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Hospital takes new approach to cutting costs

Healthcare Auditing Weekly, January 16, 2007

In an effort to save money, Seattle-based Virginia Mason Medical Center is working with insurers and large local employers to aggressively cut high costs. But even though insurers and employers benefit from the efforts, it seems as thought the medical center can't win, according to the Wall Street Journal.

"The more cost-effective it became, the bigger financial hit the medical center took," the newspaper wrote.

The article attributed the problem to the country's health system, which rewards doctors for giving patients more treatments instead of better treatments. When Virginia Mason was informed that treatment costs there were much higher than average, the medical center developed a novel approach for reducing costs. For example, patients who complain of back pain often visit their primary care doctor, then a specialist who orders an MRI. After the MRI, the patient may meet again with the specialist, who often prescribes physical therapy, as long as it seems to be the correct treatment.

Virginia Mason administrators realized that it would be more cost effective for the patient to meet with the doctor and physical therapist up front, rather than taking the more expensive, time consuming route. Virginia Mason still has some kinks to work out of the system, but their approach makes for an interesting case study.

Source: Wall Street Journal (subscription required)

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