Kill The Term “Reimbursement”

I recently ran across a post written by Paul Teague, a contributing writer to the Procurement Leaders Executive Network. In his post, Paul talks about risk management for procurement professionals and why healthcare procurement and financial executives have it tougher than most. He points out that “risk” is hard to manage because you never know where it’s coming from. And while I agree with most of what Paul had to say, I have to say that I take issue with that last statement. Because when it comes to managing risk, even in this era of reform, the sources aren’t hard to identify –and the risks they contribute to our management equation aren’t hard to distill.

Major disruptions to supply are almost always related to weather, financial and/or political instability. Of course, that’s why procurement professionals are ill-advised to put all their eggs in one basket. How you allocate your business; how many suppliers you ultimately reward business to, etc., should always account for geo-political uncertainties. According to Dr Robert Handfield, author and supply chain professor at North Carolina State University, “CPOs need to more actively consider how these factors impact the costs to their small suppliers, budget-planning uncertainty, delayed investment decisions, delayed hiring decisions, etc. All of these things can affect a suppliers’ ability to perform, and therefore CPOs need to be thinking about them.”

What about healthcare financial executives? For them, the three big risks are easy to spot:

  • The inevitable deficit reduction initiatives beginning in FFY12.
  • The estimated one-third increase in Medicaid enrollment.
  • The dramatic increase in regulation of private health insurance.

Ironically, whether you’re a procurement specialist, a SCM generalist or a high powered financial executive, the most powerful levers have now been made more obvious than ever before.  They will be those that enable management of the cost/value equation, reducing the problems in care that generate cost, and creating accountability for physicians’ patient care decisions throughout the care continuum. And based on everything that we have seen and write about here at Healthcare Matters, managing risk under ObamaCare will also require a change of attitude –especially when it comes to thinking about getting paid. Healthcare financial executives –in fact everyone who works in a hospital– would be well-served to drop the term “reimbursement” and come to grips with the fact that it’s no longer some kind of “pass through entitlement,” but a payment stream managed by a third party (the government) that is loaded with all kinds of new politically-sensitive and financial conditions.

—Tom Finn

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