Blog PostJuly 9, 2014

A Simple Question Leads to Great Health Savings – Pass it on

Skyrocketing costs are the root of the health care crisis yet the most difficult to fix

It is pretty safe to say that most Americans have seen neither the promised affordability or care from the Affordable Care Act.

Since the federal health law was signed in 2010, millions of people have lost the health insurance and doctors they were promised they could keep. And the new options made available on government health insurance exchanges are generally more expensive, confusing and restrictive than before.

The gravest disservice to the country though is not what the law tried to do, but what it failed to do: Rein in decades of skyrocketing health care costs that have been wrongly determined by everything other than what they should be, that is patients’ demand and control over their own health care dollars.

For everything that the $2 trillion in taxpayer dollars will go toward over the next ten years, the law does nothing  to fix what is actually broken. It only adds more people to an already severely broken system.

Fortunately, some enterprising health executives are doing what the government is not, thanks in part to a budget check at the University of Utah as recounted by Kaiser Health News:   

“In 2012, (Univ. of Utah medical executive Vivian) Lee was stunned when she challenged senior managers and physicians to find ways to reduce spending, and “they said, ‘We don’t know what it costs, so how can we manage it?’”

Unfortunately this nescience is a national epidemic in the very industry that requires this precise knowledge. A Harvard Business Review brief titled, “How to solve the cost crisis in health care” explains that there is an “almost complete lack of understanding” the cost of delivering patient care and and how those costs compare with outcomes. And no one can seem to agree on what the word “cost” even means:

“When politicians and policy makers talk about cost reduction and ‘bending the cost curve,’ they are typically referring to how much the government or insurers pay to providers – not to the costs incurred by providers to deliver health care services. Cutting payor reimbursement does reduce the bill paid by insurers and lowers providers’ revenues, but it does nothing to reduce the actual costs of delivering care.”

The Utah epiphany spurred the University and a few other health systems to embark on a colossal and colossally overdue undertaking – tracking the health care costs and quality for every patient, 26,000 patients for the Utah medical system alone:

“Their calculations include not just the salaries of doctors and nurses, but also those of cleaning crews, cafeteria workers and anyone who interacts with the patient – as well as the costs of drugs, lab tests and supplies, from gauze and surgical mesh to implants.”

Some findings were mind-numbing: “In orthopedic surgery, for example, analysts found the cost of the same joint replacement surgery, performed by 10 different surgeons, varied by as much as $19,000.”

The data led to enough profound variations that legitimate questions forced logic to prevail:

“Why did the same surgery done by some physicians cost so much more than others? Were lower-cost drugs working as well as more expensive ones? Were lab tests being ordered unnecessarily?

Answers to some of those questions have helped the system trim costs in the past year, including:

— $556,300 from reducing the length of stays after kidney and liver transplants;

— $498,700 from developing standardized protocols for when to give patients expensive immune-system boosting drugs;

— $452,000 from lab test savings. Turned out, it wasn’t the really expensive tests that were driving up costs, but the sheer volume of lower-cost, often unnecessary ones.”

In the first year, the effort saved the University of Utah health system $2.5 million out of a $1 billion budget. This data analysis ability applied to every health care system in the United States would do more to reform the health cost crisis than any promises of the Affordable Care Act.

Our nation’s health care costs are nearly one-fifth of our country’s Gross Domestic Product. Politicians and policymakers who are looking for a smart, fiscally responsible model that could take a serious bite out of this ever-growing number should look to the folks in Utah.