In this episode, Michael introduces Doug Aldeen, a healthcare and ERISA attorney. He has represented reference-based pricing organizations, PPO networks, medium to small self-funded plans, TPA’s and provider sponsored HMO’s in various capacities.
Doug started his career at an insurance defense firm, then worked at a local HMO for years. It was there that he learned the ins-and-outs of the healthcare industry and realized that “discounts” aren’t real, but the prevalence and unsustainability of cost-shifting very much are. He found that in many cases there’s no correlation between what hospitals charge and their cost, and “turbo-charging”—where hospitals raise billed charges at unreasonable rates—is common in commercial insurance yet illegal in the Medicare world. Doug has seen “turbo-charging” of 12-24x, and 30x pricing on prescriptions and implants.
Surprisingly, employers are often completely unaware of what’s going on under the hood of their healthcare plan. They’re left in the dark because of limited access to data, billing statements without itemized, line-item costs, and “Revenue Neutrality Agreements” that sometimes allow providers to be paid more than they bill. Doug believes commercial insurance plans serve as an ATM for hospitals at the employers and patients expense, all because no one is monitoring, auditing, and demanding to see what’s getting billed, what’s getting paid, and why. And with the employer fiduciary duty under ERISA, this could be a costly oversight for employers that may lead to lawsuits in the future.
Doug works primarily with employers who have self-funded plans and reference-based pricing plans. He develops direct contracts with Hospitals and Providers on behalf of employers and their employees. For Doug, a successful agreement with a provider should be simple; only clean claims are paid, all claims are auditable, price is reasonable and there is a benefit incentive for employees to receive care at the facility. More importantly, a safe harbor has been created where the employee can receive care without having to worry about balance bills which are not allowed under the contract. With his day to day work and advisory position at RIP Medical Debt, Doug is making a positive impact in the healthcare industry and we’re excited to see him keep up the good work.
Here’s a glance at what we discuss in this episode:
- 00:30 – Introducing Doug, a healthcare and ERISA attorney who helps employers and payers offer affordable healthcare to employees and dependents.
- 02:12 – He’s been a lawyer for 28 years; he worked in an insurance defense firm doing dram shop cases in 1997 and ended up at a local HMO for 7 years.
- 03:30 – The most fundamental flaw in the industry: discounts aren’t real, overpaying, and cost shifting in the commercial market are unsustainable.
- 05:45 – There’s no relation between what they are charging and their cost; we need honest conversations and common middle ground.
- 06:30 – Hospital “turbo-charging”: Hospitals charge X and insurance companies match it with the premium; it’s “chumminess” between providers and insurance carriers.
- 08:35 – Turbo-charging is expressly illegal in the Medicare-world but not the same in the commercial world; you can see this anywhere from 12-24x.
- 09:30 – He’s seen 30x pricing on Rx and implants; CFOs need preservation of P&L and need to get motivated to understand how this all works.
- 11:00 – Turbo-charging is illegal with Medicare; we can’t vilify healthcare providers, it’s not them.
- 12:40 – Data ownership: Cigna owns the data and allows you to access it on a limited basis; the data should be a part of the plan; you should be able to see bill charges.
- 14:10 – Anthem has a “Revenue Neutrality Agreement” executed on the side with the hospital system – they found 30% of claims were paid more than the billed charges.
- 16:05 – Employers don’t know if they’re getting what they’re promised without an audit; they don’t even see itemized, line-item billings.
- 18:30 – Employers, keep an eye out for agreements where providers can be paid more than they actually bill.
- 19:40 – Health plan transparency regulations were just recently passed. Insurers must now share cost-sharing estimates at the request of an enrollee and publicly release negotiated rates for in-network providers, including out-of-network allowed amounts, billed charges, and drug price charges.
- 21:15 – Why a commercial plan is an ATM for hospitals; no one is really monitoring the store and there’s nowhere else to really shop.
- 22:40 – Employer fiduciary duty under ERISA: Similar to fiduciary responsibility with respect to 401Ks
- 23:50 – Employers are fiduciaries to make sure they’re paying a fair price for healthcare on behalf of employees—you can’t do that with “network discount” products.
- 25:30 – Employees could sue an employer for breach of a fiduciary duty and it happens all the time in the 401K world.
- 26:00 – Doug’s direct contracting work: He works with employers who have self-funded plans and reference-based pricing plans; he gets hospital financials to see their numbers.
- 26:50 – By doing this, he sees the cost-shifting that occurs by comparing Medicare and commercial costs.
- 27:50 – He gets the data and their true costs; it’s all available for those who look and can read it.
- 28:45 – AGB (Average Gross Bill Charge) is all claims divided by all payments; you need the data to know where the gap is.
- 30:10 – In some cases, they tell you to go somewhere else; they will not base any contract on a percentage of Medicare.
- 31:00 – Key components of a successful agreement: Paid consistently, a covered benefit, auditable, clean claims only.
- 32:15 – Waiving co-pays and having a safe harbor provides the right incentive for employees to stay healthy and get care.
- 34:30 – Hospitals cannot unilaterally charge gross bill charges without first determining eligibility under their financial assistance policies (FAP); this jeopardizes 501R & 501c3.
- 37:55 – Doug’s fee structure: Flat fee + PMPM for 12-18 months.
- 39:10 – Start with hospital financials to see which ones are healthy; know the competition.
- 40:05 – RIP Medical Debt: They buy medical debt on the secondary market to forgive people’s medical debt.