Hospitals are in the sickness business—not the healthcare business. They get paid to diagnose and treat illness, making more money for doing more things to each patient.
We talk about healthcare as a patient-centered enterprise, but that’s not really true either. Anyone who’s been a patient in most hospitals knows that they are confusing, hard to navigate, and demand an incredible amount of redundant information. Most departments within the hospital have their own information systems and most of those don’t speak to each other. Because regulations require the capture of certain information (or maybe because it’s needed to ensure that the hospital gets paid), basic information is asked over and over again—not between institutions, mind you, but between departments within the walls of the hospital. Until recently, the appropriateness of clinical intervention and quality hasn’t been linked in any way to payment. And if mistakes were made within the system, hospitals made more money by fixing those mistakes (like medication errors, hospital-acquired infections, falls, inappropriate readmissions, etc.). Even now, despite the Centers for Medicare & Medicaid Services’ (CMS’s) intent to deny payment for such never events, we’re on a path to dilute this nascent connection between payment and outcomes that should have been there from the start.
When financial squeezes have occurred, hospital administrators understandably cut and tightened. However, when you cut corners, run too lean with staff, and deal with sicker and sicker patients in acute care settings, mistakes are much more likely to occur! And we’re not suggesting that these errors are made with malicious intent, but rather that the critical focus on accountability for outcomes has been largely absent.
The reality of healthcare is that it’s big business. Despite the window dressing, when you get right down to creating change in any industry, it’s all about the money: Who pays for what and how. Economic incentives work in a very nuanced way, consciously and subconsciously, and drive decisions. As long as healthcare delivery continues on the path of fee-for-service reimbursement without regard to outcomes, the tendency to do more / make more will remain strong.
CMS has recognized that changes have to be made and has instituted some of these in the way it pays for healthcare. Commercial payers are quickly following suit. But current payment is predominantly done on a piecework basis, and when we’re trying to change tiny slices of activity, it’s really hard to meaningfully redesign the work.
Even as CMS struggles to reduce the cost of care, individual consumers are increasingly burdened by the combination of higher premiums and cost shifting by employers that leaves them with a larger percentage of that cost to bear. Inevitably these forces are building consumer pressure for a more market-responsive healthcare delivery system and all that implies.
Imagine a future where consumers ask questions about the price and outcomes that healthcare systems deliver—not questions about the cost of one MRI versus another, but rather about all the costs for a pregnancy or an orthopedic procedure. Today, costs for these areas are relatively easy to calculate as they have a defined beginning, middle, and end. Yet, very few healthcare systems are prepared to answer such questions. Fewer still are able to include the physician, home care, or rehab components. And for those that can offer a price estimate, even fewer are able to provide transparent data on health outcomes or the patient experience compared to competitors.
Without these data, how can a consumer decide to choose one hospital over another? This is the future of healthcare, and healthcare systems and independent physicians need to get ready for it.
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Rita E. Numerof and Michael N. Abrams are president and managing partner of Numerof & Associates, a firm that helps businesses across the health care sector define and implement strategies for winning in dynamic markets.
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The views, opinions and positions expressed within these guest posts are those of the author alone and do not represent those of Becker’s Hospital Review/Becker’s Healthcare. The accuracy, completeness and validity of any statements made within this article are not guaranteed. We accept no liability for any errors, omissions or representations. The copyright of this content belongs to the author and any liability with regards to infringement of intellectual property rights remains with them.
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