HIGPA: Cost containment in an uncertain future

The legislative part of healthcare reform is over, but the regulatory process is just beginning

The healthcare reform law has an estimated 540 new provisions to be implemented, 40 of which require the Secretary of Health and Human Services to directly issue regulations. So why is Washington still talking about healthcare cost containment? Wasn’t that part of the deal?

The recently passed healthcare reform bill did a lot to reorder the healthcare system, but little to contain the rising cost of healthcare. The next question to be debated by Washington will be whether or not healthcare costs will be contained through public (government mandates) or private (business) solutions.

Here are the Top Ten Reasons Why Healthcare Cost Containment is Next on the Agenda in Washington (but only after the 2010 mid-term elections):
10. The U.S. economy is over $13 trillion per year in gross domestic product (GDP).
9. The President’s budget for 2010 was $3.5 trillion, or 25 percent of the GDP. The federal government’s budget deficit for fiscal year 2009 came in at a record $1.75 trillion. Taxes anyone?
8. The U.S. spends $2 trillion annually on healthcare goods and services. That’s a lot of tongue depressors.
7. The U.S. government budget includes spending on mostly Medicare, Medicaid, Social Security and Defense. Think really expensive toilet seats.
6. Twenty-five percent of the federal budget is spent on Medicare and Medicaid, or, as pollsters like to call them, “voters!”
5. How big is overall spending on Medicare? Bigger than a breadbasket. The United States’ 2007 budget included $385 BILLION for Medicare.
4. Hospitals alone purchase between $196.5 billion and $219.2 billion in supplies. Don’t doctors and nurses look so cool in those scrubs?
3. Second largest dollar expenditure for hospitals is the cost of goods and purchased services, also called “stuff.”
2. Four words: Really old sick people.
1. It’s unconstitutional to water board politicians.

David Letterman’s job is safe, because this Top Ten list is more concerning than funny. But that’s the point. To paraphrase Jim Morrison (who would have been 67 this year and Medicare-eligible), “the future is uncertain and the end is always near.”

The debate has just begun
As a matter of policy, the United States Congress must cut its current programs, raise taxes, or contain costs to address the expected rise in healthcare costs.

As a matter of politics, the most likely scenario is that policy-makers will attempt to implement a combination of these choices. What will be heavily debated, however, is the question regarding what is “right” for the future. Do voters favor policies that emphasize public sector solutions or private sector efforts to contain healthcare costs?

One of the key lessons learned during the most recent debate is that business can’t sit it out or try to finesse the outcome. It can either come to the table early (as the pharmaceutical industry did) or it can stand in the Rose Garden for the pictures while continuing to fight the inevitable (e.g., device manufacturers).

The group purchasing industry avoided both death (i.e., an attempt to repeal the GPO Safe Harbor) and taxes, not because it was spared consideration, but because Congress recognized the group purchasing industry’s highly successful record of reducing costs while improving quality for hospitals and other healthcare providers.

GPOs are poised to play an important role in the coming debate on controlling costs. GPOs help hospitals control costs by using data to identify savings opportunities, benchmarking pricing and utilization data, and ensuring that providers pay the appropriate price under contract. It all comes down to an organization’s willingness to make changes, in favor of standardization. So the choice in the future will be clear: cost containment or cost controls? Public or private? You make the call!

About the Author

Curtis Rooney
Curtis Rooney is president of the Healthcare Supply Chain Association, www.supplychainassociation.org