Jeff Hathaway, PT, DPT

The greatest problem in healthcare ? Hospitals, even market dominant hospitals, won’t walk away from the big ins companies that underpay, late pay, clawback, deny claims, waste their time in denial appeals, and require them to pay up to 8 pct of revenue to RCM consultants so they think they are getting what they are owed. Here is the crazy part. The ins companies ARE NOT THE ONES ACTUALLY PAYING THEM on commercial plans. Employers are. 60 pct of employees get their insurance from their self insured employers. The ins carrier is just a middleman that pretends to add value. All the clinical “value” they add, the hospital could do better, for both medical and pharmacy. Most hospitals have no idea whether they make or lose money with their big ins contracts. They are just afraid to lose patient flow. But. They actually know which companies their patients are coming from. They actually know or can find out, how much more the employers are paying the ins company, than what the ins company pays them (the spread, just like in pharmacy ) And to make it worse, those ins companies negotiate their rates as a discount from the “charge master “, which is like WAC in pharmacy. Just a made up list price. Because the hospitals are afraid or too uninformed to walk away from these deals, the hospitals use the inflated charge master prices as the basis to charge uninsured , or out of network , or insured but not covered for their care, at charge master rates. Which of course the patients can’t afford. And it crushes their finances or they go without care I’ll summarize. Employers , and their members , are paying far more than they should to companies they don’t like working with , that effectively rip off both the employer and hospital , and they could eliminate the middlemen if they went directly to to the employer. It’s so simple. Sell your services to the employers that use your services at a price that is less than what nine companies charge for your services and you will make MORE money and employers will save a ton And if they did this, they could dump the chargemaster and reduce the price they bill patients when they are at their most vulnerable But they don’t want to change. And don’t get me started on how much hospitals over pay for drugs and devices because of the GPO deals they do. It’s just stupid. Which in turn leads to the hospital being a bad actor with 340b , facilities fees and afraid of their doctors who demand they pay more for things like glue and implants so they can get vacations. If you are a politician and reading this. Now you know why this is so fucked up and it’s not about capping rates. The insurance companies are smarter than you. They will just move the money to other places. It’s not about giving money to patients. You can’t shop for care from hospitals that are too gutless to walk away from the ins companies that distort all of healthcare economics Go to your local hospitals , particularly those at risk of closing and ask for their profitability by carrier. Fully burdened. Ask how much they spend on RCM and consultants. In many cases they could survive if they ran like a real business and hired execs that could do the work rather than just manage consultants. They could work out contracts in their communities rather than with ins companies and benefit everyone. The middlemen are not needed. Get rid of them

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Private equity firms bought 500 hospitals. Death rates in their emergency rooms went up 13%. They fired 12% of the staff. Then they paid themselves billions in dividends. A Harvard study just confirmed what doctors already knew: people are dying so investors can hit quarterly targets. Exactly what happens. A PE firm buys a hospital using debt. The debt gets placed on the hospital's balance sheet, not the firm's. Now the hospital owes hundreds of millions it never borrowed. To service that debt, the hospital cuts costs. Costs mean nurses. The numbers from the Harvard/University of Chicago study are horrifying. After PE acquisition, emergency department salary spending dropped 18.2%. ICU salary spending dropped 15.9%. Hospital-wide employees were cut 11.6%. Emergency department deaths rose 13%, seven additional deaths per 10,000 visits. A separate study found patients undergoing surgery at PE-acquired hospitals had 17% higher odds of dying within 90 days. Steward Health Care, owned by Cerberus Capital, filed bankruptcy with $9 billion in debt after closing hospitals across Massachusetts. The CEO lived on a $40 million yacht while emergency rooms went dark. Eight hospitals serving 2 million people nearly disappeared because a PE fund extracted more cash than the system could survive. The private equity industry has poured over $1 trillion into healthcare. They operate a quarter of ERs nationwide. This isn't going away. The investing angle nobody talks about. Non-PE hospital operators like HCA Healthcare (HCA) and Tenet (THC) are the direct beneficiaries. Every time a PE hospital closes or deteriorates, patients flow to the nearest competitor. HCA has returned 1,200% since 2011. Patient volume from PE closures is a structural tailwind nobody's pricing in. Medical staffing firms (AMN Healthcare, Cross Country) charge premium rates specifically because PE hospitals cut staff. The staffing shortage IS the business model for these companies. The disruption play: outpatient surgical centers (SCA Health, now part of UnitedHealth) are pulling profitable procedures out of hospitals entirely. PE-owned hospitals lose their highest-margin surgeries to outpatient, and the death spiral accelerates. Pull up tradevision and monitor healthcare M&A alerts, hospital closure filings, and patient volume migration data. When a PE-owned hospital announces "restructuring," the patient volume shift to competitors like HCA starts within 30 days. That 30-day window is when the competitor's earnings revisions haven't updated yet. Free to try. (a private equity firm bought your local hospital. borrowed $500 million in the hospital's name. fired 12% of the nurses. emergency room deaths rose 13%. then they paid themselves dividends. nobody went to prison. they're currently buying another hospital.)

Short answer: because wholesalers sit in the “plumbing layer” of healthcare, and plumbing is invisible until it bursts. Longer answer below—your instincts here are sharp, and most debates skip exactly the layer you’re pointing at. It’s not bad until things start smelling like sh*t, and I think we are there now.