The Goblin, The Cobbler, and the Elf Pt. 2: Creating Incentives for Better Care

The Elf’s Warning

Being a healthcare and blockchain company, we get a lot of questions about our data dashboard product ConnectingCare. Because this isn’t the easiest topic to tackle, I explained the difference last week between Fee-based and Value Based Care through a story about a Goblin, a Cobbler, and an Elf.

In the story, an Elf freed a down trodden Cobbler from the Fee for Service Goblin, allowing the Cobbler to focus more on his outcomes. The Elf issued a warning, however: If the Cobbler spent too much fixing the shoe, or the shoe needed repair again soon, the Cobbler would be penalized.

This is where our story continues….

The Elf’s Warning:A ConnectingCare Story

The Cobbler had been working with the Elf for several months now. He noticed he was able to spend more time paying attention to the needs of people’s individual shoes, which caused the need for fewer repairs, and it was actually costing less.

The Elf and the Cobbler had agreed that every shoe repair would cost 25 coins. Anything below 25 coins the Cobbler could keep or give his customers a refund.

One day the Elf gave the Cobbler 50 coins.

“What is this for?” exclaimed the Cobbler.

“Your savings.” said the Elf. The Cobbler had been doing such a good job over the last few months fixing shoes efficiently and at a low cost he was entitled to 50 coins. The Cobbler continued his work with new found joy, ever more grateful for the Elf.

A few months pass and the Elf gave the Cobbler 15 coins for his savings. The Cobbler was a little disappointed, but he was still grateful for the new system the Elf had created.

A few more months passed and one day the Elf came to the Cobbler and told him he owed 10 coins.

“What do I owe 10 coins for?” exclaimed the Cobbler.

“Over the past few months it has cost more and more to repair each shoe and a few needed to be re-fixed. This is the cost of what you now owe over the next few months.”

The Cobbler was dumbfounded. He had literally fixed hundreds of shoes between now and then. He had no idea what he should do differently.

“Remember,” The Elf said, “Every time you fix a shoe, there are others involved. The Tanner has to make sure the shoe is polished, and then a Seamstress has to make sure the laces are in good order. These are all part of the 25 coins.”

“But I have nothing to do with these costs!” exclaimed the Cobbler.

“Fixing the shoe starts with you, and the goal is to give people the best shoes which will last,” countered the Elf.

“What should I do?” asked the Cobbler?

“Well maybe you, the Tanner, and the Seamstress should all be working together more,” said the Elf.

The Cobbler thought about this. He wasn’t sure how he would do this, but he needed a solution.

To be continued…

When someone gets a hip replaced, the next stop is often a post-acute care facility where they may need to learn to walk again. They may have additional costs for rehab and home care as well, meaning ongoing costs months, even years after the initial surgery. All of this factors into the cost of the hip being replaced.

However, it is the original doctor tasked with replacing a patient’s hip that sets off the need for the other services, and the quality of their work affects the costs of those follow-up services.

In America, the average cost of hip replacement is about $33,0000, including surgery and recovery. Let’s says of that $33,000, the initial surgery cost $15,000, with the remainder earmarked for rehab and recovery. If rehab and recovery goes well, and those healthcare providers only need to spend another $10,000 on the patient, the original doctor would receive $8,000 in savings (because the total cost of care was only $25,000).

However, if complications arise and follow-up treatment runs $20,000, the original provider would be penalized $2,000. This is why the Cobbler ends up owing the Elf at the end of the story, rather than the other way around. He is fixing shoes, but not very well, requiring the Tanner and Seamstress to fix his work.

In this way, Value Based Care creates both incentives and penalties for patient outcomes. To achieve cost savings, providers need to understand why post-treatment costs are increasing, which means better communication with other healthcare providers, which is where ConnectingCare comes in.

Stay tuned for our final installment where we wrap up this harrowing saga and show how our platform is enabling providers to communicate quickly and safely to the benefit of all.