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Industry Insights

Paduda: Cost Doesn't Equal Quality

  • National

In the ever-changing world of health care economics, one thing is becoming more of a norm: high hospital costs. Crazy facility fees coupled with hospital/health system consolidation are leading to higher prices for payers.

Joe Paduda

Joe Paduda

Facility fees, viewed by some as the latest gimmick to generate additional revenue for hospitals, are accounting for upwards of 40% of countrywide workers' comp medical expenses.

Making matters worse is hospital/health system consolidation. Consolidation often leads to higher prices; the Federal Trade Commission’s director of the Bureau of Economics said hospitals have been seen to raise prices by 40%-50%.

Consolidation/M&A took a bit of a pause during COVID but has reemerged and is expected to keep going due to financial pressures and desire to gobble up market share.

Workers’ comp is already vulnerable due to its inability to rival group health’s scale, along with unfavorable regulatory dynamics.

As the smallest payers in health care, it is critical for WC payers to make sure they are utilizing high-quality facilities with reasonable costs.

Consider the following example: In Jacksonville, Florida, there are two facilities 21 minutes apart, same side of the city center, but with different profiles. The Mayo Clinic, widely regarded as one of the best hospital systems in the world vs. an HCA hospital, Florida Memorial.

According to Health Strategy Associates’ proprietary Facility Assessment Tool, the Mayo Clinic scores the same on patient safety, but much higher on clinical outcomes, person satisfaction and efficiency, all while being SIGNIFICANTLY less expensive than nearby Florida Memorial Hospital.

Using data provided by the Centers for Medicare and Medicaid Services, state entities and HSA’s proprietary algorithm to best reflect the medical treatment of workers' comp injuries, the tool enables adjusters and case managers to ensure that patients avoid poor-quality facilities and that employers pay a fair price for excellent care.

Joseph Paduda is the principal of Health Strategy Associates, a consulting firm focused on improving medical management programs in workers’ compensation. This column is republished with his permission from his Managed Care Matters blog.

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