I’m not a doc, but my wife had both knees replaced by Dr. M. I’ve also been a fan of free market economics all my life. As a fan of free markets, I don’t like the crony capitalism that pretends to be the real thing. As I understand it, these huge hospital systems operate technically as non profits, although in reality they are much more like any huge corporation with a profit motive. It a huge advantage over doctor owned hospitals and clinics as the huge systems pay no income, property, or sales taxes.
The framing of managing disease versus curing it is the most important distinction in this piece, and it does not get said clearly enough in most healthcare conversations. A system structured around chronic disease management has no financial incentive to eliminate what it is managing. That is not an accident of design. It is the design.
The innovation problem runs directly through this. When the revenue model rewards ongoing treatment, research and development follows the money. We fund better management tools, not better resolution pathways. The question of why we still do not have durable solutions for conditions we have understood for decades is not a scientific mystery. It is an incentive question.
The ASC data makes the independent facility case better than any argument could. Lower cost, lower infection rates, higher patient satisfaction, faster recovery. The outcomes are not comparable to hospital-based care for elective procedures. They are demonstrably better. And yet the default remains the hospital setting because that is where the billing codes are built to generate the most revenue, not where the patient fares best.
What independent facilities and private practices preserve that consolidated health systems systematically eliminate is the direct relationship between the clinician and the patient as the organizing principle of care. When a physician owns their setting and their outcomes, the incentive structure changes. The patient is no longer a revenue unit moving through a system. They are the point.
That realignment is where better outcomes actually come from.
Answering your closing question from the plan sponsor seat. The waste I see most clearly is the one you named only in passing: pharmaceutical rebate games. In self-funded plan pharmacy contracts, list price is still the basis for member cost-sharing in most structures, while the plan captures rebate value on the back end. Members pay as if no rebate exists. And the contractual opacity around admin fees, GPO fees, and manufacturer price concessions labeled under other names has quietly become a larger PBM revenue stream than the rebates themselves.
What I am doing about it is structurally the same thing you are doing, one contract at a time. The ASC model is proof that when plan sponsors and clinicians align around the right setting for the right procedure, the cost curve bends. The pharmacy equivalent is direct manufacturer contracts, transparent pass-through PBM structures, and carve-outs from the Big 3 orbit. The work is harder and the levers are smaller than they should be. But the principle holds: you do not wait for the insurer, the PBM, or the federal government to fix this. You build the alternative yourself.
I’m not a doc, but my wife had both knees replaced by Dr. M. I’ve also been a fan of free market economics all my life. As a fan of free markets, I don’t like the crony capitalism that pretends to be the real thing. As I understand it, these huge hospital systems operate technically as non profits, although in reality they are much more like any huge corporation with a profit motive. It a huge advantage over doctor owned hospitals and clinics as the huge systems pay no income, property, or sales taxes.
The framing of managing disease versus curing it is the most important distinction in this piece, and it does not get said clearly enough in most healthcare conversations. A system structured around chronic disease management has no financial incentive to eliminate what it is managing. That is not an accident of design. It is the design.
The innovation problem runs directly through this. When the revenue model rewards ongoing treatment, research and development follows the money. We fund better management tools, not better resolution pathways. The question of why we still do not have durable solutions for conditions we have understood for decades is not a scientific mystery. It is an incentive question.
The ASC data makes the independent facility case better than any argument could. Lower cost, lower infection rates, higher patient satisfaction, faster recovery. The outcomes are not comparable to hospital-based care for elective procedures. They are demonstrably better. And yet the default remains the hospital setting because that is where the billing codes are built to generate the most revenue, not where the patient fares best.
What independent facilities and private practices preserve that consolidated health systems systematically eliminate is the direct relationship between the clinician and the patient as the organizing principle of care. When a physician owns their setting and their outcomes, the incentive structure changes. The patient is no longer a revenue unit moving through a system. They are the point.
That realignment is where better outcomes actually come from.
Answering your closing question from the plan sponsor seat. The waste I see most clearly is the one you named only in passing: pharmaceutical rebate games. In self-funded plan pharmacy contracts, list price is still the basis for member cost-sharing in most structures, while the plan captures rebate value on the back end. Members pay as if no rebate exists. And the contractual opacity around admin fees, GPO fees, and manufacturer price concessions labeled under other names has quietly become a larger PBM revenue stream than the rebates themselves.
What I am doing about it is structurally the same thing you are doing, one contract at a time. The ASC model is proof that when plan sponsors and clinicians align around the right setting for the right procedure, the cost curve bends. The pharmacy equivalent is direct manufacturer contracts, transparent pass-through PBM structures, and carve-outs from the Big 3 orbit. The work is harder and the levers are smaller than they should be. But the principle holds: you do not wait for the insurer, the PBM, or the federal government to fix this. You build the alternative yourself.
Good piece.