The Business of Health Care

How Do We Bend the Cost Curve? Reduce the Waste.

Health care had its own version of the LeBron James “Decision” last month with the Supreme Court upholding the critically important elements of the Affordable Care Act. Now that the uncertainty is behind us―at least until the November elections―health care leaders can continue preparing their organizations for the changes ahead.

Fixing the system requires reforms at the macro level. But it also takes a symphony of smaller actions happening in concert. As experience bears out, it is difficult to agree upon a collective action with so many competing interests in health care and the partisanship that has gripped politics. But there is a song that we can all agree upon, loud and in unison. Reduce the waste.

Nearly a third of our health care costs come from wasteful spending and inefficiencies that could be avoided. Left unchecked, this is a nail in the coffin of our system; but, if tackled, is a huge cost containing opportunity. By identifying waste in the delivery system and systematically reducing it, we could lower costs without resorting to budget cuts and fees that compromise the quality of care.

In the labyrinth of health care, waste has been difficult to identify, but emerging research has pinpointed where inefficiencies can be significantly reduced with policy or regulatory action, by re-engineering the delivery of care and through the utilization of health IT. Across the country, pockets of innovation have sprung from forward-thinking organizations that are reducing wasteful spending and improving patient care. We need to focus on making this a more widespread practice and changing the national conversation on cost containment.

Dr. Donald Berwick, former head of the Centers for Medicare and Medicaid, has been a vocal champion for reducing waste. Acknowledging the difficulty that comes with the effort, he issues a challenge that we should accept: “It’s always easier to stay in the status quo. That’s where courage and backbone matter.”

As part of its Bend the Curve campaign, NEHI has identified specific actions for reducing $521 billion in wasteful health care spending in seven critical areas: medication errors, hospital admissions for ambulatory care sensitive conditions, patient medication adherence, emergency department overuse, hospital readmissions, antibiotic overuse and vaccine underuse. This research is uncovering best practices from those who are successfully reducing costs by eliminating waste and showing us what is possible.

Medication non-adherence, for example, is a costly and complex problem. By our estimation, it costs $290 billion annually and results in avoidable illness and death. There are many actors involved with this issue―from physicians and pharmacists, to patients and care teams. And there are proven approaches that leverage all of them to address the issue on a system-wide basis. Improving care coordination, using technology such as e-Prescribing and electronic health records, and employing tools that can identify patients with the greatest risk for non-adherence are just a few.

North Carolina has developed a model that cut $1.5 billion in avoidable costs. The Pharmacy Home project, launched by Community Care of North Carolina five years ago, has embedded clinical pharmacists and care managers within its 14 networks of physician practices to improve coordination and medication management for its patients.

Another area of wasteful spending is the overuse of antibiotics, which results in $63 billion in excess health care and societal costs annually. Reducing antibiotic overuse by just 20 percent would save up to $5.2 billion in health care expenses each year and would eliminate up to $11.3 million in additional hospital stays.

Within health systems, hospital executives can lead and execute strategies to educate staff and patients about the appropriate use of antibiotics. A study out of Brown University School of Medicine looked at ways to improve two problems in the nursing home setting-the unnecessary use of antibiotics and medication errors. The research team found that educating both patients and providers about the overuse issue was critical to curbing the problem; in fact, those who were undertreated for antibiotics were not harmed, while those who were often experienced clinical complications.

These successes should be guiding the way our health care leaders and policymakers approach the conversation of improving our health care system. Programs that are reducing waste while improving care quality should be at the center of constructive and action-oriented discourse about how to cut health costs in America.

Policymakers have a duty―whether through policy and regulatory reform, or thought leadership and funding support―to scale best practices nationally. Health care leaders also have an important responsibility. As part of our daily balancing act of executing on what needs to get done in the short term while also preparing for the future, we need to employ common sense strategies that eliminate wasteful health care spending starting right now.

Wendy Everett, ScD, is the president of NEHI, a national health policy institute.

1 reply »

  1. You seem to be missing one of the most common underlying causes for excessive Healthcare cost. Most would agree prevention is the lowest approach to lowering cost. The next in line would be early diagnosis and correct treatment. The current medical model of the 10 minute GP visit and the GP’s best guess referral to a specialist is a bad model. The GP has little time to hear and analyze the patients whole picture so typically refers based on the symptoms with the most obvious match to a specialty and maybe a few tests. The GP often gets it wrong and the specialist is too specialized to find the problem. This leads to ER visits followed by more 10 minute attempts to diagnose, more simple tests followed by another specialist. This goes on and on, sometimes for years. The failure to correctly diagnose early often leads to chronic diseases that cause more visits, tests, expensive ER visits and on and on. With GP visits getting shorter and shorter especially at HMO like Kaiser, this is driving a costly cycle of diagnosis failure. There are many strategies to correct this problem. The simplest for an integrated system like Kaiser would be to offer members access to online software that provides the most obvious differentials for the GP and a summary. Patients have lots of time to interact with software providing far more details and history than a 10 minute rush to diagnose. If the GP had the diagnosis software output available at the 10 minute meeting, its suggestions could quickly choose the most sensible tests and referral suggestions. This would dramatically help the GP and cause a 10 minute visit to be as effective as an hour with a team of experts. This sort of software is already available. An integrated data organization like Kaiser could provide access to the software whenever a GP felt it made sense. That in turn would aid the doctors in getting the right tests and referrals and diagnosis much more quickly than the existing model. This could be combined with a diagnosis experts group for complex cases where the software and GP felt it made sense. Why don’t simple ideas like this just happen? Doctors and Healthcare seem to be attached to their dogmas. Its time to breal it.

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