Healthcare Hullabaloo: Office Space

It’s an old joke – the three most important things about real estate are location, location and location. However, it is also a truth that is said in jest – in real estate, location means everything.

The same can be said about a little-understood sector of health care – physician administered drugs. This health care niche serves to illustrate how the health insurance industry wastes millions every year – all while claiming that they are doing their part ‘keeping health care affordable”.

Many chronic conditions require heavy duty drug therapy to combat them – illnesses like cancer, aids, and severe infections. These powerful drugs are so potent that they can only be administered under the close supervision of a physician. This is the world of physician administered drugs.

There are two locations where patients can receive this therapy – in a doctor’s office or in a hospital. Because the US hospital is the most expensive place on this blue marble to receive health care, it would be logical to assume that the physician’s office is the more cost effective location – and it is – sort of.

The devil is in the details.

The problem is that our health insurance system actually encourages patients – and sometimes even forces them – to use the more expensive alternative.

Even though receiving these drugs at a hospital costs nearly twice as much as receiving them at a Doctor’s office, most patients decide to use the more expensive alternative. Here’s why:

Let’s say that the drug a patient needs to receive costs $1,200 per treatment when delivered at a physician’s office and $2,000 per treatment wheh they receive it at a hospital. This is a no-brainer – the patient would go to the physician’s office for treatment, wouldn’t they?

As much as it pains me to say it – I wouldn’t. And, if you are covered by any type of health insurance, you probably wouldn’t either.

Most health care plans have a fixed copay of around $50 for an outpatient hospital visit. The same plans often demand a 20% copay for receiving physician administered drugs at a doctor’s office. So, the out of pocket cost is $50 when a patient gets treated at the hospital or $240 when they get treated at a doctor’s office. When you then factor in the fact that many of these drug therapies require the patient to receive treatments three times a week, it quickly becomes cost prohibitive for a patient not to go to the more expensive hospital for their treatments.

Regular readers of this blog are familiar with the concept of Star Trek economics, and they realize that in the not-so-long run the hospital treatments will end up costing everyone more money, but who can blame anyone who opts for the lower out of pocket expense.

http://healthcarehullabalo.blogspot.com/2010/02/star-trek-economics.html

In the short term, at least, the hospital option seems to be the most logical.

The point of this discussion is simple – a small change in the benefit policies of your health insurance carrier could save us all hundreds of millions annually, but this simple change isn’t happening.

Still, our health insurance industry still tries to convince us that they are doing their part to ‘make health care affordable”.

Affordable. Yeah, that’s the ticket!

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