Getting Control Of Healthcare Expenditures – The Reduction Of Healthcare’s Moral Imperative On Employers

AMPS

By: Mike Dendy, MHA/MBA        –          CEO/President Advanced Medical Pricing Solutions, Inc (AMPS)

Our current system of corporate healthcare financing is nothing short of absurd.  Health plan members seek care without regard for or knowledge of costs and administrative fiduciaries pay those bills without even the slightest bit of diligence to confirm validity of charges or services rendered.  We buy medical services through expensive purchasing cooperatives (PPOs) that increase rather than decrease costs.  And, we levy the same participation fees on members who work diligently to care for themselves properly as those who manage themselves in near suicidal fashion.

American businesses are rife with great managerial talent who flyspeck expenses on every element of their operations other than healthcare.  Not trusting their own internal modes of checks and balances, most businesses seek outside auditing assistance to provide hyper-granular levels of review to confirm that not one single dime is lost to misappropriation.  Except on healthcare where charges of $1,000 or more for a toothbrush, $500 or more for a bag of saline solution, or $70,000 or more for a simple appendectomy are never considered or challenged.

What is the root cause of such inappropriate and inconsistent financial management of health plans by corporate America?  The answer is the overriding moral imperative to provide healthcare coverage burdened upon businesses for the last 50 years.  Employers want to “take care of their employees.” Historically there has been minimal opportunity for those employees to seek alternate forms of coverage outside the cloak of group coverage.  Thus, the employer has been stuck footing the bill for what is often reckless use of comingled corporate and employee funds.

However, with the advent of the national and state exchanges, everyone in America has the ability to seek and receive healthcare coverage outside of that offered by their employer.  Employers must take this opportunity to regain control over their healthcare cost management.  The opportunity could be extremely lucrative for employers and their employees alike as copious scrutiny of healthcare expenditures could reduce the cost of group healthcare by well over 30% without affecting the access to or quality of care.

The Accountable Care Act (ACA) offers additional incentives for corporate cost management as well.  Built into the ACA is a well-known penalty for “Cadillac Plans” which will significantly penalize plans that are deemed rich in benefits.  This is a bit of a misnomer that employers can use to their advantage.  The ACA verbiage uses the term “value” to define a Cadillac Plan and the only possible way to determine value in dollar terms is through either premiums or premium equivalents.  Using management controls to lower costs will unilaterally reduce premiums or premium equivalents and thus keep employers out of the penalty box.

In Paul O’Neill’s preface to the book The Company That Solved Health Care by John Torinus, Jr., former Alcoa CEO and Secretary of the Treasury, O’Neill writes, “The healthcare industry is badly in need of new business models and systems thinking.  (This book) incorporates some of the best management discipline as it proves health and healthcare costs can be improved dramatically at the ground level.”  Torinus then writes: “It’s time to put employers and employees-those who buy and use healthcare, not the insurance companies and medical providers- back in the driver’s seat.”

In addition to the moral obligation noted, a significant miscalculation by employers has been the belief that large health insurance concerns work on the employers behalf to reduce healthcare costs.  In actuality the exact opposite is true.  The large health insurance companies have set up every possible road block to employers achieving reasonable fees for healthcare services provided.  This is because the insurance companies profit greatly by having employers believe that the only way to access and pay for care is through their purchasing cooperatives commonly referred to as Preferred Provider Organizations (PPOs).  To maintain that illusion, the insurers enter into agreements with health providers (doctors and hospitals) setting up networks and then don’t allow employers to know what they are paying for services, calling such information proprietary.  A health insurance company’s intrinsic value is directly tied to the size and scope of their PPO networks and thus their loyalties follow that financial incentive.

In a recent study of over 1,600 hospital bills reviewed in significant detail, Advanced Medical Pricing Solutions (AMPS) found that on average employers are paying more than 300% of Medicare pricing on in-patient hospital claims and over 400% of Medicare on outpatient services, all of this after the supposed discounting offered via PPOs.  Since Medicare payment is cost-plus based, and thus profitable by design, paying fees for services at 3X or 4X such an amount is not financially responsible.  Employers have no idea that they are paying such amounts due to the opacity created by the large insurance companies and the PPO networks they own.

Take for example that the average payment for an MRI in America $1,080 (and often as high as $4,000) versus what is paid for such a service in France where it’s $280.  Or, a normal baby delivery where the cost in the US averages $16,653, in England and France the cost is $2,604 and $3,541 respectively.  Of course, US average payments are post PPO “discounting.” Finally, a prescription for Lipitor in the US is $145 and in the UK it’s $43.

There is something very wrong with the way we purchase healthcare services in the US and the only way out is to stop paying through cooperatives (PPOs) that don’t work, for companies to define what is reasonable reimbursement for a service and for employee/members to spend as much time on healthcare purchase decisions as they do when purchasing a car or flat screen TV.

Mike Dendy, Biography

Mike Dendy, who resides in Atlanta, GA. is the CEO/President of Advanced Medical Pricing Solutions (AMPS) a healthcare cost containment company. Dendy has both a Master of Business Administration and a Master of Health Administration degree and has been an executive in the health insurance field for twenty years. Based in Atlanta, GA, AMPS has helped healthcare payers, and self-insured organizations receive a fair price for healthcare services for nearly a decade. AMPS offers a single gateway approach to a suite of cost-containment services. AMPS delivers and aggregates a host of services for managing the financial risks associated with healthcare claims. AMPS’ Clients include large and mid-sized corporations, TPAs, self-insured plans, HMOs and other entities that pay claims on behalf of health plans. For more information, visit www.advancedpricing.com.

Previously, Mike served as Chairman and CEO of HPS Paradigm Administrators Inc. from 1997 until its sale in 2004.  HPS is a health insurance administrative services firm (TPA) serving corporate and government employer groups throughout the country.  HPS also provided outsourced cost management and administrative services to Georgia’s second largest HMO plan from 2000-2003.  Under Mike’s direction, HPS Paradigm grew from $9mm to over $100mm in gross revenues in seven years.  The company enjoyed a 22% EBITDA within an industry that averages less than 10% and grew administrative fees from $900,000 to over $10,000,000.  HPS Paradigm was recognized during this period by multiple sources as one of the premier third party administrators (TPA) in the country.  Under Mike’s management, HPS Paradigm was awarded SAS-70 accreditation, which is held by less than 12% of all TPAs, and “World Class Administrator” recognition, by the McLellan Consulting Group for overall corporate excellence.

HPS Paradigm was purchased by STI Knowledge, Inc. in March of 2004.  STI Knowledge is a world-wide business process outsourcing (BPO) company serving Fortune 500 clients including Alcoa, E-Trade, Polo-Ralph Lauren, Citrix and Beazer Homes.

Prior to his purchase of Paradigm Administrators in 1997, Mike founded Health Partners Services Inc. (HPS), a consulting and healthcare brokerage firm.  From 1992-1997, HPS developed community health system plans in a number of southeastern U.S. markets and grew consulting revenues to $600,000 annually.  Mike’s specific areas of specialty include: stop loss insurance, benefit plan design, provider negotiations, pharmacy benefit management, disease management, predictive analysis, and cost containment.

Previously, Mike served as Vice-President/Publisher of Time Warner’sWhittle Communications / Esquire Magazine Media Group from 1984-1992.  Mike became the youngest partner in the history of Whittle Communications and held a number of positions including Regional Accounts Manager, Director of Regional Account Sales, National Director of Sales for Esquire Properties and Whittle Medical Publications, and Vice President / Publisher of Whittles’ $40 million multi-publishing and broadcast media unit Special Reports, which was heralded as the most successful new business launch in media history at the time.

Mike’s educational background includes an undergraduate degree from the University of Georgia in Journalism and Psychology.  Mike attained the degree Master of Business Administration (MBA) from Georgia State University  in 1997, and a Master of Health Administration (MHA), also from Georgia State University in 2002.  Both of Georgia State’s graduate programs are nationally ranked.  Within the MHA program, Mike attained a perfect 4.0 grade point average. Mike attained both the MBA and MHA degrees while working full time by attending classes at night and on weekends.

Additional education includes executive management programs at Harvard Business School (1999), Harvard School of Public Health (2001), and Harvard Law School (2002).

Mike is a member of the Advisory Board of the Robinson School of Business at Georgia State University and also serves on the Advisory Council for the School of Healthcare Administration at Georgia State University.

 

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