How Hospitals Can Thrive Under Economic Pressure

Harold Miller, CEO of the Center for Healthcare Quality and Payment Reform, recently appeared as a guest on HealthLeaders Podcast where he discussed ways hospitals can restructure how they deliver services and how they get paid.

Harold Miller, the president and CEO of the Center for Healthcare Quality and Payment Reform, joined us on HealthLeaders Podcast where he spoke about ways hospitals can restructure and rethink how they deliver services and how they are paid so they can thrive in challenging economic times. Here are three questions we asked from the podcast interview.

HealthLeaders: How can healthcare organizations thrive in challenging economic times?

Harold Miller: The immediate challenges are to restructure staffing to address the workforce shortages that hospitals are facing. The second thing is to keep small rural hospitals from closing.

There are shortages developing because people are simply leaving healthcare because of burnout and hospitals and health systems can't thrive financially if they can't deliver high-quality care and they can't deliver high-quality care without adequate staff.

It isn't just a matter of paying more. Staff is burning out because they are afraid of harming patients, so I think it's going to be essential for hospitals and health systems to restructure the way they deliver care and restructure the work for their staff.

Organizations will need to increase their staff levels so that people want to work there and feel that they are delivering care to patients. I think that the hospitals that do that first will be the most successful.

The biggest challenge to this will be faced by small rural hospitals, because they have been struggling with costs for a long time. When those small rural hospitals close, the community doesn't just lose a hospital, it loses all its healthcare services.

HL: What will that restructuring need to look like?

Miller: Hospitals need to look at the most critical services they offer and how they take care of patients. That might mean that some other services have to be suspended, which in the short term may increase costs. But in the longer run, we need to fundamentally change the way hospitals are paid.

The standard formula for success for hospitals for years has been to do as many procedures and tests as possible and to charge as much as you possibly can for them. This has led to an unaffordable health insurance system and to personal bankruptcies. I think the mission of the hospital has to be reoriented. The mission of the hospital must be to deliver necessary services as safely and efficiently as possible and to charge only what is necessary.

The problem that hospitals have faced though, is that they do two fundamentally different things—but they are only paid for one of them. Hospitals deliver services to patients when they are sick, and they are paid for that. But the other thing that hospitals do, which is essential for a community, is that they are available when somebody needs them—that standby capacity is critical for a community. But hospitals aren't paid for that.

We don't pay for other essential community services that way. We don't pay fire departments based on whether there's a fire and we don't pay police departments based on how many crimes there are, and we shouldn't be paying hospitals solely based on how many services they deliver. They need to be paid a standby capacity payment so that the hospital can maintain its essential fixed costs and then the hospital should only charge and be paid a smaller amount for an individual service whenever it delivers. And with that combination of payment, the hospital can then have adequate payment to deliver appropriate services.

With that combination of payment, the hospital can then adequately deliver appropriate services without feeling compelled to deliver unnecessary services and the pressure to make high profits.

HL: In What ways can healthcare CFOs step up to create an organization that provides high-quality healthcare while maintaining its financial stability?

Miller: A key thing is that in hospitals, the CFO and CMO must be working together, and the finance and the clinical part of the organization need to be working together. In many cases, that's not the case. Clinical people deliver clinical care without even thinking about what it costs, then the hospital finance folks have to figure out somehow where they can cut costs without any ability to influence the way care is being delivered.

People who are trained as CFOs don't understand the clinical side of the operation and the folks who deliver clinical care generally don't understand the finances, and that fundamentally has to change. There has to be a way that they can work together to say how can we redesign care in a way that will cut out the unnecessary costs and pay adequately for the cost that we need, and that's done by having a partnership between the CFO and the CMO and the chief nursing officer and other clinical staff in the hospital.