Tuesday, May 06, 2008

A Reformer's Manifesto

In the previous post we took a look at problems in the health care system from an industry perspective. It is a system in need of reform, but what is the solution?

I argue that the answer is good old fashioned capitalism or rather consumerism. We can change the health care experience by becoming more powerful buyers.

Doctors are always happy to claim certification by a medical board. When we choose a doctor we need to ask for disciplinary records as well. Last week the New Jersey Superior Court opened up malpractice settlements - one of the most progressive state actions taken so far to empower health care consumers. We should ask for the same in all states.

Health Grades (HGRD: Nasdaq) is trying to lead the way with on-line hospital quality rating and physician profiles. Crystal Equity Research has a buy recommendation on HGRD. The Company is profitable even if sales have not grown as fast as some on Wall Street had expected. Visits to the Health Grades web site are growing rapidly with each passing month since the Internet has become the primary source for health care information for consumers.

We should also ask whether the physician or hospital has adopted electronic patient records. Two years ago, Congress mandated that physicians and hospitals fully implement electronic medical records by 2014. According to the Center for Disease Control, at the current rate of adoption, the mandate will not be achieved until the next century.

Yet a recent survey of medical practitioners indicated that they believe adoption of electronic records today could make a measurable improvement in the health of patients like you and me within the next ten years. If your doctor can program the GPS in his/her Mercedes but still has not adopted an EMR system, you should find another doctor.

A strong commitment to modernization is part of why we have a Speculative Buy rating on shares of The Quantum Group (QGP: AMEX). Quantum is a management service organization in Florida dedicated to serving as an intermediary between HMOs and physicians. The company has several patent applications pending for technologies to automate business processes in the doctor office such as prescriptions, test results and patient records.

My third and final action for us as self-appointed health care system reformers is to eliminate employers as our health care guardians. Economies of scale and the availability of good actuarial information made group health insurance coverage and employer payment an intelligent arrangement fifty years ago. Today, the availability of vast data on the incidence of disease and the ability to collect insurance premiums from individuals through automatic debit or e-commerce websites, make unnecessary the intrusion of employers in what is arguably among of the most critical purchases we ever make.

Most of you probably like having your employer pay your insurance premium. Unfortunately, like any other product, health insurance plans are developed to serve the needs of the payers. When the employer is part of the equation, it will be the company’s needs that are paramount - not the employee. Since the health insurance premium is only a small portion of the total pay package for an employee, the cost of switching jobs for the sake of health insurance coverage is very high - your employer is not worried about losing you for the sake of a health plan.

Every health care provider who takes your insurance card knows an employer-insured patient is at their mercy - only certain doctors and certain hospitals are on that insurance company’s roster and the employee is not changing plans any time soon. The boss is paying the bill - so if the care is not all that good today, so what - the doctor is not worried about losing that patient for the sake of a co-pay.

eHealth, Inc. (EHTH: Nasdaq) is the first insurance brokerage to offer health care insurance to individuals and families exclusively through an e-commerce platform. The process eliminates costly paper-based processes and puts consumers in control of the coverage choice. So far retention rates are strong, suggesting consumers are finding the information they need to make choices and having as good an experience as they have had through employer-based health plans.

This is my reform manifesto for the health care industry....with a few stock ideas as a bonus!



Neither the author of the Small Cap Copy web log, Crystal Equity Research nor its affiliates have a beneficial interest in the companies mentioned herein. Crystal Equity Research has Buy ratings on HGRD and EHTH and a Speculative Buy rating on QGP shares.

1 comment:

John medical records said...

really nice to know about the health. I think that EPR software also allows comprehensive reporting so that the cost and effectiveness of the patient care, and other factors can be assessed.