Health Biz: Old problems ring in New Year

WASHINGTON, Dec. 30 (UPI) -- The new year will bring new challenges to the healthcare industry, such as dealing with lower reimbursements and tight finances, but the old headaches, including malpractice premiums and personnel shortages, also will be back.

In Part 2 of a special HealthBiz series looking ahead to 2004, Jim Pizzo, managing director of healthcare consulting for the Huron Consulting Group in Chicago, and Lewis Redd, national practice leader at Cap Gemini Ernst & Young Health in Atlanta, told United Press International companies will be busy on a number of fronts.

Pizzo said medical malpractice remains out of control, to the point where in some cities obstetricians cannot buy malpractice coverage, forcing some to put their assets into a trust fund and practice without the insurance.

"If it doesn't stabilize, the government will have to find a way to insure the doctors or cap the payout," he said. "OB's are paying double what they paid just a couple of years ago."

While obstetrics may well be a specialty where a physician cannot help but have some problems during a career, rising malpractice rates now make any treatment incident a major problem.

Some states -- Indiana and Texas, for example -- have enacted tort reforms restricting damages. Nevertheless, Pizzo said, premiums are rising in Texas next year because a long shelf life for malpractice claims makes physicians liable for events many years into the future.

He noted one physician in Maryland began asking for a $10 donation from each patient to help cover these costs -- he collected some $3,000 in a month.

Personnel shortages will be another leftover issue, even as healthcare facilities in many areas are tackling it.

Redd said there still are problem areas, especially in nursing, where 10-year projections show a 29-percent shortage of nurses.

He said other arenas also will look for new talent -- including information technology and back-office management -- in particular among firms struggling with a high bad debt rate.

Outsourcing will be used to help alleviate staffing problems and to save money.

"(Companies) are looking at finding someone who can take on the information systems, do it as well or better ... but cheaper," Redd said.

Already, in the business office, hospitals are moving toward outsourcing staff and Redd said it is a trend that will grow as revenue issues heat up.

The shortage of physicians is perhaps most acute in rural areas, Pizzo said, where healthcare has not made money in five years because fixed costs have increased but patient volume has not kept pace.

"Rural is going to be tough," Pizzo said. "Rural health is going to be a big issue. It's very expensive and physicians aren't attracted to it anymore."

Capacity -- the ability for hospitals and other facilities to handle a growing elderly population as the baby boomer retire -- also will make for interesting decision-making by healthcare companies.

Pizzo said the volume of patients moving through healthcare systems will increase by 10 percent and hospitals may not have the capital to keep up with needs for the latest in technology and additional facilities.

"Capacity management is an issue," he said. "No money for bricks and mortar improvement -- so capacity could be an issue for five to 10 years."

Redd said healthcare systems can streamline their care delivery processes -- make decisions more efficient, get people well sooner and reduce hospital stays -- to answer the capacity problem.

"Making more efficient use of what you have is a key now," he said, rather than a focus on disease management to reduce costs.

Financing is a major issue facing healthcare in 2004 because of tight capital markets and reduced Medicaid reimbursements, and it has created a dilemma for some large teaching hospitals, which Pizzo said are "challenged a little bit more financially now."

He said there may not be enough cash to fund all of the hospital's needs and boards will be faced with looking at balancing its academic programs with revenue producing programs.

The industry may have hoped the Health Insurance Portability and Accountability Act would just go away, but it has not and implementation is proceeding -- if in fits and starts.

Redd said, however, healthcare facilities that embrace the law and look at it as an opportunity to bill and get paid faster will see it actually might be an enhancement rather than a cost and administrative burden.

Pizzo called the expected fight over HIPAA a "non-event" and added it ultimately creates more standardization. "Billing will be easier and quality control will become easier -- and privacy is a non-issue and long overdue," he added.

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Ellen Beck's e-mail is sciencemail@upi.com