By Read Part I here.
Why are all ratings not equal? Because they are designed for different purposes!
Herein lay the underlying truth to the many objections posed by organizations being rated. Rightfully so, the Three R’s (ratings, rankings and reviews) of providers must be kept in the context of overall purpose. This is one of the challenges to getting The Three R’s accepted and to making report cards right.
Health care is a big industry to rate and it is going to take more than one blog entry to develop a clearer picture of how best to move forward and embrace ratings systems, but let’s put down some context and history, as it is important to our current day objections and it is instructive to our future direction.
In the Beginning… in a fee-for-service market, before we had enough data to understand the enormous variability of clinical care, and before HCFA first contemplated releasing mortality data, performance measurement was all about financial performance measures. The ratings and rankings were quite simply all about financial and operating ratios, and hospitals were the institutional providers who were the rated with the CFO taking the bullet. Thanks to the public debt markets of the municipal bond industry, the hospital industry’s bricks, mortar and technology were mostly financed by long-term tax-exempt municipal bonds. Like most all other financial instruments these bonds are purchased and sold in the secondary markets long after the initial raising of capital, in some case decades. Being a predominantly not-for-profit industry, there exists no statutory reporting of a hospital’s financial results, and thus the Bloomberg terminals used by traders were void of hospital performance data, and the secondary bond market and the portfolio surveillance by large bond funds and bond insurers was a real challenge! No current data, no timely ratios, no real-time analysis…plenty of risk for those trading bonds. Sound familiar?
