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Sunday, October 11, 2009

When franchise players leave the team

Today I read in the LA Times and the Washington Post that the poster child for integrative health care, the Mayo Clinic, is making moves to limit access to patients who have certain forms of Medicare and Medicaid. It is pretty obvious that they are making those decisions since their margins on those patients are less advantageous than patients covered under other insurers or those who pay cash. If the truth be told, they are likely pursuing a strategy publicly that virtually all other health systems are doing privately if they can.


What does it mean when major health systems limit access to insured patients. Obviously it means they will have a hard time getting what they want when they want it. The implications in a world post health care reform will very much depend upon how health care reform is structured. There will likely be outlets for que jumping for those who have means, although there is no guarantee this will be the case given our experience with Medicare. What sort of enhancements will be available to those who have means?


It may be that the Mayo model is dependent upon extracting higher rents from private insurance models and being geographically placed to avoid specific high cost, lower margin patient populations. If health care reform closes the avenues for patients to pay premium prices, either indirectly through their insurance or directly through their own pocketbooks, what happens to the Mayo model? Does their model have sufficient margins to continue with only the geography piece to exploit?


In contrast to the Mayo refusal to accept selected patients covered by Medicaid and Medicare, most public hospitals are happy when they can receive any payment for much they end up providing for free, but they do not represent the model for sustainable health care of the future. I suspect they may fare even worse under health care reform. The first thing to go will be their local subsidies. Taxpayers will not believe there is any reason for their tax dollars should go to pay for both underwriting a national health plan and their local public hospitals.


One thing that we should all expect is that things that our actions will always generate a combination of intentional AND unintentional consequences. The unintentional consequences which will unquestionably occur is that the only viable health care entities which will survive in the future are ones that can avoid spending more money than they take in. Virtuous, non-profit seeking organizations will do fine as long as their non-profit seeking behaviors result in consistently positive cash flows. That is not likely in the long run (or even in the short run).

In a world where prices for services float and multiple levels of service are priced through market measures, there are all types of opportunities for for health care organizations and providers to fill the almost infinite numbers of niches which ultimately serve human needs. However, the direction we are moving will result continuation of the status quo; financial survival of organizations that can figure out how to avoid the terrible trifecta: poor payers, bad geography, and poorly paying health care activities.

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