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Focus on value
Hospitals, patients benefit when providers treat quality like a financial report

By Leah Binder
Posted: April 27, 2013 - 12:01 am ET

"Of all the transformations reshaping American healthcare, none is more profound than the shift toward value.”

These are words from a powerful—and surprising—report issued a few months ago. The report exposes weaknesses in hospital quality, examines market shifts unfavorable to continued lags in hospital performance and makes an urgent call for hospitals to get their house in order. Here's the surprise: The report didn't come from the Leapfrog Group or other purchasers. This sharp-edged call to action comes from within the hospital industry itself: the Healthcare Financial Management Association, the professional association for hospital chief financial officers.

This is not the first time I've been impressed with the blunt voice and visionary leadership of the HFMA. CFOs are part accountants, part soothsayers and part pragmatists. After all, they have the unenviable job of making elaborate financial forecasts amid a tsunami of change. The Patient Protection and Affordable Care Act is changing all the rules, and the only thing we can really predict with confidence is that many unintended consequences lie ahead. In the private sector, purchasers are passing significantly more costs to their employees, creating a new breed of price-conscious patients who are, for the first time, “shopping” for healthcare.

What should CFOs do to follow the guidance of their professional association and deliver more value? I like the advice from Dr. Bob Galvin, Equity Healthcare CEO at the Blackstone Group and a co-founder of Leapfrog: “Aim for true north: the best interests of the patient.” Cynics will grumble that true north sounds nice, but not when it means losing revenue. Indeed, a study in the Journal of the American Medical Association this month, which showed hospitals earning nice profits as a result of surgical errors, reinforces once again the perverse financial incentives that make the job of doing the right thing that much more difficult.

The good news is that in addition to helping CFOs sleep better at night, heading true north can result in a better bottom line, even in the short term. An Institute of Medicine-published report by a group of high-profile hospital leaders, A CEO Checklist for High-Value Healthcare, confirmed that many hospitals gained significant margins by shifting to a culture of quality-first.

But as the HFMA points out, whatever the short-term gains from delivering quality care, in the long term, hospitals aren't beating the odds without a handle on quality and safety metrics. That's where the CFOs come in.

Lots of clinicians will argue that the finance guy doesn't know anything about preventing an infection or following guidelines in surgery, so he should stay out of it. But hospitals with high rates of infections or errors usually have a variety of related problems, such as getting employees to follow rules, supply management, housekeeping quality, physician accountability or high nursing turnover. Just one quality breakdown, an error or a near-miss, is a harbinger of hospitalwide malfunction. Malfunction is not a platform for financial success. Nor does it breed confidence in the CFO when she sits down to negotiate the new ACO contract or takes risk in a bundled payment arrangement.

So how does a CFO successfully contribute to the hospital's quality agenda? Accountants have a knack for accountability, so first and foremost, CFOs should insist that their hospitals collect the best data, and participate in the best programs, such as hospital association improvement projects or registries such as the American College of Cardiology. Dissect these reports with the same rigor you apply to your audited financials.

Second and related, CFOs should insist the hospital report to the annual Leapfrog Hospital Survey. This is not a commercial appeal on my part: Leapfrog is a not-for-profit organization promoting consumer transparency, and there's no fee for hospitals to report and no fee to the public to access the data. This year, our purchaser members are launching the national Leapfrog rollout, formally asking every hospital in the U.S. to participate.

There's no better tool than Leapfrog, not only for quality improvement, but for motivating change, and the latter is the toughest challenge in any hospital. Perhaps you can find another source of national comparative information on your hospital's quality and safety, but you won't find another source this transparent, because there isn't one. Most data collected by hospitals is not made public, and even the little data available rarely shows variation. You won't motivate change by hearing that your hospital is average.

In the end though—agree or not with the merits—in the era of the Internet and Big Data, transparency is inevitable. This growing movement for transparency, along with the availability of new media technology, allowed Leapfrog to launch the Hospital Safety Score last year, a letter grade rating hospitals on their safety using publicly available data from the CMS, as well as the Leapfrog Hospital Survey (visit Hospital Safety Score or download the free app). The Hospital Safety Score is the gold standard in hospital transparency—and it's not optional. If a hospital qualifies for a grade, they get one.

CFOs know how to turn all this data and the new movement for public transparency into a platform for action, leadership and change. Indeed, the rough terrain ahead on the finance side can't be navigated without better control of the clinical side. Start with the compass pointing north.

Leah Binder is president and CEO of the Leapfrog Group, Washington.

Cynics will grumble that true north sounds nice, but not when it means losing revenue.

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