Health care providers more interested in growth than in cutting costs, survey shows

[Mr._Graybeard]

From a news report by Guy Boulton of the Milwaukee Journal Sentinel. Unfortunately I cannot find a link to the survey itself at this time.

How can health care become more affordable if almost every health system wants to grow and increase its revenue?

That’s one of the questions raised by a recent survey of health systems.

Roughly a third of those surveyed said their largest investment in the next three years will be capital projects to expand or build hospitals, clinics and other facilities. An additional 24% said their largest investment will be expanding their networks of primary care clinics and outpatient services.

Both generally increase costs and, in turn, the need for more revenue.

It suggests one of the conflicts facing health systems: They recognize the need to control costs but also want to grow.

The survey by Kaufman Hall/Axiom, a consulting and software company, was of 169 executives, vice presidents and other staff of health systems, ranging in size from one hospital to 10 or more hospitals. More than 70% of those who responded were executives or in finance.

The responses provide a glimpse into what top executives and other staff see as their organizations’ challenges and priorities.

The survey — done with the help of the Healthcare Financial Management Association — focuses on performance improvement and includes questions on revenue, expenses, future investment and efforts to control costs.

One paradoxical result of the survey is 23% of the health systems said the greatest pressure on their efforts to control expenses was the money needed to pay for “strategic growth initiatives.”

It ranked second behind rising salaries and wage inflation.

In other words, almost one in four health systems said their greatest obstacle in controlling costs was that they needed to spend money to maintain market share or increase revenue.

“They always talk about cutting costs, but they seldom actually do it,” said Gerard Anderson, director of Johns Hopkins Center for Hospital Finance and Management. “And the reason is they have no incentive.”

 

[Midpack]

That shouldn’t come as news to anyone, but I’m sure it will...

 

[Mr._Graybeard]

It strikes home with me because an affluent city near me, population 15,000, has two full-service hospitals within a 5-minute drive of one another. The city actually discouraged the second medical group from building within the city, citing studies that said it would likely increase the cost of care. The medical group then got the adjoining township to approve the project so the group could build just outside the city limits.

The group is Aurora Health Care, Midpack, which you may be familiar with because it recently merged with Illinois' Advocate group. BTW, I see that Aurora announced a 4.5% rate increase for 2020.

 

[6miths]

It strikes home with me because an affluent city near me, population 15,000, has two full-service hospitals within a 5-minute drive of one another. The city actually discouraged the second medical group from building within the city, citing studies that said it would likely increase the cost of care.

There can be no doubt that medicine is big business in the US and the incredible opacity of costs make it easy to game the system. Not only does this practice increase cost but it worsens care by diluting the existing pool of skilled doctors, nurses and technicians. Because of the profit motive there is a ridiculous amount of excess capacity (physical and diagnostic) which of course leads to excess costs due to unnecessary procedures and testing. But it's all good because I am sure that the buildings are beautiful and the 'wait' time in the 'ER' is zero.

 

[Mr._Graybeard]

There can be no doubt that medicine is big business in the US and the incredible opacity of costs make it easy to game the system. Not only does this practice increase cost but it worsens care by diluting the existing pool of skilled doctors, nurses and technicians. Because of the profit motive there is a ridiculous amount of excess capacity (physical and diagnostic) which of course leads to excess costs due to unnecessary procedures and testing. But it's all good because I am sure that the buildings are beautiful and the 'wait' time in the 'ER' is zero.

When Aurora opened the place they had a grand piano in the lobby! I think they eventually realized how excessive that looked, though, so they took it out.

My primary care physician was a group associate, and I liked him quite a bit. After I got maneuvered into having a prostate biopsy, though, I wised up -- a little too late, but I got there eventually -- and found another PCP.

 

[MichaelB]

From a news report by Guy Boulton of the Milwaukee Journal Sentinel. Unfortunately I cannot find a link to the survey itself at this time.

Yes, health care providers are totally focused on maximizing revenue. This is seen in their pricing; the disconnect between the price and cost of a service shows each is managed separately and to different objectives.

We have had a few years of slower health care price inflation, and I think that is soon to end. Hospital groups have strong pricing power and have spent the past decade merging and consolidating, and private equity investments have been very active among health care providers. We should expect to see a pick up once again in the growth rate of health care costs, and my guess is a fair part of that will be passed directly to consumers.

 

[MRG]

What business isn't focused on increasing revenues and profits?

 

[Mr._Graybeard]

What business isn't focused on increasing revenues and profits?

Nearly all of the health care providers in my state enjoy nonprofit status.

 

[JoeWras]

Nearly all of the health care providers in my state enjoy nonprofit status.

I came here to mention this.

So not only are the three major actors in this area all growing like crazy, building incredible palaces of medicine, they also are non-profits and have the audacity to send me mailings begging for donations. Ridiculous.

 

[Midpack]

What business isn't focused on increasing revenues and profits?

If healthcare had any real competition they’d be comparable to other businesses, they aren’t at all comparable...

 

[JoeWras]

If healthcare had any real competition they’d be comparable to other businesses, they aren’t at all comparable...

And we have no prayer of comparing different providers to enforce our consumer right to be informed and choose the competition.

Imagine buying a car and having to sign a document basically saying: "We may send you an extra bill 6 months later for no reason all except perhaps the salesperson chatted with another for advice in the break room. The consulted salesperson shall be due whatever they ask of you."