Research

Bending the health care cost curve with accountable, patient-centered, coordinated care

A comprehensive discussion of health care reform would include three issues, according to Stephen Shortell, dean of the School of Public Health at the University of California-Berkeley. Access to health care is certainly one issue, and the health reform bill as it's being proposed would address it. Affordability and sustainability — not of health insurance but of health care itself — are important issues too. But, they "get relatively short shrift in the current legislation" according to Shortell, who spoke at the 3rd Annual Health Economics and Policy Lecture, hosted by the School of Health Management and Policy at the W. P. Carey School of Business.

2009-12-21

Nearly one-fifth of U.S. GDP goes to health care — a share that has risen dramatically in the last three decades and continues to do so every year. Clearly, something's got to give. The U.S. Congress is in the process of debating legislation meant to overhaul the nation's health insurance system to provide coverage to around 40 million uninsured Americans, who want and need health care but cannot afford it under the current system.

But when we consider that health insurance costs make up just 15 percent of our health care spending, a major question remains: what are we doing to address the other 85 percent of our health care costs? Three issues are in play, according to Stephen Shortell, dean of the School of Public Health at the University of California-Berkeley. Access to health care is certainly one issue, and the health reform bill as it's being proposed would address it.

Affordability and sustainability — not of health insurance but of health care itself — are important issues too. But, they "get relatively short shrift in the current legislation" according to Shortell, who spoke at the 3rd Annual Health Economics and Policy Lecture, hosted by the School of Health Management and Policy at the W. P. Carey School of Business.

Health care affordability and sustainability

"We have to change the underlying system of care," Shortell said. "We must look at delivery system reform — the actual system itself within which health care is delivered to patients." According to Shortell, between 70 and 80 percent of health care costs go to caring for patients with chronic conditions, and the cost of health care rises by more than 6 percent each year — double the average rate of inflation.

That's why health economists don't talk simply about reducing costs, they talk about "bending the cost curve," which means reducing the rate at which health care spending rises. To do that, we need a better system to diagnose and treat chronic conditions, Shortell said. Shortell's recent study looked at how large physician practices utilized "care management processes" (CMPs) for patients with chronic conditions.

CMPs include maintaining a patient registry (a database of patients with a specific condition), providing educational materials to patients, soliciting feedback from patients about their doctors, employing nurse care managers, sending patient reminders, and utilizing point-of-care reminders (which help physicians make evidence-based decisions).

Only 22 percent of practices used all six CMPs for patients with diabetes; 10 percent did for patients with asthma or congestive heart failure; and 4 percent did for patients with depression. The low adoption rate stands out in the face of evidence that care management processes have proven to make a difference in terms of the quality of patients' health. That can make a difference in health care costs.

Healthier people — including those with chronic conditions who actively manage those conditions — make fewer trips to the ER and the hospital (where the greatest costs are generated). So why aren't more physicians utilizing care management processes?

Shortell dismissed the idea that doctors, nurses, and other health care providers simply don't care about their patients, or are incapable of providing quality care. Instead, he said, high-quality, sustainable, affordable health care is made difficult because "health care providers are hampered by perverse payment incentives and regulations."

Accountable, coordinated care

The answer, Shortell says, is to create a system in which payment incentives and regulations guide the delivery of the kind of health care we want: care that is high-quality, sustainable, and affordable. Shortell recommends developing accountable care organizations (ACOs) — umbrella organizations that coordinate care among various providers and accept responsibility for the cost and the quality of the health care they provide.

"The answer is coordinating care," Shortell said. That's what ACOs are meant to do — integrate the delivery of health care among different providers. "ACOs typically include a primary care physician, a hospital, and specialists, and could also include nursing homes, home health agencies, rehab facilities, and mental health providers. But they're based on primary care," he said.

"The key is moving away from fee-for-service and instead creating incentives for keeping people healthy," Shortell said. Accountable care organizations would be encouraged to provide higher-quality care and to keep costs low by coordinating a patient's care among different providers.

According to Shortell, it might work like this: health care providers sign an agreement to participate with an ACO (primary care physicians can only be in one ACO; specialists can participate in multiple ACOs). Past years' cost data could be used to develop a spending target for the providers in the ACO. If the providers spend less than the target, they share the savings.

And because the ACO actively measures the performance of its providers, it is able to offer bonuses for exceeding quality-of-care targets as well. Shortell estimates that in Medicare alone the cost savings from voluntary ACOs (providers are not required to participate) over 10 years would be $5.3 billion. That's a big deal for a program with a trust fund that is projected to be out of money by 2017.

Putting the patient at the center of health care

At the heart of the accountable care organization is what Shortell calls a patient-centered medical home (PCMH). It's not actually a physical structure; a PCMH is a new model for the delivery of medical care. The model is centered around the primary care provider (the patient's "home") and is designed to provide long-term, "whole person," coordinated care to patients — to both reduce the cost and improve the quality of health care.

The principle behind the PCMH is international evidence showing that health care systems with greater investment in primary care have better health outcomes at lower cost. Shortell's research demonstrates that the quality of care, patient experience, care coordination and access are all better under the patient-centered medical home model than in a traditional health care delivery system.

The number of emergency room visits and hospital admissions are lower, too. The PCMH model has been successful in a number of places, including Community Care of North Carolina, which involves 1,300 community-based practice sites and approximately 4,500 primary care clinicians throughout the state.

The program has generated a total savings to Medicaid and the State Children's Health Insurance Program of between $135 and $400 million, in large part by decreasing patient hospitalizations for asthma 40 percent and ER visits 11 percent. At the Group Health Cooperative of Puget Sound, which has embraced a PCMH model, physicians are paid a salary and can earn bonuses for providing high-quality care.

Under that model, the incentive is for doctors to provide the kind of high-quality care that their patients demand, not to rush through visits in an effort to see as many patients as possible and order unnecessary tests and procedures. Patients are assigned a team of health care providers who together are responsible for their patients' health. Providers are rewarded for consulting over the phone and by e-mail, which allows for more frequent (and, often, more efficient) health care provision.

Group Health Cooperative has found that the PCMH model reduced ER visits by 29 percent and hospital admissions by 11 percent; it also led to significantly higher patient experience scores and less staff burnout, Shortell said. Transitioning from a traditional-care model to a patient-centered medical home model, Shortell said, requires reform in four key areas:

• Structural and team changes, including smaller physician rosters, longer standard visits, and physician/medical assistant pairing;
• Point-of-care changes, including e-mail and phone visits, real-time specialist consulting via electronic medical records, and collaborative care planning;
• Patient outreach changes, including chronic disease medication outreach, abnormal test outreach, and self-management workshops; and
• Management changes, including daily care team huddles, salary-only physician compensation and a visual reporting system to track changes.

According to Shortell, most physician practices have yet to implement the kinds of reforms that would qualify them as patient-centered medical homes. "Not many physician practices today would meet the standards for becoming a PCMH." Shortell acknowledges that a sudden emphasis on primary care physicians, who are outnumbered by specialists more than two to one, will require a "rethinking and redesigning of primary care."

"What kind of primary care do we want? Who else might be able to provide it?" Shortell asked, suggesting that alternative providers like pharmacies, clinics at schools and workplaces, and parents at home will be necessary. "There will be a shortage of traditional primary care providers. So let's think 'disruptive innovation.' Let's think about providing primary care where the people are."

That, Shortell, said, requires a well-established, strong delivery system to refer patients from a non-traditional primary care environment to specialists, when it's necessary. "We'll have to harness all of the disruptive innovation opportunities in healthcare to make a new lower-cost, higher-quality system work."

Coordinated care is key

For Shortell, a high-quality, lower-cost health care system boils down to one thing: coordinated care. He sees both the accountable care organization and the patient-centered medical home as moves toward a "population health management system" of which medical care is only a part.

"It also involves healthy foods, safe neighborhoods, consistent prenatal care, effective schools." And it's made possible, Shortell said, by coalitions of health providers that are accountable for people's health status and have financial incentives to help us be healthier.

"Change in the health care system," said Shortell, "requires a supportive payment and regulatory environment; organizations (like accountable care organizations) that facilitate the work of patient-centered teams; and high-performing patient-centered medical home teams." The result: medical care that is high-quality, affordable, and sustainable.

Bottom Line:

• Health insurance costs make up just 15 percent of our health care spending. Addressing the other 85 percent of our health care costs will require reforming the system itself — how health care is delivered to patients.
• According to Stephen Shortell, high-quality, sustainable, affordable health care is made difficult under the current system because "health care providers are hampered by perverse payment incentives and regulations."
• "Bending the cost curve" (reducing the rate at which health care spending rises) will require coordinated care among providers, with primary care physicians — who are incentivized to keep costs low and quality high — at the center.
• Accountable care organizations (ACOs) — umbrella organizations that coordinate care among various providers and accept responsibility for the cost and the quality of the health care they provide — could be the framework for a system of coordinated care.
• At the heart of the ACO is a patient-centered medical home — a new model for the delivery of medical care centered around the primary care provider (the patient's "home") and designed to provide long-term, "whole person," coordinated care to patients — to both reduce the cost and improve the quality of health care.

Health Economics