Monday, February 14, 2011

Breathing more easily

Do you remember this post from 2009, where I praised Children's Hospital Boston for an asthma intervention program that provided advice and assistance to families? The summary:

Using a combination of interventions (e.g., counseling about drug dosages, HEPA filters for vacuum cleaners, rodent control measures), they dramatically reduced the number of asthmatic incidents for the children in several of Boston's neighborhoods. A subsidiary benefit was a huge reduction in the number of emergency room visits.

Well, now comes the business issue, summarized in an excellent article by Cheryl Clark at HealthLeaders Media.

It costs about $2,600 per child, but avoids $3,900 in hospitalization costs over a two-year period, hospital officials say. Elizabeth Woods, MD, who directs the hospital's initiative, says cost analyses point to a 1.46 return on investment. The hospital has papers in press that illuminate its progress.

So, where's the problem?


"That's a saving to society,
not to the hospital," Woods says.

So here's a great program, but one whose success could hurt the hospital's bottom line, one that costs money and reduces business.


This, of course, is the argument for bundled payments for chronic illnesses and/or capitated payments for all medical service. In this article, Atul Gawande leaps to that conclusion. And there is something to be said for that.

But the short term business analysis sometimes fails to account for all of the items that inure to the benefit of a hospital for doing "the right thing."

Here's a sample of that broader view, the reduction in ventilator associated pneumonia and other hospital acquired infections in a hospital's intensive care units. As above, the direct result was a reduction in costs to insurance companies, Medicare, and Medicaid, and a commensurate reduction in revenues to the hospital. But, and this is a big but:

On the business front, it has contributed to a reduction in length of stay in our ICUs. We were able to avoid the multi-million dollar capital cost of expanding our ICU capacity. Indeed, we were able to create capacity out of the existing facilities and improve throughput.

Hospitals today often face limitations on their ability to raise capital. Avoiding a new fixed expense like that, while effectively creating capacity, can make business sense even if some short-term revenues are lost.

Also, some hospital costs are variable, not fixed. Some of that $3900 saved at Children's Hospital, for example, is certain to be related to supplies that will no longer need to be purchased. Likewise, some portion of nursing and respiratory therapy resources can either be reassigned to other cases, or if the trend is long-lasting, simply avoided by having fewer staff people over time.

And, of course, as noted by the CHB official, "Some of the losses might be made up by not providing worthless or futile care."

So, before we make the leap to a new payment regime, let's be a bit more complete in our analysis.

5 comments:

wrinkledman said...

I see an analogy between these kinds of health initiatives which reduce short term hospital income but pay off big in the long run and green initiatives by power/utility companies which reduce their sales to individual businesses and households but also allow them to continue to provide power without building a bigger grid.

Ann Rosas said...

Let's think creatively about this funding issue and get more organizations involved. How about offering the vacuum manufacturers a tax break if their vacuums are used in this program? Insurers can think of the vacuum as being part of an asthma 'tool kit', instead of just paying for inhalers, add the cost of the vacuum and other in-home materials to the insurance package for these children. Paying for a $150 dollar vacuum that will help reduce asthma complications and/or hospitalizations makes good business sense for insurers.

For society, imagine how much more these kids can achieve with less time lost to being hospitalized. A healthier child can achieve more in school and life. Think about the parents of these kids not losing work time to caring for their sick kids.

Under our current funding model, the hospital loses money on the reduced hospitalizations, but what they gain in prestige and reknown for developing this asthma-control model may draw new funders to their cause.

Houston Ima said...

Agreed! I feel that there is so much that can be analyzed right now to find those innefficiencies and sort them out before we launch into new payment systems and new regulations. So much can be revised if we look at the issues holisitically (communications issues, operational issues, physical limitations, etc) and try to resolve them, and my experience has shown that many times, low-tech solutions are most helpful. Or perhaps it's just a matter of getting the right people around the table. Either way - there is so much room for improvement right now that is NOT being taken advantage of...

Keith said...

Your example illustrates what the problem is in trying to drive down the costs of health care. Attempts to limit cost often mean a reduction in growth of the institution, but this seems to work counter to the buisiness model that we embrace in this country, which is one of constatnt growth as a measure of success.

We in medicine create our market by stripping away resources for what would seem much better use of our dollars in preventative strategies that would maintain ones health. Instead we spend billions on gleaming new hospitals with loads of expensive tertiary services, ready to deliver state of the art health care to our tobacco using, overeating, and underexercised masses.

Last time I looked at the mission staements of many of these fine health care institutions, they uniformly refer to improving the health and well being of the populations they serve. Many have lost sight of this fact, or are forced to by competitive forces that demand that each hospital having a gleaming grantie lobby with a lovely fountain to compete in this insnae market. The result is that even though we all know our resources would be better directed into community programs that encourage and provide better nutrition, more proactive smoking cessation programs, etc, etc., hospitals and health care institutions will not provide them since they do not generate a profit and may actually be harmful to the instituions bottom line. But are non profit hospitals supposed to be persistent drags on our economy by virtue of their need to survive as resource guzzling dinosaurs, or are they actually going to fulfill their stated mission?

Let hospitals and health care instituions do whats right for a change, instead of whats good for the bottom line. After all, what we ultimately all want is to not need hospitals and doctors at all, as the best form of health care I can imagine. We should all be working to put ourselves out of business, period!

hobanny said...

(Haven't read your blog in a while, I heard last month that you left leading that big hospital, so now I'm back checking out what you're doing and thinking about now.)

The trick is finding ways to link the savings to the payor. North Carolina's Medicaid program has done that. Those kinds of asthma programs and other forms of patient follow-up and case management are done by nurses who physically work in clinics. But Medicaid pays their salaries, not the clinic where they work, the payor pays.

I'm a reporter and I write about these things. What was incredible to me was convincing the folks who edited that story (both locally and at NPR) that this was the crux of the issue. Align the incentives and voila... you save NC Medicaid some-120 million a year.

So, it's not an argument for bundled payment per se, but for finding all kinds of ways to creatively incentivize payors to pay for the efficiencies, not the hospitals and clinics that really don't see much immediate return on investment.