The Healthcare Imperative Lowering Costs and Improving Outcomes: Workshop Series Summary (2010) / Chapter Skim
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Peterson Foundation -- convened four meetings throughout 2009, under the umbrella theme The Healthcare Imperative: Lowering Costs and Improving Outcomes. These meetings explored in detail the nature of excess health costs, current evidence on the effectiveness of
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As defined in the meeting planning and presentations, excess health costs derive from the dynamics at play in six overlapping domains of activity. • Unnecessary services • Services inefficiently delivered • Prices that are too high • Excess administrative costs • Missed prevention opportunities • Medical fraud Because of the overlaps, the difficulty of measurement, and the subjectivity in herent in estimates made under conditions of scientific uncertainty, precision was elusive for estimates of the total amount of excess in the costs of health care.
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Certain of the participants, invited to offer insights specific to the challenge of reducing healthcare costs by 10 percent within 10 years, individually identified the approaches below as prime candidates for strategy and policy attention to lower costs while improving outcomes, given what is currently known about both the nature of the problems and the availability of potential solutions. Care-related costs • Prevent medical errors • Prevent avoidable hospital admissions • Prevent avoidable hospital readmissions • Improve hospital efficiency • Decrease costs of episodes of care • Improve targeting of costly services • Increase shared decision-making Administrative costs • Use common billing and claims forms Related reforms • Medical liability reform • Prevent fraud and abuse Finally, meeting participants identified a number of possible issues and activities for follow-up attention of the Institute of Medicine and its Roundtable on Value & Science-Driven Health Care (formerly the Roundtable on Evidence-Based Medicine)
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Peterson Foundation acts as an independent, nonpartisan convener and facilitator devoted to the mission of increasing public awareness of the nature and urgency of key economic challenges threatening the nation's fiscal future, and accelerating action by identifying sensible, sustainable solutions. Engaging the range of issues -- from debts and deficits to excessive energy consumption and a lagging educational system -- threatening the nation's financial future, the Peterson Foundation has committed significant resources and attention to the area of healthcare costs and solutions given health care's direct impact on the economy, including their support for this workshop series.
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. On the individual level, the average cost of annual health insurance premiums for a family of four exceeded $13,000 in 2009, growing five percent in just a single year (Kaiser Family Foundation, 2009a)
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The series aimed to gather stakeholders in a trusted venue to engage the issues and concerns needed to facilitate the development of a healthcare system that not only delivers best practices and adds value with each clinical encounter, but adds seamlessly to the knowledge base for health improvement. Motivated by the proposition noted above of reducing per capita health spending in the country by 10 percent within 10 years without compromising health status, quality of care, or innovation, the meeting objectives included: characterizing and discussing the major causes of excess healthcare spending, waste, and inefficiency in the United States; considering the strategies that might reduce per capita health spending in the United States while improving health outcomes; and exploring policy options relevant to those strategies.
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• The third workshop in the series, titled The Policy Agenda and held on September 9-10, explored the policy options to speed adoption of previously discussed strategies to control the drivers of health care spending. • The final meeting in the series, titled Getting to 0 percent: Oppor tunities and Requirements and held on December 15-16, explored in greater detail the priority elements and strategies key to achiev ing 10 percent savings in healthcare expenditures within 10 years, without compromising health status, quality of care, or valued innovation.
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Orszag, in his keynote address in Understanding the Targets, explained that federal spending on Medicare and Medicaid would grow to unprecedented levels over the coming decades if cost growth continued at uncontrolled levels. He highlighted that Medicare spending per capita by hospital referral region varied more than threefold -- from $5,000 to over $16,000 -- and that this very sub
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. Fragmented Decision Points, Inconsistent Principles, Political Distortions Clear from the discussions was the multifaceted nature of the problem, ranging from poor care coordination, lack of consistent evidence-based guidelines, and medical errors resulting from multiple handoffs, to inconsistencies in the policies of health insurance regulators, payment systems that encourage volume over value, and political influences that sometimes overturn scientific determinations.
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Compounding the problem of economic incentives promoting volume over value, the implicit pressures of the medical liability environment and defensive medicine were noted as contributing substantially to the delivery of unnecessary services. Much higher reimbursement levels for specialty over primary care further distort the incentives for certain services.
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. Opacity as to Cost, Quality, and Outcomes Without meaningful and trustworthy sources of information on healthcare costs, quality, outcomes, and value, patients were described as becoming disempowered in the decision-making process.
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Streamlined and Harmonized Health Insurance Regulation Many participants posited that addressing system fragmentation required effective streamlining of the diverse protocols and requirements arising from interactions between insurance companies, myriad employers and
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Payment Redesign to Focus Incentives on Results and Value Based on encouraging signs from demonstrations and theoretical models, many attendees suggested that much may be gained (lower costs, better outcomes) from broad changes to focus payments on episodes, outcomes, and value and to better target resources to those patients at highest risk of poor outcomes.
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The attention and resources dedicated to health information technology in recent legislation reflect the significant potential for electronic health records (EHRs) to facilitate care coordination and minimize medical errors (CBO,
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Many suggested that not only might electronic records improve clinical decision making and handoffs, but clinical data should be considered a knowledge utility. As a resource for real-time monitoring of the results of treatment and ongoing generation of new evidence for effective care, several individuals suggested that electronic health records have the ability to facilitate continuous improvement in the quality of care delivered.
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They include issues related to reorientation to patient-centered value; payment reform; multimodality of approach; specificity of responsibilities; incrementalism; transparency and accountability; and collaboration. WORKSHOP ONE: UNDERSTANDING THE TARGETS The first workshop, titled Understanding the Targets explored the major drivers of excess spending in health care, focusing on the categories below: • Unnecessary services; • Inefficiently delivered medical services; • Excess administrative costs; • Prices that are too high; and • Missed prevention opportunities As noted earlier, Office of Management and Budget Director Orszag led off the workshop and the series with a keynote address that emphasized the compelling challenges to the nation's fiscal integrity, focusing on the growth of health costs and individual and societal consequences.
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Below brief summaries of the individual presentations are presented. Unnecessary Services Speakers in this session examined the provision of unnecessary services, highlighting the consequences of scientific uncertainty, perverse economic and practice incentives, and lack of patient engagement in decisions (Chapter 2)
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Wennberg cautioned that data was still needed to assess the financial impact of provider-based SDM on total expenditures, and the effect benefit designs and reimbursement models could have on increasing use of SDM. However, given the potential savings, he recommended a paradigm shift from informed patient consent to informed patient choice.
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Kaplan suggested that efficient use of skilled mid-level providers could reduce healthcare costs substantially for both purchasers and providers. Using the care pathway for breast nodules as an example, he explained that more than 90 percent of patients with breast nodules do not require surgery.
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He offered that savings from efficiency and streamlining might approximate $6 billion annually, about 0.2 percent of total healthcare costs in the United States. While Jessee suggested that this estimate was provocative, he also cautioned that it was preliminary in nature, as it was based on limited cross-sectional survey data.
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Excess Administrative Costs The presenters in this session approached estimating excess administrative costs from a variety of macro- and microeconomic levels, all with the goal of identifying the portion of expenditures spent on administration that could be reduced by increasing the efficiency of the delivery system, which highlighted the need for administrative simplification and harmonization (Chapter 4)
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Care Site Administrative Costs Beyond Benchmarks James L Heffernan described physician billing costs as a substantial component of administrative costs, and comparatively higher than the costs for similar functions in other industries.
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Capps focused on the consequences of hospital consolidations, describing recent trends and evidence from economic and health services research that found that consolidation often results in higher prices for hospital services. Using national data on the system affiliations of hospitals and other hospital characteristics and results from the existing economic literature, he quantified the likely effects of consolidation on the prices paid to hospitals for inpatient care and estimated the contribution of hospital consolidation to overall healthcare spending.
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Missed Prevention Opportunities These presentations explored how changing demographic trends in the population's health status and underinvestment in population health
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While acknowledging that certain costs could have been omitted or double-counted due to insufficient data, he suggested an estimated net medical cost savings of $7 billion or a 0.4 percent reduction in personal healthcare expenditures from increased use of recommended primary preventive services. Conversely, he found that none of the included secondary preventive services were cost saving.
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Of this amount, he related that nearly two-thirds or $436 billion is attributable to outpatient care, which is partly due to an ongoing structural shift away from inpatient settings that should in theory reduce total system costs. However, it was estimated that the United States saves at most $100 billion to $120 billion in inpatient care costs as a consequence of our capacity to provide care in an outpatient setting, far less than the $436 billion in above expected costs.
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He described their pioneering work with bundled payments for cardiac surgery, which has yielded significant improvements in the delivery of evidence-based care and decreased re-hospitalizations within 30 days by 44 percent. With a focus on the high-utilizing chronic disease population, Steele relayed that their care management initiative has reduced readmission rates among the targeted population by nearly 30 percent within a year and decreased total medical costs by 4 percent -- a return-on-investment of 250 percent.
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While suggesting that Intermountain's protocols could be adopted across different models of care delivery, she additionally discussed the larger challenge of sustainability of savings beyond initial implementation. Decision Support Provided Through Electronic Health Records With accumulating evidence that EHRs can improve the efficiency, quality, and safety of health care by providing more complete information with evidence-based decision support to physicians at the point of care, Rainu Kaushal explored the potential of EHRs to lower costs and improve outcomes.
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In order to accomplish broader use of all clinical data for new insights, he recommended a comprehensive restructuring of our clinical data collection process, including the development of universal problem lists which could facilitate patient care, quality improvement initiatives, and clinical research. Care Culture and System Redesign While the presentations in this session were diverse, all the strategies discussed share the central idea of shifting the current culture to one of patient-centered care through such levers as streamlined and harmonized health insurance regulation, quality and consistency in treatment with a focus on the medically complex, sharable clinical records, and medical liability reform (Chapter 9)
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Care Site Integration Initiatives Timothy G Ferris discussed a 3-year Centers for Medicare & Medicaid Services care coordination demonstration based at Massachusetts General Hospital (MGH)
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He also reviewed literature suggesting that widespread HIE might save nearly $80 billion in annual healthcare costs, and also explored the limitations of the methods utilized to reach the estimates. Jha cited the formation of a national strategy and standardized infrastructure protocols as keys to driving the success of HIE.
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Medical Liability Reform Randall R Bovbjerg suggested that conventional reforms of medical liability could be expected to reduce health spending and health insurance premiums in three ways: (1)
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Transparency in Comparative Value of Treatment Options Focusing on methods of reducing healthcare spending in the United States without compromising quality of care or population health, G Scott Gazelle discussed the requirement of careful allocation of healthcare dollars and the ability of cost-effectiveness analysis (CEA)
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Identifying a number of reasons for this partial success, she suggested that, as healthcare costs have ballooned out of control, purchasers have increasingly selected plans based on cost of premiums or best provider discounts; many private purchasers have not rewarded high performing plans; consumers often have few or no choice of health plans; and many health plans have been ambivalent about their role in quality.
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This presentation identified alternative ways of paying for health care, from bundled payments to care warranties, which might enable and reward higher quality and lower costs. Also discussed were the types of patients, provider organizational structures, and market conditions that were most conducive to successful use of each payment approach.
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utilized copayments, coinsurance, deductibles, and other similar strategies to contain healthcare spending by encouraging patients to only consume medical services with benefits greater than their costs. Extrapolating from recent literature about the efficacy of VBID, he estimated if VBID were applied nationally to five common conditions, a potential savings of more than $2 billion per year might be possible.
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Community-Based and Transitional Care Speakers participating in this session identified the critical role prevention and population health, as well as quality and consistency in treatment with a focus on the medically complex, could play in lowering the burden of chronic illness and improving productivity and quality of life (Chapter 12)
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As such, she explained that palliative care was highly adapted to serving the 23 percent of Medicare beneficiaries with five or more chronic conditions who drive over two-thirds of all Medicare spending. After describing the benefits of palliative care in terms of the major domains of quality, including patient-centeredness, benefit, safety, and efficiency, she suggested that savings associated with palliative care, once scaled to meet ongoing needs, were estimated to be nearly $5 billion per year.
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Technological Innovation Adam Darkins discussed the potential for technologies that incorporate health informatics, telehealth, and disease management to impact the outcomes and costs management of patients with chronic disease. Focusing on telehealth, he reviewed accumulating data that suggested such care coordination with home telehealth approaches could significantly reduce healthcare costs and improve access to care in rural communities.
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Anderson suggested that payment reforms, no fault malpractice insurance, and care coordination are transplantable strategies for lowering costs and improving outcomes in this country. Noting that specialists in the United States earn up to 300 percent more than those in other countries, that prices for branded drugs cost up to twice as much, and that hospital stays are up to 200 percent more expensive, he suggested that cost control mechanisms in other nations such as Germany have helped control spending growth and could yield significant savings if applied here.
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Based on their report, the Commonwealth Fund estimated that significant savings could be achieved from implementation of their policy recommendations, with a potential of $123 billion over a decade from instituting bundled payment policies, $83 billion over 10 years from strengthening primary care and care coordination, and $70 billion from promoting HIT. Following Davis' keynote address, the meeting turned to an update and discussion of the estimates from the previous two workshops (see "Pulling the Numbers Together" below)
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Bertko focused on the experience of the private sector with bundled payments, reviewing experiments that have occurred over the past two decades. After describing the successes of Geisinger Health System's ProvenCare™ program, under which hospital and physicians are paid a global fee, and insurers' bundled transplant programs in centers of excellence, he contrasted this with a discussion of failures, including what was called (in the late 1990s)
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He additionally emphasized that the design of bundled payment models requires clear objectives from policy makers, input from providers and others, and technical assistance on management and quality improvement at the local level. Issues for Patients Nancy Davenport-Ennis indicated that bundled payment systems are aligned conceptually with patient interests in improved outcomes and lower healthcare costs.
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In order for palliative care to be accessible to all patients with serious illness and their families, he urged consideration of a number of key initiatives: education of patients, families, and healthcare professionals of the benefits of palliative care; emphasis that palliative care is not synonymous with end-of-life care; additional resources for workforce development to train sufficient numbers of specialists to effectively provide palliative care to patients and families in need; patient-oriented and health services research; and reimbursement structures that promote team-based care. Issues for Healthcare Organizations If the twin aims of lowering costs and improving population health are to be achieved, Ronald A
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He additionally discussed patient engagement as playing a central role in patient management of their own care and provider payment reform as essential to the success of incentives for care coordination and management. Delivery System Integration Highlighting the benefits of streamlined and harmonized health insurance regulation, payment redesign, and secure, sharable clinical records, the presentations in this session targeted delivery system integration and connectivity as methods of lowering costs and improving outcomes (Chapter 17)
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This presentation specifically focused on approaches to payment that would encourage greater coordination of care, resulting in higher quality and lower Medicare spending: reducing preventable hospital readmissions, increasing the use of bundled payments, and holding accountable care organizations responsible for the cost and quality of the care their patients receive. Building on these ideas, Harold S
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She identified a number of current barriers which limit appropriate use of such providers, including federal and state laws and regulations; opposition from healthcare systems, professional medical groups, and managed care organizations; reimbursement and other payment policies; and exclusion from demonstrations proposed as part of health reform. Policies options outlined by Naylor included: advancing regulatory reform that would revise state "scope of practice" laws where unnecessarily restrictive; including qualified providers in testing of proposed system redesign and payment reform demonstrations; payment reform that emphasizes the team as the payment unit and reinforces the team's accountability for individual and population health while promoting fair compensation for licensed independent practitioners by all payers; implementation and enforcement of "any willing provider" laws in all states; and promotion of research assessing the value and comparative effectiveness of innovative care and payment with a variety of providers.
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Drawing on the work of the Healthcare Administrative Simplification Coalition, she focused on four processes with the potential to reduce costs for providers and payers and improve service to purchasers and consumers: (1) practitioner credentialing, (2)
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Stakeholders must recognize that the majority of consumers are unaware of quality deficiencies in our healthcare system and are insulated from healthcare costs. As tools to create delivery system changes that address the needs and desires of consumers, she highlighted options including implementation of patient-centered care models, use of patient experience surveys, changes in benefit design, and consumer-friendly performance reporting.
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First, at the very highest level -- aggregate excess costs systemwide -- he noted that estimates made from four analytically distinct approaches came to roughly similar approximations for the nation's total excess healthcare costs. Specifically, looking at regional variations in care costs, the Dartmouth group estimated overall excess expenditures to be about 30 percent of national health expenditures (Wennberg et al., 2002)
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Approximations using this approach sum to 2009 totals of about $210 billion in excess health costs from unnecessary services, $130 billion from inefficiently delivered services, $190 billion from excess administrative costs, $105 billion from prices that are too high, $55 billion from missed prevention opportunities, and $75 billion from fraud (Box S-2)
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• Overuse: services beyond evidence-established levels • Discretionary use beyond benchmarks – Defensive medicine • Unnecessary choice of higher cost services INEFFICIENTLY DELIVERED SERVICES Total excess = $130 B* • Mistakes -- medical errors, preventable complications • Care fragmentation • Unnecessary use of higher cost providers • Operational inefficiencies at care delivery sites – Physician offices – Hospitals EXCESS ADMINISTRATIVE COSTS Total excess = $190 B*
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. In referring to several presentations that suggested the potential for considerable savings from payment reform, McGinnis noted that Rastogi's savings estimate of $355 billion for the commercially insured from implementation of bundled payments was similar to a published estimate of $301 billion in savings from utilization of bundled payments for acute care episodes (The Commonwealth Fund, 2009)
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This final point was particularly relevant in the discussion of bundled payments and payment reform, as many major examples of bundling success, such as those of Geisinger and Kaiser Permanente, occur within the context of vertical integration of providers. Therefore, the discussants underscored that it remains unclear how bundled payments could be opera
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In addition to focusing on payment reform, Rosen additionally advocated further discussion on individual responsibility and personal investment as critical as consumers and providers jointly work to improve health and the untapped potential of medical liability reform to lower costs. WORKSHOP FOUR: GETTING TO 10 PERCENT Building on the discussions of the preceding workshops, a knowledgeable group of authorities from different stakeholder sectors convened to explore in greater detail the priority elements and strategies key to achieving 10 percent savings in healthcare expenditures within 10 years, without compromising health status, quality of care, or valued innovation.
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They focused on high-yield strategies, ranging from decreasing the costs of episodes of care to medical liability reform to shared decision-making, as well as considering care-related costs, administrative costs, and related reforms. Several insights were offered by multiple individual attendees on the common elements of successful strategies: • Reorientation to patient-centered value among all stakeholders (patients, providers, payers, manufacturers, and regulators)
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Considering the Opportunities Participants reviewed the range of strategies explored throughout the workshop series and, working in small groups followed by open discussion, considered opportunities for strategies aimed at providers, patients, and payers. Their discussion centered on care-related costs, administrative costs, and related reforms.
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. Across the areas noted in Box S-4, participants expressed personal opinions on the range of savings opportunities, including $8 billion to $12 billion from preventing medical errors, $44 billion to $48 billion from preventing avoidable hospital admissions, $16 billion to $20 billion from preventing avoidable hospital readmissions, $38 billion to $80 billion from improving hospital efficiency, $32 billion to $53 billion from decreasing the costs of care episodes, $9 billion to $20 billion from improving targeting of costly services, $6 billion to $9 billion from increasing shared decisionmaking, $181 billion from utilizing common billing and claims forms, $20 billion to $30 billion from medical liability reform, and $5 billion to $10 billion from preventing fraud and abuse.
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Additional Considerations The rising epidemic of obesity, an aging population with an increasing burden of chronic illness, and the influence of current health behaviors on future health status were also cited as considerations during the conversations. With levels of obesity projected to exceed 40 percent by 2015 (Wang and Beydoun, 2007)
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While the participants highlighted a selection of particularly high-yield, cost-lowering strategies during the meeting, Mitchell and several others noted that many promising strategies, such as increased use of mid-level practitioners, additional ancillary providers (such as health coaches and nutritionists) , salaried physicians, and a reassessment of the link between funding for medical education and hospital reimbursement, deserve further exploration and study as potential methods of lowering healthcare costs.
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For example, Tuckson cited the Healthcare Administrative Simplification Coalition, a collaboration between providers and payers to streamline administration by simplifying the credentialing process, standardizing data exchange, and leveraging health information technology. Providers, payers, and purchasers were also seen as playing important roles in improving patient health behaviors by encouraging preventive care and educating consumers on both the value of receiving care and the impact of individual health decisions on personal and population health.
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Several additional facets suggested for consideration included specific delineation of estimates across the public and private sectors as well as the unin sured; consideration of areas of overlap between estimates, and of implementation and maintenance costs; and identification of the barriers to effective "spread" of successful strategies. In addition, the workshop presenters focused on the direct costs of health care, but the indirect costs of health care -- ranging, for example, from those of absenteeism for unnecessary services to decreased invest ments in education -- also warrant consideration.
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Participants spoke of the role of education in clarifying the relationship between out-of-pocket costs and total medical spending, illustrating the impact of costs on all levels of society, and further motivating partnerships between con sumers, providers, payers, and policy makers. While the ideas summarized above reflect only the presentations, discussions, and suggestions that spanned throughout the workshops and should not be construed as consensus or recommendations on the specific numbers or opportunities, they provide informative insights into the opportunities to lower costs and improve outcomes present within the current healthcare delivery system, and represent areas needing further consideration.
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2008. Evidence on the Costs and Benefits of Health Information Technology.
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2003. What is population health?
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The Healthcare Imperative: Lowering Costs and Improving Outcomes Workshop, July 16-18, Washington, DC. Thorpe, K
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