A Hospital Prevents Readmissions, but Threatens Revenue

Cheryl Clark, for HealthLeaders Media , February 10, 2011
So, where's the problem?
"That's a saving to society, not to the hospital," Woods says.

"The hospital does it because it's the right thing to do for kids and families for asthma care and provide it as a model. But it's primarily a saver to the payers....who are reducing their expenses (but) they're not paying us currently for the services," says Woods.  "What we've been advocating for is that there be a more sustainable way of funding this, that also takes into account the money upfront to prevent the hospitalizations."

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

Brigham and Women's Hospital surgeon and author Atul Gawande wrote me in an e-mail this week that he was told by Children's CEO Jim Mandell that the asthma prevention efforts are "a good example of the tension between doing great work on quality and safety that then threatens you with major money losses," since such a huge portion of revenue comes from hospitalizations of children with uncontrolled asthma. 

In a recent talk to hospital leaders, Gawande suggested the hospital could be looking at "bankruptcy" if this major source of admissions revenue dropped significantly.

Use of that word irritates Josh Greenberg, Children's Hospital Boston's vice president for government relations, because he insists that's not the way his hospital's chiefs are thinking about this. "That's complete nonsense," Greenberg says, adding that he knows Gawande "likes to say that."

Rather, Greenberg says, the hospital will do "the right thing for kids," and that involves keeping them from needing inpatient care. Some of the losses might be made up by not providing worthless or futile care, he says.

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1 comments on "A Hospital Prevents Readmissions, but Threatens Revenue"

Neal Colburn (2/10/2011 at 3:31 PM)
The opportunity to align quality outcomes with financial incentives was provided under global capitation. Having once been president of a community health center controlled HMO, I thought that it would obtain buy-in from hospitals in a collaborative program investing in quality practices and patient management, as noted in the article, improving quality; raising the health status of our patients; and thereby, reducing cost; then reivesting part of the savings in more cost-saving programs. I thought that hospital administrators would understand that improving the health of the community; reducing hospitalization while retaining the same capitated revenue would be attractive. Unfortunately, hospital CEOs and CFO would only consider fee for service payments for procedures, services and bed days, albeit with some small discounts for volume - the opposite of the hoped-for incentive direction. As a result, the opportunity to work collaboratively and align financial and quality incentives, and possibly programs was lost in most cases. This was repeated in market after market. The HMO was able to obtain buy-in from many of the primary care providers with quality process incentives and capitation. Many were able to significantly bend their cost curve, but with their small portion of the resources they were not able to substantially impact the total system cost. Now the federal government and other payers are betting on the ACO and Patient-Centered Medical Home models with less control over global resources but also less downside risk. Hopefully, the incentives will be well directed and appropriately valued to drive significant change. However, it will take more enlightened vision, collaboration and decision-making than appears to have been the experience in the past. Let's work together this time and make it work.




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