Welcome to introduction to healthcare and public health in the United States, Unit 5:
Financing Healthcare (Part 2). In section 5d, Controlling Medical Expenses, we will
discuss methods to limit the rising costs of healthcare in the United States.
In this section, we will review some potential methods of controlling rising costs in
medicine. We will examine the role of health information technology in reducing and
limiting healthcare costs, the use of electronic health records and evidence based
medicine including clinical decision support and clinical practice guidelines to control
costs through coordination of care, health information exchange and provider support.
Then, we will examine the patient centered medical home, or medical home for short,
and its capacity to reduce healthcare expenditures, and finally look at a medical home
model known as concierge medicine or direct primary care.
There are many factors driving the increase in expenditures for medical care in the
United States. Among them is the cost of technology, increased utilization, and
administrative costs.
According to the Congressional Budget Office, 50% of the total annual expenditures on
healthcare pay technology costs. New imaging devices such as CT scanners, magnetic
resonance imagers, and artificial body parts, contribute to major advances in the
diagnosis and management of patients.
And also to increasing costs.
New procedures have lead to new treatments for difficult or untreatable illnesses and
injuries, for example the lapband for morbid obesity. Use of the da Vinci robot for
minimally invasive surgery has the potential to decrease length of stay and reduce the
risk of complications, but costs thousands of dollars more per procedure due to the high
cost of the equipment.
Beginning in 2011, the 66 million baby boomers born between 1946 and 1964 will reach
age 65 and become eligible for Medicare. Claims analysis indicates that individuals
greater than 65 years of age expended over $8000 per year on medical services. These
increases in both the numbers of individuals requiring care and the expenditures
associated with them, will continue to raise healthcare expenditures.
The increase in chronic disease in the aging population results in the use of additional
resources in the diagnosis, management, and prevention of disease progression and
complications putting a drain on healthcare resources.
Administrative costs account for an estimated 7% of total healthcare expenditures in the
US. These fees are more than double the average of other industrialized countries.
Insurance companies establish different rules and processes for the submission of
Component1/Unit 5d
Healthcare IT Workforce Curriculum
Version 1.0/Fall 2010
1
claims, and these processes require additional administrative costs by healthcare
organizations to meet the specific requirements.
Transparency, or lack thereof on the part of third party payers in the process of
determining the value of healthcare services and reimbursements leads to variations on
payments for the same service among different insurance companies, and in some
cases within the same company.
Insurance companies have traditionally looked to providers for discounts in order to cut
costs. In a fee-for-service reimbursement scheme, physicians may alter their practice
patterns leading to increased utilization of services to offset the lost income and pay
practice expenses. This leads the need for additional staff and to a cycle of increasing
utilization and administrative costs.
Additional factors driving utilization include patient preference and defensive medicine.
Demand for new technology can be driven through direct-to-consumer advertising about
products and services that may imply additional health benefits through their adoption.
This cost of new technology may not be justified by the marginal increase in value in the
care and treatment of patients. However, providers may begin using it due to patient
demand.
Defensive medicine – the prescribing of diagnostic and/or therapeutic measures to
avoid malpractice litigation – contributes to over-utilization of some services, for
example expensive imaging studies. Tort reform and the use of clinical guidelines may
help to lower costs in the future.
We know why costs are going up. What methods can be used to increase access to
care, improve quality, and control costs? Who becomes responsible for keeping costs
under control – the patient, the physician, the hospital, the third-party payer, the
employer? How does one determine the value of new technology in improving patient
outcomes? How do we slow or avoid the development of chronic disease in an aging
population?
There is no easy answer to these questions. One potential cost control method
includes limiting the available resources or rationing. Another method involves
decreasing utilization patterns by increasing the patient share of the costs, or by
investing in wellness and prevention.
Both rationing and increasing the patient share of costs raises ethical questions about
care for the disadvantaged, the potential for creating a two-tiered healthcare delivery
system, and the appropriate utilization of services by untrained consumers. In addition,
while wellness and prevention programs may result in less complications and longer
Component1/Unit 5d
Healthcare IT Workforce Curriculum
Version 1.0/Fall 2010
2
periods of health, the additional consumption of health resources needed in wellness
and prevention programs may offset any potential savings.
Perhaps the best method of controlling costs is to increase the efficiency of healthcare
delivery using health information technology, evidence-based medicine, and clinical
practice guidelines.
Health information technology or HIT, in conjunction with evidence-based medicine,
offers an opportunity to slow healthcare expenditures. The Health Information
Technology for Economic and Clinical Health Act or HITECH Act authorized the federal
government to take the leadership role in developing standards to allow for the
nationwide electronic exchange and use of health information to improve quality and
coordination of care. It will provide savings through reduction of medical errors and
duplicate care. The government will invest over $19 billion to reward healthcare
organizations and providers who use electronic health records or EHRs in a meaningful
way.
An EHR facilitates the coordination of care and can support providers through the use of
clinical decision support or CDS, based upon the clinical practice guidelines applicable
in the particular clinical situation.
Clinical decision support is the real time delivery of information that could aid in the
diagnosis or management of the patient as the physician uses the electronic medical
record. Physicians receive reminders that may help themmake appropriate decisions
regarding the use of healthcare resources for the diagnosis and management of the
patient.
The use of CDS has the potential to lower costs by avoiding diagnostic expenses such
as duplicate testing and/or procedures that have only a marginal value in aiding the
decision-making process. It aids management of patients by avoiding errors, for
example, prescribing a medication to which the patient has an allergy or which may
adversely interact with another medication the patient is already taking. Real time
decision making may avoid the additional expense associated with those errors.
HIT further supports lowering costs through health information exchange by permitting
access to records through the sharing of information among providers, and the potential
to avoid duplication of procedures and services.
Evidence-based medicine or EBM involves the review of published research studies in
evaluating value of a treatment. Using the results or evidence of these reviews to
design clinical practice guidelines, practitioners can treat patients based upon an
established standard of care. This has the potential to lower costs since patients are
treated according to a standard based on evidence of the effectiveness of a treatment.
Component1/Unit 5d
Healthcare IT Workforce Curriculum
Version 1.0/Fall 2010
3
It also has the potential to stop the practice of defensive medicine by establishing a
standard for care.
Some physicians have criticized clinical practice guidelines as cookbook medicine, but
the goal of clinical practice guidelines is to establish a benchmark from which a
physician can initiate treatment under a particular set of circumstances. It does not
prevent a physician from altering the treatment plan in the future based upon the results
of the standard of care.
Evidence-based medicine can be used to establish the value of new technology. For
example, the additional cost of minimally invasive surgery using the da Vinci robot has
been justified by the lower complication rate and length of stay, thus decreasing overall
costs of care. By comparing the overall costs of minimally invasive surgery using the da
Vinci system, including complications, against those of standard minimally invasive
surgery, evidence can be gathered to support or disprove the cost savings assumption.
Attempts to lower costs while maintaining access, comprehensiveness, and quality of
care include an approach called the Patient Centered Medical Home or Medical Home
for short. Early indicators suggest that it may result in lower costs. It could be
considered a long-term approach to providing comprehensive evidence based primary
care to meet the medical needs of patients. Services include care for acute and chronic
illness, preventive care, lab and x-ray among others.
The primary care physician directs medical services with the assistance of a team. This
team may include nurse practitioners, physician assistants, nutritionists, pharmacists,
social workers, and behavioral health specialists that takes collective responsibility for
the patient’s medical needs. There is enhanced access to all care team members,
which facilitates partnerships between patients and the providers.
The team is responsible for coordinating care with other organizations such as home
health providers or hospice, and making appropriate referrals to hospitals and
specialists.
Active patient participation in the decision making process empowers patients and their
families.
A care planning process using evidence-based medicine, clinical decision support tools,
and quality performance measurements assures quality and safety.
A 2004 study found overall medical expenses could be reduced by 5.6% resulting in
huge savings using the medical home model.
Concierge medicine is a medical home model also called direct primary care or retainer
practice. The patient pays a monthly or annual retainer or membership fee and
Component1/Unit 5d
Healthcare IT Workforce Curriculum
Version 1.0/Fall 2010
4
receives all care through the practice. In return, the patient receives special services
and enhanced access to the provider.
There are variations on the model. All of the models limit the number of patients in the
practice, usually less than 500. Some may bill insurance an addition to the membership
fee, but many do not. The plans are not a substitute for insurance, and patients should
maintain private health insurance for catastrophic medical events.
Typical features of the retainer practice are similar to the Medical Home. Appointments
are available the same day for urgent medical issues and next day for non-urgent
issues. The patient has the provider’s mobile or home number and access 24 hours a
day. Patients receive the personal attention of the provider during extended office
visits. Many insurance plans do not offer or limit the number or type of preventive
services available. Most retainer practices offer a full range of preventive care physicals
and screenings.
When necessary and appropriate, patients receive house calls to home or workplace as
required. Wellness and nutrition counseling are provided, along with mental health
counseling and behavioral counseling for such issues as stress reduction and smoking
cessation.
In general, practice costs are lower primarily due to the limited number of patients in the
practice. Since many concierge practices do not bill insurance, the administrative staff
levels are lower. In addition, fewer nursing staff are needed to support the smaller
volume of patients seen on any particular day.
Overhead costs are lower as less office space is needed to accommodate the smaller
number of patient appointments and administrative staff for billing, etc. This also results
in lower utility costs.
Quality of care is perceived to be higher by patients, but evidence suggest there is no
difference in the quality of measured medical outcomes from a traditional primary care
practice.
According to a report in Health Affairs published in 2010, further study is needed to
show if this model will have any effect on overall healthcare expenditures. Some
employer groups are testing the model to see if it results in lower overall healthcare
spending. Since patients must still maintain health insurance for extraordinary
expenses not covered by the membership fee, there may not be any real cost savings.
In addition, during the short term this model may exacerbate the shortage of primary
care physicians as more providers move to the model, but it eventually may lead to
more physicians becoming primary care specialists.
Component1/Unit 5d
Healthcare IT Workforce Curriculum
Version 1.0/Fall 2010
5
Improved efficiency through the use of health information technology, evidence-based
medicine, and clinical practice guidelines has the potential to produce the most saving.
Evaluating new technology and incorporating the evidence of its effectiveness into
clinical practice guidelines may lead to substantial savings in the future.
New primary care models such as the Medical Home have shown reduction in costs
and potential for savings, while the jury is still out on concierge medicine retainer
models.
Component1/Unit 5d
Healthcare IT Workforce Curriculum
Version 1.0/Fall 2010
6