Health of the Union

James C. Robinson, PhD:

“Hospitals need revenues to finance operating expenses, to invest in new capacity, and to provide charity care for the uninsured, yet they receive payments from public insurance plans that lag behind the growth in the costs of care.  Positive contribution markets on orthopedic and cardiac procedures for privately insured patients can be used to subsidize less remunerative procedures and patient groups.  The average total margin for US hospitals in 2008 was 2.8%, according to American Hospital Association data, indicating the extent to which the double-digit contribution margins documented here are used to support other services.  The extent to which the margins documented here are two high, too low, or just right depends on the mandates placed on hospitals by public policy, private litigation, and cultural expectations.”

In order to deal with this harsh set of circumstances, turning data into information should be a hospital’s number one financial goal.  Hospitals need revenues to finance operating expenses and to invest in new capacity.  In order to do so, hospitals need to be able to map their metrics by picking the top expenses that drive costs and, instead of analyzing spreadsheets to make decision, see how a hospital’s revenues impact those specific cost drivers.  This ultimately leaves us with the contribution margin approach to the income statement.

Driver-Based approach: gross revenue – expenses (key drivers) = contribution margin

One of the most important points that Curtis (the doctor from the video) made was that financial leaders at hospitals cannot just use their own judgment.  By using integrated advanced analytics, financial executives can turn data into information rapidly to not only understand the important components of their current key drivers but also predict the future through modeling with pro-forma statements.  You can get to this point by integrating any current data source with business intelligence tools so that you can move away from the current Excel based world and have all of your data in the same place so that you are making important financial decisions using a single version of the truth.  Any industry that is capital intensive, like healthcare, needs to use predictive analytics to be truly competitive.

The Relative Cost of Healthcare

 

What sort of real impact have rising healthcare costs had on the average American? In the last ten years, most things have gone up. A combination of inflation of a generally increasing economy have sent the average cost of goods and services upwards by about 26%. Not everything has gone up; exponentially improving technology and globalization have decreased the cost of communication, while the increase of discount stores (and possibly some decline in style) has sent down the cost of clothing.

However, the costs of education and medical care  have increased dramatically. As with anygood or service, the “price” of healthcare has to do with two age-old forces: supply and demand.

SUPPLY:

 Sinse 1980, medical school enrollment has been decreasing per capita, according to the Dept. of Labor Statistics. (This graph does not take into account foreign doctors who immagrated to America.)

 

 

 

 Meanwhile, that incredible increase in technology that we’ve seen  in the past 30 years has also lead to innovative new developments in medical treatments and prescription drugs.  Because these amenities are relatively capital0intensive to produce, the overall cost off medical treatment has increased.

But the real increase in healthcare costs have come from demand.

DEMAND

In the past 30 years, Americans have become drastically more unhealthy, overweight, and overmedicated. Our rates of excercize have decreased by 5%. Our rates of obesity have increased by 15%, and our dependance on prescription drugs has increased by over 200%.

 

 

 

 

 

 

-Zack

http://scienceblogs.com/transcript/2008/08/lets_talk_about_facts_this_ele_2.php

http://carsonco.net/page13/page13.html

What Health Reform Means to Your State

What Health Reform Means to Your State

The site provides an interactive map with tools explaining how the  Affordable Care Act is impacting people in every state.  It also discusses a series of myths and explanations for each one. The site tackles common beliefs including: “Businesses will suffer under health reform.” It also discusses more controversial issues including: “Health insurance reform will use my tax dollars to fund abortions.”

The site is useful, however, it is important to do more in depth research to get the full story behind acts.  The Wall Street Journal posted an article explaining how both Republicans and Democrats believe the have the answer to all our health concerns.  However, because health care is such a complex issue, it is difficult to believe that one approach will solve all problems.  The article closes by stating, “patients and doctors can differ with experts and not be ignorant or irrational…. in medical care, the “right” clinical decisions turn out to be those that are based on a patient`s goals and values.”

-Lauren

http://online.wsj.com/article/SB10001424052702303404704577311641531125820.html

US Healthcare: Money Trap

Americans spend more money on health care than patients anywhere else in the world.  In 2009, the US spent about $7,960 per person, twice as much as France who is know for providing very good health services.  For all that money, one would think they are receiving the highest quality of health care but results have been mixed, ranging from superb to inferior.

 The objective of health reform is supposed to control cost but our aging population continues to drive up medical costs.  Interesting enough, Germany, Italy and Japan have much larger percentages of elderly people yet they spend less per capita on health care. Almost all other advanced industrial nations cover virtually everyone, while we leave about 50 million uninsured.

Administrative costs a high with the intensive paperwork required from clerks and accountants.  As well, technological advances, which some  have seen to be highly beneficial, often cost a lot more that standard treatments.  However, American doctors laf far behind their counterparts abroad in using electronic health records.  Insurance companies profits and the high pay of their executives may account for some of the cost differences between other countries (but there seems to be little data on this.)

Recent reports from the Organization for Economic Cooperation and Development concluded that spending is high in the US partly because the prices charged by American doctors and hospitals, which are higher than anywhere else. The chart below shows a comparative price report on the large price differential from country to another.

Measuring how effectively we spend health care dollars is hugely complicated. But cross-national surveys offer some clues. We’re good at giving patients what they want — if they ask for it. Thus meaning,  Americans can see a specialist or get elective surgery a lot faster than patients in other countries.  With that, Americans are more likely than people in other advanced nations to experience medical errors or problems with uncoordinated care, and to forgo care because it’s too expensive.

 

 

The O.E.C.D. report rates America at or near the top for survival rates in breast and colorectal cancer but slightly below average in cervical cancer. We rank in the middle of the pack in the percentage of heart attack patients who die in the hospital within 30 days of admission. And we have alarmingly high rates of hospital admissions for asthma and uncontrolled diabetes — an indicator that many patients don’t have good primary care, which can prevent costly hospital stays.

While most other advanced countries hold down prices through government regulations, we set prices Medicare and Medicaid programs.  However, in private markets, reform has to rely on other means, such as financial incentives for providers to curb costs by coordinating care and improving efficiency.  One demonstration program significantly reduced spending by bundling payments to hospitals and doctors to cover all in-patient services connected with heart bypass surgeries. The idea at the heart of the reform law is that such strategies, once proved effective, could be carried out on a large scale — and eventually bring total spending under control.

Country Salary Comparison

The variance between the wages doctors receive in each country is astounding, while in some countries doctors are one of the highest paid positions and it others they simply are not.  Below is a chart that compares wages and salaries of health services workers in variety of countries.  The amounts listed a adjusted using U.S. dollar purchasing power parities.  The ratios of salaries to GDP per capita reflect the year the data was collected and are not adjusted for inflation. For countries that have both self-employed and salaried professionals in a given field, the amount presented is the higher of the two. Four countries have both salaried and self-employed specialists: the Czech Republic (where compensation is $29,484 for salaried and $34,852 for self-employed specialists), Greece ($67,119 and $64,782), the Netherlands ($130,911 and $252,727), and the United States ($170,300 and $229,500).