Scott MacStravic, PhD
There is no doubt that hospitals in the US have a constant challenge trying to survive and prosper in an environment of payer parsimony. And it is clear that at least some have found advantage in keeping people out of their facilities, rather than enticing them in. Their actions are “benevolent” in the sense of not only doing good, but in acting in the people they serve’s best interests. But it is also “opportunistic” in that their actions select only those for this service who will benefit the hospital.
What these hospitals are doing is first identifying people whose uncontrolled chronic diseases and risk conditions -- particularly diabetes, hypertension, congestive heart failure and asthma – keep forcing them to come to ERs or be admitted. There are lots of such people in every hospital market, and keeping them out of the ER and inpatient units is certainly in their best interests. But by selecting those without health insurance for proactive chronic disease management, the hospitals serve their own best interests by keeping non-paying patients away from their doors.
If hospitals served the general public in such proactive efforts, including people who have good insurance, they would be carrying out their stated missions and adhering to their stated values in most cases. But they would also be going against their own best interests, since they would be keeping paying, as well as non-paying patients away. Instead, they select to serve only those whose reactive sickness care demand would not be profitable for them. [E. Echkolm “To Lower Costs, Hospitals Try Free Basic Care for Uninsured” New York Times Oct 25, 2006 (www.nytimes.com)]
By selectively serving the poor, these hospitals, mostly public or non-profit institutions, get double benefit. They carry out their “public service” or “community benefit” missions, and justify public support or tax exemption, along with keeping unprofitable patients out of their facilities. But they could also serve insured patients with the same problems, and make money by doing so.
Medicare and Medicaid are both engaged in demonstration projects testing the effects of a variety of approaches to proactively managing chronic diseases in order to keep their beneficiaries out of ERs and inpatient units. Both commercial insurers and employers are hiring vendors or operating their own programs to do the same. And they are paying to get that job done.
CMS, for example, is sharing up to 80% of cost savings achieved by large physician groups and integrated systems (once minimum savings of at least 2% compared to projected costs are achieved, and up to a limit of 5% of total projected costs). [“Physician Group Practice Demonstration Bonus Methodology Specifications” Centers for Medicare & Medicaid Services Dec 20, 2004 (www.cms.hhs.gov)]
And employers are even better prospects, since they can save in avoided disability and productivity costs, as well as sickness care expense reductions. Now that productivity improvements due to disease and risk management have been demonstrated, the employer market for such services may increase dramatically. [“HealthMedia Announces Productivity Improvements from Wellness and Disease Management Programming Using the Work Productivity and Activity Impairment (WPAI) Questionnaire” PRNewswire.com Sep 27, 2006]
While the proactive health management market -- whether aiming at reducing only sickness care expenditures, or productivity losses as well – is dominated by vendors, there is no reason why hospitals could not compete in this market, at least with local employers. This would enable them to combine truly benevolent efforts to improve chronic disease patients’ lives, as well as those of people at risk for both acute and chronic conditions, with serving their own interests by generating profitable revenue therefor.
The market for reactive sickness care is certainly not going to disappear, and will probably continue to grow. But as governments, insurers and employers strive desperately to reduce their sickness care costs, and consumers have enough trouble bearing their growing share of such costs, the proactive health management market is likely to be a lot more profitable in the long run, as well as in the best interests of all the people and organizations that hospitals serve.
