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The Path Not Taken: Hospitals

by Scott MacStravic

Since I was born and raised in the Boston area, I was naturally exposed to a lot of the poetry of Robert Frost, including his poem about choosing “the path less traveled by”, and how that “made all the difference”.  Hospitals have a choice today of paths, where which they choose could certainly make, if not all, at least a major difference in their future – the option of moving toward proactively managing health and disease, as opposed to mainly or solely reactively treating illness and injury.

Hospitals have always been ‘dabbling’ in proactive health, including offering free immunizations to their employees and communities, along with health fairs and other educational or screening events.  Screening has had the added advantage of identifying people who should be seen by physicians, and often end up needing hospital care, so are at least partly marketing tactics, in addition to delivering “community benefit”.

The option of choosing the proactive alternative more intensively is not merely one of adding service lines to current activities.  Proactive health management (PHM), by definition and intention, will reduce the incidence and prevalence of illness and injury in the populations served by hospitals, and thereby reduce the need, demand, and expenditures for sickness care, and thereby the revenue to which hospitals will have access.

Proactive “wellness” care has often been promoted as a tactic to gain PR value and the interest of employers in hospitals’ markets, and thereby to potentially make up for reductions in the overall sickness care market by winning a greater share of the reduced market.  Since wellness care can generate its own revenue (it has been twice described as a $1 trillion market in its own right), the combination of gaining a greater share of a declining two-plus trillion dollar sickness care market and a significant share of the one-trillion dollar proactive health market could turn out to be a successful strategy.

But PHM can also place hospitals “on the side of the angels” with respect to the “health care cost crisis”, by enabling them to become part of the solution, rather than a major part of the problem.  Sickness care — for employers, insurers, and governments, as well as taxpayers and patients – is a “cost center”, whose benefit has always been difficult to put a value on.  By contrast, PHM is a “cost-saving” center for patients and payers, as well as a potentially “revenue-generating” center for both providers and employers.

As employers, often among the biggest employers in their communities, hospitals should logically be invested in PHM for their employees, since this can save substantially on labor costs.  Not only does PHM reduce sickness care costs, it also reduces worker absences, impaired productivity at work (“presenteeism”), errors and quality problems, and even employee turnover.  It can also improve employee morale and commitment, energy levels and enthusiasm, and thereby increase customer satisfaction, loyalty, and the generation of new business and revenue.

Because the total economic impact of PHM is difficult and expensive to measure, the pattern of past efforts – by employers in general, and hospitals in particular – has been one of measuring only one or a few of the many dimensions that probably have been affected.  In most cases, even a limited measurement effort has found significant returns on the PHM investment (ROI), so has been sufficient to justify repeated or continuous investment, and no additional measurement efforts were needed.

But deliberately choosing to ignore the rest of PHM’s value can lead to reducing or even ending investments that would have been continued if the full benefits were known.  And with the growing importance of employee performance, not merely productivity, given the increasing potential for pay-for-performance (P4P) bonuses and revenue, measuring performance provides both a strong reason for and basis for evaluating PHM’s impact on performance.

Instead of or in addition to measuring a wide range of selected measures of quality, output, errors, efficiencies, etc. as possible effects of PHM investments in employee health, hospitals can focus on workforce performance in the specific dimensions for which it is paid extra under P4P systems, and reported in published performance ratings that affect payers and consumers choices of hospitals to put in their provider networks and use for patient care.  By evaluating PHM in light of performance impact, and by achieving better performance as a result, hospitals can both increase their knowledge of the full effects of PHM and increase the resources available to invest in and measure its effects.

If hospitals choose to invest in PHM as a revenue-generating service line, in addition to doing so as a labor cost saving and performance improvement internal investment, they can use what they learn about the best ways to improve employee performance as the basis for their externally marketed PHM programs.  They can also use the results they have achieved in their own employee PHM efforts as evidence of their success and total economic impact when marketing to employers.

When they evaluate their success in external PHM efforts, hospitals will naturally want to include the net effect of such efforts on their sickness care revenue and overall profitability as well.  The net effect could be positive, if externally focused PHM reduces overall demand for sickness care and revenue derived therefrom.  It could also be positive, if the combination of external PHM revenue and any increased market share gained through successful partnerships with employers produces an overall positive effect.

In any case, the combination of internal and external PHM investments will represent a path not previously taken by most hospitals, and make a big difference one way or the other.  Many hospitals and integrated health systems — including Mayo Clinic and Fairview Health Services in Minnesota, Geisinger Clinic in Pennsylvania, Northwestern Memorial in Chicago, and Duke University in Durham, NC — have already invested in internal, external or both applications of PHM.  All are in the early stages of both application and measurement of results, but are certainly at least partially aware of how much difference this path can make.

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