Viewpoint: How reimbursement drives rigidity in US healthcare

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Unlike other markets, hospitals lose money during their peak seasons due to their inflexibility, according to an Oct. 4 Harvard Business Review article.

For example, florists will increase production and/or price before Valentine's Day in preparation for high demand. But under the current fee-for-service model, hospitals lose money when they have empty beds and operating rooms, which discourages them from having extra capacity when a spike in admissions occurs. 

This is why hospitals struggle when there is a surge of flu or COVID-19 cases, the article said.

Additionally, the quantity of beds in a hospital is fixed while the price of inpatient care is static. When last-minute staffing happens, it increases expenses, but revenue stays the same.

In April 2020, there was a 44 percent increase in required full-time employees, which increased labor expenses by 63 percent. This staffing shortage still remains in 2021.

The article argues that healthcare systems need to develop seasonal plans to improve flexibility.

Read more here

 

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