HFMA writer Rich Daly interviews senior executives from Cleveland Clinic and Intermountain Health regarding how a shared, industry-leading cost accounting model has helped them to move toward dynamic planning, better cost accounting and more accurate, actionable cost data for decision-making.
HEALTHCARE’S PERFECT FIRE
An entire city had been burned to the ground. It would never be the same. It would be better.
It was 1871. It was Chicago. A fire had just destroyed 17,500 buildings and left one out of every three residents homeless.
The compelling story behind the Great Chicago Fire is not that Mrs. O’Leary’s cow started the fire by kicking over a lantern – that actually never happened. The interesting part is not what caused the fire; it is what emerged from it – which can give us a powerful lesson about where we can take healthcare, which in many ways is on fire like never before.
In the aftermath of the fire, ideas poured in on how to create a new and better city. From those ideas, the Great Chicago Plan was created. Rubble would become landfill to create a lakeshore that never existed before. New fire standards were created that became the standard nationwide. This stream of innovation would lead to a new kind of building, called the “skyscraper,” literally changing urban landscapes, not just in Chicago, but around the world.
The end result? Over the next 20 years, a city virtually destroyed somehow tripled in population. By 1893, Chicago became an international center of excellence, hosting more than 20 million visitors for a world’s fair, the Columbian Exposition.
2013 is our 1871
The question we need to ask ourselves is if an entire city can be leveled, yet emerge stronger in the span of only 20 years in the 1800s, then how can we leverage the incredible ideas, resources and technology we have access to today to build the type of healthcare system we want to leave behind for future generations?
For those of us who have been in healthcare for many years, we take this question as an obligation and we take it very seriously. In that light, we need to view 2013 as our 1871. The rate of change taking place is breathtaking – the advent of new systems (information technology), new structures (accountable care organizations), new incentives (value-based purchasing), new partners (hospital-employed physicians), new payers (both private and public health insurance reform), new players (retail health), new data (business intelligence, decision support), and the list goes on.
In other words, with all of this change coming, it is the ‘perfect storm’. Or, better said, it is the ‘perfect fire’.
The question is whether we will fight it as an uncontrollable fire or whether we will embrace it, leveraging it as a clearing of the way for something better. While all stakeholders face this question, it is clear that some are taking action and others are already being left behind.
Cost of care…a burning platform
An important example of this is how some are tackling what many believe is the burning platform of our time – the rising cost of care.
With new payment structures that reward quality and outcomes, many provider organizations are now rushing to understand the true cost of care across the continuum (episodes, disease states, populations), rather than in traditional departmental or entity silos. To tackle this, they are taking action by implementing advanced decision support and business intelligence systems that provide the information they need in real-time vs. retrospectively.
Children’s Hospital of Atlanta, Mission Hospital in North Carolina, Legacy Health in Oregon, St. Luke’s University Health Network in Pennsylvania and West Virginia United Health System are examples of organizations that have major initiatives in place to make cost data liquid and combine it with quality data. This blending together of clinical outcomes and business operations could not come at a more critical time, for our healthcare delivery system or for the patients it serves.
In healthcare, we all know that without margin, there is no mission. But our path towards profitability has hit a roadblock. Forward thinking organizations understand that a traditional revenue cycle management approach has limitations in a system that is shifting towards capitation and outcomes-based payments. If revenue becomes fixed, the only way to drive margins is to drive down cost while maintaining or improving outcomes.
This transition comes at a time when the cost of healthcare is becoming a mainstream consumer conversation. For evidence, look no further than the recent cover story of TIME magazine called ‘A Bitter Pill’. While many may disagree on controversial points raised, what is undeniable is that it is stunning that an article on healthcare costs is the longest one in the magazine’s history.
A week earlier, a New York Times story described how a college senior tried to help out his 62-year old uninsured grandmother by asking 100 hospitals to quote a price for her total hip replacement. Half of the hospitals responded, with quotes ranging from $11,100 to $125,798. The other half either could not or chose not to provide a price. But there was a twist to the story – not only was his grandma’s hip OK, but it turns out she didn’t actually even exist. The writer was a student conducting research on healthcare costs.
Our perfect fire
So, whether the pressure is coming from new payment structures or from consumers, there is no doubt that the right answers are out there right now for healthcare, with many providers and other key stakeholders leading the way. The question is whether we are listening to the ideas and taking action – using this fire as an opportunity to build a new and very different healthcare system.
This is our 1871.
This is our ‘perfect fire’.
This is our moment. And this will be our legacy.
It’s time to build.