June 6, 2013

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Beyond Diagnosis

What is the Treatment for Spiraling Healthcare Costs?

June 6, 2013

In the United States, healthcare costs are on the rise at a trajectory that seems unsustainable.

For industrialized countries as a whole, the average percentage of the national GDP that is going to healthcare is 9.5 percent. But in the United States, it’s 17.6 percent of our GDP, and it’s projected to reach nearly 20 percent of GDP by 2020.

“And unfortunately, we can’t really show the health status of our population is exceptionally better, given that investment,” says Dr. Sean Mulvihill, CEO of the University of Utah Medical Group.

This healthcare spending frenzy impacts businesses, which see their premiums rise by double digits every year. It impacts healthcare providers, who are under pressure to perform miracles with fewer resources. And it impacts individuals, who pay more out of pocket every year, and who face, potentially, an increasing tax burden to pay for government healthcare programs like Medicare and Medicaid.

“We know that there are many areas of misalignment in healthcare payment today,” says Mulvihill. For example, hospitals simply make more money when patients experience complications. “And we see also a relatively perverse incentive in the private-pay world around this issue of complications of care,” he says. “There’s not an alignment of incentives for the hospital to actually prevent complications when the margin of caring for those patients goes up substantially.”

Despite these perverse incentives, getting to the root causes of out-of-control healthcare spending—and then devising effective solutions—is a challenge that the University of Utah Health Care system is taking on, along with many other major healthcare systems.

Heart of the Problem

As hospitals and providers begin teasing out the threads of healthcare spending, they need to ask themselves three questions, says Mulvihill. First, how healthy is our population? Are we maintaining health in a way that reduces the healthcare utilization?

Public health efforts like anti-smoking
campaigns can make a difference in this realm. But, Mulvihill notes, “That’s in some ways out of the provider’s control. We have patients that we know do things that are health-risk behaviors that have been very difficult to educate and improve upon over time.”

The second question is “how many processes of care are required for each episode of healthcare—how many days in the hospital, how many lab tests, how many pharmacy prescriptions, et cetera, are required to get the patient through their healthcare episode with the best possible outcome?”

Through rigorous data collection and evaluation, providers can begin to sort out which processes just don’t have as much healthcare value. “We think that there’s a lot of that in the system,” he says. “But figuring out what’s appropriate to do is a real challenge.”

The last question is how much does each one of these processes cost in the course of an episode? And that is where health systems need to begin looking at cost containment on per unit payments for services, says Mulvihill.

Transparency and Cooperation

The key to answering these questions is transparency.

In fact, the U of U Health Care system puts patient ratings and reviews for every single U physician on its website—all 1,100 of them.

“This transparency is a relatively new thing in medicine. In fact, we think we may be the first and perhaps the only major health system in the country to have this kind of transparency,” says Mulvihill. “There’s a barrier in some healthcare systems about this notion of transparency we need to work through. We believe it’s an important principal.”

Furthermore, Mulvihill says healthcare systems and providers need to work together to define what quality is in a healthcare context. “Good health” can be hard to measure.

One emerging area is measuring what Mulvihill calls functional outcomes: “What was the health status of the patient before and after treatment? Did they resume normal physical function? Did they return to work?”

About a decade ago, the U’s healthcare system joined with a consortium of other healthcare systems in a research project designed to gather a breadth of data and then “define outcomes and risk factors in a common way, and measure them in the same way, and compare the results with each other,” he says.

Over time, about 400 hospitals have joined the consortium, although only two other hospitals in Utah have joined—Intermountain Medical Center and Primary Children’s Hospital.

Mulvihill acknowledges that there is some cost, time and effort involved in tracking the data in this way, but he says there is also a significant return on investment.

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