April 23, 2017

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Utah Shows the Way on Hospital Costs

Last month I spoke with a woman with a movie star name and rock star performance. Dr. Vivian Lee is the CEO of University of Utah Health Care, and her accomplishments in Utah should serve as a model for Vermont.

When Dr. Lee became the CEO of her hospital, she pulled her executive team together and asked a basic question: do we know what it actually costs to provide services? This simple question, which would be completely unnecessary in any other industry, elicited shrugs and shakes of the head from her staff. The “sticker price” for medical procedures in Utah, like here in Vermont, bore little to no relationship to the actual costs incurred by the hospital to perform them.

Dr. Lee articulated a simple directive to her staff: determine the true costs of everything we do. Rolling up their sleeves in what she described as “the Utah way,” her staff sifted through the swamp of medical costs and emerged five months later with the true expenditures for every procedure and treatment at the University of Utah medical center.

Was it worth it? Boy was it! Armed with the true costs, physicians and departments throughout the hospital were, for the first time, able to see who the high spenders were and why. Actual expenditures were matched up to patient outcomes, reforming the way many physicians treated their patients, improving public health while saving money.

Importantly, Dr. Lee’s work was motivated by pressures just like those we’re experiencing in Vermont. Limited Medicaid funding, coupled with a move away from “fee-for-service,” required transparent cost data in order to smartly manage her hospital budget moving forward.

Here in Vermont, we are rightly moving forward with payment reforms that will move us away from fee-for-service. But unless we know the true costs throughout the system, our hospital leaders will be flying blindly as they make decisions on where and how to restrain spending. It is my goal in the coming year to make sure that payment reform and transparent pricing work in tandem to lower costs for Vermonters. Perhaps in just this one instance, as goes Utah, so should go Vermont!

To learn more, read this New York Times article: http://www.nytimes.com/2015/09/08/health/what-are-a-hospitals-costs-utah-system-is-trying-to-learn.html?_r=0

I hope you have a safe and happy holiday season.