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A Hospital Prevents Readmissions, but Threatens Revenue

Cheryl Clark, for HealthLeaders Media, February 10, 2011

But, he adds, that doesn't escape the ugly truth, which is that "the current financing system for healthcare in this country doesn't support these kinds of programs," even though they have lifetime benefits for the children, their families, for the healthcare system and for society at large.

"Everyone worries about their member-per-month costs, but not the long-term health impact from providing healthcare programs (like this one) for kids, and that's a real problem," Greenberg says.

Woods says the cost of these remedies may seem like a lot, but in context, it really isn't. For example, a $150 HEPA vacuum cleaner costs less than a month's supply of inhaled corticosteroid medication, the need for which may be reduced by regular carpet cleaning to prevent airborne allergen exposures, and is certainly less costly than hospitalization. The hospital pays, but Medicaid and private insurers get the savings from the avoided need for expensive healthcare services.

The hospital also spends its own money – including revenue from grants and philanthropy – to keep the program staffed with a director, clinical director, clinical nurse, community outreach worker, community nurse educator, an evaluator and a program coordinator.

The idea that an industry might undertake expensive projects to avoid selling its products is not new, although in some cases companies have been forced to do so. Utility companies now pay for home insulation and special meters that detect overuse. Some of these efforts are now "rate-based" which means that these expenses can receive a rate of return, encouraging utilities to do more of the right thing. One hopes the automobile industry is building its cars more safely and in ways they last longer.

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1 comments on "A Hospital Prevents Readmissions, but Threatens Revenue"


Neal Colburn (2/10/2011 at 3:31 PM)
The opportunity to align quality outcomes with financial incentives was provided under global capitation. Having once been president of a community health center controlled HMO, I thought that it would obtain buy-in from hospitals in a collaborative program investing in quality practices and patient management, as noted in the article, improving quality; raising the health status of our patients; and thereby, reducing cost; then reivesting part of the savings in more cost-saving programs. I thought that hospital administrators would understand that improving the health of the community; reducing hospitalization while retaining the same capitated revenue would be attractive. Unfortunately, hospital CEOs and CFO would only consider fee for service payments for procedures, services and bed days, albeit with some small discounts for volume - the opposite of the hoped-for incentive direction. As a result, the opportunity to work collaboratively and align financial and quality incentives, and possibly programs was lost in most cases. This was repeated in market after market. The HMO was able to obtain buy-in from many of the primary care providers with quality process incentives and capitation. Many were able to significantly bend their cost curve, but with their small portion of the resources they were not able to substantially impact the total system cost. Now the federal government and other payers are betting on the ACO and Patient-Centered Medical Home models with less control over global resources but also less downside risk. Hopefully, the incentives will be well directed and appropriately valued to drive significant change. However, it will take more enlightened vision, collaboration and decision-making than appears to have been the experience in the past. Let's work together this time and make it work.