The Medical Consumer, the “Priceline-ing” of Health Care, and Your Hospitalist Subsidy

by Dr. Brian Harte, MD, FACP, SFHM

The increasing prevalence of “consumer-directed health plans,” AKA High-Deductible Health Plans (HDHP), as well as the insurance exchanges, public reporting and technology, has opened up the floodgates of health care consumerism. Can we imagine a day when the internet and price transparency permit comparison shopping, and perhaps even consumer-driven price negotiation with health care providers?

Twenty years ago, most of us arranged and purchased our vacation travel arrangements using a “travel agent.” The internet brought a wave of accountability and transparency of information (i.e. customer reviews, pricing, etc.) to the travel consumer’s fingertips, Ultimately sites such as Priceline which allow consumers a weightier hand in the purchasing process, upending both the travel industry and the travel agent profession.

We aren’t all the way to a “pricemedline.com” in healthcare, although there are many examples of companies pushing the industry in that direction. What we do know is that more patients have some kind of insurance; that patients are being called upon to directly foot increasing shares of their cost through HDHP and other products; that years of rising costs and prices are now being met by assertive counterstrategies such as price transparency and reference pricing. As consumers (and employers) have access to and use better data on cost and quality to make choices that hit their own pocketbooks, hospital and health system revenues are going to be impacted – hard. Just look at examples (such as here and here) of transparency forcing hospitals to adjust their pricing, or lose market share.

As if this weren’t enough for a hospital or health system CFO, other factors are in play too. More consumer responsibility will mean more bad debt as patients who end up facing bills they can’t pay. And remember, although the ACA helped millions get insurance, the great majority of patients enrolled through the exchanges are in bronze or silver (AKA High-Deductible) plans, while their income level was low enough to qualify for a subsidy. The combination of high deductibles and low income surely spells trouble for a hospital’s accounts receivable department.

My observation is that this reality has executives working both proactively (for instance, on improving quality, and looking for potential consolidation dance partners), and reactively (cost-cutting). However, that same reality hasn’t really hit the consciousness of the front-line caregivers yet. They don’t see the nature of their work changing nearly so quickly. I think physicians in independent practice are, to a greater or lesser extent, aware, but those in large practices and/or those employed by health systems may not be. And I’m really unsure how hospitalists are educating themselves, and how proactive they are being about it. For years, hospitalists have been the beneficiaries of a booming job market and rising salaries, finding a “sweet spot” initially as PCPs and specialists left the hospital, and then jumping into patient safety, quality, and the “value equation” with both feet.

However there are a few statistics that concern me when I think about the practice of hospital medicine because the trend in financial support seems to be on a collision course with the economics of hospitals. According to the 2012 State of Hospital Medicine Survey by SHM, the great majority of hospital medicine practices receive substantial financial support from their hospital. Given the nature of the practice, most of this probably goes directly to physicians’ salaries, which themselves have gone up significantly year-over-year. How long can this trend last?

Now, to be clear, I am not saying that hospitalists are overpaid. Rather, my concern is whether hospitalists will be able to demonstrate the value to justify these subsidies (about $140K per full-time employee for non-academic groups), especially as hospital revenues taper off or even fall. I’m having difficulty seeing how hospital medicine group subsidies will not follow suit. We are in a world where hospitals are challenging their physicians to do more, with less.

Hospital-based physicians are certainly not going away in the hospital, the ICU, or the ED. The push to “value” will demand their services even more in the future. However, it is imperative that hospital medicine group leaders have a voice with their administrations, their physician communities and their patients to make sure that all stakeholders understand clearly how hospitalists’ value is being measured, and then manage the group and expectations.

“Pricemedline.com” is coming. Hospitalists and other hospital-based physicians will need to aggressively bolster their case for “adding value” and manage the expectations of hospital executives, patients and other stakeholders as healthcare becomes more commoditized and purchasing decisions lie in the hands of patients.

Brian Harte, MD, FACP, SFHM is the President of Hillcrest Hospital, a 500-bed hospital in Mayfield Heights, Ohio and a flagship hospital of the Cleveland Clinic Health System.   He is the immediate past-President of South Pointe hospital in Warrensville Heights, and has been a hospitalist in both private practice and academic programs over the past 15 years. He is the former Chairman of the Department of Hospital Medicine and the Medicine Institute at Cleveland Clinic, comprised of over 200 primary care and hospital-based physicians across dozens of sites focused on improving the health of the Greater Cleveland community. He has also served a Medical Director in the Cleveland Clinic Division of Medical Operations, spearheading operational and quality data-reporting for the Health System. In addition, he is a Deputy Editor of the Journal of Hospital Medicine and a Senior Fellow and member of the Board of Directors of the Society of Hospital Medicine.

Dr. Harte attended college at Yale University, medical school at the University of Pennsylvania, and completed his residency in internal medicine at the University of California, San Francisco in 1999.