Reducing waste requires collaborative effort

February 1, 2014

Avoidable costs amount to more than $1 trillion

Waste in the American healthcare system is both rampant and costly-but experts say collaborative approaches between payers and providers to reduce waste and identify the best patient interventions could help drive costs down and improve overall care.

Reports detailing exactly how much wasteful spending exists in the American health system vary, but one report from PricewaterhouseCoopers' Health Research Institute reported that wasteful spending has been calculated at up to $1.2 trillion of the $2.2 trillion spent on healthcare in the United States. They found that the largest area of waste was attributed to defensive medicine, or redundant, inappropriate, or unnecessary tests and procedures.

To combat this wasteful spending, Brett Hickman, a partner in PricewaterhouseCoopers' Health Industries Advisory Practice says payers and providers have adopted strategies that run the full gamut of integration with one another, whether its non-integrated attempts to individually address medical management through utilization reviews or quality assurance, full integration, or something in between such as shared savings arrangements.

"Across the country, you have the understanding or realization that there is a lot of waste, a lot of inefficiency, a lot of duplication, and the savings is not in rates. The savings is in how well care is managed or not managed and it's really in utilization," Hickman says.

New payment models

Payers are trying to reduce healthcare costs and cut out unnecessary or wasteful spending by changing payment models, increasing the focus on evidence-based medicine and sparking competition between providers.

While fee-for-service payment models once dominated the industry, some health plan executives say it isn't the best model to reduce unnecessary spending and address patient needs.

"In the provider community we look to work toward risk based contracts with our provider groups and in so doing we feel that they have a stronger stake in the game," says Paul Kasuba, MD, chief medical officer for Tufts Health Plan. "They are going to be more incentivized or aligned to think about the kind of care they are providing and do it in a more effective fashion."

Profit-sharing structures can create a necessary financial incentive for physicians to restructure their ideas on patient care, according to Kasuba, who continues to practice as an internist as well.

"I think that it probably accelerates the changes," he says. "I think most physicians out there want to practice using evidence-based medicine and want to do what's right but often it takes some time for things to be adopted."

Bruce Nash, MD, MBA, chief medical officer for the Capital District Physicians' Health Plan (CDPHP), agrees that to reduce overall waste in the system health plans need to take the initiative to move away from fee-for-service structures. As part of the plan's enhanced primary care program, which includes more than 200 practices and impacts more than 200,000 of CDPHP's members, primary care physicians are no longer paid on a fee-for-service structure and instead are heavily reimbursed based on how well they improve the patient experience, enhance the overall population health and reduce costs.

"We actually pay them more for the sicker patient. So they can spend more time for better outcomes," he says.

The response from physicians has been positive, and Nash says once physicians in the plan commit to the patient centered medical home approach they receive an increase in their base pay of 15% to 20% in addition to incentive dollars which can be an additional 20% on top of that.

"They are getting additional revenue into their practices so they can really sort of modify how they are practicing, in some cases seeing fewer patients per hour and spending more time with the appropriate patients or for that matter blocking off a couple hours off a week to think about and work as a team within the practice about how they can improve their care delivery," he says.

Nash says the plan is still waiting for further analysis to determine how effective their efforts were in 2012, but says data from an initial pilot showed improvements in 15 out of the 18 HEDIS measures and saw cost reductions due to less hospital utilization and emergency room visits.

 

Revenue reduction?

Even with incentive payments, a shift from fee for service could mean less income for providers, however experts say the current healthcare system is unsustainable as it is and needs to evolve to continue to function.

"Is there enough gain in the risk sharing to offset the revenue reduction and the answer is probably not," Joseph Fifer, president and chief financial officer of Healthcare Financial Management Association, a 30,000 member professional society for healthcare financial managers. "There probably isn't enough sharing that risk gain to offset that but it's better than the alternative."

Sharing financial risks and rewards isn't the only tactic health plans are using to curb unnecessary tests and procedures. The healthcare community as a whole has also been placing a greater emphasis on evidence-based medicine and creating standards and recommendations to guide patient care. For instance, the American Board of Internal Medicine (ABIM) Foundation launched the Choosing Wisely initiative, which encourages specialty societies to create evidence-based recommendations related to their specialty to guide the use of medical tests and procedures.

Although Choosing Wisely does not formally include health plans in the initiative, many healthcare executives say they've promoted awareness of the initiative to network providers and in some cases have created their own evidence-based guidelines and recommendations to guide care and reduce unnecessary tests or procedures.

"I think that's sort of a key piece we've learned in recent years that even with aligned financial incentives that physicians really don't have the time and in some places the wherewithal to actually mine data to identify where they should focus their efforts," Nash says.

 CDPHP has instituted specific programs to guide utilization of areas of healthcare that are associated with high cost and high variation, such as high-tech imaging procedures. They also run a medical therapy management program to highlight the latest pharmaceutical studies and findings with network physicians.

"So we at the plan here have invested heavily in our informatics capabilities in recent years so now we can go out and really give targeted information to specific practices to say listen in the area of pharmaceuticals for example, these are the four drugs we want you to handle differently because according to the data and the existing guidelines it seems that you are in variation with what the rest of the medical community is doing," Nash says.

Evidence-based medicine

Placing a greater emphasis on the latest medical evidence can increase buy-in from physicians and aid in patient discussions.

"For me, if I am a patient, I am going to rely on that physician's judgment with that evidence-based medicine to create the best care protocol for me, but in doing that you just eliminated lots of variation, you've created a high quality environment and you know the other thing is, which is  a byproduct to all of that, is you've reduced your cost," Fifer says.

Health plan executives say provider report cards or rating systems can also be an effective way to get providers and physicians to think differently about how they provide care in the future.

"Physicians are motivated by being compared to standards and other physicians because we all want to do well and we all want to be perceived as high quality and high value," Kasuba says. "So, we've found also that by bringing that information out to our providers to show what some people would call practice pattern variation and allowing them to work that through with themselves and with us supporting that also changes the way they do things."

Payers and providers may already be taking steps to reduce waste in the healthcare system, but experts say it's also important to note that meaningful change won't happen overnight.

"It is important that as we look at this whether we are calling it waste or inefficiency, really what we are talking about is a redesign of the healthcare delivery system and this is going to take some time to do it in a way that it is really providing the most care for the most individuals," Kasuba says.

Jill Sederstrom is a freelance writer based in Kansas City.