What Obamacare Ignores: Cutting Health Care Costs
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The Fiscal Times
October 30, 2013

As Congress cranks up its tongue-lashing machine to skewer the architects of the botched HealthCare.gov rollout, a critical issue regarding the Affordable Care Act has gotten pushed into the background.

Outside of some pilot programs in Medicare, most of the Affordable Care Act (ACA) does little to reduce the actual cost of care. Nor does it increase the efficiency of the U.S. health care system, which will still likely maintain its status as providing the most expensive medical care in the world.

Will the private sector embrace the kinds of change needed to make the health care system fiscally sustainable?

Perhaps some Medicare-funded programs in coordinated/accountable care and bundled payments will have an impact, but it remains to be seen if those approaches – among several others – will be adopted on a wide scale outside of the public program.

It's not that there is a shortage of ideas on how to streamline the health care system and boost quality while cutting costs. A recent Harvard Business Review piece laid out a comprehensive set of measures that show some promise:

The "value agenda," elaborated by Michael Porter, a Harvard Business School professor, and Thomas Lee, chief medical officer at health care services company Press Ganey, "will require restructuring how health care delivery is organized, measured, and reimbursed." Here's a summary of their findings:

Transparent Pricing Will Drive Change. Do you know how much you will pay for any hospital or clinical service upfront? Most people have no clue, because their insurer or the public programs (Medicare, Medicaid, VA, federal health systems) handle all of the billing. But making those prices transparent will be important. "The intensifying pressure from employers and insurers for transparent pricing is already beginning to force providers to explain — or eliminate — hard-to-justify price variations," Porter and Lee write. "In our state, Massachusetts, the price for a brain MRI ranges from $625 to $1,650. Facing lower payment rates and potential loss of market share if they charge higher prices, they have no choice but to improve value and be able to 'prove it.'"

One-Stop Care Centers Are Needed. Suppose you have an ongoing malady such as back pain. You know the drill: You visit a host of specialists and do diagnostics in different places at different times and hope that they can find a remedy. An IPU is organized around conditions for virtual "one-stop shopping" that is not only more efficient, it may provide better care. "Wherever IPUs exist, we find similar results — faster treatment, better outcomes, lower costs, and, usually, improving market share in the condition. But those results can be achieved only through a restructuring of work," the authors found.

Focus on Outcomes. The way most health care systems are set up, the business model is to offer as much service as possible. That may foster inappropriate care and unnecessary and costly procedures. Concentrating on the best procedures based on clinical studies may be a better approach, and “one of the most powerful vehicles for lowering health care costs,” the authors wrote.

Location, Location, Location Really Matters. Having many offices, clinics and hospitals can be an expensive proposition for health care organizations. Where a patient gets treated makes a big difference in the cost. Organizations with multiple locations accounted for 69 percent of medical admissions in 2011, but the Harvard study says many of those locations are just “loose confederations of largely stand-alone units that often duplicate services." Concentrating services in fewer locations could reduce costs.

Employ Information Technology Efficiently. Providers don't always know the full story on patients because of inadequate information systems. "Often IT systems complicate rather than support integrated, multidisciplinary care,” the HBR study says. “That’s because IT is just a tool; automating broken service-delivery processes only gets you more-efficient broken processes." Care providers must share medical records, measure outcomes and make it easier to extract valuable information.

If this "value agenda" achieves the kinds of efficiencies of scale the authors predict, it will have another enormous side benefit: It will help people get better treatment – and save lives.

According to a new study in the Journal of Patient Safety, up to 400,000 patients die every year in the U.S. due to "preventable harm." Medical errors, inappropriate treatment and botched procedures are part of this sorry picture.

“It should be no surprise that preventable adverse events that harm patients are frighteningly common in this highly technical, rapidly changing, and poorly integrated industry," the authors of the Patient Safety study concluded. "The picture is further complicated by a lack of transparency and limited accountability for errors that harm patients.”

Behind that statement is the rampant inefficiency of the system that promotes treatment and hospitalization over the patient's wellbeing, which, unfortunately, the ACA does little to address.

Journalist and speaker John F. Wasik has written 14 books on subjects that range from wealth to ecology to retirement. He writes for Reuters and contributes to Forbes, The New York Times and other publications.