Catherine Jacobson, FHFMA, CPA
I’ve always had a passion for strategy and planning, but I didn’t expect it to be a formal part of my job responsibilities.
Then, three years ago, when our vice president of planning left the organization, I said I’d be interested in taking it on. Today I spend as much time working on strategy as I do on finance.
Assuming responsibility for strategy and planning was not a difficult transition for me, given my involvement in these areas as the CFO. A growing number of CFOs are involved in strategy, through business development, physician integration, or partnerships with other organizations. Whether or not planning is part of your title, you should be looking at the healthcare world through a strategic lens. That’s why this issue of hfm is devoted to competitive strategies.
In one of the articles featured in this issue, Regina Herzlinger articulates a long-term vision for healthcare reform that centers around holding providers accountable for long-term population health outcomes. In that future state, providers who can control long-term outcomes for chronic medical conditions could earn significant financial rewards. That vision takes the idea of competing on quality to a new level of collaboration—one that’s about as different from the competitive strategies of the past as you can imagine.
Although we’re currently seeing limited rewards for high quality, we are starting to experience penalties when we don’t meet quality standards. Last month in this space, I wrote that the days when hospitals were paid to surgically remove a forgotten sponge from a previous surgery are over. Medicare and a growing list of other payers won’t pay for those types of never events.
This month, I can tell you that some hospitals are literally paying a penalty for cases like those. In September, the California Department of Public Health issued administrative penalties of $25,000 each to several hospitals where patients underwent second surgeries to remove retained foreign objects. (Under state law, that penalty has since increased to $50,000.) And the penalties are not only monetary; the state posts detailed incident reports online and links them to a press release. Although mistakes happen even at the best of hospitals, it’s hard to quantify the cost of such disclosures to a hospital’s carefully cultivated image. As consumers learn to differentiate hospitals based on quality measures, these indirect costs will increase.
So we’re preparing for a world where we could reap rewards for reducing the number of heart attacks and other complications experienced by people with diabetes in our communities. Meanwhile, we’re living in a reality where we pay a penalty for not keeping track of the sponges during surgery.
It’s clear that health care is just in the beginning stages of competing on quality. But quality-based strategies are a prerequisite for future viability. Our role as healthcare financial leaders is to frame this issue for our organizations in terms of what it means to our future financial viability. It’s an area where we need to make it count.