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2010 Industry Survey

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Sponsored by: McKesson & VHA

Reform Might Mean Making Margin on Medicare

Taking Out Costs May Be the Only Way to Get There

ABOUT THIS SURVEY
The HealthLeaders Media Industry Survey 2010 report is based on seven concurrent surveys sent to healthcare leaders in seven segments across the industry: CEO, finance, technology, physician, health plan, marketing, and quality leaders. In addition, data has been extracted based on community and rural status. The surveys included some common questions for all respondents and some questions directed to leaders in specific segments; some benchmark questions from the 2009 edition are included. A total of 1,210 print and electronic surveys were completed in October 2009. The sample size allows for a 3% margin of error.

Though the long-term effects of healthcare reform cannot be known in the short term (political posturing notwithstanding), CEOs, CFOs, physicians, and quality officers seem resigned to the notion that reform will hurt their bottom line. That doesn't mean they're uniformly negative about what all reform components will do to their finances—in fact, a sizeable minority actually sees plenty of positives from reform—but most are in the pessimistic camp. Glenn Crotty Jr., MD, perhaps speaks for the majority when he calls health reform "capitation in sheep's clothing."

Crotty, chief operating officer at Charleston [WV] Area Medical Center, echoes the results of the HealthLeaders Media Industry Survey 2010 when he says that most healthcare executives feel that "the financial picture will worsen. Most feel that this is BBA II," he says, referring to the much-decried Balanced Budget Act of 1997, which delivered deep cuts in Medicare reimbursement. "BBA I took about $77 million out of our organization, and we think this will be worse," he says.

Timothy Ranney, MD, a physician and vice president of medical affairs for Good Samaritan Hospital in Kearney, NE, has a more sanguine approach to reform attempts, saying the longstanding practice of cost-shifting—that is, charging private insurers more to make up for shortfalls in government reimbursement—will no longer be tolerated.

"Forward-thinking hospitals are concentrating all their efforts into being able to make money on Medicaid and Medicare," says Ranney, who also serves as the executive lead for quality at four-hospital Catholic Health Initiatives Nebraska. "If you can do that, you can do well in almost any environment. And it's doable."

Tomorrow's priorities
Quality: CEOs rank quality/patient safety as their top priority, as they did last year. However, last year 43.27% of CEOs designated healthcare quality as their No. 1 priority, and 69% designated it among their top three priorities. For 2010, CEOs are a bit less enthusiastic: Just 17.96% call it their No. 1 priority, and it makes the top three of just 39.50% of CEOs, down nearly 30 percentage points. Perhaps that's largely because, as Ranney says, "everyone talks a good game around quality and while that's all well and good, most people who make the financial decisions on what quality is view it as a cost, and therefore it's a budget item that they try to cut."

Cost Reduction: One priority that is on the rise is cost reduction, up from No. 6 last year, when just 21% of CEOs put it in their Top 3. For 2010, cost reduction has moved up to Priority No. 3, selected by 35% of CEOs.

As one might expect, finance leaders are looking pretty closely at the numbers in the coming year. While last year, 48.81% of CFOs declared quality/patient safety as their No. 1 priority, that's plummeted to just 9.87% for 2010. Only 27% of CFOs still include quality among their top three priorities, a big drop from 2009's 68%—and a sobering reminder that when quality isn't part of the reimbursement equation, it rapidly drops from leaders' priorities in bad economic times.

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