How Much Is That Patient In The Window?

I was having a discussion with a friend who is very well-versed in health-related marketing. We were trying to understand how various tools and technologies are valued by the CFO [chief financial officer] of an HMO or hospital. The basic question was how does the CFO assign a value to improving healthcare.

Clearly, the issue of cost in the healthcare system has been top of the news for quite some time. The changes that Pres. Obama instituted across all of America have an effect on most US citizens. The two major issues discussed on a very regular basis have to do with availability and cost of healthcare. The term availability is sometimes (inappropriately) used as a proxy for overall quality of care. The assumption is that any doctor in any location will provide proper care. So the only question is whether such care is available close to the patient. But can you assume that any doctor will provide the best care?

During my discussion with my friend, I spoke of the significant difficulty that hospitals have with getting doctors to wash their hands before seeing patients. Left to themselves, the doctors in many hospitals wash their hands less than 20% of the time. When one considers that handwashing is one of the most effective means of controlling the spread of infection, it truly is unfathomable that any doctor would dare touch a patient without first having used a sink.

There are companies that have various solutions for this problem. Most of them work on a simple principle: that if the doctor knows he/she is being watched, the likelihood of washing hands goes up dramatically [to over 80%]. My friend then asked me if these statistics would convince a CFO to invest in such a handwashing monitoring system. But what my friend was actually asking me was how the CFO would value such a system and thus be willing to pay for it.

From a medical perspective, the answer is painfully clear. How can anyone not install a system that has a such a dramatic positive effect on health care? But my friend then asked if anyone ever gets sued for not washing their hands. In other words, if one of the arguments in favor of reducing patient infections is that it reduces the medicolegal risk to the hospital, then this risk can be translated into dollars. Once you have this dollar figure, you can compare it to the cost of the handwashing technology and decide if it is worthwhile.

I have personally experienced such an interaction on multiple occasions. In the past, I have presented projects that clearly had a benefit from a healthcare point of view. But the projects were not accepted because I simply could not prove that there was a worthwhile return on investment. During my years of medical school and then residency, I never had a lecture on justifying healthcare based on return on investment. Perhaps that was a weakness in my training. I have too often met decision-makers who can reduce a population’s welfare down to a simple two column calculation. One column is the cost in dollars and the second column is the benefit in dollars, without any complicated projections of long term benefits of better care. If the cost is more than the benefit, the project does not move forward.

One of course could argue that reducing the rate of infection would get patients out of the hospital faster. And since hospital bed occupancy is so expensive, it clearly would be in the hospital’s best interest to discharge patients as soon as possible. But if the hospital gets paid relative to days of occupancy, the hospital could actually make money by providing poor care. Things are definitely changing in the US due to the fundamental change in which many hospitals will be remunerated for the care they provide. But it is still a factor in many decisions of senior managers of hospitals whether more or less occupancy is better. And these decisions do NOT consider the patient’s state of health.

Given the amount of money that is being invested in medical technologies, it is critical that startup groups and their investors consider who their customer really is. Imagine a startup that develops a technology that could reduce every admission’s time by half. Clearly, patients would want such a technology installed. The physicians may also appreciate such a technology as it would reduce their daily work. On the other hand, the same physicians might feel that they are getting less clinical exposure [i.e. practice on patients]. So at least some of the physicians might not be pleased. The hospital administrators might be furious because they may find themselves losing a tremendous amount of income and/or be forced to close beds or perhaps even entire wards. Hospital administrators don’t like to see dark wards – it gives them the sense that the hospital is failing.

I could continue with many more examples of how quality of healthcare is treated as being secondary to its cost in most organizations. I am not naïve and I fully appreciate that someone somehow must pay salaries and the electricity bill. But I still believe that profit from healthcare should be very wisely managed, with a significant percentage of it going back into the system in order to improve quality of care. I also believe that if a hospital cannot guarantee a very high rate of handwashing amongst its doctors, then it truly has no choice but to pay for a technology that will guarantee this. And if the hospital cannot afford the technology, then it has no business taking care of patients. And such a hospital should be closed.

A hundred years ago, the cost of a patient in a hospital bed was minimal. There were no effective treatments for most diseases, and anyone who was truly ill died. If the patient is denied a technology that could save his or her life, because of its cost, then we have not advanced much in these last hundred years. I would expect that the CFO and chief physician of any hospital would constantly be working as a team to find the way to financially support the treatments that patients truly need. I don’t pretend for a moment that this is easy. But back in medical school, I was taught that the practice of medicine would take a toll on me and my loved ones. I accepted that fact because of the ultimate goal. But if medicine is taken over by those who measure success only in terms of financial gains, then the practice of medicine will end. For me, at least, I will need to find other employment. Perhaps my friend has something for me.

Thanks for listening