Health Insurance Middlemen - No Value Added
CVS is Trying to Take Over the World
It's kind of like Demolition Man where Taco Bell owned everything. It's a classic 1993 movie starring Sandra Bullock and Sylvester Stallone. I used to joke either CVS or Hartford Hospital were going to run the world.
Things were rough for Hartford Hospital recently with the temporary loss of the Anthem contract. Maybe Hartford Hospital should offer to buy Anthem. They run most of the hospitals around here. If it weren't for a stubborn insurance company they could dictate the cost of our health insurance. They could be like CVS - why bother negotiating the price of prescription drugs with an insurance company when you can own one - so they bought Aetna.
Monopolies are Not Good for Your Healthcare
Hartford Healthcare is a good example. Not that we are picking on Hartford Healthcare - it's happening around the country.
A large hospital merges with smaller community hospitals. The community hospitals have to merge to survive. The big hospital then buys and runs most of the primary care and specialty medical practices.
The strategy saves medical doctors from having to deal with insurance companies, while giving the bigger hospital system more bargaining power.
Caught in the Middle
In the end the large healthcare system gets paid more. Since prices are higher, you end up paying more for your care.
In the case of Hartford Healthcare versus Anthem a lot of people were faced with switching doctors or hospitals or changing insurance companies. It seemed like Anthem and Hartford Healthcare were playing chicken. Not sure who won - they didn't publish their rates.
It All Comes Down to Profit
I read this twice - in 2 different places - so it must be true. In the November 1, 2017 Wall Street Journal commentary by Keith Lerner, "The Deception Behind Those In Network Health "Discounts"" and also in the 2017 book An American Sickness by Elisabeth Rosenthal, MD.
Current law requires 80% or 85% of health care premiums be spent on healthcare. Premiums have to increase for profit to increase.
Compare the profit from a $1000 to a $2000 premium. At the 80% level profit from a $1000 premium is $200. The profit increases to $400 on the $2000 premium.
The bigger the profit the bigger the executive bonuses are.
A Hand in Your Wallet
Pharmacy benefit managers are middlemen. They make deals with drug manufacturers for medications. The pharmacy benefit manager sells a list of drugs to your insurance company for a set price.
The drug costs passes to you through your health insurance company. The difference between what they pay and what they charge you is pure profit for the pharmacy benefit manager. No value is added, just cost.
The Game may be Changing
Amazon may be looking to get into the pharmacy business - becoming competition for CVS, which is also a pharmacy benefit manager. No wonder CVS may be trying to buy Aetna. Not a bad business move to hedge against Amazon.
Other insurance companies are also getting into the pharmacy benefits management business - United Health in 2015 and, more recently, Anthem. Anthem is in the process of setting up its own pharmacy benefits manager. There must be money to be made.
Middleman Companies in PT
Many insurance companies cut direct ties with physical therapy offices. To be an "in-network" provider with insurance company, PT offices were required to sign a contract with a PT middleman company.
The PT middleman company gets paid by the insurance company. The middleman company takes a cut. Then the middleman company pays the physical therapy office for your treatment.
Cigna is a good example. CIgna recently terminated their contract with our office. Cigna told us we had to sign a contract with a middleman company called American Specialty Health from California if we wanted to be an "in-netowrk" Cigna provider. Cigna pays the middleman company American Specialty Health for your PT. American specialty health pays us for your PT.
PPTSM gets paid 15-20% less from the PT middleman company that we did from Cigna. From the Explanation of Benefits statements patients have shown us, it looks like the PT middleman company American Specialty Health keeps the 15-20%. Aetna did the same thing a few years ago with a different middleman company called OrthoNet. Aetna cut what they paid us. It only makes sense they pay OrthoNet the difference.
So 15-20% of the premiums you pay to Cigna or Aetna that used to go toward PT treatment are actually going to a PT middleman company - no value added.
If the office seems busy, it's becasue we have to see 20% more patients just to made ends meet.
Christopher DiPasquale, PhD, PT, OCS, SCS, CHT is a physical therapist at Performance Physical Therapy & Sports Medicine with offices in Hebron and Colchester, Connecticut. He is board certified by the American Board of Physical Therapy Specialties in Orthopedic Physical Therapy and Sports Physical Therapy and a Certified Hand Therapist by the Hand Therapy Certification Committee.
For more information visit pptsm.com or call the office: Colchester 860-537-3014 or Hebron 860-228-4883
dollar bill photo credit: https://commons.wikimedia.org/wiki/File:Onedolar2009series.jpg