Three Problematic Hospital Myths
“The truth is you may have razor-thin hospital margins in case you are good at simply spending all the cash that’s given to you.”
SOURCE: The Drawback Present: 3 Problematic Hospital Myths
Shane Cerone and Dr. Sam Flanders have been accountable collectively for working a hospital—a hospital that ran at 158% of Medicare and which had extremely rated high quality and security—I wished to get my mitts on somebody who had executed this efficiently, as a result of I’m making an attempt to determine why it appears so arduous for others to emulate.
Right here’s a quote: “The truth is you may have razor-thin hospital margins in case you are good at simply spending all the cash that’s given to you.” Shane Cerone says this arising and throw sizzling, proper? Razor-thin hospital margins could also be attributable to excessive prices or some problematic market situation or uncompensated care. Or razor-thin working margins may additionally transpire since you’re simply actually inclined to spend each greenback you’re given.
For a full transcript of this episode, click on right here.
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Form of shines a brand new gentle on the nonprofit phrase, proper? Anyway, after Shane Cerone raises his eyebrows on the razor-thin hospital margin cliché at this level, then he continues, “And I feel that’s what goes on with out a aggressive healthcare market. It’s not possible to separate these issues.”
That means is it some drawback related to offering care in a group, or is it an excessive amount of cash gassing up the non-public jet? “It’s not possible to separate [these] issues and perceive what’s actually attainable.”
Yep. That’s one thing that certainly one of my company at the moment, Shane Cerone, will say in about T minus 19 minutes or one thing. So, spoiler alert.
Now, let me begin from the start.
What occurs when there’s a market, an precise market, for any good or service? Nicely, costs are rationalized, provide and demand curves meet at an equilibrium level, and the invisible hand knocks sellers and patrons into line. Abracadabra. We’ve got honest costs.
If I proceed down reminiscence lane to our freshman Econ 101 microeconomics class (simply in case it was that 8:00 a.m. and any of us slept via it), these aforementioned provide and demand curves, for them to do their equilibrium factor, these curves require a collection of transactions that “trial and error” themselves into that aforementioned equilibrium honest for patrons and sellers worth. Transactions was the important thing phrase there.
In different phrases, a market is the sum or regardless of the common of its transactions, proper? It’s like a gaggle of crows is known as a homicide, a herd of cows. Nicely, a gaggle of transactions is known as a market.
Now what’s required for a transaction to be an precise transaction? Let’s see.
Oh, right here’s a begin. Each the customer and the vendor should concentrate on the worth on the time of the transaction as one elementary charge important. And this isn’t simply textbook economics that I’m speaking about proper now. It’s additionally contract legislation.
And yeah, anybody who has spent 5 minutes at this rodeo, you listening, you may have instantly cottoned on to the truth that that is already not going nicely for anybody planning to argue that there’s, in truth, a healthcare market in the US, as a result of does anybody even know the worth that they’re shopping for or promoting at for any given healthcare transaction previous to agreeing to purchase or promote? Establishment carriers and TPAs (third-party directors) have entered the chat.
However if you happen to don’t have transactions with clear value or high quality of the products bought, then yeah, actual robust to have competitors, which is one other market charge important that’s depending on there being, for reals, transactions.
Actual arduous to buy high quality if you don’t know what the standard is. We frequently speak about this subject from the standpoint of the customer right here at Relentless Well being Worth. Hearken to the exhibits with Kevin Lyons (EP487, Half 1), Jonathan Baran (EP483, Half 1), Wayne Jenkins, MD (EP358). Right this moment, although, we’re gonna speak about this from the standpoint of the well being system.
How does a non-market have an effect on well being techniques? I’m pondering now about one thing John Rodis, MD, MBA, talked about in episode 286 that I repeat within the present that follows.
Brief model: Dr. Rodis was CEO of a hospital that threw their backs into bettering high quality and security, they usually received zero quantity, zero calls for for his or her efforts—no enhance in demand—nor have been they capable of negotiate larger service charges. So, like, why hassle? Simply put a snazzy billboard on the freeway, “We’re primary,” and name it a day. And yeah, what a loss for the group, for sufferers, for members, but additionally for folk working in any given hospital making an attempt actually arduous to get their group to do proper by sufferers.
So, wow, was I on the sting of my seat at the moment to get an opportunity to speak with Dr. Sam Flanders and Shane Cerone from Kada Well being, who, by the way in which, donated to the pod to assist out with our bills. My goodness, do I really like this tribe that we now have created right here and people of you who step up and assist out. It prices loads of money, really, to maintain this present on the air.
So, thanks a lot to Kada Well being and in addition to all people who pops up and drops a few bucks within the tip jar on our Site that we do completely nothing to advertise. We get 5 bucks right here and $500 there, and all of it provides up, and it makes my coronary heart glad to see how nice individuals are on days when issues look so darkish generally.
Sorry, we have been speaking concerning the non-market that’s the healthcare business. Okay, I used to be thrilled to seize Shane Cerone and Dr. Sam Flanders, as I mentioned, and get them on the present at the moment as a result of they have been accountable collectively for working a hospital—a hospital that ran at 158% of Medicare and which had extremely rated high quality and security—as a result of I wished to get my mitts on somebody who had executed this efficiently, as a result of I’m making an attempt to determine why it appears so arduous for others to emulate.
Now the options present is gonna be in two weeks the place Shane and Dr. Sam Flanders get into how they saved costs low and delivered top quality and security to their group. And if you happen to can’t stand ready two weeks, do return and take heed to the present with Dan Greenleaf—there’s two of them (EP489, Half 1 and Half 2)—and he talks about this from the standpoint of a multispecialty group.
Dr. Sam Flanders and Shane Cerone are speaking about this from the standpoint of a hospital system.
Right this moment, nevertheless, we’re exploring, deeply and with nice perception, problematic healthcare myths. Now, these myths are warmly embraced by those that form of profit from them being embraced, which might be some fairly good foreshadowing for the options present.
However these 3 myths are, first, let’s simply lay out the mom of all myths, that there’s a functioning healthcare market the place carriers management the costs of consolidated well being techniques and so on.
Fable 2: Hospitals merely can’t afford to function when costs paid by business contracts are lower than 150% or 200% of Medicare. There needs to be wild value shifting to native employers; in any other case, they may exit of enterprise in some form of clearance sale.
Fable 3: When costs go down, so does high quality, as a normal rule. Now there’s gonna be one present in between this present, our problematic delusion present, and the “okay, now let’s assist hospitals clear up for all of this” present.
And the present I’m gonna pop proper in the midst of these two bookends is a present with Elizabeth Mitchell from PBGH, the Purchaser Enterprise Group on Well being, as a result of toothpaste is out of the tube. And anybody banking on the nonmarket bonanza persevering with … yeah, heads up. Right here’s what it appears to be like like across the nook sooner or later arising, as a result of (oh, my God, I’m horrible at retaining the suspense beneath wraps) however PBGH simply took all of the transparency knowledge and an entire bunch of claims knowledge and high quality knowledge, and now they will see precise costs being charged and precise high quality and security being delivered by any given well being system or group.
And—oh, wow!—is that highly effective, as a result of it really creates the potential for precise transactions, that are the constructing blocks of markets, and—oh, wow!—does it have an effect on well being techniques on consultants, on TPAs, and ASOs (administrative providers solely). I’m controlling myself from going off on an entire tangent about this influence on consultants and TPAs, however I can’t as a result of that’s what half the present is about subsequent week, so come again subsequent week.
Within the meantime, take pleasure in this episode with Dr. Sam Flanders and Shane Cerone. Then once more, as I mentioned, come again subsequent week, take heed to Elizabeth Mitchell. Then come again for the options a part of this episode, the place we speak about, yeah, options, the place Dr. Sam Flanders and Shane Cerone, simply with such knowledge and expertise, tick via methods to gradual the elevating costs roll; methods to make issues work advantageous, simply advantageous, on 150%, 200% of Medicare; how there may be zero purpose any hospital needs to be thumping its chest and saying high quality will go down or dire this or dire that in the event that they don’t get their double-digit charge will increase.
So, onward right here is my problematic myths dialog with, as I’ve mentioned 19 occasions already, Shane Cerone and Dr. Sam Flanders from Kada Well being; and the present is sponsored by Aventria Well being Group with an help from Kada Well being.
Additionally talked about on this episode are Kada Well being; Kevin Lyons; Jonathan Baran; Wayne Jenkins, MD; John Rodis, MD, MBA; Dan Greenleaf; Elizabeth Mitchell; Purchaser Enterprise Group on Well being (PBGH); Vivian Ho, PhD; Stanley Schwartz, MD; ZERO.well being; Mark Cuban; Cora Opsahl; Eric Bricker, MD; Dan O’Neill; and Lisa Bari.
You possibly can be taught extra at Kada Well being and comply with Shane and Dr. Flanders on LinkedIn.
Shane Cerone is the CEO of Kada Well being, LLC, a consulting, administration, and management follow that helps employers in lowering the price of distinctive healthcare and advises hospitals, well being techniques, outpatient facilities, and doctor teams on practices that enhance care high quality and effectivity.
Previous to establishing Kada Well being, Shane spent greater than 20 years main high-performing hospitals and doctor group practices in each group and tutorial well being techniques. He has served because the president/chief government for Beaumont Hospital (Royal Oak), Mercy Iowa Metropolis, Virginia Commonwealth College Hospitals, and St. Luke’s Hospital & Well being Community in St. Louis.
Throughout his tenure as its president, Beaumont Hospital (Royal Oak) was acknowledged as one of many nation’s highest-performing hospitals and well being techniques, persistently ranked as a nationwide chief for medical excellence (US Information & World Report), care high quality and security (College HealthSystem Consortium), and affordability (the RAND Company).
Shane earned a bachelor of arts diploma in biology from Nebraska Wesleyan College and a grasp of arts diploma in hospital and well being administration from the College of Iowa, the place he serves as adjunct assistant professor.
Sam Flanders, MD, FAAP, is a seasoned healthcare government and doctor with a distinguished profession in high quality, security, and efficiency enchancment management. He most lately served as government vice chairman for high quality, security, and inhabitants well being at St. Luke’s Hospital in St. Louis, Missouri.
Previous to becoming a member of St. Luke’s, Dr. Flanders held the place of senior vice chairman and chief high quality and security officer at Beaumont Well being (now Corewell Well being) in Michigan. Previous to Beaumont, he served in the same position at Indiana College Well being (previously often known as Clarian Well being Companions).
Dr. Flanders earned his medical diploma from the College of Illinois Faculty of Medication and has an undergraduate diploma in pc science from College of Michigan. He’s board-certified in pediatrics. For over 30 years, he has served as a volunteer doctor at summer season camps for youngsters with diabetes, serving to to coach and assist younger campers to raised management their illness.
