Scott MacStravic, Ph.D.
The idea of identifying the profitability of individual customers, or at least of customer segments, as a basis for strategic planning and operations, a common practice in many industries, may seem foreign, even unethical, for health care. [Return on Customer Monthly (www.1to1.com)] Hospitals and physicians may offer some special services and amenities aimed at attracting and keeping more profitable customers--VIP suites, units and pavilions are common in hospitals, along with executive health programs, for example. But discriminating in terms of selecting those to serve in favor of more profitable and against less profitable customers would seem inimical to the missions of most healthcare organizations, and even illegal.
On the other hand, ROI on specific services, and the profitability of service/customer mix are certainly strategic concerns. Hospitals have often learned to their regret that “focused factory” entrepreneurs are explicitly focusing on more profitable services, leaving “full-service facilities stuck with a less profitable mix. Specialty hospitals, ambulatory facilities, along with full-service hospitals are relocating or opening “branches” in more affluent suburbs to at least balance the profitability of their customer as well as service mix.
Both hospitals and physicians have, on occasion, refused to sign or renew contracts with particular insurance plans, when these plans offered less than reasonable payment schemes. This often causes scandals because thousands of patients may be forced to change providers if payment disputes are not resolved. More often, payers discriminate among providers in terms of what they deem quality or cost issues, through “tiered” payment, patient cost sharing or preferred provider networks.
But there are at least two specific markets where consciously predicting and monitoring the profitability of individual customers and the mix thereof is both necessary and less morally objectionable. First is the general market for occupational and corporate health, where customers are businesses first, and patients second. Unless providers can achieve positive operating margins with the payments business clients deliver, it makes little sense to seek or keep their business.
Second, and perhaps a little more controversial, though equally necessary, is the proactive health market. When providers choose to operate proactive disease or risk management programs, whether for third-party payer clients or paying individual patients, there are likely to be some customers who are not profitable. And if there are enough who are not, after all, entire proactive health programs may become unprofitable.
Of four diabetes management centers opened by hospitals in New York City as its diabetic population doubled over the years, three proved not financially viable given the payments they were able to attract, and the one that re-opened, as well as the one that survives, depend on charitable donations to keep going. [I. Urbina “In the Treatment of Diabetes, Success Often Does Not Pay” New York Times Jan 11, 2006 (www.nytimes.com)]
When a 14-physician practice in Colorado tried offering diabetes management using the Chronic Care Model, it could only gain payment from one regional HMO, covering only 304 of the 650 patients participating in the program. This mix of participants and lack of additional clients produced a net loss of over $25,000 in this initiative, though the practice chose to continue to offer it in light of its significant impact on patient outcomes. [P. Mohler & N. Mohler “Improving Chronic Illness Care in a Private Practice” Family Practice Management 12:10 Nov/Dec 2005 50-56]
These examples probably reflect a combination of choosing the wrong product and the wrong customers. Diabetes patients, have not consistently proven to be profitable targets for disease management of members of insurance plans, or Medicare for that matter. DM in general has gained mixed reviews relative to net cost savings from both. [F. Diamond “DM’s Cost Effectiveness Doubted in CBO Report” Managed Care Magazine Nov 2004 (www.managedcaremag.com)]
By contrast, if employers were the clients, they can save significantly more in absence, disability and reduced productivity losses, compared to only sickness care cost reductions. In general, total losses to employers from employee sickness and injury runs two to five times as much as medical care costs alone. But diabetes is actually a disease where this multiple tends to be among the lowest, with total labor costs only about three times as great as medical care costs, while the multiple for other conditions, such as allergies, depression, migraine headaches, and other conditions range from five to twelve times as great. [S. Nicholson, et al. “How to Present the Business Case for Health Care Quality to Employers” Applied Health Economics and Health Policy 4:4 2005 209-218]
Selecting patients most likely to cooperate in proactive efforts, even “firing” those who do not cooperate as participants, can be necessary to making proactive programs viable. Entrepreneurial vendors routinely select those they predict will be the most profitable participants, for example, graduate the resources devoted to each based on their probable cost savings, or both. Even hospitals engaged in proactive health efforts aimed at their own employees graduate their investments in each based on predicted returns.
Neither deliberate “de-marketing” of services to unprofitable patients, nor graduating the resources devoted to their care are acceptable practices in reactive sickness care. Each sick patient is deemed as good as the next when planning and delivering sickness care. But in proactive health, the relative profitability of individual clients, and even of individual patients may be essential to consider when selecting targets for attraction or retention, as well as in graduating the resources allocated to the efforts aimed at each.
Kevin C. (Casey) NolanManaging Director, Navigant Consulting Inc.
For those of us old enough to remember what was then the ground-breaking TV sitcom “Archie Bunker,” the show opened with the stars (Carroll O’Connor and Jean Stapleton) sitting at a piano screeching out a tune that had something to do with “those were the days.” On a couple of cross-country flights recently (without any carry-on liquids, by the way!), I came across two articles that caught my attention and I began to “connect the dots” and long for the good old days.
The first article appeared in the Wall Street Journal and focused on the challenges the big insurance companies were facing in maintaining their profit margins. The key take-away from that article for me was that the insurance companies were maintaining “pricing discipline,” meaning that they were willing to trade off missing their enrollment targets in order to meet the analysts’ profit expectations (which is an entirely different subject for a future blog!!) by keeping or raising their premiums. The article went on to note that as a result of this “pricing discipline,” the rates charged to small employers were increasing dramatically, with many of these small employers increasing the employee cost or dropping their coverage altogether because of the cost.
The second article was an opinion piece in the Wall Street Journal by Andy Stern, President of the Service Employees International Union, in which he challenged the CEOs of the Fortune 500 to make healthcare their national priority. In his piece, Mr. Stern noted that we are currently experiencing the most profound transformation of the economic landscape in the history of our country—and perhaps the world. In this transformative economy, which is accentuated by the demographics of the United States, the average person entering the job market today will have worked for 8 to 12 jobs by the time they are 35 years old. As Mr. Stern puts it, “Employers will be pit stops for them (the younger employees), not permanent homes. In other words, we are rapidly moving from employer-managed work lives to self-managed work lives, in which workers must figure out on their own how to maintain things like health insurance and retirement.”
Combining these two articles with a segment I heard on NPR that commented that the number of defined pension benefit plans in this country was down to less than 30,000, we are clearly on the cusp of a profound shift in the way health insurance is structured and paid for in this country. Gone will be the days of company-defined and paid-for insurance. Welcome to the consumer-driven economy. And these are most definitely NOT the good old days! And the lesson for healthcare executives is the strategies that made you successful “back in the day” will no longer guarantee your success in this transformed economy. In fact, they may lead you to ruin. So understand that “those were the days,” but those days are gone. It is a whole new ball game!!!
Robert FrombergEditor-in-Chief, HFMA
I’m on vacation this week, which is usually an occasion for my children to teach me lessons about how to be a better person. And while this may not be directly related to healthcare finance, it is related to all of our professional activities...at least I believe so.
In this case, my older son, who is ten, decided he wanted to stop at a bookstore, where he bought a small kit about how to do card tricks, which is something he had been trying to teach himself for some time. Later that evening, the skies were cloudy, it was raining off and on, and we had decided to stay home and eat. But my son said, “Let’s go to Pelican Alley,” which is a favorite restaurant, but a ways away. We were ambivalent because of the weather, but we finally said OK. And when we stepped outside, the clouds broke and the sun shone through. At the restaurant, my son brought his card deck with him and entertained us with a few tricks. (My favorite involved cutting the cards with a knife.)
Then he said he wanted to do a trick for other diners in the restaurant. Oh, we said, we don’t know, they’re eating. Come on, he said. How about I just show that waitress? He pointed to a waitress who didn’t seem busy at the moment. OK, we said.
He started to show the waitress a trick, and I noticed that a man sitting nearby with a woman was looking at my son intently and smiling. When my son returned, I told him that the man seemed interested, so why not show him the trick. He did, at which point the man stood up and walked outside. When he returned, he had a small bag attached to his waist, from which he began extracting balloons. It turned out he was a professional clown. I left my magic stuff back at my place, he said, but I have a few balloons. He proceeded to create the best balloon shapes any of us had ever seen for the kids and everyone else at the table, while giving my son pointers on where he could learn more about doing card tricks and magic. It ended up being a delightful evening for everyone.
I reflected that it was only a delightful evening because my son had followed his gut. He followed his interest in card tricks. He followed his interest in the restaurant, when the rest of us were ambivalent. He followed his desire to show card tricks to others. And not only did that result in a fun balloon show from a talented clown, but some excellent tips that my son can use to pursue his interest further. It was a night he will remember, and a lesson I will remember: to follow my gut, because you never know what unexpected benefits will result.
What was once referred to mainly as “alternative medicine” has come to be labeled as “complementary and alternative medicine” (CAM), and is often part of “integrated” or “integrative” medicine. In most cases, the word “complementary” is used to indicate that other forms of medicine, i.e. non-allopathic, which presumably includes osteopathic, are used to add something of value to traditional medicine. When these additional approaches are included, they increase the range of “solutions” that healthcare providers may use in addressing patients’ problems. Combining CAM with traditional hospital services, with one-quarter of hospitals involved therein, has not been an overwhelming success, however, with few generating a profit thereby. [“Few Hospitals Profit from Complementary Care” Healthcare Strategist Trend Watch Aug 18, 2006 (www.hcpro.com)]
The true meaning of complementary is “making complete”, not merely “adding some value to”. What is deemed complementary medicine does not make allopathic or osteopathic medicine complete – it merely adds some concepts and tools -- such as acupuncture, massage therapy, and chiropractic manipulation – that a physician may choose to employ directly or refer patients to as part of treating a particular patient for a particular problem. When selected complementary treatments are employed in a truly coordinated fashion by or with physicians, they become part of an integrated solution, but not a complete medical package.
What is truly needed as to complete traditional medical care is not a modest set of selected non-traditional treatments, but a full set of proactive (also called prospective, preventive, even pre-emptive) health interventions. These should include:• Chronic disease management -- aimed at minimizing the crises, complications and worsening of the disease, itself, plus reducing the need for and use of reactive sickness care for such conditions, and their intrusiveness into patients’ lives• Risk condition management -- aimed at minimizing the extent to which conditions such as overweight/obesity, and “pre-disease” states -- such as high, but not-yet-disease levels of blood sugar, pressure and cholesterol; osteopenia; etc. – cause or become diseases or lead to injuries• Risk behavior management – aimed at preventing, ending, or reforming unhealthy and risky behaviors -- such as smoking, substance abuse, physical indolence, unbalanced and over-rich diets, ineffective stress management, and unsafe patterns of sexual behavior, driving, working, playing, etc.-- that significantly increase the risks of disease or injury• Health/wellness/fitness promotion – aimed at improving patients’ status beyond the mere “normal” level, to reduce their risks of disease and injury, improve their recovery therefrom, improve their “development” or reduce risks during normal life stages from birth to death, minimize risks or side effects from disease treatments or increase the success of rehabilitation
These categories of proactive health care are truly complementary in the sense that they complete the potential of medicine with respect to the health of patients. Modest efforts commonly applied and insurance-covered, such as once-a-year immunizations and physical exams may contribute to such completion, but don’t come close to achieving the full potential. Medicine might once have included more of these proactive elements, but third-party payers’ parsimony and short-term focus have greatly diminished their inclusion in practice, while the need for and value of proactive health has, if anything, increased.
And now third-party payers are promoting the proactive side of medicine, though mostly via non-traditional “health care organizations”. Specialized vendors, along with employers or commercial insurance plans (e.g. CIGNA, Aetna), themselves, are the dominant sources of proactive medicine today, not hospitals or physician practices. This has long been true, and worksite wellness among employers and disease management among insurers have both expanded to cover almost the full range of proactive medicine.
These are also “medical care” providers, at least in the sense that they have physicians as medical directors and nurses as coaches or case managers, for example. The relatively modest number of traditional providers, including hospitals and physician practices, that are significantly invested in proactive medicine tend to serve far narrower markets, offering limited services for limited conditions. Diabetes management and fitness centers, bariatric surgery and executive health programs operated by hospitals, or chronic care model programs, occupational and executive health services offered by physicians are examples of “toe-in-the-water” approaches by traditional providers.
At least in theory or rhetoric, hospitals are supposed to be in the health as well as sickness business. The American Hospital Association’s official vision is to see: “…a society of healthy communities where all individuals (emphasis mine) reach their highest potential for health.”[www.aha.org]. The American Medical Association officially consists of “Physicians Dedicated to the Health of America”, to: “…improving the public health through promoting healthy lifestyles.” (www.ama-assn.org)
But the reality is that both hospitals and physicians derive the vast majority of their income and devote the vast majority of their efforts to treating people who are sick, not to reducing the incidence and prevalence of disease and injury, or of crises, complications and worsening of chronic conditions. Indeed, when they have ventured into the proactive side of medicine as a business venture, they have as often failed as succeeded in making such businesses viable.
The other stakeholders in the ineptly labeled “healthcare system”, especially payers and patients, are increasingly seeing their own best interests as much or more in the proactive health as reactive sickness side of medicine. Providers may continue to devote the vast majority of their efforts and investments to reactive sickness side, though many, particularly physicians in “retainer practices” have found ways to combine these truly complementary dimensions of medical care successfully.
In the case of medicine, what “complements” its reactive sickness dimensions not only completes it, but competes and conflicts with these traditional dimensions. Proactive health is aimed at, evaluated on and paid for because of its success in reducing the need for, use of, and expenditures related to reactive sickness care. But despite this conflict, medicine can only be considered complete if it offers and delivers the full range of its potential with respect to the health, as well as sickness of patients. Nothing less truly reflects complete medicine and the complete, best interests of patients and society.
Margaret VeachSenior Editor, HFMA
At last week’s annual meeting of the National Conference of State Legislatures in Nashville, Pulitzer Prize-winning presidential historian Doris Kearns Goodwin shared the lessons in leadership she had learned writing her newest biography, Team of Rivals: The Political Genius of Abraham Lincoln. For his cabinet--the most unusual in U.S. history, according to Goodwin--Lincoln chose men who had openly criticized him, men who had badly wanted the presidency themselves but had lost to him. Asked how he could appoint such individuals to work so closely with him, Lincoln replied, “These are among the strongest men in the nation; I cannot deprive the nation of their strengths.”
What particular quality made Lincoln such a strong leader? Goodwin believes he had several, including these:
These lessons in leadership have as much application today as they did 150 years ago--perhaps even more so. Recognizing the strengths of others, sharing credit, accepting responsibility are all qualities that take courage--and make leaders.
Jeni WilliamsSenior Editor, HFMA
Do you have what it takes to be a CFO? More than 50 HFMA members who aspire to become CFOs attended a seminar at the 2006 Annual National Institute to find the answer. According to presenter Robert Hemker, CFO for Palomar Pomerado Health in San Diego, there are eight primary things that healthcare CFOs need to know.
Who you are. Values such as integrity, honesty, respect, and ethics are critical for CFOs. They must display a willingness to be held accountable, not only to their organization, but to their patients, their employees, and their communities. “This one is a challenge, and some people are willing to accept that challenge, and some are not,” Hemker says.
Your customer. Knowing who your customers are and what their needs are is important no matter what type of organization you work for.
What a CFO is. “What you’ll find at each level of the organization is a unique understanding of what a CFO is,” Hemker says. For example, a CEO will likely view the CFO as a strategic and operational leader and an adviser and counselor to the senior leadership team regarding development of programs and services. A chief nursing officer, on the other hand, will view the CFO as “keeper of the purse strings,” the person who ensures the financial viability of the organization.
Your organization. Healthcare CFOs cannot get by on their knowledge of finance alone. They must also have a strong grasp of all of the organization’s operations, such as nursing, ancillary operations, strategic planning, marketing, IT, quality and patient safety, and the perspective of the organization’s medical staff.
The healthcare environment. CFOs must understand the external factors that affect health care, such as increasing regulation, competitive threats to market share, challenges to tax-exempt status, and risks to operating margins, as well as challenges such as disaster relief and recovery, management of capital and debt, and consumer-driven health care.
How to communicate effectively. The key to effective communication with all constituencies is to listen, listen, listen, Hemker says. Don’t speak in “financeze,” he says. Instead, learn your customer’s language.
How to execute strategy. This is the CFO’s most crucial role, Hemker says. “Each one of the challenges facing health care, although they seem like uncontrollables, has an element of strategy behind them,” he says. Knowing your constituency, through one-on-one interactions, will help you develop strategies to meet these challenges.
Succession planning. Surround yourself with future leaders and successors to the CFO role, Hemker says. Develop career ladder growth skills by developing additional skills, looking for new opportunities to grow, seeking mentors, and watching, learning, and growing.
Robert FrombergEditor in Chief, HFMA
Yesterday over breakfast I read an Associated Press article that told the story of several patients nearing the end of life who faced sticker shock over the cost of expensive treatment that would prolong their lives but that was not covered by insurance. Some of the patients said no to the treatment.
The article raises huge issues about cost and coverage, but first check out the way the article portrayed how one patient learned about the high cost of this treatment:
She was waiting for her second treatment…when someone from the business office marched in. Her share, she was told, would cost more than $18,000, since the drug wasn't insured for her type of cancer.
“Someone from the business office marched in.” Marched? Now where did that come from? Well, no matter. Whether it was the reality or the reporter embellishing or the patient’s perception, this image is a reminder of the way people view those at hospitals who bear information about cost and payment. What a great example of why the PATIENT FRIENDLY BILLING® tools for improving financial communication are crucial.
The larger issue, of course, is healthcare costs. The debate on this point often sidesteps the painful issue of the finite nature of healthcare resources. The article quotes Harlan Krumholz, M.D., of Yale University as saying, "People still have an underlying belief that there's an infinite amount of resources that can be invested in healthcare. But I think we're coming to a realization that we're going to need to confront these issues." Does anyone remember when Richard Lamm, former governor of Colorado, spoke about the so-called rationing of care? The response: he wasn’t in office much longer. Anyone interested in this issue should read an article Governor Lamm wrote in hfm magazine a few years ago called “Who Is Entitled to What?” in which he writes, "We cannot provide unlimited, unrestricted health care if we are paying limited taxes and insurance premiums."
So there we have it—in one short AP article, the range of challenges in the business of caring, from the way in which one business office person talks to one patient to the need to figure out a way to determine how many healthcare resources should be devoted to which patients. Whew.
Scott MacStravic Ph.D.
I noticed the other day an online promotion for a webcast called “The C-Suite’s Guide to Employer Relationships,” sponsored by the publication HealthLeadersMedia.com. The announcement noted that: “For decades, hospitals have been separated from the true purchasers of healthcare – employers – by payors. While health plans are still firmly in the middle, leading hospitals and employers are finding innovative ways to create relationships with each other. For hospitals, these relationships are an opportunity to attract more patients and extend their services beyond traditional need-based care. For employers, a direct line to the hospital’s c-suite creates a dialogue for reducing the high cost of healthcare.”
It mentions that hospitals can use employer relationships to “…convince employers to insist your hospital(s) be include in their payor’s network” and to “…sell health risk assessments to employers as a way to help lower their premium costs.” It notes that health risk assessments can enable hospitals to “…aggregate data from the assessments to help you plan for your service lines’ needs.” And relationships with employers can help hospitals “…develop lasting customer relationships with a group of paying, insured consumers.”
While hospitals have had opportunities to develop relationships with employers ever since both have existed, they are often not the best of pals. Hospitals have offered VIP suite accommodations and executive health programs to business executives, i.e. premium level, luxury treatment and health management for them, when they wish. But few hospitals are in the occupational health business, or doing much to help employers control their most worrisome source of labor costs – sickness care/insurance for their employees and dependents.
There is a good reason for not helping with this problem – it represents the main source of revenue for hospitals, sickness care, and the best source of profitable revenue for them, with government programs constantly seeking to cut payments. Indeed, the advantages cited above reflect the superiority of insured employees as patients, but employers lose whenever their covered employees or dependents use hospitals’ services.
The HealthLeadersMedia.com program does mention that health risk assessments (HRAs) are logical places to start such a relationship. But HRAs are only the start, and of something big and threatening to hospitals. They represent the first step in what are becoming almost universal efforts -- among employers who think of their employees as valuable assets, at least – to improve the health of those employees. Employers are now investing in a wide range of proactive health management initiatives based on HRAs of their employees and dependents.
And these initiatives are aimed explicitly at reducing employee/dependent sickness, sickness care, and overall sickness-related productivity losses. And since the greatest productivity losses tend to come from chronic diseases, employer initiatives typically focus on reducing the incidence of such diseases, while managing existing diseases to reduce the crises, complications and worsening thereof. If successful, such efforts could dramatically reduce the use of hospital care by employer-insured patients, leaving them dependent far more than ever on the generosity of CMS.
The option hospitals have, of course, is to partner with employers in addressing employers’ biggest problem – the total costs and damage to their performance caused by preventable or manageable illness and injury. Since employers’ total costs and damage amounts to multiples of sickness care costs, per se, these partnerships could easily result in significant, profitable revenue from preventing and managing illness injury to make up for any losses in revenue from treating sickness. Lacking that, partnerships that benefit only hospitals are both unlikely and hardly worth the name.
Richard L. Clarke, DHA, FHFMAPresident and CEO, HFMA
Courage in Leadership, the theme of HFMA Chairman Joe Fifer, involves having the courage to speak up when things are going wrong, and the courage to do the right thing for the right reasons.
Lisa Goldstein, Moody’s team manager for healthcare ratings, writes in the forthcoming September issue of hfm magazine that “Successful leaders demonstrate a willingness to make and execute difficult decisions.” She notes that successful management teams establish strong credibility as demonstrated by their track record of achievement. In other words, they “walk the talk.”
Revenue cycle is an area where courage in leadership is needed. Issues such as pricing, billing and collection techniques for the uninsured, and accounting for community benefits require that leaders make the right decisions for the right reasons--not because of the threat of litigation or regulation.
Take pricing. List prices for medical services are almost impossible to defend without a long explanation about cost shifting, payer contracting, governmental rules, and so on. And these issues are real and complex. But many believe these explanations are merely ways to mask the true cost of these services. Reporters, consumer advocates, and legislators all decry this system of pricing--one that we appear to defend. Courage in leadership, however, would lead us to walk the talk by changing the method by which prices are set. And some provider organizations are doing just that. They are renegotiating payer contracts, developing pricing rationales based on cost or average payments, and working to eliminate regulatory barriers to rational prices at the state and national levels. It is not easy, and for the most part, it’s not currently required. But it is the right thing to do.
Similarly, developing, implementing, and publicly disclosing charity care and collection policies is an example of courage in leadership related to the revenue cycle. Recently, I listened to a consumer advocate who stated that while most hospitals may have rewritten their charity care policies, most do not publicly describe or display them. From the hospital perspective, there is a risk that some individuals will take advantage of the situation by providing incorrect information to meet criteria, or dropping health coverage to gain the benefit of our policies. But that concern should not drive the methods by which we implement and disclose these policies. Responding to the real issues faced by uninsured and underinsured persons of limited means is the key concern. Fully implementing and disclosing these policies is another way we demonstrate courage in leadership.
And what about accounting for community benefits for tax-exempt organizations? Some organizations attempt to justify their tax exemption by identifying everything that might be considered of value to the community. But walking the talk requires us to first proactively identify community needs, then to plan to meet them within the financial capability of the organization. It is a forward-looking approach to making a difference, not a backward-looking justification for exemption. And it’s done because it is the right thing to do.
HFMA has the tools to help. The key is having the courage to use these tools.
Robert FrombergEditor-in-Chief, HFMA“Price transparency? That’s impossible.”
The topic of discussion was price transparency, and one staff person reported that a healthcare finance professional recently called it “impossible.”
That’s a rational response. It’s rational if you mean that posting average prices on a web site is not useful. It’s also rational if by “price transparency” you mean providing real-time, patient-specific estimates of hospital charges that a patient will pay out of pocket. And it’s rational if you broaden “price transparency” to include its close cousin: simplified charge and payment structures.
Meaningful price transparency and rational pricing involve processes and relationships so complex that achieving the desired objectives seems about as likely as the Chicago Cubs winning the World Series.
In fact, let’s make a list of why price transparency is impossible. I don't want to make your hand hurt scrolling down the screen, so I’ll condense:
That list of reasons that price transparency is impossible comes from Consumerism in Health Care, the recent PATIENT FRIENTLY BILLING® project report. But here’s the odd thing: This list appears on pages 6 and 7 of a 20-page report. In other words, this list of the impossible is the starting point. The rest of the report tells you how to begin chipping away at the impossible.
This month hfm magazine published an article called “Advance Estimates: 4 Approaches to Price Transparency in Health Care” by Terry Allison Rappuhn. The article shows four health systems providing tailored preservice estimates to patients. None of the examples is flawless, but these systems, too, are chipping away at the impossible. And next month hfm magazine includes an article called “Revenue Cycle Customer Service Adapts to Consumerism” by David C. Hammer that provides many examples of health systems enhancing their financial communications with consumers.
Twenty years ago, I observed a focus group of physicians commenting on a proposed periodical designed to provide the latest clinical-care guidelines. I recall one physician looking up from the sample on the table and right at the mirrored wall, behind which sat the observers. Although he couldn’t see us, he shook his finger at us. “I know you,” he said, his voice rising. “You people back there want to control how I practice medicine. Well I’ll retire before I let that happen. And I’ll tell my children not to be doctors, either.”
I left that focus group thinking that standardizing clinical processes was impossible. But today, evidence-based medicine--while always a work in progress--is part of the everyday discourse in health care.
Having had that experience, I can’t help thinking that with so many healthcare finance professionals chipping away at the impossible, meaningful price transparency is inevitable.
I can recall when the hospital emergency department (ED) or room (ER) was considered a major advantage, with high trauma center designation the best advantage to have. Large numbers of patients enter the hospital through the ER, and as long as the local public hospital took care of the “knife and gun club” patients who had no insurance or ability to pay, the ER was an essential portal for hospitals to have.
Thanks to the decline in the number of short-term general hospitals, the number of their ERs has declined as well, while new specialty hospitals and free-standing ambulatory care facilities have not made up for the decline. According to a recent article, the number of hospital ERs has fallen by 12% since 1990, while demand for ER care has skyrocketed. [P. Kletke “The Disappearing Hospital Emergency Department” Hospital & Health Networks Aug 1, 2006 (www.hhnmag.com)]
Countering this trend is the fact that trauma centers have more than doubled during that period, from 678 to 1604, a 137% increase, as the proportion of hospitals with such centers increased from 13 to 35%. And the combination of more people choosing ER for care (per capita visit rate up 10%) and the growing population (up 18%) has produced an increase in ER use of 30%, and since the number of ERs has decreased, an increase in the use of existing ERs of 50% over the past fifteen years.
ERs have always been used for three levels of need: 1) truly emergent care where patients need care immediately or risk severe damage, even death, and need the facilities of the hospital to deal with the problem; 2) urgent care where patients need care promptly, but do not require the unique facilities of the ER, and could obtain needed care in an urgent care center, or even a physicians’ office if one were available; 3) non emergent/urgent care where patients lack a regular physician or usual source of care, and may be unsure whether they would be welcomed elsewhere, or does not wish to wait until one is available.The apparatus needed for truly emergency care is very expensive, and with few patients really needing it, could be prohibitively expensive if the ER were only used by emergency patients. Even urgent care pay significantly more in an ER than they would for similar care in an urgent care center. And ER charges for non-emergent/urgent care tend to be outrageous compared to what a physician visit or trip to a convenience care clinic would cost.
There has been a strong concern over “misuse” of ERs by non-emergent/urgent patients for decades, but little effective action taken to reduce such numbers. The recent burgeoning of convenience clinics located in supermarkets, superstores and drug stores has created a whole new infrastructure for reducing ER visits by offering a better, more conveniently located and affordable alternative. Urgent care centers have not caught on as well as might have been expected, but convenience care may well make a big dent in ER use.
More important, convenience care clinics may force physicians to open their offices at more convenient times for families where both parents work, further increasing the options available to them, and saving them the costs and long waits predictable in ERs. Harris County, Texas has imposed a deposit requirement of $150 in its public ERs, or $80 for its urgent care centers, if patients have non-urgent signs and symptoms.
The deposit requirement, coupled with waits that sometimes extend to 12 hours for ER care, is expected to discourage at least some patients from seeking non-urgent care in the ER, and steer more to the growing urgent care capacity it is creating, to routine visits at community health centers, or even to the growing number of convenience clinics opening in the area. Harris County expects the ER volume to decline by 20% thanks to its “RightCare” strategy, and greatly reduce the roughly half the time its ERs spend on divert status.
While “punishing” people for using ERs is one way to reduce misuse, it is likely that a marketing strategy would work better. Harris County community health centers often involve eight-week waits to get an appointment, for example, though they try to see patients who need to be seen for minor illnesses within a week or two. Clearly, patients in general will want to be seen far more promptly than that, and would be better off going to a source of care that could become their medical home. The challenge is to make access to urgent or simply convenient care far more available and affordable than ERs are, enough so to attract people away from ERs, rather than expecting ERs to drive them away through unaffordable pricing and ridiculously long waits.
The hfm magazine 2007 editorial calendar is all but finalized. The calendar, which lists topics the magazine plans to cover during the year, has obvious use for writers and advertisers. (Let the flood of calls begin!) In addition, it's a window into the issues that HFMA, based on our research and insights, believes are most important to healthcare finance professionals (or in some cases should be important but have not quite bubbled up yet on our interest surveys).
Speaking of sneak previews, before I get to the calendar, allow me a little shameless promotion. In a few days, the first issue of our new publication for small and rural hospitals, Big Business for Not-So-Big Hospitals, will hit the mail with articles on where small hospitals should invest their resources and regulatory issues that will affect small hospitals, among others. I hope you'll click on the link, take a look, and subscribe. And another new publication, Consumer-Directed Health Care, just mailed last week, with articles such as tools of the CDHC trade, supply costs and price transparency, and who's who in CDHC.
On to the calendar. As always, I welcome your thoughts.
January: Leadership
Planned topics include evaluating your leadership skills, motivating and inspiring employees, developing talent and new leaders, and leadership actions related to consumerism and price transparency.
February: Technology
Planned topics include making the most of the revenue cycle technology you have, assessing your information technology needs, financing information technology (especially electronic health records), and technology for managing health savings accounts and other aspects of consumer-directed health care.
March: The Uninsured and Underinsured
Planned topics include the latest state and federal activity to regulate community benefit, charity care, and collection practices; new regulations requiring proof of citizenship for Medicare payment; and examples of financial practices related to uninsured and underinsured patients from leading organizations.
April: Cost Management
Planned topics include collaboration between administration and physicians to control supply costs, collaboration between administration and physicians to improve clinical care processes, service line management, and controlling labor costs, including how to address long-term nursing shortage, structure employee benefit programs, and address unionization.
May: Business Development
Service line structure in light of DRGs being rebased to reflect severity, how to collect and use market intelligence, physician recruitment and payment, merger and acquisitions: trends, due diligence, and how to exit from a business arrangement.
June: Enterprise Risk
Planned topics include C-suite risks such as those related to conflict of interest and executive compensation, antitrust and antikickback issues, and quality and price transparency.
July: Benchmarking and Performance Improvement
Planned topics include key performance indicators for the revenue cycle (how to identify and use them), what finance professionals need to know about quality measurement, and hot to identify and use measures of organizational financial performance.
August: Financial Reporting
Planned topics include why and how not-for-profits are adopting Sarbanes-Oxley provisions, reporting charity care, effect of revisions to IRS 990 and other IRS issues, and cash flow management.
September: Revenue Cycle
Planned topics include innovative approaches to front-end revenue cycle improvement, point-of-service collections, and revenue capture, as well as special revenue cycle issues for small and rural hospitals.
October: Consumerism
Planned topics include innovations in price/quality transparency, commercial payment trends (including consumer-directed health plans), strategies for simplified pricing, how to help patients understand and use health services, how to improve financial staff’s consumer service skills, and how hospitals are structuring benefits for their employees.
November: Strategic Planning
Planned topics include key findings and strategies from HFMA’s environmental outlook, strategies for facility planning, essentials of competitive strategy, strategies for IT planning, and the role of finance in strategic planning.
December: Medicare/Medicaid
Planned topics include new Medicare payment rules, examples of states’ efforts to restructure Medicaid, and other significant changes to Medicare and Medicaid; the view of the capital markets regarding hospitals’ ability to cope with Medicare; and a forecast for what Medicare changes may need to occur in 5-10 years.
Disruptive behavior between surgeons, nurses, and anesthesiologists occurs frequently in hospital operating rooms—and it can hurt patient outcomes, according to a study by VHA Inc.
Sixty-eight percent of survey respondents said disruptive behavior needlessly contributes to impaired quality of care, while 67 percent linked disruptive behavior to adverse events and medical errors, according to a VHA release. Respondents also linked disruptive behavior with compromises in patient safety (58 percent) and patient mortality (28 percent). Nearly half of respondents said they were aware of an event that could have occurred because of disruptive behavior, and 19 percent said they knew of an adverse event that occurred as a direct result of disruptive behavior.
Those surveyed also expressed concern over the frequency of disruptive behaviors, the VHA says. Twenty-two percent of attending surgeons and 12 percent of anesthesiologists say they have witnessed disruptive behavior, ranging from verbal abuse to physical and sexual harassment, in other physicians on a weekly basis. Twenty-one percent of nurses have witnessed disruptive behavior in other nurses on a weekly basis.
The study described disruptive behavior as any inappropriate behavior, confrontation, or conflict, ranging from verbal abuse to physical and sexual harassment.
MarieAnn North, MBA, FACMPEDirector, Navigant Consulting, Inc.
Two years ago, I decided it was time to complete my Fellowship with the American College of Medical Practice Executives. I had intended to do so for many years, and had completed all but the final requirement. Unfortunately, the final requirement was an original research paper without a due date. Needless to say, it sat on the back burner for several years. It’s not that many papers weren’t started along the way. The ideas became stale, and I lost interest. It took finding a topic that captured my attention to generate the energy and enthusiasm to see this endeavor through to completion.
I stumbled on my topic quite by accident. I was asked to do a “brown bag lunch” with the faculty at one of my client sites on my thoughts as to why there are so few women in the top roles in academic medicine. Data supported the perception that diversity statistics were not improving noticeably. My research and interviews concluded in a list of what it takes for women to make it to those top Academic Medical Center or Medical School roles. While this was written from a female perspective, my male colleagues thought the list to be quite applicable to them as well. Below is the “formula for success” from my interviews, which also led to the successful completion of my Fellowship!
For those aspiring to make it to the top, success can be attained if you:
