How do we disrupt the cycle of rising health costs?

Last week two new excellent new reports on health spending asked, do
we get what we pay for?Risingcosts_2

The answer is, well, sometimes — particularly when you follow the perverse incentives that lead you on the money trail of waste, ineffectiveness and, worst of all, poor health outcomes.PricewaterhouseCoopers’ Health Research Institute and the Center for Studying Health System Change offer their views on this topic with slightly different lenses.

In You Get What You Pay For, PwC examines 20 health systems and finds that managing costs is the top ranked factor for re-engineering payment systems throughout. Costs are put ahead of quality, efficiency, or meeting demand. While prospective payment (a la DRGs) has been adopted in 20 countries belonging to the OECD, and two-thirds of those countries believe their payment methods will change as they’re not stemming cost increases.

"Better informed patients" are seen as an optimal way to manage demand — not increasing out-of-pocket payments, at least not as a strategy on its own.

Quality data is emerging in many countries outside of the U.S. such as
England, Germany and Spain, but as in the U.S., consumers aren’t paying
much attention to that data.

(Note: PwC studied Australia, Belgium, Canada, Denmark, Finland,
France, Germany, Hong Kong, Italy, Malaysia, the Netherlands, Norway,
Poland, Singapore, Slovenia, Spain, Sweden, Switzerland, the United
Kingdom, and the United States. In their research and data aggregation
process, PwC used an internal wiki which helped capture the learnings
of PwC consultants throughout the world.)

In CSHSC’s report, Getting What We Pay For: Innovations Lacking in
Provider Payment Reform for Chronic Disease Care
, the focus is on the
growing burden of chronic disease and the failure of existing payment
systems — especially fee-for-service — in addressing continuity and
coordination of care.

The researchers found that without broad-based
reform to align incentives that address chronic care, market barriers
will prevent meaningful change. Barriers include fragmented care
delivery, lack of payment for non-physician providers and services
supportive of chronic disease care, potential for revenue reductions
for some providers, and a lack of a viable reform champion. That
champion could take the form, the Center says, of employers and plan
sponsors. They do not hold out hope for Medicare in the short run as
Medicare demonstration projects have a long cycle from beginning-to-end
and to results reporting. And while there are many private sector
pilots, these lack the scale required for meaningful change.

Jane’s Hot Points: PwC points out that payment incentives
among stakeholders in a health system must be designed to change
behavior and improve health outcomes. What informs those incentives is
information — the flow of data between patients, payers, and
providers. We can’t ask consumers to take on the "empowered, informed"
role without arming them with information. Ditto for providers, who
practice in the proverbial dark when it comes to the patient outcomes
they’re individually achieving. Health care is an information-based

Yet, getting to where we need to go in this PwC vision is still a long
way off. I listened to Dave Garets, the President and CEO of HIMSS,
present first quarter 2008 data on hospital adoption of EMRs. It’s not
a positive picture in light of President Bush’s goals of most Americans
having access to their personal EHR by 2014, according to Garets. And
the momentum achieved thus far could slow down even more in the next
few years as hospitals plan to allocate more resources for "revenue
cycle" applications. Those are the tools that will help hospitals
manage financial viability.

After all .. .costs are the No. 1 problem in the system, according to the
smart folks at PwC. We are in a vicious cycle. What we need is a
disruption to that cycle. Where will it come from?

5 replies »

  1. They do not hold out hope for Medicare in the short run as Medicare demonstration projects have a long cycle from beginning-to-end and to results reporting.
    isn’t 35 years a long enough demonstration project? because implementing hr 676, expanding our existing, proven medicare system to cover everyone in the country, would be both inexpensive and easy, compared to any other alternative.
    incidentally, we could fix medicare’s worst problems by ditching part d and getting the for-profit insurers out of it.

  2. PWC:
    “To help control costs, Republicans and Democrats alike urge an increased focus on the twin pillars of wellness and prevention, yet the parties have yet to outline significant policies promoting this agenda and the employer’s expanded role.”
    That’s because neither have a clue that this will not work and if they did would not have the spine to make it work.
    “However, all of the major candidates agree that a single-payer model is not tenable…”
    Just what the healthcare industry wants to hear. So what is tenable, the same outcome from lack of proper energy policy? As with energy policy, does America think doing nothing is tenable? Is America happy with the outcome of no viable energy policy now?
    Any other option other than universal single-pay will not work to control costs. As Americans kid themselves that the oil industry (and speculators) will solve our energy crisis, they kid themselves that the healthcare industry will solve the affordabiltiy crisis in healthcare. But let’s make both sides happy and the solution painless (after all isn’t that government’s job), let’s just have government print more money.

  3. When I read “perverse incentives”, I thought of the displays of Cymbalta and Chantix in the waiting room of one of the local doctor’s office. I recently tried to get a doctor for our household, but he would not accept me as a patient because I do not have health insurance and never intend to get it. I want to pay up front for health care. I’m thinking maybe it isn’t so bad that this happened, but what I am wondering is this: We have a county medical clinic, and although it serves the poorest and homeless people, a paying customer can go there. The doctors are on salary, as county employees. They do get drug samples from pharmaceutical companies, but do they get incentives for prescribing certain drugs? If they do not, I think they might just provide superior health care.

  4. Research, and the breakthroughs, innovations and new treatments that result, can reduce health care costs. I know it’s just part of the equation, but it definitely needs to be kept in mind in these discussions.