Less Margin, No Mission?
I’ve re-read this article a number of times: “Cancer clinics are turning away thousands of Medicare patients. Blame the sequester.”
It’s a sad situation – the federal government, via Medicare, has cut the reimbursement to cancer clinics for chemotherapy treatment as a result of the across-the-board “sequestration” budget cuts. Root cause here? Lack of leadership in Washington D.C., perhaps, or blame the voters.
What’s sad is that some cancer patients are being TURNED AWAY from the clinics due to the cuts because the doctors say the patients are “unprofitable.”
First, do no harm?
Cancer clinics across the country have begun turning away thousands of Medicare patients, blaming the sequester budget cuts.
Oncologists say the reduced funding, which took effect for Medicare on April 1, makes it impossible to administer expensive chemotherapy drugs while staying afloat financially.
Patients at these clinics would need to seek treatment elsewhere, such as at hospitals that might not have the capacity to accommodate them.
“If we treated the patients receiving the most expensive drugs, we’d be out of business in six months to a year,” said Jeff Vacirca, chief executive of North Shore Hematology Oncology Associates in New York. “The drugs we’re going to lose money on we’re not going to administer right now.”
Congress tried to limit the reimbursement cuts to 2%, but due to reasons better understood by Washington insiders (Medicare B vs D), some of the cuts are higher (but not made really clear in this article).
It seems any organization (or government department) should be able to take 2% out of their cost structure through Lean, Kaizen, and process improvement activities.
Is turning away patients the only response? Is it true they would be automatically out of business due to these cuts? (Again, how steep are they??) Are the cuts really a matter of survival or is that just posturing?
This CBS story says:
A one-month course of chemo for one patient could cost $10,000. Medicare reimbursement will now fall about $200 short.
The clinics can’t figure out how to reduce their own costs by $200 to make up for this? Or, are the cuts really higher than 2%??
The clinics get reimbursed not only for the chemotherapy administration (6% payment above the med cost), but they also bill for visits and other services, yes?
In the Toyota approach, a certain level of profit is not considered an entitlement. In the old “cost plus” model (used in healthcare and, say, the defense industry), your price was your cost plus some profit margin: Price = Cost + Profit
If costs went up, prices were raised to maintain profit. Companies still try to do this today, saying they are “forced” to raise prices to customers because some component of cost (materials, labor, etc.) is higher. This article plays the “forcing” card — nobody is “forcing” the clinics to turn patients away. That’s their choice.
Toyota has taught that Profit = Price – Cost where prices are set by the market. In this case, the “market” of healthcare is really screwy and the government mandates prices, sort of like GM, Ford, and Chrysler used to just mandate price reductions on their suppliers, bullying them instead of working collaboratively like Toyota.
When the price is forced down, profit falls…. UNLESS you can also reduce cost.
In the Lean mindset, of course, we’re looking to reduce waste, not just slash costs (which would traditionally mean layoffs in healthcare).
Is this possible here?
“If you get cut on the service side, you can either absorb it or make do with fewer nurses,” said Ted Okon, director of the Community Oncology Alliance, which advocates for hundreds of cancer clinics nationwide. “This is a drug that we’re purchasing. The costs don’t change and you can’t do without it. There isn’t really wiggle room.”
You might not be able to reduce costs, but you might be able to reduce waste to increase throughput, spreading out your fixed costs and lowering your cost per case (increasing your margin).
After an emergency meeting Tuesday, Vacirca’s clinics decided that they would no longer see one-third of their 16,000 Medicare patients.
How did they decide this? What is the impact going to be on these patients?
Ironically, if the patients go to a hospital, the care might cost the government MORE money:
The care will likely be more expensive: One study from actuarial firm Milliman found that chemotherapy delivered in a hospital setting costs the federal government an average of $6,500 more annually than care delivered in a community clinic.
Another example of what a crazy “market” this is. See also “Doctors join hospitals, and prices soar.” The same patient value gets reimbursed differently.
Does anybody out there have perspectives on what’s happening, what’s being considered, and what the practical alternatives are?
I’m reminded of a hospital CEO I saw give a stern message to his leaders about 18 months ago: “We are never going to be paid more for what we do than we are paid today.” It was a rallying cry to work together to reduce waste and reduce costs — using Lean instead of layoffs.
I understand organizations need to make a profit or a surplus. That’s where the phrase “no margin, no mission” is so often used. But what about the margin being just a little lower? Does that justify throwing patients aside?