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Why "Supply Side" Solutions to the American Healthcare Crisis Aren't Working

Posted by Joe Antle on July 3, 2019 10:20 AM EDT
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A recent article in Inside Business, Hampton Roads' weekly business news tabloid, and a chat with its author over a cup of coffee have reinforced our HealtheTeams Support Group's...

...philosophy and contention that simply focusing on improving the quality of healthcare, reducing its costs and otherwise "fixing" the supply side of the economics of healthcare will not work.  Rather, a rigorous focus on reducing the volume of services and products required of the healthcare system and thus improving population health in general (and specifically in chronic illnesses) is the primary strategy for a sustained improvement in the overall performance of the American healthcare system.

My conversation with Gregg Kennerly, managing partner and founder of Advanced Benefits Strategies and reading his article in Inside Business, were convincing that much work and investment has been spent on the "supply-side", but the costs continue to increase and the value and quality of healthcare continue to decline.  His article and the discussion explained the ten reasons that this will continue unless new strategies are put in place.  He agrees with me and our blogging group (Chip Block and Thomas Edwards) that the focus on reducing demand on the healthcare system through strategies aimed at educating healthcare consumers, improving healthy lifestyles, advancing evidence-based solutions for recovery from substance use disorder, mental illness and other recovery opportunities related to surgery and certain chronic disease states has enormous potential.

Here is a list of the top reasons Gregg feels that the current state of healthcare and the health insurance industry that finances the vast majority of healthcare services and products will not improve without a big shift in our cultural biases.

Top reasons health care costs are nontransparent

• There is no “retail price” in health care. Virtually all providers are paid under contracted rates. Prices for most patients and procedures are tied to nothing except the per-procedure cost negotiated in a health network contract.

• Provider contracts with PPOs and HMOs create proprietary secret pricing. The prices negotiated between hospitals, physicians and insurance networks are closely guarded by both parties.

• The insured population pays the cost for those with no insurance. This needs to be addressed. No hospital in the country will let you bleed out on the front steps. Everyone is getting treatment, but not everyone pays. So prices for the insured population somewhat reflect the indigent and Medicare population of the area.

• People are afraid to ask the cost of medical services. What else do we consume without asking what it will cost? Nothing! Consumer directed plans such as HSAs which are designed to get consumers more involved with health costs, have been somewhat successful with teaching employees to ask questions and accumulating money in an HSA to pay for smaller expenses.

However, these efforts have been slower than predicted in curbing medical price inflation over the last decade or so.


• The current delivery system has a vested interest in keeping the status quo. The big get bigger and gobble up competing facilities and providers with their larger scale and leverage with insurance companies and health plans. Merger and acquisition deals in the health care industry are all based on the predictable stream of cash coming from the current contracted network arrangements.

• Although there are some efforts to better define what is fair reimbursement for medical services (google reference-based pricing), Medicare is still the only program where a fixed value is placed on health care services. Hospitals hate Medicare reimbursement, and most claim to lose money on all Medicare patients.

While I have only re-published excerpts to Gregg's excellent article, you should take the time to read the article in its entirety.  If you care about innovation and new models for improving socio-economic problems such as the high cost of quality healthcare, you would be well-advised to read all of Gregg's article by clicking on the following link:

Top Reasons Health Costs are Nontransparent

In the meantime, if you want to contact Gregg directly to learn how and why these reasons will impact healthcare costs improvements and what can be done at your business to offset that, feel free to contact him.  Below is some information about Gregg and how to contact him:

Gregg Kennerly is the principal at Advanced Benefit Strategies of Virginia, which designs and implements innovative corporate health care plans. Reach him at service@absofva.com or 757-536-4554.


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