Latest / Becker’s Healthcare Podcast / The Economics Behind Patient Care with Dr. Morgan Lorio

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The Economics Behind Patient Care with Dr. Morgan Lorio · Becker’s Healthcare Podcast

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  - The strategic agenda facing hospital and health system
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  - 400 speakers across four days of sessions that
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  - Not in the abstract, but against the real
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  - decisions they'll face heading into the next year.
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  - It's the kind of event you leave with
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  - a clear sense of where you stand and
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  - what comes next.
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  - So join us November second through the fifth
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  - at the Hyatt Regency in Chicago,
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  - and come ready to do the hard thinking.
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  - Register on our events page at beckershospitalreview.com
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  - by clicking on the events tab in the
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  - upper right.
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  - Welcome to the Becker's Healthcare podcast. I'm Laura
• 1:00
  - Dierda with Becker's Healthcare.
• 1:02
  - Today, I'm joined by doctor Morgan L'Oreal, a
• 1:04
  - retired orthopedic spine surgeon, past president of the
• 1:07
  - International Society for the Advancement of Spine Surgery,
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  - former chair of its coding and reimbursement task
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  - force, and a member of the advisory board
• 1:14
  - of the American Academy of Interventional Spine and
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  - Neuromodulation.
• 1:19
  - Doctor Laurier recently published commentary in the Washington
• 1:21
  - Examiner
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  - examining a striking divergence in the American health
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  - care economics.
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  - Insurance premiums have risen dramatically. Inflation adjusted physician
• 1:31
  - reimbursement has declined. Administrative burdens continue to grow,
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  - and some of the nation's largest health care
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  - corporations have experienced extraordinary economic expansion.
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  - His article asks
• 1:43
  - deceptively
• 1:44
  - a simple question.
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  - Where did the money go? Doctor Loriaux, welcome
• 1:48
  - to the podcast.
• 1:50
  - Well, thank you, Laura. It's a pleasure to
• 1:51
  - be here. Absolutely. Now, Morgan, let's start with
• 1:55
  - that question in particular.
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  - What prompted you to ask where did the
• 1:58
  - money go? Well, Laura, I started with a
• 2:01
  - simple observation. You know, patients pay more.
• 2:04
  - Employers
• 2:05
  - pay more.
• 2:07
  - Taxpayers pay more. Yet physicians increasingly hear there
• 2:10
  - isn't enough money to maintain reimbursement.
• 2:12
  - Patients face increased cost sharing, and both physicians
• 2:15
  - and hospitals
• 2:17
  - spend enormous resources navigating administrative requirements.
• 2:20
  - So rather than beginning with the ideology,
• 2:23
  - I thought we should begin with accounting.
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  - And for the for this talk, I'd like
• 2:27
  - to consider four numbers.
• 2:30
  - Employer
• 2:30
  - sponsored fell health insurance premiums
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  - were about $13,770
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  - in 2010.
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  - In twenty twenty
• 2:40
  - twenty five,
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  - they rose to $26,993.
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  - That's the first number.
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  - Then,
• 2:49
  - the second one is, adjusted for inflation in
• 2:52
  - practice costs, Medicare physician payments declined
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  - 33%
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  - from 2001
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  - through
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  - 2026.
• 3:02
  - The third one is physicians report dealing with
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  - an average of 43
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  - prior authorizations
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  - every week,
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  - consuming about twelve hours of physician
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  - and staff time.
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  - And then the the last set of numbers,
• 3:17
  - four and UnitedHealth
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  - Group's revenue increased from 94,000,000,000
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  - in 2010
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  - to nearly 448,000,000,000
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  - in 2025.
• 3:29
  - Think about it. Now revenue is not profit.
• 3:31
  - That distinction matters.
• 3:34
  - United has evolved into a vertically integrated health
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  - care enterprise
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  - participating in multiple parts of the health care
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  - economy.
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  - The point isn't that 448,000,000,000
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  - was somehow retained by an insurer.
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  - The question is broader.
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  - Follow the dollar
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  - through the entire enterprise,
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  - not merely through the insurance premium.
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  - None of these numbers proves
• 3:57
  - anybody did anything wrong. But put them together,
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  - and I think we're entitled to ask
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  - who
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  - captured the value.
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  - We know what health care cost,
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  - but do we know where the value went?
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  - But, Morgan, some physician compensation
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  - reports show doctors in a number of specialties
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  - earning more. How do you reconcile that with
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  - the declining reimbursement?
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  - Well, because
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  - compensation and reimbursement are not the same thing.
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  - A physician can earn more annually while he's
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  - being paid less per unit of work by
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  - seeing more patients performing more procedures
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  - or working longer hours.
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  - Doximity, for example,
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  - reported a 3.7 increase in average physician compensation
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  - in 2024,
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  - but describe that growth in the context
• 4:45
  - of consecutive years of reimbursement cuts,
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  - growing demand for care,
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  - physician shortages,
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  - and widespread physician overwork.
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  - At some point, we're measuring gerbils on a
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  - treadmill.
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  - How fast can you make that physician run
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  - to maintain the same economic position?
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  - That's what the numbers can dehumanize.
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  - Greater throughput isn't necessarily greater value.
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  - If maintaining physician income requires ever increasing clinical
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  - volume,
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  - The hidden currency
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  - being spent is physician capacity
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  - and ultimately time with the patient.
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  - Don't make a mistake
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  - a faster don't mistake rather a faster treadmill
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  - for a raise. I repeat, don't mistake
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  - a faster treadmill
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  - for a raise.
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  - And that's an interesting point. I think some
• 5:39
  - people will hear this and conclude that you're
• 5:41
  - blaming the insurers. Is that your argument?
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  - No. No. This shouldn't become another exercise in
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  - identifying a health care villain.
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  - Insurers, hospitals, physicians, pharmaceutical
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  - and device companies, government, all perform necessary functions,
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  - and this isn't simply an insurer story.
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  - American medicine itself has become increasingly institutionalized.
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  - Depending on how consolidation is defined,
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  - recent estimates put roughly half or arguably more
• 6:10
  - US physicians within hospitals or health system structures,
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  - while only about 42%
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  - remain in private practice in 2024,
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  - going down
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  - from 60%
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  - in 2012.
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  - The Government Accountability Office, GAO,
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  - itself confirms that estimates vary because different studies
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  - define and measure physician employment, ownership, and affiliation
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  - differently.
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  - The precise percentage, though, depends on what you
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  - count.
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  - But whichever
• 6:39
  - accepted measure you use,
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  - the direction of travel is
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  - unmistakable.
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  - So perhaps the deeper story isn't that money
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  - simply moved from physicians to insurers.
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  - The structure of American medicine itself changed.
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  - More of the health care dollars now flow
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  - through institutions
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  - surrounding the clinical encounter,
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  - hospital systems,
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  - insurers,
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  - pharmacy benefit managers or PBMs,
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  - and other vertically integrated health care organizations.
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  - Each sector
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  - can demonstrate its own economic rationale, but who
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  - measures the aggregate clinical consequence?
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  - That's the missing denominator.
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  - The denominator has to be the patient.
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  - A dollar saved administratively
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  - is not necessarily
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  - a dollar saved clinically.
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  - That's fascinating to hear. And I know you've
• 7:34
  - begun using
• 7:35
  - a term I think is really interesting, and
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  - that's clinical macroeconomics.
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  - What do you mean by that? Well, clinical
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  - macroeconomics is the study of how large scale
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  - financial reimbursement, regulatory, and organizational decisions affect
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  - clinical decision making, patient access,
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  - physician capacity,
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  - medical innovation, and patient outcomes.
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  - Its central premise is simple.
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  - The economic architecture of health care itself
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  - is indeed a clinical intervention.
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  - Change reimbursement, and you may change whether a
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  - physician continues providing a service.
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  - Change coverage,
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  - and you may determine whether a patient receives
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  - treatment
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  - at prior authorization,
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  - and you may change
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  - when the patient receives it.
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  - Consolidation
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  - can change referral patterns, competition, physician autonomy, and
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  - site of service.
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  - Those decisions may occur far from the bedside,
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  - but their consequences
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  - eventually reach it. I'll put another way.
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  - The health care dollar doesn't stop being clinical
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  - just because it leaves the examination room.
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  - Health care
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  - spending
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  - tells us where money was paid.
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  - It does not, by itself, tell us where
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  - clinical value is created.
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  - Clinical macroeconomics
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  - asks us to follow both.
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  - Let's make that tangible.
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  - I guess, could you talk a little bit
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  - about is prior authorization a good example?
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  - Well, it may be the perfect example.
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  - We usually ask whether prior authorization reduces unnecessary
• 9:11
  - utilization
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  - and saves money. That's that's legitimate.
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  - But
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  - if those authorizations
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  - consume roughly twelve hours of physician and staff
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  - time each week,
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  - we also need to ask, what does that
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  - time cost?
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  - What else could those people have been doing?
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  - Did authorization
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  - delay treatment?
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  - Did the delay affect outcomes?
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  - What did the infrastructure on both sides cost?
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  - And then we have to ask the real
• 9:40
  - question.
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  - What was the net clinical value produced?
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  - That suggests a principle.
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  - Every health care dollar diverted from direct patient
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  - care
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  - should demonstrate
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  - measurable
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  - clinical value
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  - equal to or greater than the care it
• 9:59
  - displaces.
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  - Administration can create value,
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  - but it should have to demonstrate value just
• 10:06
  - as clinical care increasingly does.
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  - We measure the cost of care. We should
• 10:12
  - also measure the cost of preventing care.
• 10:16
  - A denial is not merely an administrative act.
• 10:20
  - Denial
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  - is an economic decision
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  - with a clinical consequence.
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  - You've spent much of your career working with
• 10:27
  - reimbursement and medical innovation.
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  - Where does that fit
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  - overall
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  - when you think about innovation?
• 10:34
  - Well,
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  - this is one of the most underappreciated
• 10:37
  - consequences.
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  - We often speak as though innovation occurs
• 10:41
  - when somebody invents a better operation,
• 10:44
  - a device,
• 10:45
  - a diagnostic test, a pharmaceutical, or even a
• 10:48
  - treatment.
• 10:50
  - But
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  - invention isn't adoption.
• 10:53
  - For an innovation actually to help a patient,
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  - it has to survive
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  - evidence,
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  - regulatory approval,
• 11:03
  - coverage,
• 11:04
  - coding,
• 11:05
  - reimbursement,
• 11:07
  - adoption, and delivery.
• 11:09
  - You can have an FDA cleared or approved
• 11:11
  - technology supported by evidence,
• 11:14
  - but if coverage labels it investigational,
• 11:17
  - reimbursement
• 11:18
  - doesn't support it,
• 11:19
  - or administrative friction makes adoption impractical,
• 11:23
  - it may never meaningfully
• 11:25
  - reach patients.
• 11:27
  - So innovation that cannot traverse coverage
• 11:30
  - and reimbursement
• 11:31
  - is innovation a patient will never receive.
• 11:35
  - Health care economics, therefore, doesn't merely determine what
• 11:39
  - we pay for innovation.
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  - It determines
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  - whether innovation
• 11:44
  - functionally exists.
• 11:46
  - Not every new technology should be covered,
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  - but new and experimental are not synonyms.
• 11:52
  - The appropriate questions are evidence,
• 11:55
  - outcomes, and value.
• 11:57
  - So if you have the attention of policymakers
• 12:00
  - and health care executives, what would you have
• 12:01
  - them do?
• 12:03
  - Well, before changing anything, I would measure it.
• 12:06
  - That's why my medical I'm sorry. My, Washington
• 12:09
  - Examiner commentary call for an economic, audit of,
• 12:13
  - American health care. These principles have already moved
• 12:16
  - from commentary in the policy.
• 12:19
  - I authorized or rather authored a ISAS as
• 12:21
  - formal response to CMS on the proposed 2027
• 12:26
  - Medicare physician fee schedule, which was approved by
• 12:28
  - our board and cosigned by our our president,
• 12:31
  - Alex Alex Vaccaro.
• 12:34
  - The AMA subsequently,
• 12:36
  - axed,
• 12:37
  - ISAS
• 12:38
  - to join the broader federation effort opposing CMS's
• 12:42
  - proposed 50% modifier,
• 12:44
  - 25 reduction. We signed on because, it demonstrated
• 12:47
  - resource duplication
• 12:48
  - is not the same as presumed efficiency.
• 12:53
  - I I recommend following the health care dollar
• 12:55
  - from patients, employers, and taxpayers
• 12:58
  - through insurers,
• 12:59
  - PBMs,
• 13:00
  - hospital
• 13:01
  - health systems,
• 13:02
  - physician practices,
• 13:04
  - manufacturers,
• 13:05
  - administrative
• 13:06
  - intermediaries, and government,
• 13:08
  - and then
• 13:09
  - connect those financial flows to clinical consequences.
• 13:14
  - For every major health care expenditure, again, I
• 13:17
  - would ask four questions.
• 13:18
  - Where did the money go?
• 13:20
  - What clinical value did it create?
• 13:24
  - What clinical
• 13:25
  - capacity did it consume?
• 13:27
  - And did patients ultimately
• 13:30
  - benefit?
• 13:31
  - If administration
• 13:32
  - prevents unnecessary
• 13:34
  - or harmful care,
• 13:36
  - quantify the benefit.
• 13:38
  - If consolidation
• 13:39
  - improves outcomes
• 13:41
  - and lowers total costs, show it.
• 13:44
  - If an innovation costs more initially
• 13:47
  - but prevents downstream disability or hospitalization,
• 13:51
  - capture that value too.
• 13:53
  - This isn't an argument that physicians should receive
• 13:55
  - every health care dollar. It's an argument that
• 13:59
  - every participant
• 14:00
  - should ultimately demonstrate value
• 14:03
  - against the same denominator,
• 14:05
  - the patient.
• 14:06
  - The question isn't simply who captured the dollar.
• 14:10
  - It is, did the recipient
• 14:12
  - create clinical value
• 14:14
  - commensurate
• 14:15
  - with the resources it captured?
• 14:18
  - And if someone asks, Morgan, who do you
• 14:20
  - think is responsible?
• 14:23
  - Well, that's precisely why I want the audit.
• 14:26
  - I don't want to decide who captured the
• 14:28
  - value and then look for evidence.
• 14:30
  - I want to follow the money and let
• 14:32
  - the evidence tell us.
• 14:34
  - This isn't a Republican or Democratic question,
• 14:37
  - and it isn't a physician versus insured question.
• 14:40
  - It's an accounting question.
• 14:43
  - Finally, what is the one idea you'd like
• 14:45
  - health care leaders listening to to remember today?
• 14:48
  - Okay. Well, every economic decision in health care
• 14:51
  - eventually has the potential
• 14:53
  - to become a clinical decision.
• 14:56
  - That's why I keep coming back to this.
• 14:59
  - The economic architecture of health care is itself
• 15:01
  - a clinical intervention.
• 15:03
  - America is extraordinarily
• 15:05
  - good at measuring how much health care cost.
• 15:09
  - We need to become equally good
• 15:12
  - at measuring what clinical value those dollars actually
• 15:15
  - produce.
• 15:16
  - Health care does not ultimately exist to finance
• 15:20
  - health care.
• 15:22
  - Health care exists to care for patients.
• 15:27
  - Doctor L'Oreal, thank you for joining us and
• 15:29
  - sharing your perspective today.
• 15:31
  - Thank you, ma'am. Thanks for having me.