Category Archives: Economics

North Adams hospital to close: Here’s how it fits into the bigger picture

I’m quoted in the Springfield Republican today about the closure of North Adams Hospital and the implications for healthcare in Massachusetts more broadly. The article draws heavily on a report we contributed to about the challenges facing lower and middle income communities as a result of how healthcare is financed in this state.

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By healthcare consultant David E. Williams of the Health Business Group

Health Business Group in HealthLeaders

HealthLeaders (‘Vicious Cycle’ Flagged in MA Hospital Financing Disparities) reports today on a white paper we contributed to about the impact of hospital price differences in Massachusetts.  We built on previously publicized price data to highlight the implications for middle class and lower income communities: they effectively subsidize their richer brethren who pay the same premiums but get their routine care from pricier providers.

One of the things that surprised us is that Medicaid managed care plans, which are hired by the state, pay teaching hospitals much more than they pay community hospitals.

The report includes four recommendations to address the disparities:

  1. Require high-cost providers to hold cost growth below the general benchmark under Chapter 224 of health reform
  2. Consider each provider’s payer mix when setting Medicaid (and possibly commercial) rates
  3. Implement a Medicaid Accountable Care Organization (ACO) to contain costs and encourage quality, rather than relying on cutting unit prices
  4. Encourage commercial health plans to design products that reward members who use low cost providers

I’m quoted in the article.

By healthcare consultant David E. Williams of the Health Business Group

15 minutes could save you… nothing in medical bills

Two medical bills arrived in the mail over the weekend. One requested $525 for a specialist office visit, another $250 for a routine colonoscopy at a hospital. Since I don’t think we owe for either of these and the numbers are pretty big I decided to tackle them.

The specialist bill was odd because it didn’t appear that the insurance company had been billed. We go to this specialist frequently and have had the same Blue Cross Blue Shield of MA plan for a long time so I wondered what happened. After going through the phone tree, being kept on hold and listening to a recording about “higher than normal call volume” I was connected with a customer service rep. She said, “actually looks like insurance just paid. Your balance is $5.” On the one hand I was happy but on the other hand if I had just waited for the next bill it sounds like I would not have had to call at all. I’m still not sure why they sent the bill to me without any indication of billing the insurance company.

For the colonoscopy I decided to call my health plan first to check whether I had full coverage. They had “higher than normal call volume,” too, which I think must be normal. They were surprised to hear about the request for $250 but then looked at the bill and said it had been submitted as an outpatient surgical procedure (for which I would owe $250) rather than as a routine preventive screening.

I then called the hospital and had a long wait on hold, although they didn’t say anything about it not being “normal” call volume. I explained the situation, the rep then went to do a bit of research and came back to tell me it was billed properly –but not as a routine colonoscopy– and could I please pay the $250. I said no, hung up the phone, and spoke to the patient who assured me it was in fact a routine, every 5 year screening.

Not exactly what to do next, I decided to send an email to the hospital (conveniently, there is a billing email on the bill) presenting the information I have. I was happy to receive a reply within one business day letting me know they were checking with the physician to look into it.

So bottom line: I spent about 45 minutes on these bills and don’t have a lot to show for my effort so far. On the other hand I have helped drive up administrative costs by prompting action from my specialist’s billing office, health plan customer service, hospital billing office and now a doctor.

By healthcare business consultant David E. Williams, President of the Health Business Group

CVS and cigarettes: Asking the wrong follow-up question

After CVS, what's next for smoking?

After CVS, what’s next for smoking?

CVS’s decision to stop selling cigarettes is a smart one. Cigarette sales are incompatible with the company’s positioning as a health care provider. With the reduction of smoking rates, growing restrictions on where people can smoke, and increasing numbers of localities banning cigarette sales in drug stores it will probably make business sense over time as well.

I’ve been surprised that so much of the commentary on CVS’s decision has focused on what else the company should stop selling. Candy, gum and soda are bad for you, too, so maybe CVS should stop selling that. And the list goes on from there –maybe some of their toys are dangerous, for example.

Asking what else CVS should stop selling is asking the wrong question. Cigarettes cause an order of magnitude more harm than those other categories and are more addictive. That’s a good reason  to stop selling smokes without having to stop selling other things that aren’t 100 percent healthy.

I’d like to see a bigger emphasis on reducing the availability of cigarettes more broadly and making them more expensive.

Cigarette taxes vary wildly by state. Missouri is the lowest at $0.17 per pack and New York is the highest at $4.35. (New York City tacks on an additional $1.50.) The federal tax is $1.01 and some places add other taxes including state and local sales tax. The average retail price for cigarettes is about $6, so tax represents a big part of the price.

These big differences provide a major incentive for smuggling. Although no one knows exactly what percentage of cigarettes are smuggled, it’s a lot.

Indian reservations are another source of low-tax cigarettes. High tax states like New York have seen considerable friction as non-Indians have sought out on-reservation stores for bargain prices.

The effects can be insidious. A friend told me recently about a public housing project in his area where a man goes door to door selling cigarettes he obtains cheaply on a nearby reservation. If the price were higher the rate of smoking in this price sensitive population would be likely to decline.

I’m not proposing a specific mechanism to address these challenges, but I would like to see the low tax states raise their tax rates,  more enforcement effort devoted to stopping interstate smuggling, and more aggressive action to reduce the availability of reservation cigarettes. Although this will never happen, one approach could be fore the federal government to charge a tax of $6 minus whatever the states charge. That would provide an incentive for every state to raise the tax to a uniform, high amount.

photo credit: The Guncle via photopin cc

By David E. Williams of the Health Business Group.

Uber: An antidote to taxi corruption

Taxi service in the Boston metro area is pretty bad. Cabs are still booked by phone. The dispatcher lacks caller ID so the street address and name have to be dictated. Cabs often show up late or to the wrong street. In speaking with cabbies over the years I’ve learned that one of the problems is that dispatchers play favorites, in particular by awarding jobs to those drivers who pay them bribes. One of the results of that is poor service for customers who are not always sent the most convenient cabs. I’m not the expert on corruption in the cab business but you can read more about it in the Boston Globe if you don’t believe me.

So I’m grateful for the Uber service, which provides a more convenient, less expensive service that in my experience has also been more reliable and friendlier than the taxi alternative. (If you don’t know, Uber is a smartphone app that allows passengers to request private cars, cabs, SUVs or black cars and to pay automatically.) Interestingly –and not surprisingly to me– I am encountering UberX drivers who are former taxi drivers for the taxi companies in my town. When I ask them what they like about Uber they mention the ability to determine their own hours –but when I push them a little more they open up about the lack of corruption as another reason to participate.

Now, not every one is so sanguine about Uber. (See Why Does Uber Suck Now?) for a different take by one of my neighbors. I agree that Uber staff have been a bit sleazy, at least in New York, and I’m sure that experience with drivers will be variable. But I don’t object at all to surge pricing. As long as it’s disclosed it should bring more cars on the road when there’s demand for them. (You can always take a cab if you don’t like it.)

At least for now, Uber is giving out its venture capitalists’ money to build up the business. If you use my invite code: psx4h to join Uber you’ll get a $20 credit and so will I.

If you’ve read all the way to this point and are wondering about the connection to health care, I’m sorry to say there isn’t one.

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By David E. Williams of the Health Business Group

Health Business Group assesses economic impact of Steward Health Care System

Steward Health Care System is having a major impact on the economy of Eastern Massachusetts. An analysis by Health Business Group, where I am president, demonstrates that Steward directly and indirectly supports approximately 33,000 jobs and was responsible for $8.4 billion in economic impact in 2011 and 2012.

The full report is available for download.

Cut-rate concierge medicine? One Medical resorts to discounting

Good stuff, cheap

Good stuff, cheap

I have mixed views about concierge medicine. On the one hand I like the idea of higher service levels for patients and the ability for doctors to practice medicine the way they think is right without feeling like hamsters on a wheel. But overall I’m pretty skeptical.

  • I’m worried that concierge medicine may draw in physicians who are more concerned than average about their own lifestyles. My non-concierge doc works 80 hours per week and answers my electronic messages right away for no extra charge
  • It’s far from clear that the best primary care docs are concierge docs
  • Many concierge offices are just like regular primary care offices in that they make use of physician extenders: nurse practitioners and physician assistants. I have nothing against these professionals but it’s not what I’m looking for in a premium offering
  • The practices may make primary care more convenient and comfortable but I’m skeptical that they achieve anything special for patients who are really sick and end up in the hospital or under the care of a specialist

It is interesting to see just how inexpensive concierge care has become. One Medical Group in Boston charges only $199 per year for its concierge services. To put that in perspective it’s less than one percent of what my firm pays in premium for family coverage. And yet even at that rate the company seems to be having trouble attracting customers.

I had to chuckle when I received a brochure in the mail yesterday offering a $50 discount –actually a Whole Foods eGift Card– for new customers. Apparently even $199 is too expensive to draw patients in.

Maybe another way to look at it is that regular primary care in Boston is pretty darn good. You can get a same-day appointment if you need it, the doctors will spend the time with you when it’s called for and will go out of their way to help you get in to the proper specialist when required. Many will communicate by electronic message and return phone calls.

I’d actually be happy to pay an extra $199 or even more for a real improvement. And if my current doctor switched to a concierge practice model I’d go with her and pay more. But the concierge model as a whole has a lot to prove before it really catches on.
photo credit: Daquella manera via photopin cc

By David E. Williams of the Health Business Group.