I usually like to be a little light hearted when making observations about the state of healthcare. That separates me from the serious pundits, most of whom have never run a Boy Scout first aid clinic, much less a complicated healthcare delivery organization. I hope I am not being unfair to the Scouts. This time I am going to be serious.
In the past week two significant developments occurred which demonstrate that being a relatively small healthcare organization is not the same thing as being a chump.
The first development involved NorthBay Healthcare, the organization where I had been CEO. A few months before I retired (hit the beach as I like to refer to it) as NorthBay Healthcare’s CEO in 2017, two large health plans cancelled their contracts and began paying NorthBay whatever they deemed appropriate for emergency care and any resultant inpatient care.
Imagine that you go into a supermarket and decide you have the ability to determine the price you will pay for an item without regard to the cost of the item. Imagine the reaction of the supermarket. That was what those two health plans were doing while NorthBay was providing a very valuable, often life saving, service to their plan members.
One plan was Blue Shield of California and the other was Kaiser Foundation Health Plan. Neither plan to the best of my knowledge allows its customers to decide what premiums they will pay for health insurance.
This practice resulted in a significant revenue shortfall for NorthBay. Meanwhile both plans were highly profitable and building their reserves to an amount which exceeded regulatory requirements. It became clear that the only recourse for NorthBay was to the courts. Both health plans were sued by NorthBay.
The Blue Shield case was decided in a San Francisco Federal Court last week. The jury decided after a very short period of deliberation in NorthBay’s favor. Blue Shield now will be required to pay NorthBay for lost revenue.
Blue Shield, in an absurd, hilarious and fanny covering press release, tried to spin the verdict as if it was the victor. No one was buying what they were selling. That jury’s decision should help other healthcare providers faced with similar situations.
Make no mistake, if you are a health plan and end a contract, you do not have the right to unilaterally decided what you will pay for the care provided to your beneficiaries.
Next up is the Kaiser case which involves even more revenue. NorthBay’s main hospital is the most comprehensive medical center in Solano County and Kaiser members and the health plan have greatly benefited from its emergency services.
At another time I will explain my belief that health plans, except those owned by provider organizations, are part of the problem with the structure of health care today.
In another telling development, Oroville Hospital in Northern California successfully sold $200 million in bonds for a new wing. Like NorthBay in 2016, Oroville found that they could have sold even more than $200 million given the demand in the marketplace.
NorthBay and Oroville are among a group of stellar independent health care organizations who jointly own a risk retention company which provides high quality risk management services. There are ways of getting the benefits of “bigness” without sacrificing your local community to control by corporate giants and the risk retention company is just one example. You don’t need to be a mega-monster healthcare system to deliver cost-effective, high quality care.
The marketplace is belatedly recognizing that the huge organizations which are trying to dominate healthcare, whether they are health plans or corporate providers of patient care, come with excessive costs, lack of focus, ego-driven management and poor results. And that is just for starters!
Meantime, if you are looking for chumps, you best look at the big guys. They are hard to miss.