By David Hogberg Thu., March 17, 2011 11:42 AM ET Tags: ObamaCare - Health Care - Hospitals Monday will be the one-year anniversary of the H

By David Hogberg
Thu., March 17, 2011 11:42 AM ET
Tags: ObamaCare - Health Care - Hospitals

Monday will be the one-year anniversary of the House passage of ObamaCare. To mark this occasion, IBD is going look at some new problems that have already developed due to this law. But first we’ll examine how ObamaCare fails to address chronic hospital inefficiency.

“Hospitals have not adopted the practices that have led to productivity gains in other industries,” said Rich Garnick, CEO of Anthelio, which works with hospitals to improve efficiency.

Garnick says hospitals lack “a seamless approach for tracking information.”

When a hospital obtains a patient’s information, it does not make it readily available to all personnel. Often, the process of taking a patient’s info will have to start anew as he moves from one unit of the hospital to another.

With a bank, a consumer’s information goes into the system once (say, when he uses his bank card to purchase something) and is readily available to everyone who works at the bank. Indeed, the system works so well that the consumer can go to different branches or go online to get the information or access the accounts.

America’s third-party payer system, in which insurers or the government pays for health care instead of patients paying for it directly, is a big reason why hospitals remain inefficient.

“Because the consumer isn’t paying directly, he doesn’t have the visibility he has in other industries,” Garnick said.

What does ObamaCare do to change this? Nothing. In fact, its supporters revel in the fact that it reduces the amount people pay directly.

Rather, it tries to use the third-party payment systems that are Medicaid and Medicare to create “value-based purchasing.” In non-wonk speak, that’s “getting a good deal for your money.”

Under ObamaCare, the Department of Health and Human Services is supposed to establish a program “under which value-based incentive payments are made in a fiscal year to hospitals that meet the performance standards” set by the HHS Secretary. Hospitals that meet those standards will get a “bonus” to their Medicare and Medicaid reimbursement.

But the history of such top-down reforms is that this won’t improve quality; it will simply provide hospitals with another way to game the system.

Some hospitals will probably try to avoid sicker patients that make it hard to meet those performance standards. Most likely, they’ll appeal to the big hospital lobby — the American Hospital Association and the Federation of American Hospitals — to pressure Congress and HHS to alter the standards so that it is easier for hospitals to qualify for the bonus payments.

In short, hospitals will be rewarded for satisfying regulations out of Washington, not for finding ways to improve patient care and lower costs.

Another ObamaCare provision to make hospitals better is the “Medicaid Global Payment System Demonstration Project.” HHS will experiment with a “capitated” payment system where a hospital gets a set amount of money for each patient. All treatment costs for a patient must come out of that payment.

In theory, this encourages hospitals to avoid keeping treatment costs down. For example, hospitals might eschew unnecessary tests so they can keep the unused money.

But do capitated systems actually save on costs? The evidence is mixed, at best.

Some studies have found that capitation reduces costs relative to a fee-for-service payment system. Others suggest that capitation can reduce some costs but do not decrease the use of new technology. But some research found no difference in costs. At least one found that capitation increased costs.

Ultimately, ObamaCare failed to take the one major step that would increase efficiency not only in hospitals but throughout the health care system. It should have let patients control the money and keep all or part of the unused funds. This step would also include health savings accounts and vouchers for major treatment, such as hip or heart surgery.

Putting the power of choice in the hands of free people is a big reason why the rest of our economy functions so well. Too bad Obama, Pelosi, Reid, et al., didn’t give it a go in health care.