Self-Regulation or Government Regulation: Which Is Better for Hospitals and Health Systems?

Don’t look now, but systematic efforts to lower costs and improve efficiencies may be taking hold within health care organizations. Recently, USA Today ran a story describing how the Bon Secours Health System and the Banner Health System are achieving this.

Among other things, Bon Secours Health System is giving fewer blood transfusions during heart surgeries. Counter intuitively, perhaps, this is improving care, and costs are falling with marked results.

The share of patients receiving transfusions fell to 42 percent from 66 percent, the average amount of blood transfused dropped by two thirds and the system saved $1.1 million. What’s more, the complication rate dropped along with the length of time people spent in the hospital.

This is all well and good, but such an achievement begs some questions: Why are these achievements making news now? Why is this such a big deal? After all, businesses have long known the value of working more productively and shaving unnecessary costs. Why hasn’t our health-care system?

Some answers to these questions lie embedded in certain biases within the health-care culture that have gone unexamined. Here’s one: It’s better to err on the side of over treatment than under treatment, whatever the cost. This has translated into the maxim: If some is good, more is better.

As a corollary, hospitals and health systems have traditionally relied on physicians to deliver health care for patients without budget restrictions. In one sense this is understandable, because doctors have served as patient sources for hospitals. And employing doctors and promoting them to prospective patients has helped to boost the patient draw.

Here’s another unexamined bias: In their competition with each other, hospitals and health systems have focused exclusively on growing revenue. They’ve paid little or no attention to cost management. No wonder, then that greater productivity and cost reductions have languished like neglected step children.

Still another bias has been to rely on physician impressions relative to health care procedures rather than on hard, measurable data. This, too, is changing.

The same USA Today article reported that the Banner Health System analyzed data on the use of adhesion barriers –pieces of film or fabric—to prevent abnormal scarring following abdominal and pelvic surgery. Some Banner hospitals used the barriers during 79 percent of C-sections, and others used them less than 1 percent. Data analysis data revealed that the barriers made no difference.

The upshot: Banner has used the barriers for C-sections in less than 1 percent of C-sections in 2011 and has saved more than $1 million.

All of which brings to mind a truism about health-care in our United States, and it’s this: If you don’t self-regulate the way you do business, something else will soon come along to regulate your business for you.

In the United States, that something else is the federal government. We’ve already seen this happening with Medicare and Medicaid exercising what many consider to be loathsome price ceilings on health-care services.

The steps the Bon Secours Health System and the Banner Health System have taken are teaching us that the best way to manage health care costs in our free-market economy is to self-regulate. Otherwise, our government will do it for us.