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How Value Gives Healthcare Providers an Edge

Philip Betbeze, for HealthLeaders Media, September 10, 2013

Big savings

In Walmart's Centers of Excellence program, Mercy has consulted on 39 patients. Of those, physicians told 17 to not even bother getting on a plane because they would recommend against surgery. Some 22 have traveled to Springfield. Of those, Mercy physicians have performed spine surgery on 11 and told another 11 that surgery was not their best solution. Previously, all 39 would have probably ended up with spine surgery, which is risky to begin with, and which may have actually harmed them.

"The best hospitals should be the ones who put themselves out of business, right?" says Scarrow, half-jokingly, referring to the revenue Mercy could have earned from this group of patients. "We ran into this same thing with the Medicare demonstration project, managing patients with congestive heart failure and diabetes in a proactive way to keep them out of the hospital. We were successful. Our reward was we made less money."

Yet that fact does not deter Mercy's leaders from pursuing such affiliations with employers and payers. Mercy pioneered value-based deals with local employers such as Bass Pro Shops and O'Reilly Auto Parts. And though it can lead to second-guessing as the health system turns away patients for whom it could easily perform expensive procedures of uncertain benefit, Scarrow puts it in the context of the big picture.

"We're $16.5 trillion in debt already, and the largest demographic group in history [the Baby Boom generation] is coming into their prime consuming years as they hit Medicare. There's no way we can sustain this, so we have to find better answers."

There is a silver lining. As a top performer in quality and evidence-based medicine, Mercy gets additional patient volume for its efforts. Scarrow is hopeful that will continue and that Mercy will remain a leader, because "it's about ethics, quality, and price, and when you allow the market to sort that problem out and decide winners and losers, you'll get a more efficient solution."

But he's under no illusions about employers. They're doing this to save as well as improve care.

"If we don't have these things in spades, they will go to someone else. They'll treat us like any other vendor. The market is choosing who does this well, and that is where patients will gravitate."

He says as a nonprofit health system, Mercy Springfield has an emergency room that sees 100,000 patients annually, and it treats all payers.

"The price we pay for that is that we have to make money off the commercially insured to subsidize," he says. "For-profits getting into medical destination could undercut our price significantly. That is one potential problem we will have to solve somehow if we are going to stay in this line of business."

Reprint HLR070813-5


This article appears in the July/August issue of HealthLeaders magazine.


Philip Betbeze is senior leadership editor with HealthLeaders Media.
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1 comments on "How Value Gives Healthcare Providers an Edge"


S Willson (9/16/2013 at 5:26 AM)
Good post. Thanks for writing it.