"Dr. Ralph Pascualy, chief medical officer of Swedish Medical Group, says the group has reduced its outpatient charges by an average of 35 percent in an effort to adapt and remain competitive in the new era of health care." Some signs are starting to emerge that U.S. health care is an actual business that must respond to a competitive climate after all. Swedish Medical Group, which operates five hospitals in Seattle, Edmonds and Issaquah, and a network of more than 100 clinics across the Puget Sound area, decided to slash outpatient prices by 35%. 35%. Think about your profit margins as a competitive business -- would you have the ability to slash your prices 35% and continue to survive? That's a lot! Most businesses are operating on much smaller profit margins because they have to constantly respond to competition and other considerations. The health care system we all had a hand in creating hasn't been your regular business. Hopefully, this is a sign that we're headed in the right direction towards health care operating more like your business, which is better for everyone. Dr. Ralph Pascualy, chief medical officer of Swedish Medical Group, says the group has reduced its outpatient charges by an average of 35 percent in an effort to adapt and remain competitive in the new era of health care. Swedish has been “working pretty hard on reducing our cost and improving our efficiency,” he said. Different procedure cuts vary. For example, a magnetic image (MRI) of the brain will be 70 percent less at $1,810 than the $6,143 it was under the old system. A diagnostic colonoscopy is now $1,518 under the new policy, which took effect Jan. 1, 31 percent less than the $2,203 bill it used to be. Of course, consumers could end up paying different rates from what Swedish bills in these examples depending on their insurance plan's contract. But people with a high deductible plan paying out of pocket could see even lower prices. Inpatient care prices remain the same, and it will be up to consumers to make sure their insurance company actually passes on the outpatient savings, but patients paying out-of- pocket will immediately feel the impact of the lower rates. Officials say the cuts to outpatient charges won’t cut the quality of care. Again, wow -- 35% cut without reducing quality. This is just the latest strategic move the Seattle-based hospital system has made to adapt to changes that have been rocking the health industry since the Affordable Care Act passed in 2010. Swedish made news last December when it revealed that it would change the way it pays doctors by starting to move away from the traditional fee-for-service system to making 25 percent of their compensation directly determined by performance and outcomes. It's another move towards the way your business has to run -- on results. We hope to see even more. Cutting outpatient charges has actually been in the works for awhile. Leadership made the decision to cut outpatient charges in the fall of 2013. The change was made possible by a number of cost control efforts the hospital system had introduced over the last couple of years. “It takes a number of months to get your costs down and then you can actually transfer that out and give that money back to the community,” Pascualy said. The biggest element of those efforts was cutting staff through layoffs and attrition. Roughly 1,400 employees left in 2012, including 530 who were laid off. Another cost-saving measure was elimination of Swedish’s home health service. We hate to see employees lose their jobs, but if it doesn't affect quality, then you have to assume there was inefficiency and duplication that needed to be addressed. You might think a hip-hip-hooray for the Affordable Care Act is in order, but Paul Guppy, research director of the Washington Policy Center, says not so fast. Guppy agrees that the decision by SHS to cut prices shows that given the right conditions, health care providers can respond competitively while meeting the needs of consumers, just as in other areas of the economy. But Guppy maintains the price reductions at SHS developed in spite of, and not because of, President Barack Obama’s Affordable Care Act (ACA). “It is unlikely these price cuts are driven by the Affordable Care Act, because the ACA does not promote normal market competition,” Guppy said. “Instead, the individual mandate and other regulations force people into state exchanges or into Medicaid, where choices are limited or nonexistent. “Providers of services, whether it’s health care or cell phones, will reduce prices when they know consumers have real choices and can take their business elsewhere, not when people’s options are restricted or limited by federal law,” Guppy said. Alex Hurd, Senior Director, Product Development, Growth and Payer Innovation for Health & Wellness at Walmart, said his team's mission is to be the "#1 retail provider of affordable health care." As Walmart and other large retail chains with national reach step into the health care arena, you can't help but suspect CMOs like Pascualy are paying very close attention. | "Alex Hurd, Senior Director, Product Development, Growth and Payer Innovation for Health & Wellness at Walmart, said his team's mission is to be the '#1 retail provider of affordable health care.' " Hurd said Walmart has already established a strong network for providing vision and audiology services and over-the-counter medications, the company is now focused on building out its capabilities in primary care, chronic disease management, and consumer engagement, with a major expansion of its "Healthcare Begins Here" health insurance education platform planned. Tom Beauregard, Chief Innovation Officer for UnitedHealth Group expects retail care to further expand as it becomes more integrated into payer models. Stephen Lockhart, Chief Medical Officer for Sutter Health, said Sutter is well-positioned to "be a laboratory for change in health care" and the system is partnering with CVS Health to pursue new care coordination strategies and with MDLIVE to provide virtual consults to employees. "It's important to view the system from the customer's viewpoint," he noted. "It's by maximizing the patient experience that we'll build brand and patient loyalty." Music to our ears! But will more health care providers follow Swedish & Sutter? Nathan Benefield, vice president of policy analysis at the Commonwealth Foundation, says it’s clear other health care providers could do the same if they focused on keeping costs low, but third-party payment remains a sticking point. “Unfortunately, there hasn’t been much price competition in the health care sector because of the third-party payer system,” Benefield said. “Patients almost never shop around for better prices, and they rarely even know the cost of a service or a procedure, because in most cases an insurance company or the government is going to pay the bill. “There remains a lot of opposition to this movement, both from unions and from regulators that discourage competition, especially price competition,” Benefield said. “But there are other efforts—things like low-cost health clinics and cash-only providers—moving to provide health care alternatives and compete for patients with lower prices.” Naomi Lopez Bauman, director of health care policy at the Goldwater Institute, points out that hospitals, which are on the receiving end of multiple streams of taxpayer dollars given to support health care services, are rarely transparent in how they price health care services, which makes price competition more difficult. “The reality is that there are multiple prices for the same procedure, depending on whether you are an insurer, an uninsured individual, or a charity care case, and few actually pay the published price,” Bauman said. “Any steps that hospitals take in order to make prices more transparent should be applauded.” Katherine Restrepo, a health and human services policy analyst for the John Locke Foundation, a free-market think tank, agrees with Guppy in saying the ACA impedes competition. “The ACA does not push for healthy competition,” Restrepo said. “It pushes for managed competition in which sundry regulations under the law limit how competitive insurance companies and hospitals can be.” More competition will definitely mean health care providers will cut prices, especially in view of the increasing number of standalone surgery centers, says Restrepo. “Technological advancements coupled with approved Medicare reimbursements for a growing list of services performed in these smaller, lower-cost settings make for a more competitive and efficient heath care marketplace, which benefits the patient with quality care at a lower price compared to the same service being performed in a full hospital setting,” Restrepo said. Add these competitive health care pressures to the fact that technology is also putting more of consumers' health in their own hands, literally, through their smartphones, and it is starting to look like a brave new world is on the horizon. Now if I could just decide between all the streaming music services on my smartphone -- oh, another industry that needs a brave new world. But that's a topic for another day. "Toe bone connected to the foot bone Foot bone connected to the heel bone" ...doo dee doo... Sources: Dem Bones by James Weldon Johnson 8/24/2015 Swedish slashes outpatient prices by 35 percent - Puget Sound Business Journal http://www.bizjournals.com/seattle/blog/health-care-inc/2014/03/swedish-slashes-outpatient-prices-by.html 1/14 BUSINESS JOURNAL PHOTO | MARCUS R. DONNER 8/24/2015 Seattle Hospital Cuts Cost of Outpatient Services 35 Percent | Heartlander Magazine http://news.heartland.org/newspaper-article/2015/08/11/seattle-hospital-cuts-cost-outpatient-services-35-percent Bruce Edward Walker (walker.editorial@gmail.com) is a policy analyst for The Heartland Institute. http://blogs.oliverwyman.com/healthcare/2015/08/20/takeaways-providers-retailers-the-new-front-door-to-health/#.VeDVRLR2Dtm Mondaq Report Last Updated: August 25 2015 Article by Foley & Lardner |
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