Scott MacStravic, Ph.D.
Hospitals in the US have been engaged in what can only be called “price silliness” for decades. The prices they have charged have long had little relationship to their costs, for example, and have long looked more than silly and more like outrageous to patients, charging them ten times as much for simple items that patients could buy for themselves, such as facial tissues or aspirin, for example. And because their charges for some services were less than their costs, while for others far more, they have encouraged competitors to “cherry pick” those services that are consistently profitable, while general, full-service hospitals are becoming unprofitable.
Silly prices have provided a fictional basis for negotiating with payers for what they will actually pay, which often turns out to be a small fraction of the price. This may please payers, by representing a “deep discount,” but one wonders whether payers look for the discounts, or for the lowest possible payment, regardless of posted prices. And it has caused hospitals to engage in at least two other silly practices that undermine their trust in their communities.
First is the practice of charging uninsured, self-paying patients the “posted price” for services they get, even though such prices are often two to five times as great as the hospital willingly or grudgingly accepts from third party payers. This is only compounded when the hospital also aggressively attempts to collect these silly prices from patients, most of whom can’t possibly afford them. Media scandals, lawsuits galore (though most unsuccessful), and significant declines in community reputation, image and trust have followed.
Moreover, such aggressive pricing and collection practices have prompted second looks at the tax exemptions that not-for-profit hospitals enjoy, threatening them with significant additional costs at a time when most are barely surviving already. If such hospitals had to pay local, state and federal taxes, it is likely that hundreds would go out of business, so most are devoting extra time and effort to prove that they are indeed charitable organizations deserving of this special tax treatment.
But hospitals may be using the same silly prices in their efforts to preserve their tax exemption. Their posted charges make an all too attractive basis for reporting how much they have “spent” in community benefit efforts. If hospitals report “foregone revenue” or “free care” based on how much their charges were for charity patients, they are likely to be grossly exaggerating what they have actually invested. This is much like the constant TV commercials that claim to be offering a “$50 value” or some such for free if you buy their gadget for only $19.95 plus shipping and handling.
When there is a lack of agreement on what actually represents hospital “contributions” to the community, the tendency is bound to be to report based on foregone charges, since these are so much higher than costs. Any hospital that reports only the costs of services they have donated would look like a piker compared to peers reporting foregone charges. And there appears to be little agreement on which basis is proper. [“MJ Feldstein “Hospitals Share the Details on Charity, Other Care” St. Louis Post Dispatch May 19, 2006 (www.stltoday.com)]
In some cases, local businesses have demanded hospitals report on the basis of only costs, or no more than the prices hospitals are normally paid by third parties when accounting for charity care contributions. In others, hospitals have seen the benefit of reporting only realistic numbers, rather than risk the public reacting as negatively to inflated contributions as they have to inflated charging to uninsured patients. Even if this “costs” hospitals significant numbers, it may save them significant embarrassment later. Besides, it is honest and authentic, rather than spin doctoring. [M. Wagner “New Guidelines Could ‘Cost’ Hospitals on Charity Care Numbers” Triangle Business Journal May 22, 2006 (www.bizjournals.com)]
There may have been and still be some short-term advantages to acting as if posted charges are real, the practice of silly pricing seems destined to boomerang in the long run. It has also caused severe damage to hospitals’ reputations and community trust in many cases. If their communities, to say nothing of local, state and federal governments felt that reports of community benefit were similarly egregiously inflated based on fictional charges, the damage could be far worse.
Robert FrombergEditor in Chief, HFMA
In any public policy discussion, the hardest role to play is the one in which you find yourself saying, "Yes, but it's not that simple." Take the Bush administration's recent statements about hospitals needing to publish their prices or legislation will be forthcoming to mandate it. Consider this response: "Yes, but it's not that simple; price transparency is a complex thing that requires collaboration among many parties, not just a mandate." Such a response puts providers in the uncomfortable position of seeming to argue against something that they generally believe in--the importance of price transparency. The same situation exists when a state government attempts to mandate a certain level of charity care. Hospitals are not against charity care, but again can find themselves in a position of having to say, "Yes, but it's not that simple."
In HFMA News this week is a story involving pending legislation in Massachusetts that would give government a role in determining appropriate RN-patient ratios. As in the examples above, it's a tough situation rhetorically, not to mention in terms of policy. Of course Massachusetts hospitals are in favor of providing high-quality care, and of course they realize that sufficient staffing is an important part of high-quality care. Yet, they are in the position of needing to say, in essence, Yes, but the best way to make such determinations is by individual teams of care providers in individual hospitals based on individual patients.
I wouldn't dream of suggesting that I have an answer to such situations, but I have two observations. One, it's always a shame when a common goal is not achieved because of differing views about how to reach it. Two, the next time I make a statement and someone responds, "Yes, but it's not that simple," I'm going to be sure to listen hard to the reason why "it's not that simple."
There is a growing development in employee relations for which hospitals should perhaps be the leaders, or at least among the foremost proponents and examples – evidence-based Total Benefit Management. Just as with medicine, the idea of the evidence-based approach is that employers should base their benefit decisions on hard data and rigorous science related to whether they will and do gain desired results from their TBM investments. [Assessing Quality-Based Benefit Design California HealthCare Foundation April 2006 (www.chcf.org)]
TBM, itself, means two things, the first being the foundation and reason for doing it in the first place. It only makes sense when and because employers think of and treat their employees as valuable assets, where different levels and types of investment in their acquisition, retention and development will make significant differences to the performance of the organization. For employers who think of and treat employees as replaceable cogs in their production, selling and service “machines”, as sources of costs, rather than ROI, it makes no sense.
The second meaning focuses on the “total” dimension, treating all elements in human resources and employee relations as part of the total investment, to be integrated and evaluated based on their ROI. For health care organizations, it is the health-related dimensions of this ROI that should be of most interest, though all their employee-focused investments should be included, as well. [R. McCarthy “The New Direction in Disability Management: Putting It All Together” Business & Health 17:6 June 1999 25-30]
The proponents and practitioners of TBM today, such as Pitney Bowes, Dell, etc. treat their health-related investments as having expected, measurable, and significant returns in the area of productivity and labor costs. When Dow Chemical Co. analyzed its health-related performance impacts, for example, it found that sickness in all its dimensions created significant costs. But only about 20% of these costs were direct medical expenditures, 8% were absence-related, while 72% were the effects of reduced productivity among employees who were at work but handicapped by some sickness. [“Total Value/Total ReturnTM Tells the Pitney Bowes Esperience: Healthier Employees Translate into a Healthier Bottom Line” PRNewswire.com Apr 17, 2006]
With the threatened pandemic of bird flu a constant threat, and the known impacts of having sick employees on the job threatening to spread their sickness to others, the impact of “presenteeism” becomes even greater. And hospitals, as large employers, are as much if not more at risk for reduced productivity among employees who are present on the job as any employers. But they are also far more able to do something about it, and even to market their expertise and experience to other employers. [S. Sullivan “Presenteeism, Cost and the Opportunity for Better Health” Effective Disease Management: Reduce Costs and Improve Productivity” Employee Health Care Conference San Diego, CA Mar 1, 2005 (www.americanhealthways.com) 1-3]
Proactive health management efforts, from worksite wellness to risky behavior and pre-disease, and particularly disease management, hospitals could be “model employers” demonstrating and benefiting from the productivity impacts of creating healthier employees. Certainly, with labor shortages apparently a permanent challenge in health care, anything that can significantly improve the productivity of employees at work, along with the proportion who are actually on the job can help in that challenge.
And hospitals that become masters at proactively managing their employees' health, along with their other benefits as part of evidence-based TBM, will be in a position to market their services to employers in their markets. And this could open up new non-managed-care revenue markets as well as create closer and mutually beneficial relationships with employers – on top of the internal performance benefits to hospitals, themselves.
Kevin C. (Casey) NolanManaging Director, Navigant Consulting, Inc.
At a recent hospital board planning retreat I gave a presentation on the trends in health care. It is a presentation topic that I speak on frequently, laying out the tremendous changes occurring in our industry, outlining the challenges posed by those changes, and offering suggestions for addressing the changes.
After my presentation, one of the hospital board members pulled me aside. I expected him to have a question on my presentation or perhaps (!) even to offer a complimentary word. Instead, he told me that he was the president of a textile manufacturing company and that the textile industry was experiencing a radical restructuring due to global competition that made the transformation of the health care industry that I talked absolutely pale in comparison.
As I listened while this board member gave me a primer on the transformation of the textile industry, an interesting thought occurred to me regarding the health care industry: other industries do have similar or perhaps even greater challenges and we can probably garner some ideas from them for how to deal with our challenges. My observation is that health care professionals tend to talk to and interact with other health care professionals. We tend to read health care publications, surf health care oriented web sites, and attend health care focused conferences. This is a characteristic that I am sure is not unique to the health care industry. I am certain that my friend the textile president board member reads textile publications, talks to his colleagues in the textile industry and goes to textile trade shows.
As large as the health care industry is, it is still “only” 15% of the GDP. There is another 85% of the economy that is not health care. And that other 85% also faces intense and increasing pressures from competition, regulation, technological changes, consumerism, and numerous other factors beyond their control. We can—and should—take time to step out of our health care-centric world and scan the other 85% of the economy to see how other industries and businesses are coping—or have coped—with similar changes and challenges. There are lots of smart people outside of the health care industry who have wrestled with problems similar in nature to those facing our industry and we can learn a lesson or two from them and perhaps tackle our challenges with a new perspective.
So as important and interesting as our health care world is, we need to recognize that we aren’t the only industry undergoing a transformation and that if be build a bridge from our world to the other 85% of the economy, we can bring back some new ideas and approaches for tackling the changes and challenges rocking our industry.
A graphic designer once told me how to draw a straight line freehand. He said you make a point where you want the line to end, then go to where you want the line to start and draw toward that point, never looking at where you actually drawing, just keeping your eye on the point in the distance. Well, I tried it, and I can’t say I drew a perfectly straight line. But it was better than my usual efforts without use of a ruler.
I don’t have much call for drawing a freehand straight line, but I applied that idea to something I do, which is write. And it occurred to me that this same technique is used effectively in all kinds of stories and articles: at the beginning, you let a reader glimpse the end; then you go back to the beginning and write toward that ending.
Last week, I saw many healthcare organizations telling their stories to the capital markets at the Non-Profit Heath Care Investor Conference, and those that, in my opinion, told their story with the greatest success used the point-in-the-distance technique.
Virtually all the organizations presenting began by stating the vision of the organization, followed by the strategic goals, the key activities, and the financials. The best presentations, however, were the ones that did the best job emphasizing the point in the distance (the mission) and clearly drawing a line toward that point (linking each goal, each activity, and the financial results to the mission). None of the presentations was bad, but that ones that were the least effective tended to articulate a mission that was too generic, to present too many strategic goals and/or not link those goals to the mission, and to not echo the mission or strategic goals again until the very end of the presentation. In short, sometimes the components were strong, but they did not connect clearly, and sometimes the point in the distance was not clear enough.
An example of a successful presentation: One organization clearly identified its mission as being the provider of choice in the community and among the best in the nation. It followed that with short video clips of the excellent results of an innovative approach to hip replacement surgery. The presentation continued with external recognitions, including U.S. News ranking as one of America’s best hospitals, Magnet recognition, and others. Next, the executives presented key strategies, all linked clearly to clinical excellence in specific areas, then capital investments designed to support those strategies. A section on today versus the future was especially successful in explaining how the strengths of today would be translated into an even stronger, more unified approach to clinical care excellence. The financial presentation that followed showed strong performance in the usual financial indicators, with the bar graphs clearly supplemented by spoken words that linked financial performance to fulfilling the strategies for clinical superiority. The summary landed squarely on the point in the distance that the presentation established at the outset: being the provider of choice.
With capital such an important ingredient for success, healthcare organizations can learn from the way these leading organizations talk to the capital markets: by drawing a straight line toward their vision for the future.
Todd A. NelsonVice President, Finance and CFOGrinnell Regional Medical Center
When the call for “price transparency” came to America’s hospitals, shouldn’t it have also gone to the supplier community as well?
Imagine a world where cost information is kept from patients, physicians, boards of directors, auditors, insurance payors, and consultants. Imagine a world where you cannot share certain financial performance information with those same constituents to get advice. Imagine a world where you must negotiate a contract in a vacuum, without benchmarking information, or legal assistance. Imagine a world where language printed on an invoice, different from a negotiated contract, creates a binding contract if paid by your organization.
That world may be closer than we think.
Suppliers are beginning to place confidentiality clause language in their contracts. The clause prevents hospitals from discussing details of a contract with anyone--unless the supplier, at their sole discretion provides prior written authority to release that information. That means you can’t tell your patient what the product cost. You can’t tell the physician what it cost. You can’t tell your board of directors the terms of an agreement. You can’t even share the information with an insurance payor to get a better rate on your procedures. It is illegal to tell a consultant engaged in negotiating contracts on your behalf. And, finally, you would need prior written consent for your auditors to review your files for an audit.
What if all suppliers took this approach to claiming their pricing information is confidential and your hospital doesn’t own its purchase price data? Who’s next to be sued? The local audit firm for looking at invoices during a routine audit? The insurance company for requesting a copy of implant invoices to verify pass through pricing? The hospital for providing information to better manage their chargemaster?
Hospitals aren’t asking to be able to share confidential contract information with the hospital down the street. Nor are we asking to share it with the supplier’s competitors. At the end of the day we just want to be able to do business as usual, get a fair deal from the insurance payor, and know whether we’re getting a good deal when we negotiate a contract. Is that too much to ask?
Call your senator or representative and get them to look into this issue. After all, the federal government is picking up the tab on the majority of healthcare purchases. Without cost information, and the ability to get a fair deal, how much more will taxpayers spend on healthcare? Not to mention the fact that hospitals can’t be transparent with their prices if they can’t share information regarding what they paid from suppliers with their patients.
Some quick thoughts upon returning from the Non-Profit Health Care Investor Conference in New York:
“American health care gets it right 54.9 percent of the time…I wonder what we could achieve if we got it right 98 percent of the time.” That comment came from Brent James, MD, M.Stat Executive Director of the Institute for Health Care Delivery Research of Intermountain Health Care, in the conference’s keynote address. By “get it right,” he meant provide the right care at the right time in the right manner.
And he had some thoughts about how American health care can “get it right.” One is to apply to clinical care the techniques used to manage the business side. As James said, we need to manage our core business, and “the core business of the care delivery system is care delivery.” Those management techniques include capturing and analyzing data, communicating results, holding people accountable for achieving results, and managing change. This approach will, says James, help provide a “shared baseline” that will move health care from “craft-based practice” to “profession-based practice.”
“These are the markers for a successful healthcare organization,” he told the audience, a mix of investors and healthcare executives. He adds that the resulting cost reduction will be crucial to keeping Medicare fiscally viable.
The leading healthcare organizations that presented at the conference appear to have gotten the message, as one after another emphasized its investments and success in improving quality. Some presenters focused on patient safety. Others focused on quality of care more broadly. Some focused on meeting external benchmarks; some focused on internal benchmarks. Some focused on broader measures; some focused on specific conditions or treatments. But all had a compelling quality story to tell and all told that story in language that to some extent drew on business management.
(Another message this group seemed to get was the critical role of healthcare IT. James said that “in ten to fifteen years, if you haven’t implemented an electronic health record, you won’t be able to compete.”)
But an analysis released yesterday by Moody’s to coincide with the conference poses a significant challenge about the relationship between today’s quality improvement activities and future financial success. The analysis says that the ROI from a quality strategy will be demonstrated not only by the market benefit from national accolades, but by “more lasting and fundamental signs of improved quality that may not be so publicly recognized, such as improvements in market position and operating results. As the industry develops common metrics for measuing quality, our approach to hospital bond ratings will likely also evolve.” Moody’s goes on to indicate several “current measures or indicators that we believe can evidence initial success around quality,” including improved patient satisfaction scores, lower malpractice premiums, and limited physician turnover.
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HFMA recently asked David Gergen, adviser to four presidents and well-known political commentator, how our nation's political leaders could deal with the problem of the uninsured. Here is his response.
The political leaders are unable to take decisive steps because there’s so much division within the healthcare industry itself. Any comprehensive solution proposed in Washington is inevitably going to draw fire from one or another interested party, so it’s very difficult to achieve consensus in Washington. The parties are terribly split. But I don’t think you can blame this solely on the politicians. What we have learned over the years is that the divisions in our politics reflect divisions in the country and within industries or among groups. And one of the reasons you can’t get consensus in Washington is there is no consensus within the healthcare field about how to solve some of these problems. So it’s going to have to be a partnership among a lot of people to get serious reform. One bright spot on the horizon right now is in Massachusetts with the embrace of a new statewide system that seeks to ensure that all citizens of the commonwealth have health insurance and that costs are affordable. That Massachusetts breakthrough represented a compromise by numerous special interest groups, as well as by politicians. We’ll have to wait and see whether it will work, but I think it points the way toward the kind of solution we’re going to need over time--that is, that the only way we’re going to gain a consensus is for people to be willing to give up some of their sacred cows. My sense is that major corporations in the country are trying to get out from under the healthcare responsibilities to their employees. So we see the Wal-Marts and others that are not providing the kind of healthcare insurance that we would normally like to see. That trend is going to continue. Healthcare costs are like a tax. Corporations facing heavy taxation of healthcare are going to do one of three things: They are either going to reduce the number of employees to whom they offer health insurance in the United States, or they’re going to move the jobs overseas, or they’re going to seek some solution outside the corporation or some different method of running a healthcare system. It is inconceivable that corporations will sit quietly and embrace a healthcare system that costs 25 percent of the GDP. That’s just not going to happen. So I think change is coming. What kind of change--whether it’s going to be good change or not--is hard to say. There are some corporations today that are speaking much more favorably about single-payer systems than ever before, to my surprise.
The political leaders are unable to take decisive steps because there’s so much division within the healthcare industry itself. Any comprehensive solution proposed in Washington is inevitably going to draw fire from one or another interested party, so it’s very difficult to achieve consensus in Washington. The parties are terribly split.
But I don’t think you can blame this solely on the politicians. What we have learned over the years is that the divisions in our politics reflect divisions in the country and within industries or among groups. And one of the reasons you can’t get consensus in Washington is there is no consensus within the healthcare field about how to solve some of these problems. So it’s going to have to be a partnership among a lot of people to get serious reform.
One bright spot on the horizon right now is in Massachusetts with the embrace of a new statewide system that seeks to ensure that all citizens of the commonwealth have health insurance and that costs are affordable. That Massachusetts breakthrough represented a compromise by numerous special interest groups, as well as by politicians. We’ll have to wait and see whether it will work, but I think it points the way toward the kind of solution we’re going to need over time--that is, that the only way we’re going to gain a consensus is for people to be willing to give up some of their sacred cows.
My sense is that major corporations in the country are trying to get out from under the healthcare responsibilities to their employees. So we see the Wal-Marts and others that are not providing the kind of healthcare insurance that we would normally like to see. That trend is going to continue. Healthcare costs are like a tax. Corporations facing heavy taxation of healthcare are going to do one of three things: They are either going to reduce the number of employees to whom they offer health insurance in the United States, or they’re going to move the jobs overseas, or they’re going to seek some solution outside the corporation or some different method of running a healthcare system.
It is inconceivable that corporations will sit quietly and embrace a healthcare system that costs 25 percent of the GDP. That’s just not going to happen. So I think change is coming. What kind of change--whether it’s going to be good change or not--is hard to say. There are some corporations today that are speaking much more favorably about single-payer systems than ever before, to my surprise.
David Gergen will be speaking at HFMA's upcoming Annual National Institute June 18-21.
While numerous hospitals are involved in various kinds of “health” programs that involve businesses as clients, there is a new market emerging for “productivity health management” (PHM). It involves integrated “health” (in the broadest sense) services aimed at reducing the total labor costs of employers, primarily through improving worker productivity.
It has long been known that improving employee health can have a wide range of cost-savings effects, by reducing:
In addition, there has been plenty of evidence that healthier employees can promote improvements in product and service quality, in customer satisfaction, market share and revenue, along with cost reductions. And health preserving and promoting program efforts by employers can increase both employee retention and new employee recruitment, further reducing labor costs, along with quality and customer satisfaction. While there will always be problems of attribution in crediting the correct portion of wide-ranging improvements such as these to employee health investments alone, the full range of effects have been found when looked for.
PHM focuses on the known fact that cost savings to employers from health improvements are often two or three times as great as reductions in sickness care insurance costs. Dow Chemical Co., for example, found that on average, the total productivity costs of common chronic illnesses were five times as great as medical/hospital care costs. [J. Collins, et al. “The Assessment of Chronic Health Conditions on Work Performance, Absence and Total Economic Impact for Employers” JOEM (Journal of Occupational and Environmental Medicine) June 2005 547-557]While almost all mega-studies of chronic disease management (DM) efforts have found mixed results in terms of ROI, but almost all have failed to count the productivity and total labor cost savings therefrom, so have vastly underestimated returns. Employers, however, tend to include these, and have become enthusiastic proponents and customers for such efforts. In one study, for example, researchers at Brigham Young University found ROI ratios were nearly $16:1 for every dollar invested in worksite wellness programs, once productivity impacts were included. [“16:1 Return on Investment from Workplace Health Promotion BYU Study Finds” Wellness Junction.com Feb 2, 2006]
Hospitals and large health care organizations should clearly be at least considering PHM – for themselves to reduce their operating costs, as well as for local employers as a revenue generating venture. Developing and refining PHM programs with their own workforces will give them the experience needed to learn the most cost-effective methods and the full extent of savings possible. It will also give them the experience and results needed to market PHM programs to employers.
David Gergen, former advisor to four U.S. presidents and currently professor of public service and director of the Center for Public Leadership at Harvard University’s John F. Kennedy School of Government, recently told HFMA his views on the biggest challenge facing the healthcare industry:
The biggest challenge facing the healthcare industry today is how to square the circle, namely, how to provide high-quality health care at costs that are affordable to all Americans. And we all know that there are tensions in that equation. People from all over the world still come to the United States for health care, because they realize the quality exceeds what can be found almost anywhere else, and that the best hospitals, the best doctors, the best surgeons are here. We are achieving the goal of high quality, but, as everyone knows, especially employers and people at the lower end of the income spectrum, the costs have been going up inexorably, so that today health care represents some 16 percent of GDP and is heading toward 25 percent. Those are unsustainable numbers, and that’s why the push is on. Given the number of people who are uninsured, given the inability of many people now to afford this high-quality health care, the push is on to reform the system. And I think reforms are going to come willy-nilly. Whether they come in time and whether we do this right are big question marks.
The biggest challenge facing the healthcare industry today is how to square the circle, namely, how to provide high-quality health care at costs that are affordable to all Americans. And we all know that there are tensions in that equation.
People from all over the world still come to the United States for health care, because they realize the quality exceeds what can be found almost anywhere else, and that the best hospitals, the best doctors, the best surgeons are here. We are achieving the goal of high quality, but, as everyone knows, especially employers and people at the lower end of the income spectrum, the costs have been going up inexorably, so that today health care represents some 16 percent of GDP and is heading toward 25 percent. Those are unsustainable numbers, and that’s why the push is on. Given the number of people who are uninsured, given the inability of many people now to afford this high-quality health care, the push is on to reform the system. And I think reforms are going to come willy-nilly. Whether they come in time and whether we do this right are big question marks.
Jeni A. BellSenior Editor, HFMA
Looking for ways to retain talent in your organization? What about free food, vet insurance for their pets, all-expense paid trips, or sabbaticals in Hawaii?
Money magazine recently profiled several companies that reward their employees with free perks, such as concierge services, mystery junkets, and weight loss plan memberships. Among the best examples: an outdoor outfitter that pays its employees to work with an environmental group of their choice for up to two months. Lucky workers for this company have been paid to observe wolves in Yellowstone National Park and restore native plants in Hawaii.
What are you doing to boost employee satisfaction?
President Bush consistently has called for medical liability reforms that will combat “skyrocketing medical liability insurance rates” that “force physicians to restrict their services or close their practices.”
However, tomorrow’s Health Affairs will publish an article that says empirical evidence from AMA surveys contradicts this claim. The authors, led by Marc Rodwin, a professor of law at Suffolk University Law School in Boston, conclude:
To paraphrase Mark Twain’s comment on reading his obituary in a newspaper, the reported recent demise of medical practice as a result of rising malpractice premiums has been greatly exaggerated. The perception that increased malpractice premiums cause a crisis is at odds with evidence from the AMA surveys…. Claims that the level of malpractice premiums justify a tax credit to prevent physicians from leaving the practice of medicine are hyperbole, especially when physicians’ income is viewed compared with that of others.
To access the article today only, click here.
Starting Tuesday, you can access the article here.
We'll give more detail in HFMA News.
When reading the latest Financing the Future report, Strategies for Financially Distressed Hospitals, I was struck by the central role of communication in the financial success or failure of an organization.
Sometimes it’s an information technology problem. One turnaround story involved a health system that “lost total control of its numbers due to a computer conversion….” The system’s executives “had limited information on where they stood financially because data were very scarce, and if available, were suspect because of the information system problems,” said the CFO.
But just as frequently, inadequate communication “is a leadership issue, not a technology issue,” according to the report. Flip through the report and you’ll see all its tools share one purpose: to communicate about financial performance. But the communication is not just about numbers and their meaning—it’s also about securing trust in the direction of the organization. One health system, for example, suffered from deep distrust between physicians and management. One solution: open communication. The new CEO “gave the physicians his cell and home phone numbers, setting the tone for ongoing partnership discussions.”
Click here to download the report.
Fred Lee, author of If Disney Ran Your Hospital, recently shared these thoughts about hospital financial performance with HFMA:
Let’s say that the lab decides to stop stapling lab test reports to the patient charts. By making that decision, they have saved some money in their department. Now instead of going to the nurse’s station and, in a gesture of service and courtesy, stapling the lab tests to the patient charts, they simply drop the lab tests on the desk and walk off. Shifting that kind of work obviously does not improve the financial performance, because you’re not eliminating the work, but you’re asking somebody to do this work who isn’t as familiar with doing it as the lab staff is. That’s the number-one thing that I wish CFOs would look at. For instance, I’ve heard that some hospitals, before approving the department budgets, require every department to submit its budget first to a committee that represents the front-line caregivers, such as nurses or therapists. These front-line caregivers get to look at the budgets to ensure that a department didn’t improve its budget by pushing work onto them. That way, CFOs can get help in scrutinizing budgets to stop this kind of behavior. The overall financial performance is what a CFO is interested in. Success isn’t achieved by simply making every department squeeze its budget as thin as possible, which creates all kinds of pain in the organization that, left unattended, causes the organization to become dysfunctional.
Let’s say that the lab decides to stop stapling lab test reports to the patient charts. By making that decision, they have saved some money in their department. Now instead of going to the nurse’s station and, in a gesture of service and courtesy, stapling the lab tests to the patient charts, they simply drop the lab tests on the desk and walk off. Shifting that kind of work obviously does not improve the financial performance, because you’re not eliminating the work, but you’re asking somebody to do this work who isn’t as familiar with doing it as the lab staff is.
That’s the number-one thing that I wish CFOs would look at. For instance, I’ve heard that some hospitals, before approving the department budgets, require every department to submit its budget first to a committee that represents the front-line caregivers, such as nurses or therapists. These front-line caregivers get to look at the budgets to ensure that a department didn’t improve its budget by pushing work onto them. That way, CFOs can get help in scrutinizing budgets to stop this kind of behavior. The overall financial performance is what a CFO is interested in. Success isn’t achieved by simply making every department squeeze its budget as thin as possible, which creates all kinds of pain in the organization that, left unattended, causes the organization to become dysfunctional.
You can read more from Fred Lee in the May issue of hfm magazine. And you can hear more from Fred Lee in person on Wednesday, June 21, at HFMA's upcoming Annual National Institute.
A number of articles have appeared recently on the issue of racial disparities in health care—both treatment and management. The multiple pressures on state and federal policymakers, as well as on provider executives, may place racial disparity issues in a second tier of concerns, but these authors argue that the issue is a core part of the caring mission of health care, as well as of improving healthcare financing and delivery. Here are excerpts.
Deborah St one of Dartmouth College writes, “Although racial and ethnic disparities in health have been on the federal government’s agenda since 1985, no policy reforms have significantly reduced disparities. The question arises whether states can effectively address this issue without waiting for solutions from the national government.” She goes on to suggest that “a moral frame based on a concept of distributive justice in which medical care must be distributed according to need might give state policymakers more leverage and might strengthen political will to address the issue.” [“Reframing the Racial Disparities Issue for State Governments,” Journal of Health Politics, Policy and Law, Feb. 2006]
David Barton Smith of Temple University places emphasis on the role of the federal government and the need to change the way healthcare is financed: “A basic precondition for eliminating disparities in treatment is universal coverage and standard comprehensive benefits. These are also a basic precondition for controlling cost and improving quality for everyone. The current fragmented system of financing of care is in part a legacy of our racially segregated past. The current effort to document and eliminate racial disparities in treatment brings together minority group and quality improvement advocates.” [“Going Backward into the Future,” hfm magazine, Sept. 2005]
Another article cautions healthcare executives that racial disparities also exist in our healthcare management teams. Frederick D. Hobby, president and CEO of the Institute for Diversity in Health Management, writes, “What is diversity’s next challenge? Convincing the senior executives of the nation’s hospitals that they must become the chief cultural officers of their organizations. They must hold themselves and their subordinates accountable for the organization’s mission just as much as they hold them accountable for the margin.” [“Diversity’s Next Challenge,” hfm magazine, May 2006--print edition only]
The idea of either forcing employers by law to offer insurance to employees, or enticing them through tax incentives to do so, has been growing of late. Governments are realizing that lack of health insurance is a major issue among voters, and that uninsured patients end up costing tax money in far too many cases. They may force cost-shifting by providers, or force workers into Medicaid and other social programs, both of which end up costing taxpayers, and limiting the discretion politicians have over government spending, as the amounts earmarked for entitlements keep increasing.
But there is one reason for employers requiring or attracting employers to pay for employees’ health care. Employers gain far more from better health among their employees than do insurers, either government or commercial examples, from better health among their beneficiaries and members. Moreover, in many cases, employers hang on to their employees far longer on average than do insurers (though Medicare is an exception), so have a longer period to prospectively justify and retrospectively demonstrate the value of making their employees healthier, as long as they can overcome the traditional financial myopia of managers, shareholders, and Well Street analysts.
Particularly for low-turnover employers, though not for employers who pay minimum wages and treat employees like entirely replaceable and indistinguishable cogs in their production wheels, enticement makes sense, but so do the natural consequences of healthier employees to their bottom lines. Insurers gain only lower covered sickness care expenditures, their “medical loss” amounts. And commercial insurers may find that reducing their medical loss amounts will make it tougher to maintain their profit amounts, since they will be dealing with lower amounts of money if covered expenditures decrease, so their clients will watch insurers’ profit ratios relative to lower outlays.
Employers can gain two or three times as much from healthier employees – in lower absenteeism and presenteeism, higher productivity, loyalty and recruitment success, even customer satisfaction and quality – than they derive from lower sickness care costs alone. And because they have the most to gain, they have the greatest foundation for investing in employee health, as well as a built in daily relationship that insurance plans lack.
Large employers, and particularly those who are self-insured have easily the best opportunities. They enjoy the potential for qualities and economies of scale due to larger numbers of employees eligible for proactive disease and risk management. And many who have large numbers of employees in the same locations can sponsor onsite wellness, risk and disease programs economically. By contrast, insurers are essentially “condemned” to relying on remote contacts with their members, which tend to be less effective.
Moreover, such employers can use group approaches to assessments, monitoring and communications/coaching, enabling further economies that otherwise are only available to personal providers, who will often lack economies of scale. They can promote onsite peers helping peers, in either mentor or shared “buddy” arrangements, in addition to the services of professional providers and coaches. A growing number have onsite health care facilities and staff that can greatly increase the convenience to employees and reduce time lost for themselves.
Ideally, employers would be more generous in supporting provider-offered proactive health services than are commercial insurers. Medicare, fortunately, is starting to recognize the value of and cover some proactive health services. Since it covers mainly retired rather than active employees, hence only saves on sickness care expenditures, CMS may not be as generous as should employers. On the other hand, since Medicare beneficiaries generate far higher sickness care costs than do employees, on average, it may be that it can afford to be even more generous. Only time can tell – both whether it can afford to be, and turns out to be as generous as is necessary.
Of course, the other half of the problem requires that providers, particularly primary physicians, join in the proactive health movement, to ensure that employers and government payers get the returns they will expect from their investments, while ensuring that providers survive and remain in practice. Whether they work for proactive health vendors, or operate their own proactively focused practices, we need clinical professionals in proactive health, just as much as in reactive sickness care, and payers have to recognize their role in making clinical professions attractive and rewarding enough to maintain our health care infrastructure at levels commensurate with need.
If there were a single-payer system operated by the federal government, it would have both economies of scale and the potential for a long-term appreciation of the advantages of healthier citizens. It would lack both the added labor cost reduction reasons to invest, however, and any real continuous relationship with consumers. A system where employers can optimize their financial advantages while employees optimize their health advantages seems preferable for at least the employee population. Governments and individual insurance may be needed as the “safety net” for the unemployed, but as long as employers have the most to gain, and can track the ROI from investments in healthier employees, they should be kept in the game.
In theory, at least, employers might gain enough in non-sickness-care expense reductions to justify their promoting their employees’ health, without participating in traditional sickness care insurance. But many, because of short employee tenure and low appreciation of employee value are likely to not gain enough, so the “natural” advantages may not be enough to promote and maintain their health investments. Under such circumstances, requiring them to pay what will be higher taxes for supporting traditional sickness care would serve them right. It could also create an “evolutionary” dynamic where employers who choose to invest in their employees’ health will be more likely to survive and “reproduce,” thereby eliminating the problem of non-contributing employers.
Revenue Integrity through Claims Submission and Management by MedAssets MedAssets works with providers to help reduce AR days, increase cash flow, reduce bad debt, and enhance the overall operational efficiency and accountability of the hospital's revenue cycle.
