By JEFF GOLDSMITH

Years ago, the largest living thing in the world was thought to be the blue whale. Then someone discovered that the largest living thing in the world was actually the 106 acre, 47 thousand tree Pando aspen grove in central Utah, which genetic testing revealed to be a single organism. With its enormous network of underground roots and symbiotic relationship with a vast ecosystem of fungi, that aspen grove is a great metaphor for UnitedHealth Group. United, whose revenues amount to more than 8% of the US health system, is the largest healthcare enterprise in the world. The root system of UHG is a vast and poorly understood subsidiary called Optum.

At $226 billion annual revenues, Optum is the largest healthcare business in the US that no-one knows anything about. Optum by itself has revenues that are a little less than 5% of total US healthcare spending. An ill-starred Optum subsidiary, Change Healthcare, which suffered a catastrophic $100 billion cyberattack on February 21, 2024 that put most of the US health system on life support, put its parent company Optum in the headlines.

But Change Healthcare is a tiny (less than 2%) piece of this vast new (less than twenty years old) healthcare enterprise. If it were freestanding, Optum would be the 12^th largest company in the US: identical in size to Costco and slightly larger than Microsoft. Optum’s topline revenues are almost four times larger than HCA, the nation’s largest hospital company, one third larger than the entirety of Elevance, United’s most significant health plan competitor, and more than double the size of Kaiser Permanente.

If there really were economies of scale in healthcare, they would mean that care was of demonstrably better value provided by vast enterprises like Optum/United than in more fragmented, smaller, or less integrated alternatives. It is not clear that it is. If value does not reach patients and physicians in ways that matter to them—in better, less expensive, and more responsive care, in improved health or in a less hassled and more fulfilling practice—ultimately the care system as well as United will suffer.

What is Optum?

Optum is a diversified health services, financing and business intelligence subsidiary of aptly named UnitedHealth Group. It provides health services, purchases drugs on behalf of United’s health plan, and provides consulting, logistical support (e.g. claims management and IT enablement) and business intelligence services to United’s health plan business, as well as to United’s competitors.

Of Optum’s $226 billion topline, $136.4 billion (or 60% of its total revenues) represent clinical and business services provided to United’s Health Insurance business. Corporate UnitedHealth Group, Optum included, generated $29 billion in cashflow in 23, and $118.3 billion since 2019. United channeled almost $52 billion of that cash into buying health-related businesses, nearly all of which end up housed inside Optum.

For most of the past decade, Optum has been driving force of incremental profit growth for United. Optum’s operating profits grew from $6.7 billion in 2017 (34% of UHG total) to $15.9 billion in 2023 (55% of total). However, the two most profitable pieces of Optum by operating margin—Optum Health and Optum Insight—have seen their operating margins fall by one third in just four years. The slowing of Optum’s profitability is a huge challenge for United.

Gaul Had Three Parts, So Does Optum

The largest and least profitable (by percent margin) piece of Optum is its giant Pharmacy Benefit Manager, Optum Rx, the third largest PBM in the US.

Optum Rx is more than half of Optum by revenue ($116.1 billion) but less than a third of its profits. The core of its profit comes from rebates from drug companies for featuring their drugs on OptumRx’s formulary- which governs which drugs United Healthcare subscribers get access to and how much they pay for them. Optum Rx derives almost 62% of its revenues from managing pharmaceutical spending for United’s health plan, but the remainder for servicing both health plan competitors of United and self-funded employers. It is the most “vertical” piece of Optum—in that it has the highest share of its revenues coming from United out of all of Optum’s major segments.

The accounting for these rebates is, to put it gently, less than transparent. Some of these rebates are returned to UHG customers (such as self-funded employers). Some are returned to insurers other than United for which Optum Rx processes pharmaceutical claims. And some are kept as profit inside either Optum Rx or United’s health insurance business. Optum Rx does not disclose the ultimate destination of many billions in rebates.

This lack of transparency is, understandably, a subject of political controversy. Congress is considering tightening PBM disclosures and possibly redirecting the flow of rebates back to health-plan customers and, gasp, potentially to patients themselves. Given the widening political controversy about whether PBMs actually save consumers money, Optum Rx’s business model is a major strategic vulnerability for UHG.

The second major piece of Optum, OptumInsight, has been in the glare of public controversy since its Change Healthcare subsidiary was hacked by the mysterious Russian hacker collective BlackCat in February. Its main business lines are: business intelligence, consulting, IT enablement, and business process outsourcing to non-UHG health enterprises. OptumInsight is the smallest of Optum’s three pieces at $18.9 billion, but the most profitable—22.5% profit margin—$4.3 billion in operating earnings. I have written extensively about OptumInsight, almost 42% of whose revenues derive from servicing United’s other businesses, but will not repeat that analysis here.

Optum Health

The piece we want to focus on here is the largest generator of profits for Optum, Optum Health, a diversified healthcare services enterprise. Optum Health is a $95.3 billion business, which makes it the second largest care enterprise in the US after Kaiser Permanente. It generates nearly $6.6 billion in operating profit for United. However, Optum Health’s profit margin declined from more than 10% in 2018 to about 6.6% in the third quarter of 2023. If not turned around, Optum Health’s declining profitability is a threat to United’s enterprise valuation and reputation. This is why when Optum reported disappointing 3Q23 earnings, United’s Chairman Steven Hemsley cleaned house at Optum Health, installing new leadership.

Since United is not required to disclose acquisitions that are not “material”, there is no way of knowing what United has actually bought and what it presently owns. But Optum Health is home to an enormous collection of physician groups, surgicenters, a large urgent care network, and two of the largest home health agencies in the US. It is a sprawling nationwide roll-up of healthcare assets.

Optum claims 90 thousand physicians in its networks but is cagey on how many are actually employed by Optum and how many are independent physicians in Independent Practice Associations that wrap around the employed groups and are common in the West and Southwest. An educated guess would be that Optum employs from 45 to 60 thousand physicians. If true, this would still be between double and triple the size of Permanente Medical Groups. Optum’s profitability dwarfs that of Kaiser (see below), perhaps a function of Kaiser operating 39 hospitals and Optum not operating a single one.

Optum Health receives $57.7 billion (or 60% of its total revenues) from United’s health plan—the vertical part. But it also claims $21.8 billion in premium income, e.g. capitation, from “non-affiliated” customers, namely health plan competitors of United’s health plans. That capitation represents almost 23% of Optum Health’s total revenues. In addition, Optum Health reports $14.1 billion in services income, almost certainly “fee-for-service” based income from other health plans. What share of Optum Health’s $6.6 billion in profits come from these contracts with United’s competitors is a compelling mystery, since this is not reported in United’s financial disclosures.

Whatever the profit split, Optum Health is very much dependent not merely on the kindness of strangers, but of competitors of United’s core business. An important and unknowable question is whether Optum’s contract renewals with those competitors have enabled it to recover the soaring costs of nursing coverage, temporary physician coverage, turnover and retirements, and other labor factors that have exploded in the wake of the COVID pandemic. Every care delivery enterprise in the US has faced rising people costs, as the largest care delivery enterprise in the US, these forces have not spared Optum.

Optum’s medical group acquisition strategy to date has targeted independent (e.g. non-hospital) medical groups with significant at-risk (e.g. “capitated”) populations, mainly in Medicare Advantage plans. These included the original asset, the Nevada based Sierra Medical Group which United acquired when it purchased the Sierra Health Plan in 2007, but also Healthcare Partners, Monarch and North American Medical Management (based in Los Angeles), WellMed in central Texas, Atrius and Reliant in Massachusetts, Everett and PolyClinic in Seattle and Kelsey Seybold Clinic in Houston Texas. It is a growing presence in Oregon, New York and Connecticut through mainly smaller acquisitions. The map below showed where Optum Health’s assets were as of 2022.

The Vertical Integration Conundrum

Healthcare strategists have touted the idea of vertical integration –pioneered by Kaiser Permanente—which offers a comprehensive healthcare service experience—pretty much soup to nuts—through its health plan. The only way to access Kaiser physicians and hospitals is by enrolling in their health plan. Vertical integration has been viewed as a way of reducing health cost (by eliminating middlemen’s profits) and procuring products and services more efficiently, though actual evidence that it does so is scarce upon the ground.

With United, the health plan preceded the health services. In the first thirty years of its existence, United was a “network” plan, which contracted with independent hospitals and doctors for care. With the Sierra acquisition in 2007, United embarked on an adventure in strategic ambiguity—owning physician clinics which provided care to United customers as well as those of competing health plans. After Sierra and WellMed, a large capitated medical group in central Texas that Optum acquired in 2011, Optum’s medical group acquisitions have been, at best, loosely tied to United’s health plan enrollment. A 2018 analysis showed at best modest overlap between United’s Medicare Advantage market presence and the Optum Health network.

Making United “more vertical” in Optum markets would be complicated. Offering financial incentives to the Optum Health patients presently enrolled in competing plans to switch to United would pose two challenges. One is that this would damage Optum Health’s contracts with competing health plans. And sharing savings (e.g. some of United’s profits) with patients to redirect their care or lowering their rates would reduce health plan profit margins.

Conversely, telling Optum patients that they could only get care if they enrolled in United’s health plan would trigger a firestorm of negative publicity not to mention retaliation and cancelled contracts by United’s health plan competitors. Telling United subscribers they could only get care from Optum physicians and facilities would overwhelm them in volume and trigger longer waiting times and provider burnout. In sum, it does not appear to make business sense for United to make Optum more “vertically aligned” with its health plans. So straddling competitors in local markets seems to be an ambiguity with which United will have to cope going forward.

How much unregulated and invisible profit United’s health plans can generate  “inside” United’s visible and highly regulated medical loss ratio (MLR) by selectively and generously compensating Optum’s physicians, surgical facilities, etc. is the most compelling mystery of this business model. Matthew Holt, a veteran industry observer, has termed this strategy of maximizing enterprise profit through contracting favorably with yourself “provider fracking.” Companies that control both insurance and care delivery have a great deal of flexibility in what the accountants term “transfer pricing”.  This flexibility is valuable and would be lost were Optum to be spun off in a future United restructuring.

Two Big Risks for the Partially Integrated Optum Health

There are two other major clouds on the horizon for Optum Health. One is the Federal Trade Commission’s proposal to ban of non-compete clauses for corporate employees, including physicians. Non-compete clauses effectively make the patient populations of acquired physician groups the property of Optum. If physicians leave Optum, they are required to move out of the community to practice, surrendering their patients to the company.

Many of the senior physicians who were equity holders in the large practices acquired by Optum departed millionaires with United’s cash, leaving behind junior colleagues to suffer through both Optum system conversions and leadership changes that affected their daily lives as practitioners. Outlawing non-competes would enable disgruntled Optum physicians to remain in their home communities and take their patients with them.

If FTC precedents hold, the non-compete clause prohibition might not apply to non-profit hospitals (80% of all hospitals are non-profit), putting Optum and other corporate employers of physicians at a competitive disadvantage. In my opinion, entities that rely on coercive measures like non-competes to assure physician loyalty need to take a long hard look at their corporate culture.

The FTC’s proposed ban on non-competes is a major enterprise risk for Optum Health’s vast agglomeration of medical groups. If enacted, it would force Optum management directly to address physician working conditions, values, and priorities. United does have the potential for markedly reducing the documentation burden for Optum physicians that take care of United patients by selectively altering its claims review strategies. It will be interesting to see if they do so.

E Pluribus Unum

The other major cloud on the horizon is the unionization of physicians. According to AMA, some 67 thousand practicing physicians (e.g. not interns, residents or fellowship trainees) are members of labor unions. There are been several recent high profile instances where disillusioned hospital-employed physicians elected union representation (Allina in Minneapolis/St Paul, Providence St. Vincent and Legacy Health in Portland OR, are recent examples).

Unionization is often not motivated directly by compensation issues but rather by a sense of powerlessness and a feeling that core issues that affect the employee are not being addressed. Unionization would both increase Optum’s operating costs and reduce its management’s flexibility. Optum Health’s groups are by far the largest and most lucrative target of physician unionization in the United States.

Down in the Valley

The emerging market risks for Optum can be seen in two medium sized cities in Oregon’s Willamette Valley. During the early pandemic, Eugene-based Oregon Clinic encountered terminal operating difficulties and sold to Optum in late 2020. In March of this year, Optum sent letters to patients of departing Oregon Clinic physicians that they would have to find care elsewhere because they were unable to recruit replacements for their physicians. These 32 physicians resigned, apparently, because they were unhappy with working conditions at Oregon Clinic after the Optum takeover. Reading between the lines, due to non-competes, the departing physicians were unable to remain the Eugene area and thus unable to continue seeing long-standing patients.

Meanwhile, up the road forty miles in Corvallis, Optum requested that the State of Oregon expedite review of its proposed acquisition of the Corvallis Clinic due to accelerating cash flow difficulties that made it impossible for the Clinic to meet its payroll. The State ultimately acceded to Optum’s request.   The apparent cause of the cash flow problem: the Change Healthcare cyberattack, which made it impossible for Change, an Optum subsidiary to accept or pay claims from its provider networks, including, most likely Corvallis Clinic. In other words, the catastrophic system failure of one piece of Optum likely accelerated another piece of Optum’s acquisition of the largest physician group in town.

Taken together, these simultaneous problems have not served to enhance Optum’s image as a care provider in the southern Willamette Valley. They make the company appear as a cold and exploitative outsider capitalizing on problems it helped create. These events will not enhance the likelihood of United growing its core insurance business in the area or endear the company to Oregon’s health system regulators, or its state managed Medicaid program, the Oregon Health Plan.

Outgrowing Its Nervous System?

Optum Health has almost quadrupled in size in the past six years, but its profit margin has fallen by a third. Given the explosive pace of acquisitions and the cost pressures on physician practices during and after the COVID pandemic, this margin deterioration is not surprising. However, if Optum Health’s new management does not stabilize its operating performance, margins could deteriorate further, putting pressure on United’s earnings.

There are no evident economies of scale or co-ordination in physician services. How Optum can recruit and retain high quality motivated physicians and advanced practice nurses to its vast care system is a major challenge to the enterprise. They will need a compelling answer to the question: “Why work for Optum?” The answer cannot be: we are huge and you don’t have a choice. How the company creates value for its tens of thousands of physicians and nurses will be the central management facing United, or indeed any large-scale employer of these complex professionals.

There is growing evidence that there are diseconomies both of scale and co-ordination in health services generally. Those diseconomies manifest themselves in the vast empty space between the giant enterprise and the physicians and patients who rely on them. Every denial of care by United’s AI-driven claims management system makes a tiny dent in the company’s consumer image. Patient anger over arbitrary and self-interested health plan meddling in care decisions resulted in first managed care backlash in the late 1990’s. United’s recent Net Promoter Score of -5 suggests that it has a long way to travel to regain customer confidence and loyalty.

The physician-patient relationship remains the bedrock of the health system. If the nerve endings of an enterprise do not reach out and sense the effect it is having on that relationship, it isn’t going to be very long before it either ceases to grow or ceases to be profitable or, likely, both. United and Optum have reached that tipping point right now. Follow Optum’s physicians and their patients and see the future.

Acknowledgements: Trevor Goldsmith provided research and technical support for this piece. The author appreciates Ian Morrison, Andrew Mueller  and Jamie Robinson for reading and commenting on this piece.

Jeff Goldsmith is a veteran health care futurist, President of Health Futures Inc and regular THCB Contributor. This comes from his personal substack

By KIM BELLARD

Larry Levitt and Drew Altman have an op-ed in JAMA Network with the can’t-argue-with-that title Complexity in the US Health Care System Is the Enemy of Access and Affordability. It draws on a June 2023 Kaiser Family Foundation survey about consumer experiences with their health insurance. Long stories short: although – surprisingly – over 80% of insured adults rate their health insurance as “good” or “excellent,” most admit they have difficulty both understanding and using it. And the people in fair or poor health, who presumably use health care more, have more problems.

Health insurance is the target in this case, and it is a fair target, but I’d argue that you could pick almost any part of the healthcare system with similar results. Our healthcare system is perfect example of a Rube Goldberg machine, which Merriam Webster defines as “accomplishing by complex means what seemingly could be done simply.”   

Boy howdy.

Health insurance is many people’s favorite villain, one that many would like to do without (especially doctors), but let’s not stop there. Healthcare is full of third parties/intermediaries/middlemen, which have led to the Rube Goldberg structure.

CMS doesn’t pay any Medicare claims itself; it hires third parties – Medicare Administrative Contactors (formerly known as intermediaries and carriers). So do employers who are self-insured (which is the vast majority of private health insurance), hiring third party administrators (who may sometimes also be health insurers) to do network management, claims payment, eligibility and billing, and other tasks.

Even insurers or third party administrators may subcontract to other third parties for things like provider credentialing, utilization review, or care management (in its many forms). Take, for example, the universally reviled PBMs (pharmacy benefit managers), who have carved out a big niche providing services between payors, pharmacies, and drug companies while raising increasing questions about their actual value.

Physician practices have long outsourced billing services. Hospitals and doctors didn’t develop their own electronic medical records; they contracted with companies like Epic or Cerner. Health care entities had trouble sharing data, so along came H.I.E.s – health information exchanges – to help move some of that data (and HIEs are now transitioning to QHINs – Qualified Health Information Networks, due to TEFCA).

And now we’re seeing a veritable Cambrian explosion of digital health companies, each thinking it can take some part of the health care system, put it online, and perhaps make some part of the healthcare experience a little less bad. Or, viewed from another perspective, add even more complexity to the Rube Goldberg machine. 

On a recent THCB Gang podcast, we discussed HIEs. I agreed that HIEs had been developed for a good reason, and had done good work, but in this supposed era of interoperability they should be trying to put themselves out of business. 

HIEs identified a pain point and found a way to make it a little less painful. Not to fix it, just to make it less bad. The healthcare system is replete with intermediaries that have workarounds which allow our healthcare system to lumber along. But once in place, they stay in place. Healthcare doesn’t do sunsetting well.

Unlike a true Rube Goldberg machine, though, there is no real design for our healthcare system. It’s more like evolution, where there are no style points, no efficiency goals, just credit for survival. Sure, sometimes you get a cat through evolution, but other times you get a naked mole rat or a hagfish. Healthcare has a lot more hagfish than cats.

I’m impressed with the creativity of many of these workarounds, but I’m awfully tired of needing them. I’m awfully tired of accepting that complexity is inherent in our healthcare system.

Complexity is bad for patients, bad for the people directly giving the care, and only good for all the other people/entities who make a living in healthcare because if it. Instead of making pain points less painful, we should be getting rid of them.

If we had a magic wand, we could remake our healthcare system into something much simpler, much more effective, and much less expensive. Unfortunately, we not only don’t have such a magic wand, we don’t even agree on what that system should look like. We’ve gotten so used to the complex that we can no longer see the simple.

I don’t have a Utopian vision of a healthcare system that would solve all the problems of our system, but I do have some suggestions for all the innovators in healthcare:

• If your solution makes patients fill out one more form, log into one more portal, make one more phone call, please reconsider.
• If your solution takes time with patients away from clinicians, making them do other tasks instead, please reconsider.
• If your solution doesn’t create information that is going to be shared to help patients or clinicians, please reconsider.
• If your solution only focuses on a point-in-time, rather than helping an ongoing process, please reconsider.
• If your solution is designed to increase revenue rather than to improve health, please reconsider.
• If your solution doesn’t recognize, acknowledge, report and act on failures/mistakes/errors, please reconsider.
• If your solution can’t simply be explained to a layman, please reconsider.
• If your solution adds to the healthcare system without reducing/eliminating the need for something even bigger in the system, please reconsider.
• If your solution steers care to certain clinicians, in certain places, rather than seeking the best care for the patient in the best place, please reconsider.
• If your solution adds costs to the healthcare system without uniquely and specifically reducing even more costs, please reconsider.
• If your solution doesn’t have built-in mechanisms (e.g., use of A.I.) to be and stay current on an ongoing basis, please reconsider.

 I’m sure all those innovators think their idea is very clever, and many are, but remember: just because an idea is clever doesn’t mean it’s not Rube Goldbergian.  They need to step back and think about if they’re adding to healthcare’s Rube Goldberg machine or helping simplify it. My bet is that usually they’re adding to it.

So, yeah, I agree with Mr. Levitt and Dr. Altman that health insurance should be less complex.   Just like everything else in the healthcare system. Let’s start taking the healthcare Rube Goldberg machine apart.

Kim is a former emarketing exec at a major Blues plan, editor of the late & lamented Tincture.io, and now regular THCB contributor.

Plenty of reason to worry about the future of American health care this week. The biggest for-profit hospital chain–HCA–was accused of aggressively pushing patients into hospice care, sometimes in the same room, in order to make their hospitality mortality numbers look better. Most of the leading benefits consulting companies were exposed as taking payments from PBMs–yup, the same organizations their employer clients thought they were negotiating with on their behalf. And one of the biggest names in digital health, Babylon Health, tumbled into destitution, taking billions of dollars with it and leaving uncertain the fate of the medical groups in California it bought less than two years ago. Even the most successful capitalists in health care — United HealthGroup and its fellow insurers — saw their stock fall because apparently outpatient surgery volume is ticking up. 

On the policy front the malaise is spreading too. The end of the public health emergency (remember Covid?) is being used as an excuse by the old  confederate states to kick people off Medicaid. Georgia and Arkansas appear to be bringing back work requirements, even though I thought CMS has banned them and every study has acknowledged that they are cruel and ineffective. About 20 million people got on to Medicaid during the public health emergency and KFF estimates up to 17 million may be kicked off, while over 1.7 million already have.

Finally an article by Bob Kocher and Bob Wachter in Health Affairs Scholar remins us that big academic medical centers are nowhere near ready for value-based care (VBC). Jeff Goldsmith has been vocal on THCBGang and elsewhere about how VBC is becoming a religion more than a reality. And I remind you that Humana’s MA program is still basically a Fee-For-service program in drag (even though that’s now illegal in their home state). 

I grew up in American health care expecting that eventually a combination of universal insurance mixed with value-based purchasing would lead to a series of tech-enabled companies doing the right thing by patients and making money to boot. With the managed care revolution, the ACA and the boom in digital health all firmly in the rear view mirror, the summer of 2023 is a lesson that you can never be too cynical about health care in America.

.

It’s no secret that health care pricing has been out of whack for a very long time. This past week PBMs and pharma manufacturers were in front of congressional committees trying to defend the indefensible–how much drugs cost and why? Hospitals have been required to publish their fictional price lists (their chargemasters) for a few years now and more recently have been instructed to reveal what they actually get from health plans for specific procedures. You would assume that this would move overall pricing pressure down to the “best price” but that effect seems to not be happening. At least not yet. This week also did see the bankruptcy of PE-backed (or should that be PE-toppled) emergency staffing corporation Envision. But that was more because its business model depended on surprise billing and not being in insurer networks.

More typical is the recent dispute in which primary & urgent care chain Carbon Health went public with its fight against Elevance subsidiary Anthem Blue Cross in California. While it was in-network Carbon claims that it received less than Medicare rates from Anthem, while its large delivery system competitors were getting 2-4 times Medicare rates.

This sounds about right to me. Late last year I had two identical telemedicine visits for back pain with specialists. One in a private practice, another with a doctor from UCSF–my local academic medical center. Before you troll me, they were both offered to me last minute, I didn’t know which doctor would be available if I needed a procedure, and it’s always good to get a second opinion. Plus I had blown through my deductible by then so they were free to me!

My insurer paid $795 to UCSF and $219 to the private doctor. So for exactly the same thing one provider got more than 3&½ times what the other did.

There’s still lots of chatter about the growth of value-based care, but even within Medicare Advantage there’s lots of fee-for-service, and it even pops up in places it’s supposed to be dead-–like Geisinger. We are nearly 20 years on from the Bush Administration talking about transparency as the solution to health care costs yet the opacity and confusion around pricing is as bad as it’s ever been. Yes, we know some of the numbers, but the US is a long way from seeing the invisible hand working its magic and making the same thing cost the same amount across health care. The only place where that happens is under the neo-Stalinist central pricing of Medicare. Not that that seems to work well either. 

There’ll be a couple more years while the “new” transparent plays out in the market, but don’t expect too much of a revolution. Then likely we’ll try something else.

BY MIKE MAGEE

The Medical-Industrial Complex is swarming with grifters. This is to be expected when you build a purposefully complex system designed to advance profitability for small and large players alike. The $4T operation payrolling 1 in 5 American workers is, in large part, a hidden economy, one built by professional tricksters, designed by Fortune 100 firms with mountains of lobbyists, but reinforced as well by friendly doctors and hospitals engaged in petty and small scale swindling who justify their predatory actions as entrepreneurial, innovative, and purposeful means of necessary financial survival.

When lobbyists for high-priced stakeholders get called before Congress, as they did on March 29, 2022 before the House Committee on Oversight and Reform, they make it sound like Americans should embrace the privilege of being screwed over by MIC elite. But as former Kaiser Permanente CEO, George Halvorson, recently reminded, “People are getting bankrupted when they get care, even if they have insurance.”

It’s enough to draw a person back to the early 1950’s when Arthur Sackler helped launch the Medical-Industrial Complex. In fact, our modern day willingness to mask health care cruelty in high-minded language and miscarry  justice is extreme enough to draw one back to June 9, 1954, when Boston attorney, Joseph Welch, hired by the U.S. Army to defend it against accusations of Communist infiltration, said to Sen. Joe McCarthy, “Little did I dream that you could be so reckless and so cruel…You’ve done enough. Have you, sir, no sense of decency at long last?”

Halvorson and others seem to be reaching a similar boiling point, ready to utter to controllers and apologists of the MIC – “Have you not done enough?”

The most recent tipping point comes in the form of a June 16, 2022 KFF poll revealing that more than 100 million Americans, including 41% of all adults, carry significant medical debt, much of it out-of-sight, carried on personal credit cards. Hospitals and doctors have been tapping into the patients cards for payments, leaving patients tapped out, with high interest plastic debt. 1 in 8 now owe more than $10,000, which nearly 20% say they will never be able to pay off.

The problem is accelerating as health insurers have pushed skimpy plans with deductibles that can legally reach $8,700 a year per individual. As I documented with Tenet Health Care Systems and their Conifer Collection System in 2018, the debt business has bailed out poor hospital practices and medical group mismanagement more than once. Now four years later, 58% of collection agency listed debt is medical in nature. One in 10 of the desperate debtors owe money to family members, and collective medical debt now tops $195 billion as of 2019.

As if it couldn’t get worse, the debt (as one might expect) is not spread evenly. Southern states are over-represented due to poor insurance protection laws, lack of Medicaid expansion, and greater presence of chronic disease in their populations. Medical debt is 50% more common in Blacks, and 35% more common in Hispanics, than in whites. If you live in an unhealthy county (measured by high rates of chronic diseases), 1 in 4 have medical debt, compared to 1 in 10 in healthy counties.

Of course, if you are unhealthy in the U.S., you are also in the cross-hairs of direct-to-consumer drug advertising. The practice of pushing medications through TV ads is only allowed in one other nation in the world. 

More than 1 in 3 Americans will fill those prescriptions at CVS, where whistleblower, Alexandra Miller used to work. What is she blowing her whistle about? According to STAT’s uber-pharma investigative reporter, Ed Silverman, her lawsuit contends that “Starting in 2015, CVS allegedly coordinated an effort that relied not only on its SilverScript (Medicare Part D) subsidiary, but also its Caremark pharmacy benefit manager (PBM) and its chain of CVS retail pharmacies to prevent consumers from obtaining low-cost generics because the company profited from making only higher-priced brand-name medicines available to its customers….”

 The kickback scheme involved CVS Health’s Part D plan sponsor, SilverScript; its pharmacy benefit manager, CVS Caremark, and CVS Pharmacies with hidden rewards flowing back and forth as patients credit card debt skyrocketed. As America proceeds headlong into a recession, and the economy becomes bedridden, the ghost of Arthur Sackler is rising from its gilded crypt and whispering, “It is your own health care system that is making you sick and broke.”

Mike Magee, MD is a Medical Historian and Health Economist and author of “Code Blue: Inside the Medical Industrial Complex.“

This post came as a comment by SR to Dr. Kibbe’s piece on electronic medical records. It’s a great consumer perspective and worth reprinting in full. — THCB Staff

Health Care consumers and patients have a wide range of interests,
needs and values that vary across our lifespans and circumstances and
hopefully there will be many different tools, products and services
provided to both providers and users of health care.

For example, my 70-year-old retired father is the head of a neighborhood
wellness program with over 3,000 people and maintained a family blog
during my mom’s cancer treatment but doesn’t own a cell phone and would
rarely change physicians despite differences in quality. I am rarely
ill, and yet expect SMS alerts if a lab test is done and want my
clinical records to link with my Nike tracker in my shoe as well as
apps on my Iphone.

I envision a system similar to the financial sector (bad example
right now perhaps) where you are able to move your information from
clinician to clinician (online bank statements = EMR) supplement that
with information gathered via other ancillary providers (investment
account at E-trade) take all of that information into my PHR (without
entering most of the data so it is similar to downloading into
Quicken) adding in some personal data (from my nike+ sensor and mobile
apps that track my diet and yoga classes) and generate reports (like
turbo tax) to share with some of my providers

In the banking system transactions happen offline via a debit card
so I really want a smart card (lifemed card) loaded with my current
problem list, meds, demographic information so that I never ever again
have to fill out a clipboard. I also don’t care who "owns" the data I
care that I can move it to where I need it to be in real time and it is
safe, secure and presented in a way that I can understand.

I don’t want to have to go to medical school on the side, spend
hours filtering through social networking sites to determine if someone
works for a drug company. Are the outcomes any better if I do? I expect
health care providers to provide me with the best links to information
(Information Therapy) and if I need social support provide me with the
best offline resources to real people as well as online.

I also don’t want to shop for the highest quality lowest cost
providers like I am purchasing a Tv since I will rarely be in a
position to make a change based on that information. If my spouse has a
heart attack or a parent has cancer I expect all providers to give us
the highest quality care but it would be great if clinical alerts were
sent to me as well as my providers. (this would stress my parents out
though if they got them) I don’t want to be placed in the position of
changing a hospital or care giver when a spouse is having a HA because
I just goggle searched the hospitals infection rate. (I might use
quality metrics to buy insurance or for an elective procedure but
question what some metrics measure? High quality of providers or just
those with high income patients?)

Technology is not the "solution" to our health care un-system (as
Europe is able to accomplish better outcomes without EMR’s or PHR’s)
but the commitment to include patients in their own health care
management that technology allows us is a reflection of that shift.
Information is just the first step. It has to be transformed into
knowledge and knowledge into behavior change and that requires mass
customization of the IT tools and surrounding services.

There is more to health care then transactions of data and at its
core healing takes place in the context of a series of relationships
and those are based on trust not technology.

(FYI full disclosure – I actually implement EMR’s for a living,
serve on State quality and patient safety boards; National HIT
committees and I am a strong consumer advocate. I am very well aware of
the best practices in HIT as well as the very real limitations of HIT)

George Van Antwerp is a Vice President at Silverlink Communications where he focuses on developing healthcare communication solutions across the industry with a focus on the pharmacy space. He and I have been conversing back and forth by email for a couple of years (since before he joined Silverlink who are—FD—sponsors of THCB & Health 2.0). He blogs regularly on both topics at Patient Centric Healthcare and today is his first post on THCB

I think an onion is the right analogy for healthcare for three reasons: (1) it can make you cry; (2) every time you pull off a layer you learn more; and (3) what you see from the outside is a lot different than what you see from the inside.

• It can make you cry.

When you have the Congressional Budgeting Office projecting the healthcare costs will be 49% of GDP by 2082, you know things have to change. This is a front page topic almost everyday across the country. But, like an onion, if we don’t handle this right, it will make you cry out of frustration and pain. Change is not easy especially in a complex system that we have today. Finding the right mix of push and pull is going to be important.

Quality is still an issue across the system. Biting a bad onion or having a quality issue with your care can make you cry. Look at the USA Today article from yesterday about Too Many Prescriptions, Too Few Pharmacies or an entry on my blog about the Institute for Healthcare Improvement.

• Every time you pull off a layer you learn more.

This applies so many ways to healthcare given our system, but I think of this from two perspectives – data / information and process. We have so much data in healthcare, but without the right model to make it into information, it just sits there. And, as we layer data (e.g., medical plus pharmacy plus lab) or integrate healthcare data with demographic data, we can learn so much more about our patients and how to care for them. This ranges from simple questions such as how to motivate behavior (e.g., cost savings versus loss avoidance) to how to deliver information based on their learning style.

Every question you ask (or layer you pull off) reveals a new set of data that can be transformed into information while at the same time creating new questions. Does the relationship you found in the data simply indicate correlation or is there actual causality there? I look at the data that CVS/Caremark presented around saving 30% of healthcare costs by driving compliance and adherence and wonder why people aren’t jumping up and down trying to capture this savings.

• What you see from the outside is very different than what you see from the inside.

There is a concept in Six Sigma about designing the process from the outside-in. Imagine sitting in the middle of the onion…all you see is onion all around you. That is a common pitfall when solving problems in the industry that we work in. We are too close to the problem and the historical solution.  If all we see is the onion, those on the outside (our patients / members / employees) see the onion in relation to other food options. Their expectations for healthcare are produced by other companies that they interact with. They expect web solutions that work.  They expect excellent service. They expect to be valued as a customer and of course need the power to walk away and chose another option.

This is a common problem in healthcomm (healthcare communications). We present information in a channel that we believe is effective based on our experience and paradigm (i.e., written, verbal, kinetic). We use language that we think is helpful. A few of my favorite examples from my PBM days are:

(1) Telling patients that they need a renewal (prescription). They don’t know what that means.  It means they need a new refill since their original prescription refills have run out.

(2) Telling a physician to consider prescribing lisinopril and giving them sample bottles that say lisinopril. (Because, of course, they would know the chemical name for Zestril.)

But, this happens all the time. Telling a person that wants all the facts a lot of qualitative information will fall on deaf ears. Providing a person with lots of options when they’re looking for an expert opinion will frustrate them. One way to frame this is based on personality type.  (Of course, that information isn’t sitting in a database somewhere for us to tap into.)

The reality is that people are different. As you think about your healthcare process, try to be the patient. As one of my bosses used to say, give it to your grandmother and see what she thinks.  Can she understand it? Can she make sense of the process?

It’s not easy finding the right amount of onion to use in your recipe, but it is important to continue trying to improve.