Wednesday, April 24, 2013

Is it profitable for health care providers to cut costs?

In a world where providers are still paid for doing stuff to patients, it is hard to cut costs.  The NY Times has a story of a Chicago provider "Advocate," that signed a contract with a payer (in this case Blue Cross Blue Shield) where

.... certain patients are assigned to the accountable care framework — about 380,000 — and their health costs are projected. If Advocate achieves savings below that amount while meeting explicit quality targets, it splits the money with the insurer. If not, its revenue is at risk.

In some ways, accountable care resembles earlier efforts to control medical spending, including the health maintenance organizations that proliferated in the 1980s but fell out of favor, in part because they severely limited patients’ choices. But accountable care differs by giving doctors and hospitals a direct financial stake in saving money and a reason to invest in various programs of preventive care rather than relying exclusively on the fees they would normally earn from providing services.

To make money on these patients, Advocate must keep them out of the hospital.  So far, it is making a tiny bit of progress:

So far, Advocate has achieved a small but significant savings of about 2 percent below projected costs, Blue Cross Blue Shield said, but it is not clear whether it can continue to make progress. Already, some Advocate hospital chiefs have expressed fears over losing revenue and warned about the threat to their financial performance. Doctors fret that their incomes may suffer. “We’re doing it because it’s the right thing to do for patients,” said Dr. Stuck, the Advocate family physician. “We’re not making more money.”


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  2. When is the "start date" for hospitals receiving a fixed amount for medical care given for a specific diagnosis? After this occurs, cost reductions should be beneficial, whereas currently they are actually harmful to the hospital's margin. If outcomes improve, costs go down due to fewer services being provided (for the complications), but currently this reduces revenue.

  3. It can be profitable for hospitals to cut costs if its implemented in the proper manner. The ultimate goal for hospitals are to return sick individuals to health. As of recently there were zero incentives available to prevent readmission of patients. Basically if you went back to the hospital there would be no repercussions and hospitals would get paid regardless of the care the patient received. In preventing readmission you are cutting costs for both the hospitals and the insurance companies.

    Like anything else incentives add pressure for you to perform. In attaching financial benefits and giving hospitals the opportunity to reduce costs you can increase the quality of care. With continued success in this manner hospitals will have increased profits which could lead to better equipment and better available technology for patient care.

  4. I don’t think it’s good to cut costs because that can lead into quality getting decreasing. I feel we should always look for health of everything including one where we work or is important to us. I am extremely lucky that I do Forex trading with OctaFX broker since they have epic conditions with low spread of 0.2 pips, high leverage up to 1.500 while even their platform for trading is just awesome because I can use it for mobile as well.