Today, I’m speaking to Roland Harris. That’s not him in the hair raising photograph. That is what he wants to talk about. Hospital billing. Why it’s so darn complicated. How he wants to fix it.
Roland is Chairman and CEO of Medida Metrics, a Healthcare Performance Company. He is currently working on the implementation of activity based costing/management software that is quick for hospitals to install within 60 to 90 days, and it forces rapid change that can ultimately make figuring out where costs are highest or unneccessary.
Unneccessary costs that get passed on to you, the healthcare consumer. That’s when you go to a hospital for a procedure and end up floored when you get your bill. Figuring it out can be daunting.
A closer look reveals charges you never imagined.
“Transformation needs to take place within the entire industry, with policies, just as it did over a decade ago in the automobile industry,” says Harris. .
Harris adds, “Today a hospital has to challenge its basic assumptions. are its management policies what they need to be, do their supporting systems provide the insight required to prevail and grow in an increasingly competitive environment. Hospital’s already employ many of the Six Sigma tools that the automobile industry utilized but without the hard data to support their decision making. The ExactCost software solution allows them to extract such data in a readily usable manner so that their decision making is fact based not intuitionally driven.”
He adds, “ It really is transformational in the same sense that the automobile industry had to discover all the bad things about itself in order to discover how it could go about putting itself on a more efficient, effective track.”
Ultimately, in the case of automobiles, as you know, the price came down, the availability went up, and the cost to the institution went down, and profits have since recovered and are growing.”
If the hospital was interested in the same kind of impact, in improved product meaning better patient care, a reduced cost to themselves that they could pass along to the patient as part of that improved care, a more effective and efficient institution that would use, in some cases, similar techniques. They’re IT-based.
They started early on trying to produce new types of vehicles using the same approaches, and you’re trying to fill in gaps in the market and all that kind of stuff, so the resistance, the desire to deny that there was a problem was part of what I would consider to be a 25-year period; and then there was a gulp where they realized they had to cut their costs by cutting 10% across the board, which is what you’re beginning to see hospitals and others do in trying to deal with the notion of Obamacare, etc.
They’re just cutting across the board, but they’re not really looking at: What is the impact of all these different cuts, and am I cutting in the right areas? Because they really haven’t developed an approach, a way of thinking about what their problems are to really be able to nail it down in a very specific way to make changes that will have the greatest positive impact.”
Harris says, “I think because, to some extent, of the regulation and having to come to grips with it, they’re being forced along the path faster than, I would argue, the automobile industry. So to go back to the notion that this company was established in 1999 with the notion that what they saw in automobiles was going to be carried over to hospitals. I would say that in 1999, hospitals could care less. There were a few Israeli hospitals that were trying it out, largely because, in Israel, the whole notion of entrepreneurship is encouraged, so there were a few that were trying it out.”
Hospitals didn’t think they had to care about what their costs really were. Ultimately, insurance companies and governments covered most of the costs. There was the casual user who might have to pay out of pocket, but they work with them to try to come up with a good best price.
In 1999, let’s argue, to give us a timeline, they could care less. I would say probably until about a year … so maybe three years ago … they cared a little bit, not necessarily about the technology that I’m suggesting, but they cared a little bit about it. There was enough noise in the system that said they were going to have to change.
There was enough pressure on institutions that weren’t performing very well and were having to consider what their options were, so I’d say, basically from 1999 until literally three years ago, so let’s say 2008/2009 there was a growing in interest in doing something, but they weren’t quite sure what it was.
Right around 2009 what they decided they were going to do is they were going to invest in data-warehousing technologies as IT. That was the improvement because it would give them better financial information.
They all started … the hospital industry tends to follow each other, so when one of them decided to invest in data-warehousing technology, everybody invested in data-warehousing technology.
If you talk to consultants who understand what it is they’re doing, they will tell you that the implementation of data warehousing does nothing to really solve the problem that they have … right? … because their problem … right now a typical hospital has somewhere between 25 and 40 different IT-based systems that are operating.
Many of them are disconnected. Some of them are attuned from a standpoint of billing and other kinds of financials. Many of them are built around the notion of reimbursement. None of that really allows you to really understand what it costs you when Roland Harris comes into your admitting room, goes through all of your processes, is administered to, and ultimately released by the hospital.
I can’t capture that with the standard systems that they have in place today, so what I do is I figure out what my gross costs are, every aspirin I have in the place, every pill I’ve dispensed, all of my doctor’s time that I have to account for, and then with a hatchet I basically chop it up.
That’s how you get a $12,000 expense to somebody like Richard’s son who’s in the hospital for four hours. They just grossly estimate what must have been associated with taking care of him. They then basically allocate that, and the system then disposes of it.
In the case of an insurance company, insurance companies have negotiated rates, so the insurance company says, “Ha! $12,000 … that’s not really $12,000 it’s really $6000 of which I’m going to dispute, so I’m going to pay you $4000, and so it’s kind of understood. The bill is still $12,000, the bill is still made up of a series of things that people don’t completely understand or come to grips with.
Same thing with the Federal Government. The government says, “Ha! I don’t pay for certain things; I’m going to take those out.”
Few are really dealing with: What was the real cost to administering to Roland’s stay at that hospital. They’re all working of these gross calculations, regional calculations, and things like that, to come up with approximations that they all agree kind of work, and then they work it out.
If you’re the poor person that shows up without any insurance or some kind of government support, you literally could walk away with a bill for $12,000, and if you’re sitting here with that $12,000 bill in your hand and you were to turn to anybody in that institution from the CEO all the way down to the administrator and ask them, “How can you account for the fact that you just charged me $12,000?” only in very gross language could they ever give you any sense whatsoever for how what they did for you is associated with $12,000.
Hospitals will understand where they are competitive and where they are not. This will enable them to improve their operations or outsource that with which they cannot compete.
My 36 years of experience with IT would suggest that the implementation of a software system serves as a guide to change. Software has inherent rules which in order to utilize it requires that you ‘buy in’ to what it is attempting to do. ERP system in the automobile industry had the same effect.”
If you wanted to encourage rapid change, which I would argue healthcare needs to, one of the ways to do it is to, in fact, implement a system of some sort that forces a set of rules that you think you roughly can agree to.
If you go back to the data warehousing notion, data warehousing doesn’t do it for you. All data warehousing does is, in the back room somewhere, where people are not forced to really interface with it, it basically takes information coming in and accounts for some of it in general ways, and stores it so that it is more available to those who already know that information exists.
What my system does is actually put in a position where you can ask questions about yourself that you literally didn’t know the answers to, hadn’t preprescribed that you were going to have to store information related to it, you literally could ask a question from almost any perspective into the institution to understand what the real cost, what the time was associated with it, and what the outcome was associated with whatever that particular procedure might have been. Right? It’s iterative. It gets smarter with you.
Today what happens is: you walk in and somebody decides, “Okay, it’s Roland Harris. He has insurance/he doesn’t have insurance. Please sit over there.” Eventually somebody comes for you which is a nurse. The nurse spends some amount of time, who knows how much real time they spend with you. You’re then put in a procedure room; some things happen/don’t happen. You’re either admitted to the hospital or a procedure is performed. It goes through that whole process.
That process is kind of made up every time somebody walks in through the front door. You can’t really account for how expensive it is. You can’t account for whether there are any missed steps in what you do. You can’t account for whether you could have done it in a better way. You can’t decide that, in some cases, you might not even want to perform certain kinds of procedures because your hospital really isn’t structured to be able to do it effectively.
What I can do is say: How many knee surgeries have been performed in this institution over the last month and have the system automatically call up all the knee surgeries. Then I can take a look at what doctors were associated with those knee surgeries, and then I could now take a look at the doctors associated with knee surgeries and determine what the general outcome was for each one of the doctors. Then I can ask myself, “How much did it cost me to actually have that doctor do whatever they did,” and I can go and take another cut at it.
Finally I can say, “I can’t figure out ” … because my routines are the same … “why is it that one doctors is costing $12,000 and another is $2000?” and it may be that … I asked at another one … which was “What device was actually deployed by the doctor as part of the procedure?” and it turns out they used a different kind of knee because they used the runner’s knee and this doctor seems to prefer the runner knee. Well, it turns out he’s putting runner’s knees in 60-year-old nonathletic people.
Now the question for the institution is: Is that really a best practice? Is that really what we want to do? Would we prefer to be in or out of the knee replacement? Would we prefer to use the device that is less expensive in this particular case? Is there a reason why the doctors are doing what they’re doing? We generate those kinds of questions, and then we can tie it back to what it actually cost you to do it.
An institution might be benefited by the $12,000 knee, or it turns out that, in this case … this was a real situation … they didn’t actually benefit from it. It turns out that the infection rate around the runner’s knee was actually much greater, and so, therefore, the people being readmitted into the hospital actually drove up the cost to the hospital.
In a world like Obamacare where, effectively, the second time a person comes around you can’t charge full boat for it, that puts you in an awkward situation. In today’s world, let’s argue, up until today, I can charge twice. Who cares? Now my care … because I care about my patient … but if I just cared about revenues coming into the hospital, the fact that I have to perform Dr. A’s procedure two times more often than I do Dr. B’s is actually okay because he generates more revenue. I select my doctors on the basis of their ability to generate revenue for the hospital.
In the future, I want to know that there’s a difference in regards to the way they do what they do because I may not be able to afford the doctor that has to redo his surgery this often because of the devices he chooses, so the option might be either not to have that doctor perform at my hospital or to convince that doctor to use the device that is more likely to produce a better outcome. That’s what we do.
There’s something like 150 different types of surgical gloves that an average hospital will have in inventory, and it’s just because doctors have preferences.
If you were running your own store, would you really allow 150 different … you might allow some for people with sensitive skin or certain kinds of procedures, but the notion that literally you’re going to inventory … and it’s not really 150, it’s many times more than that, but let’s just use 150 because it’s big enough, but it’s small at the time.
Think of every choice that any individual in an institution could potentially make that might affect: 1) just the overall quality of care, so even if you’re not driven to try to drive up your numbers, wouldn’t it be nice to be able to provide better care because the 60-year-old is getting the knee that’s going to last 20 years and not the knee that’s designed to last ten for certain kinds of situations.
Some of them are driven by where they set numbers and targets for themselves, and the more profit-oriented ones, the ones more specialized, would tend toward that. Its the notion that, at the end of the day, they don’t know where they are. They don’t know why those choices are made, and therefore they can’t act of them.
They can’t make themselves a more efficient institution, and they can’t change their policies and practices when, literally, those policies and practices exists differently in the heads of every physician, every nurse, every administrator, every staff person that exists within that institution.
It’s not for the patients. This is generally for the hospital, itself. There’s no reason why, at some point, you couldn’t, in fact, be able to have a discussion around what the bill was with better detail because of the reports, so maybe one of the reports that a hospital selects is one that would better explain, ultimately, the bill that is in the person’s hand; but this is more internal.
The question is, from a legal standpoint: how much information do they really want to provide? But yes, they could nail down at a patient level, they could do it at a doctor level, they could do it at a department level, they could do it over a month’s time, they could do it over a year’s time. They can cut it any way they want, so they could produce a report that literally took a particular visit and broke it down, and you would, therefore, be able to explain why the aspirin costs what the aspirin costs.
What I am more interested in, even that that, though, is the notion that they only charge $25.00 or 10,000% for an aspirin because they have because they really don’t understand what the cost of the aspirin was involved in the particular procedure that ended up in the $12,000 bill.
They ought to at least know why they have to charge that much money for an aspirin, and today they couldn’t tell you even close to why the aspirin has to cost so muchThere’s no way that their aspirin is better inspected or anything else that would cause that aspirin to be worth so much more when administered at a hospital versus buying it at your doctor’s office or a local pharmacy.
So, why is it so difficult for hospitals to collect useful reports up to now to show actual cost of care?
Harris says it’s because their systems aren’t oriented to do that. Before, when he talked about the fact that somewhere between 25 and 40 different hospital systems exist, they all exist for their own purposes. They don’t exist to render information that can be pulled together to create the kind of report that ties out how who touched Roland for how long, and what did they do with Roland when they had him, and what procedure rooms were used, and what equipment was used. All of that stuff is available in a hospital today, but it’s not available in a way that they can pull it together to explain to Roland why it cost what it cost for Roland, or any patient.
To take you to the other side of it, just as an example of what could be done if it was at the nth level: Years and years ago, when I was working for IBM, I used to do outsourcing, and I had a hospital that I ran out on the West Coast. It was actually … because this story is a good one, I’ll tell you it was El Camino Hospital. It was small hospital.
I went out one day and they were obviously doing some work to add a wing to the hospital, and so I asked … because I knew a lot of the doctors and things like that. I asked them, “Why are you adding a wing to the hospital.” They said, “Well, somebody did a piece of homework, Roland, and it was just an amazing thing. We noticed that we were getting more women in here to have babies than makes any sense given the population that generally exists in our area.”
I said, “Why is that?” and they said, “Well, we don’t really know because we only did some marginal marketing analysis, but we think it’s because the women want their kids to be born, basically, at Silicon Valley. We think they literally want their kids born in a place which would be noteworthy, so they come here to have their babies. So we’re now beginning to administer to that by adding a wing where more births occur at this hospital.”
If a hospital really got to that point, Maria, where it really started thinking to itself, “Do I have perform every single procedure? Should I do everything that could be done by a hospital or are there some things that I’m actually better at?”
I’ll give you another example. Right now a lot of hospitals make a lot of money off of radiology, but there’s a lot of stand-alone radiology centers. As the Accountable Care Act begins to push on the notion that you have to prove that you are actually operating in the most effective, efficient manner, more people with the option are going to choose to go these stand-alone radiology centers, and the hospitals are going to be forced to take the results coming out of those centers versus rerunning them themselves, and a lot of those really expensive radiology centers are going to be almost half empty because they’re not going to be able to charge the same kind of rates, based upon the $12,000 story, as they have historically. They make a fortune off those things.
Hospital will understand where they are competitive and where they are not. This will enable them to improve their operations or outsource that with which they cannot compete.
They don’t like that, that’s where they make their money, but again, I did outsourcing for years for IBM and I worked through the pharmaceutical industry where they told me, “Why would ever outsource because we put sugar in little capsules and sell it for exorbitant sums?” That’s a quote.
They ended up outsourcing like fiends when they finally got pushed up against the wall and people started inspecting the cost of their business.
I did the same thing in insurance companies. When insurance companies said, “Why do we care? IT is a rounding error cost to us? It’s our manufacturing site, Roland, why would I ever give that to you?” By the time I finished, they were backing up trucks trying to give me their equipment.
I think hospitals are in the same position. You can, right now today, say, “We do it all because that’s what people expect us to do,” but in the future you may not be the best at all those things. You may not be able to run it at the right cost. You may have to get out of some of those businesses.
The question is: How do you know what businesses you should be in and what businesses you shouldn’t be in, what you do well and what you don’t do well, if you can’t even tell me the cost of an aspirin?
We’ve installed it in a small hospital in Florida. I won’t say it’s fully operational at this point; and we’ve got a couple of other deals in the wings that have gone through the pilot and the pilots have been … so we’ve gone from where they didn’t want to do a pilot to now they’re doing pilots, but not only are they doing the pilots, Maria, but they’re coming out of the pilots and going, “Wow! This really matters.”
I give you, again without the hospital just because of the nature of these discussions, but in one case this hospital had installed a new radiology upgrade. They thought that it was actually a benefit to them based upon the way it had been sold to them. Our system all of a sudden identified that their costs substantially rose over a period of time. They had no clue why their costs went up.
We got up underneath it and found out that they had added this pilot by adding to this particular set of radiology devices and that the pilot was driving additional man power requirements.
Nurses were spending more time, doctors were spending more time. The redo rate ended up being higher. The amount of time it took to do the procedure was longer.
So they were able to cut something off that, otherwise, they may have never found. It would have just added to the cost of everything.
It would have been another one of those costs that would have to have been ratcheted out and handed off to somebody that makes up the $12,000 hit, and instead, they’re not fully aware of it, and based upon that, they’re now moving very quickly through their process … which hospital process is slow … but very quickly through their process to actually get approval to install this across their radiology division and ultimately, I would hope, the entire hospital, because they found that they saved millions of dollars just in one identification from our system.
And there’s one other hospital I don’t have permission to use the name of that is installing it for heart procedures. Then there’s a major lab, one of the top labs in the world, we’re probably a few weeks away from getting an agreement to go forward with them because the pilot was so successful.
The pilot was so successful, Maria, that … it was funny because, again it challenges the system. The internal people had been studying the area, basically on paper to the best of their ability internally for years, and had come to the conclusion that some of the mapping of costs that they were trying to do artificially within their organization really wasn’t revealing the real cost. They had estimated what they thought the real cost was, but the operations side of it refused to believe that it actually cost what the finance people were arguing it cost.
We went in, and in less than … we installed in 30 days, they ran it for 60 days afterwards. We came up with an analysis, a deep analysis of their real costs.
They were able to, therefore, immediately agree that a substantial number of the things that we’d identified were absolutely accurate. They got down to four things that they thought, “Well, maybe it’s not as accurate.” They got up underneath that and found out that was also accurate.
So the argument is a political one internally which is, “Oh, if that’s really what it appears to be, then we’re making choices in our business that are wrong.” That’s how fundamental this thing is.
Hopefully I can announce that soon, but a substantial worldwide laboratory that literally may change the way it chooses its products in the future and how it prices them on the basis of the analysis that they were able to do using our system, just in a pilot.
If I go from 2009 or so to the Accountable Care Act being actually put into law, the tension now going from, “We’ll survive it. We’ll work around it,” to being real. You’re seeing epic implementations.
Around meaningful use you’re seeing lots of data warehousing stuff going on. These guys are spending millions of dollars on data warehouses that will, in some cases, take five years to deploy, that at the end of the day, will just give them better information in narrowest places and not the kind of information I’ve just described.
I can install my system in a department in a less than 90 days. It can be up and running and available to them. We steal the information from their system by understanding what those systems are and how they produce information. We draw that information from them and create our own reports, so we don’t have to change anything they’re doing to do what we want to do.
It’s really quick to implement, relatively inexpensive, and it provides insight.
The piece that, on top of that, ultimately … back to the transformation discussion … is really necessary is: ultimately doctors have to think … like when I worked for IBM and IBM was going right down the drain, and Gershner came onboard, what he had to do was he to change the way management thought about its jobs and its responsibilities and make us feel more responsible for the choices we make.
Ultimately, in hospitals, that has to happen, too, and then they have to have a tool that allows them to understand the impact of the choices they make. We provide the tool. The hospital still has to work on how they’re going to go about having that impact so that people begin to think different around what their real responsibilities are.
The question is whether it’s installed across … I would recommend that people install it generally in radiology and lab first. They’re easiest to implement. We can generally get them done in 60-90 days. Again, hospitals have their own procedures and things like that, so it can be longer, but we can install generally in that period of time.
What does this system cost to implement?
Harris says it really varies. The cost per year is basically $375,000 per department, and if you run it across an entire institution, a hospital or hospital system, it’s basically a million and a half dollars. Those are rough numbers because it changes. Some of these organizations we’re working with right now are so substantial that the price would be much higher than that, but as an opening gambit for an average hospital, that’s roughly what you’d be talking about.
Do employees have to be trained to use it as well, because that’s a consideration?
Harris says employees actually take quite naturally to it because it makes their job actually easier.
He says, “The first thing is: do they fight it because they think that’s it’s going to cause a downsizing in their department, so you’ve got to have discussions around that, but for those who either are told, ‘Don’t be afraid, we’re not planning on downsizing,’ is part of it, or are more excited by the advancement.”
What we’ve actually found is … we call them superusers. We general draw into our early implementation, or the pilot, we will draw in a selected handful of thought leaders that other people will follow, and we given then superior skills in using our product.
Then we let them loose so that they can play with it, and those superusers have been driving a lot of the cultural change. It’s not a very expensive thing. You don’t need a whole lot of people.
There’s two different changes: One is the change culturally to an institution in regards to how it thinks about itself; that’s difficult. I’m not attempting to argue; I do all of that with my product. I put some pressure on that to have that happen sooner because of my product.
Then the other side of it, which is implementation and getting people trained on it, that’s really easy to do. Generally within a few days somebody can be apt enough.
What it also does is … if you remember back. You may not old enough to remember. Basically, the original VisiCalc spreadsheet kind of thing where you install this application with great delight because you thought it was going to solve all your problems, and then you realize, after you installed it, it’s just sitting there blinking at you and you actually had to learn how to put information in and yada, yada, yada.
What happens, I would argue, is the system allows you to be much more intuitive. The more you use it, the smarter you get. The smarter you get, the deeper it allows you to go until you can ask questions you never would have even thought of before.
On the surface level, to get the information around the radiology example I gave you, that we’ve done as part of the 90-day implementation program. It was probably less than two or three day’s worth of class in there, and then we allowed access to the system for the superusers.
That’s how simple it can be at the easiest level. Hopefully one day there will be a CFO who is sitting there who wants to have that kind of insight, wants to understand how one department impacts another.
For example, in the case of radiology, when radiologists buy certain kinds of equipment, it may actually had an impact on the lab; or when the lab changes its procedures, it might have an impact on radiology because one is depending upon the other to do certain kinds of research and things associated with whatever the procedures happen to be.
Is the type of savings that trickles down that ultimately trickles down to the patient?
If you could imagine that a hospital would incur a couple of million dollars of additional cost and not know where it was from, and have that happen 10 to 100 times a day, and then ultimately with a hatchet, somebody has to hand it out to the different people being billed, it absolutely has a huge impact on the patient.
The other thing is that the Affordable Care Act basically also puts another pressure on it, and that is … and again I know you know healthcare so I’m just giving you the shorthand view … basically, it’s like a limbo cane.
Initially the hospitals get together and develop a certain set of relationships in order to get their costs under control. They predict a certain cost for a procedure based upon those relationships, and all they have to do is get up under the high limbo bar in order to take some of those savings as part of their profits based upon the Affordable Care Act.
But every year what’s going to happen is that bar is going to get lowered lower and lower to the ground until it’s evident on opening day how to go about saving money with this new consortium; but when you’re halfway down that bar and you’re really bending way over backwards, so you really know what your real costs are, what your choices are? Have been you been making them religiously? Have you been partnering adequately? That stuff they don’t know how to do.
Obamacare basically drives down the costs by artificially lowering the bar on a regular basis, but when they need to do is be able to get up underneath the bar because, eventually, what they’re going to find is they can’t go low enough unless they’re really sophisticated in regard to what their costs are.
Opening day it will seem simple. Somewhere in the not-too-distant future it will be almost impossible for some of those hospitals to get under that bar because have the wrong relationships, because they don’t really understand their costs, because they do procedures where they’re in conflict with other institutions that have better cost structures, on and on and on.
An insurance company could actually decide to be at the center of it, go out and develop relationships with specific hospitals, with specific radiology centers, on and on and on, create kind of a cost structure, go to the government and say, “We are going to do knee replacement surgeries and right now you pay $1000 for a knee replacement surgery. I can do it for 800 bucks. If I can do it for 800 bucks, I want to share in the difference between the 800 and the 1000. That’s what the Accountable Care Act would do.
You don’t have to be hard-wired as if you’re all becoming a single company in order to get that advantage. You can actually apply as, in effect, a created organization that exists only for purposes of government payment.
That’s my argument for why the hospitals are going to have to care, because you take that kind of group … so it’d be interesting to know, and if you don’t mind I might reach out myself, but if you know and could just let me know, I ‘d appreciate the answer. If they’re just getting together in a loosely-coupled, where effectively what they want to do is they want to share what they think are the best practices of each institution. They want to share what they think are the lowest-cost approaches to doing things, and then, in effect, they’re going to bid on certain capabilities in through the government programs so that they can get some of this … again, they share in the excess. They get to keep some of the excess the government will give back to that kind of consortium.
That’s what’s going to happen as the Obamacare stuff rolls out.
Again, there are two different ways. One is they’re just becoming a more complex organization, and then they have to make choices. I an absolutely do that. But the other is, if they’re going to be buying … they’re, in effect, partnering with each other for purposes of government payments and they’re, in effect, establishing routines and procedures together that they think they can do under the price limit, then the whole notion of cost becomes an imperative.
That’s the stuff you don’t hear people talking about when you hear them talk about Obamacare on TV and the newspapers, etc., is that … in my estimation, if done correctly and all things remain, because it’s a very complex law, it basically will drive an average hospital to its knees because, year after year, that limbo bar will be lower and lower and lower, and if you really don’t have your act together, you’re still “doctor driven” where you’re not really trying to tie together, “Are we in the right places? Are we doing the right things? Are we partnered with the right people? Have we outsourced things that we shouldn’t be doing ourselves to smaller institutions like radiology centers because they can do it more efficiently? Have we figured all this stuff out?” If they don’t, they’ll crack.
Will the patient care diminish under Obamacare because they want to bring their things in at a lower cost?
Harris says if the argument is that doctors always do the right, which arguably is what the act depends upon, then the answer would be no because a doctor would have to admit at some point that they couldn’t do that particular procedure at a particular hospital and would select the hospital that actually is more apt, and so, effectively, some hospitals would just go out of business.
In reality, are there some people that will be affected because their hospital will die painful, slow deaths? Maria: There are so many … recently I was reading about the closings of so many hospitals in poor neighborhoods has been … I think there were 42 closures … that there’s a lot of that going on, and I don’t know if they would have even had the money to implement software like this to see … I mean, maybe they were bleeding money in areas that they didn’t know, that they could’ve been saved had they had software like this to keep track of expenses, but I don’t know.
What we’ve stopped doing, Maria, is we’ve stopped selling to institutions that are on the verge of going out of business or are in real trouble because they’re so afraid that, if anything, they do more of the bad things that got them into trouble, not less; and so we just find we get lost in it. They get excited by it, they want to do it, but they can’t do it today because they’re got a meeting and … you’re right.
Literally, in a couple of cases, I went in. I started with calls at the CEO level, was basically almost thrown out of the office because “We don’t need this, yada, yada, yada,” ended up catching a meeting with a CFO since I happened in the building. The CFO lights up like a bulb and says, “Man, this is great. Do you know where I’m going next?” He says, “I’m going to a meeting where they’re going to tell me I’ve got to cut $50 million out of my budget this year and I don’t have … at this point, let’s say, it’s June, so $50 million is over six months. He says, “And I don’t know where I’m going to get it.”
I know he doesn’t like the notion that, “I might need something like what you’ve got,” but Roland, “I need something like what you’ve got.”
Ultimately … again, I won’t name names … but that CFO ended up losing his job. Did he lose his job because he started pushing back on the fact that these guys weren’t smart enough about this stuff? Who knows. He ended up losing his job.
It’s not a simple act to have people who are drowning understand that, if they take two strokes, there’s a life preserver.
We’ve stopped going to institutions that are really in desperate immediate trouble because they can’t keep themselves focused enough to realize we’re part of the solution.
We are working through different consulting organizations that may already have an interest in working with those kinds of firms, to maybe use this as a tool, but what we’ve found is: we need institutions that either believe they’re going to be thought leaders under the new Affordable Care Act, or that they are going to be survivors through acquisitions and, therefore, will be powerful enough and have enough money orientation to be able to get through it.
That’s where we start. Again, our process has been a painful process because the way that hospitals consider new things is to … it’s such a lengthy process. What you get is you get ultimate buy-in when you finally get through the process, but the process, itself, is extremely painful.
I would suggest one of the things they need to do is think about how they think about things because even the best of them will not survive.
The smarter the institution, the more they’re convinced they do most things right, and so then you start from there.
That’s a long path to go on, and if you’re dealing with those who are dying and basically are on their last gasp, they can’t think straight to be able to realize what we actually can do for them. Somebody would have to have a level enough head to install it in the department most likely to be immediately benefited from it, and then to have the wisdom to sit there and go at it until they get it, until you finally get that first spreadsheet up on a green screen and it all adds up, and you think to yourself, “Man, that’s pretty good.”
I’ve now got my household budget in this thing, so now I’m going to figure out, “Is golf really killing me or is it the weekend visits to the bar?” or something.
Is there a way for these institutions to use your software on, say, a 30-day test?
We’ve actually got it. It’s reasonably inexpensive. For $80,000, which most institutions don’t even blink at, we will install the system. Let’s say it take 30 days or so, or 60 days to install, depending upon what the application is and what they want to connect to it, and then we give them another 60-90 days as part of the same $80,000 where they can play with it. We’ve gotten past that, and so far nobody who’s actually played doesn’t believe it actually has a benefit. I do think that people will start lining up because, again, the industry tends to follow industry leaders.”
WHAT HAS THE RESPONSE BEEN FROM HOSPITALS THAT HAVE TRIED IT?
What I do know now … before it was more theory because, again, you go all the back to our birth, it was a bunch of guys who didn’t really necessarily know healthcare who decided healthcare needed it. We’re now at the point where, what we do, we know it works.
It’s not a matter of somebody built something, it really isn’t required, and so it’s getting treated the way it could … where people, including Mayo … where really sophisticated people put their hands on it, they like it.
Nobody has said, “This doesn’t work. This is crazy. The answers are wrong.” Where they’ve thought they think some of the answers might be wrong, they go off and they do the homework, and they come back and they go, “No, you were right.”
DOES THE APPROVAL PROCESS TO IMPLEMENT IT TAKE LONG?
We’re not having the problem of those who are willing to actually put their hands on it. It still, for whatever reason, Maria, hasn’t shortened the process of approval.
HOW DOES THE PUBLIC BENEFIT FROM HOSPITALS USING IT?
If you had this amalgamation of all the hospitals and everyone was using this software, and then you say, “You know what? At the end of the year, we’re going to generate this report that actually tells the public trends of costs in hospitals,” if they were open to that, because transparency is important today, and if this is a product that could make things more transparent for the public, for the patients, as well as the hospitals?
I don’t know if they’d be open to that, but it seems like the ability to generate a report both internally … maybe the first year you want to analyze it yourself to see where you can lower costs and then strive toward showing off.
CAN COMPARATIVE REPORTS BE GENERATED FROM IT, SO WE CAN COMPARE EXPENSES AT DIFFERENT HOSPITALS?
Basically, that’s what we would like to be able to do, but on opening day, because it feeds off the hospital’s own information, so therefore, the more hospitals you have attached yourself to it, the more we’re able to draw insights from those hospitals and, in effect, create exactly the report that you’re talking about, which would be a much more insightful, thoughtful report than anything anybody else has been able to generate because they do it off of data that is so rounded, so general, it really doesn’t help you much.
The more people that use our system, Maria, the more we are able to produce those kinds of reports with that kind of insight.
HOW MANY HOSPITALS NEED TO SIGN UP IN ORDER TO START GENERATING SUCH DATA?
The more hospital I get online, the more I can generate exactly what you’ve just described and do it in such specificity that others would have a difficult time keeping up with me; so that is one of the things I’m trying to do.
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