Readers Write

Philip Betbeze, for HealthLeaders Media, May 19, 2008

I've gotten a heck of a lot of mail lately, so I thought I would share it with you as I do my spring cleaning with the beginning of summer approaching. Incidentally, we won't be publishing HealthLeaders Media Finance next week because our publication day is Memorial Day. If I'm lucky, I'll be enjoying a burger and a cold beverage or two—and so will you, most likely. Lucky me—the rest of our editors still have to do their weekly e-zines. But they'll get their revenge on Labor Day.

Fair warning: There are a three long ones from readers who wanted to cheer, boo, and elaborate on my Cross Purposes piece a few weeks back. But read on, there are more as you scroll down. . .

You're right on when you suggest that the two goals of mission and margin are not mutually exclusive.

Here is one way that a hospital can make sure that the two goals are compatible. The hospital outsources all of its billing and collection activities to a single third-party payer that agrees to pay the hospital a global sum monthly, based on a negotiated budget that reflects both the hospital mission and the realities of the marketplace, and guarantees an agreed upon margin to the hospital in advance. As with many other hospital activities, like outsourced food service or housekeeping, the single third-party payer would employ most of the hospital staff that currently works in these areas, keeping enough essential staff at the hospital location to assure close coordination between billing and collection activities and the much more important activities of the hospital in fulfilling its mission.

With the bottom line no longer an issue, and with careful management of the budgeted expenses for the anticipated volume of service, the hospital can concentrate on all of the elements in the negotiated budget that reflect the mission of the hospital about health. There need be no more worries about what you call "cutting their own financial throats." Of course, in some years, actual expenditures may turn out to be much greater [or much less] than anticipated. This can always be dealt with by provisions in the contract between the hospital and the third-party payer that require or permit agreed-upon adjustments in the budget during the budgeted year or the following year.

With outsourcing of the billing and collection activities to a single third-party payer, based on an agreed-upon negotiated budget, the hospital and the third party payer will necessarily become involved in ever closer collaboration. This collaboration will be most effective in reducing the cost of the billing and collection activities as the third-party payer becomes more and more skilled at dealing with all of the different sources of payment. The payer will relieve the hospital of having to deal with financial issues with other third parties—government and business payers, as well as individual patients and their families—but the single third-party payer no longer has to bother with paying the contracting hospital on a case-by-case basis. Even more important, the single third-party payer will have every reason to work closely with the hospital on achieving budgeted health goals. That has great potential to reduce the necessity to bill for unnecessary inpatient care and other expensive services that can be reduced in volume as a result of the revitalized health focus of providers with guaranteed income and bottom lines.

Locally based third-party payers, like some of the Blue plans, will probably find fewer problems creating this new line of business—paying for care on a global budget basis—than those that lack any history of collaboration with a community health focus.

Robert Sigmond
Fellow, Health Research and Educational Trust

This may sound defensive to you, and it probably is; nevertheless, I take an extremely strong position against your article regarding a hospital's mission being at odds with the practices of keeping people on an inpatient basis.

You stated, "Isn't it odd that an entity like a nonprofit hospital survives financially by keeping people in hospital beds while its stated goal is to keep people out of them? It's true. Check the mission statements of any number of nonprofit hospitals and you'll find various ways to say that the hospital's goal is to promote wellness and restore health."

I beg your pardon. We survive financially because of extremely prudent business practices, deferring needed renovation and/or repairs and assuring we get paid what we are entitled to be paid by Medicare, Medicaid, and Blue Cross. Most hospitals have extremely effective case management/utilization review initiatives going on in the hospital to assure that patients are only admitted when they meet certain criteria, and they are discharged only when satisfying other criteria. Most acute-care hospitals participating in Medicare, Medicaid, and Blue Cross, at least in Michigan, are paid fixed amounts based on the patient's diagnosis, and, I might add, this applies to both inpatient and outpatient. Keeping a patient in the hospital longer than necessary would simply drive up costs and result in no additional payments being made to hospitals. I feel confident most CFOs would not take that scenario lightly.

Richard E. Trufant
Community Health Center of Branch County
Coldwater, MI

Yes. . .and no
Where do most hospitals make their money, in order to remain in business?

For years, we have been asked, "What's the census?" Well, if it were based on our elective surgery patients, we might be comforted with the answer that all of our beds are full. Ironically, it's when we are at our busiest times that we experience our greatest contractual write-offs.

After realizing that our own healthcare costs were 6.1% on an $82M budget (in 2007), we decided to do something to make employees more interested and responsible for their own health. Years ago, we offered each employee $80 if they would participate in and complete a wellness screening and fitness improvement/learning program. We saw very little impact for our investment. Instead, this January, we launched a health and wellness initiative based on the "Biggest Loser" television program as a prelude to our new approach toward wellness. It's designed and modeled after the Asheville project, which focuses on better management of prescription drugs (our staff pharmacists will serve as consultants to our employees). Note that we spend $600,000 plus on medicines for our employees.

The long and short of it is that we have around 150 employees who have collective weight loss of more than 1,000 pounds to date, and the contest is not yet complete. Each employee paid $50 to sign up for the program we call ACH's Biggest Healthy Loser (so they have skin in the game), and we provided 24-hour access to the "Sweat Shop," a small gym on campus, as well as access to personal trainers from a local college sports medicine program. Nothing fancy.

The best comments I've heard this week related to "ACH's Biggest Healthy Loser" are: "I am no longer on my blood pressure medicine" and "Managing my diabetes has never been better."

We hope to open this program to our community, in order to effect change in the overall health of its members—so we started closer to home, in-house. We in healthcare need to find better ways to manage our own healthcare costs. And we also are trying to learn—and ultimately teach our own employees—how to be better buyers of our own medical services.

Stan Jonas
Alliance Community Hospital
Alliance, OH

Here's one from a doctor who felt like taking up for me after the last batch of comments from his colleagues. . .

Ignorance is bliss
As Will Rogers said, everyone is ignorant—it's just that we are ignorant about different things. Many of my fellow physicians are brilliant in many ways and all of them are committed to good patient care. However, many of these same physicians are ignorant or even hostile to the advantage of standardization and systems. We have been trained to avoid cookbook medicine. Evidence-based means the evidence we choose to believe. This belief is further reinforced in the way malpractice is handled. Following guidelines hasn't really protected us. Most physicians who find themselves in this situation feel they are in the water hoping for a lifejacket rather than securely in the lifeboat. As a result, we have become professionals on a team rather than a professional team. Standardization and checklists do work as noted by Peter Pronovost, MD. Unless we change the thinking and the reasons that cause us to "go it alone," the struggle for consistency and cost containment will continue.

Marshall Steele, MD

Here's one from another MD who found my comparison of physicians to a barrel of oil comical. Just to reiterate, I didn't exactly, compare physicians to a barrel of oil. He sent an even more comical response. . .

Oil, schmoil
OK...that was a stretch. Personally, I think comparing physicians to a barrel of oil is an embarrassment to the oil.

Robert Teague, MD

I'd like to thank our readers for their comments and for allowing me to publish them. Feel free to write me anytime.

Philip Betbeze is finance editor with HealthLeaders magazine. He can be reached at
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