It’s hard to fully understand the morass that is modern health care. It’s a mess, which is why we have launched our Regenexx Corporate program. The video above describes what we do in more detail, but this morning I would also like to walk you through how we can save big bucks for companies drowning in a sea of exploding health care costs. Today I’ll focus on one big hospital moneymaker, known as facility fees. Let me explain.
The Facility Fee Game
A recent article in medical economics exposed the concept of facility fees. Basically, these are arbitrary fees that allow anything associated with a hospital to be 3–10 times as expensive as the same care delivered at an outpatient clinic across the street. So let’s explore today how this all works and why Regenexx is the disruptive change every company needs to bend the cost curve down.
Why Hospitals Are so Darn Expensive
Right now, our existing medical care system is hospital-centric. In fact, over the last few years, it’s become more and more focused on hospitals. For example, in many markets, hospitals have been buying medical practices at a furious pace. So much so, that only one-third of physicians are now in independent practice and not closely tied to or employed by a hospital. At face value, you might look at all of this and say, “So what? Isn’t it better to have doctors employed?” The problem is that everything performed in a hospital or hospital-owned facility is outrageously expensive. Let me explain.
Hospitals are so expensive because of a little-known charge called a facility fee. My first exposure to this came when I was asked to testify in court on a patient’s injury that involved a lawsuit over a car crash. I had performed a facet injection on the patient’s neck at an independent outpatient surgery center, and before me, another doctor had performed the same injection at a hospital-owned facility. I was then asked to review all of the bills to determine if they were reasonable and necessary, and related to the injury. The facility fee for the outpatient surgery center was a few hundred dollars. The facility fee for the same procedure performed in a similar setting, but owned by a local hospital? More than $24,000!
How Physicians Owned by the Hospital Magnify Facility Fees
As discussed, we now have two-thirds of all doctors owned by the hospital. These physicians are required to keep “leakage” to a bare minimum. This is a hospital term that describes what happens when a patient is sent outside the hospital system. So let’s follow an orthopedic patient through the facility fee machine that is the modern hospital.
A 50-something executive is hiking and feels pain in his right knee. That knee swells and he soon begins to hobble. After a week, he’s still limping around, so he goes to see a local family doctor who is part of the local hospital system. The office visit in a private facility across the street would have been $100, but in the hospital, it’s $200. That doctor orders a knee MRI on the hospital-owned MRI, which instead of costing $500 costs $1,500, due to the facility fee. That image shows a meniscus tear, so the patient is sent to a hospital-employed orthopedic surgeon who decides to operate on the tear. The patient is then taken to a hospital-owned surgery center where the facility fee is $6,000. The same surgery performed across the street in a private ambulatory surgery center would have been $1,200. The patient is sent to physical therapy, which across town in a private PT practice would cost $60 a visit times 12 sessions. However, in the hospital-owned outpatient PT center, it costs $120 a visit. So an event that should have cost the executive’s company $2,500 costs almost ten grand.
There’s Another Problem with This Care Encounter
The other big issue here is, of course, that we have many high-level research studies showing that the meniscus tear seen on the hyperexpensive MRI in a 50-something-year-old patient was part of the normal aging process and unlikely to be associated at all with the patient’s pain. In addition, we have further research that the meniscus surgery where they chopped off the torn piece of meniscus is not better than physical therapy or a sham procedure. Hence, what cost a few thousand to ten thousand dollars really only needed a quick platelet-rich plasma (PRP) injection at one to two thousand dollars. That PRP shot does have high-level research that shows it works well to help the symptoms of mild arthritis, which is what this patient has wrong with his knee. So if we take the weighted average of those costs (two-thirds chance that the cost is 10K) at $6,700, the real cost of helping the patient could be more than two-thirds less.
Why Orthopedic Surgeons Can’t Do the PRP Shot
As I have shown above, if an orthopedic surgeon is employed by the hospital or in business with the hospital in a co-owned outpatient surgery center, a huge chunk of revenue for the hospital and the surgeon is the surgery facility fee. Hospitals have long since figured out that the way to purchase surgeon loyalty is to have them own a piece of that facility fee machine. Hence, it costs the surgeon money to do anything but operate. So while a very honest surgeon might try the PRP shot, the better angels of our nature rarely get in the way of revenue.
How do you know this is a true statement by merely looking around you? We now have many large studies published in the New England Journal of Medicine showing that the meniscus surgery I described is no better than a fake procedure. Hence, if surgeons were using the best available evidence to guide treatment decisions, meniscus surgery rates would have plummeted. However, the procedure is still the number-one elective orthopedic surgery performed today. Don’t take my word for it, read these pieces in the New York Times:
The upshot? Regenexx has always been a disruptive technology. Every day, we save countless patients from invasive and often ineffective orthopedic surgeries by substituting advanced interventional orthopedics using orthobiologics. However, there is another reason we save so much money for self-insured health plans. We bypass the hospital facility fee machine by performing those procedures in private practices. If you’re interested in having us speak with your employer about adding the Regenexx procedures to your health plan, see our Corporate website.