A recent U.S. government study revealed 1% of patients in the U.S. are responsible for a whopping 21% of healthcare spending. Wow, talk about a “target-rich environment.” We’re all familiar with the 80/20 rule where, in a given population, 20% of the group is typically responsible for 80% of costs, resources consumed or produced, etc. This news takes the 80/20 concept to a new level.
According to Kaiser Health News, the federal Agency for Healthcare Research and Quality report also said that just 5% of patients are responsible for 50% of all healthcare costs. On the other side of the ledger, the healthiest 5% of the population accounts for just 2.8% of spending.
The story behind the horrifying numbers: people with progressive, sometimes multiple chronic diseases such as kidney failure, diabetes, and COPD account for huge costs to the healthcare system. The patients in these groups even have a name: “super utilizers.” A different, not so flattering name is used in ERs everywhere: “frequent fliers.” On average, each super utilizer cost the healthcare system $88,000 in 2010.
In addition to overusing hospital emergency departments for their care, Kaiser said super utilizers suffer from a phenomenon called “extreme uncoordinated care” whereby they go to multiple, unrelated hospitals, (and all too often to the hospitals’ expensive ERs) for their care rather than a single outpatient clinic. The hospitals have no easy way to access patient records from other institutions to determine coexistent conditions and treatments. So they take the most direct path. They treat the immediate symptoms and discharge the patient.
In the past, hospitals could get away with just treating the patients’ symptoms and sending them on their way. With the advent of the Affordable Care Act (ACA), however, the incentives to the hospital are changing. Instead of a flat fee for service, the ACA provides penalties for high readmission rates and incentives for lowering readmissions within 30 days of treatment. From the article: “Hospitals have traditionally made more money readmitting patients than trying to prevent them from bouncing back.”
The ACA creates accountable care organizations (ACOs), groups of doctors, hospitals and clinics. The ACOs pool resources to treat Medicare and Medicaid patients more effectively and share in the savings. The ACOs work by creating and using coordinated care plans. The plans and their case managers have broad authority to do whatever it takes to help patients. By helping patients under the new ACA rules, the case managers help the hospitals increase their profitability.
The extra assistance to patients enabled by the coordinated care plans can include accompanying them to doctors’ appointments, paying for cab fare, buying food or furniture, phone calls and home visits to follow-up on prescription medication compliance, and more. These often simple interventions can have a significant effect on super utilizers. It is to be hoped that there will be a beneficial effect to the U.S. healthcare system as a result.
Takeaways: Healthcare financing is being reformed. That means healthcare delivery reform is coming as well. Hospitals are businesses, whether for profit or nonprofit. If their business models are threatened, they will respond to incentives and penalties to change. For medical device companies trying to introduce new products into this rapidly changing environment, realize that the traditional sales methods may work for a while longer. Realize also that the changes will affect purchasing decisions and procurement methods.