We’re ready to work on cost savings, just not for patients.
There is a tremendous amount of culture change needed to move from fee-for-service to value-based health care. One of the paradigm shifts is for hospitals to embrace the strategy of cost reduction as opposed to the traditional focus on top-line revenue. In a system that focuses on value rather than volume, increasing the amount of hospital resources a patient consumes could have a detrimental effect on income.
For example, if a patient admitted for appendicitis generates a set fee for the hospital, the addition of unnecessary diagnostic tests only takes away from the hospital’s bottom line. If discharge is put off because nursing is waiting on the physician to round after a busy clinic day, the hospital (and potentially the treating physician) has to eat the additional cost.
As changes in reimbursement schemes become imminent, discussions on how to adapt to these changes are occurring more frequently in hospital C-suites all over the country. Even venture capital firms are getting in on the action in some regions.
This begs the question: How will those cost savings translate to patients’ pockets (if at all)?
In most other industries, a main strategy businesses use to vie for customers is competitive pricing. In the age of high-deductible health plans and health savings accounts (I have both), health care consumers will probably start to demand more price transparency. Gone will be the days of quality-independent 10-fold differences in charges for the same procedure in different hospitals — in the same city.
Hospitals need to change their traditional mindsets of driving up charges in order to adapt. They are beginning to embrace the need for front-line cost reduction (50 percent waste in clinical processes — yikes!), but many are blind to the need to pass down savings to patients. Instead, they want to keep cost savings a secret from consumers, worrying they will demand a similar decrease in charges. This requires health care consumers to understand the difference between what a service costs a hospital and what the hospital charges. With third-party payers (insurance companies) playing less of a role in actual payments, this difference will become more evident.
Health care organizations should be aggressively working on the business of quality patient care. As quality increases and internal costs fall, systems that are ahead of the curve will thrive, while those that are stuck in the past may not survive.
Alexandra S. Brown is associate director, Healthcare Delivery Institute, HORNE LLP.
