Kicking the Can by Scott C. Glennie

Author:Scott C. Glennie [Glennie, Scott C.]
Language: eng
Format: epub
Tags: Fiction, Retail, Suspense
ISBN: 9781492815075
Amazon: 1492815071
Barnesnoble: 1492815071
Publisher: CreateSpace Independent Publishing Platform
Published: 2013-11-01T04:00:00+00:00

58

Peter Lowsley selected another cue stick and rolled it across the felt to make sure it was true. He picked up the blue chalk cube and struck the end of the cue stick repeatedly, like lighting a wooden match.

“Drummond, your premise—a high fixed-cost cost structure spurs volume—is a revelation in health care research…doesn’t exist in the literature to my knowledge. Something a CPA would pick up on.”

“I estimate forty to sixty percent of hospital and physician costs don’t vary with changes in patient and procedure volume. Profits are sensitive to changes in volume in high fixed-cost industries.” Lowsley drew the stick back until the tip was nigh an inch from his chalked finger and then stabbed the cue ball, releasing enough kinetic energy to explode the triangular pattern into a starburst, propelling balls in all directions. The orange 5-ball dropped into the side pocket.

“I’m solids.”

“Your hospital example is demonstrative—there’s tremendous pressure to fill beds ‘at the margin,’ because of the financial risk-reward ratio. Incremental volume is low-hanging fruit.”

Lowsley banked the 7-ball into the corner pocket and continued to circle the table, scouting his next shot.

“Coupled with the fact hospital reimbursements have been set by Medicare Cost Reports, and voilà—an explanation for mammoth hospital campuses. Medicare’s reimbursement scheme encourages continued expansion.”

Lowsley sank the 9-ball in the corner pocket but failed to put enough English on the cue to avoid scratching. He spotted the 9-ball on the table and handed the cue ball to Drummond.

“The average census among community hospitals according to the American Hospital Association is less than seventy percent—on any given day, only seven of ten beds are filled. A hospital with forty percent fixed costs can reduce its total costs by ten percent and double its profits if it operated at ninety-five percent capacity. Excess capacity is expensive. The potential savings are significant if capacity can be removed from the system.”

Drummond lined up the cue on the 1-ball and drilled it into the corner pocket.

“The airlines used ‘bankruptcy and consolidation’ to remove capacity to increase loads, and the industry’s now profitable after decades of losses—but there’s no precedent for hospital bankruptcies.”

“Not yet.”

“If we can compress the significant variation in Medicare surgical payments between high-cost and lost-cost hospitals that’s well documented in the medical literature and force the industry to jettison excess capacity, the savings to the system will be huge. We transition from ‘filling the beds’ mentality to keeping patients out of the hospital; it’s the largest piece of the health care pie.”

“Best of three?”

“I’ll make a notation for Gupta to access Medicare Cost Reports and the hospital cost surveys on file with the states’ Offices of the Insurance Commissioner,” Drummond said as he reracked the balls for another game.

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