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April 13, 2022
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David Burda
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Economics Outcomes Policy
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When Being More Efficient Produces Better Outcomes

Years ago, in a publishing galaxy far, far away, the healthcare business publication that I worked for as a reporter required each news story to be read four times. Every story got four “reads,” as we used to say. The news editor did the first read, two copy editors did the second and third reads, and the copy desk chief did the fourth. Only then could a news story appear in print. (Like I said, it was a long time ago.)

At each step, the story got worse as the next read compounded errors introduced and questions raised by the previous read — all of which the reporter had to correct and answer. In many cases, a story would come full circle and be close to the original version that entered the editing chain. The story would run virtually unchanged in the publication after surviving many attempts to destroy it.

I found out later that the publication’s editor, in violation of company policy, was paying overtime to the salaried copy editors involved for all the extra time they were spending editing news stories. So not only were story versions getting worse, but the process added production time and cost. Think of it as our version of fee-for-service medicine.

The ridiculous system finally fell apart after one of the copy editors complained to human resources that his under-the-table overtime check was late — a check that HR didn’t know existed. Next thing you know, each news story got two reads, not four, the number of errors introduced into news stories dropped and no one worked late answering silly questions. Think of it as our version of value-based reimbursement.

The above journalism flashback was triggered by MedPAC’s annual March report to Congress. I finally had some time to stroll through MedPAC’s 604-page report, which you can download here.

On page 98 of the report is a fascinating chart that compares the performance of “relatively efficient” hospitals with “other” hospitals, which presumably are not “relatively efficient.” As it turns out, being efficient — like the revamped editing process at my old publication — is connected to better results.

MedPAC defined “relatively efficient” hospitals as those that met the following four criteria in each of the previous three years:

  • Their risk-adjusted mortality rates were among the best two-thirds of all hospitals
  • Their risk-adjusted readmission rates were among the best two-third of all hospitals
  • Their standardized costs per inpatient stay were among the best two-thirds of all hospitals
  • Their risk-adjusted mortality or standardized costs per stay were among the best one-third of all hospitals

MedPAC found 292 of those and compared their performance with 1,598 other hospitals. In 2020, those 292 relatively efficient hospitals enjoyed the following compared with the other hospitals:

  • Lower mortality rates
  • Lower readmission rates
  • Lower standardized Medicare costs per stay
  • Higher patient satisfaction levels
  • Higher Medicare profit margins
  • Higher all-payer profit margins

I know, I know. Correlation isn’t causation. The 292 relatively efficient hospitals may not perform better because they’re efficient. Or being efficient doesn’t cause them to produce better clinical, financial and patient experience outcomes. But it sure does look like it, doesn’t it? Just like it was no coincidence the quality of our news stories improved when our copy-editing process got more efficient.

When payment is fixed, you figure out a better way to do something. That’s as true in healthcare as it is in any other business.

Thanks for reading.

About the Authors

David Burda

Dave Burda began covering healthcare in 1983 and hasn’t stopped since. Dave writes this monthly column “Burda on Healthcare,” contributes weekly blog posts, manages our weekly newsletter 4sight Friday, and hosts our weekly Roundup podcast. Dave believes that healthcare is a business like any other business, and customers—patients—are king. If you do what’s right for patients, good business results will follow.

Dave’s personal experiences with the healthcare system both as a patient and family caregiver have shaped his point of view. It’s also been shaped by covering the industry for 35 years as a reporter and editor. He worked at Modern Healthcare for 25 years, the last 11 as editor.

Prior to Modern Healthcare, he did stints at the American Medical Record Association (now AHIMA) and the American Hospital Association. After Modern Healthcare, he wrote a monthly column for Twin Cities Business explaining healthcare trends to a business audience, and he developed and executed content marketing plans for leading healthcare corporations as the editorial director for healthcare strategies at MSP Communications.

When he’s not reading and writing about healthcare, Dave spends his time riding the trails of DuPage County, IL, on his bike, tending his vegetable garden and daydreaming about being a lobster fisherman in Maine. He lives in Wheaton, IL, with his lovely wife of 35 years and his three children, none of whom want to be journalists or lobster fishermen.

 

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