Surgical Strike

Deputy Marshal Samuel Gerard: "How's the boy doing?"
Dr Anne Eastman: "He saved his life."
--The Fugitive

Interesting BW article profiling an innovative Everett, WA hospital. Suggests the ton of low hanging fruit that could drive significant cost savings and quality improvement in health care.

The question is why more operators don't engage in such efforts. Read the article and look for incentives/disincentives for improvement.

Something that should stick out is the stifling influence of Medicare/Medicaid. 53% if this hospital's revenues come from the pair--a bit higher than the ~45% share of health care expenses encompassed by goverment programs.

Both government and private insurers reimburse on a fixed fee-for-service basis. The way to goose revenues in this model is to treat more, test more, etc. Do more, get paid more. No premium is paid for quality and there is little incentive to improve productivity.

Moreover, lower fee schedules enacted by Medicare/Medicaid encourage providers to compensate for low government reimbursements by raising invoices to private insurers 30%+ over Medicare rates (a.k.a. 'fee shifting'). Private insurers have less bargaining power than the Medicare/Medicaid bloc.

Can you see that private insurers are likely to look like bad guys because they are shouldering more of the cost increases? In reality, fee shifting from Medicare drives much of this phenomenon.

Nearly 20 yrs ago I was a member of a corporate project to reduce my company's health care related expenses, which were increasing at nearly 15% annually. Docs, hospitals back then lamented about the influence of government fee schedules on provider efficiency. Two decades later, little progress has been made.

As noted in the article, the proposed health care legislation retains the fee-for-service design.

The primary roadblock to medical progress is government's escalating presence in health care markets. Solving the 'health care crisis' requires less, not more, government involvement in this sector.