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Should Healthcare Orgs Be Required to Do Zero Cost Accounting?

Posted on August 31, 2018 I Written By

John Lynn is the Founder of the HealthcareScene.com blog network which currently consists of 10 blogs containing over 8000 articles with John having written over 4000 of the articles himself. These EMR and Healthcare IT related articles have been viewed over 16 million times. John also manages Healthcare IT Central and Healthcare IT Today, the leading career Health IT job board and blog. John is co-founder of InfluentialNetworks.com and Physia.com. John is highly involved in social media, and in addition to his blogs can also be found on Twitter: @techguy and @ehrandhit and LinkedIn.

During today’s #HITsm chat, Jeremy Coleman made a strong statement about what he believed every healthcare organization should have to do:

What do you think of Jeremy’s idea? Should every healthcare organization be required to do zero cost accounting? Should every hospital know what their trust costs is for someone to spend a night in their inpatient bed?

These are complicated questions, so let’s start the discussion and see if we can share and learn from each other. At the core of these questions to me is a larger question of whether the price of the services we receive in healthcare should be related to their costs. We all know this isn’t the case when we think about the obscene $20 aspirin you get in the hospital. They charge that price for services they offer because they can. Ok, that’s oversimplifying it, but not too much.

Given that costs aren’t associated with the price healthcare organizations charge for things, I wonder how valuable it is to know how much something costs a healthcare organization. Would knowing this information really change how a healthcare organization operates?

What I think we might find if we do this analysis is that the way things are priced in healthcare really makes no sense at all. However, I think it will also illustrate that there’s no easy path to change the way things are priced in healthcare either. It’s going to take a series of incremental changes that in aggregate will equal a dramatic change. I’m just not sure who in healthcare is patient enough to make these types of incremental changes. Plus, many vested interests will fight against these changes.

I wish I remembered who said this, but I recently read someone who said that insurance companies have hidden behind complexity for years. It’s in their best interest to have things so complex that they don’t make sense so that they don’t have to justify the costs. It’s not just insurance companies that have hidden behind complexity in healthcare either.

As Dan Munro, author of Casino Healthcare, often says, “No one group is to blame for the US Healthcare cost crisis because each segment of the industry is complicit.” Said another way, no one wants to mention that the Emperor has No Clothes. I’m afraid this is why we don’t want to do zero cost accounting and really know how much something costs us in healthcare.

“The Current Model for Healthcare is Not Sustainable?” – Why Not?

Posted on April 23, 2018 I Written By

John Lynn is the Founder of the HealthcareScene.com blog network which currently consists of 10 blogs containing over 8000 articles with John having written over 4000 of the articles himself. These EMR and Healthcare IT related articles have been viewed over 16 million times. John also manages Healthcare IT Central and Healthcare IT Today, the leading career Health IT job board and blog. John is co-founder of InfluentialNetworks.com and Physia.com. John is highly involved in social media, and in addition to his blogs can also be found on Twitter: @techguy and @ehrandhit and LinkedIn.

I’ve heard this phrase over and over:

The Current Model for Healthcare is Not Sustainable?

It’s especially prominent on social media and at conferences. Sometimes they change the word model to costs or some other related word. The message is clear. Healthcare is screwed up and people are pissed that it costs so much. On that I agree with them in many respects. However, I don’t agree that the current model isn’t sustainable. In fact, today I saw it and asked them why it wasn’t sustainable.

No one could give me a good answer.

However, to be clear I clarified that I wasn’t suggesting that we shouldn’t try to change the current model and that we shouldn’t try to stop the crazy healthcare cost curve. I also didn’t argue with the dire consequences that will happen if we don’t change healthcare from its current model. We should do all of those things.

It’s one thing to argue that we could or should do something and quite another to say that the current trajectory is unsustainable.

Healthcare has been surprisingly good at sustaining all of its bad characteristics. In fact, in many ways the bad things in healthcare are actually incredibly profitable.

In response to my question about why the current model is not sustainable I got the following story:

I was behind a lady at CVS who decided not to get her meds because she needed to pay her electrical bill. This cannot be sustainable.

A sad story and no doubt there are hundreds more like it. It’s heartbreaking to read and something we should work to fix. However, don’t wait for the healthcare organizations to fix it. This gets a little twisted, but think it through. If that lady chooses not to take her meds, what happens? Does the doctor get paid less? No. Does the hospital get paid less? No. In fact, if she doesn’t get her meds and gets really sick, the hospital is going to make a ton of money. (Yes, I know about value based care and hospital readmissions, but that’s a small percentage of overall revenue).

I’m not suggesting that any healthcare provider goes around saying that patients shouldn’t be compliant with their medications because it would be good for their hospital business. Even I’m not that cynical. However, if we were in any industry that’s what we’d want people to do. However, in other industries if you chose not to get your medications you’d have a bad experience (ie. you’d get sicker) and then you’d want to use me less. Healthcare is the opposite. If you get sicker you use me more.

The reality is that healthcare is not a true market. Go and read Dan Munro’s book Casino Healthcare to see what I mean. Healthcare is complex and it hides its issues behind that complexity.

I’m sure that some people reading this are going to offer up some pockets and small examples where this isn’t true in healthcare. Great. We need more of that and soon. We need it because healthcare is costing our nation too much money. We need it because healthcare is costing businesses too much money. We need it because many people aren’t getting the care they need because they can’t afford it. We need it for a lot of reasons.

However, we don’t need these changes because healthcare is going to collapse if we don’t change. In fact, to paraphrase Dan Munro, most in healthcare are profiting from its dysfunction. That’s why it’s so hard to change. Sadly, I don’t see anything that tells me we’ll stop paying either. The current model is surprisingly resilient and sustainable.

Of course, that’s not to say outside forces couldn’t change things. They can and they should. Patients are paying way too much for healthcare and we should be pissed and push for change. Businesses are paying too much for healthcare and we should be pissed and push for change. Government pays more for healthcare than anyone else and they’are paying too much for it. They should be pissed and push for change.

Just don’t expect providers or even payers to disrupt themselves. They’re all enjoying a shockingly sustainable business model. IT can only do so much when it comes to solving the business model issues.