PA Hospitals Blame Consumer-driven Health Plans for Financial, Health Woes.

A group of hospital officials in Pennsylvania came out this week with statements saying that consumer-driven health plans are making people sicker, not healthier, and hurting the financial health of hospitals.

According to a news story that originally appeared in The Patriot-News, Carolyn F. Scanlan, the president and CEO of the Hospital and Healthsystem Association of Pennsylvania, along with executives of PinnacleHealth System and Penn State Milton S. Hershey Medical Center, had met with the paper’s editorial board to discuss the impact of the nation’s economic crisis on hospitals.

The paper reported that a major concern of the group was the impact of consumer-driven health plans. Such plans typically have high deductibles and co-pays, making patients responsible for larger portions of bills than under traditional plans.

A goal of the plans is to motivate consumers to spend more carefully, and give them a financial incentive to take better care of themselves so they don’t need as much health care.

But, the story noted, Pinnacle and Hershey Medical Center officials said the plans are causing people to avoid health care.

They cited declines in preventive care such as mammograms, and elective surgeries such as hip and knee replacements that might not be medically necessary, but improve patients’ lives.

The hospital officials reportedly told the newspaper that patients with consumer-directed plans often don’t realize how large their shares of bills will be and that it’s common for patients to cancel procedures upon learning how much they will have to pay.

Another concern of the hospitals is rising charity care and bad debt, the paper reported. Hershey Medical Center has spent $13 million on charity care during the fiscal year that ends in June. Bill Pugh, the chief financial officer at Pinnacle, said bad debt rose 25 percent there in 2008.

There is little doubt that the recession is causing health coverage issues for many Americans, but to blame consumer-driven health plans is simply short-sighted on the part of the hospitals.

The plans that carry higher deductibles may cause people to think twice about seeking elective surgeries – that is what they are intended to do. But there should not be an impact on prevention as most consumer-driven plans pay 100% for preventative services. In fact, the Blue Cross Blue Shield Association and others with considerable statistical data to back them up say that persons with consumer-driven plans are taking better care of themselves than do those with more traditional plans.

There is also no reason to suspect that these types of plans are increasing bad debt to the degree that the hospitals are witnessing. Again, while most consumer-driven health plans carry a little higher deductible, they also include features like Health Reimbursement Arrangements (HRAs) and Health Savings Accounts (HSAs) that help members fund the deductibles with pre-tax dollars, in many cases some or all of these dollars are furnished by the employer. Furthermore, once the deductible is reached these plans usually pay for 100% of covered services as opposed to traditional plans that have long co-payment corridors where the cost of care continues to be shared by the patient long after the deductible has been satisfied.

No, the health plans are not to blame for the woes of the hospitals. Instead, I would suggest that it’s the hospital’s dependence on a system where there is no pricing transparency and where rich benefit plans provide no incentives for the hospitals to become more efficient.

Here’s a news flash: The money is running out. There will be no more first-dollar plans that completely insulate the patient from the cost of the service.

Instead, these facilities need to embrace the change and become more consumer-focused. Lasicks eye surgery is a great example of an elective procedure that is not typically covered by health insurance. Over the years the price has come down considerably and the quality has improved.

Rather than blame a health plan design for their troubles, perhaps these hospitals should spend some time with the Geisinger Health System just down the road from them. As was noted recently in this blog, Geisinger, located in the coal country of Pennsylvania, offers a 90-day warranty on elective heart surgery, promising to get it right the first time, for a flat fee.

Not only does the health system guarantee its work, but heart patients have fared measurably better, and the health system has cut its bypass surgery costs by 15 percent. Today, Geisinger has extended the program to half a dozen other procedures.

As I pointed out in my post about Geisinger, it is disappointing to learn that “best practices” like those being demonstrated at Geisinger are not being embraced by the health care industry.

2 thoughts on “PA Hospitals Blame Consumer-driven Health Plans for Financial, Health Woes.

  1. Marty: I have a slightly different take the on the promise you impute to consumer directed health plans. While I agree that the claims of the hospital executives may be somewhat off-base; there is a message in their statements; and may be a developing trend elsewhere.

    In my experience, “consumer directed health plans” generally have much larger deductibles that traditional group health coverage. The difference is hardly marginal.

    Even one of the more notable private market HDHP proponents, Scott Shreeve, recently complained about obscene premium increases after years of not filing a claim.

    To simply cost shift, i.e., have the patient or member essentially self insure does nothing to redesign the health care system. It merely shifts the financial burden. The literature has considerable accounts of needed medical care delayed if not withheld outright.

    And the research I have seen published to date claim there is no quality differential, and that higher deductible amounts do not discourage access to needed care are preliminary at best, sponsored by the very plans that offer them, and were hedged with author commentary as not necessarily predictive per se.

    Without systemic reform, so called consumer directed health care will be nothing more than a banner for private market special interests to carry. It will not serve a large percentage of Americans in need of care and/or covered access to services.

  2. A real solution is what Geisinger offers. Yet, they are structurally different from most hospital systems/physician networks, i.e., they are an “integrated delivery system” that bundles and aligns risk via their own insurance vehicle.

    They have developed a viable model that works; when you can assume risk for the sicker, older and poorer patients in the risk pool, guarantee outcomes and still make money; you’ve got something working right!

    They have met the Deming test, i.e., they can describe what they do in a process, and therefore minimize the variation gremlin.

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