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Keep Your Eye on the Quality-Value Equation

Rick Johnson, for HealthLeaders Media, December 2, 2008

Talk to CEOs of American hospitals, and they'll freely admit the U.S. health system is fraught with waste. In the next breath they might very well tell you about the efficiencies and cost controls they have tried to implement, but few would point fingers at the local hospital administrator as the source for the country's spiraling healthcare costs.

After all, healthcare here is a competitive business. Margins are thin for most, and some community hospitals are even closing their doors. Some of the real sources of waste are noted in a recent Washington Post story. Top health system CEOs tell the Post that the U.S. needs to pay for results rather than services and that as much as half of the $2.3 trillion spent doesn't improve patient health. If I'm a large employer reading this story, you'll probably be able to see the steam coming out of my ears. Bad enough I'm struggling in a depressed economy, but CEOs of major health institutions are telling me that they knowingly waste half of what I spend on employee healthcare.

We've heard this complaint before, and it comes down to the quality-value equation—which is the very thing that can give global hospitals a competitive edge. Without the burdens of the fee-for-service model and onerous regulations, global providers can concentrate efforts on providing the great outcomes at a good value that consumers, employers, and payers are looking for.

However, as third-party payers enter the global marketplace and private international hospitals continue to feel the pressure of adding expensive technology and amenities, global CEOs should work hard to avoid the pitfalls that lead to unnecessary costs.

With a global physician shortage looming, it is all too easy to give in to the urge to buy the newest technology even if you're not sure it will improve outcomes. Here in Boston, Paul Levy, president and CEO of Beth Israel Deaconess Medical Center, writes in his blog that he's giving in to business pressures to purchase a da Vinci Robot Surgical System because other hospitals in his region already have the technology and he thinks it will help him recruit physicians.

These concerns are hardly limited to Boston academic medical centers. Private hospitals in India, Thailand, Singapore, and the Middle East no doubt want to add the latest—but not necessarily the greatest—technology in their efforts to attract top-notch doctors and patients seeking state-of-the-art care. When it makes business sense, there's certainly nothing wrong with this, but in an increasingly flat world the quality-value equation should rule over adding cost for the sake of marketing strategy.

Nearly every hospital leader wants his or her hospital to be considered a center for innovation, but the more mature leader considers what the value is to the patient and delivers it consistently.


Rick Johnson is senior online editor of HealthLeaders Media. He may be reached at rjohnson@healthleadersmedia.com.
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