Medical cost conundrums could see daylight

June 4, 2012
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Rich DeVos reminded us the other day that community hospitals were not started by businesses, they were started by the people in the communities, and the communities — not businesses — still really own the hospitals.

DeVos believes and encouraged everyone to take ownership in their community health care system. One way people might do this is to show up at the annual public meetings sponsored by Spectrum Health in response to the community commitments it made to the court years ago to win support for the hospitals merger that created Spectrum Health. This year two public meetings are scheduled.

On Wednesday, June 6, there will be a hearing on Spectrum’s budget at 6 p.m. in room 1710 of Butterworth Hospital, to give the public a chance to review Spectrum’s budget and ask questions about finances. The health system’s profit margins, free or reduced-cost care policies, why they charge what they do for services and vendor selection processes all are subject to public comment or question.

On June 13 at 6 p.m. in room 114 of the Healthier Communities offices at 665 Seward NW, the public can review and comment on the use of the $6 million annual commitment fund Spectrum pledged to the community.

The word on the street is Spectrum Health uses an Illinois billing service instead of local firms. If so, why?

And here are some other questions that might deserve some sunlight.

Does Priority Health HMO (owned by Spectrum) really use a Detroit-area billing service rather than a West Michigan service?

Why add a Washington, D.C., based attorney to the board if Spectrum is a West Michigan system?

Does Spectrum really charge more for CT and MRI scans than what they cost?

Who is eligible for reduced cost care?

Then there is the transparency issue regarding the actual cost of American health care, which Mike LaPenna describes as a “raging topic” these days because there isn’t much transparency.

LaPenna is one of Michigan’s top experts in health care systems business development and founder of The La Penna Group Inc., a Grand Rapids-based consulting firm. But LaPenna Group doesn’t just work with hospitals; many of its clients are corporations that provide health insurance benefits to their employees — and they are self-insured corporations, which means that company “has total 100 percent exposure to health care costs.”

A few years ago, a corporation hired LaPenna to study actual health care costs in nine different regions in the country, because this Fortune 100 company was going to build a major manufacturing plant in one of them. Two of those potential plant sites were in Michigan — both in West Michigan, in fact.

“Those were ranked at the bottom,” said LaPenna, meaning they were “at the highest cost” of health care of the nine.

When it comes to health care, “Kalamazoo is a much more expensive environment than Grand Rapids,” he said, or at least it was four or five years ago. He does not think that has changed.

So does that mean Grand Rapids is a bargain? No.

“I think the pricing is outrageous in Grand Rapids, Michigan, from what I’ve seen,” said LaPenna.

Spectrum, said LaPenna, “is a higher priced institution than others in the area.”

He bases that on Medicare reimbursement data for the last two years of an individual’s life, from 2003 through 2007, compiled by the Dartmouth Atlas of Health Care. The national average was $30,455. Saint Mary’s Health Care was at $23,871, Metro Health at $24,873, and Spectrum at $27,741. Bronson, in Kalamazoo, was $29,990.

Mercy Hospital in Portland, Maine, the largest one there, was at $22,361.

LaPenna said a hospital might claim it charges more because it provides more than other hospitals can, but there is also a Hospital Care Intensity Index, with 1.00 being the national average. Spectrum Health, in the 2003-2007 time frame, was 0.80.

“You can get some things done at the University of Michigan, or at major centers like the Cleveland Clinic or at Johns Hopkins, cheaper than you can have them done in West Michigan,” said LaPenna.

“I think that our transparency is also embarrassing,” he said. He is referring to how much things cost at the hospitals throughout the country.

“I’ve got an app on my phone so I can find cheap regular gas, because that’s important to me. But I don’t know how to find out that colonoscopy price. Is that ridiculous, or what?” he said.

Consumers have a right to know how much something is going to cost at the hospital, but LaPenna said that is not something consumers can easily do — if at all.

Some hospitals are becoming more transparent, putting cost estimates online regarding their specific procedures (Baptist Memorial Healthcare System in Tennessee, for example). And as LaPenna pointed out in one of his recent newsletters, Healthcare Blue Book can provide an estimate, based on insurance claims for your area code.

Spectrum does have a cost estimator for various procedures, but that doesn’t include the fees that will be charged by the surgeon, anesthesiologist or radiologist.

Why not? There’s another good question to ask June 6.

A software hotspot

How many shops are there in Grand Rapids cranking out new software every day?

Software guru Keith Brophy, CEO of Ideomed, estimates there are “about 75 software companies in town: 25 product companies; 25 software development companies and 25 dotcom companies.”

“I don’t have any hard stats, but over the years I have been involved in various boards, etc., where we have talked about loose estimates … If you add on ‘consultant groups’ or ‘one person dotcoms,’ then I think the number goes up to over 150 in this area,” he said.

“Where we differ from some of the high tech metro areas is that none of ours are very large, but we definitely have a strong … under-the-radar fabric of them here,” he added.

Brophy is the CEO of Ideomed, launched about a year and a half ago by Spectrum Health Innovations. Ideomed has developed a mobile device app called Abriiz (rhymes with “a breeze”), to help remind pediatric asthma patients to take their meds on schedule. It works in tandem with an Internet web page and specially designed inhalers to send reminders to the kid via his or her smartphone.

In late April, Ideomed won a silver Edison at the 2012 Edison Awards in New York — and that’s a ton of international high visibility for any new company with a successful idea.

Brophy is already well-known in Michigan as an electronics technology entrepreneur. He was one of the original key executives at NuSoft Solutions, a software and Web site developer and Microsoft consulting firm based in Troy that had about 75 employees in its Grand Rapids office.

Feels reel good

GR Whitewater founder Chip Richards shared a story with the DDA recently about a fishing expedition he and cohort Chris Muller took on the Grand River earlier this year that might serve as a good omen for what they are trying to accomplish relative to the expensive cleaning of the river and restoring the rapids for kayakers and other water enthusiasts. Richards said it wasn’t a particularly good outing for catching fish, but he noted Muller reeled in a $50 bill.

“Ladies and gentlemen,” he said, “the money is in the river.”

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