Wall Street Journal Examines 'Novel Solution' By Hospital, Health Insurer To Improve Efficiency, Retain Profits

Main Category: Primary Care / General Practice
Also Included In: Health Insurance / Medical Insurance
Article Date: 16 Jan 2007 - 19:00 PST

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The Wall Street Journal on Friday examined how efforts at Seattle-based Virginia Mason Medical Center to more efficiently treat patients with certain conditions resulted in lower profits until the hospital developed a "novel solution" with a health insurer. According to the Journal, the case "offers a lesson in dealing with one of the most confounding elements in America's health care crisis: a perverse system of payments that rewards doctors and hospitals not for how well they treat patients, but for how much they treat them." In 2004, Aetna said specialty practices at Virginia Mason cost twice as much as those of other hospitals in the area and planned to exclude the hospital from a new network of top health care providers. Virginia Mason began efforts to improve efficiency and reduce costs, but those efforts led to lower profits. Virginia Mason CEO Robert Mecklenburg said, "Everyone gained but Virginia Mason." In response, Virginia Mason and major Aetna customers, such as Starbucks and Costco, developed a system to pay the "medical center more for some cheaper treatments," the Journal reports. However, the system remains a "gamble" because Aetna accounts for only 10% of business for Virginia Mason, and other health insurers have not agreed to similar systems, according to the Journal (Fuhrmans, Wall Street Journal, 1/12).

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