6 Simple, but very controversial, ways to bring Healthcare Cost DOWN


Over the course of the last year I have had the joy of teaching CEU course around the country to the insurance and financial industry.  One of the courses I taught was titled “Healthcare Cost Factors.”  In this course we cover the following:

  1. Define and explain the importance of charge master rates at hospitals.
  2. Describe the role and responsibilities of medical billing consultants.
  3. Understand the forces that drive medical costs.
  4. Comprehend the cost of healthcare relative to the US GDP.
  5. Define and explain the role of Medicare payments, as well as its perverse incentives
  6. Explain various medical malpractice issues.
  7. Critically examine the Affordable Care Act and how it addresses the cost of care


I also finished the course with what I believed to be the central purpose, and that was solutions for solving the spiraling cost of healthcare.  Since Obama Care didn’t tackle the issue of cost, on the contrary, we have seen triple digit increases in premiums, hospital charges, and drug prices in many markets.  I presented 6 very Simple, yes I said SIMPLE, ways to drastically bring the costs down.  Now, I will admit they are a bit radical, and they may and will hurt some in the industry, but look at what healthcare has done to the consumer.  I had a bird’s eye view of the industry with my 30 plus year working in the field. I realize that it is a complex and complicated beast.  The healthcare industry is integrated so deeply in our economic structure that changes like these will be a real jolt to our system, but we are not on a path that is sustainable.

Look I’m not trying to imply that it will be easy, NOT AT ALL, but we must start somewhere and Obama Care did just that.  It was painful, but let’s tweak them a bit and keep the things that worked and change the things that didn’t.  Ok, so here are the 6 component of my solutions.  Remember, controversial they are, but stone throwing, name calling will not solve our issues, good sound open discussions is the way to come to a conclusion.

  1. Tightening anti-trust laws related to hospitals to make sure that they aren’t allowed to become so dominant that insurance companies are helpless in negotiating prices.

There has been a trend over the course of many years of hospital systems all over the country gobbling up smaller hospitals in order to grow their bottom lines.  I understand that some of those smaller institutions were failing and by having those hospital close and losing coverage areas and continuity of care we create another entirely different problem.  Let’s deal with the reality that is in front of us, too few choice, larger and larger systems cause the prices to go up not down.

  1. Taxing hospital profits (Non-profit hospital).

In 2013, and I know nothing has change today (2017), the journal “Health Affairs” reported that “Seven of the 10 most profitable U.S. hospitals are nonprofit entities, including Peace Health’s Sacred Heart Medical Center at River Bend, which was No. 9, according to new research.   Full article: http://projects.registerguard.com/rg/business/34331715-63/sacred-heart-medical-center-at-riverbend-was-9th-most-profitable-u.s.-hospital-in-2013-study-says.csp

If we would just tax them just 5% of their gross revenue, (which would be $8,560000.00 just for SHH) and it went back into the healthcare coffer not the pockets of government, we could go a very long was to solving the financial issue.  I have the privilege living in Eugene and have working in and around the giant for many years.  So it is a bit of a sore subject for me personally.

  1. Outlawing the Charge master rates. Http://

Congress tried to impose standards in 1996 (HIPAA), but this has not yet happened, so hospitals are still free to use a charge master, and furthermore they can and do updates to that charge master on a regular bases.  Here is the rub, when they update the charge master they often will increase the prices of every single charge with the same percentage at the same time.  Just imagine if they raised the prices on 12,000 to 45,000 prices every quarter 2% or more.  Here is another article from Health Affairs that speaks to just that.  http://content.healthaffairs.org/content/25/1/57.full     I know when I sold a pacemaker to a hospital, many of which purchased the devices in what was and is known as a cost capping contract.  They basically dictated how much they would pay for such devices, and if you wanted sell your product in that hospital you had to except that, or take your stuff off the shelf.  But when I really got an eye full was when I had a discussion with an irate patient one day, he showed me his bill, I about fell over.  There was a 250% markup on that device, that’s when I began to view this problem in a different light.

  1. Amending patent laws to limit the exploitation of the monopoly of certain drug-producing companies.

A great example of this is the epipen from Mylan, although they are by far not the only pharma company to raise prices.  There are hundreds of examples of companies that have raised their price, especially those who have a market lock on a particular drug.  Look I told you this controversial, and doing something like this you run the risk of a company say no I’m not going to put millions of dollars into R&D just to have the rug pulled out from under me.  I get it, but look at Biogen stating it would raise its price for Daraprim to $750,000.00 per patient year (treats a rare disorder called Spinal Muscular Atrophy), Gilead setting the price for Sovaldi at $1,000.00 per pill which translates to $84,000.00 per year, (it is the new Hepatitis C med).   Are you aware that congress, for some stupid reason, allowed the lobbyists to set in play that Medicare is not allowed to negotiate pricing with the Pharmaceutical companies, that to me is an outrage and needs to be changed NOW.  We need a comprehensive

  1. Tighten and cap how many CT Scans or MRI’s Medicare and private insurance will pay for to reduce overspending on lab tests.

The next 2 solutions run together in many ways.  One of the reasons, but not limited to this reason, is the legal protection.  Physicians and hospital tend to order test with the idea that they may need to protect themselves in particular cases.  If we change the medical-malpractice juggler knot (pun intended) we could reduce the need for more test, although, there is a real and apparent distinction in this particular 5th step.  That is, take away the financial incentive of physicians to financially benefit for testing, known as the Stark Law. I know you are scream at the top of your lung that this not true and it doesn’t happen, there are too many save guards, self-referral doesn’t happen.  Well I am so so sorry to inform you, BUT IT DOES EVERY DAY!  It’s one thing for a doctor to hire a sonographer and buy an echo machine, or hire a treadmill tech and buy a treadmill.  Those tests are in the process of the diagnostic chain.  Here is an article from JAMA June 2, 2014: http://jamanetwork.com/journals/jama/article-abstract/2090194




  1. Develop reform against medical-malpractice, such as safe-harbor defenses, to continue the reduction of unnecessary, extra scans and medical tests.

So to continue the previous discussion and bring a close to this article, medical-malpractice is an integral part of the cost containment issue.  I am reminded of a personal story from 24 years ago in my own life.  My wife was pregnant with our second child.  It was a boy yahoooooo!  First one was a girl so now we have one of each.  I can’t recall the exact month, but they did some testing, and the test came back from the lab as positive for downs syndrome.  We were floor.  What were we going to do?  Well the first thing we did is get an amniocentesis done.  Test came back inconclusive. Wow, now what.  Well we proceeded to term and Joshua was normal, and everything was perfect.  I went back to the OBGYN with a bit of a chip on my shoulder.  Now remember, I have been working in medicine for about 12 years by this time, and new a Dr. put’s his or her pants on the same way anybody else does.  They are not GODS!  I asked him why this test was so wrong and he said and I quote, “We as physicians have demanded that the lab test be strengthened so as to protect us from malpractice law suits.”  I came unglued and I won’t go into the rest.  Suffice it to say those test have found their way back a happy medium, but that didn’t change the issue of the stress it caused us, and the way medical practices are practiced today.  We are a very litigious society and we need to change this attitude or those costs are just going to get higher and higher.


In closing I hope this article will stimulate discussion for all side and opinions.  I look forward to a lively discussion; just don’t throw stones or no name calling.  Let us find a solution to this unsustainable problem together.  Give me a shout on Linked in at: Jed A. Reay or comment right here

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