If Mount Olympus Was Subject to Medicare DRG Reimbursement, Would Zeus Have Been So Innovative With Eternal Damnation?

Part Seven/The Deck is Stacked Against Organizational Innovators in the US...there is simply no way to get paid for the innovation.

Sisyphus was a clever fellow, and he thought himself as clever as the gods. Zeus, however, was a god, and displayed his own cleverness by binding Sisyphus to an eternity of frustration. Today, pointless or interminable activities are often described as Sisyphean.

Few tasks can be more interminably frustrating then trying to get a hospital paid for a service. Rather than receiving a payment appropriate for a given service and the costs associated with it, the diagnosis-related group (DRG) payment system forces innovators to find an appropriate rate from an existing DRG.

The shackling of innovation by the DRG system has several consequences for the US hospital innovator:

• The DRG system restrains price competition by sustaining overly compensated but inefficient incumbents and dilutes any cost advantage brought by innovation.
• The lengthy and cumbersome procedures to establish new DRGs can discourage innovators with new business from entry because they will not be provided with appropriate reimbursement.
• US hospitals cannot price flexibly, as Indian hospitals do, and have no incentive to find price points that are appropriate for different market segments.
• There is no means to negotiate with the Centers for Medicare and Medicaid Services (CMS) to secure reimbursement for innovative procedures or business models.

Private insurance reimbursement also impedes price competition, because the insurers have difficulty negotiating with the large hospitals that have market power. Insurance networks are forced to include all of the clustered services that a hospital chain offers...including those services that would normally be targeted by a more efficient entrant.

It comes as no surprise that with all this insurance comes an enormous administrative burden. While the US patient sees Case Managers whose primary focus is to arrange for insurance reimbursement and getting them out of the hospital as fast as possible, the Indian patient is being attended to by support personnel from the nation's hospitality industry...who are dedicated to improving the patients comfort and satisfaction.