RE·MEDI - Overview
The Healthcare Problem
Even as the Patient Protection and Affordable Care Act (ACA) has survived several life-threatening challenges, it remains unpopular and its future is still uncertain. Its fundamental problem is that it is attempting to defy the laws of economics. As David Catron recently wrote in The American Spectator, ". . . the penalties for ignoring those [economic] laws are draconian indeed. If you increase the cost of doing business for insurers, they’ll raise premiums and deductibles. If you make it impossible for them to make a profit selling coverage through exchanges, they’ll pull out. If you make coverage too expensive, people won’t buy it. If that coverage pays doctors less than it costs to treat a patient, doctors won’t treat them. If you pass a law that ignores such realities, it will be subjected to fact after brutal fact until it finally dies.”
We offer a healthcare solution that is based entirely on sound economic principles. With our new technologies, we correctly realign all of the perverse incentives that make the current healthcare system so complicated and so costly.
A Free-Market Solution
Each year, individuals purchase millions of products from the marketplace, and, with this considerable shopping experience, even the most unobservant shopper realizes that the more intensely sellers compete for business, the more likely are consumers to get good value for their money.
Unfortunately, there are few products or services for which there is less competition than healthcare. The little competition that can be found is the result of annual (or less frequent) negotiations between major purchasers of healthcare (mostly large insurers and employers) and managed care organizations. But this competition is a weak substitute for real market competition, which is produced daily by informed consumers searching out the best values the marketplace has to offer.
It is indeed unfortunate that healthcare—one of the most important purchases we make—is procured in markets that are so competitively weak. It is not surprising, then, that few believe that their healthcare purchases are bargains once they learn the prices that have been charged, and which are mostly paid by third parties.
To address the high cost as well as other problems related to the delivery of healthcare, Research Enterprises, Inc. has developed a new technology called RE·MEDI (pronounced remedy), an acronym for Research Enterprises' MEDical Incentive system. It is comprised of proprietary technologies protected by patents.
Why Healthcare is so Costly
The key to RE·MEDI's effectiveness lies in the difference between healthcare markets and most other markets. In most markets, consumers personally bear the full cost of the products they purchase. Because their incomes are limited, they are motivated to shop carefully by exploring advertisements, product reviews and other sources of information that help them make comparisons of price and quality.
Smart shoppers cause markets to become competitive. When faced with sellers who charge more, sell inferior quality, give poorer service, or offer fewer choices, smart shoppers penalize them by making their purchases elsewhere. In the face of savvy shoppers, sellers must compete effectively or be forced out of business. As noted earlier, smart shopping is the very last thing found in today's healthcare markets. This should not be surprising, given that third-party payers (e.g., insurance companies) severely blunt any incentive to search out the best healthcare values. But even with strong incentives, the access to price and quality information is practically nonexistent.
It is these two crucial factors—incentives and information—that the RE·MEDI system introduces to local healthcare markets. By so doing, it transforms these moribund markets into veritable hotbeds of competition among doctors, hospitals and other healthcare providers. The result is sharply lower prices, significantly increased quality, greater choices, new, cost-saving technologies, and quicker market penetration of advanced treatment methods—in other words, all of the benefits normally produced by other vibrant, competitive markets.
By relying on market incentives to hold down healthcare costs and to achieve quality care—rather than on laws or regulations, with their unintended (but predictable) adverse consequences—RE·MEDI brings unprecedented levels of free and informed choice, competition, and efficiency to local healthcare markets. As a result, substantial benefits accrue to: employees and other consumers of healthcare; employers who offer healthcare benefits to their employees; government agencies that purchase healthcare; and doctors and other providers.
Incentives and good information are the keys to producing a true market solution to the many problems associated with the delivery of healthcare. First, let us consider incentives.
Creating Powerful Incentives
To create highly competitive healthcare markets, a powerful financial reward is offered to economical healthcare shoppers. In the RE·MEDI system, all benefits are paid according to a defined benefit schedule; that is, a fixed dollar payment, or reference price, is established for each covered medical procedure, illness and pharmaceutical. Costs above this benefit amount are the responsibility of the insured. But if costs are less than the benefit amount, the insured receives a rebate for the full amount saved; or the savings can be credited to the patient's Health Savings Account (to avoid income taxes). Thus, insured healthcare consumers bear all of the extra costs, but they also receive all of the savings. They now have "skin in the game" for all of their healthcare decisions. If Treatment A costs $100 more than Treatment B, the insured always will be $100 richer by choosing Treatment B.
This incentive, aptly called Ca$hback Coverage, is a far more powerful way to make people cost-sensitive when purchasing their healthcare than are co-pays and co-insurance schemes. Imagine how your own spending would change if some third party were to pay 85% of the cost of your next automobile purchase!
Having now given the consumer an incentive to seek out the best healthcare values, we now need to arm her with readily accessible information on the price and quality of care.
The Doctor ShopperSM
Empowering with Information
RE·MEDI empowers people with the best possible information for finding superior healthcare values in the local healthcare market; namely, the prices and patient outcomes of competing doctors, and the prices charged by pharmacists and other providers. These are printed in a personalized report called The Doctor Shopper. [Side 1; Side 2].
The Doctor Shopper displays the prices, qualifications, and performance measures of doctors who administer the specific treatments needed by the patient. One feature of The Doctor Shopper is the handy Value Chart that plots several doctors according to their prices and the outcomes of their patients. (Unbiased and risk-adjusted outcomes information is generated by means of a patented process exclusive to the RE·MEDI system.)
On the Value Chart it is very easy to identify the "best" doctors: they are the ones connected by the red line labeled The Cutting Edge. These doctors are "best" in the sense that no other doctor on this chart shows better patient outcomes at a lower cost. Naturally, most patients will want to be treated by one of these "best" doctors, so doctors not on the Edge will be highly motivated to position themselves on it. However, there are only two ways for a doctor to move to the Edge: by lowering his prices, and by improving the outcomes of his patients. Of course, these are precisely the responses that we are seeking.
Providers also can do a number of things that will cause them to move away from the Edge, thereby making themselves less competitive. Among these are performing unnecessary treatments, acquiring new medical equipment that is not cost-effective, and shifting other people's costs onto RE·MEDI patients. Providers who wish to remain competitive under the RE·MEDI system will have to avoid these wasteful and costly actions.
Moreover, because it is virtually always in every provider’s financial self-interest to produce, for any given cost, the best possible outcome value for every patient, there is simply no longer a need for external utilization review. (Utilization review is a costly activity of insurance companies and other payers who, for example, police doctors and hospitals to ensure that they do not order unnecessary tests, do not perform unnecessary or inappropriate procedures, and do not keep patients in the hospital too long.)
For the same reason, any regulation whose primary purpose is to moderate prices or improve quality is redundant—at best. More than likely, a one-size-fits-all regulation will produce many instances of poorer outcomes, and few instances of improved outcomes, as compared with a doctor who best serves his own financial interest by serving the best interest of his patient.
Making It Work
To maximize the effectiveness of Ca$hback Coverage and The Doctor Shopper, we introduce a third concept—Diagnostic Centers. A Diagnostic Center is typically the first stop for a patient with negative signs or symptoms, and who is not experiencing an emergency medical situation. The Diagnostic Center is staffed with clinicians, a primary-care physician, an internist and specialty care doctors. These personnel operate under contract on behalf of the RE·MEDI system's members.
A person arriving at the Diagnostic Center is examined by a clinician to determine if her medical condition is routine or non-routine. If the former, and the treatment is straightforward, she will be treated by the clinician. If her condition is still routine but more complicated, she will be treated by the primary care physician. Before leaving the Diagnostic Center, she also may receive a prescription.
However, if it appears that the patient's condition is non-routine, she will be seen by the internist. If appropriate, he will refer her to a specialist whose specialty encompasses the patient's likely medical condition. This specialist will examine the patient and perform or order diagnostic tests and procedures so that an accurate diagnosis can be ascertained. Following this diagnosis, the Diagnostician will prepare a formal, written treatment plan, which will be processed through the RE·MEDI system's proprietary software to identify several doctors who can treat the patient's medical condition. These doctors' prices, outcomes, credentials and other information will be gathered and organized, and then printed in The Doctor Shopper. The patient will receive The Doctor Shopper before leaving the Diagnostic Center, and just at the point that she needs to select a doctor for her treatment.
Armed with The Doctor Shopper, the patient is now in an excellent position to select a doctor for her treatment. However, she need not select a doctor from the Shopper. In fact, she may select any available, licensed doctor in the world for her treatment without paying an out-of-network penalty. The reason for this "generosity" is that, under Ca$hback Coverage, the insurer is not affected by this provision. The insurer pays out only the benefit amount, neither more nor less.
It is noteworthy that approximately 90 percent of patient visits will conclude with the visit to the Diagnostic Center, while the other 10 percent will be visits to the specialist for treatment. However, these 10 percent of visits account for about 70 percent of total personal healthcare expenditures, so it is an important group to address if healthcare costs are to be controlled.
This separation of treatment from diagnosis provides several benefits. The first and most important benefit is that it creates the ideal opportunity to present patients with The Doctor Shopper. As we have noted, once the treatment plan is prepared and the Diagnostician determines the treatments the patient needs, the Diagnostician's computer can search the RE·MEDI system's database for doctors who can perform these treatments and who have offices near where the patient lives or works. The doctors' most recent prices are also in the database—they have been taken from the claims that the doctors have previously submitted to our claims processing center for payment. And, in most cases, the database contains the qualifications and performance measures of these doctors.
The second benefit is that it erects an additional safeguard against the performance of unnecessary or inappropriate treatments. It was just shown that providers who perform such treatments move themselves away from The Cutting Edge, thereby making themselves less competitive. Now, because such treatments will be excluded from the written treatment plan—because the Diagnostician has no incentive to include them—the treating doctor will not be reimbursed even if he should perform them, as they require the Diagnostician's authorization before they will be reimburseed. (The exception is if the treatments are part of an alternative treament plan that the patient has approved, but even in this case, the reimbursement amount is limited by the Diagnostician's treatment plan and not by the treatment cost itself.)
A third benefit from separating treatment from diagnosis is a substantial reduction in liability risk. All patients receiving a treatment plan automatically receive a second opinion—one from the Diagnostician and another from the treating doctor. Since both are held responsible for the diagnosis, concurrence is essential. Where there is disagreement, a red flag is raised, presenting the opportunity to avoid potential harm to the patient and a costly malpractice suit. The Diagnostician and the treating doctor typically will confer with each other to resolve the disagreement.
A fourth benefit is to encourage a team approach to treating the patient. To be most effective, the Diagnostician and treating doctor will maintain communication during an on-going treatment, with the Diagnostician providing oversight responsibility. The Diagnostician will re-examine the patient from time to time and confer with the treating doctor to assess the patient's progress and determine whether a modification of the patient's treatment plan might be in order.
A fifth benefit relates to the procurement of diagnostic tests. Diagnosticians can be directed to obtain these tests and other diagnostic procedures from sources that in the past have provided accurate test results produced in a timely manner and at competitive prices.
A patient in the RE·MEDI system becomes empowered like no other patient: she is now armed with the essential price and quality information that she needs to find readily the best values in her local healthcare market. The information has been tailored specifically to her particular medical requirements; and the information is simply handed to her at the conclusion of her visit with the specialty Diagnostician. Finally, she receives this information at precisely the time she needs it—when she must choose a doctor for her treatment. By exercising this power, she compels doctors to compete vigorously for her business.
A Powerful Cost-Cutting Machine
We have constructed a potent machine for producing efficiency in healthcare markets. This machine is powerfully driven—by market forces created by intense competition. It is also a simple machine: When the patient visits the Diagnostician, the Diagnostician determines whether or not the patient requires further treatment from another doctor. If further treatment is indicated, then the Diagnostician prepares a written treatment plan. This, along with The Doctor Shopper, is handed to the patient. The patient could choose to ignore The Doctor Shopper with its information on prices and doctor performance. But because of Ca$hback Coverage, she stands to lose or gain possibly hundreds or even thousands of dollars if she does. Even more important, the effectiveness of her treatment will likely depend on her choice of doctor. Thus, it is virtually inconceivable that the patient would fail to consult The Doctor Shopper, even though she may already have a doctor in mind. Finally, whenever a patient consults The Doctor Shopper, powerful market forces are brought into play that create competition among doctors and hospitals. If enough patients in the local market are enrolled in RE·MEDI—it is judged that they need to comprise at least 7 percent of healthcare expenditures within the local market—then the competition will be intense, causing prices to fall and quality to increase.
A Fully Automated
Health Plan AdministratorU.S. Patent
The fourth component of the RE·MEDI system is FAHPA, our fully automated health plan administrator that is based on an electronic health record (EHR) and an exceptionally efficient claims processing system. This efficiency in processing claims derives from three characteristics of the RE·MEDI system: 1) with Ca$hback Coverage, any overcharges are the sole responsibility of the patient, because the benefit amount is determined by the diagnosis and the treatments in the treatment plan, and not by what the provider charges; 2) unnecessary or inappropriate treatments are eliminated because they add unnecessary costs to the treating doctor's treatment, thereby making him less competitive, and Diagnosticians have an incentive to exclude them from the treatment plan; and 3) the miscoding of treatments to maximize reimbursements is eliminated because codes are not needed for reimbursement with Ca$hback Coverage. As a result, there is no need for claims to be reviewed manually. With FAHPA, information is collected, checked, and payments are made all by computer—but not by mainframes. This system is so efficient that over 40,000 claims per hour can be processed on a single notebook computer—more claims than are produced each day by the city of Chicago.
FAHPA offers other benefits as well. There is online enrollment, and patient eligibility is confirmed in real time during each medical visit. For enrollees there are no claims to submit or other paperwork to complete. Providers also receive major benefits: only a minimal effort is needed for a treating doctor to prepare a treatment record, which the system automatically transmits to the claims processing center as his insurance claim. It is also stored with other patient records in his electronic filing system for future retrieval. Providers receive overnight reimbursement for the treatments they perform and only rarely will a claim be denied, unlike the current situation. Moreover, they receive no more calls from utilization review personnel, who, under the current system, frequently interrupt them while they are trying to practice medicine.
The RE·MEDI system produces a number of additional benefits. For example, it significantly reduces the amount of medical risk in the healthcare system, and this will cause medical malpractice insurance premiums to be lowered. It stimulates the discovery of cost-saving medical technologies as competing providers seek ways to lower their costs, but it also inhibits the "medical arms race," whereby hospital administrators acquire the latest and most sophisticated medical technology irrespective of its cost-effectiveness. RE·MEDI can also offer significant reductions in expenditures on prescription drugs, and it can make fraud extremely difficult to perpetrate. Additional benefits are discussed throughout this Web site.
The whole of the RE·MEDI system is considerably greater than the sum of its parts. Without Ca$hback Coverage, the incentive to use the information in The Doctor Shopper would certainly be weakened, thereby diminishing competition among providers. If The Doctor Shopper were eliminated, healthcare shoppers would be seriously handicapped in their search for superior healthcare values, and, again, competition among providers would be weakened. If the Diagnostic Centers were eliminated, the effectiveness of The Doctor Shopper would be significantly reduced: when, where and how would The Doctor Shopper be distributed to the patient? Moreover, the problem of unnecessary treatments would recur, and with it the return of utilization review. Claims would again require manual review, which would destroy the superior efficiency of FAHPA.
The four main concepts of the RE·MEDI system—Ca$hback Coverage, The Doctor Shopper, Diagnostic Centers, and FAHPA—are mutually reinforcing. Together they create a powerful system for driving down healthcare costs, while at the same time elevating the quality of healthcare delivered.