Hospital Value-Based Purchasing Program: How YOUR Hospital’s Quality is Being Graded

Quality can be difficult to judge and determine.

To use an example outside of healthcare, a gymnast or figure skater needs to know how the judges score and what they’re looking for in order to perform well.

In a similar way, hospitals need to know what Medicare is looking for in order to maximize reimbursement while maintaining and improving high-quality patient care.

The vision of the Centers for Medicare and Medicaid Services is that “all CMS beneficiaries [achieve] their highest level of health, and disparities in healthcare quality and access [are] eliminated.”1 In accordance with this vision, a shift is taking place. Historically, hospitals were paid based on the quantity of services they provided. Recent changes reinforce the need to reward hospitals based on the quality of care they provide. This includes a renewed focus on following best clinical practices and enhancing patients’ experience in the hospital.

Under the Hospital Value-Based Purchasing (VBP) Program, Medicare makes incentive payments to hospitals based on either: 2

  • How well they perform on each measure compared to other hospitals’ performance during a baseline period.
  • How much they improve their performance on each measure compared to their performance during a baseline period.

Every hospital in the Inpatient Prospective Payment System (IPPS) is given a Total Performance Score (TPS) to determine the amount of funding it receives. Specific measures are used to determine each hospital’s TPS. This is Medicare’s “scorer’s card” or blueprint for evaluating the VALUE that each hospital provides.

For the Fiscal Year 2018, the TPS is derived from four domains (25% weight for each):

  1. Clinical Care Domain.
  2. Patient and Caregiver-Centered Experience of Care/Care Coordination Domain.
  3. Safety Domain.
  4. Efficiency and Cost Reduction Domain.

HCAHPS Survey results form the basis for the Patient Experience of Care domain in the Hospital Value-Based Purchasing program.3

The world of healthcare is an ever-changing one. If an organization hopes to continue to thrive, those who lead it cannot be spectators. Click To Tweet

They must recognize the changes that are taking place – the standard by which they are being judged – and adjust accordingly.

How will your organization respond?

1. https://www.cms.gov/About-CMS/Agency-Information/OMH/about-cms-omh/mission-vision-our-work.html

2. https://www.cms.gov/Outreach-and-Education/Medicare-Learning-Network-MLN/MLNProducts/downloads/Hospital_VBPurchasing_Fact_Sheet_ICN907664.pdf

3. https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Downloads/HospitalHCAHPSFactSheet201007.pdf

Physician Preference Items (Part 2)

In the first article in this series, we highlighted several important points about physician preference items, including issues, inefficiencies and discrepancies. Here, in part two, we’ll discuss potential solutions.

One study published by The Milbank Quarterly: A Multidisciplinary Journal of Population Health and Health Policy discussed the value of “standardization strategies.” These strategies are designed to restrict physician choice in one way or another.

“The formulary model restricts the number of choices of manufacturers from which physician preference items are purchased or of the range of products that are bought for a given procedure,” while “the ‘payment-cap model’ does not explicitly restrict particular products or manufacturers but instead standardizes costs by restricting the price paid for products in a particular category.”

Restricting surgeon choice is not a popular approach, but change is never popular. However, change is necessary in a healthcare system that seems to always have rising costs and falling reimbursement rates (https://www.ncbi.nlm.nih.gov/pmc/articles/PMC2690325/).

Education is another way to address the issue of supply chain inefficiencies. Surgeons need to be made aware of similar and even superior products that can be purchased at better prices. Other programs have provided surgeons with the breakdown of costs for a particular surgery they perform and how it compares with the costs for other surgeons to perform the same surgery. This model informs surgeons and creates a safe form of competition which could help reduce a hospital’s spending.

No matter what approach is taken, the relationships affected by any changes implemented must be considered. Click To Tweet

Physicians often have strong ties to sales reps. Perioperative administrators must maintain healthy relationships with surgeons. Hospitals must remain in good standing with the communities they serve. Many hospitals, in an effort to focus their efforts on providing excellent patient care, have partnered with third-party organizations who excel in negotiations and have experience in finding cost savings for hospitals, particularly in the area of supply chain. Whatever steps a hospital takes to contain spending in the supply chain and minimize waste on overpriced PPIs, administrators must understand that doing nothing is no longer an option.

The stakes are too high and the potential savings too great to ignore the impact PPIs have on supply chain inefficiencies.

What has your organization done to minimize supply chain inefficiencies?

Physician Preference Items (Part 1)

A healthcare organization’s primary goal is to provide quality care to its patients.  In order to accomplish this goal the organization must remain profitable, and in order to remain profitable an ongoing evaluation of spending must take place. Funding is absolutely necessary to support the operation of large complex facilities like hospitals. If the spending of a healthcare organization is not evaluated and adjusted appropriately, it will negatively affect the ability of the organization to provide quality care to its patients year after year.

Hospitals are faced with supply costs that continue to escalate at rates that have never been seen before, making the challenge of providing affordable quality patient care even more difficult.  According to a study by the Association for Healthcare Resource & Materials Management, supply costs will exceed labor as hospitals’ greatest expense by as soon as 2020 (https://blog.definitivehc.com/reigning-in-hospital-supply-costs-and-physician-preference-item-spending). Hospitals do not have the option to be spectators in the face of such trends.

Supply chains in healthcare have built a reputation for lagging behind other industries in how efficiently they are managed. A growing reason for this includes multiple reports estimating that “Physician preference Items (PPIs) constitute anywhere between 40% and 60% of a hospital’s total supply costs” (https://blog.definitivehc.com/reigning-in-hospital-supply-costs-and-physician-preference-item-spending).

With Physician Preference Items making up such a large portion of hospitals’ supply costs, it would prove beneficial to spend time analyzing how these items are purchased and how a hospital might benefit from addressing this area of spending. PPIs can be defined as devices or supplies used in medical procedures that are purchased and used at the discretion of the physician. The issue arises because while physicians determine what items are purchased, the hospitals are the entities that actually pay for the products.

The concept of PPIs began with hospitals’ efforts to give surgeons the ability to choose supplies that they deemed most appropriate for a particular patient with a particular need.  Unfortunately, this has led to an unprecedented rise in costs for these items. Manufacturers and vendors know how to make a profit. They also know that we are creatures of habit, and surgeons are no exception. If a surgeon has grown comfortable with a particular device, supply, or even sales representative, it can become extremely difficult to convince a surgeon of the benefits of using a similar or even superior product at a better price. PPIs are often more expensive than alternatives that have shown similar clinical outcomes – some studies have even shown worse outcomes for procedures using the more expensive PPIs (https://blog.definitivehc.com/reigning-in-hospital-supply-costs-and-physician-preference-item-spending).

While some have suggested eliminating PPIs altogether, it must be noted that surgeons often have valid, even life-saving, reasons for using particular supplies that they believe most appropriately serve a patient’s needs.

Hospitals must not blindly jeopardize quality care and best clinical outcomes in the name of saving money. Click To Tweet

Instead, healthcare organizations must focus their efforts on process improvement, better resource utilization, data continuity between information systems, and product visibility. All of these, in addition to partnering with physicians, will enable a hospital to improve the efficiency of its supply chain.

A JAMA Surgery study from December 2016, showed how partnering with physicians and providing them with data and financial incentives led to a 6.5% decrease in median supply costs over a one year period. The median supply costs for the control group that was not given data and financial incentives actually rose 7.5% over that same year. This study magnifies the costly difference between actively engaging supply chain stakeholders and taking a passive approach by doing nothing.

A 2015 study at the University of California in San Diego did not include financial incentives but gave surgeons detailed data regarding cost and OR start times. By providing more reliable data and better communication with surgeons, this program led to a savings of over $60,000 in a four-month period (https://blog.definitivehc.com/reigning-in-hospital-supply-costs-and-physician-preference-item-spending).

Regardless of these in-hospital approaches, hospitals across the country differ in their ability to negotiate prices for medical supplies. This is not a new problem. A study done as far back as 2006 revealed that one New York City Area hospital paid $8,000 more than a competitor paid for the same artificial hip (https://www.ncbi.nlm.nih.gov/pmc/articles/PMC2690325/).

What can hospitals do about this discrepancy? We’ll cover that in part two of this series!

Is Your GPO Partner Saving You Money or Just Replacing Your Staff?

Your group purchasing organization (GPO) service is expected to find you cost-savings, but its bundled services and products could cost more than if you simply hired a full-time hospital staff. However, would an in-house staff bring enough cost-savings to offset employee salaries?

Understandably, a full-time staff tasked with reviewing and negotiating on your behalf would be a costly venture, but the return on investment might be worth the effort. Considering how much hospitals spend daily on non-labor services, an experienced staff of professionals negotiating prices, analyzing data and reviewing your contracts is a tempting alternative, but what if you could have both?

By both we mean a full-time staff working to save you money without the cost of hiring an in-house staff, which defeats the purpose of saving you money. For this setup, you might consider an independent consulting service that works endlessly to find you cost-savings without the added salaries of an in-house staff or the added fees of a GPO.

GPOs – Cost-Saving or Cost-Replacing?

Many hospitals work with GPOs to find cost-savings, but GPOs have started to bundle their own products and services, replacing the cost-savings they find with their own fees. Additionally, what exactly are the bundled services doing for your organization? Are they necessary for your needs and are all services being utilized? Finally, can you find the same services in the marketplace or is it something exclusive and innovative?

Perhaps you could find innovation with your full-time staff because employee ideas are one of your best assets. Or, you could save yourself the added cost of employee salaries and hire an independent consulting service to develop an exclusive spend strategy for your organization.

An independent service would leverage strategies used in other hospitals and consist of professionals who are experienced in purchase spend savings. Click To Tweet

VIE Healthcare has helped many hospitals reduce the cost of running a hospital through innovation and diligence. We also help hospitals revamp their work culture, improve employee performance and streamline their operations for improved mapping of the patient journey. To learn more about VIE and our unique concepts, leave a comment below or call our office today for a free consultation.

10 Ways to Improve Hospital Margins

One would think that patient care, employee performance and financial margins would reach optimal levels in the US if the US healthcare consumption represents 17.2% of its GDP, and yet, US health outcomes are worse here than in other countries. Thankfully, there is hope for US hospitals with these few tweaks.

Review and renegotiate non-labor costs

Hospital supply chain departments are responsible for managing costs, but too many are missing cost-saving opportunities. One way to capture savings is to carefully review your non-clinical spend and non-labor costs to determine which ones you are overpaying. Once identified, strategically reduce expenses by renegotiating pricing and terms.

Find reimbursement opportunities

Research every possible opportunity for reimbursement. For instance, check your state’s website for unclaimed funds that are owed to your organization. Be sure to check for your hospital name and other affiliations. Another immediate cost-saving strategy is to map costs to Medicare margins for reimbursement, which is a hot topic of discussion in healthcare these days.

Review bank fees and merchant cards periodically to reduce charges

Review your merchant card agreements periodically to see if there is a chance of reducing fees. Your hospital and affiliates accept credit cards and there might actually be a promotional discount or other factors that would warrant reduction in fees. The same practice applies to bank fees.

Review agreements for miscalculations and data errors

This practice could easily apply to every aspect of your supply chain. For instance, your purchase spending invoices might have erroneous data that’s caused you to pay more unnecessarily. Therefore, agreements should be audited annually to detect any miscalculations that could be affecting your hospital financial margins.

Optimize patient needs with ethnographic strategies

Patients today are serious about their healthcare and their healthcare experiences directly affect your hospital’s bottom-line. Simply surveying patient responses about their healthcare treatment is not enough to conclude an accurate assessment of overall healthcare experiences. You’ll need to apply strategies that produce results which represent all your patient demographics.

Implement innovation that benefits your current hospital community

Assess your hospital community to find ways that will ease your patient’s stress level during their visit, but keep in mind that patient needs differ among hospitals. For example, a hospital in a rural location would benefit from a different type of service than a hospital in a larger city.

Optimize patient contact from beginning to end

Patient care doesn’t begin and end in the ER. Optimizing care from initial point of contact until care is no longer necessary solidifies a positive experience for your patients. And, patients these days are much more vocal about their experiences online. One bad review on social media could dent a hospital’s reputation and eventually their financial margins.

Encourage employee ideas and suggestions

Too often organizations ignore their best money-making, cost-saving secret weapons: their employees. Click To Tweet

Hospital staff are heavily involved in the day-to-day operations and they see first-hand what needs to be fixed. Many times they even have great ideas on how it should be done. Encourage your staff to voice their ideas during staff meetings or in private.

Establish cultural structures that improve employee performance

Your staff spends most of their day running your healthcare organization. They deserve a positive work environment to better care for your patients. Create cultural structures that will improve their performance and facilitate their daily duties. A positive culture includes positive structures for management as well.

Train leaders to inspire employees and streamline operations

Leaders have a tremendous amount of responsibility riding on their shoulders. Training leaders to prioritize and streamline their operations, while inspiring employees to perform their best, are two ways leaders can improve their hospital operations and work culture. VIE offers several strategies to make this possible.

VIE Healthcare offers a variety of innovative cost-saving, financial and operational strategies for hospitals and all other healthcare organizations in their most challenging areas. Peruse our website for more information, leave a comment below or call our office to improve your hospital margins, patient satisfaction and employee performance.

How Variables in Hospital Waste, Pricing & Usage Bring Cost-Saving Opportunities

Too many hospitals struggle to control wasteful behavior, vague pricing structures and under-utilized resources that significantly affect their bottom-line. Many aren’t even aware that certain variables within these obstacles actually expose cost-saving opportunities.

Where to Find Hospital Cost-Saving Opportunities

Variables such as disparate systems, misinterpreted data and confusing contract terms affect a hospital’s financial margins, but how can a hospital prevent leakages in every aspect of their supply chain operations without employing an army of experts to do so? Most importantly, how can a healthcare organization proactively search for cost reduction solutions within these very same obstacles?

How to Reduce Hospital Costs in the Supply Chain

The best way to discover health cost solutions in your hospital supply chain operations is to dive deep into your current procedures and expose all the problems. Click To Tweet

Once you’ve found the source, you’ll need to develop an action plan to fix it such as renegotiating hospital contract terms, streamlining procedures and/or eliminating under-utilized equipment and technology. Finally, you’ll want to set parameters to sustain your cost-saving efforts long-term.

Undoubtedly, this is a time-consuming and tedious process that requires expertise in various different fields and hours of manpower, which is why the more profitable hospitals outsource this part of their supply chain operations. VIE Healthcare, a group purchasing organization (GPO) that specializes in health cost reduction and health cost management strategies, exists for this very reason.

Improving Healthcare Finance Operations

VIE consists of experts in the more common areas of healthcare spend, such as purchased services. By leveraging successful strategies we’ve used for other healthcare organizations, we thoroughly analyze every detail of our client’s hospital management procedures to find areas where there is an opportunity for savings. Almost two decades in the trenches, VIE has developed some very solid cost-reduction strategies.

To see how VIE can improve your hospitals’ bottom-line, call our office at 1-888-484-3332 ext. 500 to speak with Lisa Miller or leave a comment below.

17 Obvious Ways to Improve Patient Experience in a Hospital Waiting Room

Sometimes hospital visits take up half of a day with most of it spent waiting to see a doctor, and waiting without certain comforts can make a stressful situation even more stressful. Therefore, based on two decades of patient journey mapping, VIE has compiled 17 simple and obvious ways a hospital can immediately improve a patient’s experience in the waiting room.

1. Portable Device Charging Stations

Patients and their families will want to make and receive phone calls while they wait to see a doctor. With charging stations available in the waiting room, patients are guaranteed to stay charged at all times. Patients can also charge their laptops and other portable devices to stay connected to the Internet as they wait.

2. Free and Fast Wifi

Almost everyone is online these days, whether it be for personal or business reasons, and the ability to stay connected is important if you have a few hours to kill in the waiting room. To stay connected, patients would need free and fast WiFi connectivity. If Starbucks or McDonald’s can do it, so can a hospital.

3. Clean Bathrooms with Quality Toilet Paper

Patients are already stressed to be in a hospital environment, a clean bathroom with quality toilet paper would only improve the entire patient experience. To have a program that has staff checking the bathrooms twice a day would ensure bathrooms stay clean, or having a sign telling users to alert the staff in the event of a bathroom mishap would go a long way with a patient.

4. Enticing Refreshments

Waiting hours to see a doctor can get pretty boring, but having a nice supply of quality snacks will make a patient’s time in the waiting room a bit more tolerable. However, there’s nothing worse than the tease of good snacks when the quality is subpar. Good and free coffee, water and snacks would certainly make a patient’s time in the waiting room much more pleasant.

5. Friendly Front Desk Staff

Front desk staff talking amongst themselves and ignoring the patient isn’t the way to greet a patient or families, but unfortunately this obvious tip isn’t carried out in every hospital. Patients are already tense and annoyed to be there. A bad attitude will only make a tense situation even more tense. Train and incentivize your staff to always be pleasant and attentive. First Impressions set the tone for the rest of the experience.

6. Variety of Current Magazines

Magazines in a waiting room are always a great idea, but outdated and monotone magazines are just depressing. Old and similar magazines are not only boring, but make a patient question the hospital’s tactics. Are they using outdated equipment? Does the doctor even keep up with the latest health trends? Will the doctor understand my specific situation based on my gender or age? Old magazines can trigger many negative thoughts in the waiting room. Keep them current with a wide variety that appeals to various ages and genders.

7. TV in the Waiting Room

Luckily, most hospitals have caught on to the television trend. Most hospitals and smaller clinics have televisions in their waiting room and patients find it to be a nice distraction. It’s entertaining for kids if the kiddie channel is on and pleasant for patients and family if it’s not on the emotionally charged political channels, which have the opposite effect. Overall, TVs in the waiting room are a pretty inexpensive way to improve a patient’s time in the hospital if done right.

8. Designated Kid Station

Speaking of kiddies, a Kid Station is another great idea for an improved patient journey. Most times parents aren’t able to find babysitters in the event of an emergency and must travel with the kids at a moment’s notice. There’s also the issue of pediatric waiting rooms. A kid station designed specifically for kids of all ages will keep them occupied so adults can calmly deal with the doctor visit itself.

9. Scented Hand Sanitizer

Many hospitals have already implemented hand sanitizers in their waiting rooms, although some studies now show that hand sanitizers in hospitals are not strong enough to kill certain bacteria. Determining the potency of your hand sanitizer will have to be researched and decided in-house, but having hand sanitizers available in the waiting room should be a staple regardless. The only thing better than a strong and effective hand sanitizer is a scented one. The extra detail will make patients feel pampered and therefore improving their overall experience.

10. Comfortable Seating

Seats in the waiting room may look nice and match the overall décor, but hospitals should address the issue of comfort. Sometimes the furniture looks fine, but simply isn’t comfortable. Take a look at your waiting room and ask yourself if you would enjoy sitting on that uncomfortable seat for up to an hour or longer. If the answer is no, it’s time to change.

11. Clear Directions to Hospital Departments

Finding your way through a large hospital is difficult enough for anyone not familiar with the building(s), but imagine the frustration of a patient or family member who is in pain or already frazzled trying to find their way around. Some hospitals have started color-coding their departments, overcoming language barriers and making it easy for even a child to find their way.

12. Calming Music

Calming music is helpful in any intense situation. Doctors will many times listen to music during surgery for that very reason. Why not do the same for patients and families in the waiting room? Calming music also sets the tone for the day, helping staff and physicians to start the day on a positive note.

13. Ear Plugs

Some hospitals have started offering earplugs in the hospital rooms to drown out surrounding noise. It wouldn’t hurt to offer the same in the waiting room because let’s face it, children can be loud. Earplugs help drown out the chaos in the waiting room when unsettled children are around or when there is any other disruptive noise in the area.

14. Appropriate Room Temperature

Hospitals have germs to consider so temperatures in the waiting room are usually kept pretty low. The theory is to deter the spread of bacteria, but low temperatures might also deter human beings from relaxing. It’s best to keep temperatures at a reasonable level so it keeps bacteria at bay while also comforting patients as they wait.

15. Staff and Patient Communication

Communication between staff and patient should be regular, frequent and accurate. Click To Tweet

Patients and families can get very frustrated when they don’t know the status of their appointment. Staff should come out regularly to communicate any information they have about a patient’s case. Staff should under-promise a time to be seen and over-deliver expectations by transferring them to a room ASAP.

16. Family Care Center

A family care center that consists of several amenities will make a visit to the doctor seem like a holiday. Consider a center equipped with a nap room for the elderly and kids, a gym, bathrooms with a changing station in both the men’s and women’s restrooms and even a beauty and grooming area like the Hospital of the University of Pennsylvania in Philadelphia, PA, has done successfully.

17. Personal TVs in the Pre-Op Area

TVs in general help pass the time while waiting to see a doctor, but personal TVs in the pre-op area take it a step further. TV channels can be manipulated specifically for the patient waiting to be operated because the thought of surgery is nerve-racking enough as it is. Personal TVs will distract the patient with their own choice of entertainment before the big surgery.

Sales & Healthcare Can Be a Conflict Of Interest

This year’s predicted 5.3% increase in healthcare costs is part of an upward trend expected to propel spending up to $5.7 trillion by 2026¹ . The rising cost of medical goods and services contributes significantly towards that trend. While increased spending would normally equate to better quality for the consumer, in the arena of healthcare this is not necessarily the case.

The push towards a value-based model is driving healthcare organizations to provide the best possible patient care at the lowest possible price. The most successful combine these factors as they seek to serve their patients and communities. But in striving to do so, they encounter a conflict of interest.

While a doctor’s priority is patient care, the goal of the vendors of vital medical goods and services is to realize a profit. To achieve their goal they employ sales reps to sell their products at the highest possible price. The higher the price tag, the more commission a sales rep will earn and however ethical their intentions, their motivation is often the need to meet or exceed their on-target earnings in this lucrative market.

The sales rep in your Operating Room

Medrep’s 2018 Medical Sales Salary Report highlights the reliance on commission-based earnings behind this conflict of interest². Taking just one example, sales reps selling surgical devices doubled their base salary with commission last year.

To quote the report,

“sales representatives do whatever it takes to make the sale”

For one third that means regularly working in a hospital’s O.R. The argument for the presence of sales reps in the O.R. claims they offer a tangible benefit to surgeons and medical professionals. Their in-depth knowledge of the devices they sell, it’s suggested, can increase efficiencies in the O.R.

A 2016 research paper examining the relationship between surgeons and medical device
representatives challenges this assumption by highlighting potentially ethical issues,
including:³

  • The extent of the reliance of surgeons on sales reps and their employers for
    education and surgical assistance in the O.R.
  • Practical concerns related to levels of competence among O.R. employees.
  • The need for unbiased assessments of surgically implanted devices to foster
    evidence-based practice – a requirement which ‘cannot be overstated’. Medical
    sales reps, it suggests, are unable to provide this as they are highly trained in and
    biased towards products from a single vendor.

A further article from The Washington Post describes sales reps as a constant presence in
the O.R., primarily to answer the questions of the surgeons related to the operation of
their devices. The article notes that, while this may be beneficial, it is often without the
knowledge or informed consent of the patient – and sometimes to the ultimate detriment
of their care⁴.

The sales rep also has considerable influence over the surgeon’s choice of device in this
scenario but that recommendation is not necessarily based on what is best for the patient.

Finding a solution

There are two areas to consider:

Implementing the following strategies can begin to address those issues:

1. Raising cost awareness in the Operating Room

When products are clearly labeled with pricing in the O.R., individuals become more
cost conscious⁵. From my observations, a responsible caregiver always puts the patient
first and minimizes the use of higher priced items when a less expensive option will
produce the same – if not better – results.

For example, in the fast-paced world of perioperative nursing, a PACU nurse/aide may
need to retrieve a Foley catheter kit to use for a patient and has a choice of two. Only one
may be equipped with a temperature sensor but in the moment, it can be difficult to
differentiate. The nurse/aide selects the catheter with the temperature sensor,
concluding that it is better to have that available, even if they do not need it. When the
kit is required again, they develop a habit of using the more expensive catheter.

Over the course of a year, this type of repeated action can lead to thousands of dollars of unnecessary waste, which could be diverted to improving patient care. Click To Tweet

It is a scenario which plays out in hospitals across the country in many different contexts.

2. Seeking price transparency from vendors

In my experience, an overarching attitude of secrecy often permeates negotiations with sales reps who attempt to conceal product costs or prevent hospitals from discovering that other organizations have paid a much lower price for the same product.

The Commonwealth Fund, whose motto is to provide ‘affordable, quality healthcare for everyone’, states that price transparency is one way ‘to encourage consumers to choose low-cost, high-quality providers and to promote competition based on the value of care.’⁶ In the increasingly expensive world of healthcare – where people’s lives and well-being are at stake – an informed decision is critical. This includes knowing the cost of care for a patient.

Again, we see a conflict of interest. Some hospitals have attempted to address this issue through legislation that requires vendors to disclose prices, while some vendors have attempted to address it through litigation and by creating contracts that do not allow hospitals to disclose pricing. In the light of concerns over rising prices and the ethical issues discussed in this article, the onus is on healthcare organizations to negotiate the best prices for the products and services they need to care for their patients. By knowing what comparable items cost, healthcare organizations are able to make informed decisions regarding which products are best-suited for a patient’s care and which may result in the best value.

3. Moving towards the ‘rep-less’ model

For healthcare organizations moving towards the rep-less model, the conclusions from the 2016 report included the following:

  • A recommendation that hospitals employ salaried individuals trained in a variety of medical devices to assess and select the most suitable for their patients. In this model, financial incentives would not apply.
  • Implementing a program which enables surgical assistants to replace the role of the sales rep in the OR. These employees would undergo full technical training on medical devices of a similar standard to the reps, reducing the reliance on their continued presence.
  • Purchasing implants directly from the manufacturer or at a substantial discount. In a world of rising healthcare costs, this may become the ultimate goal for every healthcare organization.

At VIE Healthcare, we emphasize the need for our clients to have a customized cost strategy. This cost strategy is unique to your hospital or health system and becomes the framework for transforming your organization’s costs and achieving unparalleled cost savings year over year.

1 https://www.reuters.com/article/us-usa-healthcare-spending/u-s-healthcare-spending-to-climb-5-3-percent-in-2018-agency- idUSKCN1FY2ZD

2 https://www.medreps.com/medical-sales-careers/medical-sales-salary-report

3 https://www.ncbi.nlm.nih.gov/pmc/articles/PMC4972437/

4 http://www.ihi.org/communities/blogs/what-s-keeping-quality-leaders-up-at-night

5 https://www.washingtonpost.com/national/health-science/why-is-that-salesperson-in-the-operating-room-for-your-knee- replacement/2016/11/14/ab8172fa-78e6-11e6-beac-57a4a412e93a_story.html

6 https://www.commonwealthfund.org/publications/newsletter/health-care-price-transparency-can-it-promote-high-value-care

The “Check Please” Program at Cleveland Clinic

Why the need?

As healthcare in this country shifts its focus to a more value-based model and as hospitals are being reimbursed less and less for services delivered, healthcare systems must adjust accordingly. No longer are hospitals reimbursed based strictly on the volume of care they provide- they are now being asked to show proof that the care they are delivering is high-value care. As a result, hospital systems are reexamining their operating costs and seeking new ways to lower spending without impacting the quality of their care.

Operating rooms produce the most revenue for a typical hospital. At the same time, operating rooms can often be the biggest ‘spenders’ and ‘wasters’ of a hospital’s money. If healthcare organizations hope to minimize waste and improve financial responsibility, one of the first places they should look is the operating room.

Approach.

One such organization that has taken initiative in this area is Cleveland Clinic.

Oftentimes, a hospital’s biggest obstacle to saving money in the OR is the unwillingness of surgeons to try a new product or less expensive method. Click To Tweet

Perhaps they are committed to a particular manufacturer they have grown comfortable with over an extended period of time. This can lead to a somewhat antagonistic relationship between surgeons and hospital administrators who are always looking for ways to save money while improving patient care.

Rather than viewing surgeons as the opposition, Cleveland Clinic introduced the “Check Please” program in 2015. With the input of surgeons, this program maintains the goal of reducing cost in the OR by increasing surgeon awareness of hospital cost per case and the cost of every item used in the OR. Contrary to popular belief, a more expensive surgery does not guarantee better outcomes. A Cleveland Clinic study that looked at 652 lumbar diskectomies performed by 9 surgeons over the course of 47 months actually showed that higher surgical cost led to worse outcomes. The study also showed the wide variation in cost for the same surgery. Much of the variation can be attributed to the use of more expensive materials, the overuse of disposable supplies, or the waste of OR supplies.

Expected results/Actual results.

The overall goal of the “Check Please” program is to reduce costs of surgery while maintaining or improving outcomes. Through the online “Check Please” system, surgeons are able to view the individual costs for all of the disposable items used in a given surgery. They can also compare the cost of their particular case with those of similar procedures performed by other surgeons. “The program [also] enables comparison of the cost of OR materials (e.g., disposable items and implants) for given Current Procedural Terminology (CPT®) codes among surgeons and by location.”

By implementing this program, Cleveland Clinic showed its understanding that partnering with, rather than opposing, surgeons is the most effective approach to finding real cost savings in the operating room. Showing surgeons how the cost of their procedures compares with the cost of their peers enables them to make decisions that will save the hospital money.

Details regarding the “Check Please” program (which began by working specifically with spine surgeons) taken from here.

In summary, healthcare organizations could benefit from taking a similar approach. It certainly requires research and effort, but by committing to gathering data, sharing that data, and working together with surgeons, hospitals will indeed find ways to minimize waste, become more efficient, and improve the quality of care they provide. The value of partnership and effective working relationships cannot be overstated when it comes to saving money for any organization.

The Challenge of Remaining Profitable as a Hospital

Verity Health System of California, Inc., which operates 6 hospitals in northern and southern CA, filed for bankruptcy on August 31, 2018. The system did not find itself in this situation for lack of capable leadership. It is managed by billionaire and former surgeon Patrick Soon-Shiong, who also founded and sold multiple biotech companies and recently purchased the LA Times newspaper. Verity Health CEO Richard Adcock has stated that they are reexamining all of its contracts, including the management deal with Soon-Shiong, as it seeks to restructure and find a potential buyer. (https://www.beckershospitalreview.com/finance/6-hospital-verity-health-files-for-bankruptcy.html)

Verity Health System’s filing for bankruptcy is not as uncommon an event as many might think. In the first six months of 2017, a total of nine US hospitals filed for bankruptcy. Many factors can lead to a hospital’s bankruptcy, including reimbursement landscape challenges and dwindling patient volumes. (https://www.beckershospitalreview.com/finance/9-hospital-bankruptcies-so-far-in-2017-070617.html)

However, the all-encompassing issue remains clear:

According to Moody’s credit rating agency, “US hospitals are suffering from costs that are rising faster than revenue and the industry is on an unsustainable path.”  (https://www.reuters.com/article/us-verity-bankruptcy/california-hospital-chain-with-ties-to-billionaire-files-for-bankruptcy-idUSKCN1LG24F)

Berkshire Hathaway’s Warren Buffett told CNBC this year that health-care spending is a “tapeworm on the economic system.” (https://www.cnbc.com/2018/03/02/no-frills-micro-hospitals-emerge-as-a-new-way-to-cut-health-care-costs.html)

According to an annual survey conducted by the American College of Healthcare Executives, “financial challenges” ranked, for a third consecutive year, as the top concern for hospital CEOs in 2017. Click To Tweet

“Governmental Mandates” and “Personnel Shortages”, which directly impact the financial environment of a hospital, ranked as the second and third concerns, respectively. “Assuring patient safety and providing quality care is the No. 1 job of hospital leaders,” says Deborah J. Bowen, FACHE, CAE, president/CEO of ACHE. In their efforts to accomplish these goals, hospital CEOs face increasing pressure as the financial burdens of their hospitals grow.

Within the category of Financial Challenges, the CEOs who were surveyed identified more specific concerns:

  • Medicaid reimbursement (including adequacy and timeliness of payment, etc.): 71%
  • Increasing costs for staff, supplies, etc.: 64%
  • Reducing operating costs: 57%
  • Competition from other providers (of any type—inpatient, outpatient, ambulatory care, diagnostic, retail, etc.): 48%
  • Transition from volume to value: 47%
  • Managed care and other commercial insurance payments: 46%
  • Inadequate funding for capital improvements: 42%
  • Medicare reimbursement (including adequacy and timeliness of payment, etc.): 42%
  • Revenue cycle management (converting charges to cash): 37%
  • Moving away from fee-for-service: 36%
  • Emergency Department overuse: 28%
  • Pricing and price transparency: 24%

(https://www.ache.org/pubs/research/ceoissues.cfm)

Partnering with VIE Healthcare will empower CEOs to tackle the financial challenges of their organizations.

VIE Healthcare’s expertise and attention to detail will help your organization decrease cost and improve value and efficiency, easing the financial burden that every hospital faces.