Consumer-focused Care spoke with Kenneth Mays, Marketing Director for Bumrungrad International, a leading player in medical travel/ medical tourism in Southeast Asia, as a world class, JCAHO accredited (the American hospital accrediting organization) facility.
The interview took place at the World Health Care Congress and both a podcast and a transcript lay out the conversation below.
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Health insurance companies are already an oxymoron– they neither are about health nor insurance– instead they have become a redistribution vehicle for transferring money from the healthy to pay for chronic care of the sick and end-of-life “heroics”.
The Nytimes has an interesting article on the emergence and implications of Tier 4 “co-pays” for medications– bringing a percent of drug cost into the co-pay equation for expensive medications.
With the new pricing system, insurers abandoned the traditional arrangement that has patients pay a fixed amount, like $10, $20 or $30 for a prescription, no matter what the drug’s actual cost. Instead, they are charging patients a percentage of the cost of certain high-priced drugs, usually 20 to 33 percent, which can amount to thousands of dollars a month.
For example, here is a sample Tier 4 explanation from BCBS NM.
What is a 3-Tier or 4-Tier prescription drug plan? continue reading »
Was listening to a podcast with Robert Nesse, CEO of Franciscan Skemp Healthcare, which is part of the Mayo system.
In talking about High Value Health care, he put forth an interesting equation I hadn’t heard to date.
His take on the Value Equation for health was that is was:
Value = (Outcomes + Safety + Service)/(Cost + Time)
This is interesting to me as it is a mechanistic equation that seems to be based in a belief that there is some optimal value we can all agree on. One would imagine that would allow society to set some absolute value on each service, which fits in the overall approach taken by Medicare, Medicaid, health insurance, etc.
If we believe in a retail marketplace, value suddenly looks very different than the equation mentioned above. Per Karl Menger, in his Principles of Economics in 1873:
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John Goodman makes a very interesting argument pointing to 3rd party payment as a primary cause of the lack of innovation in health services. He highlights a lack of incentive for more efficient care, as it is combined more often with financial penalty instead of reward.
“There is no systematic reward for excellence and no penalty for mediocrity. As a result, excellence tends to be the result of the energy and enthusiasm of a few individuals, who usually receive no financial reward for their efforts.”
However, Goodman takes two aspects: price and quality too far. In citing the retail clinic, he claims that transparent pricing and quality of service allows success outside of 3rd party payment.
However, in discussions with Linda Hall Whitman, former CEO of MinuteClinic, this example falls somewhat short. 3rd party payment was a key to the financial viability of the MinuteClinic, including significant funds from BCBS MN. MinuteClinic’s success was based instead on SUPERIOR service combined with SUPERIOR quality at half the price.
There appears to be three approaches that consumer-focused innovation can improve upon to drive real adoption: 1) Out-of-pocket price, 2) Expected quality of care, 3) Expected level of service.
