Make 1998 the year for ‘smart’ planning

By Stephen W. Earnhart, MS

President and CEO

Earnhart and Associates, Dallas

The year 1998 should be called the "smart" year in health care planning. There are significant changes coming for us, and we all want to be on the cutting edge. It’s time to start thinking smart. Let’s become proactive instead of reactive, realistic instead of emotional, profitable rather than break-even.

Take a few chances this year, after careful consideration of the potential consequences. How smart is it for hospitals and physicians to continue to work against each other? Why should the profits from your facility go to a large health care company instead of your local community? Is it really smart not to have a completely cross-trained professional staff going into another year of competition with the local physician-owned ambulatory surgery center (ASC)?

I think we are going to witness the beginning of the end for HMOs and managed care companies this year. The reasons, of course, are obvious: They got greedy. The fall of every cartel in the history of the world has been directly linked to greed — OPEC being a recent example.

If the managed care companies had not been so consumed by "pennies per share," Wall Street investors, and "return on investments," they could have had a long, relatively smooth ride in our industry. But they cut too deeply into the flesh of the business and forgot the anesthetic.

Physicians are revolting, consumers are outraged, and lawyers are now able to sue them. Even the recent Jack Nicholson movie, As Good As It Gets, throws a barb at the managed care industry. (Unfortunately, it can’t be published here.) Don’t start the celebration yet, though. It will to take awhile for the beast to die. But it is starting.

What’s going to replace it? If you give up one bad habit, you often pick up another. But we’re thinking smart now, so that won’t happen.

One good thing about managed care — it can always be used as an example of how not to do it in the future. I think we’re going to see more realistic types of programs that are offered by the consolidation of local hospitals and physician groups. Let’s hope they have learned something from the current situation.

Moving on.

APCs: Making your life a living hell

Ambulatory patient categories (APCs) or ambulatory patient groups (APGs) are very smart tools designed to make your life a living hell. APCs start in June for freestanding centers and January 1999 for hospitals. I see this payment or reimbursement vehicle as dominating the industry for the new decade or until our country switches completely to socialized medical. But when that happens, there will be significant opportunities for the enlightened — namely, "private" — surgery centers and hospitals (as in the United Kingdom, Canada, South America, etc.) to provide services for those of means who are willing to pay cash for a different class of quality.

I have spent considerable time trying to understand APCs/APGs, and I still don’t get it. It seems to me it’s just an enormously complicated program that created many, many government jobs, and after you go through all the steps in determining your reimbursement, it’s lower! Every center will need a billing coder and expensive software to find out they’re getting less money. Wouldn’t it be easier just to cut the reimbursement?

Running health care like a business

Being smart in 1998 means making many unpopular decisions for owners, operators, and administrators. I talk to many people, including physicians, hospital administrators, ASC staff, and insurance company representatives. Conversations are becoming somewhat predictable. Health care is starting to be run as a business.

Whoa! What a concept!

Probably the most vocal are physician or potential physician investors in ASCs. These are from the corporately owned or the new breed of hospital/physician joint-ventured ASCs.

I recently completed a feasibility study for a hospital in the Midwest. Of the 25 physicians interviewed, only one had a concern about patient costs. Normally, patient cost is a major motivator of physicians getting involved in a surgery center. It was right up there with convenience and turnaround time. The major motivator for physicians at the hospital was "running it like a business." Physicians are becoming realists. Smart business people. As they should be.

There are responsibilities associated with running a business. Economic credentialing is one of the more significant issues. More and more physicians are active participants in the policy-making of the ASCs. Going, going, gone are the days when just any physician on staff will be offered equity participation in a center. Their years of inefficiencies, showing up late for cases, unwillingness to assist in cost containment, and general inconsideration of others are coming back to haunt many physicians in the ambulatory surgery setting.

"But you have to allow them privileges to use the center" is a response I hear all the time from administrators and other physicians. "Why?" is my response. What will they contribute today that they haven’t before? We are even called upon to recommend "who" and "what level of equity" they should offer physicians. Smart. Remember: Health care professionals didn’t invent the current situation, but we have no choice but to respond.

Be smart about staffing levels

Staffing levels will have to change. Many hospitals getting into the for-profit surgery center business are shocked at the reduced staffing levels — often 50% less for the same number of ORs and cases. One way this is possible is by having an all-RN staff. I recommend it just about everywhere. The inexperienced and uneducated feel that hiring all registered nurses is too expensive for a surgery center. Actually, though, it is far less expensive if you do it right. By effectively cross-training and motivating your staff (yes, financially), you can accomplish far more with less.

The professional registered nurse has always been there when the going got rough. Well, it’s time to get them going again. Don’t think you can save money by hiring unlicensed ancillary personnel — you cannot. Be smart.

To be continued . . .

(Editor’s note: Earnhart can be reached at Earnhart and Associates, 5905 Tree Shadow Place, Suite 1200, Dallas, TX 75252. E-mail: World Wide Web: