If you have been reading this rant, you know that Health Care Costs are on track to literally bankrupt the country in a very few more years. This article from today's New York Times explains exactly why the solution is so difficult. And when you read it, remember that the Republicans explicitly removed the only provision in Obamacare that was designed to produce such data.
Why Medical Bills Are a Mystery
By ROBERT S. KAPLAN and MICHAEL E. PORTER
RISING health care costs are busting the federal budget as well as those
of states, counties and municipalities. Policy makers and health care
leaders have spent decades trying to figure out what to do about this.
Yet their solutions are failing because of a fundamental and largely
unrecognized problem: We don’t know what it costs to deliver health care
to individual patients, much less how those costs compare to the
outcomes achieved.
When insurance companies or government bodies try to control costs, they
usually make across-the-board reimbursement cuts that ultimately are
unsustainable because they have no connection to the true costs of
delivering care. Providers themselves do not measure their costs
correctly. They assign costs to patients based on what they charge, not
on the actual costs of the resources, like personnel and equipment, used
to care for the patient. The result is that attempts to cut costs fail,
and total health care costs just keep rising.
Regardless of what decision the Supreme Court reaches on the legality of
the Affordable Care Act, measuring outcomes and costs is indispensable
to driving improvements.
Because health care charges and reimbursements have become disconnected
from actual costs, some procedures are reimbursed very generously, while
others are priced below their actual cost or not reimbursed at all.
This leads many providers to expand into well-reimbursed procedures,
like knee and hip replacements or high-end imaging, producing huge
excess capacity for these at the same time that shortages persist in
poorly reimbursed but critical services like primary and preventive
care.
The lack of cost and outcome information also prevents the forces of
competition from working: Hospitals and doctors are reimbursed for
performing lots of procedures and tests regardless of whether they are
necessary to make their patients get better. Providers who excel and
achieve better outcomes with fewer visits, procedures and complications
are penalized by being paid less.
Our research and executive workshops show that many sites are already
improving their measurements of patient outcomes. But they have done
little to measure the actual costs of achieving those outcomes. We are
currently working with several health care organizations, including MD
Anderson Cancer Center in Houston, Children’s Hospital Boston, Partners
Healthcare in Boston and Schön Klinik in Germany, that are beginning to
figure out how to measure costs. They use teams of clinicians and
administrators to identify all the processes involved in care, from a
patient’s first contact with a health care provider through his or her
inpatient stay and outpatient follow-up care. The teams then identify
the quantity and unit cost of each resource — clinical staff, equipment,
supplies, devices and administrative support — used in each process and
add these together to learn the total cost of a patient’s care.
The information helps them discover immediate and significant
opportunities for improvements in care and reduced spending. MD
Anderson, for example, has studied its evaluation process for new head
and neck cancer patients. By substituting trained staff members for
physicians, standardizing processes and improving information
technology, it has been able to make care more efficient without any
adverse effect on patient outcomes. It has made changes that reduced
total costs by 36 percent, and freed employees to serve more patients
without adding to costs.
A surgeon repairing cleft palates at Children’s Hospital Boston
discovered that 40 percent of the total cost of an 18-month-care process
was due to the time a child spent in the intensive care unit before and
after surgery. By using a far less intensively staffed and equipped
observation room, the hospital could achieve equivalent quality and
safety at much lower costs.
Most health care providers have hundreds of these opportunities to use
time, equipment and facilities more intelligently. These opportunities
have been obscured by existing costing systems that have little
connection to the processes actually performed.
With accurate information on outcomes and costs, providers can improve
care and save money by eliminating things that don’t help the patient,
like multiple check-ins and medical histories, tests that provide little
new information and long waiting times. Many routine tasks are
performed today by highly trained doctors and nurses. These tasks can be
shifted to others, freeing the most skilled clinicians for far more
productive work.
Health care providers with expensive and poorly utilized equipment,
space and staff can see the benefits of consolidating services to
improve utilization and reduce some existing capacity. They can also
perform routine services in lower-cost locations, reserving expensive
medical centers for complex care.
These opportunities will allow the health care needs of an aging
population to be met with little need to increase spending.
Understanding costs could be the single most powerful lever to transform
the value of health care. This would give payers and providers the
data they need to improve patient care, and to stop arbitrary cuts and
counterproductive cost shifting.
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