Perspectives

As appeared in Healthcare Finance News , Healthcare Purchasing News blogline and Patient Safety & Quality Healthcare. 

A curious thing is happening.

As the health care conversation moved front and center over the last several years, a correlation developed linking cost and quality. Politicians and providers, payors and patients have embraced these complementary themes as the “one-two punch” that will win the fight to keep our health care system safe, solvent and sustainable. As far as punches go, it sounds almost painless: Make the system better and safer, and the savings will follow. Who would argue with that logic?

Now it seems that some prominent voices have started to pivot the conversation toward the need for greater cost control, suggesting that quality and safety efforts alone may not deliver the necessary savings. Recently, three opinion pieces appeared in the New England Journal of Medicine (NEJM) and the Journal of the American Medical Association (JAMA) that call into question some basic assumptions about the economics of our health care system. Another article, published in Healthcare Finance News, added a new sense of urgency to this pivot in opinion.

The first article, “Where are the Health Care Cost Savings?” appeared in the January “Viewpoint” section of JAMA. The author pokes some pretty big holes into several commonly held beliefs about the drivers of health care costs. He references a number of sources to make the case that defensive medicine, insurance and pharmaceutical profits, and the often heroic and expensive care doled out to a small percentage of patients, account for much less spending than what is generally assumed. His argument points to the 10 percent of the population that accounts for 64 percent of health care spending, driven largely by seven major categories of chronic disease conditions. This allows him to make a cost and quality connection, calling for continued efforts to reduce avoidable complications and improve tertiary prevention. The new message here is subtle, but real. His editorial is about putting cost first and about the fundamental changes that need to take place to get spending under control.

The second piece is not subtle at all. It appeared the same week as the JAMA article, in the “Perspectives” section of the NEJM. The title says it all: “The Savings Illusion — Why Clinical Quality Improvement Fails to Deliver Bottom-Line Results.” The authors question why costs continue to climb despite improved clinical quality. They suggest the explanation lies in the rigid cost structure common to most health care settings. The existing cost structure perpetuates a system whereby improvements in clinical quality typically lead to additional capacity requirements instead of bottom-line savings. The authors describe a four-layer cost structure where clinical improvements that help reduce truly variable costs, such as medications and supplies, generally lead to measurable savings. They argue that clinical improvements that reduce semi-variable costs (direct hourly personnel), semi-fixed costs (equipment, OR time), and fixed costs (administrative time) are increasingly less likely to yield true savings. They go on to say that “hospitals will need to adapt their cost structures and capacity to accommodate lower per capita utilization rates as well as reductions in the per-episode intensity of care.”

Just a few weeks later, the NEJM ran an article titled “What We Talk about When We Talk about Health Care Costs.” The author drew inspiration from the newly published ethics guidelines from the American College of Physicians that call for physicians to practice “parsimonious care.” He uses the word “parsimonious” to illustrate the difficulty of talking simply about health care costs. He displays no difficulty, however, when he writes, “The problem is that no one in charge seems willing to acknowledge that getting a handle on cost growth will also involve uncomfortable trade-offs. We cannot as a society provide patients with unlimited access and unlimited choice. Providing better quality care, though it is vital, won’t change that reality.”

Finally, we come to the article published in Healthcare Finance News that recapped an interview with Dr. Donald Berwick, the former administrator of the Centers for Medicare and Medicaid Services (CMS), and Gerry Shea, an executive with the AFL-CIO. The piece summarized the main themes from the interview in a list of “six things to know about the current state of America’s health care system.” What I found so interesting about this piece is that Berwick, long known as the standard bearer for quality and safety, and Shea, a powerful union leader, both agreed that the top six things we need to know about healthcare ALL had to do with the problem of cost. Here’s my summary of their list: (You can read their remarks here.)

• We must address health care costs with urgency and as a primary goal.
• The country cannot afford health care spending at current levels.
• The working class is affected most by rapidly rising costs.
• We need to bring the same commitment to lowering costs as we have to improving quality.
• Goals need to be set and increased focus needs to be put on costs.
• Quick, drastic measures will not deliver a long-term solution.

So, what does this all mean? Are we done pursuing quality and safety? Do we begin rationing care and denying services? I believe that the opinions expressed by these thought leaders, in the pages of some of the most respected medical publications, represent the beginning of an important next phase. As we work to remake our health care system into one that is safer and sustainable, we need to begin the conversations that will lead us through the tough choices and challenges and on to real opportunities for lasting change. We must reach past the low-hanging fruit to the real goal — doing what is best for patients. This means focusing our safety and quality efforts on areas where the potential to save lives and dollars is greatest, and to help adapt our systems to work well within a new economic reality that favors best practices, improved outcomes and patient and provider satisfaction. We need to acknowledge that no one can expect unlimited access to unlimited choices, without unlimited resources. If we do this, we can build a system that allows for appropriate access to the best choices, so that it performs better than ever, in a manner that is safe and sustainable, for generations to come.

As seen on HIStalk.com

Walking the aisles of the exhibit hall and participating in HISTalkapalooza at the world’s largest gathering of healthcare IT professionals and the companies that do business with them led to several interesting discoveries.  

All of the usual suspects were well represented in the exhibit hall (Epic, Cerner, GE, etc.), along with the expected collection of smaller IT vendors and specialty niche solutions (did you know that Rubbermaid makes hospital-grade computer carts?). And, of course, you found companies like IBM, Oracle and Microsoft that also play in this space.

Coming in to the meeting, it was expected that ICD-10 would be a big topic of focus, but with the recently announced delay in the implementation requirement, that story seemed less relevant. There was also the announcement  that the stage two requirements for Meaningful Use were ready to be published in the Federal Register, but likely wouldn’t be available until after HIMSS. The announcement was big news, but it came too late to have any discernible impact on the conference floor. Finally, the trend toward mobile devices and cloud-based solutions is still grabbing a great deal of attention and booth space.

The trend that was most interesting was the rise and growing prominence of companies exhibiting at HIMSS that – at first glance – may seem out of place. For example, I had a meeting with the folks from Lockheed Martin. Yes, the same Lockheed Martin that makes fighter planes and satellites also has a healthcare business and is now partnering with Johns Hopkins on a patient safety and quality initiative. One of the larger booths in the exhibit hall belonged to a collection of IT and benefits management businesses that were recently cobbled together by one of the major insurance companies. I guess it should come as no surprise that as the American healthcare system continues to grab more attention (and more dollars) than any other segment of the economy, businesses new and old would look for their place at the table.

This trend got me thinking about my own place at HIMSS, and more specifically, where CareFusion should be slotted in the spectrum of industry represented there. To the uninitiated, you might think that CareFusion belongs closer to the Rubbermaid end of the spectrum, especially if you only focus on the “things” that CareFusion makes. What do surgical instruments, infection prevention, or infusion pumps have to do with information technology? However, when you realize those “things” are key components in a portfolio of solutions, many of which are tied together by the very technology that defines HIMSS, you begin to see that CareFusion brings a unique perspective and vision to the HIT conversation.

What became vividly apparent this year at HIMSS is that Healthcare IT today, and the concept of Meaningful Use, is much more than an EMR. It is the information ecosystem that supports every patient encounter. It is the millions of clinical data points streaming from a ventilator or an infusion pump, into a server or into the cloud. It is a medication order entered in a CPOE system, tracked and secured through an automated pharmacy system, and the surveillance engine on a constant vigil for inappropriate medication dosing or signs of infection.  It is new technology designed to make devices and HIT systems talk to one another and provide critical patient data to caregivers when and where they need it, seamlessly across hospitals and systems.

Initiatives like Meaningful Use can sometimes make us forget that healthcare IT is more than just software or the systems we build to collect and store data; it’s how those systems enable us to convert data into useful information to help improve workflow, efficiency and patient safety. As many providers begin to focus on Stage 2 Meaningful Use requirements, broader concepts like interoperability and standardization will emerge as critical objectives in achieving the desired end goal.

Or, as ONC chief Farzad Mostashari, MD, asserted in his keynote speech at HIMSS, “we’re on the right track to make meaningful use of meaningful use.” What I saw and heard at HIMSS was a promising acknowledgement of our shared responsibility to improve healthcare. It’s a challenge that’s breaking down barriers between providers, suppliers and companies of all industries and competencies working to make a contribution. I was proud to represent a company bringing so many meaningful solutions to the table.

I know what you’re thinking…five years later? Here comes another prognostication about the future of our healthcare system. Well, maybe, but we’ll get to that part later. Although the Patient Protection and Affordable Care Act (PPACA) is not yet two years old, there is one place in the United States where healthcare reform has a true history. The state of Massachusetts passed its own package of healthcare reform measures in 2006, under then Governor Mitt Romney. I recently read an interesting article that looks at the five-year results of the Massachusetts reform legislation. This might serve as a crystal ball, of sorts, into the future of the federal healthcare legislation.

The two plans have many direct parallels, including an individual mandate to obtain a minimum level of insurance coverage, subsidized coverage based on income, insurance exchanges, and insurance reform. So, five years later, how are they doing? Well, according to the article:

“…preliminary data show that the program has extended coverage to more than 98 percent of state residents; that support for the program has been consistently high among both doctors and patients; that premiums fell for many individuals but rose for small businesses; and that access to preventative care is up while non-essential emergency room visits are down…”¹

 

The results are encouraging, with the exception of the increased burden of healthcare costs on small businesses. The fact that less than two percent of Massachusetts residents do not have health insurance coverage is especially meaningful, considering that in the U.S. as a whole, that figure is now more than 16 percent. These findings could easily be used to make a strong argument that the Massachusetts reform plan appears to be working. That is until you read the next paragraph in the article:

“…however, rising costs may push the Massachusetts program – and healthcare plans nationwide – to a breaking point. Per capita healthcare spending in the state is increasing slightly behind the national trend, but even at that rate it is projected to reach an unsustainable level by 2018.”²

 

By 2018, per capita healthcare costs in Massachusetts could reach an average of almost $16,000. That is $3,000 more than the projected national average. As a result, the current governor has proposed to change the state reimbursement system from a fee-for-service model to a type of capitation, driven by quality and efficiency. The proposal would pay providers a lump sum to care for a given number of patients, with the payments closely coupled to quality measures. Sound familiar? It is essentially a state-run, state-wide Accountable Care Organization (ACO).

Can we use the Massachusetts experience to make predictions about the results of the PPACA after five years? Maybe, but only if the law is not repealed or weakened as a result of a Supreme Court action or the outcome of the 2012 election. If the PPACA remains intact for five years, we may very well see similar results, specifically a decrease in the number of uninsured patients and some positive trends regarding access to preventative care and non-essential emergency room visits.

Unfortunately, we don’t have to wait five years to see the most important parallel between the state of Massachusetts and the nation’s healthcare realities. It is clear today that the rising costs of healthcare are on an unsustainable trajectory. If we have any hope of truly bending the cost curve on healthcare spending, without resorting to draconian cuts that could undermine the entire system, then we must embrace and fully operationalize the practices, policies and procedures that maximize the safety, quality and efficiency of healthcare delivery.

Tens of thousands of lives, and tens, maybe hundreds of billions of dollars are lost each year to devastating healthcare-associated infections and medication errors. Precious hours of a provider’s day are lost to workflow inefficiencies. Tight hospital operating margins can be sacrificed due to a lack of basic insight and data about supplies, medications and costly clinical conditions. And the most critical and expensive areas in healthcare – the operating rooms, procedural areas and intensive care units – are still too often run on preference over proof.

Just like the federal deficit and debt concerns, there will have to be a balanced approach to making the economics of the American healthcare system sustainable. There will be no escaping changes in reimbursement and funding. However, the impact of those changes can be minimized if the cost structure can be contained by an unwavering focus on safety, quality and efficiency.

If we can learn anything from the Massachusetts experience, it’s simply that five years later, the time for action is now.

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^1,2 Krasny, Ros, and Clarke, Toni. (December 5, 2011). Special report: The legacy of Romney’s healthcare Rx. Reuters. Retrieved from http://www.reuters.com/article/2011/12/05/us-campaign-romney-healthcare-idUSTRE7B109A20111205.

Unless you have been in hiding, you have probably noticed a great deal of buzz about “Accountable Care Organizations” (ACOs) as a way to accomplish some of the goals of healthcare reform. And, if you have been paying attention, you may have also noticed that once the Centers for Medicare and Medicaid Services (CMS) published the proposed rules and regulations for implementing an ACO, many organizations jumped right off the bandwagon. One of the most thoughtful hospital system CMOs that I have the privilege of knowing said it best: “I like the concept of Accountable Care, I just don’t like the way CMS has constructed the Organization aspect of ACOs.”

The ACO is an attempt to craft a solution for one of the fundamental problems we face:  We don’t really have a “health care” system; we have a “disease intervention” system. Too many Americans wait until they are sick before they go to the doctor, which often leads to the least efficient and most costly care. And, because most payment models are currently structured to reimburse providers for doing “stuff,” these sick patients run up bigger bills and bring in more revenue than a healthy patient coming in for a routine checkup. What often gets lost in this discussion is that the ACO is just one part of a demonstration project aimed at reversing the financial incentives that contribute to higher costs and inefficiencies that plague the system.

In an ACO-type model, a population of patients is cared for by an organization of primary and acute care providers and facilities. The goal is to align the financial incentives with maintaining the overall health of that population of patients. That should result in fewer costly procedures and lower rates of hospital admissions. If such a fundamental shift is to be successful, it will require higher adoption of evidence-based practice in an attempt to drive improvements in outcomes and cost. The management of health and chronic disease, the medications that are prescribed and the procedures that are performed will be increasingly based on evidence over preference. While there will always be outliers and clinically justifiable reasons to deviate from established standards of care, the financial incentives to do so may not exist much longer.

Like healthcare reform in 2010, the political struggle to address rising deficits and the national debt has become the defining political meme of 2011. While the headlines may be different, the budget battle and the future of American healthcare are intimately intertwined. Spending on health care, through the Department of Health and Human Services (HHS), is the single largest item in the federal budget and a major contributor to our recent run of record deficits and a national debt that exceeds $14 trillion.

American healthcare faces a future where the only certainty is that providers will have to find ways to continue to improve the care that is delivered, while politicians figure out where and how to cut hundreds of billions of dollars in spending. A recent survey of nearly 800 hospital CEOs by the American College of Healthcare Executives (ACHE) shows that for the sixth consecutive year, “financial challenges” ranked as their highest concern. The second and third greatest concerns were “health care reform implementation” and “government mandates.”  Trailing behind at fourth was “patient safety and quality,” dropping from the number three spot it held in 2009.

As we work to adapt to the new economic realities that will define the future of American healthcare, I believe there are four areas of focus that hold the key to a successful transformation of the current system: Quality, safety, cost and efficiency. These four concepts do not exist in isolation, but rather as two sides of a value equation. Quality and/or safety are no longer good enough if they don’t also drive down cost and/or improve efficiency, and vice versa. For any new idea, drug, treatment, solution, device, workflow or paradigm to have a chance of adoption, it must first make an impact across both sides of this equation. In other words, it’s not about doing more with less; it’s about doing better with less.

This transformation will not be easy, but it can be successful; and, it can lead us to a healthcare system where we can help keep people healthy, provide better quality care and protect our bottom lines.