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Healthcare Should Not Be All About Money! It Should Be About Delivering Cost Effective Medical Care!

Stanley Feld M.D.,FACP,MACE

Val Jones M.D. Senior Medical Director of Revolution Health in her Voice of Reason Blog post entitled “Hospital Adminstrators’ Salaries Draining The System” was more vitriolic than I was about Paul Levy’s defense of his one million dollar plus Hospital administrator CEO salary.

In her post she said
“Well, this conversation from the blogosphere gets my blood boiling, I can tell you! In a recent blog post about the ugly under belly of hospitals, I discussed how administrator salaries decrease hospital resources. Dr. Stanley Feld’s excellent blog post digs even deeper:”

In her post “Why Hospitals Are So Ugly” she said, “So one day I called the chair of the department of interior design at Parsons School of Design and asked whether she might send her students to my hospital to consider how to improve our situation.”
“I found out much later that our acting CEO was making about ½ million dollars per year in salary at the time. All the while the poor patients had to recover in a grim void of sensory stimulation.
Several months later the Parsons students made a presentation to our hospital’s executive team, and this was met with great enthusiasm. We all thought that we were on the verge of an exciting breakthrough for patient wellness. But alas, in the end not a single design suggestion was implemented as our administrators told us that there was no money available for environmental improvements.”
There is ugliness in hospitals – and it runs deeper than the white walls. As with many sectors, money is the deciding factor regarding whether or not something gets done. I think that hospitals should take a hard look at their white walls, and the white linings of their executive pockets and ask themselves whom they were built to serve.”

Many physicians have experienced false hope and false promises from hospital administrators. Val Jones M.D. hit the nail on the head. It is all about money! A big part of the healthcare system’s dysfunction “runs deeper than the white walls” in the hospitals. The healthcare system’s dysfunction originates in the board room of administrative meetings, the synergism of hospitals with the insurance industry(see Dr. David Westbrock’s comment at the bottom of the link)
and a faulty DRG system.

A faulty DRG system that hospital administrators have learned to exploit over the past 23 years.
The patients are simply pawns in the money game. Paul Levy gets an incentive bonus on revenue generated from this faulty system. There are many ways to optimize DRG payments from private insurance, Medicare and Mediciad. All you have to do is hire the right consultant to teach you how to do it.

The loser is the patient. The biggest losers is the patient without health insurance because he is responsible for the retail price and society as a whole.

DRG payments for Massachusetts are totally opaque. The only state I could find that publishes DRG charges was Wisconsin. It is fascinating to explore the hospital charges for various illnesses. I picked a hospital in Milwaukee and choose coronary angiography and cardiac bypass surgery as examples of charges. The report also presents payments from the insurance industry, Medicare and Medicaid. These charges are hospital charges and do not reflect hospital costs.

It is true sticker shock. It is an explicit examples of how hospitals charge and what they get paid. The hospitals collect 71% from private insurance, 39% from Medicare and 27% from Medicaid. I was told in a personal communication that a hospital can make a very nice profit with Medicaid payment for Obstetrical care service if efficient care us delivered. A bed generating $12,000 a day on average, is not a bad business.

The hospital charges for sub-specialty procedures are even more. Disease complications (risk weighting) increases charges further.

Let us assume at the low end the average payment is $6,000 a day per bed according to the Wisconsin DRG price information. The bed revenue in 365 days is $2,190,000 per year. A 1,000 bed hospital would generate revenue of $2,190,000,000 (2.19 billion dollars) a year. What is the hospital’s real overhead? Just try to find out! Have you ever wondered how almost every hospital in the country can afford to expand? Does Paul Levy deserve a performance bonus? How much are other secondary administrators earning? What kind of incentive bonuses are they getting? How does that add value to the patient-physician relationship? We have a big problem!

I will discuss one piece of the solution next time.


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