Hospital Mission: Quality And Efficiency or Cost Shifting?

Mitch Roob

By: Mitch Roob - Chief Executive Officer, Indiana Economic Development Corporation (IEDC)

Category: Healthcare

What do the recent announcements of 1) Indiana’s Medical Errors Reporting System, and 2) hospitals like St. Francis in greater Indianapolis and Parkview in Fort Wayne deciding to move to the suburbs, have in common? A lot more than you may think.

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These two stories highlight the untenable position that Indiana hospitals face: how to provide high quality care at a low cost, yet cost shift at the same time.

Indiana’s first medical errors report highlighted the number of preventable errors that occurred in Indiana hospitals. Aside from pinpointing specific errors, the intent of the report is to help Hoosiers make informed decisions about the types of treatments and providers they select. Further, the report is a mechanism to encourage providers to pay heightened attention to providing high quality care to Hoosiers. As health care consumers are provided with quality data, they will, at the same time, demand price transparency. And, why will health care consumers demand price transparency? So they can evaluate both cost and quality data in order to make a value-conscious decision.

Now, here comes the kicker for hospitals: Caught in the web of societal issues poorly addressed by government, hospitals are forced by federal law to provide care to the uninsured. However, these hospitals are not fully reimbursed for this care. Instead, we require them to shift costs to paying patients, which translates into almost $953 dollars in increased health insurance premiums per Hoosier family. The number of uninsured Hoosiers has grown by 30% in the last ten years, yet government subsidies to providers to offset these costs show no growth. This coerces hospitals into developing new schemes to assure they retain a large enough margin to fund their missions and comply with federal mandates. As demonstrated with St. Francis and Parkview, urban hospitals are fleeing to suburban locations and abandoning communities in a feverish quest for the insured patient. Other Indiana hospitals have increasingly opted not to provide less profitable but critical services, such as mental health care, in order to pursue more profitable lines of care. These maneuvers are critical for survival because if there is no margin, there is no mission.

We want patients to be true consumers of health care. But, how can an insured patient understand if their bill for back surgery is a good “value” when marbled into the price is a hospital's unpaid costs for an uninsured person’s car accident? The lack of price and quality transparency in the health care sector prevents Hoosiers from being smart shoppers of health care. This diminishes the pursuit of high quality care by providers and ultimately contributes to growing health care costs and more uninsured Hoosiers.

Governor Mitch Daniels’ Healthy Indiana Plan (HIP), lauded by Health and Human Services Secretary Mike Leavitt, proposes to direct the proceeds from an increase of the price of cigarettes to programs for smoking reduction and childhood immunizations, with the balance providing coverage to uninsured Hoosiers least able to afford coverage. This program would leverage millions of new federal dollars to help reduce the number of uninsured in the State and cost shifting by providers. The program redirects traditional government subsidies paid directly to hospitals and instead enfranchises individuals to take personal responsibility for their health care and to be value-conscious consumers of health care.

All Indiana hospitals face an uncertain future if we cannot devise a system that allows them to focus on providing high quality, efficient health care services instead of trying to cost shift at the same time. St. Francis and Parkview could be just a few of many hospitals that are forced to shut their doors if Indiana cannot craft a solution to reduce the number of uninsured.

While the Indiana House of Representatives defeated one version of a bill to increase the cigarette tax to pay for healthcare for the uninsured, and the current House budget proposal calls for a flatline in the Medicaid budget, there is still plenty of time in the legislative session to address these issues head-on. However, if the Medicaid budget does not keep pace with health care inflation, the State has no choice but to slash provider rates and hold back subsidies to providers. This will only increase the vicious cycle of cost shifting by all providers.

Indiana must act now to devise a system that promotes price and quality transparency, reduces cost shifting, and reduces the growing health care premiums for all Hoosiers. Hoosiers must urge their legislators to 1) pass the HIP plan, and 2) increase funding to the Medicaid budget. The availability of health care services for all Hoosiers depends on it.

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