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What Your Hospital CEO Is Thinking: A Reality Check and Rebuttal
Ms. Amy Schley made an interesting post that seemed to spur some conversation on cost-based health care services. Due to her increasing legal experience working on memos for a hospital, she let us in for a little behind the scenes peek at what some of her bosses’ emails had taught her. For one, I’m glad that people are thinking about healthcare once again.
On the other hand, I’m extremely disappointed in where this conversation inevitably goes. People with no experience in actual hospitals gather together to discuss how horrible it is that hospitals just can’t work as a business. “Why, outpatient facilities are able to do the same job for cheaper!” “Why should anyone pay more for something they can get for less?!?” “This is why healthcare is so messed up in this country!”
Please allow me to unveil (at great length) what your executive hospital administrators are thinking in response to Ms. Amy’s post, derived from actual budget meetings, sit downs that I have had with my own executive management team, and my experience as a hospital nurse (as well as conversations with my pharmacy COO sister and Ex-Accounts Receivable VP pharmacist father).
Hospitals are attempting to provide a service that is very human; unlike other service industries, people need health care. People need doctors. People need medicine. While a service is being provided, a hospital or other health care provider is providing necessary treatment even for the most simple of functions. These services simply cannot be provided by a machine. The services that infirm people require also require people to perform.
These people, these providers, also happen to be human. They require food and water and breaks in order to perform optimally. Health care providers usually work extraordinarily hard: they work unreasonable hours in difficult circumstances to provide care and indeed, service to people who are often ungrateful. These humans provide care for other humans’ bodily functions. They come into contact with biohazardous material unexpectedly and put their own health at risk.
New regulations in hospitals minimize the humanity in care and tend to emphasize numbers, goals, outcomes, and adherence to business models. This would advance health care exponentially if it weren’t for one thing: humans. Humans are unpredictable and the course of care is often complicated by patients with complex and multifactorial diagnoses with unexpected reactions to the interventions. That is only the patients. The providers are also human with all of the benefits and drawbacks therein.
This complicates matters further for the economic-model proponents. We cannot have services without payment. That is considered slavery. Yet many times, this is what is expected of health care staff. They are required to perform services beyond their job description as “part of the job”. If those services are not provided, hospitals are panned or maligned as being uncaring, patient-unfriendly facilities. Cost is never mentioned.
Let me answer Ms. Amy’s points:
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.
@AmySchley is right. Hospitals are aware the healthcare is too expensive, opaque in pricing, and wasteful. This is a point of conversation to employees on a near-constant basis. Posters are set up in the conference rooms and our break-rooms, once a brief oasis of normal human biological functioning, is now the new place to be accosted with economic data. Ever wonder what we are doing that is wasteful this week?
Don’t! There’s a new 70+ inch TV enveloping an entire wall of the break-room. It will let you know your failings any time you come in for a moment of respite. See our numbers? And don’t forget! There’s more continuing education on a new initiative for Patient Satisfaction that needs to be completed on the intranet prior to the mandatory inservice.
On a more serious note, health-care pricing opacity partially comes from the source of information. If you ask your nurse or your doctor how expensive things are, ethically, they cannot tell you exact prices. It interferes with your care and is a source of conflict. They are your providers, period. Most have divorced themselves from the pricing as much as possible in order to not have it prejudice their treatment decisions. Discussing costs and pricing is not conducive to building a relationship of trust. Many patients refuse care or leave against medical advice because they are afraid of the financial impact. If telling someone up front how much testing, treatment, or a procedure is going to cost would result in them not receiving medical care, there would be a civil suit immediately upon their demise.
Ms. Amy stated:
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.
and later:
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.
This makes it sound like hospital executives woke up one day and realized that their facilities were being replaced. Please let me disabuse you of that notion. Hospitals are not, nor will they ever, be replaced for “consumer-friendly options”. Hospitals are places for acutely ill people to receive hospital-level treatment. They should not be places for routine examinations. The move from locations with blended outpatient and inpatient services to truly inpatient acute care is happening now. Hospitals are realizing that they can save money and provide more services in an outpatient setting. If they want to cover their costs, hospital systems (because they are truly a delivery system) are beginning to provide imaging and sub-acute services on an outpatient basis. These services can be provided in a less expensive setting that is less likely to complicate the course of care.
One of the ways that outpatient settings reduce cost is avoiding Medicare penalties. The rules for Medicare are different for hospital licensing and procedures. Outpatient settings do not suffer from the same restrictions or expectations: less cost, more benefit. Additionally, in an outpatient setting, complications can be correctly attributed to the patient, rather than the facility. If a patient in a hospital refuses to move and gets a preventable pressure ulcer, this may be fined steeply. Should the patient receive one at home, the responsible parties pay accordingly.
Ms. Amy calls it “pay for value”, while the US Government calls it “value-based purchasing“. This is a misnomer. It is not paying for the value of the care, it is paying (or better yet, not paying!) for outcomes. This has increased defensive charting (overcharting) and certain medical tests that are unnecessary in order to document that the outcome was unavoidable. The repayment by Medicare, then, does not meet this new increased cost; the hospital tends to absorb the cost as a necessary evil for continuing to be a Medicare provider. Indeed, hospitals absorb much of the health care costs for underserved populations and for the patients who cannot conform to government guidelines.
Repayment by Medicare is now given, held, or restricted based upon performance. This is one way of controlling medical costs. As Medicare creates unreasonable benchmarks and withholds funds based upon results, insurance companies will follow. Early adoption of their strict rules, regulations, and outlines for treatment (which include antibiotic use, surgical guidelines, use of medical devices, ad nauseum) gives hospitals bonuses, whereas holding out, reduces payments until a defined time. Then it becomes a fine.
Yet another way that the government is controlling your care. Your Hospital CEO knows this and is playing the game as best they can in order to reap the benefits and stave off penalty. Your Hospital CEO also knows that it is reducing individuality in care and is leading to conveyor-belt medicine.
Your Hospital CEO is also having companies like Deloitte consult in expensive cost-analysis projects to determine what they can possibly do in order to make up for losses. These consulting firms often have no experience in real medical practice, but will advise hospitals as if they were any other business: the patient is always right, service is key, make sure the hospital is an exquisite experience they could not have anywhere else. Unfortunately, the patient is not right (or else many of them would not be there!), service cannot be swift, and Disney-like without consequences for other patients. My own hospital had Disney’s service gurus consult to help us become more patient-centered. This results in CEOs more concerned about satisfaction surveys and VBP (value-based purchasing) than the health or well-being of the staff. When the well-being of the staff suffers, sick calls go up, and staffing costs rise.
This cost is passed on to the consumer. Remember: the most expensive cost in health care is the cost of the staff needed to provide it.
In another spot, Ms. Amy pointed out evidence-based improvements in hospital care:
For example, ventilator-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.
Even prior to Medicare’s new rules, this was a point of concern for all learning hospitals (hospitals that are University-affiliated or provide a teaching ground for medical education). The original study was released over 10 years ago and most hospitals (to my knowledge) began VAP-related reduction measures shortly after it was released.
From a personal health care provider perspective, I have never experienced any conditions in non-terminal patients that were accepted as “just one of those things that happens” – from hospitals I have been a patient in, worked in, or had a family member be in. I admit that I was at least a little offended by the supposition that preventable complications are blindly accepted.
@AmySchley goes on:
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).
With new technology, complicated procedures, and patients sicker than ever, it may be difficult to ensure that costs stay within the bundled price. Surgical complications arise not only from the surgeon and the care provided post operatively, but also arise from the home preparation for the surgery and condition of the patient. More often than ever before, the condition of the patient is a concern. People want risky surgeries and they want perfect outcomes. As we attempt more complicated procedures, the cost will necessarily rise; the education and tools required demand it. Fewer people can perform these delicate procedures and their services will be expensive.
One of my most recent patients suffered from unforeseen operative complications; it could not have been prevented with even the most attentive, technologically advanced surgical team. The patient had presented in the hospital quickly after suffering a stroke. Treatment was provided and in the course of extraordinary measures, a bizarre complication occurred: there was an attempt at rescue which failed catastrophically. It could not have been avoided in the course of providing the desired treatment.A lawyer has, of course, already been retained by the patient’s family.
This brings us to one of the most important mantras of health care management: the people who have the greatest ability to keep prices from spiraling out of control are the consumers.
@AmySchley is right about one thing. It is interesting to know how the sausage is really made.
Published in Healthcare
Making the bed. I’d rather be strapped to a chair and forced to listen to Nancy Pelosi for 8 hours.
As I’ve said too often before, Americans not only want but believe themselves entitled to receive every possible new expensive medical advance. And all at the expense of other Americans. But it just isn’t possible to provide everything to everyone under any system. And it never will be. Most of the problems constantly causing such wailing and politicking among us are due to this never mentioned reality. No one wants to mention it because it points out the unappealing reality: someone is going to miss out. The only question is who and that is and will be determined by what system is used to decide who gets the ‘goods’. We do and, and I suspect will, continue to search for the system that will provide everything for everyone at little or no cost to anyone but will never find it. We could though, if we chose to, move to a realistic system where ability to pay along with some measure of personal health maintenance based on following a healthy lifestyle over decades resulted in some measure of access coupled with a reasonable measure of sympathy for those less fortunate due to no or little factors involving personal choice. But only if political influence could be removed and most citizens had the courage to look at things honestly. That would still not provide everything to everyone but it might result in lower cost as it precluded most lawsuits and resulted in less third party payer problems. I don’t expect that to happen. Though I’m basically an optimist I’m pessimistic in this area due to my realistic tendency to view my fellow citizens on the basis of life experience. If that makes me just an old curmudgeon so be it. I gladly leave the rest of the fighting about these things to all of you, since you are both smarter and more qualified that I could ever be. Thankfully.
Just the opposite. Hiding costs is anti-competitive.
I agree with @philturmel on this. People do need health care, but not nearly as much as they need water, food, shelter, clothing, and other basics. Health care is a service industry, but it is not uniquely vital, as you suggest. Don’t get me wrong, I think our jobs are important, but not as important as farming, working for a city water supplier, working in food transport, etc.
Kaiser does very well, or did when I knew about them, with Industrial Engineering methods. They have engineers design their clinics. For years they hired poorly trained doctors and my generation, for the most part, would have nothing to do with them. By the 1990s, they were doing much better at recruiting well trained surgeons.
Commenting function is acting up.
I loved both @amyschley‘s post and this one by @therightnurse.
As a survivor of a career whose great majority (24 years) was spent in healthcare IT (first with a large organization whose infamy proceeded (I think) from its reputation as the largest non-profit bankruptcy in US history (oh, I have stories), and then with a small, much loved, hospital with a community mission and a local focus, I could relate to points in both of these posts.
And all I’ll add is that the folks who work in healthcare are your friends and neighbors. And that most of us are just doing our best and trying to make things right. As with most things in life, if we wrote the regulations and the rules, things would be different. Trust me. I know.
Hilarious item from California, where so many things are hilarious.
https://www.cnn.com/2018/02/11/health/aetna-california-investigation/index.html
The Aetna Medical Director admits he never looked at UR requests.
Did they really think he would approve something not in the “guidelines?” A few years ago, a nurse with metastatic breast cancer was turned down for a bone marrow transplant by her HMO. She found out who the HMO consultant was, a UCLA oncologist, and then made an appointment with him as a cash patient. He recommended a bone marrow transplant and she sued and won. I’m not sure the BMT was worth while but the guy who was the HMO consultant was pretty stupid not to imagine someone who knew their way around healthcare would find him out.
Arrgh. Brings back memories of a hospital I worked at. The ER was old and falling apart. But the hospital got a brand new lobby with marble floors and counters, a grand piano, an upscale coffee shop and valet parking. Oh yeah and a new suite of luxury offices for management just off the lobby.
It’s a very fine line. One could get you sued. One could get you fired… it just depends on who specifically rats you out. If you tell a patient’s family member lab results and the doctors hadn’t already discussed it, that’s a firing offense. People are irrational and even more so when a family member is seriously ill.
My former hospital has two new towers and host of administrators but still has the same operating rooms built when the hospital opened in 1972.
Here is a story about how it should work. How we built a Trauma Center years ago.
https://chicagoboyz.net/archives/13160.html
It also depends on who you tell and what their agenda is.
Recently, a family member of mine was unexpectedly admitted to a highly-skilled critical/intensive care unit of a certain sort at a local, world-class hospital not far from where I live. On the same unit, a couple of cubicles down, was a nationally-known sports celebrity, also unexpectedly admitted after a recent on-the-field injury.
Mr. She and I got off the elevators on our first visit to see our family member, to find the entire unit lousy with famous fellow sports team members of this patient, and a young lady, a lab tech obviously not long out of school, hyperventilating in the hallway.
“OMG, OMG!” She exclaimed, apropos of nothing, to me as I walked by. “That’s [name of famous sports celebrity patient]. I had no idea! OMG!”
I told her to shut up, took her aside, sat her down, told her she’d just committed a fireable offense, but that since it was pretty obvious, from all the activity going on and what was in the news, who was on the unit (I’d already figured it out before she grabbed me and confided), I wasn’t going to report her. And I explained that what she’d done was unacceptable, and mustn’t happen again.
She swore she had learned a lesson, and assured me that it wouldn’t. And she thanked me.
I hope she meant all of that.
I left the bedside briefly when my daughter was having issues in school. I needed to be present during the daytime (and I had been working nights). I took a job in IT and it changed my view of patients, doctors, nurses and other healthcare workers forever.
I couldn’t believe the way that the hospital specifically made our charting even more difficult by allowing options for people to make mistakes (even though they knew it was an issue) or making something have multiple alerts, pop ups, or hard stops. I’ve had incidents with patients where I couldn’t put in an order because some stupid thing hadn’t been clicked acknowledging something else. People’s lives depended on it, seconds counted and our computer program was inhibited by the facility. It just blew my mind.
Some doctors really do believe that they are smarter than everyone else.
Yes, it’s a difficult balance. Either allowing a person to make mistakes by leaving the edits and stops out, or inhibiting swift progress through an order by requiring accuracy, and every “I” dotted and “T” crossed, upon entry.
Some hospitals “give” on the accuracy at the point the order is entered by having every single one reviewed in its entirety on the other end by Pharmacy, Lab, Radiology etc. But that takes time and adds expense also. In the current environment, I’m not sure there’s an ideal answer.
The newest and best go to the money-makers first. Eventually, it trickles down. But the administrators always seem to be doing just fine.
Nice article TRN.
Happy to be leaving the rat race for a long azz break
This is patronizing nonsense (though the tort concerns are certainly valid). It is for the patient, not physicians or bureaucrats, to weigh financial costs against potential health benefits. It is for patients to prioritize health concerns among other concerns. Many auto owners similarly struggle to well understand all their mechanics tell them, but the most trustful relationships are not those that hide costs, temporary alternatives, and other information.
More to the point, it contradicts your conclusion.
Keeping consumers in the dark empowers them to ration their own medical care?
Generally, your post is informative and insightful. Thanks.
It is possible for most people to live happy and productive lives without frequent medical assistance. The WWII generation understood that. Each successive generation is misled ever more boldly by the fantasy of cradle-to-grave comfort and strength, costs be damned.
The insurance companies considered these matters to be “Trade Secrets” Disclosing the price, even if you know, would result in being judged “Not Suitable for Managed Care.” Now, since Obamacare, the hospitals have bought up almost all the medical groups and doctors are employees., not the independent contractors we were.
My old surgical group, that set up the most successful trauma unit in California according to Don Trunkey who set up the system ,was coming up about three years ago for renewal of the trauma contract, The hospital CEO made an offer to buy the surgical group. The group declined. Six months later, the trauma contract was cancelled and an unknown group from elsewhere in California was brought in to take over the trauma center. The group that came in was unknown to the hospital staff. The ER group, which has become the “Gauleiters” of all admissions the past five years, was told not to refer ER cases to the old surgery group.
Two members of the group left the area and the other three have remained working mostly at the other large hospital. I have heard rumors of poor results in trauma but there is no public source of information. The hospital lost its JCAHO accreditation several years ago because of high complications.
https://www.ocregister.com/2015/12/03/deadly-and-hidden-mistakes-hospital-error-reports-often-elude-the-public/
I would not be hospitalized there myself. After 30 years of trying to make it the best.
Patronizing? It’s patronizing to say that that health care is inherently different than woeking on a car?
The difference is, you don’t need a car. If you *need* a surgery to take out your appendix, its unethical to make it into a money thing. If you want to know costs otherwise, you can talk to your provider’s billing people to find out your contracted rate.
So you think it builds trust if the people treating you know that you don’t want to pay for care? That’s pretty explicitly what people complain about: care is restricted based upon ability to pay. That’s why they don’t get your insurance or billing info at the ER until after you are treated. No billfold biopsy.
Additionally, most people who get a bad product don’t buy it again. That’s part of consumer control. It’s not just about a simplistic price listing. Unlike cars, the human body is more complex and less predictable. If you don’t like a mechanic because something goes over the estimate, you don’t get to not pay. You still pay. But then you go on Yelp and Facebook and slam them. Then you never go there again. That’s how consumers largely impact the system.
No, it is absolutely not unethical to make it a money thing. This arrogance on the part of healthcare providers is a core problem. You may feel ethically bound to provide a particular service without regard to cost, but it isn’t your money!
I don’t understand this. Maybe you should have been there all those nights I was operating on illegal aliens to tell me I didn’t have to do it and could be home in bed. It was ethical responsibility that held healthcare together all those decades and which has largely been slipping away since Obamacare made healthcare into another industry with the same ethical standards as used car dealers.
The CEO who terminated the trauma contract with my old group was a prior executive with Pepsico and had no history of work in healthcare. His brother-in-law was a chiropractor and took over as Director of Surgical Services.
That’s really the essence of the problem, isn’t it? If heathcare is a fundamental human right then inevitably costs are going to spiral out of control as, unlinked from the price signal, people demand more than is available. On the other hand, if we tether the cost of medicine to the market like any other good, then we will have people unable to afford it.
I expect there to be a simple solution to this; y’all have until the next page of comments to work it out.
The best system I have found, after some research, is the French system. It combines a basic benefit for all with price signals that introduce some market mechanism. I have a series of long posts on it over on my blog but the brief version is this.
The problem with the system is the French economy and the influx of British retirees who sign up for a program intended for the poor. They have not paid into the system, which is funded by payroll tax.
That is largely the problem with most systems. People take from programs where they did not pay, more takers than payers.
Yes, but many hospital procedures are not emergency services. Getting a knee or hip replacement is about reducing pain and improving mobility, not saving a life. Such procedures should be privileges of payment, not guaranteed IOUs.
I am in a minority for believing that even emergency services should depend upon the lucrative or otherwise charitable free will of care providers (that physicians should not be slaves of society). But without that priority of free will, you are correct that leaving the matter of payment aside while drafting emergency services makes sense. In such a ludicrous and unstainable system, reimbursement for services is a bonus.
That is, until people stop training to be physicians or drop out of the industry because they prefer to be free, well compensated, and not abused. From what I hear, the US is already suffering from a growing disparity between supply and demand of non-elective care physicians.
That’s what charitable organizations, patrons, extended families and social networks are for.
We live in an era when government is expected to replace all functions of social networks that have existed since the dawn of humanity. People didn’t start caring about strangers, exceptions, and the poor folks who fall through the cracks only this past century with the advent of nanny state programs.
It is insulting to our ancestors to believe that people were generally content to watch others suffer and die before these political guarantees. Government is not the only, nor the best, way to help each other. It should not be primary.
ER group I worked had had the contract at our 2 hospitals for over 20 years. New CEO who didn’t like us, because we were independent. After a busy holiday weekend where we were swamped, they came to us demanding we have a doc on call 24/7 to come in and decompress the ER.
We agreed, but recognizing it wasn’t just a question of an ER doc, we asked for the following. If we get called in, more nurse staff, lab had to speed up, Xray needed to be staffed, and admissions needed to be expedited to the floor. The problem on that holiday wasn’t the rate we were seeing patients, it was getting the rest of the stuff done that jammed us up. Admin refused.
Several months later they put our contract out to bid. We won the vote of the Hospital Staff, which should have guaranteed our contract. Admin pulled a fast one and awarded the contract to a large contract group.
They expected most of us to stay, especially the younger guys. Only 2 of us stayed, me and one partner. Had to scramble to get the ERs staffed. Shortly there after the new group had a meeting with admin over an on call doc.
New group agreed, if nursing staff increased, lab and X-ray staffed, and patients expedited to floor….
I literally laughed out loud.
Thanks, @therightnurse – I ran out of time to respond to the other thread, but there’s more than a few misconceptions out there, and a lot of what you wrote shed light on it. It’s easy and normal to assume there’s a few simple answers to complex problems, and that some kind of evil Bond villain is at the helm of every hospital. It’s just not that simple, or easy.
Yes, the medical students I taught for 15 years were initially in favor of single payer and even asked me to be an advisor for the group. Then, I noticed them becoming more cynical and now they are all interested in shift work, on a salary. There is a serious shortage of general surgeons, for example. I get solicited all the time for jobs as a general surgeon or even a cardiac surgeon. Surgery is too much work and bad hours.
This will be a crisis before long. The high incomes alleged to be collected by surgeons is not enough.