A CON Job Gone Wrong?

Shouldice Hospital in Canada is well-known for its systematic approach to conducting efficient, effective repair for a specific type of hernia.  It is low-cost, takes under an hour, and less than 1% of those who undergo this procedure at Shouldice experience a recurrence.  Shouldice has been the focus of many a case study for young future administrators and doctors.

Yet here in the United States, we continue to view the general hospital approach as the most effective approach to provide healthcare.  And our healthcare costs continue to rise.

Recently I attended a panel discussion at Northeastern University which featured three speakers. The speakers were asked to share their thoughts on the opportunities for entrepreneurs post ACA.  At the end of the panel discussion, I asked a question about the likelihood of a Shouldice-like model of speciality providers becoming more prominent in the United States for more common “routine” procedures.

I was quickly put in my place by one of the speakers who stated that it was not likely at all because we are moving towards a government system with a continuing focus on general hospitals and not towards any sort of specialty hospitals (paraphrasing here).

He is right. We are on this road.

Let me ask you this – if you’re driving on a road which is cluttered with traffic, do you ever look at the roads around you to find a faster, more efficient alternative to your current route?  Maybe not – maybe you follow the map you have especially if you don’t know where you’re going.

But if you’re stuck in traffic or the map is leading you in circles and has no end destination, do the other roads warrant a look?

Let’s play pretend for a moment.

Pretend that higher deductible health plans are the norm.  Pretend that health provider cost and quality data is readily available a the click of a mouse.  Pretend that the average consumer of healthcare is more savvy and researches the heck out of anything he or she is having done (like the research done on Consumer Reports or JD Power when purchasing something like a car).  Pretend that HSAs become widely more popular – and why wouldn’t they?  It’s your money, it’s pre-tax dollars, and it’s portable!

Continuing on this path of make-believe, let’s assume that you are in need of a medical procedure. Perhaps its hernia surgery or perhaps its a Coronary Artery Bypass Graft (CABG).  Both have become fairly “routine” procedures in modern medicine.  So you begin your research to find a place that can provide this for you at a reasonable cost. (Remember, you have a high deductible health plan, co-insurance based and with a high out-of-pocket maximum, thus you have become a savvy consumer).

You find a small, private health provider – a small hospital perhaps.  It’s not a covered provider under your insurance so the procedure won’t be covered.

However, your research shows that it can provide your needed procedure a fraction of the cost.  Your research shows you that they do nothing but this procedure – dozens per day – so it’s like an assembly line – efficient and effective.  Your research also shows you that the results are stellar – low rates of complication and infection, high rates of success…and you’re out the door in no time and back to your life.   Lastly, your research shows that the physicians who perform the procedure are board-certified, top of their class, well-respected and with no history of malpractice.

Oh, I forgot to mention…in this make-believe scenario your out-of-pocket HSA cost for this non-covered provider’s procedure is less than the out-of-pocket expenses at an in-network, well-known general hospital due to your high deductible, co-insurance based health plan.

The decision becomes a no-brainer, right?

Of course, these entities would not replace what we have today. In fact, a push towards primary care and away from specialists is what some feel this market needs in order to better manage the whole patient.   I don’t disagree. But perhaps these Shouldice-like entities will have their place as cost-effective, high quality alternatives for the more commonly performed procedures performed in general hospitals.

So why is it that we don’t have a bunch of Shouldice-like entities in the United States for some of our more routine procedures? Why is it that we have resorted to medical tourism – leaving the confines of our country to travel across the globe to find high quality, low-cost health care?  (Ok, so maybe the medical tourism note is a bit unfair as I know some of the procedures done overseas are not common or routine – work with me on this).

I’m no expert, but I can point to one of the reasons:

Certification of Need programs – aka CON programs.

If you’re not familiar with CON programs, here’s a little bit of information about them.  In short, they exist to regulate cost and duplication of services in the states which have CON programs. Currently, 36 states have these programs in place.

One of the knocks against them is that they limit competition.  Perhaps a Shouldice-like provider wants to set up shop around the corner from the large, well-known (and politically connected) general hospital.  Those in charge of reviewing requirements and approving/denying decide that the general hospital already provides the service proposed and denies the Shouldice-like entity.

I do recognize that a new general hospital with empty beds will need to fill these beds…and that this will be at a cost…the beds may be filled with people who are not necessarily in need of a hospital stay, but because there is room, the bed will become filled.

As such, CON programs do have their place. And I suppose that CON programs aren’t intended to reduce competition.  In theory the programs are based on the premise that healthcare is not like other consumer goods in our country. Healthcare does not always respond the same to market forces as other industries due to the fact that consumers follow doctors orders (albeit blindly sometimes) and do not shop for “deals”. Therefore healthcare requires certain approvals and regulations like CON programs.

But isn’t all this changing?  Don’t we have more consumer-directed health plans with tools (albeit developing tools) that can give you provider data, both cost and quality?  Aren’t we shifting towards a more transparent system whereby hospitals publish rates for basic procedures?  

In fact, there is a company located in San Francisco whose mission is transparency in healthcare based on cost, quality and convenience.  You can learn more about this company on David E. Williams’ Health Business Blog. With all of this in the works, isn’t my make-believe scenario above looking more and more like reality?

And if these CON programs are supposed to control costs, why are we still experiencing double-digit premium increases?  Why are we still spending more for our healthcare than other countries, but without the higher quality results one might expect?

Maybe the CON job isn’t working. Maybe we need a new map.

Now if you’ll excuse me, I have to hop on a plane to China. I’m having my tonsils removed over there.

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2 thoughts on “A CON Job Gone Wrong?

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