The Levers We Have at Our Disposal to Reduce Spending on High Cost Claimants


A new report out from the American Health Policy Institute and Leavitt Partners further quantifies what we already know: a handful of employees are responsible for the bulk of employers’ health care spending. The new report documented that among 26 large employers, 1.2 percent of employees are high cost claimants who comprise 31 percent of total health care spending. Interestingly enough, the report was released on the heels of news yet again that high deductible health plans continue to be more popular than ever as a strategy for employers to control costs, with employee cost sharing expected to rise yet again this year.

And yet high deductible health plans may do more to bend the cost trend for healthy employees by reducing spending on items like pharmaceuticals and lab testing but not on inpatient care.

The least heathy employees quickly blow through their deductible, and their health issues are so acute and their bills so large, they don’t shop around for care. So what is a large employer or any purchaser concerned about these high cost claimants to do?

Consumerism in how we typically think of the concept doesn’t seem to be working.  For example, according to McKinsey,most healthcare consumers are not doing their homework – they aren’t researching costs or their choice of providers. And even for the handful that do use price transparency tools, new research shows this doesn’t result in savings. It’s not that patients with serious health conditions don’t want to understand their condition, the latest evidence-based treatment options, who are the best physicians, and treatment costs. It’s just that they need assistance curating and interpreting this complex information.

Fortunately, as the recent report explains, there are other strategies that can work. The report highlights data mining, enhanced participation, wellness programs, care management, and biometric screening as some examples of strategies that can work. But to truly understand how we can address the costs associated with the most expensive patients, we need to start by understanding the leading cost drivers in health care for these patients. What causes spending to skyrocket? What are the opportunities to intervene to bend the cost curve? When we dig into the research on drivers of health care spending, it quickly becomes apparent there are several opportunities for “intervention.”

 The first intervention is making sure high cost patients have the right diagnosis to begin with. Misdiagnosis is more common than medical errors, resulting in an incredible amount of wasteful spending. One in 20 patients will be misdiagnosed, almost 12 million Americans each year. Other researchers quantify the human cost of diagnostic errors at between 40,000 and 80,000 deaths per year.

One obvious strategy to address this is the use of second opinion services, which are growing in popularity among large employers; according to Towers Watson, one quarter of employers plan to tie reimbursement to second opinion services by 2018. Such services are very valuable for confirming if a diagnosis is correct for complex, life altering conditions or confirming if the proper tests have been completed or recommended treatment plans are correct.

Once the patient has a correct diagnosis, the next opportunity presents itself: taking a pause to discuss treatment options given the patient’s diagnosis and their personal situation.  During this step, patients need to understand the best-evidence treatment options, and articulate their personal values and preferences.Unfortunately in medicine today that is so often not the case. For example, new research out from Duke University found that the vast majority of the time, patients’ preferences did not influence they type of prostate cancer treatment they received.

Sometimes just a discussion about options is an opportunity for a patient to select a less invasive procedure. For example, as the American Health Care Policy Institute/Leavitt Partners report points out, through its Surgical Decision Initiative, Honeywell compelled employees to weigh their options before having one of five common high cost surgeries.  In many cases, the most appropriate, highest quality care for a condition like lower back pain is not surgery. Honeywell realized savings of $5.6 million over the past five years, according to an independent actuary as a result of the program, and are now in the process of expanding it.

After discussing treatment options with the patient, the third opportunity for an intervention arises.  If the patient wants to move forward with the more invasive procedure or surgery, getting them to a high quality provider is the next step.  Purchasers have a growing awareness that provider quality matters.

Extensive research around price variation has shown that the best providers don’t cost the most and often the most expensive providers have worse outcomes.  Top-quality physicians may cost less over the course of treatment than their peers because they are more efficient; for example, they conduct fewer unnecessary tests and redundant imaging.

So, what makes for a top quality physician? One key metric for a high quality physician is their experience and volume in performing certain procedures. In one large study reviewing the relationship of surgery volume and experience to physician performance outcomes, there was strong finding that increased experience and case volume is associated with lower mortality and reduced hospitalizations. Experience matters. A lot.

As a final intervention point, we need to make sure the patient and their family/caregiver are getting the longitudinal support they need to cope. This is a way to ensure the patient gets access to the skills and resources available to them ranging from mental health and medication management to claims advocacy, benefit plan information, and access to caregiver and patient communities. Studies show patients with these social supports have better outcomes. For example, many readers will be familiar with Boeing’s use of the Intensive Outpatient Care Program to improve outcomes and reduce costs associated with medically complex patients. By using care managers to provide care coordination and also to arrange social supports, Boeing reduced spending on these patients by 20 percent.

For the past two decades, discussion about consumerism, skin in the game, and high deductible plans has been all the rage. And this strategy does have its place, encouraging employees who are mostly healthy make prudent care decisions. But we have spent very little airspace discussing what to do about the highest cost employees, how to manage their costs and get them the care and ongoing support that they need. That is now changing for the better and its time we had an in depth conversation about what real care management means. It is a monumental opportunity to contain costs while giving patients what they actually need.

Cindi A. Slater M.D. is the Chief Medical Officer of ConsumerMedical


10 replies »

  1. Pjnelson is spot on with the distribution of health care
    His personal experience of high costs in 3 years out of 17 corresponds with our premier actuarial firm: small claims every few months; larger claims every 3-5 years
    Barry is also correct that the high claimants change yearly
    Willis came out with a report there is a 78 percent chance a high claimant one year will be a low claimant the following year
    Using these same statistics, accumulating 213(d) medical dollars instead of cash, Health Matching Accounts can double in 35 months, less claims paid

  2. The problem is not patients, it’s prices and our salt/sugar/fat food culture. We keep trying to tweak the patient, usually the patients bank account – it has little effect.

    Good NPR story on how to solve the failure of education for low income (mostly black/hispanic) children – it’s INTEGRATION, but whites don’t want “those kids” mixed with their little darlings. I point this out because health care has the same myopic thinking.

  3. pjjnelson,

    Using myself as an example, for the last 17 years, I’ve had heart disease. I was an expensive patient during three of those years when I needed high tech interventions including a CABG but my healthcare costs were pretty low for the other 14 years. My six generic drugs combined cost less than $1,000 per year.

    People with chronic conditions like CHF and complications from diabetes could benefit from intensive case management to keep them as stable as possible and minimize trips to the ER. The same is probably true for patients with mental illness.

    On the other hand patients with ESRD who need dialysis indefinitely and those who need lots of long term custodial care will be expensive to care for every year. Patients with rare or complex medical issues may be medical mysteries that even the NIH can’t diagnose after those patients arrive with binders full of prior test results.

    The bottom line tough is that it would be very helpful from a systemwide cost perspective if as many patients as possible could get as much of the necessary and appropriate care that they need from the most cost-effective high quality providers.

  4. Barry,

    Clearly, many citizens languish in one grouping or another for variable lengths of time. The “unit costs” for the episodes of each person’s healthcare are highly variable and probably governed ultimately to some degree by Parkinson’s Law. At the point of initiation for an episode of healthcare, the evolving character of the subsequent use of resources is governed by the actions at the initial point of medical TRIAGE. For instance, the current review of the role of a Hospitalist highlights the discontinuity of that institutional function. In sum, the institutional characteristics of healthcare are more of a problem than how we structure its financial support.
    Furthermore, a rapidly evolving change in a citizen’s health, that involves many simultaneously evolving, poorly definable HEALTH dimensions, is unlikely to lend it self to definable cost-benefit analysis. Certainly, the are many situations that do lend themselves to large scale cost-benefit rules. But, more often than not, the degree of uncertainty in the midst of high-cost healthcare is profound.
    As an example, a person with a low level of red cells in the blood can usually be evaluated with a widely affirmed sequence of tests. Rarely, this requires a test on the bone marrow where the red cells that carry oxygen are produced for the blood. More rarely, these results will show a “possible pre-cancerous” problem of uncertain character. The test can be sent to multiple national experts without achieving a conclusive agreement as to a clearly defined diagnosis. Everyone involved usually knows that a rapidly evolving type of leukemia may soon occur. If it occurs, an extremely rapid and devastating sequence of events occurs usually involving the consideration of a bone marrow transplant. And suddenly the cost of healthcare has passed $1 million.
    In sum, we really don’t know much about the cost categories that populate the Power Law Distribution Curve (PLCD) for our nation’s healthcare. It shouldn’t be difficult to assess the migration of citizens through the sequence of cost categories within the PLCD.

  5. First, high cost patients are not the same people from one year to the next. Some are but many aren’t.

    Second, there is potentially a lot of money that can be saved if a service, test or procedure that doesn’t have to be provided in an inpatient hospital setting can be provided on an outpatient basis in a non-hospital owned independent facility. Even for procedures like surgeries that do need to be done in a hospital, some hospitals are much more expensive than others even at insurance company contract rates and even within the same city. Steering patients toward the most cost-effective high quality providers could save a lot of money if doctors and patients had a way to identify those cost-effective high quality providers in real time.

  6. Cindi,

    Taking a clue from the Power Law Distribution Curve, I am aware that the estimates of our nation’s annual healthcare costs/citizen are allocated approximately as follows: 5% of citizens use 50% of the total cost, the next 15% use 30%, the next 30% use 15%, and the last 50% use 5%. Do we know much about the characteristics of the citizens who progressively move up from one group of citizens to the next higher or vice versa? I suspect we know some about the two most costly transitions and very little about the lowest costly transition. Am I correct?

    I also suspect the underlying theme of the current attributes of our nation’s healthcare proceeds from the absence of a nationally sanctioned means to adequately capitalize and uniformly disperse the availability and accessibility of “enhanced” Primary Healthcare, community by community. No amount of “fiddling” with value based-reimbursement processes will solve our nation’s terrible maternal mortality ratio or any other quality outcome. Great Britain abandoned this strategy long-ago. Do we really need to learn this again?

  7. I would suggest that establishing a correct diagnosis is probably more difficult in this EHR driven care scenario. Docs are spending more time with computers than patients.

  8. NBC News recently ran a story about a woman who needed an expensive infusion every two months. The cost at a local clinic was $4,000 per treatment. The same treatment at the local hospital cost $40.000!! The quality of care was comparable. The insurance company incentivized the patient to use the clinic instead of the hospital by paying her $500 (a negative copay if you will) per treatment or $3,000 per year.

    As you noted in the post, the very high cost cases can easily justify a payer’s investment in aggressive case management including the assessment of the need for social support in the home.