Tuesday, December 13, 2016

Ground Control

With the passing of astronaut and American hero John Glenn last week, I was reminded of his famous quote, As I hurtled through space, one thought kept crossing my mind - every part of this rocket was supplied by the lowest bidder. Thankfully, in Glenn’s case the lowest bidders in 1962 made quality machinery that helped to transform our world.

In my industry, the debate over cost versus quality rages on, especially in light of a recent government regulation which changed the fee structure for services rendered at off site facilities. In a nutshell, hospitals are now paid less for ambulatory services like an imaging test that we conduct at facilities located off of our main campus. This change will make it difficult for health systems to recoup capital or operational costs.

The reality is that in this new world order, providers like Jupiter Medical Center cannot be paid less and continue to spend the same amount on the equipment we need to provide world-class quality care. Currently, original equipment manufacturers (OEMs) - those who make the machines and medical devices we need - operate on profit margins of anywhere from 12 to 18 percent. And, this does not even include the significant money they make on service contracts with hospitals.

So how do we move forward to create a sustainable business model for our industry? For each channel of our business (imaging, oncology, etc), we have to rewire the way we approach both the costs and the fees for services. 

One approach is to work our way backwards from the point of service. With imaging, for example, we would look at the costs the provider incurs and the fees they are able to secure.  We then need to move through the chain all the way back to the OEMs and work to get agreement to set a price that is fair for everyone.

This will only work, however, if we come together as a group. By that I mean, as providers we need get together and have honest conversations about what we are all charged, our profit margins and our fees and then, in turn, have those conversations with all those responsible for providing service or equipment. This will ultimately allow us to find a way to continue to maintain quality while keeping costs in check.

I am not naïve and I realize that this change is not going to happen quickly. There is an old saying “it takes a long time for a giant to die.” This is about what our industry will look like 20 years from now. Change is hard and it takes a great deal of time, effort, innovation and people willing to do the work. We have to realize that the way we currently operate is simply not sustainable and like John Glenn, we have to explore new ways to see our world.

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