I was shocked to read in your May 3 cover story that John Forsyth sees no major conflict of interest in simultaneously holding the posts of chairman of the University of Iowa Board of Regents-which oversees the University of Iowa Hospitals and Clinics-and chairman and CEO of Wellmark Blue Cross and Blue Shield ("Too close for comfort?" May 3, p. 6). Perhaps Iowa Gov. Tom Vilsack, a possible Democratic vice presidential candidate who also sees no conflict in this arrangement, should not be going to Washington or even staying in the Iowa Statehouse.
Forsyth should resign from one of his posts because he is in conflict no matter what decision he makes, and if he recuses himself often enough he will not be able to be effective in either position. If he has no better judgment in failing to see an inherent conflict, he should also resign as a director of Baxter International, a company in which I am a shareholder and former board member.
Where is the outrage from the citizens of Iowa who will ultimately pay the piper when Forsyth's salary and bonus at Wellmark are contingent on Wellmark getting more money out of the Iowa system and the patients it serves?
American Healthcare Systems
Mergers may aid IT
I agree with Todd Sloane's editorial on the lack of funding for a national elec-tronic health record ("An unfunded mandate," May 17, p. 22). As I reflect on some of our recent client work, I can't help but think that perhaps a federal and/or state mandate on EHRs might be the next great motivator of hospital consolidation (round one being managed care). We're involved in a few hospital affiliation deals. Particularly for smaller hospitals, access to information technology capital is a big motivator.
The same thing happened in banking, albeit with the consumer as the driver. As banks needed to automate back offices to accommodate lower transaction costs and create a portable, multisite-banking record that worked at any branch or ATM, local banks couldn't afford the technology and consolidated. The ATM challenge proved too big for even megabanks and had to be collaboratively outsourced. It will be interesting to see how this agenda evolves on Capitol Hill and the approach taken.
Thanks for the insight.
This isn't reimbursement
Sometimes what you call something says as much about you as it says about what you are describing. As it becomes a larger piece of the overall American economy, use of the term "reimbursement" to describe how healthcare providers are or expect to be paid seems more and more inappropriate and troubling.
For hospital CEOs, this is a "top of mind" issue. In recent surveys of its membership, the new American Governance and Leadership Group found that "inadequate reimbursement" was cited by 51% of the CEOs surveyed as their largest problem, far exceeding physician relationships, specialty hospitals and other troubles. Presumably, what this means is that the unit revenues they receive from public and private payers are inadequate to cover their costs.
The term "reimbursement" originated in Medicare and Medicaid programs, which were constructed to pay hospitals after the fact for their costs incurred in treating their respective beneficiaries, which had to be documented in cost reports. Originally, the reimbursement exceeded the costs incurred in treating beneficiaries.
Over time, however, both federal and state governments dispensed with cost as a basis for payment, and simply set payment rates based on fiscal convenience. Medicare has not "reimbursed" hospitals for inpatient care since 1983, the date of inception of DRGs. Rather, it has set fixed payment rates per inpatient admission, adjusted for regional factors and updated fitfully for inflation. Medicaid departed from cost-based reimbursement in the early 1980s, and paid hospitals, doctors and others simply what they could get away with politically.
As managed care grew from a fringe movement to the main event on the private payment side, payment based on billed charges (the original basis for indemnity insurance provider payment) gave way to negotiated rates, converging on the traditional Blue Cross method of discounted charges. These rates were determined increasingly by the brute force of supply and demand, and were (and are) importantly influenced by the bargaining leverage of respective suppliers and funders of health services. Those payment rates bear at best a tenuous relationship to the actual cost of care.
Why belabor this? Because the term "reimbursement" no longer describes accurately what hospitals, doctors and others receive from either private or public payers. To call these payments reimbursements implicitly shifts moral responsibility for the cost to those we expect to pay the bill. To continue to describe what is paid to the industry as a reimbursement implies that those who deliver care have no control over the cost or responsibility for the value of their product. It is, to put it bluntly, whining: "You OWE us! Pay up!"
In no other sector of the economy does management think this way about the payment process. Toyota does not expect us to reimburse them for an automobile. We pay them, and receive value in return. Nor does the mechanic who fixes our Toyota expect us to reimburse them. In the latter example, there is perhaps a similar type of uncertainty as there is in hospital care about what needs to be done, and a similar type of "moral hazard" and its ever-present potential for abuse.
Our teenagers expect reimbursement when they fill our automobiles with gasoline with their own money. For a $500 billion hospital industry to claim that the society inadequately reimburses it for its services signals a lack of moral agency and managerial control. It is a protestation of weakness from a powerful industry.
A Blues embarrassment ...
In your May 17 cover story, you use Blue Cross and Blue Shield of Rhode Island as the poster child for outsized "reserves, executive perks and compensation" ("Rhode Island's got the Blues, p. 6). To your credit, you indicate that Rhode Island isn't the only state harboring a "Blues plan ... with an embarrassment of riches."
It is more than just a little disingenuous for the Blues to suggest that "strong membership gains and the growing popularity of the National BlueCard program" coupled with "an unexpected slowdown in medical cost increases" is the reason for its current financial position. How do you square the rising uninsured population with strong membership gains and growing popularity? How do you square rising Blues premiums with a slowdown in medical cost increases?
If these highly compensated, resort-pampered executives were not spending so much time at the beach, they might be able to devise a viable response to the new competition on the block, health savings accounts and association health plans. Their knee-jerk lobbying efforts against these new programs are limp and stale. If they had to be more engaged in the competitive process like their for-profit cousins, Anthem, WellPoint Health Networks, etc., instead of hiding behind their not-for-profit shield, perhaps they wouldn't be "caught off-guard" next time.
Chairman and chief executive officer
Spectrum Vision Systems
Overland Park, Kan.
... what to do with riches
I think most people can understand the need for a not-for-profit to generate cash and reserves for operations, but the huge reserves and numerous accounts of excesses at these organizations are simply unacceptable. It seems clear that they've forgotten about their mission to serve the communities in which they operate.
It's ironic that on the next page of the issue is an article about the struggle to address the growing uninsured in our nation, many of whom are employed. Why not require every Blues plan to subsidize these uninsured from their profits? A fixed amount can be set per person per region and as profits rise, more people could be served. It certainly seems like there's enough to go around-if of course they can forgo a few country club memberships and trips to the Cape, that is!
Corporate strategy and project development
Information systems services
Edward Hospital & Health Services
I was glad to see that your May 24 special report mentioned that critical-access hospitals with attached long-term-care facilities are not reimbursed as well as free- standing critical-access hospitals. ("Critically acclaimed," p. 22).
I am the chief executive officer of a Missouri hospital about 90 miles south of St. Louis. We have a 120-bed attached nursing home. I feel that we are penalized because we provide this service.
Chief executive officer
Madison Medical Center
HealthSouth heading north
I want to commend you on your continued coverage of HealthSouth Corp. ("A new dawn," May 10, p. 8).
For the past two years I have been following the stories and using the wrong-doing by the company for my class projects and case studies. Although we have heard about Enron, Tyco and WorldCom, very few people have heard about HealthSouth, which, according to my research, is one the largest cases of securities fraud in U.S. history. My classmates, colleagues and even professors are amazed at this mastermind plot that inflated HealthSouth's earnings by billions.
Your story, after months of speculation, about the appointment of Jay Grinney was uplifting. I believe the company has the potential to overcome the moral laxity brought on by several greedy people and I think Grinney is the right person for the job.
As an economist I am all for financial gain and growth. But financial fleecing and overstating growth in healthcare is damaging and the trickledown is devastating. There are job cuts but also cuts in healthcare services and increases in premiums that affect access to care for the struggling middle and lower classes.
The trickledown from all of that is increased mortality.
Senior medical economist
Indiana University Medical Group
The case for hospice
Your "By the Numbers" chart (April 12, p. 9) noting the cost of in-hospital deaths of terminally ill patients supports what we in hospice care have known for years: Patients receiving good palliative and hospice care enjoy the benefits of modern pain and symptom management and die comfortably at home among loved ones at a fraction of the cost to the healthcare system of those dying in the hospital.
In our own organization serving the national capital region, the cost to pro- vide care to an average daily census of 582 hospice patients, including children and infants, during the first quarter of 2004 was about $6.97 million for nearly 53,000 patient days; in other words, hospice care, including medication for the terminal diagnosis, was delivered for $131.53 per day. By the figures quoted in the article, that's about 14% of the daily cost ($960.44) of an in-hospital death and 7% of the daily cost ($1,902.40) of an intensive-care-unit death.
The 24-hour availability by telephone of a nurse through our after-hours call center drastically reduces the need (and desire) for hospitalizations related to the terminal diagnosis.
While the math clearly supports the idea that hospice care is the most cost-efficient means of caring for terminally ill patients as they approach death, awareness of the benefits to the patient, healthcare providers and the entire healthcare system remain tremendous barriers that only education can address.
Director of communications
I just finished reading your inaugural issue of Health IT Strategist, your new electronic magazine. If it is any indication of what is to come, I think you have a winner. The depth of the information presented and backup documentation was excellent. Keep up the good work.
Westlake Village, Calif.
What do you think?
Write us with your comments. Via e-mail, it's [email protected]; by fax, 312-280-3183.