HCI3 Update from the Field: Bankruptcy Means Hope

Submitted by francois.debrantes@hci3.org on Friday, June 14, 2013 - 12:29

Newtown, CT – June 14, 2013

It's only when the first large health system will have declared bankruptcy that we'll know there's hope for the US health care system – There have been other industries in which the players have been coddled, protected by laws and regulators, and market forces. Inevitably, when the market revolution hits them, the big players failed, declared bankruptcy, and the industry massively shifted to provide value to consumers. Right now we need to stop and look around at what's really going on. First, the land-grab continues at a rapid pace, mostly for the wrong reasons even if the mouthpieces voice the reassuring string of acronyms – ACOs, PCMH, VBP. Second, readmission rates appear to be going down in some of these newly haloed institutions, but are they really? Third, almost all health plans are rushing into the fold, signing up deals with consolidating providers, locking in trend rates with purported upside/downside, but will they be able to tell whether or not the deal is working out? Fourth, the real behavior of many of the haloed is more akin to the horned and cloven-hoofed. For example, that paragon of virtue, Intermountain Health Care, stomps out a competitor. Chip Kahn, the voice of the for-profit hospitals, blasts CMS for publishing the charges of outpatient services as missing the mark, but fails to point out that it's his constituents that set those prices. And then there's the continued medical arms race between Hopkins, the University of Maryland and MedStar, all eager to build mega-million dollar proton beam therapy facilities because they will generate tons of fee-for-service profits.

What this means to you – Industry shake-ups that are truly transformative don't happen without a shake-up, and that's not what's happening today in health care for the most part. Certainly, it doesn't appear to be happening with the larger, ever consolidating providers. They claim they need economies of scale to be more efficient, deliver more integrated care, and yet those who have consolidated in the past, using the same tired old delivery models, have woefully failed at creating any economies of scale. In fact it's quite astonishing that as big as they get, their margins are always the same. So what will be different now? The answer is nothing, and Bob Galvin is right to point out the risk that these mega health systems become "too big to fail". And the truly astonishing fact is that we know the recipe to turn the industry in a better direction. In a presentation this week at the Bundled Payment Summit, Jamie Robinson showed the effect of reference pricing knee replacements by CalPERS. Prices went down. Wrap that program with contracted bundled payments to limit plan member exposure and the effects would be significant. Replicate it for all procedures and chronic care bundles, and you have true competition for care, not the artificial forced assignment of consumers into monolithic institutions. Two reports published this week, one by RWJF, and one by us from research by Bailit Health, underscore the opportunity of truly shaking up the status quo. The cloven-hoofed dressed up in drag haloes will resist it with all their might because they know what it means…the end of their dreams of market domination. But we'll keep fighting for the American consumer until we finally see the bankruptcy of those who would very much like to become too big for us to let them fail.


Francois de Brantes
Executive Director
Health Care Incentives Improvement Institute, Inc.
w: www.hci3.org