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Medicaid Factories

Some of you know what I’m referring to when I say ‘Medicaid factory’, others will think it’s some government sponsored program. Medicaid factories refers to assembly line care for Medicaid patients, treating & streeting them in order to maximize profits.

Classically, a physician will open 2-3 of these clinics in a particular neighborhood and see 60 patients a day. They hire PA’s and run the whole office as lean as possible. Only a few in-office tests are offered and billing is optimized for highest reimbursement.

The reason I decided to write this blog post is to demonstrate how a large business entity is treated and viewed compared to a solo physician. The same actions which are viewed as predatory healthcare when a solo doc engages in it is viewed as a community outreach when a large healthcare organization performs it.


Medicare & Medicaid

The same way some clinics will target the Medicaid population, some will target Medicare and others Tricare. Within these clinic strategies, there are even more pointed tactics such as starting a clinic as a fee-for-service and switching it over to a Medicare Advantage plan once enough Medicare patients have been accumulated.

Is this shady? Is this illegal? Is this in-line with the Medical Practice Act? Are these strategies the essence of why we went into medicine?

No…. but….

We all said the same thing about HMO’s when they first came on the scene. The priority of an HMO isn’t patient health but cost savings. The premise being that it’s better for patients and that they don’t know any better and the consumer protection responsibility lies with the healthcare industry.


Exploiting government payers

A great book on the topic of US healthcare is Reinventing American Health Care by E. J. Emanuel. It highlights how our healthcare transformed with the ACA and how healthcare is structured in the US.

Many of the larger medical groups chase after government dollars because the government has no choice but spend money on healthcare. Especially in the US where the government is responsible for treating:

  • the poor (Medicaid)
  • the old (Medicare)
  • military personnel (Tricare)
  • children (CHIP)

It seems that one of the big boys in this space, Kaiser Permanente, has taken the bold step of getting into the Medicaid Factory game. This is the news I came across which initiated this blog post.

The article linked above is praising how KP has built low-income housing in order to address homelessness. This might appear noble at first until we dive into the details.

Kaiser didn’t donate money to address homelessness, they got into the business of real estate. Not to mention, housing isn’t a solution for homelessness, a topic which I’ve had an interest in ever since medical school.

In fact, it’s mental health, community support, and substance abuse, all of which have to be addressed together in order to treat homelessness. Kaiser Permanente has not only failed in all of these categories for their Medicaid population in the past, but they have even been fined millions of dollars for not meeting access guidelines.


Low income housing

The next fact which needs unraveling is that Kaiser Permanente made sure to build this multimillion dollar low-income housing near their hospitals and clinics. And its CEO went on to highlight that millions more dollars are available for donation if anyone else wants to build similar housing within the geographic range of the Oakland Kaiser facility.

Low income housing is one of the best way to keep the poor in poverty. It helps ensure high rates of crime, overcrowded living conditions, teen pregnancy, and strips the dignity and independence of those who gain access to it.

The real people who need low income housing don’t mesh well with traditional housing models. Imagine the schizophrenic who does great 6 months out of the year until the weather changes or they lose their job or whatever, they will have a psychotic episode which creates havoc for others.

Most low-income housing have excessively strict rules. You’ll be kicked out for all sorts of indiscretions which might be normal in certain communities, in certain patient populations, and with certain common mental health disorders. Once booted from such a place, you’ll never qualify for another low-income home.

Since you must maintain a low income or no income to remain in low-income housing, many will resort to cash deals (often illegal deals) in order to supplement their income. It’s a circular mess which oppresses more than it helps support those in poverty.


Political battle

Medicaid and Medicare stopped being a government health outreach a long time ago. Nowadays such services are bargaining tools for politicians. The reimbursement rates are inconsistent and depend on which way the wind is blowing.

Some healthcare groups and hospital groups get millions of dollars while others are completely shut out due to capitations. It’s a game that has to be played and the patients are the pawns.

The big boys, such as Kaiser Permanente, will always have the upper hand because they have the strongest lobbying power. Kaiser doesn’t react to political changes, they initiate it and have all their ducks in order to profit from it.

Gaming the political system isn’t illegal. And Kaiser isn’t a bad organization for doing what they are doing. But as physicians it’s helpful for us to see through the bullshit.

No need to storm out of our jobs stomping our feet. But I want to be able to put such ‘news’ into perspective and don’t want the wool pulled over my eyes. In the end, there is a huge difference between being a large medical group and an individual physician.


Private clinics

Can private clinics still make money? Can we open our own private medical offices and earn money from Medicaid or Medicare or any other payer for that matter?

Yes we can. The visible hurdles are meant to dissuade us because they were put into place by large healthcare groups which wanted to have the highest access to patients.

When you are that large, you can drive the costs down significantly. The bigger you get, the harder it is for a private office to compete against you. Which is why as a consumer you shouldn’t buy everything from Amazon. You will only ensure a monopoly and drive up future costs for yourself and your fellow consumer.

The private clinic advantage

But that’s not the whole story. One advantage that we have as private clinic owners is that we aren’t as scrutinized by various auditing organizations. We can see whomever we want and turn certain patients away, at will.

A private medical office doesn’t have to hire unionized nurses. Our medical assistants can do damn near everything an RN can do. And because we aren’t responsible for a large number of patients, we aren’t forced to provide a minimum amount of access.

One of the best things for the private clinic owner is advancement of technology which brought with it virtual medicine. Though probably not the best thing for optimal patient health, it takes a lot of power away from a large medical group.



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