Diving back into the Deep End...

Well, with school back in session it is time to dive back into the deep end. By that, I mean the complex structure of policy and care that is the US healthcare system. While my internship was tremendously insightful in the mechanisms of a start-up biotechnology company seeking to release its major product into the marketplace, my day-to-day experience centered on how to navigate through the current system than how to change it.

• For example, the centers for Medicare and Medicaid Services (CMS) - the governing body for the most influential healthcare payer -  has proposed a new payment system for inpatient services at a hospital. This new system is a modification of the Diagnosis Related Groups (DRGs) called Medicare Severity DRGs (MS-DRGs). This new system hopes to restructure the payments for procedures performed by hospitals according to the severity of the patient's condition. Therefore, a hospital treating a patient undergoing a spinal fusion who is otherwise healthy will receive a lower reimbursement than a patient undergoing the same spinal fusion who has other complications or comorbidities (CCs) such as diabetes. This process hopes to capture the higher technical and resource involvement with more complicated procedures. Because most people do not fall into a CC (or a major complications or comorbidities - MCC - an even higher reimbursement rate) group, Medicare seeks to cut its costs by better classifying the patient's condition.

Alright, enough of a reimbursement lesson. The reason I mention this change is that it has major implications on the reimbursement of products and procedures used in hospitals. The company I interned at this summer must clearly understand these changes in formulating the pricing point of their new product (eventhough the Medicare population only forms about 20% of their payer base - private payers set their rates against Medicare). Therefore, I spent most of the summer wading through the changes to the DRG system to understand its impact on the company and its chief competitor (and this is only one of several reimbursement plans that are constantly in flux affecting biotech companies; others include physician fee schedules, outpatient reimbursement, and every private insurance company).

While I spent the summer understanding the changes, never did I really spend time to question the merits of the change and its overall impact on the system. If one biotech company is struggling with understanding the impact, so must hospitals (who will be the direct "beneficiaries" of these changes), providers, billers, and all payers (all of whom must relearn how to classify and pay for procedures).

However, now that I am back at school, we examine policy issues at a critical level. This enables us to understand how the system works, but also understand how the private sector might try to implement changes. While I do not mean to imply that neither policy debates do not occur in business nor the private sector can cause changes, companies(especially small ones) and providers must primarily react to policy changes and examine their effect on the company rather than take a proactive approach to examine the effect on the entire system(counterexamples include Intel and GE). However, policy debates and their  implications are standard in the HC MBA program. In my next post I'll cite an example of policy debates in the health care IT class...