Thanks to my friend Jay Kempton of The Kempton Group, I was given the opportunity to address a gathering of the Society of Professional Benefits Administrators. This is primarily a group of third party administrators, folks whose jobs it is to process the health claims of self-funded (self-insured) health plans. Very simply, these plans belong to businesses that rather than pay premiums to a big insurance company, basically pay the premiums to themselves, their employees also contributing. This allows for local control of the plan administration and typically saves these companies gigantic sums. Employers with a plan like this are far less likely to inform an employee that a service is “not covered.” Employers are also spared many of the disastrous expenses associated with the purchase of traditional insurance. If the employees truly understand the advantages of a self-funded plan, including sharing in the “saved” amounts with the employer in some instances, all parties are inclined to assume the role of the discriminating health care consumer, a role that is virtually absent in traditional health insurance plans.
About a year ago, Jay Kempton and I agreed to extending our website pricing to clients of The Kempton Group with the understanding that we would be paid quickly from an invoice. To say that this has worked out well for the clients of The Kempton Group would be an understatement. Here is the website of the Advantage Health Plans Trust, the trust that administers the holdings of these health reserves. To say that this has worked out well for our facility would likewise be an understatement. We are seeing patients from outside of our normal area, none of which we probably would have ever seen, all of which are receiving care, the price for which represents savings in many instances of 60% or more for their health plan.
Jay’s “out of the box” vision got the attention of the national association most if not all of the third party administrators belong to, and they asked him to talk about it at one of their meetings. Dr. Lantier and I got to go along. I was one of the panel speakers.
You should have seen their faces when they saw our online pricing. Remember, these are people who actually pay the claims of their clients. They know what the “going” price is for a knee arthroscopy or a tonsillectomy at one of the “not for profit hospitals.” Horror stories about big hospital rip offs dance around in these folks’ heads constantly. They now had rational numbers with which to compare. There was a general agreement that it is not the physician fees that represent a threat to the solvency of their health plans, but rather the facility fees. They completely understood that our fees were low due to our control and ownership of the facility in which we work, a situation that allows for assigning low marginal profits to the facility, the primary financial liability for health plans like these.
Needless to say, we made friends fast! I don’t know what surprised this group more: that our prices were reasonable or just the fact that we revealed up front what they were. Some of the folks in the audience are in a position to redirect surgical patients our direction, saving their clients more than enough money to pay for the costs of travel for their employees. This loss of “redirected” patients will do exactly what you think it will do: it will introduce much needed competition, lowering prices for all, while maintaining or increasing the level of quality. The result will be a better value, not just a better price.
I have actually come to the conclusion that there is an inverse relationship between price and quality in health care. This “decoupling” of price and quality is a well-known characteristic of managed economies and really should come as no surprise. Here is what’s crazy though. That I told this group “here is what I do and how much I charge for it,” was considered radical and revolutionary. I think that those who refuse to step up and do the same may well lose much of their business to those of us who have taken this step.
G. Keith Smith, M.D.