Directors Corner | September 2020 | (Proactive) Purchaser or (Passive) Payer?

“Your words become your world.” Nadeem Kazi

  • Due Diligence: The care that a reasonable person exercises to avoid harm to other persons or their property. –
  • Fiduciary: A person or organization that acts on behalf of another person or persons to manage assets.
  • Homework: Preparatory research. –
  • Purchasing: The organized acquisition of goods and services to ensure that needed items are obtained in a timely manner, with an acceptable quality, and at a reasonable cost. –

The word “ambiguous” means something very different than I thought. I thought it meant “unclear,” or “imprecise,” or perhaps “subject to interpretation.” It doesn’t. It actually refers to something can have two alternative meanings or mean two entirely different things. (Think “ambidextrous.”) As such, an ambiguous word can misinform and even mislead.

If the precise word matters (Hemmingway reportedly said he wrote the end of “A Farewell to Arms” twenty-nine times in order to “get the words right”), then in healthcare there may be no more ambiguous or more misleading term than “payer.” Is the “payer” the party who processes a payment? That’s a reasonable interpretation and is often used. Or is the payer the party who actually funds the payment. And if “payer” is the party who writes the check, is an insurer the payer (who is, after all, at risk) or is the true payer the insured company which, at the end of the day, creates the pooled fund out of which the claims are paid? Or couldn’t the payer be any of the above.

I actually distain the word “payer” for its ambiguity. It allows us to side-step fiduciary responsibility by conveniently shifting it to what we accurately refer to as a “third party.” Let’s avoid its use. In its stead, let’s speak in terms of “purchasing” healthcare and use “purchaser” instead of payer. There’s a world of difference in meaning.

Purchasing something fundamentally differs from simply paying for something. Purchasing implies being proactive. To purchase something means doing one’s homework. Purchasing health care – by which I refer to “health care services” as differentiated from “administrative services” – conveys the application of the same due diligence used when purchasing other high cost goods and services. It means functioning as a fiduciary – which, in turn, means accessing and understanding some key performance measures and their impact – on the organization and the people on whose behalf you are purchasing care.

In October’s Director’s Corner we’ll examine the first (and largest) of the two key components of your premium where prices are rising significantly faster than the CPI and, as we demonstrated in our Hospital Value Report, what you’re paying has no reliable relationship to quality: hospitals. We’ll suggest several measures that you can use to proactively purchase hospital services. Then, in November, we examine the second contributor to high costs: prescription drugs. But in the meanwhile, we’ll ask a question that you only need answer for yourself….and, well, for your organization and its employees: Are you a purchaser of care – proactively purchasing based on sound measures of value – or are you passively paying for services that impact you organization financially and your employees both clinically and financially?