The Healthcare Imperative Lowering Costs and Improving Outcomes: Workshop Series Summary (2010) / Chapter Skim
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22 Getting to 10 Percent: Opportunities and Requirements
22 Getting to 10 Percent: Opportunities and Requirements
Pages 599-618
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From page 599... ...
This chapter summarizes the discussions, insights, and perspectives offered by the individual attendees at the meeting, and it should not be construed as consensus or recommendations on specific numbers or actions. As the participants considered the opportunities present within the current delivery system to lower costs and improve outcomes, the substantial scale of the current inefficiencies was underscored.
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From page 600... ...
The attendees discussed priority areas of opportunity, such as avoidable hospitalizations and readmissions and the provision of unnecessary services, focusing on high-yield strategies, ranging from decreasing the costs of episodes of care to medical liability reform and shared decision making, as well as on care-related costs, administrative costs, and related reforms. Several common insights were offered by multiple individual attendees as to the common elements of successful strategies: • Reorientation to patient-centered value among all stakeholders (patients, providers, payers, manufacturers, and regulators)
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From page 601... ...
Many of the participants observed that payment reform may be implemented in a variety of forms, ranging from bundled payments to global payments and salaries for providers, but they emphasized payment reform as a tool and an underlying requirement for achieving many of the goals discussed at the meeting. For example, to stimulate initiatives to reduce medical errors, several attendees suggested that creation of bundled payments for hospitalizations include the costs of readmissions due to any cause within 30 days.
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From page 602... ...
. To account for the increased primary care practice costs necessary to achieve implementation of several of the strategies discussed, several participants suggested that a one-third offset be employed, yielding a total BOX 22-1 Estimated Health Cost Savings Selected approaches: individual perspectives Estimated Savings in Year 10 Low High CARE-RELATED COSTS • Prevent medical errors $8 B $12 B • Prevent avoidable hospital admissions $44 B $48 B • Prevent avoidable hospital readmissions $16 B $20 B • Improve hospital efficiency $38 B $80 B • Decrease costs of episodes of care $32 B $53 B • Improve targeting of costly services $9 B $20 B • Increase shared decision making $6 B $9 B ADMINISTRATIVE COSTS • Use common billing and claims forms $181 B RELATED REFORMS • Medical liability reform $20 B $30 B • Prevent fraud and abuse $5 B $10 B
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From page 603... ...
Assumptions Requirements Care-related costs Reduce $8-$12 B • Overall inpatient • Metrics and transparent medical error cost = $16 B national reporting errors • 50 to 75% avoided system by 2018 • Leadership/stakeholder • Savings substantially engagement higher if outpatient • Technical assistance errors also reduced capacity • Bundled payments for hospitalizations Prevent $44-$48B • Primary admissions • Enhanced care avoidable cost for Medicare coordination and admissions = $159 B and for disease management commercial payers = • Primary care payment $130 B reform within a value • 27% avoided focused medical home among Medicare model beneficiaries by 2018 • Leadership/stakeholder • 4% avoided engagement among commercial • Palliative care and beneficiaries by 2018 hospice integral to • Savings could be facilitating patient augmented by centered care among expanded use of the severely chronically palliative care ill services Prevent $16-$20 B • Avoidable • Bundled payments avoidable readmissions cost for to cover all-cause readmissions Medicare = $28 B readmissions within and for commercial 30 days of index payers = $12 B hospitalization • 50% avoided • Shared savings among among Medicare providers beneficiaries by 2018 • Data base sharing • 50% avoided among all providers among commercial • Community services to beneficiaries by 2018 support enhanced post discharge care continued
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From page 604... ...
Assumptions Requirements Improve $38-$80 B • 2018 hospital • Reengineering of hospital expenditure level for clinical services must efficiency Medicare = $420 B occur institution-wide and for commercial to maximize quality payers = $477 B improvements • Payment reductions • System-wide will create financial application would incentives to increase diminish cost-shifting efficiency • Technical assistance • Use of Toyota capacity to implement Production continuous System model can improvement substantially improve efficiency -- some demonstrate 30% to 50% reduction in costs • 1% per year efficiency across the system is achievable, yielding $38B if Medicare only, $80B if also commercial Decrease $32-$53 B • Total spending for • Provider value costs of Medicare = $476 B, measures based on episodes of Medicaid = $356 B resource utilization care and for commercial and episode treatment payers = $749 B groups • Reducing the costs • National reporting of episodes of care of value metrics for by 3% for Medicare, individual providers Medicaid and • Payments based on commercial payers = measurement results $47 B, 5% = $79 B • Patient choice • Potential savings incentives through within the value-based benefits commercial sector > design Medicare; • Cap on out-of-network • Reduce savings charges estimate by a third to allow for overlap with savings from prevention of avoidable admissions
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From page 605... ...
Assumptions Requirements Improve $9-$20 B • 20% savings by • Limited physiciantargeting of reducing excessive owned self-referral costly services and unnecessary • Reset RBRVS use of imaging • Transparency on cost studies -- $9 B of $43 and comparative B overall -- and 50% effectiveness reduction in costs • Evidence-based from non-urgent guidelines addressing use of emergency appropriate use of departments -- $11 B expensive technology of $21 B overall • Value-based insurance • Savings would be to provide further greater if other incentives costly services, such as orthopedic services and radiation oncology, were also /better targeted Increase $6-$9 B • Patient decision aids • Readily accessible shared available systemwide information on the decision for 11 conditions comparative value, making currently addressed risks, and benefits of • Average savings interventions of $2,700 per • Tailored decision tools case achieved by and aids available increasing access systemwide to palliative care • Palliative care services to 90% capacity expanded of U.S. hospitals to all hospitals and and 7.5% of all communities discharges • Payments based on • Savings would be documented use of greater if patient available tools decision aids were widely available beyond the specified conditions continued
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From page 606... ...
Assumptions Requirements Administrative costs Use common $181 B • Total 2009 BIR costs • NAIC successfully billing and = $361 B develops streamlining claims forms • Approximately • If voluntary 50% of BIR costs development and use of saved through common forms is not administrative achieved by 2018, the simplification Secretary of HHS will develop and require for participation in insurance exchanges established by health reform legislation Additional related reforms Medical $20-$30 B • Total estimated costs • State-based reform liability in 2009 = $60 B initiatives reform • About 33% to 50% • Legislative action can be saved by to institute national capping noneconomic reform of the medical damages and liability system lowering premiums • Additional savings could be gained by reducing defensive medicine Prevention $5-$10 B • Total estimated costs • Significant potential of fraud and in 2009 = $75 B savings exist in abuse • Between 7% and Medicare and 13% of costs Medicaid; creation preventable through of a central national increased detection, health insurance claims prevention and clearinghouse facilitated recoupment of by use of common fraudulently paid billing and claims claims in commercial forms to expedite fraud and public sectors prevention initiatives • Enhanced resources for detection require ongoing investment from public and private payers
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From page 607... ...
, several participants highlighted medical errors as an obvious opportunity to lower costs and improve outcomes through systematic removal of errors in hospital care, such as adverse drug events, hospital-acquired infections, falls, and pressure ulcers. Two attendees, Bisognano and Toussaint, suggested that by engaging providers, regulators, and payers, between 50 and 75 percent of the costs due to medical errors could be eliminated by 2018; that is, between $8 billion and $12 billion annually (2009 dollars)
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From page 608... ...
and $13,300 on average for commercial payers, based on an estimate of approximately 20 percent greater hospital costs for the private sector and subsequent downward adjustment for a typical commercial population case-mix (estimated inpatient spending totals of $159 billion and $130 billion, respectively, for primary admissions) , Gilfillan suggested that a reduction in the number of Medicare admissions from 275 admissions per 1,000 beneficiaries to a best-practice level of approximately 200 admissions per 1,000 beneficiaries (a 27 percent reduction)
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From page 609... ...
, reducing preventable readmission rates was deemed a priority. Again, assuming the cost of an inpatient admission totaled $12,850 and $13,300 on average for Medicare and commercial payers, respectively, Rosenthal and Gilfillan noted that reducing avoidable hospital readmissions by 50 percent among Medicare (from 50 readmissions to 25 readmissions per 1,000 beneficiaries among 45 million total covered lives [MedPAC, 2008]
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From page 610... ...
model was identified as a potent strategy to lower costs and improve outcomes. The assumption underlying the estimate discussed by Bisognano and colleagues was that straightforward hospital efficiency and continuous improvement initiatives prompted by lowering Medicare hospital costs by 1 percent annually would result in savings of $38 billion annually by 2018 (2009 dollars)
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From page 611... ...
As the Medicare program and commercial payers each cover approximately 45 million and 178 million lives (Davis, 2009; Kaiser Family Foundation, 2009) , respectively, Gilfillan suggested that a reduction in excessive and unnecessary use of imaging services by 20 percent in Medicare (from an estimated baseline spending of $20 per member per month on high-tech radiology services, based on his experience)
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From page 612... ...
Increase Shared Decision Making Considering strategies to engender patient-centered care that fully informs patients of the risks and benefits of treatment options, the attendees discussed evidence that shared decision making (SDM) utilizing decision aids could facilitate patient understanding and participation in the decisionmaking process, which often reveals preferences for lower-cost, less-invasive treatments.
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From page 613... ...
Administrative Costs With increasing administrative complexity placing significant burdens on providers and payers, attendees considered administrative simplification a high-yield, high-priority strategy for lowering costs over the next decade. Predicated on industry commitment to lowering unnecessary administrative costs, use of common administrative processes, such as the development of common billing and claims forms for use by providers interacting with both public and commercial payers and common processing protocols, was emphasized as a key to easing the administrative burden for all stakeholders involved.
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From page 614... ...
Tuckson said that the potential savings in Medicare and Medicaid are significant. Creation by legislators and regulators of a central national health insurance claims clearinghouse, facilitated by use of common administrative billing and claims forms, would expedite fraud prevention initiatives.
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From page 615... ...
Given the connection between health behaviors and these health trends, including the rising levels of multiple co-occurring chronic illnesses and the low rate of recommended preventive care, Everett and Mitchell drew attention to the issue of prevention, including community health programs that encourage healthy eating habits in schools, antitobacco legislation, and primary-through-tertiary prevention. Acknowledging that uncertainty exists about the cost effectiveness of many prevention initiatives, Tuckson noted that, regardless of its cost effectiveness, prevention is of critical importance to making gains in public and population health.
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From page 616... ...
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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From page 617... ...
The discussions focused on three specific areas -- care-related costs, administrative costs, and related reforms -- which were identified by individual discussants as presenting significant opportunities to realize cost savings while improving quality. The estimates and savings goals offered by individual attendees were based both on published evidence and the practical, on-the-ground experiences of the individual participants with healthcare improvement initiatives, and thus preliminary in nature.
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From page 618... ...
The Healthcare Imperative: Lowering Costs and Improving Outcomes, Understanding the Targets, an IOM Workshop.
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