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Can U.S. Hospitals Become More Oriented to Health Outcomes?

Posted Aug 16 2011 12:00am

I have previously discussed some of the problems associated with fee-for-service and the need for hospitals and physicians to be more oriented to health outcomes (see, for example: Performing Procedures Can Be Lucrative for Physicians ). I think that most people understand that the pursuit of outcomes is superior to fee-for-service but the challenge is revamping our reimbursement system to favor the former approach. A recent note by written by Dave Chase, the CEO of Avado.com , a health technology company, made this same point very eloquently (see: Making Newspaper Industry Mistakes ).  Below is an excerpt from it:

Now consider healthcare in the U.S.: There’s a clear understanding that the industry must shift its focus towards outcomes from “do more, bill more” orientation....Prevention-focused countries such as Denmark have dramatically lowered the need for hospitals. Once at 155 hospitals, they are at less than a third of that today. I find this easily-known fact is news to healthcare providers I speak with. ...[T]here are incredibly large capital investment projects on the docket for many health systems. Since 62% of hospitals are mission-based, non-profit organizations, it’s astonishing that they are more focused on capital projects than addressing the overall health of their communities. No one has made the case, for instance, that chronic conditions that consume 75% of the $2.6 trillion tab in the U.S. is best addressed by building more buildings. Some make the case that there’s a growing healthcare real estate bubble while costs of chronic conditions continue to expand. In healthcare, it’s as though we are building better firehouses and investing in more firefighting equipment while we do the equivalent of leaving oily rags around, letting kids play with fireworks on dry hillsides, and building structures with one exit....Whether the innovation comes from within or from non-obvious competition such as employers or pharma companies, there’s a distinct advantage in having a blank slate where cost effective systems and models of delivering care can be delivered. For the providers, they’d be well advised to develop their own innovation teams unfettered by the current model so they can develop models that will ensure the provider’s long-term survival.

In our current system, performing procedures is much more remunerative than diagnosing disease, treating patients with drugs, and coaxing lifestyle changes from them. The notable treatment exception is the lucrative oncology concession (see: The Oncology Concession Under Attack by Health Insurance Companies ). I agree that our non-profit hospitals have been drifting away from their mission (see: Non-Profit Hospitals Drift from Their Mission Despite Subsidies ). It's also well understood that many hospital CEOs need to justify their mega-salaries by focusing on the bottom line and building empires. Here's a recent item about CEO salaries from Mr. HIStalk :

A hospital CEO salary survey covering only the Midwest finds the pack led by 314-bed Children’s Mercy Hospital and Clinics (MO), which paid its CEO $6 million in the most recent year....Mercy Janesville paid $4.5 million, Advocate $4 million, and Northwestern $3.4 million. It’s bad enough when private industry CEOs make massive multiples of what the worker bees are paid, but absurd when talking about non-profit hospitals, all of which ironically anguish publicly over escalating healthcare costs.

Where is the pressure going to come from to ratchet down reimbursement for procedures and spend more on preventive medicine (see: Preventive and Predictive Medicine as Components of the Healthcare ContinuumThe Need for a Preventive Medicine Infrastructure in the U.S. Will Large Health Systems Embrace Preventive Medicine and Wellness? )? I don't see any likelihood of the U.S. government managing hospital systems like Denmark other than the VA system. However, I would not consider the VA as an exemplar for preventive medicine. In my opinion, the only pressure for greater emphasis on preventive medicine, as suggested above, could come from employers who are increasingly saddled with high healthcare costs. Unfortunately, their major current strategy seems to be to shift healthcare costs to their employees and to the federal government.

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