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My ex-boyfriend was an attorney at UPMC doing M&A. Their business strategy goes something like this: 1. "Rescue" the only small hospital in a rural area throu
by elliekelly 8y ago
My ex-boyfriend was an attorney at UPMC doing M&A. Their business strategy goes something like this:
1. "Rescue" the only small hospital in a rural area through merger or acquisition. The hospital entity is a "non-profit."
2. Over the course of the next year or two ramp up sales of the very much for-profit (and, conveniently, affiliated) health insurance plan, UPMC Health Plan to all major local employers.
3. Once sales of the health insurance plan reach "critical mass" within the community, the "non-profit" hospital becomes out of network, and ridiculously expensive, for all major insurers except one: UPMC Health Plan.
4. Within the year all local employers are basically forced to adopt UPMC Health Plan.
5. UPMC Hospital and UPMC Health Plan rates go up. UPMC Health Plan shareholders rake in the money while a small town goes broke trying to receive adequate healthcare.
- conanbatt 8y agoThis is a business modell that works only because of the difficulty of opening a new small hospital. Lets remember that any market is subject to the mopolization of consolidation, its barriers to entry that make them sustainable.
- darawk 8y agoYep. Just to elaborate here: In order to open a new hospital in an area you need to acquire a 'certificate of need'[1]. You know who approves those certificates? The other hospitals in the area. Your competition literally gets to decide whether or not you can compete with them. 1. http://www.ncsl.org/research/health/con-certificate-of-need-state-laws.aspx http://www.ncsl.org/research/health/con-certificate-of-need-...
- koboll 8y ago"Certificate of Need (C.O.N.) programs are aimed at restraining health care facility costs and facilitating coordinated planning of new services and facility construction ... The basic assumption underlying CON regulation is that excess capacity stemming from overbuilding of health care facilities results in health care price inflation." Two paragraphs in and I need to stop reading this, I'm getting murderously furious.
- darawk 8y agoYa, it's kind of incredible. And it's equally incredible how few people seem to know about this. It'd be such an easy thing to fix, and it would substantially improve competition for hospital services. It's completely beyond me why this isn't getting changed.
- aaavl2821 8y agoI completely agree. If we had to pick one thing to change to lower healthcare costs in the US, this wouldn't be a bad choice. Hospital costs are by far the largest contributor to US healthcare expenditure at 30%, and when you add in physician costs (since they are increasingly owned by hospitals) that's almost 50% of cost My sort of crazy theory is that there is a behind the scenes lobbying / media battle between pharma, the hospital lobby, and the insurance lobby and that this dictates a lot of the national conversation around healthcare. Because healthcare is so opaque and complex, and because there is so much political energy around healthcare, it is hard for the public to be informed about the facts so they just respond to emotionally driven narratives in the media. Right now pharma is public enemy number one so everyone complains about drug prices even though hospitals are probably just as bad if not worse. Both trade groups spend roughly the same on lobbying although hospitals probably have more "soft" political power bc they are major employers in pretty much every county
- Cd00d 8y agoI suspect that FAR more people are paying for prescription pharma than are visiting hospitals. So, it's not totally irrational that pharma is perceived as a greater "enemy" than hospitals even given possibly equivalent price inflation.
- pg_bot 8y agoPharmaceuticals represent about 10% of healthcare spending for Americans. Inpatient and outpatient comes out to around 52% of annual healthcare costs.[0-1] While there are many issues in the pharmaceutical industry, as a whole I think they get an unnecessarily bad rap. Most of America's healthcare problems are self inflicted. There are a lot of things that need to be adjusted in order to let markets run effectively. [0]: https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/NationalHealthExpendData/Downloads/PieChartSourcesExpenditures.pdf https://www.cms.gov/Research-Statistics-Data-and-Systems/Sta... [1]: https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/NationalHealthExpendData/Downloads/quickref.pdf https://www.cms.gov/Research-Statistics-Data-and-Systems/Sta...
- Spooky23 8y agoThe reality is that there are way too many hospital beds, which are essentially government institutions sustained by Medicare.
- darawk 8y agoCan you elaborate on that?
- Spooky23 8y agoMost populated states have an overage of hospital beds, and anywhere from 40-50% of hospital revenues are from Medicare and 12-16% from Medicaid. It’s pretty obvious when you visit a hospital, very few younger patients are hospitalized. Private insurance makes it very difficult to remain as an inpatient... even a major surgery like a spinal fusion is a 48 hour stay. These institutions are mostly unnecessary and only exist because of their political power and government funding. There are exceptions, especially in rural areas and places in the south where the population of old people has boomed.
- your-nanny 8y agooptimizing for expected averagevoccupancy is a good way to fail when facing a region wide medical emergency. excess capacity needs to be there.
- maxerickson 8y agoInsurance and public payers have pushed to make more care outpatient or delivered at less intensive facilities. Occupancy rates have declined even as the number of licensed beds has gone down (with population increasing substantially, so the per capita effect is even bigger): https://www.cdc.gov/nchs/data/hus/2015/089.pdf https://www.cdc.gov/nchs/data/hus/2015/089.pdf Especially look at small hospitals, which Medicare pays using a different formula to help keep them open (which isn't a bad thing, it increases access to care for lots of people).
- maxerickson 8y agoAt the Federal level it's really Medicare certification that is the stumbling block. Federal certificate of need laws were repealed in the 1980s, shortly after they were first tried. States that don't have CON laws don't particularly have lower healthcare costs than states that do have them.
- darawk 8y agohttps://www.mercatus.org/publication/health-spending-reined-in-CON-laws https://www.mercatus.org/publication/health-spending-reined-... Do you disagree with this analysis, or do you just think 3-5% isn't that much?
- maxerickson 8y agoA single step that reduces costs by 5% is a good thing to do, but it isn't going to fix costs all by itself.
- darawk 8y agoTotally agree. But unfortunately our healthcare system looks like it's going to require the stacking of 50 or so of these 5% fixes.
- archgoon 8y agoHowever, in the case of UPMC, it's not due to CON, as CON laws aren't in Pennsylvania based on that link.
- mrlatinos 8y agoPrecisely why government mandated third-party payer plans are a terrible idea.
- tdb7893 8y agoHonest question, why is government mandated the problem here? I don't really understand from the context
- mrlatinos 8y agoThe employers were able to get them to "critical mass."
- smogcutter 8y agoIn that case wouldn't the alternative be having no insurance at all? How would that help? Edit: I'm taking "government mandated third party payer" to mean something like the ACA mandate. If you meant a government mandated monopoly, then yes that's a terrible idea
- Spooky23 8y agoThe economics associated with modern healthcare demand consolidation, which basically means local cartels or monopolies for hospitals and health networks.
- sjg007 8y agoMost of the rural hospital income is based on medicare/medicaid.
- brandonmenc 8y agoBecause it guarantees customers for a product that - sans compulsion by law - would not have been purchased due to its high price.
- 8y ago
- Judgmentality 8y agoAs someone who used to live in Pittsburgh - fuck UPMC. They may do some excellent research and have great doctors, but their business practices are akin to Comcast. So many hidden fees (some of which I suspect would be overturned if taken to court, but that would require a class action lawsuit or someone willing to spend 1000x on lawyers than paying the fees) and just terrible practices as you mentioned. They buy up real estate in bulk and then pay no taxes because they are a non-profit (something that is regularly challenged in court but they just threaten to leave the city they're named after). What's worse is many of the buildings they buy are historic, and they raze them and replace them with cookie-cutter corporate facilities. And as they raise prices and screw over customers their executive suite rake in 7 digit salaries. I believe that running an organization of this size should command large salaries, but they are doing it by fucking over their customers not by providing better healthcare. And since they're the largest employer in the state (and this is in Pennsylvania which includes Philadelphia) they just keep doing this shit. Fuck UPMC. The only other non-profit organization I can think of that is so undeserving of the status is the NFL. We need stronger enforcement against entities that are clearly operating for a profit while reaping the benefits of paying no taxes.
- jkaplowitz 8y agoMLB also doesn't deserve the antitrust exemption it has as a pure accident of judicial history, unlike all other sports leagues. (The exemption was subsequently narrowed by Congress but not eliminated, which MLB effectively argues means they implicitly endorsed the remaining exemption and that any change would need to come from Congress. SCOTUS has upheld the exemption twice on the basis of "we don't want to disrupt things" and has refused reconsideration as recently as this year.)
- deleted 8y ago[deleted]
- amluto 8y agoStep 6: solicit donations! https://www.upmc.com/about/support/faq https://www.upmc.com/about/support/faq Out here, it’s Sutter Health. They have a slightly different strategy involving acquiring near-monopoly status and screwing everyone over. It’s gotten so bad that the state is suing to partially break them up. To be somewhat fair to the hospital groups in question, a lot of this is driven by outlandish regulation that makes it hard for independent medical groups to survive.
- aaavl2821 8y agoThat regulation favors hospital groups and reinforces their monopolies. Independent physicians who can't deal with the regulations sell out to big hospital groups, who then, enabled by their greater control of physician supply, squeeze insurance companies, who then in turn must squeeze the remaining independent physicians who can't fight back, who then give up and sell to hospitals I think in some ways the ACA empowered monopolies by enabling them to further consolidate physician supply in the guise of integrating data for "population health"
- mtgx 8y agoIn some ways? Or by design? After all ACA was always a capitalist form of healthcare.
- tomohawk 8y agoMaybe for a very strained definition of capital. The ACA was essentially written by the big industry insiders that are now benefiting from it. This is cronyism, not capitalism, and is the hallmark of a socialist / regulatory state.
- sjg007 8y agoSutter is pretty good though, it's nice to have comprehensive care in the same EMR. Kaiser is a competitor too and is actually the model the OP denigrates as UPMC at reasonable costs. Stanford is also very good especially if you actually get sick and need comprehensive care.
- MrMorden 8y agoThis business model would have a problem with Maryland's all-payer system—hospitals are only allowed one price list; they can't give any individual insurer their own schedule. Of course, being a reasonable idea means it's illegal; Maryland is currently the only state the feds allow to do this, so even if Harrisburg were willing they'd need to go through Washington.
- rb666 8y agoIt's hilarious, the shit that's allowed in the USA. Glad to be living in a country where capitalism has not taken over everything (yet).
- sodosopa 8y agoNot for profit or non-profit? Big difference. A former employer was a smaller not for profit system. They made money but it was nothing like what the corporate hospital companies could do. The place eventually went bankrupt and was purchased by one of the bigger companies. No winners here except the large company.