Money matters

In a recent Harvard Business Review article on solving the cost crisis in healthcare, the following was written:

“Making matters worse, participants in the health care system do not even agree on what they mean by costs. 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. Providers share in this confusion. They often allocate their costs to procedures, departments, and services based not on the actual resources used to deliver care but on how much they are reimbursed. But reimbursement itself is based on arbitrary and inaccurate assumptions about the intensity of care.”


Let’s take this issue of money and cost a bit further.

A write up from the New York Times summarizes the recent release of the 2011 Employer Health Benefits Annual Survey conducted by the Kaiser Family Foundation.

“…the average annual premium for family coverage through an employer reached $15,073 in 2011, an increase of 9 percent over the previous year.”

Yes, the cost of healthcare, no matter how you define it, continues to rise. Often the public must take on these additional costs as purchasers of health insurance like employers are running out of places to find the money to pay for this benefit. So despite the inability for “participants” in healthcare to agree on what cost means, the community continues to struggle.

And the scariest part – what happens if nothing changes? What happens if healthcare costs continue to rise?

Consider the following graph from the Robert Graham Center and is an example of what could happen:

Essentially this graph shows that by the year 2025 the annual household income in the US will be surpassed by the average health insurance premiums.

They conclude: “Shifting health care coverage from a commodity to a social good could reduce disparities and produce better population health. Changes in health care coverage will require more equitable and sustainable models of health care delivery and aligned advocacy to support them. The instability of health care financing and delivery provides an opportunity for family physician leaders to develop new models of efficient practice, with care that is accessible to everyone.”

So in the face of statistics like the ones mentioned above, how will we respond? Healthcare expenditures and premiums are growing at an uncontrollable rate. When cells do this we call it cancer – when healthcare does this, what do we call it?

Now is the time to start to demonstrate that there are indeed innovative models of healthcare that are out there that can bend the cost curve, improve quality and enhance overall healthcare. Where are they? What are they?

So no matter which way you look at healthcare, the money is a big deal.

How can we begin to change this? One thing is clear – we must.

Back to the Harvard Business Review for one recommendation:

“Accurately measuring costs and outcomes is the single most powerful lever we have today for transforming the economics of health care. As health care leaders obtain more accurate and appropriate costing numbers, they can make bold and politically difficult decisions to lower costs while sustaining or improving outcomes”

Unfortunately no matter how you cut it in healthcare, a lot of the change talk comes down to money. So what are we (you) going to do about it?

Dr. Miller has his doctorate in clinical psychology and is an Assistant Professor in the Department of Family Medicine at the University of Colorado Denver School of Medicine where he is the Director of the Office of Integrated Healthcare Research and Policy. His core task is to integrate mental health across all three of the department’s core mission areas: clinical, education, and research. Opinions expressed here are his own and not those of his employer.

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  • Bruce Ramshaw

    The issue of money in healthcare is important (it is how we are recognizing the lack of sustainability of our current system), but I think it is just a predictable byproduct of our current system structure. The system is currently made up of fragmented parts- hospitals, physician practices, pharmaceutical companies, device companies, private insurance companies, etc. And the leadership of each part (even physician practices and non-profits) are driven by revenue growth, profit margin, cash on hand, etc. Each part of our healthcare system is just doing what they are designed to do. As each part successfully meets their budget targets, quarterly profit targets, salary and bonus targets, etc. the overall costs continue to rise uncontrollably. Any system is designed to produce the result it is designed to produce. A new system structure designed around the most important process to define, measure and improve (the patient’s whole cycle of care) is required to change the output. I think the system should be designed with multi-disciplinary team-based care around patient groups, patient diseases and patient acute problems with engagement of the patient and family as key members of the teams. I think that focusing on the money instead of the system structure will not result in solutions that will produce significant improvement of the overall system.
    What I, and a multi-disciplinary group of teams (including patients and family members), are doing about it is we have started an academic medical center based on complex systems science. Our divisions are based on patient problems (obesity, breast disease, hernia disease, etc.) rather than physician specialties. We might not be successful (we are a true start-up), but as you suggest, we all need to try something.
    Thanks for the call to action!