The CFA Perspective

Isn’t Life Strange?  Cardiovascular Services Cost Management

Posted by Richard Clark - CFA St. Louis office

3/11/16 8:53 AM

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Some things we think are new in healthcare, after closer inspection, are really not new and just carry different or more trendy language.  Since Richard M. Nixon signed the HMO Act into law in 1972, the move to cut cost and improve quality has been driving healthcare for more than 5 decades.  Albeit, over the last 10-15 years, cost has become much more of an issue with the aging baby boom population and other pressures.  For example, the terms “bundled payment” or “population health management” or “fee for value” are just new, more robust spins on an older idea.

Consider these examples:  With the introduction of the Medicare DRGs in the late 80s, heart services providers and payers responded by developing all-inclusive “case rate” payment systems that look a lot like the “bundle” and the 90s rage with “capitation/sub-capitation” models.  These models contain most of the elements of “population health management” arrangements.   Same goal, new terms and approaches.  With the cost of delivering and paying for healthcare continuing to rise, everyone is a bit troubled by the financial impact this is having on all key stakeholders:  healthcare providers, payers and purchasers alike.

I revisited a recent Harris Interactive/Siemens Healthcare poll designed to measure the public’s value of medical testing, access and cost.  Fully 72% of the Americans surveyed said they were more concerned about what they have to pay for their care than having access to care.  This got me thinking back to my first hospital position, as a Resource Evaluator for a large multihospital system in the early 80s.  Virtually the sole focus of that job was to perform studies to uncover ways to reduce costs in providing health care at the service line level.

My very first assignment was to assess staff productivity in a busy Respiratory Therapy Department in our system flagship hospital in Phoenix.  (I also remember that my meetings with the staff of that department occurred in their break room, while many of the staff I interviewed made use of the time to smoke cigarettes…ah, the irony…ah, the good ole/bad ole days…)  From that first assignment, through the next 8 years of my early healthcare career, I used my analytical skills to determine ways to make the provision of care more efficient, while, of course, ensuring high quality.  I wasn’t called “The Hatchet Man” for nothing!  Remember, (or imagine, for those younger in years than me) that these were the days of down-sizing, not re-sizing, or right-sizing, or whatever the PC term would be today.

Apparently, the focus really hasn’t changed that much.  Ian Morrison, in his January 12, 2016 article on hhnmag.com, wrote:

“Critics of exchanges (from both the (political) right and the left) have argued that Obamacare is not really affordable coverage even after subsidy because of the high deductibles. It is true that Obamacare has legitimized high deductibles by establishing high thresholds for individuals and families, but compared with what? Employer-sponsored coverage? Surveys show that 40 percent of workers with employer-sponsored coverage now have a deductible of $1,000 or more, and 20 percent have a deductible of $2,000 or more (and the proportion of Americans with ever-higher deductibles grows every year).”

Facing such high out of pocket costs – even under the Affordable Care Act – of course Americans are concerned about cost.  So, what do we, as Cardiovascular Services providers, do now?  Well, it seems as if we must keep doing the same things we have done for the last many decades to continue to enhance our efficiency and lower costs where we can, even as the costs of new therapies and technologies grow exponentially.

Of course, the differences today make these efforts crucial not just to the hospital bottom line, but also to our very survival as healthcare providers:

  • Transparency through the web, social media, governmental mandated publishing of outcomes, and other forums, makes our successes and failures public knowledge
  • We have many more partners who can be helpful or detrimental to our efforts – we probably now employ our physicians and we are more likely to be a part of larger and larger hospital systems – these partners must be engaged and rowing in the same direction we are
  • We have access to more and better analytical tools – hopefully, with a truly accurate and valuable cost accounting system – to help us in our cardiovascular services cost management efforts

The need to be sound financial managers has not really changed much over the last 25 years:

Within individual hospital settings, CV services program managers will be forced to compete with other programs for shrinking budget dollars.  Therefore, CV managers must understand not only budget politics and strategies, but also how to control cost, volume, and quality; defend financial management decisions with accurate support data; and manage case cost.”   From Successful Management Strategies in Cardiovascular Services, 1992, coauthored among others by CFA’s Charles Franc and John Meyer, page 165

Could have been written today, couldn’t it?

As John Lodge, of the Moody Blues (for those of you who have never heard of them, try the search engine of your choice), wrote and sang in 1972:

“Isn’t life Strange?  A turn of the page.  Can read like before.  Can we ask for more?”

--From Seventh Sojourn album

As always, CFA welcomes your comments, suggestions and questions.

 

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