EP424: Five Things for Hospital System Execs to Get Real About in 2024, With Peter Hayes

[00:00:00] Episode 424, Five Things for Hospital System Exacts to Get Real About in 2024.

[00:00:09] Today, I speak with Peter Hayes.

[00:00:20] American healthcare entrepreneurs and executives you want to know,

[00:00:23] talking. Relent can start somewhere. We can sit with ourselves. We can ask ourselves some big questions. We can decide the legacies we want to leave and what we want our life's work to add up to. That is what the show should, I hope, help you accomplish.

[00:01:40] And yeah, together we've got this.

[00:01:42] Today I am speaking with Peter Hayes, and

[00:01:45] we talk about five realities of 2024 for hospital chains, kind of health systems, the big, rich, consolidated ones, which are taking over every geography where there's money to be made. These are the ones where you read about their bad behavior in the New York Times or hear about them in YouTube videos like the one I will link to in the show notes. Peter Hayes talks about the five things that these behemoth entities may really need to

[00:03:03] start thinking hard about, even in the law as of 2021. Go back and listen to the episodes with Chris Deacon or check out the myriad of LinkedIn posts I'll link to them in the show notes from Jeff Hogan. Also others like Darren Fogarty, Justin Leader, Jamie Greenleaf, and others have some great words of wisdom that you will be able to find that really explain what the point is of the

[00:04:24] CAA, the Consolidated Appropriations real about quality and patient safety. We still have about 46% of our hospitals that have a C or lower leapfrog rating. And by the way, the chance of having a fatality on an invoitable error is 90% higher at a

[00:05:40] C or lower rated leapfrog entity versus a leapfrog upgrade to insurance that covers the local hospitals. Teachers who can't afford it give birth outside the county. Meanwhile, insurers are making record profits along with hospital CEOs and C-suites.

[00:07:03] At the same time, you know who I think is the third biggest group with medical debt in this country? Peter Hayes, welcome to Relentless Health Value. Well, thank you. It's great to be here. You have put together five things that hospitals or integrated delivery networks, health systems really need to get real about in 2024. Let's start at the top of your list. What's your first thing that hospitals need to get real about?

[00:08:21] The implications of the Consolidated Appropriations Act, which went into effect 2021. And what that does is it clarifies obligations for plan sponsors, as you called them. I've also heard them called purchasers, which basically means self-insured employers,

[00:09:41] buying healthcare on behalf of employees or plan members.

[00:09:45] These individuals, and I say, you know, a hospital in Maine that is about 200% of Medicare. There's another hospital on the other end at 350. So if you just take a knee replacement, if the Medicare reimbursement for a knee replacement is 10,000, there is one hospital in Maine that is charging 20,000 for a knee replacement to the commercial marketplace.

[00:11:00] And there's another hospital that's charging $35,000

[00:11:04] for that same procedure.

[00:11:06] And for the fid and commercial market, and you move them to 200% of Medicare, that

[00:12:24] is a 40% reduction in their to ensure that I'm spending planned dollars prudently. I could see that I would be quite concerned if I was paying 150% more to certain hospitals. And then the knee replacement case study if you're thinking about this from a fiduciary standpoint. Yeah. And that's a great point actually in Maine because there's, as I said at the top, there's lots of more information out there and transparency tools. Leo Wieanski has done a lot,, his transparency product is called Billy, right? It is now. It was Medical Cost Labs. It's now Billy. Yep. And it does that. I could see in a market where you have an employer, maybe the employer is part of a coalition, but in some that employer and or their compatriot employers

[00:16:23] have a large percentage of the local market because now they've got leverage

[00:16:26] and now they can go into the hospital system,

[00:17:26] which delivers about 60% of care so they have a really dominant share, had a signed contract.

[00:17:32] And in the middle of the contract, the health system blew it up and basically said, the coming year, we're not going to serve any of that health plans members unless they reopen in

[00:17:38] the contract and they get what they want. And it due. Those vendors that are doing that are really gathering steam because that really helps that plan sponsor purchaser say, hey, look, these are the steps we have taken to pay only fair and reasonable prices for healthcare. And I think that's going to be one of the ultimate levers that kind of moves the dial

[00:19:02] here. And to put it into context, MedPak Medical Payment Advisory Committee that was established in 1997 by Congress looked at hospitals across the country and said there's only about 15% of hospitals in the country that are actually efficient. And they really define efficiency by looking at how are they performing their services.

[00:20:21] And it's interesting, some of the pushback against the Medicare reimbursement rate is,

[00:20:26] gee, Medicare dramatic. as far as increases in cost in health systems from the professional point of view, what they're paying physicians and the professionals in the hospital versus administrative, the administration has just dwarfed what has increased in sort of the salaries for the actual direct care providers.

[00:21:40] So there's huge opportunities there

[00:21:42] to really drive some efficiencies

[00:21:45] so that they can survive on a lower reimbursement level of power on the, especially some of these large consolidated health systems have over plan sponsors. We are coming to an untenable situation where the plan sponsors just simply cannot afford to do this. Like they won't be able to offer health benefits if the current trend continues relative to hospitals basically just, they just lump all their expenses in a, in a bucket, whether they're efficient or not, and then try to charge more than that.

[00:23:04] The top line just can be whatever they want three EHR systems. This is not a good use of time. It's so obvious. And yet stuff like this seems to be quite pervasive in hospitals.

[00:24:25] Some factoids, and just kind of going back to what we talked about, the Committee for system under its current model just keeps taking more and more resources that could be put to other things in our society that were better suited to do. So that's interesting. As hospital prices go up, then more of the state budget is diverted to Medicaid and then also the state usually has a large healthcare spend also for all of its employees.

[00:25:44] So like the more money that's going to hospitals got some very sophisticated financial interests in the mix here. What do we have for number three that hospitals really needs to get real about right now? The third thing is they really need to get focused on how can making sure that

[00:27:00] they're providing high quality, safe and effective care.

[00:27:05] If you actually look at us as you that type of issue with quality or safety, you would be shut down. I was in the supermarket industry and we would have folks from OSHA come through.

[00:28:22] And if there was a safety issue in the deli

[00:28:24] or the food handling or restaurants face the same thing, is likely to die at that hospital as if you go to an A-rated hospital. I mean, it's kind of you get what you pay for it to kind of sum up two. I think number three in order to get to this high quality, safe, efficient care, hospitals need to start thinking about taking risk for providing good clinical outcomes and being reimbursed based

[00:29:41] on clinical outcomes, not procedures done or that same CFO said when there's a complication admissions, whereas they're not getting paid anything for preventing that NICU admissions. And then, oh, we're shocked that the maternal mortality in this country is and the infant mortality is so high. It's like that's what the incentives and what do we have for our number four here thing that hospitals need to get real about? I think number four and I think this is I mean, this is fascinating and it's

[00:31:02] actually happening as we speak.

[00:31:04] The hospitals in the past ended up the biggest users of emergency services and other things. And yet we're subsidizing the rest of the Southern Maine community because

[00:32:20] that's where people are going for services.

[00:32:21] So that, that's a huge issue and the quid pro used to be, deductible and they start chasing them for medical debt. Those are all things that I think are kind of coming to the head and there's pending legislation. 19 states have started to say, gee, we would really like to know for the 340B program and for the tax exempt status, what are you doing?

[00:33:40] What can you show us that you're actually providing a like kind benefit back to

[00:33:45] the community? And the irony of it is for profit hospitals that are actually facilities and other parts of town where they could collect additional revenues. So I think sort of that cushion that's always been there, there's going to be lots of accountability and that's going to be something that hospitals have to be much more accountable for. I'm reminded of something that Al Lewis says a lot and he's quoting somebody else, but he frequently says, every good cause begins as a movement, becomes a business and eventually

[00:35:03] degenerates into a racket.

[00:35:06] So we have good I mean, maybe that is charitable. I don't know. But the point is that there's kind of like no definitions here of what charity care even is. In that Lown Institute study, they showed the percentages of charity care. They're like shockingly single digit percentages, like low single digit, like 1% ish,

[00:36:21] for some of the biggest, you know,

[00:36:23] in air quotes, nonprofit hospitals in the country.

[00:36:27] You had that New York Times article The main hospital there's a reason why hospitals are buying all of these oncology practices far and wide So this doctors writing scripts those scripts are getting routed through the hospitals 340 B pharmacy Which is hundreds of miles away Hundreds of miles right and then to your exact point those prescriptions are being resold to

[00:37:41] people in the suburbs at

[00:37:44] $7,000, you know like at these high rates and then you know these high prices

[00:38:43] And that is just something we all should think about, and especially around the quality piece

[00:38:45] we've already talked about.

[00:38:46] Let's focus on how do we keep people healthy,

[00:38:49] how do we use those dollars in a society

[00:38:52] in the best ways that we can,

[00:38:54] chasing some of the things that we're doing

[00:38:56] just don't make a whole lot of sense.

[00:38:58] So I hope we all come together and figure out a way

[00:39:00] to kind of solve this problem going forward.

[00:39:03] How about our number five thing,

[00:39:05] which we may have already talked about?

[00:39:06] My fifth thing is just need to make sure that the health industry is as accountable as some of our other industries for putting patient safety first and foremost. Yeah, absolutely for sure. And tell all your friends and family before you go to a hospital, look it up on LeapFrog

[00:40:20] because you can see the grade.

[00:40:22] And as Peter alluded to, and we also talked aboutode, then you have people who are actively seeking other options and the supply side starts to respond, which sort of already is. You know, you were talking about those indexed payers. We see big box retailers getting in the picture here. You know, you see Center of Excellence programs.

[00:41:41] You see all these vendors that are doing lots of navigation.

[00:41:45] It's the sum of the able to increase pricing 22%. I think we may have reached this place where there's going to be some market ability to move, but in increasing, I think it's going to take regulation to move the dial.

[00:43:03] And you're already starting to see states try to move that along. So I think it's going to be an interesting ride the next 18 to 24 months. So Peter Hayes, I'm going to recommend that everybody follows you on LinkedIn. I think your LinkedIn posts do a great job capturing a lot of what's going on in the market. Thank you so much for being on Relentless Health Value today.

[00:44:21] Thank you. Thanks for the opportunity.

[00:44:23] Peter Hayes, hey, so do you subscribe to the weekly email that comes out every week

[00:44:28] with the introduction of the show?