Introduction and Episode Overview
[00:00:00] Stacey Richter: Episode 472, "The Well Honed, Three-prong Hospital Playbook to Maximize Revenue From High-Cost Claimants". I'm gonna call this a companion to the high-cost claimant episode from last week. Today I am speaking with Dr. Eric Bricker.
The Financial Impact of High-Cost Claimants
[00:00:34] Stacey Richter: So let's continue themes from prior episodes, most particularly the episode from last week with Dr. Christine Hale- which was also about high cost claimants and just the impact that they have on the wallets of self-insured employers and any other plan sponsor.
We could have 0.5 to 1% of total plan members costing upwards of 40% of total plan dollars. And I bring this up just to highlight the magnitude of the money here. In that show from last week, we take the issue of high cost claimants from the standpoint of the plan sponsor.
To listen to this episode or read the show notes with mentioned links, please visit the episode page.
Hospital Strategies to Maximize Revenue
[00:01:12] Stacey Richter: Today, however, we're gonna be looking at this from the standpoint of the hospital system. If I were gonna come up with a motto for the show today with Dr. Eric Bricker, it's that all costs are somebody else's revenue. And when it's revenue and profit of the magnitude that we're talking about with many high cost claimants, it starts to be less of an accidental, oh wow, how did that CABG patient wind up in our clinic? What are the odds.
And more of a whoever is not steering patients is letting someone else with a big profit incentive lock down that steerage in deeply embedded ways.
But before I get too much further, let me tell you how this show came to be, and frankly, it's beginning to get a little repetitive. But in my defense, Cora Opsahl works like a block for me, and apparently we are both not opposed to happy hour. So Cora started telling me that right now you have some pretty astute plan sponsors who know a thing or two about the magnitude of hospital spend.
The Role of Plan Sponsors and Negotiations
[00:02:40] Stacey Richter: Total hospital costs are usually around half of most total plan spend. So sure you have plan sponsors doing direct contracts or really scrutinizing underlying hospital charges. Except in contract negotiations with plan sponsors either doing direct deals or doing hospital RFPs through their carrier, or just even negotiating with carriers and looking at the underlying hospital costs, hospital charges to plan sponsors in the aggregate can go up, while hospitals are still able to say, I'm gonna be net, net 0% increase across the board, or even I'm gonna do a decrease they are able to show lower prices. Wait, what? Yep, that's happening.
I was like, seriously, how are they doing this. Cora said, You should get Dr. Eric Bricker back on the pod to explain exactly how hospitals are going about this. Dr. Bricker did a video about it, which I will link to in the show notes, but the show that you're about to hear digs in hard on the playbook as well. But I'm getting ahead of myself.
So anyway, after I talked to Cora, I firm up a plan with Dr. Bricker to make a return appearance on the pod. And wouldn't you know it that exact same day? Kurt Christie messages me and says, you should have Dr. Bricker come back on the pod and talk about how hospitals profit from high cost claimants.
So yeah, love it when a plan comes together, especially because so many of you in our tribe have at various points asked for a return appearance of the one and the only Dr Eric Bricker. So here you have it.
Dr. Eric Bricker's Insights on Hospital Revenue
[00:04:34] Stacey Richter: You'll need to listen to the show to get to the bottom of the well honed at this point, contracting strategy that some big consolidated hospitals, Centers of Excellence, if you will, deploy to maximize revenue from high cost claimants. It's like a three-pronged playbook from what I have been gathering, but yeah, if you are on the hook to pay for hospital claims, do be aware of this. It is material.
Slight spoiler alert, but the playbook has to do with how hospitals negotiate with plan sponsors on their provider stop loss contract provisions. It also has to do with how they choose to consolidate and how they engineer their charge master. Sounds boring, but it's really not if you are on the hook for millions and millions of dollars as a result.
Dr. Eric Bricker's Background and Introduction
[00:05:15] Stacey Richter: Okay, so do I really need to introduce Dr. Eric Bricker? Dr. Bricker began as an internist. He also worked in hospital finance. Then he started one of the very first, actually healthcare navigation companies and also kind of out of necessity, one of the first get serious about transparency initiatives.
Dr. Bricker says, when you help 1.8 million people navigate the US Health System for 11 years, you'll learn a thing or two. So after he sold Compass Professional Health Services, he decided he'd use what he knew to help set people straight.
And yeah, go to Dr. Bricker's YouTube, channel AhealthcareZ for sure if you want to learn anything about the A to Z of healthcare.
My name is Stacey Richter, and this podcast is sponsored by Aventria Health Group.
Back by popular demand. Dr. Eric Bricker, welcome to Relentless Health Value.
[00:06:02] Dr. Eric Bricker: Well, Stacey and all your listeners, thank you so much for having me back.
Deep Dive: Hospital Revenue Strategies
[00:06:05] Stacey Richter: What I wanna talk to you today about are high cost claimants, and we recently had Dr. Christine Hale on the pod talking about this from the plan sponsor side. But I wanted to dig in on the hospital side today.
[00:06:19] Dr. Eric Bricker: That's right. And so from a hospital revenue perspective, hospitals in some ways are very much like casinos in that casino revenue and casino profits are heavily driven by the high rollers or whatever, sometimes referred to as the whales, right?
So you walk into a casino, you might see a whole bunch of people playing slot machines or sitting at a $5 blackjack table, like that's not where the casino makes its money. The casino makes its money on these high, you know, a very small number of gamblers that gamble, huge sums of money. And then they lose that money and that's where they make all their revenue and all their profits.
So everybody else is kind of like, uh, window dressing for the high rollers. And so in the world of healthcare, it's actually very similar where hospital systems make gobs of revenue and their profit margin off of these incredibly expensive patients. Whereas a lot of the other things, whether it's the office visits or the minor procedures, like that's not really where they're making their money.
They're making their money off of the patients who are sort of the equivalent of the whales.
[00:07:15] Stacey Richter: And that corresponds actually with plan sponsors. Who, you know, like you talk to almost anybody and they will say it's not like. 20% costs 80%. You know, it's not the Pareto principle, it's like 0.5 to 1% are 30 or 40% of total plan costs I've heard, or 5% of members are 50% of total plan costs. You you hear numbers like this.
[00:07:41] Dr. Eric Bricker: That's right. And I've had hospital executives say that, look, in order for them to hit their revenue numbers for the month, they basically needed like one or two whales a month. And if they couldn't get those one or two whales, there was no way they were gonna hit their numbers.
And if they had three or four whales, they would totally blow through their numbers and they would do great. So it was, it was all driven by those handful of, now we're talking, a patient stay in excess of a hundred thousand, 200,000, half a million dollars, a million dollar hospital stay.
So this is where the stories come in. Okay. Is that the hospital systems specifically design their contracts with the insurance carriers for certain types of whales. You can think of it like certain types of card games, right? So one casino might specialize in craps and another casino specializes in blackjack.
And so what they do is they negotiate what is referred to as a provider, stop-loss, contract provision. And what that does is when the hospital contracts with the insurance carrier, they say, look, you can pay us a fixed case rate of let's say, $40,000 for a coronary artery bypass graft. But as soon as our billed charges are in excess of $200,000, then you're just gonna pay us 70% of billed charges.
You're just gonna get a 30% off of billed charges.
[00:08:55] Stacey Richter: Okay, so let me, let me just stop you there and just make sure that I understand. First of all, we're talking provider stop-loss, which has nothing to do with plan, sponsor stop-loss. This is a whole other thing.
[00:09:06] Dr. Eric Bricker: That's right.
[00:09:07] Stacey Richter: And it's more of a contracting provision, it sounds like, than like an insurance, anything.
So this is kind of like the hospital system getting some assurances from carriers, whoever they're contracting with. And basically what they're saying is like, okay, so say we're doing a procedure or a DRG, whatever it is, and the normal bill charge is 40k, but sometimes things go horribly wrong with patients.
So we, the hospital system need to ensure that we're not, like, things aren't going horribly wrong and we're still getting this only 40k.
[00:09:44] Dr. Eric Bricker: I gotta pause you right there. Because there's a second part to the strategy. And the second part to the strategy is for the specific types of services where the hospital has negotiated that stop-loss contract to say, Hey, as soon as we, you know, go past $200,000 of billed charges, then we start getting paid 70% of billed charges instead of the $40,000 allowed amount.
They then specifically structure their charge master for that particular service so that every time they perform that service, they blow through the stop-loss amount and they get paid the 70% of billed charges every time. So the hospital doesn't like just occasionally enact the stop loss provision.
They always enact the stop loss provision. So it's not like the CABG went horribly wrong. The CABG went perfectly normal, but they structured their charge master so that they're never getting paid 40 grand for that. Instead, they're gonna be paid 140 grand, which is 70% at 200 grand.
[00:10:44] Stacey Richter: So it is definitely a two step process.
[00:10:47] Dr. Eric Bricker: That's right. So it's those two things combined. It's the stop-loss provision. And then it's also the changing of the charge master. Now is there, there's a third part.
[00:10:55] Stacey Richter: Let me just recap before we get to number three.
[00:10:57] Dr. Eric Bricker: Go for it. Recap.
[00:10:58] Stacey Richter: So here's the hospital playbook to make sure the hospital has casino whales that are very profitable, even if there's a tough plan sponsored negotiator trying to hold the line on how much can be billed for any given DRG.
So playbook, step one is, negotiate the stop loss provision with carriers or whoever happens to be negotiating with. Come up with a cap for that particular DRG service line item, whatever it is. But then go back to the shop after that provision gets inked. Now it is in that hospital system's, very much financial best interest to ensure that that cap gets breached early and often as possible, right?
Like, I mean, it is inarguable that there is now a financial incentive to hit that stop-loss threshold as often as possible. So if you've got finance peeps in the room, there's all kinds of different ways that to make sure that that's gonna happen. Like one is to switch around the charge master so that the charges that accrue to that code are higher.
Like you can mess around with the way the finances work, so that, as you said, it happens often enough, every time. Significant percentage is not an accident, that cap is breached. At that point, as you just said, the charges revert to 70% of build charges or whatever. And because the charge masters are higher in that, it's pretty easy to consider or understand how the charges get high really fast.
So now you've got hundreds of thousands of dollars of billed charges that a plan sponsor or carrier is paying a percentage of.
[00:12:39] Dr. Eric Bricker: That's right, and more specifically in the numbers that I used in that example, I literally have talked to the head of benefits for a major self-funded employer. Where they had $800,000 CABGs.
So I, I used 140,000 as the allowed amount in my example, and they had an $800,000 CABG. Did not have complications because of what I just described.
[00:13:02] Stacey Richter: Yeah. That's kind of incontrovertible that if you have kind of a normal, I mean, it would be one thing if there was all kinds of things going horribly awry.
But it sort of speaks for itself when you look at the clinical case and it's pretty normal and yet it costs the kind of dollars that we're talking about here.
[00:13:19] Dr. Eric Bricker: That's right. And the third piece is then the hospital knows that they have that contract and the hospital knows they have the charge master structured in that way.
The Importance of Steerage in Healthcare
[00:13:29] Dr. Eric Bricker: So then they create steerage of patients with, in this case, cardiovascular issues to their hospital system. And they do that by, what some hospitals have done is they've actually gone out and they've bought the majority of cardiology practices in that community.
Now, they didn't buy ENT practices. They didn't buy OBGYN practices. They specifically bought the cardiology practices. Because, they wanted the cardiology patients so that if a patient needed to have a CABG, that they had it there. And then they would also have either relationships with primary care groups or they would actually own the primary care groups so that when the patients were seen in primary care, they were referred to the hospital's cardiologist who then referred them over to the hospital's cardiac surgeon, who then performed the CABG.
So that whole mechanism of steerage is very intentional. So I, I sort of jokingly say if an employer doesn't steer their patients, doesn't steer their plan members, their plan members will be steered and they will be specifically steered by the strategies of the hospital system.
[00:14:30] Stacey Richter: And I definitely wanna circle back on, on what you just said, that someone's gonna steer your patients.
[00:14:35] Dr. Eric Bricker: That's exactly right.
[00:14:36] Stacey Richter: And someone's gonna steer the members. That is a really important point.
[00:14:40] Dr. Eric Bricker: And everything I just described is just for one hospital system in a particular metropolitan area. Now you go across town to another hospital system and they have not targeted cardiovascular services and CABGs and aortic valve repairs like this hospital A has done.
Instead, hospital B is like, you know what, we're really gonna hang our hat on trauma and we're gonna negotiate super high reimbursement rates on all trauma related services, whether it's inpatient trauma, surgery, or even just activating the trauma code in the ER.
And as a result of that, we are going to build super gorgeous ERs that are well lit. And you can almost tell this because the sign and the location of the emergency room on the hospital will be front and center. It'll be huge. It'll be gorgeous. They'll have like, you know, figurative chandeliers hanging down. Right. And then they also form relationships with all of the municipality, ambulance, fire departments for, so that the ambulance drivers take their people there.
And then they'll also form relationships with other ambulance, private ambulance companies as well too. And they'll designate themselves a level one trauma center so that they can get all of that in so that when they do have the traumas that that trauma's gonna, again, similar to that $800,000 CABG, instead, this hospital B is going to have an $800,000 trauma situation.
[00:16:00] Stacey Richter: Okay, so we got a 1, 2, 3 punch here from a strategic perspective. You know, first get the stop-loss provision with local, whoever you're negotiating with, carriers plan sponsors. Step two, tinker around with your charge master, tinker around with build charges so that it becomes as streamlined as possible to exceed the stop-loss provision cap.
Then thirdly, all right, well now you got the, I mean, there's a reason they call it the cash lab, the cardiac cash lab, right? So like now, and I, I don't mean to be cynical, but that's a thing out there. So you know, like now you've got the me mechanism in place. Now you can strategically acquire local indie providers or stand up out whatever you're gonna do to steer as much as possible.
Like you become the center of excellence for like whatever it is. I guess this is kind of the underbelly of, of a center of excellence so that you can get as many patients as possible to run through that service line where that stop-loss provision is in effect. This is a very thoughtful approach that does it sound like require a lot of coordination and kind of thought, but if you can put the whole thing into place, then you've basically set up a very well run financial plan here that sounds like is often very successful.
[00:17:27] Dr. Eric Bricker: And hospital systems hire outside consulting firms to tell them exactly how to do this.
[00:17:31] Stacey Richter: Yeah, it sounds like something that a consulting firm would be, would have a playbook for.
[00:17:37] Dr. Eric Bricker: And there's very big name consulting firms that make a lot of money in fees showing hospitals how to do this.
[00:17:41] Stacey Richter: Yeah, and and to your point, you're gonna have hospitals in the same area who, for whatever reason, they choose whatever service line or DRG or whatever it is, they're thoughtfully picking something.
It's probably gonna be different. It behooves someone interested in, in making as much profit or money off of this as possible to pick something different than the other local hospital.
Hidden Costs and Employer Strategies
[00:18:04] Dr. Eric Bricker: The other dynamic that is important to to keep in mind is that this is all done in a way that is hidden from employers.
And the reason the way that it's hidden, is because the insurance carrier then turns around and they have to tell employers in their area what the “average network discount is” that they have. And they'll be like, Look, we get a 50% discount, or one of the numbers that's frequently quoted is this RAND study that said that the commercial allowed amounts are approximately 240% of Medicare.
Right after you take the discount off of bill charges, you get the allowed amount, and that allowed amount is about 240% of Medicare. Now, the problem is, is that that study and that, that statistic is based upon the average allowed amounts in the marketplace, not the average, based on the volume of patients going through those prices.
So what I just described with the $800,000 CABG, that's like 1200% of Medicare. It's more, it's even more than that. But, it's offset by all these other services like dermatology and ENT and labor and delivery that might be set much lower at only like a hundred percent of Medicare or 50% of Medicare.
And so if you were to average, well, it's, it's only one. There's only one CABG price, and we've got a whole bunch of maternity and pediatric and ENT prices over here. So when you average it all out, it's only 240% of Medicare. But what they don't say is that they've driven so much volume through that astronomically high that the actual amount paid is not 240% of Medicare. It's closer to 400 or 500% of Medicare.
[00:19:56] Stacey Richter: So understanding what you're saying there, no one's looking at the volume of patients that are hitting any given code when they're saying 200, it it's, it's an aggregate number.
[00:20:05] Dr. Eric Bricker: Correct.
[00:20:05] Stacey Richter: And it's just like if you can have 7,000 maternity codes or derm codes or whatever, like there's a lot of codes in those code books, so you can have thousands of codes elsewhere. This CABG code is one code.
So it could be, like you said, thousands of percentage points over Medicare, but because it's only one code, it gets averaged out by all of those thousands of other codes.
[00:20:34] Dr. Eric Bricker: That's exactly right.
[00:20:35] Stacey Richter: Got it. I can certainly see why this isn't something that a carrier would wanna be underlining with an employer.
[00:20:44] Dr. Eric Bricker: They do not give their customers that level of detail.
[00:20:46] Stacey Richter: Well, I can see like A, if you let the hospital do this, a carrier can claim to have lowered the percentage over Medicare or whatever because what is actually going on is really unclear. So you could have plan sponsors who are like, oh, well thank you because there's a missing piece of this equation.
But also like a lot of times, as we know, some carriers who have Medicare advantage lines are using commercial lines as their negotiating leverage. So if you let this go at the negotiating table, then that also could probably enable a carrier so inclined to get a lower Medicare Advantage rate.
[00:21:23] Dr. Eric Bricker: This is a super important point, Stacey. So all of the machinations that I just described, employers, rightly so come back to me and say, but the carriers are so big and powerful. Why do they let the hospitals get away with this?
Like, I won't name carriers. But look, they have such huge, dominant places in the marketplace. Why don't they use that market power to demand better rates from the hospitals? Or why don't they prohibit the hospitals from negotiating these stop-loss contracts provisions at all? They don't have to accept them. Why don't they just say no? And the reason why is because those same carriers also have a completely separate business that is Medicare Advantage.
And Medicare Advantage reimbursements to hospitals are only right about at Medicare, okay? So you've got commercial insurance that's, you know, 2, 3, 4, 5 times Medicare. Whereas Blue Cross United, Cigna, Aetna are really only paying the hospital like the equivalent of the Medicare rates. And so those hospital systems are like, look, that is super low. The only way that we're ever going to accept Medicare for your Medicare Advantage members is if you give us super high reimbursement on the commercial folks.
And the carriers are more than happy to do that because you gotta remember, over 60% of commercially insured lives in America are self-funded, so the carriers are not taking risk on it. So they essentially are sacrificing the self-funded plans and the self-funded budgets, so that they can maintain super low reimbursement on their Medicare Advantage side.
[00:23:05] Stacey Richter: What should a benefit consultant be doing here? You know, and maybe it's the, the same thing that a plan sponsor should be doing, and I have a couple of more questions for you, but like, this is obviously a loophole. We like to think that carriers and and hospital systems are on opposite sides of the table and the carrier is fighting the good fight.
But there is certainly cases where there's some things going on where the carrier and and the hospital system are aligned. Let's just say. Knowing this, because this is news we can use, how do I think this through as I'm contemplating my carrier contracts maybe, and or what should I be expecting of my benefit consultant?
[00:23:49] Dr. Eric Bricker: It's a great question and so really your healthcare costs as an employer are, as you said earlier in our conversation, are really driven by the high cost claimants. So it's like, what? What are you gonna do about your high cost claimants? So if you're an employer sponsored health plan, it's like you wake up in the morning, what's the first thing you need to think about your high cost claimants?
You're eating lunch. What should you think about your high cost claimants? You're going to bed at night, what should you think about your high cost claimants? Okay, so fine. If you know that you have an existing network that is going to just shellac you on your high cost claimants, this is where some employers are saying like, look, we're gonna move to direct contracting.
And we're gonna take certain services and listen, this is what Walmart has been doing for over 20 years, okay? This is, this is not a new thing. And believe me, if there's an employer out there that understands healthcare, it's Walmart. Okay? I've spoken to those people, like they know what they're doing and, and they have been working with direct contracts.
Now, the key to direct contracting is there's, there's several keys. Well, first key is one, you have to do it for elective services, right? You're not gonna do direct contracting for appendicitis, right? Because what are you gonna do? Put 'em on a plane and, and get 'em over to the direct contract for the appendectomy?
No, you can't do that. And so that's where it needs to be for elective services, and that's where they have traditionally focused on elective orthopedics as the low hanging fruit. So the, the major areas are for Ortho Spine, which also includes a neurosurgery spine, and then for your total knee and your total hip implants, because those are almost never in emergencies. The other big area is then with cancer care, and so that's where Walmart also has direct contracts related to cancer care as well.
Now the step before that, that also needs to happen is, is that there needs to be steerage by the employer into those direct contracts.
[00:25:33] Stacey Richter: Just circling back, this is why you were saying earlier like, if a plan sponsor isn't making the effort to steer their patients, someone else is gonna do it.
And, and I, I think that is something to say with a huge underline that there's a lot of financial vested interests afoot here. A lot of them. So everybody else has and understands what the opportunities are relative to steering patients. And if a plan sponsor isn't having some sort of action plan, then as you said before, patients are gonna get steered just not by you.
[00:26:06] Dr. Eric Bricker: That's right. And really the number one steerage mechanism for patients, of course is their doctor. And so that's where employers that have direct contracts have historically not done as well as they could with them because all they did was use the pre-cert process to be like, oh, we see you're getting a prior authorization for a, a knee replacement.
If you change doctors from Dr. Jones and you go over here to our direct contracted doctor, then it'll be zero out-of-pocket cost for you. And that actually had a lot of friction with the patients because it's like, well, I already saw this orthopedist and I liked him or her, and I already have kind of the inertia of going in that direction.
So even if you're offering me zero out of pocket cost surgery, like I don't know if I really wanna do it because the train's kind of already left the station. And so that's where the employers that have put in onsite near site clinics and use direct primary care, use those primary care physicians to then steer the members before they even need the surgery.
Does, does a primary care physician know if you need spine surgery or not? No. They don't know. They're like, well, you probably need to be evaluated by a neurosurgery spine person or an orthopedic spine person. Let's at least refer you to that doctor for evaluation that's already part of the direct contract agreement. So that if you do actually need the surgery, you've already been set in the direction of more cost effective care as opposed to trying to change things mid-course.
[00:27:30] Stacey Richter: And I would direct anyone to listen to the Matt McQuide episode from a few weeks ago because he talks about exactly this, that what it boils down to, primary care and the decimation of primary care in this country is, and what is happening right now is kind of a direct consequence of this. It's all about trust and it's all about relationships.
And making sure that that trust and relationship has been set up prior to the moment in time when someone needs a lot of help trying to navigate the healthcare marketplace and get the right care at the right time. There's a lot of talk about, well, patients won't engage. Yeah. Because if they won't engage with someone, they have no idea who they are.
It's just this phone call from some unknown entity trying to get them to, they already have a relationship as you just mentioned, you know, with someone somewhere, right? So you're trying to trump an existing relationship, like this just random person that came out of nowhere.
So the point that Matt McQuide made, and I think, Dr. Scott Conard has been saying this for a long time as well, you say this all the time, you have to get these trusted relationships set up in advance so that when the moment in time where it really matters happens, that patient has someone that they know, they like, they trust and for good reason.
Right, I'm saying authentically so that they can get help in this really critical moment. And, and the point that you're making is it could be MSK, neuro MSK, it could be oncology. Those are really critical points in time if you don't have the primary care doc hooked up and patients in the know ahead of time, like you lost your steering opportunity and again, that patient's gonna get steered by someone else.
[00:29:09] Dr. Eric Bricker: Yeah, and this is not some like theoretical exercise again. John Torinus in "The Company That Solved Healthcare”. He wrote a book exactly how his company like did exactly this and they kept their healthcare cost trend flat for nine years. And Purdue University also does a lot of what we are discussing in this, and they have kept their healthcare cost trend at 1%.
This is not some sort of theoretical exercise, like there are real employers that have done this in the past and are doing it now.
[00:29:38] Stacey Richter: Yeah, and if you listen to the show with Dr. Christine Hale, she talks about some strategies. For steerage and just, you know, with these high cost claimants, there's usually not that many of them, but as you said at the top of the show, they are really, really costly.
So there's many things that can even be done at the individual level there. What I will say though is Dr. Robert Pearl was on the show a while back, and one of the things that he was talking about is the importance. If there's sub-specialists with very uncommon things like surgeons get better, the more volume there is.
So if you've got CABGs all over town, then what that does is it splits the volume amongst surgeons, right? So you wind up getting uh, lower quality or lower outcomes because nobody then has the volume to get really, really good. How would you address the clinical consideration here?
[00:30:36] Dr. Eric Bricker: Yeah, so there the issue becomes what is going to be the reimbursement for that concentration of specialists, and there's a couple of ways to do that.
Because if you, if you essentially corner the market for any particular service because you're a center of excellence. Then by definition you are going to charge through the roof. There's no way that a hospital system is going to become a center of excellence and not dramatically increase their prices for it.
That will happen. That happens at MD Anderson Cancer Center, hugely expensive. Memorial Sloan Kettering, hugely expensive for cancer care. Cleveland Clinic, hugely expensive for, for cardiovascular care. Okay, so that's what has happened.
What's the alternative? The alternative is either one. It is price controls. Which, guess what? We have one state in America that actually does that, and that is the state of Maryland. So like where I did my residency at Hopkins, Hopkins World Famous, right? Probably has the best ophthalmology and urology and some of the other best departments, rheumatology, right?
Hopkins cannot jack their rates through the roof. By law they're not allowed to because the state of Maryland regulates their prices. Okay. But that's the only state where it happens. So if the alternative then is, is that all hospital systems have huge fixed costs. So really, regardless of how many surgeries that hospital does, like their costs are actually pretty stable because they have to pay for all the equipment and all the salaries for people like that's fixed.
So they really want volume, and so what you need to do is you need to have a hand in delivering volume to that facility. Delivering volume to that facility that's not connected to horse trading with Medicare Advantage, that's the secret weapon that employers have, is that employers don't have a Medicare Advantage book of business that they're trying to protect.
So they can go in to the Cleveland Clinic and be like, you're the best places for CABGs around. We'd love you to do our CABGs. And, you know, we know that your provider stop loss is giving you 70% of bill charges. We'll give you 200% of Medicare, we'll give you 170% of Medicare. And the Cleveland Clinic will take it because you know what, it's almost twice as much as Medicare.
And so if you as an employer take advantage of the fact that you're not associated with Medicare Advantage, then you can actually get better rates than a center of excellence would be willing to give you.
[00:33:05] Stacey Richter: I think the point that you're making or, what I would add to it is first of all, it's one thing to do something openly, and it's another thing to do it under the cover of darkness.
So, so like, even if you look at some of these hospital transparency reports, these things aren't obvious. So it's like really done under the cover of darkness, like the sunlight has not gotten here. And I think it's one thing if you have a hospital system who's right up front, like, Hey, we're a center of excellence at CABGs and we're gonna be charging you 800 grand. Just saying.
Right, like it's one thing if that this is a choice that plan sponsors are making and choosing to do this because they understand what the cost is. And it's another thing, if there's these financial machinations, you only figure it out after you've got an $800,000 bill.
So if we're talking about nonprofit hospitals here, trying to operate for the benefit of the community or whatever, like philosophically, these conversations are distasteful I'm gonna say. When again, these things are clearly not being done transparently.
[00:34:10] Dr. Eric Bricker: Oh yeah. Stacey incredibly important point. Listen, healthcare is hugely deceptive. I mean, I have a, I have a, a whole separate, AhealthcareZ video where I run through literally 32 examples of healthcare deception.
[00:34:21] Stacey Richter: We will link to it in the show notes.
[00:34:23] Dr. Eric Bricker: But at the end of the day, deception is a good business practice. If you're trying to maximize revenue and profit, then like, deception is a tool to do that.
Okay, let me give you an example. Like the casino whales, they never publicized that those whales are losing gobs of money. You never see a whale walking around publicizing that. They just lost like a million dollars, right? It's kept on the hush hush because they want more whales to come. And if that whale ever publicized how much he or she lost at the casino, then the other whales wouldn't go there.
That's why you either have to do two things. You either have to do price setting or you have to have competition. Otherwise, listen, we're all human. Like, I'm not passing judgment on them. So we've done this with other industries in the past, okay, this isn't rocket science, it just needs to be done again.
And things like your podcast here are, super helpful in spurring that on.
[00:35:06] Stacey Richter: Well, likewise, same with the videos. And, and I feel like there's a big difference between if, if it's a for-profit entity, and the product is handbags or some consumer optional good, like that is sort of one thing. But if we're talking about nonprofit organizations with $2.5 billion trust funds serving the community around them, that's the social contract there, then I, I don't know, what do I know?
Dr. Eric Bricker, is there anything I neglected to ask you in here?
Conclusion and Final Thoughts
[00:35:34] Dr. Eric Bricker: I would just like to say, Stacey, that that the answer to that question about what do you know is, is that you know a whole heck of a lot, and so I appreciate you having me on, and I thoroughly enjoy listening to your other podcast with all your fantastic, uh, guests.
And so, uh, it's been a real pleasure and thank you for everybody for tuning in and listening.
[00:35:53] Stacey Richter: And we will link to Dr. Eric Bricker's excellent videos where I learn a whole lot in the show notes. Although I am going to strongly suspect that most of our listeners are very familiar.
Dr. Eric Bricker, thank you so much for being on Relentless Health Value today.
[00:36:07] Dr. Eric Bricker: Thank you, Stacey.
[00:36:08] Tom Nash: Hi, this is Tom Nash, one of the RHV team members. You might recognize my voice from the podcast intro. If you love the show and you wanna show us your support. Please follow us on your favorite podcast app. Sign up for the newsletter, or maybe consider making a small donation in the tip jar. Thanks so much for listening.