Healthcare Efficiency

Given that all healthcare institutions make money, let’s look at what the do with it.  Here are some broad generalizations:

                                FOR PROFIT        NOT-FOR PROFIT
Investor dividends        yes                    no
Salaries & bonuses        yes                    yes
Waste                        little                    lots
Expand operations        yes                    yes
Taxes                        yes                    no
Uncompensated care      yes                   yes

Dividends run about 2% these days.  Increases in stock value  are fickle (want some Enron shares?  Independence air?) and come from expanding operations.  Salaries etc. are probably comparable, and both provide uncompensated care (under duress).  The not-for-profits (NP) are compensated for this lost revenue by not paying taxes.   Why do the  NPs excel in waste & inefficiency?  Well, they don’t always.  Mostly tho, I think it’s a lack of focus.  NPs are conscious of the bottom line.  They just don’t focus their attention there.  Such focus can be a handicap also.  I’ve seen For Profit (P) companies seek to advance profits by cutting costs and neglecting to provide value to their customers.  Works in the short term, but eventually, everyone loses.  On balance, tho, the NPs just can’t compete for efficiency.  The CEO frets over the budget, but no one else in the organization knows or cares.  In a well run P company, everyone knows how the company is doing and how their job contributes.  Employees are constantly producing innovative improvements.  Can happen in an NP,  but usually doesn’t (lack of incentives).  The point is that there are IRS reporting differences and management differences, but generally both see the same patients for the same problems.  So why are costs so high?  Next time . . . competition in healthcare.

Posted by Dr. Robert Burney at 08:39 PM | Permalink | Comments (1)

Anne Gauthier is lead author in a Commonwealth Fund publication that provides an excellent overview of issues facing US healthcare.  This is particularly valuable when paired with her chartbook on the same site from Mar 2005.  She does share several misconceptions with most other current authors, and these impede any real progress toward goals of greater value or lower costs.  For example, on page one, she states that the “goal of any health care system should be to help all citizens live long, healthy, and productive lives....”  Hard to argue with apple pie, but, well, no, and if that is the goal, the system is doomed to failure.  Healthcare has almost no effect on any of these parameters.  The great gains in longevity have come from public health, not healthcare (sanitation, immunizations, air and water quality).  The health of the population is related more to personal habits (smoking, obesity) and is probably inversely related to healthcare.  (More or better healthcare preserves sick individuals within the population, thus detracting from its overall health.)  The improved productivity of recent years was brought on by technology and education--not by healthcare.  So, there is this common confusion between health, healthcare, and health insurance.  It’s important to link the goals with the levers.  Raising the tax on tobacco or gasoline will do nothing for healthcare, but either would likely improve health.
The second common confusion is over for-profit vs not-for-profit status.  There are insinuations in Gauthier’s work and others that for-profit institutions are somehow evil and sap resources that should be given to the poor.  Wrong!  For/not-for is an accounting trick.  ALL HEALTHCARE INSTITUTIONS MAKE MONEY.  The difference is how the profits are reported to the IRS.  More on this, if there’s interest.

Posted by Dr. Robert Burney at 09:32 PM | Permalink | Comments (1)

 Albert Crenshaw wrote an excellent article on High-Deductible Health Plans in the Washington Post yesterday.  This strategy aims to introduce more consumer choice into healthcare decisions by pairing Health Savings Accounts (HSA) with high deductible health insurance.  Well, it works, for some, but it’s not the perfect answer for all.  (Anyone surprised?)  But then, why do we have to have a perfect answer?  Perhaps this is the first step in our long journey.  (I once had a health insurance plan with a $10,000 deductible!)  The intent is to shift more of the cost for healthcare to patients and away from employers.  The increasingly cost-conscious consumer would then put pressure on healthcare costs.  This does work--look what increasing gas prices have done for the SUV market!  it also works in healthcare, but not so easily or directly.  As Crenshaw points out, however, the net effect on total healthcare costs would probably be tiny, since the big spenders (sickest patients) would not choose this option.  (Who said they had a choice??)  
One fear is that many would defer “needed” healthcare.  However, no one has quite defined what “needed” means or who decides what healthcare I “need.”  One cited casualty is preventive care (also not well defined), but surely that is partly a question of salesmanship by the primary care provider, partly incentives ( “if you don’t have your mammogram, your deductible goes up when you have breast cancer”), and partly public health.  (Flu shots are free, because it is in the public’s interest for everyone to have one.)
Neglected by Crenshaw (and others) is the downward pressure on prices of even a modest number of price conscious shoppers.  I had a this discussion recently with a woman who has type 1 diabetes and would face increased medication costs under this plan.  We concluded, however, that her total costs would decrease, because she would shop for insulin by price, and her total expenses would be more than offset by the reduced cost of health insurance.  

 

Posted by Dr. Robert Burney at 07:52 PM | Permalink | Comments (1)