Thursday, February 29, 2024 Feb 29, 2024
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Expert Opinions

Expert: The Other Side of the Hospital Consolidation Story

DFW Hospital Council President and CEO Steve Love would like to see more collaboration to reduce healthcare costs.
By Steve Love |
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One of my favorite past radio commentators was Paul Harvey. He had a tradition of giving the other side of discussion topics, especially current items, by saying “and now you get the rest of the story.”

Many articles are written about healthcare costs, medical debt, same-site neutrality, and pricing. Many articles cite hospitals as the main driver of escalating healthcare expenses as they are written by think tanks or business groups funded by outside donors. Healthcare costs account for 18.3 percent of the Gross Domestic Product (GDP), which we all agree is significant. Some, however, only focus on hospital costs as the driver of these high costs. According to the American Medical Association, hospitals represent 31.1 percent of the total healthcare costs in the U.S. This is less than one-third of total healthcare costs. So, why are these think tanks and business coalitions ignoring 69.9% of healthcare expenditures in the articles they produce and distribute to state and federal legislators?

As for medical debt, hospitals never want to hurt people financially, and in numerous discussions with member hospitals, the consensus is most do not attach liens on homes, do not file bad reports with credit agencies, and have financial counselors to assist patients in navigating their payment plans. Hospitals diligently try to qualify people for Medicaid, CHIP, and other financial plans and write off charity and indigent care if the patient meets the required criteria. There may be some bad actors in other parts of the country regarding liens, garnishments, etc., but not in North Texas.

Another reason we have bad medical debt in North Texas and the entire state is that our state legislature has refused to pass Medicaid expansion since the inception of the Affordable Care Act. Medicaid expansion will not solve all the problems but would serve as another tool to help with medical coverage for approximately 1.5 million people.

One recent article cited a survey by Small Business for America’s Future where business owners wanted price controls, and as employers, they were feeling the pain of increasing prices. Hospitals support price transparency and want to assist patients in understanding hospital charges. The reimbursement for hospitals, however, is a very complex financial calculation as different payers, networks, acuity level of the patient, deductibles, and coinsurance all factor into the final payment. Hospitals have supply inflation pressures, workforce expenses, and intense capital expenditure needs for the latest clinical technology. One of the significant supply expenses is pharmaceutical costs. Due to acquisitions and vertical integration of this high-margin business, insurance companies now control approximately 85 percent of pharmacy benefit plans.

Levin and Associates, a research firm, stated that between 2013 and August 2023, nine non-hospital healthcare giants (insurance companies and pharmacy benefit managers) spent $325 billion on over 130 mergers and acquisitions. These middlemen contribute immensely to overall healthcare costs. Now, private equity has entered the scene and cherry-picked high-margin health services. Through the Centers for Medicare and Medicaid Services (CMS), the current administration has proposed pharmacy negotiation to lower prices for Medicare beneficiaries, which will help reduce healthcare costs. Ironically, employers want lower healthcare costs, yet the U.S. Chamber of Commerce has filed lawsuits to block this initiative. Employers, business coalitions, and think tanks should contact the U.S. Chamber and ask why they would take this action.

Many think tanks push same-site neutral pricing, but one should consider other factors that many may need to consider in reaching that conclusion. Hospitals must have 24/7 standby capacity for emergency department services, backups for complications occurring in different settings, stringent ventilation requirements, infection control codes, fire and life safety codes, infection control programs, Joint Commission Accreditation, and other regulations. All of which play roles in delivering safe and effective care. Many independent offsite settings and offices have none of these requirements and are not required to comply with such standards. These regulations are needed for a safe environment; these expenses are part of the facility fees that hospital providers charge.

This piece is not meant to be defensive, point fingers, or lash out at hospital critics regarding healthcare costs. It is written to give additional information and facts regarding healthcare costs. We are all in this together and can work for ways to address rising healthcare costs. Hospitals stand ready to work collaboratively and in good faith with stakeholders to reduce healthcare costs. Printing white papers and articles and distributing them to legislators with no collaboration or input from providers for workable solutions is counterproductive to everyone. We do not need to legislate healthcare, but all stakeholders collaborate for meaningful solutions. With that approach, we can focus on reducing costs and providing safe and effective patient care.

Steve Love is the President and CEO of the DFW Hospital Council.

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