamacare, it has encouraged the growth of insurance middlemen.
Would allowing insurance companies to compete with packages across state lines help? I've heard that that could help bring down the coat of medicine.

Sent from my Moto Z (2) using Tapatalk
 

oks10

Territorial Marshal
Sep 9, 2007
8,223
6,815
1,743
Yukon, OK
#25
If anyone really wants to get into the weeds of why this issue has gone from simmering for decades to a full blown war, here it is.
But, if you think that handing victory to the insurance companies is the best plan because the private equity companies that have purchased docs, it is basically ripping the meat out of the mouths of wolves and handing it to grizzly bears.
And, it isn't just Emcare. When I returned from Aus I was shocked to find the penetrance of these companies in Oklahoma. It is nearly every hospital. Which is why I am trying to work at the VA. I hate the bureaucracy, but I like veterans. I don't like gouging Oklahomans so that an exec can make $21.7 million a year completely off of doctor billings ("Envision" is the new name of "Emcare" as listed in the article below)

https://www.nytimes.com/2017/07/24/...XRva2L1hWFyx03KjILNrdBLp-tlZMDjpf4xTgQAbmGDy8

The Company Behind Many Surprise Emergency Room Bills
By Julie Creswell, Reed Abelson and Margot Sanger-Katz
July 24, 2017


Early last year, executives at a small hospital an hour north of Spokane, Wash., started using a company called EmCare to staff and run their emergency room. The hospital had been struggling to find doctors to work in its E.R., and turning to EmCare was something hundreds of other hospitals across the country had done.

That’s when the trouble began.

Before EmCare, about 6 percent of patient visits in the hospital’s emergency room were billed for the most complex, expensive level of care. After EmCare arrived, nearly 28 percent got the highest-level billing code.

On top of that, the hospital, Newport Hospital and Health Services, was getting calls from confused patients who had received surprisingly large bills from the emergency room doctors. Although the hospital had negotiated rates for its fees with many major health insurers, the EmCare physicians were not part of those networks and were sending high bills directly to the patients. For a patient needing care with the highest-level billing code, the hospital’s previous physicians had been charging $467; EmCare’s charged $1,649.

More at link

‘Like a Light Switch’
In several hospital emergency rooms, out-of-network rates for customers of one large insurer jumped to nearly 100 percent after EmCare took over. Below, the year before and the year after a switch.
View attachment 71784
Yep. Sounds like exactly what I ran into with my ER visit but with an even higher bill than that... I think my ER bill was about $2100 IIRC (just the doctor portion, in addition to the hospital bill which wasn't anything outrageous. Was definitely less than $1000, I just don't remember how much it actually was because the doctor bill overshadows that memory...)
 

steross

Bookface/Instagran legend
A/V Subscriber
Mar 31, 2004
26,959
32,189
1,743
oklahoma city
#26
Would allowing insurance companies to compete with packages across state lines help? I've heard that that could help bring down the coat of medicine.

Sent from my Moto Z (2) using Tapatalk
My honest opinion is that it would make marginal differences.

Third-party payment for routine services with no price transparency because it is the payer, not the consumer, that contracts will never be an efficient method of obtaining goods or services. Adding more insurers to the mix to make it even easier for them to say "we can't tell you how much this costs because it depends on your insurance" will not make it better.

We will see if the president's order for price transparency has an effect.
 

osupsycho

MAXIMUM EFFORT!!!
A/V Subscriber
Apr 20, 2005
4,152
2,499
1,743
Valhalla
#27
My honest opinion is that it would make marginal differences.

Third-party payment for routine services with no price transparency because it is the payer, not the consumer, that contracts will never be an efficient method of obtaining goods or services. Adding more insurers to the mix to make it even easier for them to say "we can't tell you how much this costs because it depends on your insurance" will not make it better.

We will see if the president's order for price transparency has an effect.
So since I have very little knowledge in this area I am truly curious what you think will help things?
 

wrenhal

Territorial Marshal
Aug 11, 2011
8,057
3,777
743
49
#29
Would allowing insurance companies to compete with packages across state lines help? I've heard that that could help bring down the coat of medicine.

Sent from my Moto Z (2) using Tapatalk
My honest opinion is that it would make marginal differences.

Third-party payment for routine services with no price transparency because it is the payer, not the consumer, that contracts will never be an efficient method of obtaining goods or services. Adding more insurers to the mix to make it even easier for them to say "we can't tell you how much this costs because it depends on your insurance" will not make it better.

We will see if the president's order for price transparency has an effect.
I just feel that if more insurers can compete nationwide it would eventually bring down the cost of insurance, as well as we put some of the insurers out of business. Less insurers would make it easier on the hospitals and doctors eventually?

Sent from my Moto Z (2) using Tapatalk
 

CaliforniaCowboy

Federal Marshal
Oct 15, 2003
16,364
2,585
1,743
So Cal
#31
I just feel that if more insurers can compete nationwide it would eventually bring down the cost of insurance, as well as we put some of the insurers out of business. Less insurers would make it easier on the hospitals and doctors eventually?

Sent from my Moto Z (2) using Tapatalk
Nationwide (or cross-State) insurance would eliminate the State Insurance agencies, that are designed (in theory) to protect consumers, and on a national level represents separation of powers and State rights to govern themselves.

The Federal government really should not have any say-so in how a State conducts their business. (that's one thing to consider).

The Federal government does have jurisdiction in inter-State commerce (States selling stuff to each other and competing with each other), but I'm not sure that Insurance meets that criteria.

Regardless of those "Constitutional" issues, the only purpose to open policies/programs across State borders would be to STIMULATE competition, NOT put some companies out of business.

More competition means lower prices, not less competition.

Many companies already have employees in multiple States, so they have to offer plans that will accommodate those employees. (I'm not up on those policies, because my employer only has CA employees and CA plans).

With that said, if I need to see a doctor or visit a hospital or urgent care when I'm not in California, then those local providers seem to have to take extra steps to ensure Blue Cross of California is going to cover me in Oklahoma (for example).

From a consumer perspective, it seems as if there are at least 3 parties all pointing fingers at the others (Hospitals, Insurers and Doctors). Regardless of the parties involved, they should be able to tell us what a procedure is going to cost before we agree, or in the case of an emergency, a Hospital that accepts the insurance should ensure that any bill that comes from procedures at their facility are according to the agreement (i.e., no separate bill from some random Doctors that you have no idea what they performed).

I'm not on anybody's "side", but the existing practices are not consumer oriented.
 

steross

Bookface/Instagran legend
A/V Subscriber
Mar 31, 2004
26,959
32,189
1,743
oklahoma city
#32
I just feel that if more insurers can compete nationwide it would eventually bring down the cost of insurance, as well as we put some of the insurers out of business. Less insurers would make it easier on the hospitals and doctors eventually?

Sent from my Moto Z (2) using Tapatalk
Here is what the insurers are trying to accomplish. Getting Congress to pass this law requiring doctors who have never contracted with an insurance company to accept the median rates of those companies is a huge step toward getting this accomplished:

https://www.vox.com/platform/amp/20...FNOwC6Ku1zNhy7kmaqS-YimmC_dXuhAAFiqC6aWInwZdM
All-payer rate setting: America’s back-door to single-payer?

Single-payer health care has long been the political pipe dream of the left, but there's a nearly identical system that could actually happen.

All-payer rate setting, as the system is known, shares the same goals of single-payer: it aims to increase efficiency and reduce insurer overhead in the health care system. Single payer does this by eliminating private plans for one government plan. All-payer rate setting gets there by setting one price that every health insurer pays for any given medical procedure.

"[All payer] has everything except the government-run plan," says Mark Pauly, a health economist at University of Pennsylvania. "In all-payer systems, the government uses Blue Cross and other insurers as their agent. For consumers its the exact same except for who they write their check for premiums to."

The big difference between the two systems is in the politics. Single payer has never gotten traction in Congress and even just failed in deep-blue Vermont. All payer has actually moved through state legislatures and is being road tested in Maryland. President Obama even said in a recent interview with Vox that he believes the central concept behind the system — giving insurers more bargaining power — "makes a lot of sense."

Here's a guide to where all payer is used, how it works, and whether it could be in America's future.
1) All-payer rate setting means one price for each medical procedure

Right now, there is huge variation in health care costs at different hospitals and doctor offices. The reason is different health-insurance plans pay different prices for medical care. That means the price of an MRI scan or knee replacement surgery, for example, can vary widely, depending on how good an insurance plan is at negotiating.

Bigger plans tend to negotiate deeper discounts. Most research shows that private insurance plans pay the most, Medicare pays slightly less, and Medicaid pays the lowest rates. And even between different private insurance plans, there can be huge variation — a bigger plan with more members might be able to ask hospitals for lower prices because it can promise lots of patients.
 

CaliforniaCowboy

Federal Marshal
Oct 15, 2003
16,364
2,585
1,743
So Cal
#33
Right now, there is huge variation in health care costs at different hospitals and doctor offices. The reason is different health-insurance plans pay different prices for medical care. That means the price of an MRI scan or knee replacement surgery, for example, can vary widely, depending on how good an insurance plan is at negotiating.

Bigger plans tend to negotiate deeper discounts. Most research shows that private insurance plans pay the most, Medicare pays slightly less, and Medicaid pays the lowest rates. And even between different private insurance plans, there can be huge variation — a bigger plan with more members might be able to ask hospitals for lower prices because it can promise lots of patients.
These approaches are always hair-brained, and are never fair or just (because, waa-laa, the government is involved).

There is a huge variation at different hospitals and doctors offices - BECAUSE they have different EXPENSES (and when considered nationally - different cost of living).

There has to be a solution, but one-size-fits-all does not seem to be that solution. Does it cost as much to perform procedures at Stillwater hospital as is does at, say, St. Francis in Tulsa? The Insurers want to pay the same rate, regardless of what it actually costs (apparently - unless I totally misread this).

In the 2nd paragraph, larger plans negotiate deeper discounts, BECAUSE, they represent more patients, hence they can offer a provider a larger number of patients at that negotiated rate. They are offering volume.

That's how all insurance works, the more people that they have in a plan, the lower their costs, and the greater the bargaining power. Everybody wins.

There have to be some solutions that do take into account real life and real economics - but the stuff presented by the insurers in this article don't seem to be practical nor realistic.
 

steross

Bookface/Instagran legend
A/V Subscriber
Mar 31, 2004
26,959
32,189
1,743
oklahoma city
#34
Private Equity and Surprise Medical Billing
By Eileen Appelbaum and Rosemary Batt
Sep 4, 2019 |Health|Finance

How Investor-owned Physician Practices Are Driving up Healthcare Costs

Surprise medical billing has become a critical issue facing Americans across the country because of purposeful corporate practices designed to increase profits. As hospitals have outsourced emergency rooms and other specialty care to reduce costs, private investors have bought up specialty physician practices, rolled them into powerful national corporations, and taken over hospital emergency services. The result: large out-of-network surprise bills. The hidden actors: Leading private equity firms looking for ‘outsized’ returns.
Surprise medical billing made headlines in 2019 as patients with health insurance found themselves liable for hundreds or even thousands of dollars in unforeseen medical bills. When patients with urgent medical problems go to an emergency room (ER) or are treated by specialty doctors at a hospital that is in their insurance network, they expect that the services they receive will be ‘in-network’ and covered by their insurance. But often a doctor not in their insurance network is under contract with the hospital and actually provides the care. When this happens, patients are stuck with unexpected and sometimes unreasonably high medical bills charged by these ‘out-of-network’ doctors. This typically occurs when the hospital has outsourced the ER or other specialized services to a professional staffing firm or a specialty doctors’ practice. This problem has exploded in recent years because hospitals are increasingly outsourcing these services to cut costs. And more and more patients are faced with surprise medical bills — adding substantially to the already impossible medical debt that working people face.

Hospital outsourcing of emergency, radiology, anesthesiology, and other departments has provided an opening for physician practices to operate these services as independent organizations. Initially, hospitals outsourced these services to small, local doctors’ groups. But over the past decade, private equity firms have become major players — buying out doctors’ practices and rolling them up into large corporate physician staffing firms that provide services to outsourced emergency rooms, anesthesiology and radiology departments, and other specialty units. By 2013, physician staffing firms owned by Blackstone Group and Kohlberg, Kravis Roberts & Co. (KKR) – among the largest PE firms in the country – cornered 30 percent of this market. Since then, private equity ownership of these services has continued to grow. Private equity firms also own two of the three largest emergency ambulance and air transport services – another major source of surprise medical billing.

Private equity ownership matters because the business model of private equity firms is to use a lot of debt in a leveraged buyout of companies they acquire and then extract as much cash as possible out of them in order to pay down the debt and reward their investors with ‘outsized returns’ that exceed stock market gains. They can be thought of as for-profit corporations on steroids. Buying up specialty practices is financially attractive because there is a large and growing demand for outsourced doctors, and out-of-network doctors can command a substantial premium for their services. Emergency rooms and certain medical services provided in hospitals are not really part of a competitive ‘marketplace’ because patients in emergency medical situations rarely have a choice: they need immediate medical care and cannot ‘shop around’ for an in-network trauma doctor or radiologist. Thus, surprise bills are difficult to avoid if patients face a medical emergency and must go to the ER or if they are hospitalized and require access to specialty medical services.



How Widespread is Surprise Billing and Why Has It Grown?

Surprise medical billing is exacerbating the already serious problem of medical debt in this country, which is a leading cause of bankruptcy for American families. And surprise billing is growing rapidly. Forty percent of Americans surveyed by the Kaufman Family Foundation in April, 2019, reported receiving an unexpected medical bill; and 20 percent of those surveyed said it was due to out-of-network charges – or surprise billing.[ii] A study by health researchers at Stanford University, for example, examined fees charged to patients with private insurance who were treated by the emergency department of a hospital. They reviewed 13.6 million trips to the ER that occurred over the period 2010 to 2016. About a third (32.3 percent) of these trips in 2010 resulted in a surprise medical bill. But by 2016, that figure had increased to 42.8 percent. That is, more than 4 in 10 trips to the ER ended with patients getting a surprise medical bill.[iii] For in-patient stays, surprise billing rose from 26 percent to 42 percent, and the average costs per patient also jumped from $804 to $2,040. At this rate of increase, the estimated percent of hospital visits resulting in a surprise bill would be 48 percent in 2019 – or almost one half. The study also found that in 2016, 86% of ER visits and nearly 82% of hospital admissions incurred surprise ambulance service bills.

Similarly, another 2019 study found that patients who are admitted to a hospital from the ER are much more likely to receive an out-of-network charge — as many as 26% of admissions from the emergency room were found to include a surprise bill. The study also found that 38 percent of Americans are ‘very worried’ and another 29 percent are ‘somewhat worried’ about being able to afford surprise medical bills. People particularly vulnerable to these charges are those with coverage from large employers that are self-insured. And vulnerability also varied by region, with Texas, New York, Florida, New Jersey, and Kansas having higher rates of surprise billing; and Minnesota, South Dakota, Nebraska, Maine, and Mississippi having lower rates.[iv]

While large surprise medical bills are typically associated with doctors in the ER or in specialties such as radiology, anesthesiology, or critical care units such as neo-natal, burn, or trauma centers, other out-of-network physicians may also issue surprise bills. For example, those who assist a patient’s doctor in a procedure or hospitalists who check on patients during hospital stays can also charge separately for their services. The Stanford study found that the likelihood that a patient admitted to an in-network hospital would face a surprise medical bill because at least one out-of-network doctor cared for them increased from 26.3 percent 2010 to 42.0 percent in 2016. A particularly egregious instance occurred when an assistant surgeon sent a bill for $117,000 to a patient who had surgery for herniated discs in his neck. The patient’s own in-network surgeon sent a bill for $133,000, but accepted a fee of $6,200 negotiated with the insurance company. The out-of-network assistant surgeon is seeking full payment of his charges. This is a particularly egregious example, but surprise bills for a few thousand dollars are not uncommon.[v]

The problem of surprise billing has grown substantially in recent years because hospitals have been under financial pressure to reduce overall costs and have turned to outsourcing expensive and critical services to third-party providers as a cost-reduction strategy. Outsourcing is not new, as hospitals began outsourcing non-medical ancillary services such as facilities management and food services in the 1980s, in response to a round of structural changes in government financing. By the 1990s, hospitals were experimenting with the use of independent ‘hospitalists’ to care for patients between rounds by the local admitting doctors who had a hospital affiliation. Hospitalists’ numbers increased over the next two decades as hospital staffing firms grew and provided a range of temporary or short-term professionals to fill shortages in nursing, technical, or clinical positions.[vi]

Recent outsourcing, however, has expanded to critical care areas – emergency rooms, radiology, anesthesiology, surgical care, and specialized units for burn, trauma, or neo-natal care. Now hospitals contract with specialty physician practices or professional physician staffing firms to provide these services – even if the patient receives treatment at a hospital or at an outpatient center that is in the patients’ insurance network. According to one study, surprise billing is concentrated in those hospitals that have outsourced their emergency rooms.[vii] A recent report found that almost 65 percent of U.S. hospitals now have emergency rooms that are staffed by outside companies.[viii]

Hospitals and healthcare systems have accelerated their outsourcing of critical care areas since 2010 in part due to declines in Medicaid and Medicare reimbursements and to incentives under the Affordable Care Act to reduce costs and improve care quality.[ix] At the same time, on the supply side, hospitalist companies were merging and buying up practices of specialists employed mainly in hospitals. Hospitalist companies evolved into physician staffing firms and expanded to include staffing for emergency rooms (ERs), anesthesiology and radiology departments, and burn and neonatal intensive care units in hospitals across the country.

The business case for hospitals to outsource was straightforward. Emergency rooms are a major point of entry for patients who are admitted to hospitals, and thus, a major conduit for the in-patient hospital stays that are critical for hospital revenue generation. But they are costly and difficult to manage as they must be adequately staffed on a 24/7 basis regardless of patient flow, which is unpredictable. Outsourcing the management, staffing, and billing of ER services shifts these management problems and the risk of underpayment for these services to the staffing firm or a specialty doctors’ practice. Hospital emergency rooms cannot turn patients away if they lack adequate insurance coverage or any insurance at all; they must treat all patients. Emergency departments make money on ER visits of patients with commercial insurance, but lose money on those with Medicare or Medicaid, and see very high losses when patients have no insurance.[x]

Private Equity’s Business Model: Its Role in Outsourcing and Consolidating Specialty Services

Private equity firms have played a critical role in consolidating physicians’ practices into large national staffing firms with substantial bargaining power vis-à-vis hospitals and insurance companies. They have also bought up other emergency providers, such as ambulance and medical transport services. They grow by buying up many small specialty practices and ‘rolling them up’ into umbrella organizations that serve healthcare systems across the United States. Mergers of large physician staffing firms to create national powerhouses have also occurred. As these companies grow in scale and scope and become the major providers of outsourced services, they have gained greater market power in their negotiations with both hospitals and insurance companies: hospitals with whom they contract to provide services and insurance companies who are responsible for paying the doctors’ bills.

Hospitals have consolidated in order to gain market share and negotiate higher insurance payments for procedures. Healthcare costs have been driven up further by the dynamics associated with payments for out-of-network services. As physicians’ practices merge or are bought out and rolled up by private equity firms, their ability to raise prices that patients or their insurance companies pay for these doctors’ services increases. The larger the share of the market these physician staffing firms control, the greater their ability to charge high out-of-network fees. The likelihood of surprise medical bills goes up, and this is especially true when Insurance companies find few doctors with these specialties in a given region with whom they can negotiate reasonable charges for their services.

The design of the private equity business model is geared to driving up the costs of patient care. Private equity funds rely on the classic leveraged buyout model (LBO) in which they use substantial debt to buyout companies (in this case specialty physician practices as well as ambulance services) because debt multiplies returns if the investment is successful. They target companies that have a steady and high cash flow so they can manage the cash in order to service the debt and make high enough returns to pay their investors ‘outsized returns’ that exceed the stock market.[xi] Emergency medical practices are a perfect buyout target because demand is inelastic, that is, it does not decline when prices go up. Moreover, demand for these services is large – almost 50 percent of medical care comes from emergency room visits, according to a 2017 national study by the University of Maryland School of Medicine, and demand has steadily increased.[xii] PE firms believe they face little or no downside market risk in these buyouts.

Private-equity owned companies differ from publicly traded for-profit chains not only in their greater use of debt, but also because the private equity firm, via the general partner of the investment fund it sponsors, makes all investment decisions on behalf of the investor shareholders. Investors commit capital to a PE-sponsored fund, typically for 10 years, and have no say in investment decisions. Thus, the PE general partner’s power is concentrated and largely unaccountable, as investors cannot ‘exit’ or sell their shares if they are dissatisfied – unlike shareholders in publicly traded corporations.[xiii] In addition, PE firms charge their portfolio companies additional ‘advisory fees’ and ‘transactions fees’ that can amount to millions of dollars over time. And because PE owned companies are not publicly traded on the stock exchange, they are not required to file a detailed report to the Securities and Exchange Commission (SEC) the way that publicly traded companies must do. Their activities and their financial transactions are largely hidden from the public eye, despite the fact that they receive substantial taxpayer funding from Medicare and Medicaid for their services, though not for surprise charges.

Two private-equity owned physician-staffing firms dominate the market for outsourced doctors’ practices — Envision Healthcare, owned by KKR with 69,300 employees, and TeamHealth owned by Blackstone Group with 20,000 employees. KKR also is a major owner (along with other private equity firms) of AirMedicalGroup Holdings — one of the nation’s three largest ambulance and air transport companies. We also showcase private equity owned Air Methods medical transport company. These examples help illuminate how and why private equity firms have become national powerhouses in the provision of professional healthcare services and why their activities and those of other private equity firms in this sector are leading to higher healthcare costs for patients and the industry as a whole.
 

oks10

Territorial Marshal
Sep 9, 2007
8,223
6,815
1,743
Yukon, OK
#35
Private Equity and Surprise Medical Billing
By Eileen Appelbaum and Rosemary Batt
Sep 4, 2019 |Health|Finance

How Investor-owned Physician Practices Are Driving up Healthcare Costs

Surprise medical billing has become a critical issue facing Americans across the country because of purposeful corporate practices designed to increase profits. As hospitals have outsourced emergency rooms and other specialty care to reduce costs, private investors have bought up specialty physician practices, rolled them into powerful national corporations, and taken over hospital emergency services. The result: large out-of-network surprise bills. The hidden actors: Leading private equity firms looking for ‘outsized’ returns.
Surprise medical billing made headlines in 2019 as patients with health insurance found themselves liable for hundreds or even thousands of dollars in unforeseen medical bills. When patients with urgent medical problems go to an emergency room (ER) or are treated by specialty doctors at a hospital that is in their insurance network, they expect that the services they receive will be ‘in-network’ and covered by their insurance. But often a doctor not in their insurance network is under contract with the hospital and actually provides the care. When this happens, patients are stuck with unexpected and sometimes unreasonably high medical bills charged by these ‘out-of-network’ doctors. This typically occurs when the hospital has outsourced the ER or other specialized services to a professional staffing firm or a specialty doctors’ practice. This problem has exploded in recent years because hospitals are increasingly outsourcing these services to cut costs. And more and more patients are faced with surprise medical bills — adding substantially to the already impossible medical debt that working people face.

Hospital outsourcing of emergency, radiology, anesthesiology, and other departments has provided an opening for physician practices to operate these services as independent organizations. Initially, hospitals outsourced these services to small, local doctors’ groups. But over the past decade, private equity firms have become major players — buying out doctors’ practices and rolling them up into large corporate physician staffing firms that provide services to outsourced emergency rooms, anesthesiology and radiology departments, and other specialty units. By 2013, physician staffing firms owned by Blackstone Group and Kohlberg, Kravis Roberts & Co. (KKR) – among the largest PE firms in the country – cornered 30 percent of this market. Since then, private equity ownership of these services has continued to grow. Private equity firms also own two of the three largest emergency ambulance and air transport services – another major source of surprise medical billing.

Private equity ownership matters because the business model of private equity firms is to use a lot of debt in a leveraged buyout of companies they acquire and then extract as much cash as possible out of them in order to pay down the debt and reward their investors with ‘outsized returns’ that exceed stock market gains. They can be thought of as for-profit corporations on steroids. Buying up specialty practices is financially attractive because there is a large and growing demand for outsourced doctors, and out-of-network doctors can command a substantial premium for their services. Emergency rooms and certain medical services provided in hospitals are not really part of a competitive ‘marketplace’ because patients in emergency medical situations rarely have a choice: they need immediate medical care and cannot ‘shop around’ for an in-network trauma doctor or radiologist. Thus, surprise bills are difficult to avoid if patients face a medical emergency and must go to the ER or if they are hospitalized and require access to specialty medical services.



How Widespread is Surprise Billing and Why Has It Grown?

Surprise medical billing is exacerbating the already serious problem of medical debt in this country, which is a leading cause of bankruptcy for American families. And surprise billing is growing rapidly. Forty percent of Americans surveyed by the Kaufman Family Foundation in April, 2019, reported receiving an unexpected medical bill; and 20 percent of those surveyed said it was due to out-of-network charges – or surprise billing.[ii] A study by health researchers at Stanford University, for example, examined fees charged to patients with private insurance who were treated by the emergency department of a hospital. They reviewed 13.6 million trips to the ER that occurred over the period 2010 to 2016. About a third (32.3 percent) of these trips in 2010 resulted in a surprise medical bill. But by 2016, that figure had increased to 42.8 percent. That is, more than 4 in 10 trips to the ER ended with patients getting a surprise medical bill.[iii] For in-patient stays, surprise billing rose from 26 percent to 42 percent, and the average costs per patient also jumped from $804 to $2,040. At this rate of increase, the estimated percent of hospital visits resulting in a surprise bill would be 48 percent in 2019 – or almost one half. The study also found that in 2016, 86% of ER visits and nearly 82% of hospital admissions incurred surprise ambulance service bills.

Similarly, another 2019 study found that patients who are admitted to a hospital from the ER are much more likely to receive an out-of-network charge — as many as 26% of admissions from the emergency room were found to include a surprise bill. The study also found that 38 percent of Americans are ‘very worried’ and another 29 percent are ‘somewhat worried’ about being able to afford surprise medical bills. People particularly vulnerable to these charges are those with coverage from large employers that are self-insured. And vulnerability also varied by region, with Texas, New York, Florida, New Jersey, and Kansas having higher rates of surprise billing; and Minnesota, South Dakota, Nebraska, Maine, and Mississippi having lower rates.[iv]

While large surprise medical bills are typically associated with doctors in the ER or in specialties such as radiology, anesthesiology, or critical care units such as neo-natal, burn, or trauma centers, other out-of-network physicians may also issue surprise bills. For example, those who assist a patient’s doctor in a procedure or hospitalists who check on patients during hospital stays can also charge separately for their services. The Stanford study found that the likelihood that a patient admitted to an in-network hospital would face a surprise medical bill because at least one out-of-network doctor cared for them increased from 26.3 percent 2010 to 42.0 percent in 2016. A particularly egregious instance occurred when an assistant surgeon sent a bill for $117,000 to a patient who had surgery for herniated discs in his neck. The patient’s own in-network surgeon sent a bill for $133,000, but accepted a fee of $6,200 negotiated with the insurance company. The out-of-network assistant surgeon is seeking full payment of his charges. This is a particularly egregious example, but surprise bills for a few thousand dollars are not uncommon.[v]

The problem of surprise billing has grown substantially in recent years because hospitals have been under financial pressure to reduce overall costs and have turned to outsourcing expensive and critical services to third-party providers as a cost-reduction strategy. Outsourcing is not new, as hospitals began outsourcing non-medical ancillary services such as facilities management and food services in the 1980s, in response to a round of structural changes in government financing. By the 1990s, hospitals were experimenting with the use of independent ‘hospitalists’ to care for patients between rounds by the local admitting doctors who had a hospital affiliation. Hospitalists’ numbers increased over the next two decades as hospital staffing firms grew and provided a range of temporary or short-term professionals to fill shortages in nursing, technical, or clinical positions.[vi]

Recent outsourcing, however, has expanded to critical care areas – emergency rooms, radiology, anesthesiology, surgical care, and specialized units for burn, trauma, or neo-natal care. Now hospitals contract with specialty physician practices or professional physician staffing firms to provide these services – even if the patient receives treatment at a hospital or at an outpatient center that is in the patients’ insurance network. According to one study, surprise billing is concentrated in those hospitals that have outsourced their emergency rooms.[vii] A recent report found that almost 65 percent of U.S. hospitals now have emergency rooms that are staffed by outside companies.[viii]

Hospitals and healthcare systems have accelerated their outsourcing of critical care areas since 2010 in part due to declines in Medicaid and Medicare reimbursements and to incentives under the Affordable Care Act to reduce costs and improve care quality.[ix] At the same time, on the supply side, hospitalist companies were merging and buying up practices of specialists employed mainly in hospitals. Hospitalist companies evolved into physician staffing firms and expanded to include staffing for emergency rooms (ERs), anesthesiology and radiology departments, and burn and neonatal intensive care units in hospitals across the country.

The business case for hospitals to outsource was straightforward. Emergency rooms are a major point of entry for patients who are admitted to hospitals, and thus, a major conduit for the in-patient hospital stays that are critical for hospital revenue generation. But they are costly and difficult to manage as they must be adequately staffed on a 24/7 basis regardless of patient flow, which is unpredictable. Outsourcing the management, staffing, and billing of ER services shifts these management problems and the risk of underpayment for these services to the staffing firm or a specialty doctors’ practice. Hospital emergency rooms cannot turn patients away if they lack adequate insurance coverage or any insurance at all; they must treat all patients. Emergency departments make money on ER visits of patients with commercial insurance, but lose money on those with Medicare or Medicaid, and see very high losses when patients have no insurance.[x]

Private Equity’s Business Model: Its Role in Outsourcing and Consolidating Specialty Services

Private equity firms have played a critical role in consolidating physicians’ practices into large national staffing firms with substantial bargaining power vis-à-vis hospitals and insurance companies. They have also bought up other emergency providers, such as ambulance and medical transport services. They grow by buying up many small specialty practices and ‘rolling them up’ into umbrella organizations that serve healthcare systems across the United States. Mergers of large physician staffing firms to create national powerhouses have also occurred. As these companies grow in scale and scope and become the major providers of outsourced services, they have gained greater market power in their negotiations with both hospitals and insurance companies: hospitals with whom they contract to provide services and insurance companies who are responsible for paying the doctors’ bills.

Hospitals have consolidated in order to gain market share and negotiate higher insurance payments for procedures. Healthcare costs have been driven up further by the dynamics associated with payments for out-of-network services. As physicians’ practices merge or are bought out and rolled up by private equity firms, their ability to raise prices that patients or their insurance companies pay for these doctors’ services increases. The larger the share of the market these physician staffing firms control, the greater their ability to charge high out-of-network fees. The likelihood of surprise medical bills goes up, and this is especially true when Insurance companies find few doctors with these specialties in a given region with whom they can negotiate reasonable charges for their services.

The design of the private equity business model is geared to driving up the costs of patient care. Private equity funds rely on the classic leveraged buyout model (LBO) in which they use substantial debt to buyout companies (in this case specialty physician practices as well as ambulance services) because debt multiplies returns if the investment is successful. They target companies that have a steady and high cash flow so they can manage the cash in order to service the debt and make high enough returns to pay their investors ‘outsized returns’ that exceed the stock market.[xi] Emergency medical practices are a perfect buyout target because demand is inelastic, that is, it does not decline when prices go up. Moreover, demand for these services is large – almost 50 percent of medical care comes from emergency room visits, according to a 2017 national study by the University of Maryland School of Medicine, and demand has steadily increased.[xii] PE firms believe they face little or no downside market risk in these buyouts.

Private-equity owned companies differ from publicly traded for-profit chains not only in their greater use of debt, but also because the private equity firm, via the general partner of the investment fund it sponsors, makes all investment decisions on behalf of the investor shareholders. Investors commit capital to a PE-sponsored fund, typically for 10 years, and have no say in investment decisions. Thus, the PE general partner’s power is concentrated and largely unaccountable, as investors cannot ‘exit’ or sell their shares if they are dissatisfied – unlike shareholders in publicly traded corporations.[xiii] In addition, PE firms charge their portfolio companies additional ‘advisory fees’ and ‘transactions fees’ that can amount to millions of dollars over time. And because PE owned companies are not publicly traded on the stock exchange, they are not required to file a detailed report to the Securities and Exchange Commission (SEC) the way that publicly traded companies must do. Their activities and their financial transactions are largely hidden from the public eye, despite the fact that they receive substantial taxpayer funding from Medicare and Medicaid for their services, though not for surprise charges.

Two private-equity owned physician-staffing firms dominate the market for outsourced doctors’ practices — Envision Healthcare, owned by KKR with 69,300 employees, and TeamHealth owned by Blackstone Group with 20,000 employees. KKR also is a major owner (along with other private equity firms) of AirMedicalGroup Holdings — one of the nation’s three largest ambulance and air transport companies. We also showcase private equity owned Air Methods medical transport company. These examples help illuminate how and why private equity firms have become national powerhouses in the provision of professional healthcare services and why their activities and those of other private equity firms in this sector are leading to higher healthcare costs for patients and the industry as a whole.
That. How do we fix THAT? If someone would present something that tackles THAT issue I'd be hard pressed not to support it. lol.
 

steross

Bookface/Instagran legend
A/V Subscriber
Mar 31, 2004
26,959
32,189
1,743
oklahoma city
#36
That. How do we fix THAT? If someone would present something that tackles THAT issue I'd be hard pressed not to support it. lol.
Well, it is "the market" which is what people want so without burdensome government I don't know how to fix it.

I can say that they have ruined the job I used to be proud of. If you think they are squeezing patients hard, just think what they are doing to the employees (docs). I'm too old for this shit as I remember what it once was like. I'm looking for ways out, like most docs. The EM burnout rate is >50%. But, never fear, these same companies have created many training programs. They have started these programs in smaller, non-academic hospitals and are spitting out "specialists" at a rapid clip (so that they have bargaining power). And, these docs have been trained in their methods of over-ordering to make $$$ and also have learned their ways so will be good little soldiers in the march to private equity profit.

When I left for Australia I took a pay cut which made sense going into a public health system. I never thought on return I would take another pay cut but that is what is being offered. If not for the current poor exchange rate, I would fly back to Aus to work as the work conditions are far better and the pay is higher.
 

oks10

Territorial Marshal
Sep 9, 2007
8,223
6,815
1,743
Yukon, OK
#37
Well, it is "the market" which is what people want so without burdensome government I don't know how to fix it.

I can say that they have ruined the job I used to be proud of. If you think they are squeezing patients hard, just think what they are doing to the employees (docs). I'm too old for this shit as I remember what it once was like. I'm looking for ways out, like most docs. The EM burnout rate is >50%. But, never fear, these same companies have created many training programs. They have started these programs in smaller, non-academic hospitals and are spitting out "specialists" at a rapid clip (so that they have bargaining power). And, these docs have been trained in their methods of over-ordering to make $$$ and also have learned their ways so will be good little soldiers in the march to private equity profit.

When I left for Australia I took a pay cut which made sense going into a public health system. I never thought on return I would take another pay cut but that is what is being offered. If not for the current poor exchange rate, I would fly back to Aus to work as the work conditions are far better and the pay is higher.
Ain't that the truth... The trouble is that "the market" barely even applies here so there's not much else hospitals can experience as a consequence. In virtually every other market place, customers can show their agreement/disagreement with businesses by spending their money elsewhere, but no one "shops" for an ER... If they have an emergency they, for the most part, just go to the closest one available (with absolutely no up front estimate of pricing, which is another issue that I find completely ridiculous) and by the time they realize they're getting screwed it's too late. I'm not one for burdensome government as you put but I just honestly don't see much else that could create an influence great enough to result in any change.
 
Feb 11, 2007
4,195
1,905
1,743
Oklahoma City
#39
maybe the damned doctors should stop referring us to specialists that are not "in network"

and...

either bill at "in network rates" for emergencies, or require hospitals to keep a doctor on duty for every "network" in that geographic area. (concept similar to reciprocity)

The doctors and health providers must play a role in this mess and must come up with solutions or "solutions" will be dictated by government.
Too many people think that medical care is a "right"....but wants someone else to pay for their care. Thus it ultimately falls to the government to make a plan to pay for medical care. Experience teaches us that whatever the government runs is overrun by unnecessary high administrative costs. When doctors spend two hours filling out paperwork for every hour they spend with a patient we have a problem. Think of it this way.
How much would your car mechanic charge you if he had to spend two hours for every hour he worked on your car?