November 04, 2002
From the desk of Jane Galt:Perspective is Everything Found this
Perspective is Everything
Found this item on the excellent MedPundit:
Shakedown: Members of of the Washington, D.C. area's largest health insurance company won't be able to use the Children's Hospital without paying a steeper price. The hospital balked at the company's efforts to squeeze them further:"CareFirst started off the negotiation asking for a 12 percent decrease in rates," said Jody M. Burdell, a Children's vice president. "We asked for a 20 percent increase. CareFirst really needs to pay rates that are comparable to other managed care companies' rates."
The insurance company denies this account, but there's no reason to suspect the hospital of lying and every reason to expect the insurance company to try to save face in an effort to avoid losing subscribers. Carefirst made $92.4 million last year.
Sounds like a clear cut case of rapacious health care companies heartlessly trying to squeeze the hospitals for the benefit of their greedy shareholders, doesn't it? But then you look at the numbers. They've got about $2.5 billion in assets, and around $6 billion in annual revenue. That outrageous $92.4 million profit represents a profit margin of 1.5% annually, and a return on assets of about 3.6%. These are supermarket-chain type numbers -- a business renowned for its razor-thin margins and brutal competition, not to mention regular spates of bankruptcy. Not for its avaricious investors and plutocratic managers getting rich off the back of hard-working customers.
In other words, maybe the reason they're putting price pressure on their suppliers is that if they don't, they'll go out of business. Sidney Smith understandably sees the hospital's side -- but there are generally two sides to a story. Just goes to show how two people can look at the same situation and see entirely different things.
Posted by Jane Galt at November 4, 2002 06:56 PM | TrackBack | Technorati inbound linksAt this point, CareFirst is a "Not-for-Profit" company. They want to become "for-Profit" and be bought by Wellfleet of California. Children's Hospital typically operates at a loss. In the year 2000 they had an operating margin of 0.04%, probably good enough to classify as non-profit.
I attended a health fair given at my employer, the Naval Research Lab. Of the 10 or so participants, CareFirst was the only provider that did not have a contract with Children's. Does this have anything to do with their change to "for-Profit". I cannot imagine that it does not. The CareFirst argument is that they pay Children's more than any other hospital in the area. In my view, there is a simple reason for that. Any parent knows that children require more care than adults.
As a metric, Trigon of Virginia, also a Blue Cross Blue Shield company DOES have a contract with Children's Hospital. Unfortunately, all Federal Employees that use Blue Cross/Blue Shield will be affected by this change. I live in Prince William County, serviced by Trigon, but found that the contract with OPM stipulates that the Blue Cross Franchise in the area that the service is provided (CareFirst) is responsible for payment. So all children of Federal Employees using Blue Cross/Blue Shield in the Washington DC area are affected by this.
I would not send my Daughter to any Hospital but Children's. Other hospitals in the area are good, but treat children as if they were little adults. The same treatments that are affective for adults often do not work on children. We learned this the hard way.
Last year, thanks to the treatment that my daughter received for Ulcerative Colitis over the course of 9 months under Fairfax Hospital physicians care, she required a seven week stay in Children's hospital. She was three years old at the time. Her internal bleeding was so bad that she required four transfusions. The practice at Fairfax Hospital bordered on negligence. The prescribed treatment, effective for adults, increased her bleeding profusely. My wife and I stopped giving the drug, an aspirin derivative, and returned to the practice. The physician yelled at us for stopping treatment and told us "how do you know that it just wasn't the disease, that is the symptom of it." My daughter at age three told the Fairfax Hospital physician "You are no Doctor". We switched practice to Children's immediately. The Doctor at Children's changed the treatment to probiotics, antibiotics, steroids (she is off of now) and 6MP. He stopped at nothing until my daughter was healed. This included a single dose of Remicade that turned the corner for us. Today, at age four, she is happy and healthy. Had we stayed at Fairfax, she would have had her Colon removed.
I made a mistake in stating that "Wellfleet" of California is looking to purchase CareFirst. The company name is "Wellpoint". This was a Freudian slip. I associate this company with an enema which is about what they are doing to our children.
I am sorry for the error.
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