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Kitzhaber’s advice to hospitals

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Former Oregon governor and healthcare reformer John Kitzhaber, M.D., explains why uncertainty should require hospitals to focus on value and community health.  He talks about four forces compelling hospitals to change.

  • The skyrocketing price of medical devices and pharmaceuticals.
  • The consolidation of the insurance industry  is giving large commercial payers more power to force price concessions from providers. “This is exacerbated by the steady change in patient coverage from private to government payers, especially Medicaid and Medicare, both of which offer reimbursement lower than in the commercial market.”
  • Public and private payers are encouraging a move from fee-for-service to value-based purchasing. “This trend will force hospitals to maintain two payment systems at once: the FFS system that is generating most of the revenue and the shared savings system from which quality-based bonuses are calculated. The revenue generated from the FFS reimbursement model may not be sufficient to cover the cost of building a value-based organization.”
  • “{T}he rapid growth of disintermediating organizations such as ambulatory surgery centers and freestanding imaging centers, along with moves by large retail stores like Wal-Mart and CVS to become major providers of primary care, threatens to cut into both the specialty care and primary care business of hospitals.”
 He concludes:


“Current hospital strategies do not adequately anticipate the politics of an increasingly revenue-constrained environment in which public funding will increasingly be tied to measurable improvements in community health, and Medicare and Medicaid will have become the focal point of federal cost control efforts.”


“Those hospitals that still have healthy margins should begin to adjust their central role as major community employers, investors and procurers of goods and services. To do so, they need to use strategies that improve community health, including the courageous redeployment of resources upstream to address the social determinants of health. Now is the time to shape your own destiny.”

To read his piece, please hit this link.

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