hello this is Dr Eric Bricker and thank you for watching a healthcare Z today's topic is the payer the payer provider combination explained so what is a payer a payer is with what is historically thought of as a health insurance company which collects premium and takes on risk is actually combined with the actual provision of care it's got the hospitals it's got the doctors it's got the nurses it's got the clinics Etc this is not a new model what is the oldest payer in America or arguably the largest payer in America it's Kaiser which is headquartered in Oakland California it was started in 1945 it has TW over 12 million members it's got 40 hospitals that it runs it's got 618 clinics it's an insurance company it charges premium to employers it collects premium from the government for Medicare Advantage it collects premium it takes on risks and it has gobs and gobs of providers that actually provide care okay payers are not new but historically Kaiser was kind of the out there on its own as a pay payer but more and more folks within Healthcare are becoming payers okay so Hospital Systems themselves have become payers not a lot but a handful okay the University of Pittsburgh medical center upm m c they're a payer they sell in Insurance in Western Pennsylvania they collect premium they take on risk you PMC provides care likewise the Inner Mountain Health System which is mostly in Utah but it's a little bit in Colorado and Nevada as well okay they've got their Inner Mountain hospitals and doctors Etc they have a health insurance company called Select Health that collects premium and takes on risk they're a payer as well however the vast majority of Hospital hital in America are not payers however the majority of major health insurance carriers in America are becoming payers the movement for the payers to become providers is huge it's much bigger than the effort of providers becoming payers let's go through these payers these health insurance companies becoming providers now of course the granddaddy of them all is United Healthcare has its provider arm which is optim I've made multiple videos about optim I will leave a link to those videos in the show notes that's been around for a while really ever since the Affordable Care Act in 2010 that's kind of when Optum got started and then it's just balloon it's essentially half of all of United is now opum Etna had bought Oak Street Health Oak Street is a provider okay okay siga made a $2.5 billion in Village MD which is a bunch of clinics under their sort of their equivalent sign is equivalent of optimum their quote unquote provider arm is called ever North okay next we have Anthem which is the insurance arm of Elance right so the parent company is called Elance and then anthem's the health insurance company and it has it's sort of equivalent of opum it's provider if you will that's called Caroline now it was just in the news that Caroline just made two more Acquisitions or a partnership with a private Equity Firm for a health navigation firm called a PRI and then a huge Medical Group in Florida called Millennium that has over 150 Clinic locations and they expect it to have like four or five billion of Revenue in the future so this is a huge Movement by elevance and Anthem into the pav space okay so that then begs the question why why in the world are these carriers becoming payers and here is why it's because mostly because of Medicare Advantage as you know I'll leave a link in the show notes to the massive explosion of Medicare Advantage it's over half of all Medicare beneficiaries now have a Medicare Advantage plan where people get their Medicare through a health insurance company now and let's say that and it and it depends upon how sick you are yada yada y but let's just say as an example the insurance company gets a check for about $188,000 per beneficiary per year okay where there was a rule as part of the ACA which says that the insurance company had to spend 85% of the money on health care and could only keep 15% of the money in the form of profit and administration and blah blah blah okay that means that um United and Etna and Signa and Anthem oh by the way even smaller Blues plants like blue KC they've got spe care in the Kansas City area so you don't have to be a huge carrier even smaller carriers like BL cross at Kansas City they're doing this too okay so that means that the insurance company had to pay $15,300 in other words 85% of the premium that they collected out to doctors and hospitals and then they could keep $2,700 for administration of profit aha but then they're like we've got a fantastic idea we can use this accounting approach called interc company eliminations and we'll create these subsidiary companies that we also own like opum and Oak Street and Village MD and carolon and we will pay the $15,300 to the provider to ourselves because we're the provider so all these big insurance companies pay themselves $15,300 and they pay it to like a Primary Care Group that goes at full risk for that full $15,300 and then if the person has to be admitted to the hospital or has to have surgery or whatever then the primary group essentially is paying out from that $15,300 to like your traditional Hospital etc etc guess what though uh one of these primary care groups guess what they can provide care for they can actually only need to spend about 60% in other words [Music] $9,809 300 on traditional like hospital care and Specialists and blah blah blah that means that the primary care groups that are within opum and Oak Street and Village MD and carolon etc etc that means they get to keep $6 6,120 that is completely separate from that mlr um 85% that needs to be spent on uh care so what the insurance company then gets to keep is not only the 2,700 off the original 18,000 but the insurance company also gets to keep the $6,150 from what wasn't paid from the Primary Care Group so you add the 2,700 plus the $ 6, $120 that gets you $8 $1,820 which is almost half of the full premium that the government gave them so when the government is paying out $118,000 per beneficiary for a Medicare Advantage member the insurance company is keeping half so what's happening to the doctors in the hospitals the traditional providers of care okay they're only they used to get 15,300 they used to get 85% now they're only getting $9,100 in other words a 40% decrease in what that they were previously getting so I've used this expression in previous videos this is how health insurance companies today are eating the lunch of traditional Hospital Systems okay so the final point that I will leave with you is that this trend is just warming up and you might hear in the news well the government's going to like decrease this 18,000 like to a certain extent to the insurance company look at that look at how much they're like believe me they know that the government is going to you know turn the screws down on this 18,000 they've got lobbyists and people to try to keep that 18,000 as high as humanly possible okay believe me they've thought about that possibility they don't care they're still going to make tons of money through interc company eliminations and the actual quote unquote provision of of care themselves by paying themselves as the provider so will hospitals eventually become payers themselves will hospitals eventually catch on to this I don't know but I'll tell you what they're doing right now the hospital is only getting n Grand instead of 15.3 Grand you know what they're doing they're going to the carrier and they're saying well you're commercially insured folks on your self-funded plans they better pay us more and so the employers of America are essentially making up the difference for the hospital so it's only going to get worse for the employers that's a whole another subject for another day but it's super important for all of us to understand what a payer is and how it's affective the healthcare system in America and thank you for watching a healthcare Z
