The Sad State of the Healthcare "Market"

A typical hospital bills your insurance 10 -20x more than a fair market price for any given medical procedure. This isn't surprising: the healthcare industry is a chaotic mess of middlemen and bureaucrats, and everyone takes a cut. When you cut out everyone except a doctor and a patient, you'd be amazed at how low prices can get.

The healthcare industry is simple in theory: doctors provide medical services to patients in exchange for money. Brilliant! But a generation ago, patients stopped actually paying f or these services themselves, instead relying on their insurance plans to cover everything on their behalf. This is already extremely strange; in what other industry does a third party pay for everything you buy, in exchange for a flat monthly rate?

Imagine what this would look like in the restaurant industry. You'd pay

$2000 per month for "food insurance", and in exchange your food insurance company would pay for all your meals! Go out to any restaurant, provide your food insurance information, and order w hat you like! Of course, you'd save a ton of money if you just paid the menu prices, but since your employer (and Obamacare) mandated that you buy a comprehensive food insurance policy, you might as well use it! Already this "free market" is looking a litt le worse for wear. Now let's look at the other side of the equation: the doctors. In the past decade, hospitals and clinics across the country have consolidated into a handful of huge corporate behemoths. In the last 6 years alone, the number of doctors employed by one of these "health systems" has increased from 25%

(2012) to over 44% (Jan 2018). Doctors who work in these systems are kept entirely in the dark when it comes to money. They typically have no clue how much the hospital charges for each service; often, they don't even know what services the hospital is charging for! The process of a hospital requesting payment from your insurance company is dizzyingly complicated; that's why hospitals are consolidating in the first place—to manage the administrative burden of billing.

So that's the state of the healthcare market: the two main players— doctors and patients—have no clue how much anything costs. Instead, they've both hired a third party—health insurance companies and huge corporate hospitals—to de cide prices on their behalf.

This bizarre, anti-competitive scenario is why healthcare prices have been rising steadily for years. In principle, the negotiations between hospitals and insurance companies should eventually shake out a fair price. But that's not what happens. You see: insurance companies are regulated. They're only allowed to make a fixed profit margin. So if they bring in $1M in premiums, they're required to pay out at least $800k. So the only way for them to increase their profits is to increase the amount of money that flows through them. That's right: the insurance company would prefer to pay for more procedures and at higher prices, so next year it can legally increase its premiums and, by extension, its profits. What could go wrong?

Answer: just about everything. The total amount spent on healthcare in

America has increased by an average of 6.4% annually for the past two decades. That's faster than inflation AND average wages, so everyone in the country is spending a bigger and bigger chunk of their paycheck on healthcare. Fortunately there's a way to get off the runaway train that is American healthcare and enjoy fair prices for medical care! It's called direct primary care, and it's a totally new model for healthcare that throws useless middlemen out the window!

How DPC Solves the Healthcare Crisis

Healthcare in the United States is broken.

Actually, "broken" doesn't quite capture it. It's a roiling cesspool of greed, perverse incentives, incompetence, and a lack of interest in providing great care to the people who need it.

So let's get into it.

Insurance Companies

Insurance companies are widely blamed for causing the healthcare crisis.

And yeah—they certainly deserve a big part of the blame.

The whole point of insurance (of any kind) is to avoid a huge bill if something catastrophic happens. By paying a little bit of money on a regular basis, you avoid paying a lot of money when something really bad happens. If an insurance company is paying for something that is normal and routine, they're just a useless middleman.

Over-Coverage

Here's the thing: insurance companies have a fixed profit margin; they take a cut of all the money that flows through them. The only way for them to make more money is to process more dollars. So they started insuring things that didn't need to be insured.

Would you use your car insurance to pay for an oil change? No—you only use it when you get in an accident. You pay for routine maintenance yourself. What if your car insurer offered to pay for your oil changes, but only if you go to High Price Lube and pay a pre-negotiated "discounted" rate of $200?

This is how the system works in America; you use your health insurance for everything. Annual physicals? Pay with insuran ce. Routine blood tests?

Pay with insurance. Putting a bandaid on a scratch? Pay with insurance.

This is the madness of health insurance in America.

The Seeds of Crisis

In 1966, the American Medical Association published the first edition of the Current Procedural Terminology (CPT) manual. It assigned a short, standard numerical "CPT code" to every known medical procedure. The insurance industry loved it.

By the 80s, Medicare and private insurance companies had deeply integrated CPT codes into their claims processing system. They were a convenient shorthand way to itemize all the services performed in a doctor visit. All hospitals and clinics had to use CPT codes in their insurance claims to get paid. And for a while, things were good. Everyone spoke the same language and the system was working.

Gaming the System

Then a terrible thing happened. Hospitals learned how to game the system.

They started submitting itemized lists containing dozens of CPT codes, even for simple visits. They developed medical record software that was geared entirely towards maximizing revenues, instead of tracking medically relevant information. They started training their doctors to use certain "billable phrases" in their medical records. They started recommending MRIs and blood tests willy nilly, even if they weren't medically necessary. They started choosing a more lucrative surgery over a cheaper, safer option. The Rise of Administrators

There are a thousand other ways hospitals have managed to “optimize” their insurance billing. There’s even an entire profession dedicated to the art of maximizing hospital revenue: “medical coder”.

Of course, the insurance companies realized they were getting play ed. So they tried to fix their systems the only way they knew how: with more elaborate coding systems, more reporting requirements, and more paperwork. As the systems grew in complexity, hospitals started requiring more and more administrators to handle th e additional requirements. How many more? See for yourself.

In the past 40 years, there has been a 32x increase in hospital administrators, compared to a 2.6x increase in the total number of doctors.

That's not good.

Hospital consolidation

These days, it's so hard for a doctor to get reimbursed by an insurance company that many private practices and pharmacies are going out of business. Managing the complexity of the modern insurance system requires a huge, well -funded bureaucracy—something only big hospi tal systems can afford.

This is the core driver behind "hospital consolidation", one of the most harmful healthcare trends of the past decade. Big corporate "health systems" have been buying clinics, private practices, and even other hospitals. By aggregat ing a bunch of facilities under one umbrella, hospitals can implement their billing practices more widely, steer patients towards facilities and specialists they control, and decrease operating costs.

Increasing prices

As these health systems grew to encom pass entire counties or states, they gained a huge advantage in negotiations with insurance companies. A fair market price for a knee replacement is about $30k; this covers the hospital’s cost of labor and materials plus a fair profit margin. If you get a knee replacement within a huge health system, they'll probably try to bill your insurance company over $100k. If the insurance company complaints, the hospital will offer them an amazing deal: a massive 50% discount! The insurance company happily agrees to pay $50k—but they’re still paying

$20k more than the market price. Over time, prices drift upwards as insurance companies get accustomed to paying ever higher prices.

In recent years, this phenomenon has reached the point of absurdity. Here are some examples of real medical bills (source):

A $17 Tylenol pill in the hospital. A $98 ice pack applied during physical therapy. A $70 additional “mileage charge” for a 15-minute ambulance ride. A $10,000 “trauma team activation fee,” when a triage nurse summoned surgeons to the emergency room. A $1000 “rooming-in charge” to a mother who opted to keep her newborn in her room, rather than having him admitted to the new-born nursery.

This is the largest contributor to the last 10 years of rising healthcare costs: huge, consolidated, corporate health systems continually charging more for the same services, because they can.

The Victims of the Crisis

That's the context of the current crisis. Insurance and health systems are locked in a decades-long price war where both sides just get richer. So who are the losers?

Patients

This one is obvious. If you've had a medical appointment in the last 15 years you've seen these problems firsthand. 1. Lack of access. You'll need to book any doctor's appointment

weeks in advance. Once you arrive, you'll probably still wait two

hours in the waiting room. And once your number is finally

called, you'll have a brief, unsat isfying visit with a doctor that

spends the whole time looking at a computer. If you have a

followup question, there's no recourse —just schedule another

visit next month.

2. Expensive insurance. As hospitals bill more and more for the

same services, insurance premiums go up accordingly. This is

great for both insurance companies and hospitals —but at the

end of the pay patients foot the bill. Insurance premiums have

increased faster than wages for the last two decades. Plus, most

plans require you to pay an additional fee (a "co-pay") for every

medical service you receive.

3. Surprise bills. Even if you have great insurance, you're still at risk

of getting hit with big surprise medical bills. Your insurance plan

will only cover care you receive "in network". Yet th ese networks

are confusing and ever-changing. The concept of selective

"narrow networks" for insurance plans was devised as a

negotiating tactic —insurance companies would only work with hospitals that offered them the best prices. Now patients are

pa ying the price.

4. Bad care. Apparently providing good, compassionate healthcare

is too expensive, so health systems have optimized it away. The

average doctor visit in an American hospital only lasts 12

minutes. Hospitals pressure doctors to prescribe more

medications, order more tests, and bill for more services—even if

none of it is medically necessary. And still more Americans die

from poor care quality than any other comparable first -world

country.

Doctors

Doctors are another victim of the current crisis. The overwhelming majority of doctors get into medicine to help people. If you’ve had a bad experience with a doctor who doesn’t seem to care, it’s because they’re in an impossible situation.

Hospitals treat their doctors like cogs in a machine; they don’t care about the quality of care the doctor provides or the satisfaction of the patient.

Physicians employed by hospitals have extremely low job satisfaction rates. These short, impersonal visits take a huge emotional toll on doctors.

In surveys, 40% of doctors say they plan to leave the profession in the 49% of doctors say they wouldn't recommend a career in medicine to their children.

If you've had a string of bad experiences, it’s easy to blame it on bad doctors . But it’s virtua lly impos s ible for a phys icia n to operate in an empathetic, caring way inside of a modern American hospital. The big corporate health systems have optimized away the doctor-patient relationship in the name of higher profits.

DPC Saves The Day

DPC is a new way to get high quality, practically speaking it is a membership model for comprehensive patient centered healthcare from a doctor all for a low, flat monthly fee. It’s that simple. No insurance, no corporate health system, no middlemen. Just doctors and patients.

Practically speaking, DPC is a membership model for healthcare. Every patient pays a flat monthly fee to become a member of the DPC practice.

What are the benefits of membership? Put simply: access to a doctor that cares about you.

Your DPC doctor is there when you need them. You get unlimited office visits at no additional charge —and they'll be as long as you need. Typically you’ll be able to book a same -day or next-day appointment, sometimes directly through the practice’s website. Often you’ll have access to your doctor’s cell phone number, so you’ll be able to call or text them any medical questions as needed. Simple diagnostics like strep tests can often be performed in the office for a small additional charge. If you have a major issue, your doctor will coordinate any specialist referrals or hospital care.

Not to mention: the membership fee can often pay for itself. Most DPC practices have an established relationship with local laboratories and radiology centers. That means you can get blood tests, pathology screens,

X-rays, MRIs, and more for low cash prices. Plus, most DPC practices dis pe ns e me dica tions in-house at near-wholesale prices, so you both save money and avoid extra trips to the pharmacy.

Being a member of a DPC practice is like having a doctor in the family.

Your doctor is accessible and will always be in your corner, working to keep you as healthy as possible. It’s an amazing feeling.