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The Healthcare Industry: Thriving on Disconnect (Part I)

Part 1 of 4: The Results of Dysfunction

We are up to our necks in charts and graphs prepared by academic experts, government regulators, and industry marketing hype—all addressing or attempting to obscure, based on their various agendas, how the healthcare industry works in relation to the  money in and money out.

It is incredibly obvious that dysfunction reigns. Transparency can lead to common knowledge that must be freely available to everyone in order to make meaningful changes.  Herein lies the rub. In order to “spill the beans” about this dysfunction one would need to be above the fray and/or have nothing to lose. 

The only logical explanation for the illogical way the industry operates is the lack of a centrally defined reason for its existence that is shared by all who are involved.

Any dysfunctional process that does not operate in a vacuum needs at least one enabler.  In the case of the healthcare industry, there are several:

  • There is an astounding lack of transparency. 
  • Patients very seldom know, and usually don’t care, what the total cost of services provided will be for any given medical procedure.  
  • Healthcare services are not, and will never be “free of charge.”  When someone gets medical treatment, or birth control pills, someone pays … period.  The only question would be, “Who pays?”
  • Contrary to what may be popular belief, there is not a never-ending pile of money somewhere that can be used to pay for healthcare.   

There is currently very little incentive to disrupt the status quo.

Although various segments attempt to portray others as the bad guys, there appears to be no clearly defined good guys vs. bad guys situation here when looking at the system as a whole. I’d like to illustrate this point with a composite of everyday occurrences:   

Person A buys an insurance policy from Agent B.  Person A may not disclose all medical conditions.  Agent B may propose the plan that makes the most commission when there were better options for Person A.

Insurance Company C receives premium from Person A, and because Agent B did not explain the exclusions properly at the time of sale, Person A does not get covered for treatment of a condition that was known by Person A but not disclosed when Insurance Company C orders medical records.  So Insurance Company C receives a black eye and a department of Insurance complaint. Or, Insurance Company C denies a valid claim after finding out about a non-related condition that was not disclosed.  Person A is in a tizzy and says, “Premiums were paid. Now pay all my bills.  I don’t care where the money comes from. It is not my problem.”   

But wait. There’s more …

Provider Hospital D is practicing what is known as cost shifting, so the procedure was billed at several hundred percent of what the same procedure would cost another patient who has a different class of insurance. In addition, the billing does not match the actual service chart, resulting in 5 to 20 percent overcharges. Provider physician E charged double the normal and customary amount.

Enter the knights in shining armor to save the day … sort of.  These folks treat symptoms, and by their very existence, they validate the severity of this industry’s dysfunction.

As a result of the status quo, we have some sub-industries (also consuming premium dollars).  “Networks” negotiate discounts (from retail, whatever that is) between payers and providers. 

There are companies that make their living auditing provider billing and others that produce information to determine what is normal and customary for the geographical area where the procedures are performed. Also, “case management” companies help by working with a usually disconnected bunch of providers to prevent duplications and unnecessary charges. Pharmacy benefit management companies were created to help keep drug costs down.  Some still do.

Some players are not directly involved in the ongoing squabble for a share of premium dollars, but do have an impact on premium determination.

Government agencies (state and federal) have enormous influence on healthcare.  They also fit into the category of both good and bad when we look at the reason the industry exists.

Lawyers probably are the most likely to fit into extremes of good and bad because they are a means to amplify, but not fix, the core problem.

In conclusion

The enablers mentioned above feed on each other. The main culprit appears to be lack of transparency.  It is incredibly obvious that legislation has not worked very well here.

As noted above, there is little incentive for active players to change the system. To do so could mean less revenue, or worse, disclosure of other hanky-panky.  

It is time to step up to the plate and “spill the beans.”

About John Oliver

John Oliver
John Oliver has spent more than three decades in development and implementation of internal business workflow systems designed to provide shared access of information. Implementation includes working with operations leadership to match what computers do with the operational requirements of companies. Part of company operations requires observing and aiding in interactions with outside vendors and customers. The past 20 years have been focused on various aspects of the Healthcare Industry and observing how stakeholders interact with each other.

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