How organizations can best stop rampant healthcare cost escalation
A new work plan is necessary to enable the shift to value-based care, through the better use and sharing of patient data.
People in healthcare have spent decades of their careers talking about stopping the constant rise in healthcare costs. Literally nothing has worked on a scale big enough to matter.
Payers have tried challenging medical necessity, new products, negotiations with providers, tiered networks and more. Business has shrunk coverage to make employees more cost sensitive. The government has ramped up access but paid less, thus shifted costs to others. Medicare became the force behind value-based care. Despite all this, costs are higher than ever.
In 2025, the goal of healthcare cost control is newly fired up. There are proposed budget cuts that strike at Medicaid, medical research, public health and arcane Medicare funding mechanisms for medical education and medical debt.
It will be better for healthcare if the industry can “lead” cost reduction. The alternative – indiscriminant cuts by Congress – targets the most vulnerable and the easiest areas to eliminate. But leading requires stepping up to value-based payments. Here, we’ll look at how to do it.
Do healthcare providers know how to reduce cost?
Many of the payment models aimed at reducing costs have not shown success. There are many reasons – time needed to transform care, the challenge of multiple clinical systems, staffing and workload issues, and managing social issues have stymied success of provider experiments in value-based care. Some accountable care organizations have been successful in pushing expenditures below historically based targets. But it’s not been enough.
Large, consolidated health systems also have issues with cost. They have used their prowess to improve their negotiating power, which has increased costs. That is a problem as consolidation has expanded.
The good news is that despite actual costs, providers have quietly been investing in technology, data and infrastructure for years. They are positioned for implementation but have been unwilling to pull the switch on fee-for-service reimbursement.
A new work plan is needed
Let’s examine the work plan that providers must implement.
1. Organizational recalibration to value-based care. Success in cost management requires providers to switch focus to outcomes and costs versus value.
- Create clinical teams. With a clinical team approach, individual functions are delegated to team members to support the physician-patient relationship and treatment plan. These include contact with the patient, determination of patient needs for more intensive communication, preparation of patient information, preparation of patient self-management programs and enrollment of patients, specialty referral follow-up, monitoring of patient clinical status, patient decision-making materials and treatment cost information.
- Align to patient needs. Patients say they want price transparency, honesty, and information. They want access to care when they need it and clear answers to their questions. Providers can’t “do” cost control without establishing and maintaining a trusting relationship with patients. Clinical teams and off-hours services will go a long way to increase the odds that patients call before going to the emergency department, or ask for guidance before making a decision with a specialist. But addressing transparency, scheduling and decision-making with patient involvement is also essential.
- Change provider compensation to reflects goals of value-based care. Over time, health systems need to avoid demanding and rewarding volume and move to rewarding the benefits of value-based care. To have compensation systems disconnected with revenue and program goals does not reinforce cost control.
2. Aggregate data for value-based care and, in particular, cost management. Providers need electronic health records systems plus claims data for all providers and patients. Access to commercially insured patient data is difficult but must be a part of the value-based contract negotiation process. Access to Medicare data is now contingent on CMS payment model participation.
3. Curate aggregated data for identifying cost issues and sharing with providers. Identifying cost variation, average case costs and anomalies will require a method of curating data. Episodes of care that are patient- and provider-identified are the vehicle. Both condition episodes (focus on outcomes and risk that can spur costs) and procedures and treatment episodes (identify cost variation and drivers) are needed. Look to a vendor with expertise for clinicians’ trust in data.
4. Create a pipeline for improvements and interventions. Providers must address cost issues revealed by episodes to change the cost trajectories in existing and future patients. Episodes also identify systemic issues such as deviations from clinical pathways or high rates of complications due to poor patient selection. All are opportunities.
5. Share data with clinicians and collaborating specialists. Longer term improvements in costs are dependent on data sharing and communication with clinicians, both in-house and referred. Engaging them in initiatives requires not only data sharing, but a method of feedback and involvement.
Many healthcare systems are far along with these initiatives, but they haven’t turned their business models to value-based care. Others have much to implement. Either way, providers will face a big challenge to their revenues if they hold out. Now is the time to get serious about cost control.
Theresa Hush is a healthcare strategist and change expert with experience across the healthcare spectrum. She is co-founder and CEO of Roji Health Intelligence, formed in 2002 to help providers implement value-based care with technology and data-guided services.