Category Archives: Economics

Is medical inflation coming back to bite us?

PWC made a pretty big splash yesterday with its projection that medical costs will rise at a faster rate next year than they have in the recent past. The story was picked up by major media and I was on TV last night to discuss it on Al Jazeera’s Real Money with Ali Velshi.

In truth, the story is not so dramatic. The PWC report focuses only on larger employers. Costs are expected to rise around 6.8 percent (versus 6.5 percent in 2014) and most employers are responding similarly to how they have for the past several years: shifting more costs to employees, implementing high deductible health plans, and spending money on wellness programs. These approaches are surprisingly unimaginative and not likely to be terribly effective.

High deductible plans cause patients to be conscious about the first couple or few thousand dollars of costs. After that, they don’t really care since they’ve reached their out-of-pocket max. And high deductible plans are harsh on lower income employees who have a hard time paying the first dollars out of pocket. Upper income employees barely notice the difference.

And wellness programs? PWC didn’t go so far as to endorse this strategy, which is a smart move to preserve their credibility. Some of these programs are nice benefits but it’s awfully hard to find one that is going to reduce medical costs.

What would work better? How about offering employees plans that reward them financially for choosing lower cost, high quality providers?

Even if employers are paying more, things are not necessarily so dire for those buying insurance in the individual market. Average premiums are likely to rise for 2015, and the plans with the biggest market share are raising premiums the most. But thanks to the Affordable Care Act consumers are now dealing with a competitive market in insurance. As long as they are willing to switch plans, in many cases they’ll actually be able to reduce premiums. We’ll see in a few months just how savvy exchange shoppers are.


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

The ACA and part-time employment

Is Lady Liberty coming to kill your job?

Is Lady Liberty coming to kill your job?

The Affordable Care Act requires employers to provide coverage for full-time employees but not part-timers. That sounds like a straightforward and reasonable provision, but as usual the devil is in the details. ACA opponents have taken up the argument that this provision is a “job killer” because it will cause employers to limit employees’ hours, thereby pushing people into part-time roles to deprive them of benefits. That view strikes me as simplistic, since in my experience companies are in business to make money, not to hammer their employees.

I had an opportunity recently to chat with some HR heads from big employers –retailers and restaurants—that employee many part timers as well as full timers. I asked them for their take on the controversy. Unsurprisingly they provided a pragmatic, non-political view of the situation.

Here are the main takeaways:

  • Prior to the ACA, each company had its own definition of full and part time. As a rule they knew who they intended to pay benefits to and who not
  • The ACA is causing them to track hours of part-timers closely, with the goal of not inadvertently having to pay benefits to someone they don’t consider full time
  • The result is that work hours are being spread around more evenly among part-time workers whereas in the past some part-time workers got a lot of hours while others had fewer
  • From the standpoint of corporate HR, this is a good result, because part-timers who are assigned more consistent hours are more likely to stay. This increase in retention is good for productivity and profits. In this case the ACA is reinforcing an HR best practice that companies have started to implement in any case
  • Companies have not been trying to take away benefits from those who had them prior to ACA implementation

It’s arguable that the losers here are the few part-time employees who used to get lots of hours because their managers preferred them. Some of those are likely to make the jump to full time. Others may seek opportunities elsewhere.

These discussions are about the short term. Longer term it’s possible that employers will take the ACA into account when designing the structure of their workforce. Still, it’s just one factor among many.

photo credit: dullhunk via photopin cc

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

Return of the house call

Dodo 2.0

Dodo 2.0

House calls by physicians have gone the way of the dodo bird. It used to be the norm for doctors to visit their ailing patients at home, but that model gave way long ago to office based practices, a setting which enables a physician to see many more patients than would be possible in the old time model. If anything it would seem like house calls by physicians would be even less tenable in an era of team-based care, which seeks to leverage the scarce physician resource with mid-level providers, nurses, and administrators.

And yet at least a few solo physicians are making house calls again, and a column in HealthLeaders argues that it could even make sense for hospitals to offer house calls as a new service line.

I like the logic.

The office setting is convenient for the physician, but it’s inconvenient for patients, especially the sickest ones, for whom getting out of the house and into the office is a major ordeal, especially for those who require help with transportation and logistics.  In an era where prevention of hospital admissions and readmissions is seen as a key strategy to reduce healthcare costs, and where accountable care organizations are focused on outcomes rather than volume, there may be a new role for doctors in the home. And indeed, a doctor featured in the HealthLeaders article discusses his ability to keep even quite sick patients out of the hospital.

Diagnostic and information technology is evolving, too, in ways that help physicians be productive on the road. In fact the “Bring Your Own Device” phenomenon of doctors bringing their own iPads into the hospital demonstrates that physicians don’t have to make any information technology tradeoffs when they leave the office. New portable ultrasound machines are another example of technology that can easily be brought into the home.

When a physician visits a patient at home he or she can gain a much better sense of the overall context for the patient’s health. An empathetic, astute, holistically oriented physician should be able to turn that information into a better care plan and prevent unneeded escalation to an acute setting.

Another potential benefit is that patients can avoid sitting in a germy waiting room and potentially being exposed to dangerous infections as a byproduct of their doctor visit.

Of course, much of the same logic that applies to house calls for doctors applies to nurses as well. But it’s reassuring that the economics support the reintroduction of such highly trained professionals into the home.


photo credit: Bibi via photopin cc

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


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.


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