Unbalanced Equations

I have come to believe that, at least in the U.S., we will find it very difficult to have meaningful and high-impact changes in healthcare while the main focus remains on saving money.

This DOES NOT mean that I don’t think there is a need to rein in costs.  Clearly there is.  I only mean to say that saving money is, by itself, inadequate. 

I first started thinking about this when I read Atul Gawande’s “The Hot Spotters.”  He details an effort to help “super utilizers” of care in Camden, New Jersey.  And while Dr. Gawande rightly emphasizes the impact this had on patient outcomes, he also focuses on the savings that were realized by the program.  

This is not an isolated case.  To name just one other example, Massachusetts General Hospital participated in a three-year demonstration project to improve care and coordination of Medicare services, resulting in a 20% reduction in hospital admissions and a 25% reduction in emergency department visits, with a 7% annual savings among enrolled patients after accounting for intervention costs.

So if we have lots of examples of our ability to take specific, measurable, and attainable actions that result in significant cost savings in our healthcare system, it begs the question: why are we not seeing across the board drops in expenditures?

There is no doubt that the answer to this question has multiple layers, but the Camden example is indicative of what I think one of those layers is. Dr. Gawande goes on to write that some healthcare systems and individual professionals actively resisted – one might even say sabotaged – these super ultilizer efforts because the savings were impacting the bottom line.  It’s a clear cut example of why cost cutting in and of itself will not be the solution. We might all agree that it is a wonderful thing for a patient to go from having six diagnostic tests per month to two.  But the providers administering those tests and the labs that process them might not feel the same way, since those tests are some of the “products” they sell to generate revenue.

This is why I was not appalled, as some might have been, during my Eisenhower Fellowship when one healthcare policy person in Germany told me that the primary question regarding whether the country’s statutory health insurance companies cover a drug or procedure is its efficacy.  If it works, the person said, “then we do it.  Cost is not put in the equation.” 

A few years ago I probably would have reacted a lot differently. How can you not factor in cost? But that is where my thoughts have evolved. If your main objective is savings, the result will be blunted because of the economics.  Germany's answer to this conundrum has been a socialized system with regulated pricing, a method that the state of Maryland has fashioned for its own purposes with its Health Services Cost Review Commission.  But barring that type of strategy, which despite Maryland's success is not likely a viable way forward in the United States as a whole, cost savings have to be linked to other revenue generating opportunities for maximum results, or at the very least a trade off between profit margin and market predictability.

This is not an easy thing to do.  But unless we put both revenue and savings into the equation, we will likely continue to lament how much unnecessary spending is occurring for substandard outcomes.