You might think that in the midst of a global pandemic, hospitals would be doing a booming business. But you’d be wrong, and the reason cuts to the very issue that makes health care in America so problematic.
The Mayo Clinic is cutting pay for about one-third of its workers — more than 20,000 people — as the effect of coronavirus spreads among hospitals. Not the physical effects, but the financial fallout of an onslaught that has put even the most COVID-19 prestigious medical centers under exactly the economic strain they can least afford — having to care for dozens, even hundreds, of truly sick patients while giving up the hefty profits they make from elective surgeries, tests and imaging.
Mayo said it’s seeing a revenue decline this month of about $150 million per week since the pandemic really hit in the U.S., according to the Minneapolis Star Tribune in a story published Saturday. And the pandemic has yet to peak in Minnesota.
Here in the Granite State, Lakes Region General Hospital has furloughed roughly 500 workers, and is still struggling financially, despite nearly $10 million in emergency state and federal aid. The cause? At least in part, according to a report in the Laconia Daily Sun: “Its revenue declined greatly after it ended profit-generating elective procedures about a month ago to create capacity for an expected surge in COVID-19 patients.”
In fact, a report from the Granite State News Collaborative, of which The Sentinel is a member, quotes Reagan Baughman, associate professor of economics at the Paul College of Business & Economics at the University of New Hampshire, as predicting a meltdown in the industry because of the current crisis. “Hospitals and many medical practices rely on big-ticket surgeries, scans and other procedures to subsidize the patient care that doesn’t bring in revenue,” the report notes.
When the cost of health care in the U.S. is discussed publicly, the blame is often placed on the cost of malpractice insurance and the cost of prescription drugs. Pharmaceutical firms are the Big Evil in Big Medicine in the public eye because they often charge far more for drugs than we think they should. They jack up the price of drugs to which they own patents — even when those drugs can save lives.
Such actions are reprehensible, but consider that they are well-known. Why? Because compared to other medical costs, the price of drugs is both transparent and stable. It’s the cost of everything else we don’t know. Providers and insurers work out what they feel is acceptable, and patients have to run a gantlet of voicemail and bureaucrats to find out what anything costs, until they receive a bill for it.
Efforts to put pricing of routine procedures online have helped make things clearer, but far too often, patients aren’t told in advance that someone they’re urged to see is “out of network” — i.e., not being paid for through insurance. Or their test results, X-rays, etc., are run past another doctor’s eyes — an unasked-for “consult” for which the patient will pay dearly.
For patients, these are the real cost drivers. Which is why legislation to make illegal these “surprise billing” tactics is necessary.
Yet even that won’t solve the issue facing hospitals now, which is that their revenue model is broken. That the nitty-gritty caring for patients who are sick is a loss leader, while sometimes unnecessary — and always expensive — surgeries and tests are money-makers, says a lot about our culture and about where medicine is these days in America.
There have been attempts to transform the revenue/service equation. Dartmouth-Hitchcock tried about a decade ago to move from a fee-for-service system that encourages more — and more expensive — services to an accountable care model, which provides a pot of money per patient, then rewards providers for keeping those patients healthy.
A shift to the accountable care model was one of the goals of Obamacare. Unfortunately, Dartmouth-Hitchcock abandoned the concept after a couple of years, at least in New Hampshire. But the idea is taking hold elsewhere. OneCare Vermont is an accountable care organization with providers throughout the state, including Dartmouth-Hitchcock-run hospitals.
Accountable care organizations may not solve health care, but they may be a forward step. In any case, what’s clear is that the current crisis has laid bare the foolishness of a health care model in which routine care — the kind everyone needs — is a sinkhole of cost while specialized, often elective, treatments generate the actual profit.
Fixing that unbalanced revenue stream — and making costs transparent to customers before they incur them — will go a long way toward bringing down health care costs in this country.