Cherry-Picking and Cost-Shifting Are the Name of the Game

The following letter was published in the August 27, 2018 issue of Modern Healthcare magazine.

MH Sept 27 2018 cover.jpg

The statistics in the Aug. 13 Data Points regarding where emergency services providers choose to locate (“Stand-alone EDs flock to affluent ZIP codes,” Data Points, p. 31) point to a trend that some fail to grasp. I agree that in most retail situations – cars, flat screen TVs, etc. – competition encourages increased quality and tamps down prices. Your data reveals that potentially profitable service lines gravitate toward more affluent areas. This is especially true for facilities like free-standing surgery centers, and it amounts to cherry-picking. I don’t see people rushing to set up trauma centers in downtown Atlanta or Chicago to siphon off the uninsured car wreck, overdose and gunshot cases.

Everyone knows about the cost shifting to commercial payers because of less-than-cost payments from Medicaid, the uninsured and, in many cases, Medicare. But there is another type of cost shifting that takes place within the hospital. Since many of the vital services they offer cause a financial drain, they make up the difference from other areas that do yield net income. If they lose too many profitable patients, their ability to prop up the necessary but financially draining service areas declines.

One bright spot in your statistics is that two-thirds of the freestanding EDs are hospital-affiliated, meaning they are presumably helping the profitability of the hospitals that operate them.

Glenn E. Pearson, FACHE


Pearson Health Tech Insights, LLC

Marietta, Ga.

Getting Ready to Launch a New Product? Don't Make Either of These Timing Mistakes

Developers and entrepreneurs spend months or even years preparing their product for market introduction. A danger they face is misjudging when to launch. They must heed the old saying, “You only have one chance to make a first impression,” but some may obsess over this too much and, therefore, delay their product’s introduction longer than necessary. This can lead to losing the first-in-market advantage and/or missed sales. However, in an attempt to beat the rest of the market, other vendors make the mistake of launching prematurely, with sometimes-devastating results.   

Do you remember Apple’s disastrous 2012 launch of its new Maps app? It worked perfectly unless you didn’t want to have to find a train station in the middle of lake or were confused by aerial-view interstate maps that resembled overcooked spaghetti. Once a product gets cast as inferior, it can take years to recover. Some never do.

In order to avoid this mistake, some companies overcompensate and wait too long. This potentially creates two problems:

·         If your product is groundbreaking or transformational, a delay gives competitors extra daylight, and you could forfeit your “first to market” advantage.

·         Delays slow down cash flow, something which can prove fatal to a cash-starved startup.

Recommendation:  If you are introducing a groundbreaking service or product, seek the sweet spot where your minimally viable product performs all its essential functions adequately yet still gives you a head start in the market. A product that does exactly what it purports to do – even if it’s not particularly fancy – establishes your credibility and starts the cash flow so vital to continued development. If early adopters like what they see, they will likely talk your product up among their peers.

A Possible Compromise Regarding Healthcare as a Right

One of our thorniest health policy issues is whether or not healthcare coverage is a basic human right. Those who say “yes” feel that it’s immoral to deny anyone care. Those on the other side point to the economic challenges – including likely rationing – of providing expanded care for all. In this contentious, polarized political climate, it’s unlikely that either side will convince the other any time soon. But, if I may be so bold, there may be an acceptable compromise.

Before I present my idea, let’s consider three primary drivers that brought healthcare coverage into the public’s consciousness in recent decades.

·         Charges of hospital emergency rooms “dumping” patients in the 1980s. Some highly publicized cases where hospitals allegedly dismissed uninsured patients from ERs without properly stabilizing and treating them caused understandable public outcries and played a major role in passing the Management and Treatment of Active Labor Act of 1986 (EMTALA).

·         People being denied coverage or having extraordinarily high premiums because of pre-existing medical conditions.

·         People literally being bankrupted by crushing medical bills triggered by catastrophic medical crises.

Here’s my proposal. What if we had a two-part hybrid system?  

·         Part 1 – A national public plan that provides emergency/preventive/primary care and catastrophic care for everyone. It would be backed by a combination of increased employer taxes and redeployment of some existing funding for Medicare, Medicaid and the Children’s Health Insurance Program.  

·         Part 2 – A reconfigured private insurance market that offers coverage to fill the gap between emergency/preventive/primary and catastrophic care. This supplemental insurance would be paid for either by individuals who wish to purchase it or employers who want to provide extra coverage for their employees. Additionally, state Medicaid programs could help fill the gap for Medicaid patients if they so chose.

This approach would address all three problems listed above.  It would:

·         Guarantee coverage for life-threatening situations

·         Keep pre-existing conditions from freezing people out the insurance market

·         Minimize bankruptcies caused by catastrophic medical bills.  

Even though employers’ taxes would rise, their total healthcare spend probably would not.  Their increased taxes would be offset by decreased insurance premiums since they would no longer have to pay for the emergency/preventive/primary and catastrophic care they pay for in their current policies.  

Importantly, this concept also maintains a place for private insurance companies, who are understandably dead-set against a fully socialized program that would render them irrelevant. 

The “healthcare is a right” group should be pleased that everyone has guaranteed access to basic care, and those on the other side should see this as a more affordable option than all-out, expensive full coverage for everyone.  

Some might complain that this concept would establish a two-tiered system since not everyone would have the supplemental private coverage. But I would argue that in a free society, not everyone accesses the same products and services. That’s why we have both EconoLodge and Ritz-Carlton hotels. Furthermore, our current system does not adequately care for the needs of the “have nots.” This would at least be a good step toward more equity.

Let me know what you think.