Episode 47: Reducing the Real Costs of Care

Healthcare attorney Doug Aldeen offers a highly informed take on whether providers, hospitals, and insurance companies have a responsibility to keep costs down for patients. In this episode, you’ll learn the “state of the state” of self-funded contracting, why it’s important, how payment models need to change, and the rise of price gouging during the pandemic.

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Full Transcript

Announcer: It’s time to think differently about healthcare, but how do we keep up? The days of yesterday’s medicine are long gone and we’re left trying to figure out where to go from here. With all the talk about politics and technology, it can be easy to forget that healthcare is still all about humans and many of those humans have unbelievable stories to tell. Here, we leave the policy debates to the other guys and focus instead on the people and ideas that are changing the way we address our health. It’s time to navigate the new landscape of healthcare together and here are some amazing stories along the way. Ready for a breath of fresh air? It’s time for your paradigm shift.

Michael: Welcome to the “Paradigm Shift of Healthcare” and thank you for listening. I’m Michael Roberts here today with my co-hosts, Scott Zeitzer and Jared Johnson. On today’s episode, we’re speaking with Attorney Doug Aldeen. Welcome, Doug, and thank you so much for coming on the show.

Doug: Oh, absolutely, Michael. Great to be here. Thank you for asking me to show up and discuss this with you guys.

Michael: Absolutely. We look forward to having these chances to interact with people, you know, through all the midst of this. And we actually get to see each other and actually talk with people through all this. And that kinda leads right into our first topic here. In the midst of COVID-19, you’ve spoken recently about avoiding surprise billing and price gouging in the midst of all this. Who’s behind this? Who’s trying to start price gouging and how’s it affecting both providers and patients?

Doug: That’s a great question. And I think that the real issue we have in this country because I think it really sets the stage, which is we have a hospital billing and collecting issue. It’s not necessarily balanced billing. It’s the processes they have in place. And because most hospital systems, frankly, are set up for auto judication, Blue Cross Blue Shield and it’s just an automated thing. And the minute you introduce self-funded plans with different coverage requirements, it doesn’t flow well with their systems.

And so, you just end up having bills that should have been paid that weren’t, shouldn’t have been billed but were… It’s a discombobulated mess. So, I think there’s a couple of things behind that. I think one, you know, you’re a self-funded plan, you have obligations to meet the terms and conditions of your plan document. So, pay for the services that are eligible to be paid for. There’s supposed to be no cost-sharing under COVID. So, if you’re treated or diagnosed, there’s supposed to be no cost-sharing. And it just it’s the left hand doesn’t know what the right hand is doing. 

So, you know, on one hand, you’ve got hospitals billing for services. On the other hand, you’ve got self-funded plans that are obligated to pay for certain services and it just, the two entities don’t really talk well to each other.

Michael: I think there’s definitely like an issue of there’s just a lot of miscommunication, but is there something where, you know, does it get… I don’t want to be a conspiracy or anything like that, you know, is it more nefarious than that? Because you think of price gouging, it’s an intent that’s happening there.

Doug: Absolutely. Well, you think about the environment in which these hospitals are operating, the biggest single driver of their profitability are elective surgeries. That hasn’t been happening for quite some time. So your revenues are down, significant number of hospital systems have access to CARES Act funds. They need money. Cash is king.

And so, if you don’t have cost-sharing and you can bill pretty much whatever you want to bill, I hate to say it, you’re like an ATM machine, but you know, you’ve got the ability to generate a lot of revenue really quick by sending out bills. So I think there’s definitely a profit motive. Does it cross the nefarious, you know, evil empire type line? Yeah. I think in some instances you can say yes.

Michael: So I know that this is obviously hitting patients hard because they’ve got to deal with the outcome of that in terms of like, “Hey, I’m now stuck with this bill.” How is it affecting the providers themselves?

Doug: Well, I think it affects the providers in that you’re already operating under a very stressful environment. I think you start looking at the pay cuts that a lot of these… Because a lot of the physicians are employed by these hospitals, maybe even a private equity company. And whether it’s pay cuts, all of those different things are having a snowball effect in terms of morale. Let’s just bill the living blank out of this until we can get x amount of dollars. And so, we’re heading down that slope and the snowball was slowly but surely gathering steam.

Scott: Yeah. You know, I’ve always thought that with COVID, a lot of things are exposed that normally kind of just don’t come to fruition. The pricing for lots of different healthcare costs become much more important during COVID. Because like you said, there’s not a lot of elective surgeries going on. How the heck do we survive?

Individual practices that you used to worry more about how to manage and how busy they were are now just trying to figure out how to get workflow through their waiting room so that they don’t hurt somebody and so on. And so, all of these costs come out. I know that you’re an advisor, I think, to RIP Medical Debt. And we had Craig, Craig Antico on our program a few weeks back. From your perspective, is it the responsibility of the provider, the hospital, the insurance company, all three, about keeping costs down for patients or not? Like, no, that’s not their deal.

Doug: I think you can answer that question on a multiple of fronts. I personally think with the Hippocratic Oath of physicians, i.e. do no harm, I think that also includes do no financial harm. That’s my personal view. I would think other people would agree with that. So I do think from the entity or person providing those services, you know, obviously, there’s nothing wrong with making a profit. There’s nothing wrong with providing value for your services or assigning value of your services. So you’ve got that on one hand.

Insurance companies, I mean, you know, if it’s a Blue Cross Blue Shield or a publicly-traded company, I mean, your duty is to your shareholders. And when you start looking at the underlying foundation of the ACA i.e. the MLR where there’s actually perverse market incentives to increase the piece of the pie. Because if you think about it, if you have to pay out 80% of every dollar you collect in terms of claims. So there’s a 20% what I call you keep provision under the ACA.

So, if you’re an insurance company, you’d rather have 20% of 100 billion rather than 20% of 1 billion. So, you know, the very foundation of the ACA has created perverse market incentives for hospitals and insurance companies to work together. If you’re billing 15,000 for a CAT scan, provider doesn’t care, he’s getting paid more. The insurance company doesn’t care because they’re collecting premiums based upon that 15,000 number. And at the end of the day, the bonuses, salaries and everything else are gonna be based upon that number rather than the 1200, which might be more appropriate.

So the 20% MLR has created, honestly, this entire mess. Because when you start looking at the stocks, the publicly traded stocks since 2010, all of them have been, I mean, record busters, United Aetna, Cigna. I guess to answer your question if you’re looking at, you know, do you want to blame somebody? I mean, there’s more blame to be assigned, I think, to the insurance carriers, because they’ve let this happen over all these years, but the providers have been willing participants

Scott: We spoke to Carl Schuessler and he really put it…he’s a very he’s very funny man and he basically said like, “Hey, don’t blame the insurance companies. They’re doing what they’re supposed to do. The system was designed by them and they do a good job of making excellent money.” Which, you know, kind of takes me to this follow up question like, all right, well then how do payment models need to change in order to make things better? Is there a way to lower the costs under a capitalist medical, you know, payments set up? Can we do this?

Doug: Ultimately, the payment model I personally think is free market based and cash. I mean, why do you even… Think about this. If you use your auto insurance to buy gas, I mean, think about the price you would pay as a premium for your auto insurance. And insurance is specifically designed for catastrophic type events. And I think that when you start looking at legislation in different vehicles out there, for example, there’s what’s called an independent coverage HRA, and that allows an employer in today’s marketplace to make a choice.

I can give a defined benefit to my employees and they can go on the exchanges or shop or whatever they want to…however they want to use the money, or you can use it for employer-based coverage. But the point being is at least you have an option and I think the market is moving that way. So, to answer your question, I personally think that, you know, insurance carriers, if you start looking down the road, it’s unsustainable. It can’t be afforded. We’ve got to go back to catastrophic type insurance and people paying cash for regular visits and that type of stuff.

Scott: It’s interesting. It’s a different modality completely. The whole thing behind this, to your point, it’s like everybody’s trying to do the right thing, but they also can make a heck of a lot of money.

Doug: Yeah. The running joke is we’re $689 million away from fixing healthcare. Well, what is that? That’s the amount spent lobbying Congress each year between pharma, the hospitals, and the doctors. So they’re not going to Chili’s for 20 for 20 or 2 for 20 bucks.

Jared: For sure. What’s interesting is it’s all perspective, right? I mean, it’s easy to pass the buck if you’re the provider when the patient comes to you, you’re the one that’s usually the somebody at the front desk or the most recent frontline person that they’ve actually interacted with at the office who gets the earful about how expensive this bill is, and that’s not usually who causes the bill.

And so I think it’s easy for the provider, the staff to say, “Don’t look at me, the bill is the bill. Here’s what we can do to help, but you know, this isn’t our thing. At the very least, it’s not only our thing.” And as we see different payment models from providers, you know, from DPC models to concierge-style models, I think that’s where we start to see more consumers kind of waking up and seeing, oh, there are other ways to do this. I don’t have to be surprised four months from now at this $20,000 bill that’s in the mail now. And there are other options.

And a lot of those options really do have to do with being self-funded. You’re just talking about self-funded care a moment ago. Can you give us the state of the state? What is going on with self-funded care? What are typical options that are out there for patients and consumers? I mean, what’s the benefit and kinda how does…maybe kind of the 101 version, like how does self-funded care even work?

Doug: A lot of what I do is direct contract and I do a ton of direct contracting across the country. So you’re just taking your self-funded plan and contracting directly with a health system. And, you know, that’s gonna reduce… Think about the disintermediation that’s happened there. You don’t have a PPO network, don’t need it, but you’re reducing that spend 30%, 40% simply because you’re cutting out all the excess middlemen. I mean, so you’re contracting directly with the facility.

So a plan, you know, you have a great deal with Ascension in Milwaukee covering, you know, not only professional services but all the inpatient, outpatient, all the different stuff. In exchange, you know, they get paid 15 days, within 15 days, as long as it’s a clean claim. You know, you’ve got the benefit of some steerage and it works out pretty well. And I think that the market is moving in that direction.

Jared: And is there kind of like a sweet spot of size in terms of a health system? I mean, is there a benefit for a smaller practice, an independent practice to be able to take advantage of that kind of thing? Is it meant for larger systems?

Doug: I think size is irrelevant. I think it doesn’t matter whether it’s a small DPC practice or, you know, whether the system is massive like Ascencion. I mean, again, to me, money is money. I don’t care if you’re making $100,000 or $100 million based on the group. I just don’t think size matters. I think it really just comes down to, you know, what’s a fair level of reimbursement.

Think about this, I mean, I’ll give you a 99% discount every single time if you let me set the price. Because think about it, I mean, you are letting me set the price, I set it artificially high and I’m giving you a 99% discount. I’m still gouging you. And that ultimately is why the discount model is not gonna be around much longer. And you’ve got to build that pricing from a bottom-up. And there is information available publicly what the hospitals collect, what their non-contracted rates are, what their contracting rates are. The amount the hospitals are increasing their charges relative to their costs, which are going through the roof. And you’ve got to build that pricing from the bottom up. I mean, there’s just no getting around it.

Jared: So who are you getting calls from the most? I mean, what types of organizations are reaching out and saying, “Okay, finally, we’re gonna take a look at self-funded plans a little bit more.”?

Doug: Well, you know, I work primarily with payers, so self-funded plans. So the calls that I get are, you know, “We’ve got, you know, particular patient,” you take, like, for example, you’ll have 342 claims with Ascension that are “out of network,” and we want to resolve them on a global basis at a percentage of Medicare. And then hopefully, tie that into a direct contract on a go-forward basis. And that, you know, I’ve been successful at that probably 25% to 30% of the time.

Michael: Awesome. Awesome. So then I guess it kinda opens the bigger question of like what are the opportunities? What are the biggest opportunities for the healthcare system to change? If we kind of look at…it sounds like there’s growth in self-funded plans, that’s what you’re seeing. That’s what you’re experiencing. There’s growth there, there’s momentum. If that keeps up, what’s the big opportunity here? I guess a better way to phrase it is, what do we hope will happen? What’s the biggest benefit for everybody? What’s the best case in terms of how payment reform keeps happening and how we continue to see growth in this area? What’s the best case that happens?

Doug: I personally think from my humble view is one of the most important things that can happen moving forward is for not-for-profit health systems to return to their mission-based endeavors. Because when you start looking at the market conduct with a number of these not for profit facilities are anything, but charitable. And you start going under the hood a little bit further and you start looking at, for example, what was it once…I think Providence out West 6 billion in investment income or investment assets, and then in terms of what they’re generating from that. I mean, they’re like a mini hedge fund.

And then you start looking at their billing and collection practices and they’re suing Michael, and Jared, and Scott, and Doug for 84 bucks. And I think that we really need to have a referee that really monitors. I mean, are you really meeting your charitable endeavors, however that’s defined? How can you have a health system that’s your largest employer, but doesn’t pay any income and or real estate taxes?

Michael: We talked about how you work with RIP Medical Debt in the past. Is there anything that you can kind of share just on how you’ve been able to advise them? We were also enamored with the mission of that group and just how they’ve been able to bring relief to so many different types of people. And so, yeah, I’d love to hear more about the work that you’ve done with them.

Doug: Sure, absolutely. So, you know, they all buy medical debt on the secondary market. So think about this, hospital X sells off it’s bad debt to collection agency A and collection agency A buys it for, I don’t know, let’s just say if it’s 10,000, maybe they spend, I don’t know, 4 cents for it or something. I mean a ridiculous number. But then they turn around and want to take that 4 cents and collect the $10,000. So they’re harassing Jared every hour for the 10,000. You’re like, “Wait a minute, that was like four years ago,” you know, but the statute of limitations is five years in your particular state.

Again, if they make a dollar they’re profitable, if they make 50, I mean, wow over X amount of accounts. But the ROI, when you start looking at that, when you start looking at their models and Craig, and I don’t know if you guys talked, but Craig and Jerry were in that market for decades

Jared: Yes, they were.

Doug: And there’s models and all the different things, but, you know, you just look at and say, “You know what? Your chances of recovering from your initial investment are like 0.02%. So how about we pay you a factor of x something nominal,” but it gets them out of their initial investment and a little bit of money. And, you know, there’s people behind it, whether it’s churches, local civic groups that will say, “You know what? We’ve got $10,000, go buy a million dollars’ worth of debt, and we’re gonna spread the [inaudible 00:17:04] amount.” And it’s literally a great model. And you think about $100, $100 can buy $10,000 worth of medical debt. And if you’re a family in central Illinois, you want to go to Disney or pay your medical bill. I mean, you just literally freed him up to go to Disney. I mean, how awesome is that?

Michael: Right. Totally. Yeah. So it’s interesting because, like, I think about the RIP Medical Debt group, and I think about, you know, some of what you’re talking about and, you know, you kind of take like the average person. What can the average person do to make an impact on what’s happening? And so, you know, RIP Medical Debt, here’s a charitable organization where you can literally change somebody else’s quality of life by eliminating all that kind of debt. I’m curious as to how that relates to these options of self-funded care. What can the average person do?

My family, we just had a very healthy baby, which was wonderful, but I’ve got an older daughter that has a chronic condition that we see a doctor on a regular basis. So what can a family like mine do to say like, “Hey, I’m not really comfortable with how insurance is playing out right now for my family. What are my options? What can I do to try to change this dynamic?”

Doug: Other than maybe, you know, approaching the hospital depending on what type of insurance you have, I don’t know, but if you’ve got like a health savings account or whatever it may be, but ultimately because it’s your daughter, you’re going to this facility a lot, I mean, you’ve got to come up with something that is affordable.

And, you know, discussing it with the facility yourself, looking at the bills with a fine-tooth comb, I mean, it’s a difficult role. I’m not saying it’s impossible, but I mean, I would think that just approaching the hospital, “Here’s where I need help, you know, happy to pay. This is what I’ve got.” But then, you know, come up with some type of financial plan, if you will, that’s gonna make it affordable. I mean, it’s not an easy road.

Michael: Yeah. I know. My boss is on the phone so I will say this well. We have a good health insurance plan and it’s something we’re very blessed to have that opportunity. But I’m thinking in terms of like who has the power to make these kinds of changes? So maybe the average person doesn’t, then going up the ladders of the employers then, that need to be demanding these kinds of self-funded plans, is it the health systems? Like, who can make a difference in that?

Doug: Well, you know, so here’s where I think there’s a big picture then there’s, you know, you got to get into the weeds. So, for example, there’s the balanced billing issue, which has been floating around Congress for well over a couple of years. And nobody’s able to get it across the finish line, right, wrong, indifferent because there’s so much resistance to it.

Well, why is there so much resistance? Well, think about it. If you can’t balance bill, what recourse do you have? You don’t because all of a sudden, the $100,000 bill that really should be, let’s say, 10,000, you’ve lost all leverage. You can’t balance bill. You can’t sue them, you’re never gonna collect it. And so, it automatically flips the table because now there’s a market for those services because you can’t just bill somebody $100,000 because you’re “out of network.” You know, you’re looking at well, what’s the real place? And it forces the market to really start to work quality, price.

And so, there’s a systemic thing which I think, one, is balanced billing. And then the other things are people actually being in control of those dollars because healthcare typically has always been it’s OPM or other people’s money. But when it’s your money… If there’s anything I’ve learned in 53 years of life is everybody understands the language of money. I don’t care if you’re the taxi cab driver in New York or you’re the Fed chairman, everybody understands the language of money.

And when you control those dollars like you shop for TVs, you can look for doctors. There are great doctors, have a great business. And there’s other doctors… I had a surgeon, a friend of mine told me that 25% of surgeons shouldn’t be doing surgery. And I was just like, “Well, how would you know?” He’s like, “You wouldn’t. You just wouldn’t.”

Scott: That same case may be said across the board from, you know, 25% of the people shouldn’t be driving a cab. And I agree with that statement. I mean, there are people who are good at their jobs or people who aren’t good at their jobs, and the idea of the balance billing will help bring that out right now. Even with art, we do have very good insurance. I got the best that I could quote by, you know, in my area.

And ultimately, though, if goodness forbid, you need to be out of network, you better have a good reason because you’re about to pay a heck of a lot of money for that. And why would that be? That kind of thing. So, I do think that would be a big component of getting this back together again. I think we’re hitting our endpoint, guys, in terms of time if I’m not mistaken. Am I correct about that?

Michael: Yes, indeed. Doug, thank you so much for coming on the show. I feel like every episode…

Doug: Oh, absolutely. Thank you.

Michael: …we get a chance to learn, and learn, and learn, and hear how other people are attacking the problems and coming at this. So, thank you so much.

Announcer: Thanks again for tuning in to the “Paradigm Shift of Healthcare.” This program is brought to you by P3 Inbound, marketing for ortho, spine, and neuro practices. Subscribe on iTunes, Google Play, or anywhere you listen to podcasts.