Walmart Proposes To Align Business Profits With Health Care Patient Outcomes
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It often seems the American health care system is "like no place on earth, a land of wonder, mystery and danger," in the words of the Lewis Carroll's "Mad Hatter" from 19th century writer Louis Carroll.
And certainly the relationship between cost and outcome is awry in a system that exemplifies the best and the worst, a strange marketplace wherein the provider sometimes chases an incentive to ensure an inferior result.
Researchers from Harvard University, Boston Consulting Group and nonprofit health care delivery system Texas Health Resources published a paper Tuesday in the Journal of the American Medical Association finding strong profit among hospitals for surgical complications. While such patients don't necessarily cost more to treat, hospitals can bill more for them.
The research group analyzed records from more than 34,000 surgical patients discharged from a dozen hospitals in 2010, of which 1,820 experienced at least one surgical complication requiring an extended — and, of course — billable hospital stay.
Patients with private insurance were naturally the biggest prizes, delivering nearly $40,000 more per patient with complications. Those with Medicare, by contrast, delivered an additional $1,700 per patient with complications. Though hospitals didn't make much more from those paying out-of-pocket or through Medicaid, such patients accounted for only 10 percent of the study group.
Thus, 90 percent of surgical patients at these hospitals in 2010 were involved in a system that incentivized complications.
"We are entering this phase of tremendous experimentation in changing the model of payment," said researcher Atul Gawande, who is a surgeon at Brigham and Women's Hospital in Boston and professor of surgery at Harvard's medical school, in addition to working as a medical journalist. "We have a bonus system here that we've known has rewarded perverse behavior, but now we're able to put some real numbers on it, and it's a bigger bonus than we've ever understood."
Gawande previously described the imbalance in U.S. health care in "The Cost Continuum" (2009), asserting that not only do hospitals make more money for complications but, in many hospitals, physicians ear more money individually for every procedure or test, regardless of the eventual patient outcome.
Though many groups across many industries of human endeavor often incentivize by conjoining individual and collective goals, health care remains utterly unique. At once, it's a matter of life itself. But in America and elsewhere it's also a business.
The "business case has been difficult to make," Gawande said. "It will always pay to open another operating room or increase number of patients," with patient outcomes lying somewhere to the side.
Thus in the absence of a single-payer health care system many Americans deride as "socialism," realignment of motives lies within the business community, outside the health care industry among those largely footing the bill.
Leading the innovation would be Walmart, the country's largest retailer, which spends on average $3,500 annually on health care per employee, 27 percent less than the retail industry average - with a strategy of shunting many part-time employees to government-sponsored Medicaid programs for the "working poor."
Walmart announced last year it would pay the entire bill for bundled treatments, however, in a move that would limit corporate costs while incentivizing better patient outcomes. For heart, spine and transplant surgeries, employees would patronize one of six designated health care organizations, according to Walmart spokesman Randy Hargrove.
At the Cleveland Clinic in Ohio, physicians work on salary with no profit motive whatsoever. "Because physicians are employed and salaried, they don't have a direct financial incentive to do a particular thing, but really to do what's in the best interests of the patient," said Michael McMillan, executive director of marketing and network services for the clinic.