Is this the year we finally talk about all health care costs?

While patients, families and employers have been talking about rising (and in many cases, unmanageable) health care costs for years, it appears researchers finally may be getting on board with the issue as well.

Three notable reports came out in the past few weeks comparing what the U.S. spends on health care to other countries.

The U.S. System Costs More to Administer than Other Countries

The Annals of Internal Medicine published a study on January 7, putting new numbers to an old question. How much does the U.S. spend on the administration of health care? About four times more than Canada spends, evidently. Administering care is much cheaper in Canada, for example, because there are standardized forms and processes for providers, facilities, and families to use to access and pay for care. The study authors estimate $600 billion a year is spent in the U.S. on administrative bureaucracy instead of clinical care. On a per person basis, this amounts to $844 spent per person for health insurance plan overhead in the U.S., versus $146 per person in Canada.

The U.S. System Pays Physicians More than Other Countries Do

It’s not just health plan administrative costs that drives U.S. spending higher, though as we have written , streamlining forms and processes seems like an obvious place to start cutting costs. The U.S. also pays physicians more than other countries do. Anne Case and Angus Deaton – the economists who called attention to the rising number of “deaths of despair” in 2015 (and won a Nobel prize for their work that year) made headlines this week at the annual American Economic Association’s annual meeting when they said physicians are driving U.S. health care costs:

“We have half as many physicians per head as most European countries, yet they get paid two times as much, on average…” says Deaton. “Physicians are a giant rent-seeking conspiracy that’s taking money away from the rest of us, and yet everybody loves physicians. You can’t touch them.” (source: Washington Post).

Is this a Good Thing or a Bad Thing? (I ask in jest…)

Maybe the Internet coordinated these news reports, but the same day the Case/Deaton comments came out, several news outlets reported: Health care positions top 2020 list of best (paying) jobs! Indeed, 12 of the top 20 best paying jobs for 2020 are in health care. Here is the list from US News and World Report:

Best-Paying Jobs

1. Anesthesiologist
2. Surgeon
3. Oral and Maxillofacial Surgeon
4. Obstetrician and Gynecologist
5. Orthodontist
6. Psychiatrist
7. Physician
8. Prosthodontist
9. Pediatrician
10. Dentist
11. Nurse Anesthetist
12. Petroleum Engineer
13. IT Manager
14. Podiatrist
15. Marketing Manager
16. Financial Manager
17. Pilot
18. Lawyer
19. Sales Manager
20. Business Operations Manager

It’s good to see more attention being paid to costs, and it’s especially good to see research and data behind the alarming stories. We all know that health care costs are going up but if we really want to do something about it, we have to look at ALL health care costs. This kind of data is the first step toward policy making; let’s see what happens next.

Health care costs: What’s the real story?

As I travel around the country talking to state legislators and health care leaders, questions about health care costs are usually at the top of their lists. The first request they make is for credible, public sources of information they can use to help inform their policy decision making.

Two slides I frequently use in presentations receive the highest engagement. My informal measurements of engagement are people in the audience taking pictures of the screen when the slide appears, and comments such as, “This is incredibly helpful” or “I haven’t seen it presented like this before.”

The first slide is a graphic (see below) from the Peterson-Kaiser Health System Tracker and shows how cost-sharing requirements, especially in the form of deductibles, have outpaced wage growth.

The second slide I created because the information is harder to find than you’d expect. Notably, the information is out there, but it is buried in data sets, not in a visual that can be quickly understood and easily shared.

Combining information on health expenditure data and historical inflation information the graphic (see below) shows the annual change in spending for the three most talked about categories of health care, hospitals, physician services, and prescription drugs, as well as general inflation for the last 10 years.

If you live and breathe health policy, these visuals may be no surprise to you. State legislators, on the other hand, are asked to be experts in a mindboggling array of issues. They rely on their staff and the internet to understand these issues, but what if the internet doesn’t serve up the info they need?

M2 aims to be a reliable source of information on all things health policy, and we strive to make complicated information from a multitude of sources more concise and comprehensible. Hopefully, the slides we share prove useful to you. Let us know what you think!

Can Price Transparency in Health Care Really Lower Costs?

Telling patients what they will pay for their health care services is a key stepping stone to more efficient use of health care dollars. Consumers, employers, payers, and the system as a whole would likely benefit if the true cost to the patient were made available before a patient receives a health care service or product.

Several states already have laws on the books requiring health care providers to make at least some price information available on at least some procedures. Some states also run centralized databases where different payers report what they get paid for different services. Additionally, the federal government requires hospitals to post a list of standard charges on the internet.

The Trump Administration wants providers to further expand the price and quality information to consumers, and issued an Executive Order (EO) on Improving Price and Quality Transparency in American Healthcare to Put Patients First in late June. The order aims to help consumers make “well-informed decisions” and expand transparency efforts that provide information “which patients can research and compare before making informed choices based on price and quality.”

More specifically, the EO directs the U.S. Department of Health and Human Services (HHS) to require hospitals to publish negotiated rates in a searchable, consumer-friendly format for 300 “shoppable” services.

You Can Shop if You Want To

Consumers are being asked to make more of these decisions on their own, as we’ve described in previous posts. My home state of Colorado has a shopping tool like the one the EO has in mind. It took me less than a minute to get the result below from the Colorado Center for Improving Value in Health Care (CIVHC) for an MRI scan of a leg joint within 15 miles of my ZIP code:

Shop for Health Care Services – MRI Scan, Leg joint (CPT 73721)

Seems pretty obvious that while the closest option, seven miles away, is Centura Health St Anthony Hospital, they would charge me $510 for the scan. If I drive another five miles, I would only have to pay $150 at Denver Health Medical Center.

“Shoppable,” but Perhaps Not “Buyable”

According to the Health Care Cost Institute (HCCI), “For a health care service to be ‘shoppable’, it must be a common health care service that can be researched (“shopped”) in advance; multiple providers of that service must be available in a market (i.e., competition); and sufficient data about the prices and quality of services must be available.” HCCI estimates that approximately half of out-of-pocket spending is spent on “shoppable ambulatory doctor services.”

The problem is, you might be able to research and compare certain services with upgraded information, thus improving your shopping experience, but you might really struggle to buy the service that is lower in cost.

Using the example of lower-limb MRIs, a 2018 study titled Are Health Care Services Shoppable? Evidence from the Consumption of Lower-Limb MRI Scans found that people typically drive by multiple lower-priced providers to get to their final treatment location. Why? Because that is where the patient’s referring provider sends them. The study shows “the influence of referring physicians is dramatically greater than the influence of patient cost-sharing or patients’ home ZIP code fixed effects.”

In particular, “physicians who are vertically integrated with hospitals are more likely to refer patients to hospitals for lower-limb MRI scans.” We’ve written previously about how costs vary dramatically by site of care. That also means patient cost-sharing varies. We are asked to pay more out-of-pocket for a service we could get elsewhere. But that would mean 1) shopping and 2) acting against the advice of a provider. Not impossible tasks, but difficult for sure.

Increased transparency means you can shop for services, but that is only half of the problem. Yes, it is important to have price and quality information. If the problem were a technical one, more information would lead to different decision making. But in fact, changing the way a consumer selects a health care service – even a “shoppable” service – is an adaptive problem. That is, it requires a change in the way people think, prioritize, and behave.

Additional information on quality and price is definitely necessary, but if I drive by two Centura Health facilities with lower cost MRIs to get to the HealthOne facility my referring provider recommended, I would also need some encouragement, at least, to go against my physician’s recommendation.

It looks like we health policy types have more work to do.

Small Step Service Design Thinking – The Case of the Nurse Practitioner in the Fire Department

As we a couple weeks ago, M2 authored a chapter entitled “Using Small Step Service Design Thinking to Create and Implement Services that Improve Patient Care,” in Service Design and Service Thinking in Healthcare and Hospital Management published by Springer. Today we share highlights from the second case study we feature in the chapter.

Fire department or health care provider?

When most of us think of health care organizations, we tend to think of our own experience, perhaps our physician’s office building, or a Kaiser-like integrated health system campus. But the fragmented U.S. health care system also relies on a “safety net” that includes community clinics, public hospitals, local health departments, and the emergency medical system (EMS).

As in the rest of the nation, in Los Angeles, (the second largest city in the U.S with 4+ million people) the 9-1-1 system serves as a safety net for health and social issues in the community. Perhaps surprisingly, the Los Angeles Fire Department (LAFD) is a key component of the city’s health care safety net. “The LAFD is the largest provider of acute, unscheduled medical care in Los Angeles,” and of the more than 425,000 annual calls for service, 85% are for medical services, not fire.

What would fire response look like if you put the patient first?

In 2016, Dr. Marc Eckstein, medical director of the LAFD, led the development and launch of the nurse practitioner response unit (NPRU) pilot project. A great example of using small step service design thinking, the creation of the NPRU was driven by a deep understanding of the people the LAFD serves. Leaders of the NPRU explained their thinking in creating the healthcare innovation: “This challenge naturally summons the need to better understand who our clients really are, and how we can work with other community partners to more collectively match our collective response to each client.”

What the team understood from years in the field talking and working with residents of Los Angeles County was that community members trusted the LAFD and that is why they called. Further, the team recognized, “for those with lower socioeconomic status, the fire department is their only means of access to healthcare, and has been for a number of years.” Additionally, Terrance Ito, DNP, FNP-BC, the LAFD EMS Nurse Practitioner supervisor explained, “many of them lacked health insurance for a number of years—and having recently become insured, we’ve found that they’re having difficulty with healthcare navigation.”

Meeting patients where they are – literally and figuratively

The NPRU model is designed to intervene with patients as early as possible in the course of emergency care, in part by focusing on what are called “prehospital” encounters. In a report prepared for the California HealthCare Foundation and California Emergency Medical Services Authority by Dr. Kenneth Kizer and his colleagues, prehospital services can include transporting patients who don’t need emergency care to non-emergency department (ED) locations, refer or release individuals at the scene of emergency response, and/or addressing the needs of frequent 9-1-1 callers (or ED visitors) “by helping them access primary care and other social services.”

The NPRU is a converted ambulance that is staffed by a range of emergency professionals including firefighters, paramedics, and nurse practitioners. The missions of the NPRU include providing mobile urgent care at the scene of an emergency call, and comprehensively assessing frequent users of emergency services, then connecting them to care or social services, as necessary.

A small step service design change, the NPRU allows patients to be served where the ambulance goes – often to a person’s home after he or she has called 9-1-1, instead of transporting the patient with little thought to where the patient can best be served. Notably, in February 2019, the Centers for Medicare and Medicaid Innovation announced a new payment model that will support exactly this kind of health service innovation. The Emergency Triage, Treat and Transport (ET3) Model will allow providers serving Medicare beneficiaries to be reimbursed not only for ambulance services to hospitals, but also for transport to lower level sites of care, for example a physician’s office or urgent care clinic. The ET3 Model would also allow reimbursement for models such as the LAFD NPRU that treat “in place with a qualified health care practitioner, either on the scene or connected using telehealth.”

Our book chapter on using small step service design thinking in health care used two case studies to highlight not just theories, but models that have been tested and proven effective in improving patient care. These models mirror what we hear from patients in our client work – ask us what we think would improve patient care and create policy accordingly. This simple idea drives our work every day. We hope you will consider it in your health care policy work as well.

Small Step Service Design Thinking – The Case of the Patient Appointment

As we last week, M2 authored a chapter entitled “Using Small Step Service Design Thinking to Create and Implement Services that Improve Patient Care,” in Service Design and Service Thinking in Healthcare and Hospital Management published by Springer. Today we share highlights from the first case study we feature in the chapter.

Big leap versus small step service design

“At the heart of design thinking is the intention to improve products by analyzing and understanding how users interact with products and investigating the conditions in which they operate,” explain Rikke Dam and Teo Siang in a piece published by the Interaction Design Foundation. In health care, understanding how users interact is often the purview of engineers or project managers looking to improve the waiting room experience, or decrease wait times. We call these “big leap” service designs because they take significant time, commitment, and funding from health care organizations.

A small step design, we argue, truly aims to understand the patient’s point of view, instead of forcing a person to work around a process designed to make things easier for health care providers or organizations.

Patient appointments – boring but essential

While the health care system is moving away from fee-for-service reimbursement, it is still the dominant payment approach in the U.S. This means unreimbursed services, for example, setting appointments, are often outsourced to patients. From a patient’s point of view, not scheduling an appointment, or not showing up for one, can mean diagnosis or treatment delays which can lead to worse health outcomes. From a systems perspective, missed appointments are costly and inefficient. Perhaps most importantly from a design perspective, research shows that missed appointments are often blamed on patient inaction which can cause providers to develop negative attitudes and feelings toward patients leading to a decrease in communication and lack of empathy. Missed appointments can also lead to “increased costs of care delivery…reduced patient satisfaction and negative relationships between patients and staff.”

In a fee-for-service environment in particular, it makes sense from the point of view of the provider to recommend a follow-up appointment or make a referral for care, and expect the patient to book the appointment. But appointment nonadherence is a major problem in the U.S. health system with estimates ranging from 20 to 80% appointment nonadherence depending on the type of condition, site of care, and patient demographics.

Is this a people problem, or a process problem?

Since it benefits the patient, it seems obvious that he or she would set a recommended follow-up appointment, or appointment with a practitioner that has been referred to him or her by her current provider. But we know the frequency at which this doesn’t happen is quite high. As Chip and Dan Heath encourage readers to understand in Switch: How to Change Things When Change Is Hard, we may be attributing the patient’s behavior to “the way they are, rather than to the situation they’re in.”

First, let’s empathize.

Design system thinking recommends defining the problem by first empathizing with the end user. A large accountable care organization (ACO) in the Northeast we studied for the book chapter realized they were not immune to the problem of missed appointments, and recognized it was preventing their organization from helping patients achieve optimal outcomes.

The ACO’s small step service design innovation started with empathy. The ACO first worked to understand why their patients failed to follow-up on referrals. If you are not a patient, the answer may surprise you: Patients didn’t feel like they had the expertise to make the best choice.

From a patient’s point of view, they want the best care they can access, of course, but they don’t necessarily know what the “best” care is, or which providers are able to deliver that care for their particular set of circumstances. Further, a list of referrals with several provider names patients are often handed at the end of an appointment can make this anxiety worse. What tools does a patient have to discern between the providers on the list? Is there a difference in quality? Price? Years of experience? Bedside manner? Cultural competency?

Patient-first design extends clinical expertise

The small step service design tested by the ACO in our case study was a coordinated appointment and referral system (ARS). Driven by research showing a patient is more likely to attend a clinical appointment if that appointment is set before the patient leaves the office of the current clinician visit, the clinical leader of the ARS worked with colleagues to pilot a referral and appointment-setting process at the ACO that changed internal processes so patients left appointments with a follow-up or referral appointment already scheduled.

Our case study of the ACO in the Northeast provides a more complete picture of the design steps they used to create a unique appointment and referral system to improve patient adherence to referrals and follow-up appointments. While not the subject of this blog, it should be noted that empathizing with patients was just the first step of the process. Encouraging providers to be more involved in the appointment setting and referral process required building the case for chance across a broad range of internal stakeholders, not the least of which were the staff and clinical experts who would be asked to help patients make this important choice. The goal was to take some of the work off the patient’s plate, but this required building the case with the ACO’s doctors and health care providers for why they should do something differently.

The clinical expert leading the effort explained to us, “I try to tell doctors that we have insider access as clinicians. We get preferential treatment when we are trying to interact with the system. Imagine extending that reach for our patients.”

Through a provider’s eyes, it seems obvious that patients should schedule appointments the provider recommends. But through the patient’s eyes, it becomes more clear that the barriers to appointment-setting may have less to do with lack of interest and more to do with lack of expertise. Extending clinical expertise and “insider access” to patients to improve the rate of appointment setting may seem like a mundane process change, but the ACO in our case study thinks it will have an outsize impact on patient outcomes.

We Pay for What We Value. Guess What We Value in the U.S. Health Care System?

People often ask what the difference is between the United States and other health care systems. Health Affairs recently published a helpful piece focused on comparing costs entitled “It’s Still The Prices, Stupid: Why The US Spends So Much On Health Care, And A Tribute To Uwe Reinhardt” by Gerard F. Anderson of Johns Hopkins Bloomberg School of Public Health, Peter Hussey, a VP at RAND Corporation in Boston, and Varduhi Petrosyan, a professor and dean in the Turpanjian School of Public Health, American University of Armenia, in Yerevan. The article is an update of a similar one they published back in 2003, along with Uwe E. Reinhardt, who was the James Madison Professor of Political Economy at the Woodrow Wilson School of Public and International Affairs, Princeton University, until his death in November 2017. The authors compare the health care costs, accessibility, spending growth rates, and other fees in OECD countries.

Notably, there is no concise chart in the article, showing the side-by-side of this information – so we made one! We also calculated a multiple, to see how much more (or less, but usually more) the U.S. spends compared to the median of the OECD countries.

In the chart below, we tried to focus on the main categories of health care costs – health insurance administrative costs, hospital care, physician salaries, nurse salaries and pharmaceutical spending. Interestingly, the information needed for a comparison across countries and categories was not always available in the Health Affairs article. This highlights a pretty big problem with health care data – researchers often say that it’s hard to compare inputs across countries because of their different systems and economies, so they just don’t. This means we don’t actually know for sure how these costs compare to each other.

You may notice the huge difference in per capita health insurance administrative costs. The fact that the U.S. spends almost 8 times as much as the median of OECD countries on health insurance administrative costs (and not actual health care) is rarely a focus of health system policy change, though it is well-known:

“The next-highest-spending country after the US (Switzerland) had administrative costs of only $280. In 2017 Steffie Woolhandler and David Himmelstein [Commonwealth Fund] estimated that the US would save about $617 billion (about 20% of its total health spending) if it moved to a single-payer system.”

We have written about standardizing a set of forms before. Maybe this is a good place to start addressing health care costs in the U.S.?

Another area of high cost in the U.S. compared to other countries is hospital and health care providers. According to the Health Affairs article, all of the inputs for hospital care – including “health care workers’ salaries, medical equipment, and pharmaceutical and other supplies – are much more expensive than in other countries.”

Why are health care provider costs higher in the U.S.? In part because the allocation of physicians in the U.S. is different from other OECD countries, and skews to more expensive care: the U.S. has the lowest percentage of general physicians relative to specialists of OECD countries.

Making changes seems as easy as the U.S. looking to a country that seems to have lower health care costs and “copying” what they do. But these researchers did this same analysis in 2003 based on 2000 data and now, nearly 20 years later, they found the relative rankings of the countries to be about the same for most indicators. Health care costs are different across countries because health care systems are different across countries. And of course, systems are different across countries because values are different.

Based on what the U.S. spends in different health care categories compared to other countries, we seem to really value health insurance administrative costs. Now we know.