Payers can take it slow with payment reform and wellness programs, but hospitals need cost-saving changes now. Comments from Ken Paulus of Allina Health stood out in a crowd of payers earlier this month during a panel discussion at the Medtech Investing conference in Minneapolis earlier this month.
Lisa Suennen and John Stenson moderated a great discussion among three payers and one provider: Paulus. His needs were very different from the rest of the group, ranging from imminent cost cuts to the acceptable timeline for ROI. His comments show the pressure hospital systems are under to change almost every aspect of business from working with surgeons to implementing new technology to working with patients.
One of his most interesting comments was in reply to moderator Suennen’s question about how much doctors get involved in cost decisions. Paulus gave an example of how doctors are already stepping to the table on the cost side.
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He said his hospital system works with an orthopedic practice of 75 doctors who have their own surgery centers and who also do surgery in the Allina hospitals.
“When they do hip-replacement surgery at one of our hospitals, they require us to offer 13 different hips,” he said.
He attended the group’s board meeting recently and asked how the surgery centers were doing.
“I asked them how they made any money on hip replacements because we can only break even,” he said.
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The answer? By offering only one type of hip implant. Paulus renegotiated.
“Suffice it to say, I said, ‘We can’t make it with 13 hips, and if you don’t work with us, we’ll hire our own surgeons,'” he said. “We are now offering two hip implants.”
The group also talked about the return on investment for smoking cessation programs and weight-loss surgery. Most of the payers agreed that they could invest the money in patients now and wait for reduced healthcare bills several years later. Paulus said that the exact opposite is true with hospital systems.
“I’m looking for very quick turnaround, like 12 to 24 months, so if you have something that can do that, it will get a lot of attention,” he said. “We have to take $350 million to $500 million out of the system in the next couple years.”
Dr. Richard Migliori of UnitedHealth recommended everyone in the room read the IOM report on healthcare spending and high-value care. Paulus confirmed one of the report’s conclusions that saving money on drugs and devices is the low-hanging fruit of healthcare cost cutting.
“Folks could give away their devices at cost and it wouldn’t help because we can save money there without redesigning the system,” he said. “Anyone who can help us redesign will make a lot of money.”
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