With insidious incentives driving healthcare costs up, MAYBE we should concentrate on what can be reasonably and fundamentally changed to drive them down!

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Randy CharpentierAuthor: Randall B. Charpentier, HEM, President/Principal Consultant – HealthSafe New England

While doing research on the status of healthcare, I was curious to see what definition Wikipedia would provide.  According to the statistics in Wikipedia regarding Healthcare in the United States, we lead the world in healthcare spending per person.  While reading this, I was immediately drawn to costs as it is a hot button item with the transformation occurring with the Affordable Care Act (ACA), referred to as Obama Care.  Although these stats are not news as it has been widely publicized during this time of transformation, it bears repeating if we as consumers are to become engaged in this debate and have our voices heard.  One excerpt reads:

Aggregate U.S. hospital costs were $387.3 billion in 2011—a 63% increase since 1997 (inflation adjusted). Costs per stay increased 47% since 1997, averaging $10,000 in 2011.[14]”    

So what is behind this exponential increase in costs?

The stats reveal that administrative costs, increased utilization including rising consumer demand, new treatments, more intensive diagnostic testing, lifestyle factors, the movement to broader-access plans, and higher-priced technologies[134]  are at play.  Consumers are becoming an integral part of this transformation as cited in the statistics.   This reasoning has led for calls to reform the insurance system to create a consumer-driven health care system whereby consumers pay more out-of-pocket.[131]  

Be prepared to pay more for your healthcare if you already aren’t as Peter Morici’s recent commentary in The Street suggests:  “Ouch!  The Bill for ObamaCare Coming Due!”

As an experienced safety and risk management professional who has played various roles in both healthcare and insurance, I’m left to wonder who could afford the rise in healthcare costs when most middle class American’s are barely able to keep up with today’s rising costs in everything they consume just to survive?  Who can afford to pay more for their healthcare?  I’m of the opinion that while this is a hot topic, let’s concentrate on what can be reasonably and fundamentally changed to drive down costs, not increase them.

The transformation that I’m observing in healthcare is the status quo as I have personally experienced.  During the mega merger period of the 90’s, I observed large healthcare networks being formed in the Northeastern U.S. region and throughout the country.  For profit’s became major players in the business.  The formation of these networks led to down/right sizing of staff, cut backs in services, and new insurance products/services to adjust to the new landscape.  Today, the same trend is repeating itself.  That model may have worked to increase revenues for healthcare and the insurance industries, but did not address rising costs and expenses.  The key here is, were they effective in improving the delivery of healthcare services and reduce costs/expenses?  The statistics say no.

As I’ve noted in my previous posts, the healthcare industry remains one of the most dangerous industries for staff, patients and visitors alike.That translates into higher expenses & costs for healthcare.

  • For those employed in the business of healthcare and others, it has been estimated that employers pay almost $1 billion per week for direct workers’ compensation costs alone. The costs of workplace injuries & illnesses include direct and indirect costs. Direct costs include workers’ compensation payments, medical expenses, and costs for legal services. Examples of indirect costs estimated to be 4 times higher than direct costs include training replacement employees, accident investigation and implementation of corrective measures, lost productivity, repairs of damaged equipment and property, and costs associated with lower employee morale & absenteeism.
  • Impact on patients include, Medical errors and unsafe care harm and kill tens of thousands of Americans each year. The facts are alarming!  Over 1000 preventable deaths every day in USA hospitals and approximately two million healthcare-associated infections occur annually in the United States, accounting for an estimated 90,000 deaths and more than $4.5 billion in hospital healthcare costs. Unplanned, often preventable, hospital admissions and readmissions cost Medicare and the private sector billions of dollars each year and take a significant toll on patients and families, who suffer from prolonged illness or pain, emotional distress, and loss of productivity.
  •  The organizational costs Registered Nurses associated with (RNs) leaving their jobs (RN turnover) can be as much as $6.4 million for a large acute care hospital, and studies have associated turnover among health providers with an increase in the use of physical restraints, pressure ulcers and patient falls.

Is there an incentive or disincentive for healthcare to address these enormous costs?

thinkingThink about it.  As a patient, if your illness/injury requires extensive medical diagnosis, lab tests, change in medication, extended stay due to a hospital error, misdiagnosed illness, mistreated or hospital related injury, wrong site surgery, or hospital acquired infection, WHO BENEFITS? 

If you’re a healthcare worker who is injured on the job, receives medical treatment in the Emergency Department, follow up with Occupational Health, is seen by a physician who offers to write you a note to allow “sufficient” time for healing, or a prescription to be filled by your thinkingpharmacists, with repeated visits to the physical therapists, WHO BENEFITS? 

One positive of the ACA is healthcare quality and safety are key in evaluating a healthcare facilities performance.  The incentive for healthcare facilities to capture all possible revenue streams will be largely dependent on their safety and quality of care efforts to reduce/eliminate hospital readmission rates due to medical/medication errors, hospital acquired infections (HAI’s) and reducing wrong site surgery mishaps.

The most effective team based, collaborative system approach I’ve lead, is a formal “Incident Review Process” (aka Root Cause Analysis) where representatives from Senior Management, Safety, Risk, Human Resources, Facilities, Environmental Services, Biomed, Nursing, affected parties, supervisory staff and your workers comp insurance carrier/broker meet routinely, preferably after every incident or at a minimum monthly to discuss in detail every incident including near miss and hit events to identify root causes and corrective action plans.  If they employ a collaborative, team based approach in linking patient and staff incidents while instituting sound and holistic/systematic approaches to a quantifiable/measurable reduction in their incident rates, we may see a safety leader emerge in the industry.

We shall see if what they are measuring has a positive impact on patient and worker safety.  Hospitals will be forced to look at cost and expenses, not just revenue generation.  The key is, who will emerge as industry leaders as being not only listed as the best, but the safest!

CMS is measuring safety and quality in healthcare facilities basing reimbursement on your outcomes.  Do you measure up?  If not, you should conduct a risk assessment.  Are YOU compliance or results driven? You may contact HSNE/Randall for additional information:  rcharp@hsnellc.com


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Randall is a 20 year experienced, safety and risk management consultant specializing in healthcare compliance.  ( Expand*)  HSNE’s/Randall’s passion is keeping patients, staff and visitors safe in a healthcare setting.


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2 Responses to With insidious incentives driving healthcare costs up, MAYBE we should concentrate on what can be reasonably and fundamentally changed to drive them down!

  1. Archil Kapanadze says:

    Considering Health Care as an industry let ask: what product offer it? Does it offer Health? No, it have not even definition (not description) of Health. So, this industry offers Disease Care as a product.

    Disease burden increases by aging of population. If someone go to this system he/she became the consumer of Disease Care (Disease Management) till the end of life.

    So, consumption is increases but capacity of the system does not increases. This dis balance rises costs. Simple Economics!

What are your thoughts?