Towards a ‘Preferred Hospitals’ Manifesto
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.
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