Wednesday, March 31, 2010

Will Healthcare Reform Help Curb Unnecessary Care?

The New York Times just published an article stating that many doctors feel the new bill will do little to curb the use of unnecessary testing. Patient demand and fear of litigation will continue to fuel the overuse of tests and treatments unless something happens to counteract this. Doctors make a legitimate point; "If a patient comes in demanding an MRI, there is no incentive for me to say no even if I know it is not needed". To reduce this there will have to be a change in the way patients think about healthcare, how medicine is practiced and how it is paid for.

Setting up guidelines is not the answer. A good example of this failure is CT scans. Clear guidelines for when CT is needed have been in place for years. They say among other things that CT is not indicated after most car accidents. Many patients have no real risk of brain injury after an accident, but try telling that to the injury lawyers. These guidelines have not put a dent in overuse of CTs in these situations. Again there are no incentives in place to withhold the test, only liability.

These doctors feel that there is nothing in the new law that will address this issue head on, but that conclusion may be a little hasty. The law includes pilot programs to pay doctors more for delivering better care at a lower cost. The key here is better care not less care. Eliminating the unnecessary CT is a good thing. Eliminating the necessary CT because of financial incentives to do so is a problem. But any well intentioned efforts to reduce waste will certainly be quickly labeled as rationing care. As Uwe E. Reinhardt, a well known health economist in Princeton, stated,"The minute you attack overutilization you will be called a Nazi before the day is out".

We need to get past this and support efforts to promote efficient care and reduce unnecessary tests. One section of the new bill establishes a private, nonprofit organization called the Patient-Centered Outcomes Research Institute to address this head on. They will have a $10 million budget this year which will grow significantly in coming years. The intent is to ground physician decision making in science and limit the influence of outside factors such as marketing and litigation.

This won't erradicate overutilization, but its a start.

More on this later.

Mark Brodeur

Tuesday, March 30, 2010

The Two Sides of Saving Under Healthcare Reform

Two recent articles caught my attention because they both talk about savings under healthcare reform but from totally different points of view. First was a report by the Center on Budget and Policy Priorities (CBPP) that the savings tauted under healthcare reform by the CBO are real. Next was a review in "Healthcare Financial News" on the latest Moody's Report saying that independent not-for-profit hospitals will be at risk under this bill. These two reports show the dichotomy that we live under in healthcare. Yes, we need to cut cost in the system overall, but taking money away from struggling community hospitals and putting them out of business is not the way to get there.

First let's talk about the good news. According to CBPP the projections of savings under healthcare reform touted by the President are indeed achievable and not "pie in the sky" as the Republicans have told us. But keep in mind that CBPP is a liberal leaning fiscal policy research group. Also keep in mind that all parties acknowledge that the new plan will initially increase costs as coverage is expanded. The savings come down the road with more efficient healthcare delivery in place to a greater percentage of the public. So much can happen between now and then to change things. So even if the actuaries got it all absolutely right, outside factors will most certainly change the assumptions used to project savings. So maybe the good news isn't really so good.

Now let's talk about the bad news. Moody's Investor Service projects that most hospitals should be able to operate relatively unscathed over the next three years because many of the key provisions of healthcare reform do not kick in until 2014. But after that all hospitals, particularly stand alone community hospitals will struggle with the reduced payments. Even though there will be some increased reimbursement from the previously uninsured patients and some add ons from Medicaid for hospitals that have hired primary care physicians, in balance hospitals will need to be extremely efficient to survive. Higher cost providers will not make it.

For those that want to know more about how to get ready for this new era of healthcare, I am presenting a free webinar on "Preparing Your Hospital for the Impact of Healthcare Reform" tomorrow, Wednesday March 31, 2010 from 1:15-2PM CDT. I will present it again in two weeks at the same time. To register, simply go to our website at and look under Webinars.

More on this later

Mark Brodeur

Monday, March 29, 2010

Will Primary Care Really Be Promoted Under the New Healthcare Reform Bill?

I knew that the healthcare reform bill contained language to promote better access to primary care and some funding for prevention as well as health education, but I didn't know if these activities would really be significant or just lip service. It appears that as far as primary care access goes, there may be some real improvements funded in the new bill.

I have previously discussed the physician shortage, particularly for primary care. This will clearly get a lot worse with the addition of all the previously uncovered adults accessing the system for the first time. I have also discussed the financial dis-incentives for physicians to choose primary care over highly paid specialties. Massachusetts which has led the country in expanded access to care for its residents reports disturbing numbers. They say that over half of the state's internists and 40% of the family practice physicians have closed their practices to new patients because they are full. Provisions in the new law aim to start turning this around by offering bonus payments to primary care physicians and expanded community health centers.

Only 30% of our physicians practice primary care while 65 million people in this country live in areas that are designated as having a shortage of these physicians. So under the new bill there will be a 10% bonus from Medicare for primary care physicians who practice in these areas. This is a good start.

There will also be promotion of "medical homes" instead of the traditional primary care physicians office. These are designed to help extend the limited number of primary care physicians by making them leaders of a team of primary care health professionals. The team will consist of nurses, nurse practitioners, physician assistants and disease educators. They will work together providing more attention to those who need it most. This innovative approach could have a real impact on taking us from a system that reacts to disease and trauma to a system that truly works to prevent disease and manage it before acute intervention is needed.

Its way too early to say that this new bill is going to be effective, but I am encouraged that it will start moving us in the right direction.

More on this later.

Mark Brodeur

Friday, March 26, 2010

Four Preventable Risk Factors That Reduce Life Expectancy

I wanted to end the week by talking about something other than healthcare reform. There will be plenty more to talk about next week.

Imagine someone saying they would add five years on to your life if you would simply avoid a few health risks. This would get my attention. Hopefully it will get the interest of others as well. A study published this week in PLoS Medicine found four risk factors that, when combined, have a big impact on life expectancy; 4.9 years in men and 4.1 years in women. These four factors are:
1) Smoking
2) High blood pressure
3) High blood sugar
4) Obesity

No surprises here except for maybe the big impact they have on life expectancy. You don't die directly from these except high blood pressure but they are directly linked to chronic diseases that are fatal such as cardiovascular disease, cancer and diabetes. Knowing I could live in a relatively healthy state for five years longer is enough motivation for me.

Also not surprising is the fact that the study found a person's ethnicity and where they live is a predictor of their health. Asian Americans have the lowest body mass index, smoking rates and blood sugar, while white Americans have the lowest blood pressure. Black Americans have the highest blood pressure, while western Native American men and low income rural black women have the highest body mass index. Smoking rates are highest among western Native Americans.

We all know that the biggest savings in healthcare can be had if more people were healthy and didn't use healthcare services at the rate they do now. Hopefully studies like this one will motivate more of us to start or continue to live healthier lifestyles. I know I enjoy eating decadent foods and I hate working out vigorously, but I sure feel a lot better after months of working out than after a month long eating binge. Do we really need financial incentives to live healthier or is a longer life expectancy enough?

Mark Brodeur

Thursday, March 25, 2010

Fallout From Healthcare Reform

The new healthcare reform legislation is generating many news stories about reaction to it which is good for someone like me who is always looking for the next hot topic in healthcare to discuss. There are a number of new developments that I would like to react to.

First of these is a report from the Washington Post that Senate Republicans found two minor violations of reconciliation rules in the House bill that will force it to be revised and re-voted on. They are already living up to their pledge to stop the bill before it starts. House Speaker Nancy Pelosi says the revisions are benign and will not alter the bill substantially. She expects no problem getting the House to again pass the amended bill. We will see. A new House vote is expected this evening.

Also Senate Republicans have been offering all kinds of amendments to the Senate bill originally passed. Most of these are intended to be difficult for Democrats to reject. If even one of them is passed, it means the Senate bill must go back to the House. So far Senate Democrats have rejected 29 such amendments. This is why a political solution to our complex healthcare situation is not the answer.

Another development from the new bill is the discovery that children with pre-existing conditions can still be denied new insurance policies. How did they let that one get through? HHS Secretary Kathleen Sebelius plans to issue new regulations to further define the intent of the new bill and close this gaping hole. It should be noted that in the meantime, children who are currently be denied insurance for this reason can seek coverage through the states' high risk insurance pools being set up.

Finally, representatives of physician-owned hospitals have weighed in strongly opposing the new bill since it puts a ban on new hospitals with this arrangement. It is interesting that they are claiming this will severely compromise rural- and inner-city patients access to care. I can't think of any physician-owned hospitals dealing with either of these populations. Perhaps we should write an amendment to the bill inviting physician-owned hospitals to open in the inner-city areas and treat the currently indigent population. After all they will now have insurance.

I am sure we will continue to see many interesting developments with passage of the reform bill. Remember the Chinese curse, "May you live in interesting times".

More on this later.

Mark Brodeur

Wednesday, March 24, 2010

Aligning Physicians' and Hospitals' Interests

Yesterday I discussed that the healthcare reform bill signed by the President will among other things promote bundling of payments between hospitals and physicians. This is certainly not a new concept. In the late 1990's we all thought that capitated managed care was going to rule the world. Everyone set up a PHO (Physician Hospital Organization). Most of these, like ours, went largely unused until they were abandoned altogether. Now there will be a resurgence of such arrangements.

As we work to set these up again we need to keep in mind what I addressed yesterday. To truly align with your physicians you must capture their minds as well as their pocketbooks. So before you can be effective at this you need to know what today's physician priorities are. A recent survey of physicians under 50 listed the following top three priorities:

1) Time for family and personal life
2) Flexible scheduling
3) No, or limited, call

In addition to this you can assume that they want maximum reimbursement for their specialty.

Obviously in an environment of shrinking reimbursement it is impossible to provide physicians all of this, but there are models that are working. Medicare has funded demonstration projects of bundled payments that seem to be effective. One such example is at Baptist Health System in San Antonio, Texas under the leadership of CEO Michael Zucker. This model shares the savings and allows the physicians a gainsharing opportunity. In this case the model focused on DRG 470 which is major joint replacement or reattachment of lower extremity.

The model anticipated significant benefits:

-Greater allignment with physicians
-Improved quality and efficiency
-Reduction in costs
-Increased market share
-Higher patient satisfaction

The demonstration project was set up to discount hospital and physician payments but share with both groups any savings generated over the standard reimbursement. To get physician buy in the CEO elected not to put any of the physician payment at risk when the project started. The hospital assumed all the risk at first but still let the physicians participate in the gainsharing. They were eligible for up to 25% of their Part B reimbursement. With "skin in the game" physicians came together like they never had before and allowed the hospital to negotiate with implant vendors as a group. Cost savings were immediate and substantial. This type of cooperation did not come without some angst and pain, but it came. Continuous attention to physician buy-in is key.

Overall the project has been a success:
-The hospital has increased leverage with vendors
-Physician quality measure have improved
-Gainsharing distributions were earlier than expected
-Overall physician support (despite some defections) has grown
-Managed Care Companies are looking at similar arrangements

As we continue to brace for the many changes under healthcare reform, it is good to know that there are successful models out there for what is coming.

More on this later.

Mark Brodeur

Tuesday, March 23, 2010

Time to Start Looking Deeper at the Impact of Healthcare Reform

As President Obama today signs the new Healthcare Reform Bill passed by the House, the Internet is still buzzing about our future because of this. Republicans are vowing to stop it before it starts and Democrats are saying it is the greatest change in healthcare since Medicare. Conservatives are saying the sky is falling and liberals are saying it is not enough but at least its a start. Whatever it is, its here and probably here to stay in some form or another. So it is time to look deeper at the ramifications of reform and prepare for our future in healthcare delivery (and payment).

Obviously the first priority is to focus on quality improvements and cost efficiencies. We are entering the era of the value provider not necessarily the large provider. I have addressed this issue in a number of previous posts. But to really thrive in the future, the strong value providers will adapt in other areas as well. So today and in upcoming posts I would like to address some of these issues.

The first area I would like to address is bundled payment. In the near future it appears that the reimbursement model for hospitals will include physician reimbursement in one bundled payment. This has some very positive implications for efficiency. No longer will we have conflicting incentives of fee for service physician payment incentivizing longer length of stay against the DRG payment to hospitals incentivizing the opposite. But this also presents challenges to hospitals to work with their physicians on income sharing arrangements like they have never done before.

Your first reaction to this might be like mine; its time to get more aggressive in employing physicians. In fact many of you are already doing this and the new docs coming out of residency largely prefer this arrangement. Of course they also want a life style with shorter work hours and less call than the previous generation. This is where the rub comes in. It is not enough just to have physicians under some level of more control as employees. You must have a relationship that aligns your incentives with theirs, and that is the challenge.

This will be compounded by the fact that the physician shortage is getting worse. According to the American Hospital Association the demand for primary care physicians is outstripping the supply and will leave us with a shortage of as many as 65,000 primary care physicians within five years. Healthcare reform will only make this number bigger as those who were previously uninsured take advantage of their new status. A similar shortage will develop with specialists partially because of the shrinking reimbursement in these areas.

So before bundled payments become the standard reimbursement arrangement, hospitals have a lot of work to do aligning themselves with their physicians. The key according to Ken Mack, a prominent healthcare consultant is to capture their minds as well as their pocketbooks. There are arrangements that are working and I will discuss some of these tomorrow.

More on this later.

Mark Brodeur

Monday, March 22, 2010

Healthcare Reform Is Here! Are We Ready?

Well it finally happened. President Obama got at least some version of the Healthcare Reform Bill he has been stumping for since he took office. It doesn't look much like the bill he started with. The public option that he held out for so long is gone and it certainly does not have the bipartisan support that he promised. In fact, according to Washington insiders the rift between the two parties is larger today than it has ever been in any one's memory.

As to whether last night's monumental House vote was a good thing or a bad thing for the healthcare industry, the answer depends on who you ask. Many CEO's are saying this will be devastating, but a few are quietly saying that this will be good for them. It sounds a lot like the sentiments of the rest of the country.

I am at the Annual Congress of the American College of Healthcare Executives in Chicago which kicked off this morning. It is the largest gathering of healthcare executives in the world; over 4,000 in attendance. It is ironic that this morning's opening keynote address which was scheduled months ago was titled "The Politics of Healthcare Reform". Talk about timing. According to Tom Dolan, CEO of ACHE, he had it all planned this way. Stuart Rothenberg, PhD was the opening speaker. Stuart is a well known political analyst and "handicapper" of politicians. He had an interesting political perspective on all this.

Stuart states that healthcare reform is not done. The current bill will probably be enacted but revisions will passed even before some of the provisions of last night's bill are scheduled to go into effect. He says the mood of the country has definitely changed. There will be a mild uptick in the President's approval for a while after last night. After all, the Democrats were under real pressure to deliver something. Having passed nothing with a Democratic President and control of both houses of Congress would have been devastating to midterm elections. As it stands though, the midterm elections will still be very brutal on the Democrats. The independent voters who have supported the Democrats for four years are now changing heart. Also, most people polled, prefer not having either party control the Presidency and both houses of Congress.

One last observation that Stuart made is that it is way too early to count President Obama out for re-election. He stated that voters tend to be fickle and opinions on the country change quickly. He reminded us that President Clinton had a very low rating at his first midterm election.

But back to the new bill, it will present a new set of challenges to healthcare providers. There will be a strong emphasis on value and the government looks like it will use the allowance approach to cut costs. That is, rather than coming up with savings they will just cut rates and leave it up to providers to figure out how to survive with a lower allowance.

More on this later.

Mark Brodeur

Friday, March 19, 2010

The Basics of the New Healthcare Reform Bill

With the political drama of President Obama's healthcare reform bill coming to a climax, it looks like there may be a new House bill, based on the Senate passed bill, by the end of the weekend. If this really happens, getting the provisions of this new bill passed through the Senate seem very likely using the budget reconciliation process. What this means for us in the industry is that the biggest piece of legislation affecting healthcare since the enactment of Medicare will become law without any bipartisan support. This doesn't seem right to me. I have been arguing that we need healthcare reform and I stand by that. But I thought that the process would come from meaningful debate and input from a lot of different sources.

Don't get me wrong. I am not holding the Democrats 100% responsible for this outcome, but they did set the take it or leave it tone when they had 61 Senators behind them. They started the bully process and were not open to real dialogue in the beginning. Then the Massachusetts vote for Senator Kennedy's vacant seat happened and the Republicans have since shown the same resistance to sit down and really discuss issues. President Obama tried to retract the unyielding rhetoric had had used earlier but it was too late. The damage had been done.

Since we are finally to the point where we may really be passing some significant healthcare reform legislation, maybe it is time to take a look at the basics of what it offers. I must confess that I don't know the details, but I doubt that anyone voting on it this weekend does either. Here are some key points:

1) It will cost $940 billion (with a b) over 10 years according to the Congression Budget Office
2) 32 million more people will be covered, but major coverage expansion won't start until 2014
3) By 2014 everyone would be required to have insurance except low income people. There will be tax credits and aid to help people afford this
4) By 2014, private insurers will have restrictions on them including denying coverage for people with medical conditions and charging higher premiums for women. There will also be lifefime caps on premiums and coverage allowed for children until age 26.
5) A pool for highrisk patients and the uninsured will be set up to cover them until 2014
6) Medicaid coverage will be expanded
7) Medicare's doughnut hole for prescription drug coverage will gradually be closed
8) Many employers will have to pay a fee if the government subsidizes their workers health coverage. But by 2014 there will be state based exchanges to provide health insurance to small businesses and individuals
9)And all of this will be paid for by increased Medicare Payroll taxes on investment income and the very wealthy

All of this sounds great but I have my doubts that this will really be implemented just like it is summarized above, particularly point 9. I have been saying for some time that the real source of income to pay for this plan will come from cutbacks in Medicare payments to physicians and hospitals. Everyone says there is waste in the system and they are right. But I don't see provisions in this plan that will really attack the waste. It looks like they will just reduce reimbursement and leave the waste cutting to us.

Let's see what happens on Sunday.

More on this later.

Mark Brodeur

Thursday, March 18, 2010

Four Factors That Drive Hospital Readmissions

Hospital readmissions besides being hard on the patient are also detrimental to the hospital, both financially and on their quality scoring. Medicare is now tracking the level of each hospital's readmissions. There are a variety of factors that lead to preventable readmissions, but these usually have to do with poor outpatient management and followup after discharge. Because of our current disjointed system of care, there is often not a smooth hand off for the patient who will need monitoring and treatment at some level after discharge. Patients sometimes leave the hospital with incomplete treatment plans or medications they do not understand.

Clearly we need to do a better job of coordinating services post discharge. But what if we could do a better job in identifying those patients who were at a higher risk for readmission while they were still hospitalized? Researchers at the Ottawa Hospital Research Institute have created a score card to help determine if a patient is at high risk of readmission, or death. Their study included 1 million patients discharged from hospitals between 2004 and 2008. By looking a four factors, they could predict with 70% accuracy, those patients at high risk for readmission. These factors are:

1) Length of the patient's hospital stay
2) How sick they were upon arrival
3) The number of illnesses diagnosed during hospitalization
4) The number of Emergency Department visits during the six months prior to hospitalization

Researchers found that a combination of these factors greatly increases risk. Using this scorecard allows hospitals to identify those patient to focus on for more intense discharge management.

This discharge management can go to various levels of intensity based upon the risk factors of the patient. Those of lower risk may get by with printed discharge instructions. Some may need a followup call from the pharmacist to explain the new home meds. Some hospitals have a hot line for use by patients or their families with any questions. And finally for the highest risk patients, hospitals have them on biometric monitoring devices that send vitals and other symptoms to a transition management team. This final approach is costly but seen as worthwhile investment to prevent readmission or possibly even death.

Doing a better job of discahrge management and reducing preventable readmission makes sense. It saves money. It improves the quality of care provided by the hospital. But most of all it is better for the patient.

More on this later.

Mark Brodeur

Wednesday, March 17, 2010

The Cost of Not Enacting Healthcare Reform

Healthcare reform is back on the front page. There are all kinds of stories about last minute efforts to push through or block the current Senate bill. Most of the stories talk about the millions of dollars being spent by lobby groups trying to protect their turf. The anti-reform groups are clearly outspending the pro groups at this point. Then we have the pressure tactics being applied by President Obama to the Democrats not in the fold to get the House majority he needs. These are countered by threats from the National Republican Congressional Committee to go all out in the upcoming elections against any Democrat who votes with the President.

Nowhere in any of this is there a discussion of the issues driving the debate or ways to improve the current Senate bill to get better healthcare reform legislation passed. In fact, because the way our political system works we are forced to either pass the current Senate bill almost as is or have nothing at all. We need to get back on track to discuss the real issues to advance meaningful reform. Everyone is talking about the cost of passing this legislation. I would like to discuss the cost of doing nothing.

In a recent report by the Robert Wood Johnson Foundation, analysts at the Urban Institute projected changes in coverage patterns and healthcare costs that would occur over the next ten years if no healthcare reform is enacted. They projected three different scenarios from worst to best based on how our unemployment and economy turn around. Here is a summary of their findings:

-Middle income families will be hardest hit. The uninsured rate for this group would increase from the current 19% to as high as 28%, an increase of 7.3 million people.

-More uninsured would come from middle and higher income families. More than half of the uninsured would have incomes of more than 200% of the poverty level.

-The uninsured rate would increase significantly in older adults. For adults ages 45-54 the rate could go from 17% to 24%. For adults ages 55-64 it could go from 15% to 22%.

-The uninsured population will shift to older age groups.

-The uninsured rate will increase for those in better health. This means that premiums will increase for for the insured population since many of the healthy low utilizers will drop out.

All in all this report is not as bad as one might expect. But it does point out that the impact of not acting on some type of healthcare reform goes far beyond those that are currently uninsured. The key point here is that many who consider themselves middle class will be affected, particularly as they get older and are more vulnerable healthwise.

There is probably no stopping the current political process in play and we will end up with the outcome it gives us. Too bad that we stopped addressing the real issues some time ago.

More on this later.

Mark Brodeur

Tuesday, March 16, 2010

Addressing Hospital Labor Costs

A recent study by the American Hospital Association has confirmed some things that we already knew about rising healthcare costs: Growth in labor costs is the most important single factor driving up the cost of hospital care. The good news is that hospital cost growth is at a slower rate than all other sectors of healthcare. The bad news is that hospitals already account for one third of all healthcare costs. And labor expenses for hospitals (salaries and benefits) make up two thirds of their total costs. So addressing this issue remains a major priority.

In addition, hospitals continue to face shortages of needed specialties like nurses, pharmacists and other technicians. Growth in services combined with retirement of baby boomer workers are creating more openings than there are new workers. This supply and demand scenario puts hospitals under further cost pressures. Now to further compound the situation, hospitals will certainly be facing declining reimbursement in the future no matter what happens in the next few weeks with President Obama's healthcare reform plan.

There are things that hospitals can still do to reduce labor costs without sacrificing quality of care or customer service. In fact we routinely find in hospitals we work with that improving care can also reduce overall costs. There is certainly more to this than can be shared on a single blog post. If you are interested in getting more information on addressing labor costs in your hospital, I invite you to join us for a free webinar entitled "Preparing Your Hospital for the Impact of Healthcare Reform". This will be presented tomorrow, March 17 at 1:15pm CST and repeated again on March 31. To sign up, just go to the website for Compirion Healthcare Solutions at Click on the Websites tab and you will find this webinar. I will share specific action steps that hospitals can take to reduce costs and give benchmarks for top performing hospitals.

With all of the threats that hospitals are facing in the future, it is incumbant upon us to be operating as efficiently as possible.

More on this later.

Mark Brodeur

Monday, March 15, 2010

Five Preventable Conditions That Can Save Your Hospital $200 Million Annually

A recent study by the Healthcare Management Council, Inc. shows the top five hospital acquired conditions that combined cost a typical 200 bed hospital almost $2 million per year. The study was conducted on hundreds of facilities ranging in size from 75 to 800 beds. Costs were determined by measuring the extra care that these hospital acquired conditions (HACs) required.

On a larger scale, CDC has determined that healthcare associated infections occur in 1.7 million patients annually and result in 99,000 deaths each year. Further, they estimate that the cost of these infections to hospitals is as much as $45 billion each year nationwide. But the HMC study has shown that just a handful of of HACs can run up significant costs to hospitals. This gives us a very manageable list to deal with that can have a major impact on operations; not just relating to costs but quality to our patients as well. Below is the list in the order of their prevalence. For each condition, the total average cost to a hospital as well as the cost per patient is listed.

Decubitis ulcers-$536,900 annually; $9,200 per patient

Postop pulmonary embolism and DVT-$564,000 annually; $15,500 per patient

Accidental puncture and laceration-$248,100 annually; $8,300 per patient

Postop respiratory failure-$261,000 annually; $21,900 per patient

Infections due to medical care-$252,600 annually; $24,500 per patient

The good news is that all of these conditions are preventable. The bad news is that it will take a supreme effort to completely eliminate all of them. But if you start with a root cause analysis and then put in place best practices in these areas you can make a real impact. The acceptable goal must be zero even if it takes you some time to get there. The key is changing the current culture that unknowingly reinforces these conditions to occur.

I have had experience working with hospitals that take this type of effort seriously starting from the top of the organization and involving all levels of staff. Amazing changes can occur with the side benefit of improving staff morale. If you are not seriously addressing all of these areas already, it would be a good time to start.

More on this later.

Mark Brodeur

Friday, March 12, 2010

Wasteful Healthcare Spending: Let's Stick With The Real Issues

Yet another report on wasteful healthcare spending was recently referenced on The reference was to a 2008 report by Pricewaterhouse Cooper's Research Institute. This report claims that unnecessary price gouging makes up $1.2 trillion of the $2.2 trillion spent on healthcare nationwide. That's over 50%! If we started adding up all the percentages of cost savings available to us according to these various reports, we can save well over 100% of healthcare costs in this country. Reports like this get our attention but where are the real savings to be had by addressing the issues?

In reference to the Pricewaterhouse report, Cindy Holtzman with Medical Billing Advocates of America cites some specific examples of waste: a $140 charge for a Tylenol pill; a $1,000 charge for a toothbrush; and a patient who used one bag of IV saline but was charged for 41. While these examples clearly show how ridiculous the current discounted fee for service payment system has become, they don't make a valid argument that healthcare costs can really be cut in half. The first two examples just show how meaningless hospital charges have become. Most payers don't even use them as a basis of reimbursement, and those that do, pay a heavily discounted amount from the charges referenced. Still the $1,000 toothbrush on its own is an embarrassment just like the $1,000 toilet seat the the Pentagon supposedly bought. As for the 41 IV bags that were billed in error, this points out another flaw in the fee for service system. What the report does not reference is all the lost charges hospitals endure on IV bags and other supplies because the caregiver was too busy giving care to properly enter the charge into the system.

The real issue here is that we have come up with a charging system and separate reimbursement system that are far too complex to execute. The waste here is the cost of the armies of people that hospitals engage to maximize appropriate reimbursement combined with the armies of people that insurance companies hire to delay, discount and deny claims. And each of the many insurance companies must be approached separately. Its time for some consolidation and standardization to deal with this issue.

The current healthcare reform bill being debated is really a lot more about healthcare payment reform. If we want to really address all the issues there will have to be a lot more work done. But payment reform is a good start. Let's get rid of the $1,000 toothbrushes. But while we do it let's not kid ourselves that the real savings will be of this magnitude.

More on this later.

Mark Brodeur

Thursday, March 11, 2010

Stop the Politics And Deal With Rising Medical Costs Now

How many more signs do we need to see before we recognize that major reform to stem the tide of rising medical costs must come soon. Two days ago I talked about Emergency Departments in California threatening to close because of unreasonable cuts in reimbursement due to the state's budget shortfall. Illinois is making national news because of that state's huge budget deficit and providers of services to the state's Medicaid recipients are simply not being paid right now. How long can that go on before those providers close their doors? Now comes news out of Texas of a budget shortfall in the range of $11 to 15 billion. This is largely driven by double digit growth in the state's Medicaid program. Texas lawmakers had budgeted a 3.4% annual growth in Medicaid but are dealing with a current growth rate of 11%.

What is Washington doing to address this? Both sides are drawing party lines tighter than I have ever seen them. President Obama spent yesterday in Missouri trying to gain grass roots support for his healthcare reform bill by blasting the health insurance industry. Maybe they deserve it. Meanwhile the Republicans organized their own gathering drawing just as big of crowds denouncing the Senate reform bill as unconstitutional. Why didn't someone check this out before now? I don't hear anyone talking about the economic crisis we are facing as our current healthcare system implodes from lack of funding.

We are years away from a bipartisan political solution to this crisis but we don't have that much time. I see only two options in the near future. Either President Obama is successful at ramming through a modified version of the Senate healthcare reform bill or nothing happens. Which is the worse alternative?

All I know is that something has to change soon. If the Senate bill does make it through the budget reconciliation process (which is not at all guaranteed) at least we would have something in place to work from. If the bill is really as bad for the country as all the Republicans tell us, then upcoming elections can swing the balance back and get us a better reform program. But in the mean time we would start to address the economic crisis in healthcare we are facing.

More on this later.

Mark Brodeur

Wednesday, March 10, 2010

Its Time To Lead And Not Just Talk About Patient Satisfaction

As healthcare leaders we all talk about the importance of a satisfied patient. In fact we have different names for the process such as Customer Service, Patient Satisfaction and a newer term, Patient Experience. Regardless of what we call it, it appears on most Board dashboards as a key metric to follow.

Recent data to come out of the 2009 HealthLeaders Media Patient Experience Survey showed that 1/3 of all top level executives listed patient experience as their top priority. 90% of them had it in the top five, and all of them agreed that it would be a priority for them in the next five years. This is good news, isn't it? Healthcare leaders recognize the key role that providing a positive patient experience plays. But as they say, talk is cheap.

When asked about how much of their current annual budget was spent on this priority, a much different answer emerged. About half said they spent less than $50,000, and 11% had no budget at all. Many insisted that they would like to do more but funding was not available. It was being used on higher priorities. More troubling were those that said there was no consensus on how to address this and no game plan in place. This is where leaders need to start leading.

When asked who in their hospital had primary responsibility for patient experience, about 20% said "everyone". Congratulations, you've been to Customer Service 101. But seriously there should be no question in any hospital about who needs to lead this process. It must start from the top and be an integral part of the the hospital's culture. The hospital's investment of fiscal resources in this process must be matched by an investment of time from the top leadership.

In a climate of shrinking reimbursement and increased competition from all angles it may look inviting to cut back on programs to increase patient satisfaction. Don't say, "Its a great thing but we just can't afford it right now". I say you can't afford not to. An investment in providing a more positive patient experience will pay big dividends in customer loyalty and growth in new business. We have seen it over and over with many hospitals that we work with.

Its time to do more than talk about improving the patient experience, its time to lead the process.

More on this later.

Mark Brodeur

Tuesday, March 9, 2010

Cuts in Reimbursement Threaten ED Closures in California

Maybe the direct impact of runaway healthcare costs on our current delivery system is not as far off as we once thought. In my blog I tend to focus a lot on Emergency Departments and how they are key to the hospital's overall operation. So when I read a headline that ED's in California may be forced to close, it gets my attention. We all know that most trends in this country start on the East and West Coast and then work their way into the middle of the country. It is with this in mind that I take great concern about what is happening in Southern California.

We have all been hearing for some time that the state of California is going broke and many publicly funded services are being cut back or having their rate of funding cut. One casualty of these cuts is the Physician Services for Indigents Program in Los Angeles County. Prior to last July physicians had been receiving a whopping 27% of estimated fees for their services to indigent patients flooding Emergency Departments. Since last July this rate has been cut to 18%. No one felt that the previous rate had been too high. It's just that the state is running out of money and can't afford to pay the same rates anymore. This is sounding familiar.

There are 72 hospitals in the county affected by this and half of them are already operating at a deficit. This means that there is no private sector we can cost shift to like we did so well for years after the Balance Budget Act which slashed Medicare rates. There is a domino effect of actions being set in motion here that will have a tragic outcome. Physicians will no longer agree to provide services, some of which are life saving, for this level of reimbursement. And who can blame them. Once the doctors pull out, private ED's will be forced to shut their doors altogether. Remember that ED's can not pick and choose which patients they will take care of. So the well insured and wealthy patients will be losing their local ED as well. With most of the hospitals in the county shutting down their ED's, there will be an unreasonable burden put on the public hospitals in the county.

Will it really get to this point? Are hospitals in the county just practicing some brinkmanship to get their point across? Perhaps, but no one seems confident of this. Hopefully there will be some resolution before things play out under the domino scenario. You can look at this and say that the issue is isolated to California which has a real problem with illegal immigrants. I look at it more as a glimpse into our future on a national scale with the current direction we are taking.

I am anxious to see how things in Los Angeles County play out for further funding of ED care for indigent patients. Maybe we will get some pointers on how to address our needed healthcare reform nationwide.

More on this later.

Mark Brodeur

Monday, March 8, 2010

More on the Cost of Needless Medical Tests

I commented last week on the tremendous cost of defensive medicine and the number of needless tests that are being performed by physicians simply as a "CYA" step in today's litigious climate. But according to Dr. Howard Brody, a professor of family medicine and Director of the Institute for the Medical Humanities at the University of Texas Medical Branch in Galveston, the motivations behind these unnecessary tests go well beyond just the fear of being sued.

He blames it on the combination of a love for technology and the current reimbursement system that pays more for using this technology (doing a procedure) than sitting with the patient and using his or her brain to figure out what is wrong. On his second point I need to agree completely. I have written in previous posts about our need to change the current fee for service system of reimbursement. Its bad enough that physicians and hospitals are still paid more in many circumstances for doing procedures, but there are also profitable versus unprofitable procedures. Physicians and hospitals have monetary incentives to aggressively pursue or perhaps withhold certain procedures. For physicians, a specialist who performs a significant number of invasive procedures will earn five to ten times more than the primary care physician who spends time with his or her patients to really figure out what is going on.

Often times complex procedures are completely necessary and life saving, but why have a system that puts financial rewards in possible conflict with appropriate medical care? Our fee for service reimbursement system has encouraged the development and use of tremendous technological breakthroughs, but I think it is time to swing the pendulum back a bit to reimburse physicians for the time they spend with their patients and use of their clinical judgement.

Dr. Brody chastises physicians and says there is a lack of moral leadership. He claims that they are acting just like one more special interest group in it only for themselves. I think this is a bit harsh. The fear of being sued is clearly a driving factor in many unnecessary tests. But reforming the reimbursement system for hospitals and specialists allowing medical judgements for care provided to be based solely on medical reasons and paying physicians for their time, would allow for a better level of care at ultimately less cost.

More on this later.

Mark Brodeur

Thursday, March 4, 2010

More Data on the New Quality-Cost Imperative

Hospitals are now strongly charged with showing value. All hospitals must decrease costs and increase quality. But there has always been that nagging argument that the hospital who operates efficiently and gets patients out quickly is really costing us more because of readmissions and follow up care. It has felt good to say that the higher cost hospitals with longer lengths of stay actually do a more thorough job up front which is better for the patient and cheaper for the system overall. This sounds good but it just isn't true.

A recent study conducted on Medicare patients from over 3,000 hospitals in 2006 showed no evidence to support the higher cost hospitals in terms of outcome. The study was limited to congestive heart failure (CHF) and pneumonia patients but these are representative of many Medicare admissions. The study looked at process quality of care, 30-day mortality rates, readmission rates, and six month cost of inpatient care. Here's what they found:

-The cost difference between hospitals was huge. For CHF the range was $1,522 to $18,926. For pneumonia the range was $1,897 to $15,829. It also showed that hospitals that were the highest in 2006 had been that way for the two years previous to this.
-For CHF the quality of care scores for the costliest hospitals were slightly better than the lowest cost hospitals. But for pneumonia, the opposite was true. The low cost hospitals actually beat out the high cost hospitals.
-For CHF patients, the risk of readmission was slightly higher in low cost hospitals while there was negligible difference for pneumonia patients. Even so, the six month inpatient care cost was substantially less for low cost hospitals ($12,715 vs. $18,411 for CHF; $10,143 vs. $15,138 for pneumonia)

High cost hospitals can no longer stand behind the myth that more expensive care is better care. In most cases it is just less efficient. The call to reduce healthcare costs does not have to be seen as a threat or a mandate to sacrifice the quality of care we provide. It is an opportunity to ensure that we are providing the most effective and efficient care we can.

Quality first and finances follow.

More on this later.

Mark Brodeur

Wednesday, March 3, 2010

The Real Politics of Healthcare Reform

Who is really shaping current healthcare reform efforts? I have discussed the Republican versus Democrat infighting going on and more importantly the economic factors that must be addressed, and soon. But are either of these forces really doing the influencing of policy makers in Washington? Sadly, I think not. A recently released report showed that last year there were eight registered healthcare lobbyists for every member of Congress. Eight to one; that seems like a lot. A total of 1,750 companies and organizations spent $1.2 billion on healthcare lobbying last year and it apparently paid off for them. This according to the Center for Public Integrity which closely monitors this situation.

Lobbyists blocked key provisions of the plans including a robust government -run insurance program to compete with private health insurance providers, and significant cost cutting measures aimed at healthcare companies. Large hospital systems and insurance companies are well represented in the lobby groups with hospitals outnumbering insurance companies by two to one. This is a bit surprising to me, but I will bet that the insurance lobby as a group far outspent the hospitals.

However the real lobbyists are the professional and trade groups, particularly AARP and the AMA. Altogether there were 475 of these groups each playing their own part to shape or more probably block true healthcare reform. Even Dunkin' Donuts paid to have their say. I can only imagine what they wanted.

So I don't know what is more depressing; that we have eight lobbyists for every Congressman or that they were all so effective at influencing the legislation. This does not bode well for meaningful healthcare reform going forward. The obstacles are many, but the core problems we are facing will not go away on their own.

More on this later.

Mark Brodeur

Tuesday, March 2, 2010

The New Quality- Cost Imperative

As we wait for some resolution on the latest battles surrounding healthcare reform, we are reminded of the unprecedented challenges that healthcare leaders face providing high quality care under growing financial constraints. The latest issue of "Healthcare Executive" published by the American College of Healthcare Executives leads with the cover story on the new quality-cost imperative. But at least the argument is framed correctly; quality first and finances follow.

System wide improvements can indeed provide significant financial gains. There is a new call to provide value in healthcare. For many hospitals this is a necessary strategy for maintaining even short term viability. For all of us this is necessary to maintain long term viability of our healthcare delivery system. Tackling costs alone without addressing quality has proven to be both short term and largely ineffective. While addressing quality improvement at any cost has also shown to pay diminishing returns. Addressing both is the only formula for sustained success.

According to Stephen R. Mayfield, a senior vice president for the American Hospital Association, hospitals are now focusing on cost management rather than the revenue growth model of the last two decades. I say why not focus on both by starting with the quality issue first. We have found in our experience when working with hospitals that by addressing quality, service and efficiency issues, the growth in business comes almost automatically. Every project we have been involved with, whether it be ED, OR or Inpatient throughput has resulted in a growth in business after the operational improvements have been made.

So we all must deal with the call for improved value in healthcare. The inefficient hospital and the low quality provider will not survive. Maybe this is not all bad. The field today for healthcare leaders has never been more challenging, but I think we are up for the challenge. We have the opportunity to shape a stronger system for the future. One that is led by quality followed by efficiency providing a new level of value to patients.

More on this later.

Mark Brodeur
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