Hospital cuts on the way?

David M. Walker, Comptroller General of the United States, testified before Congress Wednesday and said, “If there is one thing that could bankrupt America, it’s runaway healthcare costs. We must not allow that to happen.”

He continued:

The federal government has essentially written a blank check for these programs. In contrast, other industrialized nations have put their healthcare programs on a budget, even ones with national healthcare plans. We should consider imposing limits on federal spending for healthcare sooner rather than later.

Coincidentally, today The New York Times has an article highlighting President Bush’s 2009 budget to be released Monday. The request is expected to surpass the $3 trillion mark for the first time in our country’s history. Health care is a target for cuts, specifically the Medicare and Medicaid programs.

Mr. Bush has repeatedly said that the costs of Medicare and Medicaid, which dwarf spending for lawmakers’ pet projects, are unsustainable. The two health programs account for nearly one-fourth of all federal spending, and their combined cost — $627 billion last year — is expected to double in a decade.

Budget documents show that Mr. Bush will propose legislative changes in Medicare to save $6 billion in the next year and $91 billion from 2009 to 2013. In his last budget, by contrast, his legislative proposals would have saved $4 billion in the first year and $65.6 billion over five years.

Most of the Medicare savings in the budget would be achieved by reducing the annual update in federal payments to hospitals, nursing homes, hospices, ambulances and home care agencies.

The budget would not touch payments to insurance companies for private Medicare Advantage plans, even though many Democrats and independent experts say those plans are overpaid.

In the next five years, the largest amount of Medicare savings, by far, would come from hospitals: $15 billion from an across-the-board reduction in the annual updates for inpatient care; $25 billion from special payments to hospitals serving large numbers of poor people; and $20 billion from capital payments for the construction of hospital buildings and the purchase of equipment.

Go read the full article. There’s lots more.

I don’t understand the policies of cost cutting by reducing payments to hospitals and other health care service organizations. Also on the table this year is a 10% across the board cut in Medicare reimbursements to physicians. What is the logic here?

In a time of economic uncertainty and decreasing margins hospitals will need cash to make investments in technology. Technology that all the U.S. Presidential candidates promise will cut costs. One example is the coming nationwide electronic medical record roll out–it is going to cost a significant amount of money. Dollars that are well spent. EMRs will help the system.

I appreciate the creativity and ingenuity that severe cost cutting will pump into the system. But the fact of the matter is that no matter how creative or ingenious our organizations are, implementing EMRs is going to be expensive. This is not a time to be significantly cutting reimbursements to hospitals. Further, lowering reimbursements to hospitals and physicians is not sound cost cutting policy. It may lower the government’s spending but the decrease in services and increase in cost shifting have the potential to be traumatic.

I can imagine hospital administrators around the country wanting to boo-yah the government the way Jim Cramer did to the Federal Reserve.


For what it’s worth (and that is probably a lot), the chances of the budget getting through Congress unchanged is at best below minimal.

Debating Ambulatory Surgery Centers

Medicare’s Diagnostic Related Group (DRG) classification system changed (again) recently.  My (basic) understanding of the change means better reimbursement for hospitals (specifically academic medical centers) and less reimbursement for ambulatory surgery centers (ASC).

ASCs have been criticized in the past for operating on the best cases (low complications, highly reimbursed procedures, some even call 911 if complications arise during surgery because they don’t have emergency capacity).  However, an argument on the efficiency impact can’t be ignored.  The learning impact for providers who operate on similar cases on a daily basis should raise quality, something we obviously need.  The majority of patients who receive services from ASCs do just fine.

Regardless of what actually was intended by the DRG change or what happens in the future, what are your thoughts on ASCs?  Is the service they provide a benefit to our health care system?  Are they taking business away from hospitals?  Do they force hospitals to be more efficient? (As always this gets a little more complicated than asking a few simple questions: I think some other issues are at work here like physician ownership and referral patterns.)

Introducing the “Rational Consumer”

Long have we heard that we need to make patients more like consumers in health care. Consumer-directed health care will … (insert promise here).

Adam Hanft at FastCompany blogs the return of the “rational consumer” (go read the post here, its biting wit is worth your time)

Consumers are willing, if not anxious, to spend more for brands that transcend the narrow benefits of functional utility – see Virginia Postrel’s “The Substance of Style.” Price sensitivity is out. Sensibility sensitivity is in. Consumers seek to wrap themselves in brands that offer up a cozy, self-reinforcing blanket of hipness and coolness. It’s a co-dependency of cues and semaphores, a mutual acknowledgment that brand and user are in on the game.

Well guess what? You’ve seen what happened to Starbucks sales and its stock during the last quarter. It was more than a mere froth of bad news, bringing Howard Schultz back into the CEO position to recover the missing mojo. Meanwhile, McDonalds is getting into the pricey coffee space, with their own McBaristas. And just last week, I read that — sacre bleue – Starbucks is testing a $1 cup of Joe, a stunning capitulation.

USA Today had a story earlier this week on employers who were dropping group health insurance plans and replacing them with monthly stipends to help individuals purchase insurance on their own. Among others:

Nick Trikolas plans to drop health insurance for his employees and give them money to buy their own coverage. He says doing so will put him in the vanguard of a movement by employers searching for answers to rising health costs.

The Wall Street Journal had a story as well:

So instead of providing group insurance, Mr. Martin is offering allowances — such as contributions to health-savings accounts, or HSAs — to employees who buy their own coverage in the individual market. Other small and medium-size employers are also providing stipends to workers who buy their own coverage through similar defined contribution programs.

Most insurees still receive coverage through their employers but we have all read about rising premiums that are forcing companies to rethink their benefit offerings. Never mind that when companies drop unaffordable insurance for employees and force them into the individual insurance market, the affordability (lack-there-of) of similar benefits does not change–it’s just passed onto the employee. Regardless, (this cliche is oft and over used) it is what it is.

In this atmosphere of change, this push for change, difficult choices will have to be made. And if sustainable change is to be made, we may very well have to rethink our views on health insurance. It is likely that any drastic reform means big changes in the insurance market. And that change could mean individual insurance plans for all.

If that’s the case, I introduce to you, health services industry, the “Rational Consumer.” A consumer that asks about the prices of procedures, compares treatment options, foregos pharmaceutical cures, decides against a trip to the emergency room…the list could go on and on.

It could be a good thing. A game-changing thing.

Role playing in the ER

The Hartford Courant brings us a story of play in the ER…to learn of course.

Basically a group of employees play a board game that simulates a very stressful 24 hours in the ER. The employees work together in order to navigate a host of issues. The purpose is to promote efficient decision making, collaboration, and learning.

I think it’s a great idea. And I think we’ll see more of it. However, can’t someone come up with a role playing game on the Wii (at the least on the computer)? Board games are so passé (except for Candy Land).


Innovation: new websites aim to cut costs

Came across a couple of innovative health care websites (read Health 2.0) in the last couple of days.

The first is SharedFunding, an employer focused company that manages high deductible health plans for companies. The website says:

Through our research we determined that when an employer purchases a high deductible health plan, and provides a benefit for the employee “below” that deductible, the employer appreciates significant savings.

SharedFunding has already saved employers a phenomenal amount of money by allowing them to appreciate strong benefits at lower costs. And, our technology and service liberates you and your employees from the complex web of healthcare claims processing.

The second is a startup from Minnesota called Carol. The Star Tribune has an article about the new company. The Health Care Blog has an interview with CEO. The company provides a marketplace where consumers can quickly self-diagnose and then select a provider that will provide treatment. From the Star Tribune:

Ankle pain? Click on the matching body part and two options pop up. For $199, doctors at Sports and Orthopaedic Specialists will check out your ankle, review your medical history and recommend treatment. TRIA Orthopaedic Center lists a similar package for $213 — and a reminder that they are the team doctors for the Vikings and Timberwolves. What did patients think? Read user reviews. Will your health plan pay? Tap in your details and find out.

The website is easy to navigate. It’s a great idea. I think the best part is that it allows consumers to make a health care choice based upon price.  OK, something I like even better is this notion of bundled services.  Providers who use Carol list their services in one nicely-priced package.

The website allows consumers to compare services by different providers and lists exactly what the price covers. They do have a section that contains a quality statement by each provider–this could be improved. So far, not too many providers have signed up, but I think it is only a matter of time for providers to take action as more consumers start using the service.

Health care in the State of the Union

President Bush gave his final State of the Union address Monday evening (although there is precedent of past Presidents delivering an address days before a new President takes office–got that?).

Anyway, health care was covered, but Bob Laszewski at Health Care Policy and Marketplace Review indicates we should not expect much in the way of change and has the details here.

The issue with cutting costs in health care reform

Cut costs, cut costs, cut costs. That’s what we have been hearing lately (30 + years?) in order to effectively reform health care.

The problem is those costs are someone’s income. In a free market economy we are able to make money as we please, and as long as someone is willing to pay, services will be provided.

When we attack costs, we attack someone else’s livelihood. I know how I’d feel if someone was trying to take away some of my income (as if I had any). How would you feel?

“We Have Met The Enemy and He Is Us”

Found this at Fast Company:

Colin Evans, 55, is a 27-year Intel veteran who’s on loan to Dossia, a nonprofit consortium founded by several major companies, including AT&T, BP, Intel, and Wal-Mart, to create a portable electronic medical record.

To go along with The Leapfrog Group; which was created:

In 1998 a group of large employers came together to discuss how they could work together to use the way they purchased health care to have an influence on its quality and affordability. They recognized that there was a dysfunction in the health care market place. Employers were spending billions of dollars on health care for their employees with no way of assessing its quality or comparing health care providers.

Private industry has felt enough pain with health care in the United States to develop these skunk works-like groups to find solutions.  We need to find sustainability.  If we don’t start the change from within, it is obvious that outside forces will.  Being forced to change is never easy.  Embracing change is the answer.  Private industry has sent the message: if we don’t, they will.

Health care and schools, failing together?

Failure, per say, is subjective to each individual’s definition. Even so, reasons for their possible failure are at opposite ends of the spectrum. One doesn’t have enough resources, the other uses too much. But this article in the The Atlantic made the connection for me. How similar does this sound to the current debate in health care?

The United States spends more than nearly every other nation on schools, but out of 29 developed countries in a 2003 assessment, we ranked 24th in math and in problem-solving, 18th in science, and 15th in reading. Half of all black and Latino students in the U.S. don’t graduate on time (or ever) from high school. As of 2005, about 70 percent of eighth-graders were not proficient in reading. By the end of eighth grade, what passes for a math curriculum in America is two years behind that of other countries.

I asked Marc Tucker, the head of the New Commission on the Skills of the American Workforce (a 2006 bipartisan panel that called for an overhaul of the education system), how he convinces people that local control is hobbling our schools. He said he asks a simple question: If we have the second-most-expensive K–12 system of all those measured by the Organization for Economic Cooperation and Development, but consistently perform between the middle and the bottom of the pack, shouldn’t we examine the systems of countries that spend less and get better results? “I then point out that the system of local control that we have is almost unique,” Tucker says. “One then has to defend a practice that is uncharacteristic of the countries with the best performance.

Nationalizing our schools even a little goes against every cultural tradition we have, save the one that matters most: our capacity to renew ourselves to meet new challenges. Once upon a time a national role in retirement funding was anathema; then suddenly, after the Depression, we had Social Security. Once, a federal role in health care would have been rejected as socialism; now, federal money accounts for half of what we spend on health care. We started down this road on schooling a long time ago. Time now to finish the journey.

Maybe we could learn from education? At least in what not to do. But some places get education very right, let’s explore why.