He asserts, that, among other things:
“When hospitals do cost reductions, they look at cost, not outcomes. This takes their bottom line away. There is a bad habit in healthcare of treating everybody like a Medicare patient, so Medicare pays on DRG (diagnosis-related group) and we don’t get paid based on things like length of stay. There’s a huge effort to cut length of stay. When I’m cutting cost, I need to cut costs in the appropriate area.”
He says the best overall way for hospitals to consider costs is: “You have to look at it from the holistic approach. What are the costs that are actually costing me something in my different payer levels? Is it a utilization or a variation? How do I get rid of variation and not worry about the number of days?”
His view of changes from new payment methodologies:
“If you have two underperforming units at two different hospitals that are five miles apart, if we moved them to one facility, they would be a high-performing function, but we don’t want to make those tough decisions. The new payment methodologies will force the healthcare industry to make tough decisions, such as do I really need four OB units within ten miles of each other or do I need one? ACOs (Accountable Care Organizations) – basically capitation with no control – are starting to look at risk components, making sure we get continuing of care from beginning to end provides an idea of how cost is structured.”
On ICD-10’s effects on hospitals’ revenue and reimbursement situations:
“ICD-10 is going to have a bigger impact on hospitals from a revenue and cash standpoint than anything else that’s coming right now. I have to get past that before I can deal with ACOs and bundled payments. ICD-10 is the biggest threat to any income. ” (For laypersons: ICD-10 is the 10th revision of the International Statistical Classification of Diseases and Related Health Problems.)
“People who are not taking it seriously understand it from a technical standpoint and not a process standpoint. The threat is impending change that has a direct impact on reimbursement and that’s where my cash and investment comes from….”
