Encore! EP363: How to Cut Healthcare Admin Burden in Half, With David Scheinker, PhD

For a full transcript of this episode, click here.

I’m gonna encore this episode with David Scheinker, PhD, for several reasons; but here’s a big one: Why are we as an industry not doing what David Scheinker suggests in this episode?

Why are we not doing, I don’t know, kinds of logical things to reduce admin burden in this country when everyone agrees admin burden is a problem?

But let me back up for a moment for context. Two things happened since this show originally aired. One is that I was invited to a fireside chat by the Advisory Board to talk with Abby Burns, one of the amazing hosts over at Radio Advisory; and we talked about value in the healthcare industry. And if you define value as benefit divided by costs, and you can cut costs—like cut admin burden costs in half—then you have created some really nice communal value, which we talked about at length during that aforementioned fireside chat.

Here’s the other thing that happened since this show originally aired. I read the book by Mike Leavitt, mainly because Steve Schutzer, MD, kept talking about it. The title of the book is Finding Allies, Building Alliances. Maybe I will do a book report about this at some point, but let me share a couple of key quotes just to get the party started here.

Mike Leavitt wrote, “A diverse alliance, well led and well managed, can bring resources to bear on a problem that no organization can match—even the largest of organizations. The synergy of resources—from financial to intellectual—can deal effectively with a wide range of issues confounding organizations today.”

I found that very interesting. Here’s the second quote, which deals with what the top reason is that such diverse alliances may wish to hook up. “[It’s] a common pain: A shared problem that motivates people and groups to work together in ways that could otherwise seem counterintuitive.” Hmm ... so, back to administrative burden.

Let’s review the facts that David Scheinker, PhD, shares in the interview that follows. He says any given transaction will cost provider organizations 14% of the total transaction costs to manage to get paid. Yes, it costs 14% of a transaction merely to get paid for the transaction. This is a big reason why both Peter Hayes, in the episode with him (EP424), and also Marshall Allen (EP425) talk about for why cash prices can be a whole lot less than going through insurance prices because you can skip a lot of insurance burden.

Now, on the payer side, add to that 14% an additional 5% to 15% to pay said transaction. That 30% of healthcare is waste stat that keeps getting tossed around. Listen to the show with Will Shrank, MD (EP413) for more on that. But, yeah ... here’s 20% to 30% of every transaction that is waste. And we haven’t even gotten into redundant care or inappropriate back surgery yet. Our industry spends up to 30% of our money just trying to get paid and pay.

Here’s a case study for you. You know who has already solved for this whole “it’s really hard to get paid and pay” dilemma? Derivative traders. It used to cost derivative traders $100,000 to do a contract, any given contract. And they worked together and got this down to $5000 by doing some of the stuff that David Scheinker talks about in the show. And, I don’t know, I feel like the healthcare industry could also do this, too, if they wanted to. But there are a whole bunch of reasons why our industry cannot seem to get together and be as ruthlessly practical as derivative traders—or banks, who have figured out how to work together to process credit cards to reduce their own common pain.

Here are but a few of the reasons, potentially, why the healthcare industry doesn’t get together to reduce administrative burden in some of the ways that Dr. Scheinker talks about.

1. Some organizations actually make a lot of money off of that transactional waste. As but one example—and not to just pick on one, but we don’t have all day—how about some RCM (revenue cycle management) companies who may or may not be owned by the same vertically integrated stacks as the payers themselves? As I have said any number ...