C. Everett Koop, former Surgeon General of the United States, said: The goal of healthcare reform should

Question:

C. Everett Koop, former Surgeon General of the United States, said:

The goal of healthcare reform should be a healthy society. People must take charge of their own health, should choose lifestyles so that they won't get sick, and should use the healthcare system less often. Healthcare providers must remember that the ethical imperative for healthcare reform is most important and must not focus only on cutting costs. In addition, we should all remember that it is healthcare, not healthcure. Caring is cheap and always ethical; curing costs billions of dollars and isn't always necessary or ethical.

Brookwood Medical Center (BMC) opened in March 1973 with 288 beds and immediately began its expansion program. BMC continued to grow during the 1980 s by adding a heart catheterization laboratory, a detoxification unit (for both drug and alcohol abuse), intensive care units, additional surgical facilities, and an on-site motel. BMC also modernized its original hospital facilities through an extensive renovation program.

By the mid-1990s, BMC offered a wide range of health-care services including extended outpatient surgery and ancillary services, nuclear medicine, advanced radiological technology, CT scan, labor and delivery, neurosurgery, and heart surgery. BMC also initiated a wide range of service programs to promote knowledge and wellness in the community. These programs included health and fitness courses, a cancer program, a diabetes program, and medical education programs.

Technology was exerting upward pressure on health delivery costs, while payers, such as health maintenance organizations (HMOs) and preferred provider organizations (PPOs), simultaneously made demands for cost containment and reduction. Hospitals not associated with a university or governmental organization must generate revenues sufficient to cover costs in the long run. Hospitals unable to contain costs faced decreasing profitability, and ultimately, financial failure. Thus, Brookwood Medical Center executives designed a program to help develop a cost-effective, coordinated health-care delivery system that was designed for growth.

In a capitated environment, hospitals charge an annual fee per person for medical care and accept the risk that the costs of care will exceed a predetermined contract rate. Success in a capitated environment requires an increased level of cost sophistication and actuarial skills on the part of the provider. Employer coalitions require capitated contracts that provide complete coverage for their employees' families at a cost that is competitive with plans offered by other insurers. Under capitation, a provider assumes all risk of providing health-care services. Administrators at BMC are considering possible consequences of capitation for highly unprofitable procedures.

Three conditions were causing trouble for health-care providers and were making it necessary to consider economic-based decisions. The conditions are as follows:

1. Fixed fee per service 2. Competition leading to lower fees 3. Technology leading to higher costs Fixed fee reimbursement policies were limiting the abilities of hospitals to pass along costs to payers. In addition, excess capacity resulted in competition among providers to secure contracts with HMOs and PPOs. The result often led to a decline in revenue per service. Finally, improvements in medical technology led to increased costs as providers acquired newer, modern equipment. Thus, hospitals found themselves in the middle of a big squeeze; revenues were declining while costs were increasing. Potential reactions by providers include implementing wellness programs and health-care rationing.

Capitation, soon to be a reality at BMC, required changes in the delivery of health-care services. The focus of health care changed from treatment to early detection and prevention. In order to survive in a capitated environment, BMC had to assume responsibility for the long-term health of its patients. Before capitation, hospital revenues increased as patient volumes increased; however, under capitation, hospital profitability increased only if capitated patient volumes decreased. Thus, it was necessary for BMC to help its patients take charge of their own health, choose healthy lifestyles, and use the health-care system less often. If BMC could find effective methods of caring for its patients before disease or complications developed, it could increase profitability by avoiding the need to provide high-cost cures and treatments.

The Diabetes Project: BMC's Outcome Management (OM) division compiled clinical and financial outcomes data for specific patient groups. This information was used to design, implement, and improve health-care processes. With the move to capitation, the OM division identified specific Diagnostic Related Groups (DRGs) that would benefit from early hospital intervention. One such group included patients admitted under Diagnostic Related Group (DRG) 294, Diabetes Out of Control. This patient group was targeted for a clinical study at BMC to determine if early intervention and patient education would improve clinical and financial outcomes. An interdisciplinary team, the Diabetes Quality Improvement Team (DQIT), was formed to review existing literature relating to clinical outcomes and compliance behaviors, to study BMC outcomes data, and to develop an intervention program for improving outcomes for BMC's diabetic patients.

Clinical Factors: Diabetes is a progressive and chronic illness with the potential for severe complications. The DQIT found that patients admitted under DRG 294 had high readmission rates and high costs per case. The DQIT found the incidence of strokes twice as common in diabetic populations compared to the general population. In addition, coronary artery disease was more severe in the diabetic patient and is responsible for as many as \(60 \%\) of the deaths in diabetics. The team concluded that both illness and mortality rates were much higher for the diabetic patient than for the general patient population. However, the team also found evidence that negative outcomes can be altered by early and consistent patient education, support, and intervention. Thus, both physician and community groups supported the establishment of a diabetes education program. In addition, BMC could realize significant gains in profitability under capitation if the program was a success because of the high volume of diabetics treated.

Compliance Behaviors: The next step for the DQIT was to determine how to intervene in the treatment of diabetic patients. Team members found that research on diabetic compliance was inconclusive. However, the studies suggest that diabetic patients who receive education about diabetes and self-care tasks will be more likely to take better care of themselves and to experience positive clinical outcomes.

BMC's Intervention Program: The DQIT developed an intervention program to improve clinical outcomes of patients admitted to BMC with diabetes. DQIT members attempted to increase patient compliance and outcomes by providing patient education, social support, and increased medical support. First, diabetic patients were identified and recruited into the program. Next, patients took a pretest to measure their knowledge of diabetes and self-care processes. Team members found that patients had extremely low levels of knowledge about their disease before the education process despite the length of time since their original diagnosis as diabetics. In fact, the long-term diabetics suffered worse outcomes and consumed more resources than those who had been recently diagnosed. Diabetic patients received extensive education and were instructed about appropriate self-care tasks. BMC set up an outpatient support team so patients would have a source of support and information after hospital discharge. Patients were encouraged to take advantage of BMC's outpatient support team and to comply with physician recommendations regarding future care.

The DQIT measured changes associated with the diabetes intervention program by collecting data from patients at discharge, and at three months, six months, and 12 months postdischarge. The team obtained measures of clinical variables to evaluate the effects of the training program. Selected information appears in Exhibit A.

Outcome: Patients who participated in the Diabetes Outcomes Project have achieved enhanced quality of both care and life, decreased physical consequences of the debilitating disease, and improved self-care abilities. The diabetic patients in the study were not the only group to benefit. External payors experienced financial benefits from the decreased costs per case and the maintenance of stable lengths of stay. Although the diabetes project temporarily reduced BMC's revenue stream, the project has shown that appropriate intervention and proper education of patient populations can positively affect its bottom line when the hospital moves to a capitated environment.

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\section*{Required}
A. Discuss the competitive environment and financial pressures facing BMC.
B. How is BMC responding to the new competitive environment?
C. Using the outcomes dissemination techniques discussed in the chapter, prepare informative graphs based on the data provided in Exhibit A.
D. What conclusions can you draw from your analysis of the data?
E. Do preventive measures, such as the diabetes intervention program, make sense (both clinically and financiaily) in a capitated environment? Explain.