You know that Mayo Clinic president and CEO Dr. John Noseworthy caught some flak after the Star Tribune reported in March that he told staff to “prioritize” patients with private health insurance over patients with Medicare or Medicaid coverage (strib.mn/2mZwpdb). Noseworthy clarified his statement, saying he regretted using the word “prioritize” and said he meant Mayo needed to increase its volume of commercially insured patients to help subsidize the care of patients whose health benefits from public programs don’t cover the cost of their health care services (mayocl.in/2nkVKyU).
I met Noseworthy in 2012 and had a great conversation with him, despite the fact that I’m not a doctor nor was my father a doctor. We talked about industry trends and how Mayo plans to respond to them. I take the guy at his word.
What Noseworthy told his staff and what he said in his statement isn’t anything new to people who know health care. It’s called cost-shifting. It’s charging more to privately insured patients and using that profit to cover the loss on publicly insured patients and still drop money to the bottom line.
The bigger point—and one we’ve made many times in this column—is health care is a business just like any other business. Cost-shifting is a business tactic used by Mayo and every hospital and doctor that treats Medicare or Medicaid patients. It’s a business tactic used by every type of business in every industry—push products and services with higher profit margins to cover products and services with lower profit margins. Tortilla chips may be two-for-one this week but avocados are triple the price, especially during Super Bowl week. You really should buy the smartphone with more memory.
Two recent surveys of health care executives reveal just how similar their concerns are to the concerns of business executives everywhere.
The first is a survey of 383 hospital CEOs conducted by the American College of Healthcare Executives (bit.ly/2oK1DDF). The ACHE asked the CEOs to rank their 10 most pressing concerns. The top two concerns were “financial challenges” and “government mandates.” You can substitute words like “oil,” “banking,” “transportation,” “telecommunications” or “food industry” for the word “hospital” and get the same result. Other common concerns in the top 10 include personnel shortages, patient (read “customer”) satisfaction, technology and re-organizations (see chart).
The second is a survey of 63 health system executives conducted by Premier, a Charlotte, N.C.-based health care group-purchasing organization (bit.ly/2oMZLtV). Premier asked the executives what their priorities were, given the industry uncertainty created by the political climate in Washington. Four of the top five priorities could apply to a commercial real estate business: managing costs, mining data for actionable business insights, engaging and satisfying customers, and differentiating themselves in the market based on cost and quality. Only one—population health management—was specific to health care.
The lesson for your company is this: When you’re dealing with hospitals, health systems, doctors, drug companies, device manufacturers, health insurers or health care suppliers or vendors, remember they’re a business just like yours. Speak to them in the language of business. They will understand.
David Burda (twitter.com/@davidrburda, firstname.lastname@example.org) is editorial director, health care strategies, for MSP-C, where he serves as the chief health care content strategist and health care subject matter expert.
I’ve never shed a tear for an insurance company. Life, auto, workers’ comp, health, liability, reinsurance—somehow, some way, most insurers do pretty well for themselves no matter how dire the underwriting experience. I’m still waiting for the dividends from my whole life insurance policy to cover my monthly premiums. The broker said it would take seven years. It’s been 25.
That’s why when I saw this headline on a press release—“Local health insurers report operating losses over $680 million”—I didn’t reach for a tissue. It was from the Minnesota Council of Health Plans, which represents seven health insurers in the state. The MCHP said health insurers here posted a collective $687 million operating loss in 2016 on premium revenues of about $25.9 billion (prn.to/2ncks57). That follows a $158.5 million operating loss in 2015 and a $229.4 operating profit in 2014.
Insurance is a cyclical business. Health plans certainly will come back, and they’ll likely come back on premiums charged to employers. (To learn more about cost-shifting, see above.) Most of the loss last year, according to the MCHP, came from state health insurance programs and health plans sold to individuals. Employer-sponsored group coverage was “steady.” Try to hold your pen that way when you’re signing your premium checks next year.