Case #2 Questions: Cavalier Hospital

We will be revisiting this case in March, after we learn about financial analysis.

1. Cavalier is entering into a bundled payment arrangement. Explain this payment arrangement and how it differs from traditional fee-for-service? What are some benefits of the arrangement over fee-for-service? What are some potential drawbacks?

2. Take a look at Cavalier’s financial statements. Given that we have not yet covered financial analysis (we will revisit this case in future classes), in what ways can you imagine that bundled payments will affect these finances? In what situations will revenues be increased? In what situations will this improve the cost structure that Cavalier has in place?

3. “[Bundled payments] means it doesn’t matter if we decide to use a nuclear stress test or an exercise stress test for a given patient because we aren’t charging the insurance company for the test. In fact, we can go ahead an use state-of-the-art technology without having to seek insurance approval each time because it doesn’t cost the insurance company of patient extra money if we use the equipment”

This is an interesting reaction to the bundled payment program – what are your thoughts? Do you see this as an appropriate reaction? Will this mindset benefit the hospital from a financial standpoint? Will it benefit the patient?

4. “Value from a patients’ perspective – if we were to ask them – should reward high-quality, affordable care, no doubt. But it would also reward practitioners whose care centers around the patient, not solely ‘value’ based on cost, measurable outcomes, and efficiency metrics. Judged by Porter’s metric, ‘amenities’ such as chaplain services, fine art, and unhurried examination would quickly become extinct.”

This is often a criticism of value-based reimbursement programs – that they fail to take into account all programs necessary to truly provide good patient care. How do you feel about these criticisms? Are they justified? If so, how could value-based reimbursement programs be altered to address this issue?

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