A "HealthTweep" Pulse Check

Exploring transformational potential of social media

Towards a ‘Preferred Hospitals’ Manifesto

with 17 comments

So what’s a ‘preferred hospital’ anyway?  A fair question, since ‘beauty’ is for the most part in the mind of the beholder!

Preferred Hospitals remains a conceptual ‘on the come’ value proposition at this point; but when I first thought of the idea, I had in mind structuring a network of participating hospitals and physicians directed primarily to the 47 million Americans without health insurance. The network’s ‘secret sauce’ consisted of providers who contractually committed to a substantially discounted (equivalent to the best or “most favored nation’s”) rates, otherwise extended to ‘wholesale buyers’, i.e., health plans, with the greatest group purchasing leverage.

In the economics of managed care, the more members a health plan trafficked in a specific market, the greater provider discounts they could expect. Most favored nations rates often equated to 50 cents on the dollar (or less!) , i.e., a 50% discount. Thus, the value proposition (to the uninsured) was twofold: (1) the contract rates would be actually honored, and therefore the member would receive a benefit in exchange for the modest dues paid vs. told ‘we don’t participate with that plan’; and (2) the provider’s rates would be adjusted to ‘fair value’ at least as determined by the entities with the greatest purchasing power in that market.

The great irony is hospitals and physicians too often (whether by design or not) reserve their ‘retail book’, i.e., billed charges, for the least able to bear the burden of charge based ‘sticker shock’. Many offer cash discounts as a courtesy in the +/- 25% range, but too often fail to present that option upfront before the downstream litany of collection calls.

At the time I originally entertained the idea, the discounted medical plan marketplace (DMPO) was populated with flimsy players, many of whom where exposed by the Georgetown University Study ‘Discount Medical Cards: Innovation or Illusion?‘ So it appeared this idea would have traction in the marketplace. While I enthusiastically jumped in, I found myself banging my head on the wall, over and over again. The value proposition seemed so apparent to me; especially linking the emerging growth of retainer, concierge or micropractices to a targeted and under-served market that contrary to popular wisdom was not a indigent demographic per se. Further, I reasoned (incorrectly I might add) that many of the forward thinking, and compassionate hospital systems (especially the one I worked for in DFW), forged under benefit of tax exemptions would proactively embrace a solution designed to reach an underserved market, and thus make a material deposit into the ‘community benefit’ bank. With IRS and the Congress on the non-profit hospital trail (i.e., Chuck Grassley, et al) looking into the veracity of 990 filiings, certainly these hospitals would see the light and embrace the greater good this model so obviously afforded; not!

None-the-less, I began to negotiate ‘upstream’ with several national PPO network managers, who in search of incremental revenues, and fighting ‘silent PPO allegations’, were electing to ‘rent’ and private label their networks in exchange for a per member, per month (PMPM) fee that ranged at that time between $3.50 – $4.00. Yet, as a start up with no membership, it became solely a cat and mouse affair. The PMPM basis was a function of the membership base which at that time was zero. From their perspective, it was a pure play ‘on the come’ business model, and good intentions not withstanding, we could not come to terms.

I also approached several colleagues, and friends in the personalized, retainer model, or concierge medicine market, and attempted to interest them in the business model. Most notably the Society for Innovative Medical Practice Design (SIMPD) was a logical partner or sponsor (I reasoned) to which I ‘pitched’ the idea, though to no avail. They were just not interested in ‘marketing” their nascent member panel at the time, nor reaching out to this underserved market per se.

Thus, no traction developed, and after much time soliticing support, and partner participation, I elected to back off of the business model.

So fast forward a few years and witness the ‘health reform 2.0 moment’ we’re all having. Revived thoughts have surfaced as to what and how a preferred hospitals network might be structured?

Here are a few ‘indicia’ of an emerging preferred hospitals manifesto:

  • Commit to pricing, cost and quality transparency
  • Adopt social media guidelines to engage and empower patient utilization of the hospital’s services (pre-admission, during and post discharge; especially follow-up concerns)
  • Offer ‘members’ most favored nations’ rates via a credible discount medical plan(s)
  • Waive where possible, or otherwise, defer collection of all upfront fees, copays, estimated co-insurance, and/or deductibles
  • Participate in budget driven and consumer specific time payment programs (as determined by independent financial counselors) via auto-debit direct from the patient’s bank (interest free)

This is only a start. I welcome your thoughts.


17 Responses

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  1. Gregg, the major issue I see is the WIFM for physicians . The modest rates they would have to agree to accept would potentially further dilute practices already living on the razor's edge financially. Throw in the underfunded mandate for EHR and you have a financial quagmire brewing. How's this for a "left field" solution to this incentive dilemma – combine the idea of tort reform! It goes something like this – If a doc agrees to participate with the preferred hospital he/she is immune from malpractice suits as long as the physician demonstrates as expected or better quality outcomes? As a provider, now you have my interest….;. All the best!!


    August 28, 2009 at 6:13 AM

  2. Gregg, the major issue I see is the WIFM for physicians . The modest rates they would have to agree to accept would potentially further dilute practices already living on the razor’s edge financially. Throw in the underfunded mandate for EHR and you have a financial quagmire brewing. How’s this for a “left field” solution to this incentive dilemma – combine the idea of tort reform! It goes something like this – If a doc agrees to participate with the preferred hospital he/she is immune from malpractice suits as long as the physician demonstrates as expected or better quality outcomes? As a provider, now you have my interest….


    August 13, 2009 at 7:38 PM

  3. I am already doing some parts of this, namely the PO/MSO model.

    I define a preferred hospital differently. The least of it is financial. I am not prepared to share that mix of qualifications as it treads to closely to proprietary information.

    It is my belief that the PMPM will not likely be permitted as it is too close, on its face, to insurance or managed care HMO. Besides, with pent up demand on this particular market, utilization will be atypically high at first, but depending on secondary expectations and the presence or lack of “entitlement mentality” it could be broken by the lack of excess loss coverage and a bad day at the actuary office.

    The no up front collections: I don’t believe you’ll get paid otherwise. There is a psychological contract that is gone after the fact.

    Not everyone who is uninsured is destitute. some choose not to indemnify by paying a monthly premium because they can afford to write a check for their healthcare, no matter how great the expense. Imprudent, in my opinion, but we do pride ourselves on freedom of choice in this country.

    The Knoxville STEP program is another model that has some merit, for now. I am concerned that the 30% off billed charges is arbitrage and is not sustainable in a bidding war, nor is there any incentive to cut or stabilize prices. It’s always 30% of X. If X goes up?……

    The additional comment from epatient Dave…. you mean that’s new? It is a basic element in my preferred model, with much, much more in the ITC realm no matter where in the world the hospital resides.

    Your manifesto also does not seem to address the unbanked who have no debit account to draw down, or no funds in an existent account from which to draw. So many live paycheck to paycheck or welfare check to welfare check.

    What of the cost to collect if there is no debit account? That alone adds so much overhead expense to the system.

    I for one believe that in a system with universal access to coverage, the QALY system, comparative effectiveness, etc. the following things will happen:

    1. The lines to access care will be the likes of which we have never seen before. Concierge docs will have all the business they want from those who can afford to pay.

    2. QALY system rationing will lead to sourcing care outside the system and exercising freedom of choice to access non-rationed care.

    3. Comparative effectiveness will result in more orphan drugs, orphan conditions and other similar effects of the esoteric diseases, conditions, and treatments as the statistics will not warrant investigation. When statistics are then tainted because the behavior has been modified to color inside the lines of risk non-payment, the art of healing will turn into a science that is standardized, replicable and unrealiztic – unless of course six sigma factory for producing new humans to such a standard to go with it. (Sounds like Stepford to me!)

    With cost controls, (translated to “revenue limits”) existing physicians will not be able to pay their school loans and will head to some other industry to make enough to not only pay their loans but to afford their lifestyle and educate their 1.7 children. New medical school entrants? As Tony Soprano would say fuggedaboutit. Why bother? And the poor suckers that are caught in the transition as new medical school entrants and residents now? Please, another dose of anti-emetic.

    Please don’t reform existing healthcare scheme. Let the wood from the ship sink to the ocean floor. Call the time of death, record it, and move on. No matter how close we each swim to each other with our special interest piece of wood, we will NEVER make another boat that floats and can carry this many people safely to shore.

    I am probably about to be called a heretic….again.

    Maria K Todd

    August 13, 2009 at 2:59 PM

  4. Interesting! But several questions:
    1. What program would pay the PMPM for the uninsured/under-insured?
    2. The ability of a hospital to offer a heavily discounted PMPM is dependent upon the ability to cross-subsidize from the undiscounted — if even the disenfranchised are enrolled at a discounted PMPM, there may be no financial viability.
    3. PMPM is based upon the demographic risk of utilization. Does the risk of utilization of the disenfranchised track the risk of utilization for those traditionally offered discounted PMPM.
    4. The hospital is just part of the problem — there is still the need for primary care and whence comes the PMPM carve out for out patient services?


    August 12, 2009 at 6:35 PM

    • Tim:

      The PMPM basis is paid by the discount medical plan organizer (DMPO), a non insurance vehicle that pools members into an association-like entity for group purchasing purposes.

      It is not insurance; just a group purchasing vehicle that should qualify for the most aggressive pricing, i.e., ‘fair value” of services, as determined by wholesale negotiations that pool membership. Considering 47 million are uninsured, and another 25 million plus are increasingly ‘under-insured’; a small fraction of that deomgraphic’s enrollment could trigger the threshold for most favored nations’ pricing eligibility consideration.

      It is funded from the modest dues paid by the member. DMPO pricing is truly ‘modest’ when compared to group, individual and even so called ‘limited benefit insurance plans’.

      For descriptions see: http://www.vimo.com/tips/tipsTopic.php?cat_id=958&subcat_id=961&subname=Discount%20Medical%20Programs


      August 13, 2009 at 11:33 AM

  5. one additional thought – as well as pricing transparency – there needs to more of a move to uncompensated care transparency – typically the state hospital associations price point websites have uncompensated care $$ and % of total charges for each hospital.. though people really have to dig to find the data – it is there..

    john domansky

    August 12, 2009 at 11:00 AM

    • It’s actually somewhat of a sham as to what ‘qualifies’ towards calculation of ‘community benefit’ consideration. Last time I checked, actual community outreach was a minor fraction (in the 3 to 5% range) of revenues. The majority of the entries where Medicaid & Medicare shortfalls, and other contractual adjustments, with some uncompensated care & bad debt for good measure. Really quite embarrassing for the non profit sector!

      The IRS issued a rather unflattering report earlier this year on the broader question of whether 501(C)3 operators where in fact ‘earning’ their exemption based on community practices: http://ftp.irs.gov/pub/irs-tege/execsum_hospprojrept.pdf


      August 12, 2009 at 11:35 AM

      • the uncompensated care $$ and % that the various price point websites show are only “charity care” and “bad debt” – NOT contractual allowances – i think these numbers are much tighter than what the 990-H forms will show –

        john domansky

        August 12, 2009 at 2:34 PM

  6. Excellent direction! Several months ago we rolled out “STEP” program – Sensitive Times Economic Program at our hospital – we basically increased our qualification limits to 300% of fed poverty – applicable to all (with or without insurance) – we also offer a flat 30% discount to uninsured population – we have advertised the heck out this program – with the main goal of getting people to utilize it and to take the financial assistance process out of the back office and to the front of our PR/advertising campaign.. We now offer an online financial assistance application on our website (http://www.knoxvillehospital.org/index.php?option=com_content&task=view&id=62&Itemid=104) – utilization of this program has significant increased – our volumes across the board are up – financial indicators have significantly improved in the past 6 months –

    most hospitals do NOT offer financial assistance to those with insurance – we do – insured out of pockets continue to exponentially rise – and will probably continue to do so – we need to also provide financial assistance to those folks..

    i applaud the effort and would love to be a part of your project…!!

    take care..john

    john domansky

    August 12, 2009 at 9:55 AM

    • John:

      A big ‘tip of the hat’ for the ‘STEP’ program, and the upfront emphasis of it’s availability, and timeliness to your service area residents! Wow, getting proactive in outreach terms v. managing as a back-end revenue cycle event is a HUGE shift. Bravo!!!


      August 12, 2009 at 11:28 AM

      • thanx for the kind words! we are very proud of our program – it has made a world of difference in our community!

        john domansky

        August 12, 2009 at 8:21 PM

  7. So if I understand the model you are looking to create a program that serve people who cannot afford or do not have access to traditional healthcare coverage. Which in my mind is a portion of the uninsured and a portion of the under-insured.

    I agree with your points, but wonder if I am confused about the barrier’s you faced in the past. Having said that I like the concept of using a community based preferred hospital to act as what I would call the healthcare hub. To me healthcare is a community based issue. Our doctors, pharmacies and hospitals for the most part are located in our community. Creating a healthcare model that creates a community anchor (aka the hospital is great idea).

    I think adding in connectivity to community businesses, providers and the pharmacy is one of the keys. The coordination of care can then be accomplished (aka the medical home). One missing point in my opinion is incentives to drive desired behaviors for both the patients and the providers. An additional point I would like to make is that I think community based employers who are self funded (ASO) might have the ability to help fund and drive this business model.

    Overall I like it, and I have personally worked on a business model that is similar. Let me know if I am off base.


    August 12, 2009 at 8:46 AM

    • Arthur, off base? No way, you are right on my friend. I originally targeted “flagship” hospitals as the anchor tenants’ for local market network build-out purposes. This meant, working with hospital aligned physicians, and in some cases management services organization as a ‘master architect’, and ‘manager’ of the local community based system.

      Hospitals are potential hubs, and can behave as organizers of local market health care resources. The problem has been lack of vision, and where strategies were chosen, too often they were the wrong ones. For example, in Texas I counseled a major proprietary system on the build-out of their managed care strategy in Houston, deploying PHOs (physician hospital organizations) that afforded joint and coordinated contracting with payors. My recommendation was to adopt a ‘payor neutral” portfolio model to contracting (vs. owning an operating a provider sponsored health plan); and to refrain from acquiring primary care physician practices; instead investing in MSO infrastructure to provide adminsitrative and group purchasing services for physicians participating in the affiliated IPA. Against my counsel. they did just the opposite. After years of heavy operating losses, the plug was pulled and write-downs booked.


      August 12, 2009 at 9:27 AM

  8. Your “preferred” seems to be oriented toward finance, which is great. For me the ideal hospital also:

    1. Encourages (even *teaches*) patient engagement

    2. Supports that by sharing the pt’s medical record data, online, at no cost

    3. Always tells the patient what treatment options are available for their condition, including treatments they don’t offer. IOW, they prioritize the patient’s health, not their own commercial interest. (I don’t object to profit, but I think it’s heinous to withhold information about options.)

    e-Patient Dave

    August 11, 2009 at 7:11 PM

    • Thanks Dave!

      Agree completely and am inclined to think some consideration need be extended to adoption, or promotion of EHRs and PHRs; perhaps even linking to HIMSS ratings for EHR adoption but only if consistent with an e-patient or participatory manifesto of some sort.


      August 11, 2009 at 11:28 PM

  9. There has been a great deal of talk in the media — print, radio, tv — just about everywhere about the behavior and tactics being employed by various organizations. There have been comments about well behaved and polite citizenry attending meetings to voice their opinions. There have been stories of those who haven’t conducted themselves well. I suspect these stories will go on throughout the month of August and perhaps beyond. For one, I hope they do go on well beyond.

    I think both sides have taken essentially the same tactics. Labeling each other with invectives, giving their supporters a ‘playbook’, and attempting to use the media to their advantage. All of this is okay. It is okay because in America we have the right to freedom of speech, assembly and freedom of the press. These are rights that thousands have given their lives to protect. The debate on health care which consumes nearly a fifth of the national economy and involves everyone is something that we should openly debate and understand the intended and unintended consequences of before we change an entire system.

    It is important to provide better access, bend the cost curve so that health care is affordable (and not just through shifting costs by taxing) as well as sustainable, and improving the quality of the care delivered.

    We are a country that leads the world in health care innovation. We have to zealously protect that aspect. No other country in the world is positioned to take our place if we take our eye off this important work.

    But above all democracy demands that citizens get involved and voice their opinions. Follow the healthcare debate and other important health care system issues at http://www.ilovebenefits.wordpress.com

    • Indeed; spirits are a little testy; and many are making downright unkind and untrue claims. A little more civility, and a lot less agenda based politics is the solution.


      August 12, 2009 at 9:28 AM

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