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What Your Hospital CEO Is Thinking
I’m currently in Charlotte, NC, working as a document review attorney. My current case involves hospitals and insurance companies, and my job is to look through thousands of emails in the inboxes of various executive and operational officers. There’s the confidential information that pertains to the case (which obviously I won’t be talking about), the day-to-day minutia of running any business (“So and so is training their replacement because while diligent and hard working, they are not a model of change-friendly leadership” is a masterful bit of corporate-speak), and the personal correspondence that probably shouldn’t have been sent from one’s work email (“My real estate agent is so lazy and lacking initiative he should be a government bureaucrat!”). But there’s also plenty of non-confidential information, from Wall Street Journal articles to slides of public presentations, and that information paints a picture of the medical industry today that I found fascinating, and I think Ricochet will too.
First and foremost, hospitals are well aware that health-care is too expensive, too hard to get, opaque in its pricing, and often wasteful in its execution. Further, they recognize that their options are either to improve themselves or be replaced by more consumer-friendly options. Chief among these ideas is the idea of moving away from “fee-for-service” models, where they are paid the services performed, to a “fee-for-value” model, where they are paid for improving the patient’s situation. Part of this is by reducing complications, a trend that Medicare is pushing by penalizing hospitals that have too many hospital-caused complications.
For example, vaporator-acquired pneumonia effects ~2 percent of inpatients, and it can be completely eliminated by following proper procedures, like leaving the patient’s head elevated at 30 percent. Unfortunately for the patients, it’s a complication that is accepted as “just one of those things that happens” in far too many hospitals. One hospital solved the problem by educating every single person who dealt with patients on vaporators — not just the doctors and nurses — on how to prevent the infection, and it literally took a department proving that a zero percent infection rate could be achieved before the rest of the hospital believed it was possible. They say that science improves one funeral at a time, but it’s supposed to be the out of date scientists — not their patients — who do the dying.
Another way of providing “fee for value” instead of “fee for service” is through the use of bundling. Say that your mechanic worked like a hospital. When you got an oil change, you’d pay one bill for the shop, another for the engine mechanic, and perhaps another for the oil specialist. Bundling is the radical idea of selling the $35 oil change as one service with a fixed, up-front fee, and increasingly, insurance companies are insisting on bundling healthcare services, leaving the hospital with the risk of the cost of the procedure going out of control (which makes sense, as they’re the ones with the greatest ability to keep prices from spiraling out of control).
Of course, that brings us to another radical idea in the health-care industry: activity-based costing. Ask your hospital how much anything costs and they don’t know. There’s a “chargemaster” program that spits out numbers, but the secret is that no one pays that price, and the logic used to set it often revolves around doubling or tripling the price in order to negotiate it down. To use the oil change example, if the mechanic billed like a hospital, the chargemaster would take the $25 it cost ten years ago, multiply it by 2 percent for inflation, quadruple that to have a list price of $100, knock it down to $50-70 for the insurance companies (depending on how well they could negotiate), and if I walked in and told them I was paying cash, they’d give me a discount and charge me $40. (To finish the analogy, the profit they made on the insurance companies would make up for the losses they take when Medicare only pays them $20 and Medicaid only pays $12.) Activity-based costing is the crazy idea of figuring out how much things actually cost. This can literally mean getting guys with stopwatches to observe how long each person spends working on the procedure and how many supplies they use. And it’s completely necessary due to yet another development in the health care industry: Consumers actually paying attention to costs.
Obamacare means that many people have much, much higher deductibles than they used to, and thus they’re paying a lot more attention to the costs of procedures. This has hospitals worried. You see, some routine items of care, such as medical imaging, have traditionally been a hospital’s “profit centers” — a fancy name for charging too much in order to make up for losses elsewhere. Unfortunately for the hospitals, many of these are things that can be done in free-standing outpatient units, and the most innovative of those units are putting their bundled prices online so consumers can comparison shop. After all, who wouldn’t skip the $1000 ultrasound at the hospital when a medical imaging center can do it for $750. Because it’s not an emergency, you do that comparison shopping at home. The Expedia.com model is coming to healthcare, and it will kill the inefficient hospitals as thoroughly as it did airlines.
Now, I sort of knew most of this from my parents: an ultrasound tech and a nurse. But actually seeing how the sausage gets made has been extremely cool, and I hope y’all have enjoyed this peek into the world of healthcare.
Published in Healthcare
DING DING DING!
I can’t wait for the collapse of all of the Western Bond markets. It will be glorious.
The USSR collapsed for similar reasons.
I LOVE THIS.
It would be good to have someone come in and break that economic power. Competition is, after all, the cure for such monopolistic costs. Conceptually, we might imagine government doing this, but since that monopoly power is granted by the political system itself, it’s not where the solution can be sought.
I want Bezos to be the deflationary nightmare that saves The Republic from it’s self.
This reminds me of a study done years ago, when I was still involved in Quality Assessment in Medicine. A hospital in Philadelphia had a some poor outcomes but a pretty good cardiac surgery group. Another hospital in the city had poor outcomes by the cardiac surgery group. The second hospital hired the cardiac surgery group of the other hospital. In essence, they traded cardiac surgery groups. Both improved their outcomes. The one with poor outcomes, improved with the better surgeons. The hospital with better outcomes did almost as well with the weaker surgery group. The problem is multifactorial.
Very much so. Ventilator-based comolications arise from much more than just a 30 degree HOB.
Also, “value based purchasing” which you seem to endorse is a lie. It is one of the many catch phrases of “Meaningful Use”; a government program primarily intended to reduce Medicare costs and turn more costs back to the hospitals while also tracking patient data.
This post could have used more experience in actual hospitals and less corporate speak and suppositions.
But I suppose it’s worth the exposure. People should know how the sausage is made.
Amy, congratulations! You are practicing law, something you once feared you might never do. (We elephants never forget!) Good for you!
The Stupid Party and the Evil Party.
And if you’ll notice, I described 30 degree HOB as one of the proper procedures for everyone to learn about, not the only one.
A quick Google search doesn’t turn up the exact article I saw in document review, but there are hospitals that have managed to get their VAP rates to zero for extended periods of time:
https://www.ahcmedia.com/articles/79394-how-a-hospital-brought-vap-rates-to-zero
https://acphospitalist.org/archives/2007/09/vap.htm
http://www.infectioncontroltoday.com/articles/2011/12/driving-down-vap-rates-one-hospitals-success-story.aspx
Okay. Since you’d like to fixate on one particular point of my comment, I can fixate on it as well: no, a quick search doesn’t turn it up. It’s probably in a medical journal on critical care. I also said that HOB was only one, I never said that you said it was the only one. However, since you are so interested in VAP, let me discuss the finer points of prevention without having to use journal articles or theoretical medicine. Let’s discuss actual practice.
VAP is not inevitable in most cases. As it has been said, the most acutely ill are most at risk as are those who are chronically on a ventilator (who are often developmentally disabled). Some of the bundling procedures started many years ago and have largely made VAP a thing of the past. A large portion of that is simple oral care and preventative measures, including ensuring that the ventilator tubing is drained of condensate frequently and positioned to prevent backflow. Growth of microbiota is reduced or eliminated by frequent cleansing with chlorhexidine (Chloroprep, for those in need of a brand). Most bacteria are not immune to chlorhexidine…yet.
When you have patients that have a chronic tracheostomy, another complicating issue is cleanliness and sterilizing or replacing the inner cannula (the tube that goes into the hole). Once you have a permanent stoma (hole), it’s less likely to get infected because the edges aren’t open. However, as one would expect, it’s a hole straight into the trachea and into the lungs. It is very, very easy to have anything non-sterile come in contact with it. People with chronic trachs are also much more likely to have other factors that reduce immune function, reduce ability to express secretions, and put them into environments that are less than sterile with people who are not always medical professionals managing their treatment.
I’ve been a nurse during the last 10 years. I have watched the changing landscape for VAP. It’s great to see research helping people.
But please do let me know how you feel about Meaningful Use, tracking measures, CLABSI and CAUTI initiatives, as well as hospitals increasing rates of movement-related injuries with staff.
…you know, from what you’ve read.