8 Things CFOs Must Know About Health Reform

Whether a Chief Financial Officer is running the fiscal operations of a hospital system, an insurance company or a company that simply employs individuals with health coverage, the decision-making process for sustainability is changing at a rapid pace. However, after years of hearing about reformation in the health system, broad, sweeping and revolutionary changes are finally happening. Major shifts are also occurring in the population, as well as technological advances that will disrupt the entire premise of a four-walled institution for care and the very model we use for health delivery.

Health care in the US is a business – a multi-billion dollar business – and understanding the financial implications of health reform will make or break every CFO. Knowing that health access, demand, quality and payment changes are inevitable there is an immediate need for CFOs across the ecosystems to embrace and plan for transformation.

1. You have too many beds.
   While many hospital leaders won’t accept this at face value due to lengthy wait times, surgical demands and desire to shift beds, the truth is there are too many beds in a lot of hospitals. Between transferals to the outpatient setting and telemedicine, the need for expensive inpatient beds is declining. Additionally, hospital leadership are increasingly finding that they face problems with state authorities when they apply to move beds. Most recently at the University of Chicago, where 338 beds were being used for a 304-person utilization pattern, the state rejected a University application to move surgical beds.
2. Food, housing and transportation of patients is your problem.
   As Americans begin to define and attempt to tackle community and population-based care, the access individuals have to quality food, affordable housing and efficient transit matter.  No one living in a food desert will have the same health outcomes as someone living next door to a Whole Foods, just as an individual with a new car will always be more consistent in making appointments and picking up prescriptions than someone who has to access three public transit buses for the same activities. Real patient engagement and activation begins with understanding the environment of each patient.
3. Your patient demographics are shifting, and so too should your leaderships. As the US continues to brown, hospital leadership must be representative of the population to understand and meet need. At a recent Modern Healthcare Top 25 Minority Executives session, an awardee remarked that the United States is now a country of minorities, and “our leadership as minorities is our future for health outcomes.” With this in mind, it is inevitable and paramount to success that the leadership of any organization resembles and represents those it serves, so it makes the financial investments and decisions that influence the community.
4. More bodies in beds will never work again.
   Value-based purchasing means that a warm body in a bed not only drives costs higher for the payer, but that the longer a patient remains in the hospital – or the more often they return – the more penalties that accrue. Therefore, the goal should not be for more bodies, but for cost-effective bodies. Depending on the community serviced, this can mean desire for more Masters Athletes, specialized services or elective services. Additionally, as we shift to a world where technology enables more clinical procedures and recovery to be done in the outpatient setting, or at home, and expensive inpatient procedures decrease in volume and reimbursements, hoping to fill beds is futile.
5. Alignment with physicians is nonnegotiable.
   No leader can effectively attain a goal without buy in from those who carry out the work.  However, it is important to be aware that “physician alignment” is a term that causes almost all physicians to turn and walk the other direction out of fear that this indicates buying their autonomy and dictating their day-to-day, moment-to-moment ability to practice. According to Healthcare Financial News the implications of physician behavior are so important in 2014 that more revenue than ever will be spent recruiting physicians who see the world the same way you do, which is not very different from how corporation CFOs think about their employee hires.
6. As consumers take on more and more pay responsibility, unexpected payment shifts will keep occurring.
   Many experts estimate that defined contribution, health insurance exchanges and the growing individual health insurance market means that patients will become more informed about spending their health care dollars, and therefore, more unwilling to spend. The future of reimbursements and pricing strategies is presently a puzzle wrapped in an enigma because of extreme uncertainty. However, it is general knowledge that Medicare and Medicaid reimbursements are going to continue decreasing, with the American Hospital Association and Moody’s already estimating an, “unequivocally negative” outlook for hospitals on the reimbursement fronts.
7. Technology and data utilization can save you money.
   While the learning curve with new technology can be excruciating and the meaningful utilization of collected information seems daunting, everything from workflow to health activities and employee/patient engagement can be monitored – and altered in real time – using new technology. Moreover, the more information that is known today, the better predictive analytics and behavioral change that can be made tomorrow. However, as the amount of technology available to leadership continues to grow exponentially, the purchasing of new tech will be a balancing act between what is a passing fad versus what is sustainable and transferable.
8. Your EHR is going to cost you. Big time.
   Now this seems obvious to most hospital CFOs, as they have already seen the initial price tags that come with implementing a “holistic” electronic system. However, the most costly elements may not yet be realized. As mergers and acquisitions continue, technology advances and EHR capabilities increase, the need to refresh systems will continue.  At present there is not one system that meets end-to-end patient or provider needs, leaving the ecosystem open for further disruption, which inherently includes more interoperability, more upgrades, more plugins and more costs.

 

Is Your Doctor Lying To You?

The doctor-patient relationship, like any good relationship, is built on trust. After all, the patient is naturally at the mercy of their physician in most cases, because the physician is the expert. Sure, the patient should have the ultimate say in their care, but the information they are basing their decisions on typically comes from the physician, and they must trust that what they are being told is the truth. Unfortunately, a recent study by Lisa Iezzoni and colleagues finds that doctors aren’t always so honest with their patients.

In a survey of a representative sample of physicians, more than a third of doctors fail to completely agree with the statement “Physicians should disclose all significant medical errors to affected patients.” Nearly one-in-five fail to completely agree with the statement “Physicians should never tell a patient something that is not true.” That’s right, more than 17% of doctors felt that there were times when it was okay to lie to patients.

As for their actual behavior, 11% of physicians reported rarely, sometimes, or often (in contrast to never) telling a patient something that was not true, and 55% reported rarely, sometimes, or often describing a patient’s prognosis in a more positive manner than warranted. Admittedly, the latter case could be perceived as compassionate rather than dishonest depending on the circumstances.

What are we, as patients, to make of these findings? Well, on the one hand, the truth could be even worse than the results suggest because of “social acceptability bias.” In other words, doctors know that admitting to being dishonest isn’t the “right” answer to give, so they may ironically be dishonest about reporting their dishonesty. At the same time, the framing of the results may actually be misleading. By taking four responses (never, rarely, sometimes, and often) and grouping them into two categories (never vs. not never), important information is obscured. If most of the doctors who admit to lying are in the “rarely” category, perhaps that’s not so bad. If, on the other hand, most of them reported lying “often” that’s a little scary. Unfortunately, the way the data are presented, it isn’t clear which is the case. I think it would have been better to put two responses in each category so that “never” and “rarely” were combined and compared to “sometimes” and “often.”

My sense is that doctors, like all people, sometimes lie–perhaps more often by omission rather than commission–but that we should not be too worried about the results of this survey. Don’t assume your doctor is lying to you or that they are always being honest. That’s what second opinions are for.

 

 

Using Medicare Data to Rate Physician Quality

Last week, the federal government announced that it would allow Medicare claims data to be used for the purpose of disseminating physician quality information to the public. What’s news is not that there will be attempts at creating so-called quality “report cards”–attempts at those have been around for some time–rather it’s that the Centers for Medicare & Medicaid Services (CMS) has finally agreed to let a wide range of folks access Medicare claims data for the purpose, which hasn’t happened before on this level.

But what are we to make of this new development? Is it a good thing or not? Giving the “consumer” more information on which to base their selection of a physician and their use of health care services seems like a good thing. After all, it’s essentially central to the idea of a well-functioning free market. As any health economist will tell you, the information asymmetry between consumers and providers leads to all sorts of peculiarities that cause the health care market not to behave like the market for other goods and services. This could then conceivably be a step in the direction of correcting some of those peculiarities.

The real question, though, is how good will this information be? Or, said another way, is poor information preferable to no information? Now, that doesn’t mean that there’s not a lot of excellent potential in these Medicare claims data. On the contrary, there’s much to be learned here. Of course, the realization of that potential is a function of the empirical rigor of the analyses researchers like myself undertake. No, the real worry I have is how this translates to the lay public without grossly oversimplifying things.

Let’s say a system is devised that, in true “report card” fashion, assigns physicians a grade ranging from “A” for outstanding to “F” for visit at your own risk. The public would certainly understand such a grading system, and people would be expected to show a clear preference for “A”-rated physicians over “F”-rated ones, but what about the bulk of physicians in the “B” and “C” range? It’s entirely possible, depending on the rating algorithm used, that a physician who excels in one particular area nevertheless gets a “C” rating. Would the public do its homework, or would it avoid doctor “C”? I worry that the latter may be the most likely outcome.

Again, I’m not saying that efforts to monitor quality and report that information publicly are a bad idea. Far from it. I’m merely suggesting that we must be extremely thoughtful in how we engage in such efforts, because the potential for significant unintended consequences is quite real. We must figure out how to approach these data using the most sophisticated of techniques, all the while with an eye on translating what we find in a manner that is accessible to the public without being “watered down” or less than accurate. The risks and the rewards are great.

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