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Future of Cost Shifting Depends on the Little Guy

Philip Betbeze, for HealthLeaders Media, January 20, 2012

But there's a big debate going on about how long these general subsidies can continue, given that healthcare costs continue to rise faster than the rate of inflation, and more importantly, that employers have gotten wise to the game.

Recently, I wrote as part of a column on the Medicare Payment Advisory Commission's recommended cuts in inpatient and outpatient payments to hospitals that while I once thought that such cost-shifting behavior would die a quick death as employers developed more sophisticated ways to value healthcare quality, I'm no longer so sure.

After all, healthcare is a growth industry for a reason, and I outlined my reasons, with research to back it up, that cost-shifting is far from dead.

Predictably, I got a lot of responses from readers who disagreed. One of the best was from a reader who pointed out, correctly, that large companies are increasingly splitting their healthcare contracting among dozens of high-quality, high-volume hospital partners.

By doing so, they guarantee a certain volume for the hospital or health system and get an excellent price per service for such guarantees, but also, they can assume excellent outcomes from such providers and if they don't get it, there are remedies.

They can also cut out the middleman, the insurer itself, if they like. All of this is true. But for every Pepsi that sends its cardiac and orthopedic cases to Johns Hopkins and every Lowe's that brings its heart patients exclusively to the Cleveland Clinic in return for low rates and high volume, there are hundreds of smaller companies that are far behind that curve and could never hope to have the infrastructure necessary to do such things.

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2 comments on "Future of Cost Shifting Depends on the Little Guy"


Ken Justinstine (1/23/2012 at 5:16 PM)
When one customer says I'll only pay half of what everyone else pays (with no ability to negotiate), you either reject it and don't take him as a customer; or you accept it, and shift the burden you have to achieve positive margins onto higher paying customers. While the hospitals share some blame with their high cost structure, the government with their money-losing reimbursement structure is the main culprit. Healthcare will look very different as hospitals adjust to the ever-declining reimbursement rates of the future.

JKuriyan (1/20/2012 at 11:45 AM)
Cost shifting is just an excuse for hospitals to gouge vulnerable small employers and individuals. Health plans also take advantage of this segment by preventing formation of health insurance purchasing groups. As James Carville explained a dog's unusual trait "they do it because they can!"