How Hospital Groups and Insurers Have Ruined Healthcare

The U.S. healthcare payment system is broken. In terms of technology, innovation, and quality of care, our system is still among the best in the world. But it is one of the worst in terms of pricing and who actually pays for healthcare delivery. Who’s to blame? There’s plenty of blame to go around, but a recent Forbes piece written by contributor Robert Pearl, M.D. lays much of the blame squarely at the feet of insurance companies and hospital groups.

As you know, our system is a private system rooted in the health insurance paradigm. The strange reality is that health insurance is not really insurance by the purest definition of the term. Rather it is a payment system that relies on an intermediary to transfer funds. Be that as it may, what is now a broken system wasn’t always broken.

An Unwinnable Tug-Of-War

Pearl maintains that the current mess we find ourselves in started back in the 1990s when insurance companies, hungry for shareholder profits, started putting the squeeze on hospitals. He says they started imposing restrictions on covered care and forced hospitals to cut costs. Insurance companies generated profits by reducing the amount they spent to pay claims.

In order to keep their own profits from sinking, hospitals began buying up one another in an attempt to monopolize single markets. It worked. As hospital mergers and acquisitions accelerated, we were left with fewer and fewer independent institutions. Today we have large hospital groups capable of controlling entire markets with little to no competition.

In essence, we now have an unwinnable tug-of-war between private insurance companies and hospital groups. Both are hell-bent on maintaining control and, with it, pricing. Who ultimately pays? Consumers. They pay with higher prices and lower quality.

Quality of Care Suffers

Pearl cites data in his piece showing just how problematic consolidation has become. In the 12 years ending in 2012, some nine hundred mergers and acquisitions took place. Over the next three years, another 1,600 were completed. Pearl says that forty large healthcare groups now own approximately one-third of the nation’s hospitals. The ten largest own one-sixth of them.

Let’s be honest, healthcare is a business in this country. There’s nothing wrong with that, by the way. But any business devoid of competition tends toward higher prices and lower quality. Healthcare certainly fits the bill. A Yale-Harvard study Pearl cited in his piece shows that more expensive hospitals don’t improve patient outcomes commensurate with their higher prices. Data from the study pretty much concludes that you don’t get higher quality care by paying more for it.

A Reason for Staffing Shortages

Assuming Pearl has interpreted the data correctly, can this be a possible explanation for why staffing shortages continue to worsen? Could it be that the same tug-of-war sending prices higher and quality lower is driving doctors and nurses out of healthcare?

IMedical Data is a company that provides data solutions to healthcare recruiters, HR departments, etc. They say that the data demonstrates there are plenty of qualified clinicians doing very good work in hospitals and outpatient clinics. There just aren’t enough of them. The question is, why?

Healthcare was once thought of as an honorable profession allowing one to make good money and help people in need. But perhaps the petal is off the rose. Maybe we have corporatized medicine so much that good people no longer want to be a part of it.

If nothing else, insurance companies and hospital groups have created an unwinnable tug-of-war that only sends prices higher and quality lower. That is not the way healthcare is supposed to be.

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