“Show Me the Money”

By Carlos Nunez

 

A curious thing is happening.

 

As the healthcare conversation moved front and center over the last several years, a correlation developed linking cost and quality. Politicians and providers, payors and patients have embraced these complementary themes as the “one-two punch” that will win the fight to keep our healthcare system safe, solvent and sustainable. As far as punches go, it sounds almost painless: Make the system better and safer, and the savings will follow. Who would argue with that logic?

 

Now it seems that some prominent voices have started to pivot the conversation toward the need for greater cost control, suggesting that quality and safety efforts alone may not deliver the necessary savings. Recently, three opinion pieces appeared in the New England Journal of Medicine (NEJM) and the Journal of the American Medical Association (JAMA) that call into question some basic assumptions about the economics of our healthcare system. Another article, published in Healthcare Finance News, added a new sense of urgency to this pivot in opinion.

 

The first article, “Where are the Health Care Cost Savings?” appeared in the January “Viewpoint” section of JAMA. The author pokes some pretty big holes into several commonly held beliefs about the drivers of healthcare costs. He references a number of sources to make the case that defensive medicine, insurance, and pharmaceutical profits, and the often heroic and expensive care doled out to a small percentage of patients, account for much less spending than what is generally assumed. His argument points to the 10 percent of the population that accounts for 64 percent of healthcare spending, driven largely by seven major categories of chronic disease conditions. This allows him to make a cost and quality connection, calling for continued efforts to reduce avoidable complications and improve tertiary prevention. The new message here is subtle, but real. His editorial is about putting cost first and about the fundamental changes that need to take place to get spending under control.

 

The second piece is not subtle at all. It appeared the same week as the JAMA article, in the “Perspectives” section of the NEJM. The title says it all: “The Savings Illusion — Why Clinical Quality Improvement Fails to Deliver Bottom-Line Results.” The authors question why costs continue to climb despite improved clinical quality. They suggest the explanation lies in the rigid cost structure common to most healthcare settings. The existing cost structure perpetuates a system whereby improvements in clinical quality typically lead to additional capacity requirements instead of bottom-line savings. The authors describe a four-layer cost structure where clinical improvements that help reduce truly variable costs, such as medications and supplies, generally lead to measurable savings. They argue that clinical improvements that reduce semi-variable costs (direct hourly personnel), semi-fixed costs (equipment, OR time), and fixed costs (administrative time) are increasingly less likely to yield true savings. They go on to say that “hospitals will need to adapt their cost structures and capacity to accommodate lower per capita utilization rates as well as reductions in the per-episode intensity of care.”

 

Just a few weeks later, the NEJM ran an article titled “What We Talk about When We Talk about Health Care Costs.” The author drew inspiration from the newly published ethics guidelines from the American College of Physicians that call for physicians to practice “parsimonious care.” He uses the word “parsimonious” to illustrate the difficulty of talking simply about healthcare costs. He displays no difficulty, however, when he writes, “The problem is that no one in charge seems willing to acknowledge that getting a handle on cost growth will also involve uncomfortable trade-offs. We cannot as a society provide patients with unlimited access and unlimited choice. Providing better quality care, though it is vital, won’t change that reality.”

 

Finally, we come to the article published in Healthcare Finance News that recapped an interview with Dr. Donald Berwick, the former administrator of the Centers for Medicare and Medicaid Services (CMS), and Gerry Shea, an executive with the AFL-CIO. The piece summarized the main themes from the interview in a list of “six things to know about the current state of America’s healthcare system.” What I found so interesting about this piece is that Berwick, long known as the standard bearer for quality and safety, and Shea, a powerful union leader, both agreed that the top six things we need to know about healthcare ALL had to do with the problem of cost. Here’s my summary of their list: (You can read their remarks here.)

 

• We must address healthcare costs with urgency and as a primary goal.
• The country cannot afford healthcare spending at current levels.
• The working class is affected most by rapidly rising costs.
• We need to bring the same commitment to lowering costs as we have to improving quality.
• Goals need to be set and increased focus needs to be put on costs.
• Quick, drastic measures will not deliver a long-term solution.

 

So, what does this all mean? Are we done pursuing quality and safety? Do we begin rationing care and denying services? I believe that the opinions expressed by these thought leaders, in the pages of some of the most respected medical publications, represent the beginning of an important next phase. As we work to remake our healthcare system into one that is safer and sustainable, we need to begin the conversations that will lead us through the tough choices and challenges and on to real opportunities for lasting change. We must reach past the low-hanging fruit to the real goal — doing what is best for patients. This means focusing our safety and quality efforts on areas where the potential to save lives and dollars is greatest, and to help adapt our systems to work well within a new economic reality that favors best practices, improved outcomes and patient and provider satisfaction. We need to acknowledge that no one can expect unlimited access to unlimited choices, without unlimited resources. If we do this, we can build a system that allows for appropriate access to the best choices, so that it performs better than ever, in a manner that is safe and sustainable, for generations to come.

 

Carlos Nunez is chief medical officer for CareFusion. He holds a Doctor of Medicine degree from the University of Miami School of Medicine, where he also completed postgraduate training in anesthesiology and critical care medicine. He currently has an appointment as adjunct professor and associate director of the Biomedical Informatics Research Center at San Diego State University.

To read more from Dr. Nunez, please visit: http://www.carefusion.com/safety-clinical-excellence/perspectives/trends_in_healthcare.aspx