Year of Publication

2015

College

Martin School of Public Policy and Administration

Executive Summary

The affordability of healthcare is a major, recurring topic in the media. One of President Obama’s cornerstone policies has been the attempt to make health care affordable. Part of the concern lies in cost differences for similar procedures. The cost for a standardized procedure such as abnormal cardiac dysrhythmia without complication varies greatly between hospitals. The cost difference of a patient getting treated for such an event can be an average of $30,000 depending on which hospital you go to. There is no immediately apparent reason for such a large difference. Another noticeable item is that all the hospitals receive a different amount of money from the combined Medicare, Medicaid, and private insurance. Why is there not a standard, default payment system? Why do hospitals charge differently for the same admitting diagnoses, even though there is a standard of care that should mimic the same treatment for each patient? Does the hospital, “average Medicare charge per patient” influence the overall cost for a standard diagnosis? Does hospital patient satisfaction score explain it? In my Capstone, I am to address these questions.

By doing this capstone, I contribute to a broad trend in healthcare, usually referred to as healthcare analytics. It consists of the use of software and consulting services, extensive reliance on data, statistical and qualitative analysis, explanatory and predictive modeling (Shmueli et al, 2011). Medical science has used data for many years. The financial and business aspects of healthcare are only recently becoming more data-driven. The days of administrators consisting of physicians making the logistical and executive decisions have been quietly ending since the beginning of the 21st century. The people who are now making those decisions tend to have business or economic backgrounds and very little healthcare knowledge. However, people with healthcare degrees who are getting business or administrative related degrees are also starting to take over these roles. It is no secret that the costs of providing care to patients have increased immensely in the last 15 years as cutting-edge technology that almost has no ceiling cost is provided to care for even sicker patients. Medicare has been getting squeezed through such policies as the Budget Control Act of 2011, while costs have ballooned due to the addition of “baby-boomers” who have started swelling the volume of people who qualify. When Medicare was first created in 1965, the budget was around $10 billion (about $74 billion in today’s dollars), in 2013, the cost was $583 billion according to the Congressional Budget Office (CBO). The budget has more than doubled since 2000. Another wake-up call for hospital efficiency is the fact that Medicare payments to hospitals and providers were made public in 2013, showing the disparities in what hospitals charge on average for procedures and what they receive on average. All of this is beginning to induce hospitals to become more lean, business-like, and efficient in order in their provision of care to patients. A common saying about non-profits is, “no money, no mission,” which unfortunately, has become reality for hospitals.

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