Healthcare and the Supply Chain

Spend Matters welcomes back Lynn Everard, our resident healthcare procurement and supply chain expert.

With the House scrambling to find enough votes to pass the healthcare reform bill, one question remains surprisingly unanswered. It's no secret that one of the driving forces behind President Obama's election and his push on healthcare reform is the Service Employees International Union (SEIU). Yet reducing Medicare payments by $500 billion over ten years will undoubtedly hit the finances of most U.S. hospitals. Medicare already pays less than private insurance companies, and now that gap will be even larger. While insurance companies may very well pick up new paying customers several years down the road when the benefits portion of the bill kicks in, in the meantime they may be forced to add to their own financial risk in the short-term by eliminating preexisting condition. Even then, at least in the short term, it is highly unlikely that they will be able to make up for what the hospitals will lose in the Medicare cuts. A few short weeks ago it seemed that it would be almost impossible to guess how all of this would play out in real life.

But as this is being written, high drama is playing out for the Jackson Memorial Health System in Miami (which is in financial crisis, seeking to address almost $240 million in 2009 losses and expected losses in 2010 of close to $200 million). Current plans call for closing two hospitals and cutting back on services for the area's hospital of last resort for the poor. Now a growing number of voices are suggesting that union employees should willingly accept a pay cut as part of the solution to close the financial gap. The SEIU is the largest union at JMH, representing thousands of workers (mostly nurses), and is so far unwilling to entertain the possibility of pay cuts. The mayor and the hospital are considering invoking emergency status in order to allow them to change the union contract. While the union is partly correct in asserting that the crisis is largely a failing on the part of senior management, it is unlikely that slashing their salaries or eliminating positions will do enough to fix the problem. This drama is far from over, but it suggests that as cuts impact hospitals, the unions that overwhelmingly supported the President in his campaign are unlikely to escape the line of fire.

Our country has been living on borrowed money for decades, and our politicians are nearing the end of their ability to use the MasterCard to pay the Visa bill. The President may very well understand the nature of the real problems facing our healthcare system, but one wonders if the politician in him won't allow him to tell us that there is no healthcare Santa Claus, and some hard decisions may have to be made to accurately address our country's situation. If you are going cover 31 million more people and cut costs in the process, providers are going to be paid less and patients won't get the care they have been used to. So we seem to be getting more campaigning when what we need is straight talk. It's hard to clean up a mess if you are unwilling to get your hands dirty.

Oftentimes politicians are too busy thinking about their re-election or their legacy to be very practical in solving the problems at hand. The President seems willing to risk his political career on passing healthcare, but the messy and confusing process isn't getting us very far. We all want something for nothing, but most adults actually realize that this isn’t really possible. Somebody always pays, and in this case, it will be all of us (one way or another). Why not just give us the cold hard facts? Give us some time to absorb the information, and then let's have a national conversation about healthcare where we all know what the options are, and decide what to do as a country. Cooking the stew in a closed kitchen is not leadership. Telling us the truth and winning our commitment to fix the problem is.

Note: The views expressed here are those of the author only and do not represent the views of any other person or organization.

Lynn James Everard

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