Two Trillion Dollars in Healthcare Reform is a Game Changer for Hospitals

By Kate Fenner

Taking $2 Trillion out of the healthcare system in the next decade is going to force everyone to change how they do business – hospitals, doctors, pharma manufacturers and retailers, medical equipment manufacturers – everyone. That’s the sum that has been pledged in exchange for a seat at the table where ultimate healthcare reform issues will be decided. For starters, hospitals will be looking at how to continue providing great care for several percent less in revenue.

The Robert Wood Johnson survey data discussed in my previous blog post are very interesting, but  in reflecting further on that 2001 survey, the world has changed. Data that were predictive in the past will not be predictive of the future. The RWJ survey simply could not account for the reality of healthcare reform and the impact of universal coverage.

Generals have always fought the last war. As they have painfully learned, the military needs to prepare for the next war. The same is true of hospitals facing healthcare reform.

The problem facing healthcare providers is the lack of primary care doctors. There is a lot of attention now in Washington about doctor reimbursement to encourage more doctors to go into primary care rather than into specialties. While this argument moves forward, too little attention is being paid to the immediate impact of healthcare reform on hospitals.

Universal care will likely overwhelm hospitals unless their systems can handle the surge of patients. Streamlining systems will be more important than ever before. Survival will no longer go to the fattest (as the RWJ Foundation data showed), but to the quickest.

The ED will be the front door to the problem. Because there are not enough primary care doctors to serve the rapidly expanded population soon to be entitled to care, these people will go to the nearest hospital emergency care unit in volumes too large for most EDs to handle. This is precisely what happened in the Massachusetts reform. Patients had nowhere to go except the nearest emergency department.

But the problem will not stop at the ED. It will rapidly flow across inpatient facilities and ancillary departments – more tests, more therapy, more pharmacy orders … more of everything. It will be like the python swallowing a pig. We will be able to watch the surge of patients hitting one department after the other as hospitals, like the python, attempt to swallow their pig.

Hospital managers cannot fix one part of their systems without a complete systemic redesign … like the old song “Dem Bones”:  The foot bone connected to the leg bone, the leg bone connected to the knee bone, the knee bone connected to the thigh bone …”

Hospitals best prepared will be those that focus now on the imperative for streamlining processes, eliminating redundancy and waste so they are quick and reimbursable. Hospitals that prepare now to handle the increase in volume will be in a position to benefit from influx of new patients.

If we are fast and good, the money will follow. 

This does not consider the potential negative impact of lower reimbursement rates. Selling at a loss and making it up in volume is no way to run a hospital. Government reformers need to understand that many hospitals are already running in the red and pushing unprofitable patients through the system will aggravate quality.

Two areas that will provide positive (even stunning) return on investment are labor cost management and case management. Both get at internal process and policy changes needed to reduce the amount of time staff spend on caring for patients efficiently. Altru Hospital in Grand Forks, ND, for instance took $4 million off their bottom line in less than 12 months.

We invite you to contact us so together we can look for opportunities to improve your most critical clinical processes. Call Cary Gutbezahl, MD, at 513-241-0142.

Filed Under: Featured Articles • Financial Performance