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Lowering the Cost of Health Care
Lowering the Cost of Health Care The West Health Initiative Kerry McDermott, MPH
Background
T
he singular mission of West Health, which consists of the West Health Institute, the West Health Policy Center, the West Health Investment Fund, and the West Health Incubator, is to lower the cost of health care. This collective effort was founded by philanthropic pioneers Gary and Mary West to create a new, lower-cost ecosystem enabled by innovative technology and solutions. Its independent resources and sole focus favorably position these organizations to engage all stakeholders in advancing practical solutions to our nation’s growing and unsustainable burden of healthcare costs. The contributing authors to the papers in this supplement1–12 to the American Journal of Preventive Medicine offer their perspectives on the roles various stakeholders play in lowering the cost of health care through preventive medicine, innovation, and technology. Recurring themes include the need for scientifıc evidence and adherence to the fındings of comparative-effectiveness research, emphasis on prevention and data-driven insights, increasing price transparency and discussions of value, improving healthcare productivity, and designing solutions with implementation and scale in mind. We fınd alignment in the need to (1) change how, when, what, and by whom healthcare services are delivered; (2) understand the value of and amount paid for care prior to receiving that care; (3) incentivize and reward the right care; and (4) govern by effıcient, commonsense rules. Data are essential to advance these fundamental tenets to lower the cost of health care. The author viewpoints expressed herein support several areas that have the potential to favorably impact healthcare costs: ●
Infrastructure Independence®. Providing patients with the right care, at the right time, wherever they are. Real-time remote monitoring, actionable diagnostics, and seamless communication of healthcare information all effıciently extend the reach and availability of clinicians and improve the timeliness and accuracy of
From the West Health Policy Center, Washington DC Address correspondence to: Kerry McDermott, MPH, 1909 K Street, NW, Suite 730, Washington DC 20006. E-mail: kmcdermott@ westhealth.org. 0749-3797/$36.00 http://dx.doi.org/10.1016/j.amepre.2012.09.012
care. By leveraging wireless solutions and technologyenabled care coordination, the infrastructure-independent care model stands in sharp contrast to the current healthcare delivery system, which is centered on clinician location and availability. Because care is episodic, it ineffectually addresses chronic diseases, resulting in exacerbations, clinical decompensations, and complications that consume enormous amounts of resources. The infrastructure-independent care model emphasizes prevention: primary, secondary, and tertiary. It relies on data, whose pivotal role is described by Meier,2 as well as interoperable systems that support fluid communication. This model demands innovation that improves healthcare productivity and brings the needed disruption to enable less expensive professionals to provide progressively more sophisticated services in less expensive settings, as espoused by Gottlieb and Makower.9 Infrastructure independence represents a technology-driven change in delivery models that can reduce short- and long-term disease burden. It embodies self-care and growing patient receptivity to receiving care in settings other than a doctor’s offıce, as advocated by Sarasohn-Kahn.4 Additionally, infrastructure-independent care is grounded in data capture and advanced analytics to optimize decision making, which are aspects of a prevention-oriented, learning health system described by Tuckson.6 ● Price transparency. Lack of information and the inability to obtain timely, easily accessible, understandable, and actionable price data prohibit consumers and providers from understanding the costs associated with often routine, sometimes critical, and always economically impactful healthcare choices. This situation makes informed, value-based decision making impossible and often results in higher-than-necessary costs to both individuals and the healthcare system. Managing the personal health ecosystem that SarasohnKahn4 describes requires online information and tools that include price data. However, as Shah states,5 although empowering patients with price information is laudable and imperative, it is unlikely to be suffıcient, as physicians sign orders and patients often defer medical decisions to their discretion. Physicians can drive a ground-up approach to cost containment but need to be privy to costs to do so.
© 2013 American Journal of Preventive Medicine • Published by Elsevier Inc.
Am J Prev Med 2013;44(1S1):S51–S53 S51
S52 ●
McDermott / Am J Prev Med 2013;44(1S1):S51–S53
Appropriate care utilization. Inappropriate use of healthcare resources, including needless repetition of different elements of clinical care, is wasteful and unnecessarily costly. Patients and other decision makers often do not understand the limitations and capabilities of diagnostic and treatment options, leading to broadly held but irrational expectations for care. This lack of understanding, coupled with the practice of defensive medicine and other perverse incentives, drive overuse of medical services and treatments. Frakt and Carroll12 provide several examples of wasteful spending that are counter to comparativeeffectiveness research fındings and the scientifıc evidence base. They state that, to reduce wasteful spending, we must identify it, disseminate supporting data, and overcome the barriers of politics. Shah5 reminds us that physicians and other providers are essential to optimizing resource decisions. However, there is a lack of guidance for appropriate bedside resource management, and we concur with the need to have an open dialogue on high- and low-value services. Olchanski and colleagues3 note that there is a gap in the health economic literature on preventive care and a need to use comparative-effectiveness research in combination with intelligent policy design to drive effective preventive services that improve health outcomes and lower costs. Additionally, the scientifıc evidence base would further benefıt from more observational data versus clinical trial extrapolations. ● Practical policy. Fee-for-service payment systems reward doctors and hospitals for driving up the volume in procedures, rather than rewarding value and better patient health outcomes. A better approach would be reimbursement models that incentivize development and use of equally or more effective low-cost, highvalue alternatives to the status quo. Additionally, effıcient regulatory pathways that expedite the availability of costeffective solutions and reduce the cost of innovation are needed. There is broad agreement that healthcare fınancing warrants reform to nudge all actors in the right direction. Straube8 advocates that the government should focus on prevention and health promotion and highlights recent activities to support that aim. He encourages leveraging Medicare coverage decisions to guide and influence the rest of the market. Isaac7 shares insight on the favorable long-term impact of effective wellness programs and aligned incentives, including lower costs, fewer days lost to disability, and lower employee turnover. Senior Community Centers of San Diego, as described by Pettigrew,10 is an outcomes-
based model for providing cost-effective preventive care by holistically addressing the needs of low-income seniors for nutrition, health care, housing, and social services. Gottlieb and Makower9 caution that the demand for innovations to demonstrate up-front savings generally fails to capture long-term benefıts and hinders efforts to secure both reimbursement and initial funding for development. Regulatory barriers can create an uneven playing fıeld that favors incumbents at the expense of entrepreneurs and their innovations. Regulation adds cost and may reduce competition by limiting the number of new products entering the marketplace. In training entrepreneurs to develop cost-effective innovations, Yazdi11 acknowledges that they must understand how regulatory environments affect the potential viability of commercially successful and sustainable solutions. There are numerous opportunities to lower healthcare costs. The reality that cost-reduction efforts stand to upset the entrenched interests of many stakeholders presents a challenge. However, there is hope in that stakeholders recognize the undeniable severity of our healthcare crisis and the importance of their respective roles in averting the dire health and economic consequences confronting our nation. Publication of this article was supported by the West Health Initiative. No fınancial disclosures were reported by the author of this paper.
References 1. Smith JM. The stakeholder imperative. Am J Prev Med 2013;44(1S1):S1–S4. 2. Meier C. A role for data: an observation on empowering stakeholders. Am J Prev Med 2013;44(1S1):S5–S11. 3. Olchanski N, Cohen JT, Neumann PJ. A role for research: an observation on preventive services for women. Am J Prev Med 2013;44(1S1):S12–S15. 4. Sarasohn-Kahn J. A role for patients: the argument for selfcare. Am J Prev Med 2013;44(1S1):S16 –S18. 5. Shah NT. A role for physicians: an observation on cost containment. Am J Prev Med 2013;44(1S1):S19 –S21. 6. Tuckson RV. A role for payers: remarks on the use of data and analytics in support of preventive care. Am J Prev Med 2013;44(1S1):S27–S29. 7. Isaac F. A role for private industry: comments on the Johnson & Johnson’s wellness program. Am J Prev Med 2013;44(1S1): S30 –S33. 8. Straube BM. A role for government: an observation on federal healthcare efforts in prevention. Am J Prev Med 2013;44(1S1): S39 –S42. www.ajpmonline.org
McDermott / Am J Prev Med 2013;44(1S1):S51–S53 9. Gottlieb S, Makower J. A role for entrepreneurs: an observation on lowering healthcare costs via technology innovation. Am J Prev Med 2013;44(1S1):S43–S47. 10. Pettigrew KA. Senior community centers of San Diego as a preventive care model: a case study. Am J Prev Med 2013;44(1S1):S34 –S38.
11. Yazdi Y. Developing innovative clinicians and biomedical engineers: a case study. Am J Prev Med 2013;44(1S1): S48 –S50. 12. Frakt AB, Carroll AE. The quality imperative: a commentary on the U.S. healthcare system. Am J Prev Med 2013;44(1S1): S22–S26.
Did you know? The AJPM Most Read and Most Cited articles are listed on our home page. Go to www.ajpmonline.org.
January 2013
S53
Background
T
he singular mission of West Health, which consists of the West Health Institute, the West Health Policy Center, the West Health Investment Fund, and the West Health Incubator, is to lower the cost of health care. This collective effort was founded by philanthropic pioneers Gary and Mary West to create a new, lower-cost ecosystem enabled by innovative technology and solutions. Its independent resources and sole focus favorably position these organizations to engage all stakeholders in advancing practical solutions to our nation’s growing and unsustainable burden of healthcare costs. The contributing authors to the papers in this supplement1–12 to the American Journal of Preventive Medicine offer their perspectives on the roles various stakeholders play in lowering the cost of health care through preventive medicine, innovation, and technology. Recurring themes include the need for scientifıc evidence and adherence to the fındings of comparative-effectiveness research, emphasis on prevention and data-driven insights, increasing price transparency and discussions of value, improving healthcare productivity, and designing solutions with implementation and scale in mind. We fınd alignment in the need to (1) change how, when, what, and by whom healthcare services are delivered; (2) understand the value of and amount paid for care prior to receiving that care; (3) incentivize and reward the right care; and (4) govern by effıcient, commonsense rules. Data are essential to advance these fundamental tenets to lower the cost of health care. The author viewpoints expressed herein support several areas that have the potential to favorably impact healthcare costs: ●
Infrastructure Independence®. Providing patients with the right care, at the right time, wherever they are. Real-time remote monitoring, actionable diagnostics, and seamless communication of healthcare information all effıciently extend the reach and availability of clinicians and improve the timeliness and accuracy of
From the West Health Policy Center, Washington DC Address correspondence to: Kerry McDermott, MPH, 1909 K Street, NW, Suite 730, Washington DC 20006. E-mail: kmcdermott@ westhealth.org. 0749-3797/$36.00 http://dx.doi.org/10.1016/j.amepre.2012.09.012
care. By leveraging wireless solutions and technologyenabled care coordination, the infrastructure-independent care model stands in sharp contrast to the current healthcare delivery system, which is centered on clinician location and availability. Because care is episodic, it ineffectually addresses chronic diseases, resulting in exacerbations, clinical decompensations, and complications that consume enormous amounts of resources. The infrastructure-independent care model emphasizes prevention: primary, secondary, and tertiary. It relies on data, whose pivotal role is described by Meier,2 as well as interoperable systems that support fluid communication. This model demands innovation that improves healthcare productivity and brings the needed disruption to enable less expensive professionals to provide progressively more sophisticated services in less expensive settings, as espoused by Gottlieb and Makower.9 Infrastructure independence represents a technology-driven change in delivery models that can reduce short- and long-term disease burden. It embodies self-care and growing patient receptivity to receiving care in settings other than a doctor’s offıce, as advocated by Sarasohn-Kahn.4 Additionally, infrastructure-independent care is grounded in data capture and advanced analytics to optimize decision making, which are aspects of a prevention-oriented, learning health system described by Tuckson.6 ● Price transparency. Lack of information and the inability to obtain timely, easily accessible, understandable, and actionable price data prohibit consumers and providers from understanding the costs associated with often routine, sometimes critical, and always economically impactful healthcare choices. This situation makes informed, value-based decision making impossible and often results in higher-than-necessary costs to both individuals and the healthcare system. Managing the personal health ecosystem that SarasohnKahn4 describes requires online information and tools that include price data. However, as Shah states,5 although empowering patients with price information is laudable and imperative, it is unlikely to be suffıcient, as physicians sign orders and patients often defer medical decisions to their discretion. Physicians can drive a ground-up approach to cost containment but need to be privy to costs to do so.
© 2013 American Journal of Preventive Medicine • Published by Elsevier Inc.
Am J Prev Med 2013;44(1S1):S51–S53 S51
S52 ●
McDermott / Am J Prev Med 2013;44(1S1):S51–S53
Appropriate care utilization. Inappropriate use of healthcare resources, including needless repetition of different elements of clinical care, is wasteful and unnecessarily costly. Patients and other decision makers often do not understand the limitations and capabilities of diagnostic and treatment options, leading to broadly held but irrational expectations for care. This lack of understanding, coupled with the practice of defensive medicine and other perverse incentives, drive overuse of medical services and treatments. Frakt and Carroll12 provide several examples of wasteful spending that are counter to comparativeeffectiveness research fındings and the scientifıc evidence base. They state that, to reduce wasteful spending, we must identify it, disseminate supporting data, and overcome the barriers of politics. Shah5 reminds us that physicians and other providers are essential to optimizing resource decisions. However, there is a lack of guidance for appropriate bedside resource management, and we concur with the need to have an open dialogue on high- and low-value services. Olchanski and colleagues3 note that there is a gap in the health economic literature on preventive care and a need to use comparative-effectiveness research in combination with intelligent policy design to drive effective preventive services that improve health outcomes and lower costs. Additionally, the scientifıc evidence base would further benefıt from more observational data versus clinical trial extrapolations. ● Practical policy. Fee-for-service payment systems reward doctors and hospitals for driving up the volume in procedures, rather than rewarding value and better patient health outcomes. A better approach would be reimbursement models that incentivize development and use of equally or more effective low-cost, highvalue alternatives to the status quo. Additionally, effıcient regulatory pathways that expedite the availability of costeffective solutions and reduce the cost of innovation are needed. There is broad agreement that healthcare fınancing warrants reform to nudge all actors in the right direction. Straube8 advocates that the government should focus on prevention and health promotion and highlights recent activities to support that aim. He encourages leveraging Medicare coverage decisions to guide and influence the rest of the market. Isaac7 shares insight on the favorable long-term impact of effective wellness programs and aligned incentives, including lower costs, fewer days lost to disability, and lower employee turnover. Senior Community Centers of San Diego, as described by Pettigrew,10 is an outcomes-
based model for providing cost-effective preventive care by holistically addressing the needs of low-income seniors for nutrition, health care, housing, and social services. Gottlieb and Makower9 caution that the demand for innovations to demonstrate up-front savings generally fails to capture long-term benefıts and hinders efforts to secure both reimbursement and initial funding for development. Regulatory barriers can create an uneven playing fıeld that favors incumbents at the expense of entrepreneurs and their innovations. Regulation adds cost and may reduce competition by limiting the number of new products entering the marketplace. In training entrepreneurs to develop cost-effective innovations, Yazdi11 acknowledges that they must understand how regulatory environments affect the potential viability of commercially successful and sustainable solutions. There are numerous opportunities to lower healthcare costs. The reality that cost-reduction efforts stand to upset the entrenched interests of many stakeholders presents a challenge. However, there is hope in that stakeholders recognize the undeniable severity of our healthcare crisis and the importance of their respective roles in averting the dire health and economic consequences confronting our nation. Publication of this article was supported by the West Health Initiative. No fınancial disclosures were reported by the author of this paper.
References 1. Smith JM. The stakeholder imperative. Am J Prev Med 2013;44(1S1):S1–S4. 2. Meier C. A role for data: an observation on empowering stakeholders. Am J Prev Med 2013;44(1S1):S5–S11. 3. Olchanski N, Cohen JT, Neumann PJ. A role for research: an observation on preventive services for women. Am J Prev Med 2013;44(1S1):S12–S15. 4. Sarasohn-Kahn J. A role for patients: the argument for selfcare. Am J Prev Med 2013;44(1S1):S16 –S18. 5. Shah NT. A role for physicians: an observation on cost containment. Am J Prev Med 2013;44(1S1):S19 –S21. 6. Tuckson RV. A role for payers: remarks on the use of data and analytics in support of preventive care. Am J Prev Med 2013;44(1S1):S27–S29. 7. Isaac F. A role for private industry: comments on the Johnson & Johnson’s wellness program. Am J Prev Med 2013;44(1S1): S30 –S33. 8. Straube BM. A role for government: an observation on federal healthcare efforts in prevention. Am J Prev Med 2013;44(1S1): S39 –S42. www.ajpmonline.org
McDermott / Am J Prev Med 2013;44(1S1):S51–S53 9. Gottlieb S, Makower J. A role for entrepreneurs: an observation on lowering healthcare costs via technology innovation. Am J Prev Med 2013;44(1S1):S43–S47. 10. Pettigrew KA. Senior community centers of San Diego as a preventive care model: a case study. Am J Prev Med 2013;44(1S1):S34 –S38.
11. Yazdi Y. Developing innovative clinicians and biomedical engineers: a case study. Am J Prev Med 2013;44(1S1): S48 –S50. 12. Frakt AB, Carroll AE. The quality imperative: a commentary on the U.S. healthcare system. Am J Prev Med 2013;44(1S1): S22–S26.
Did you know? The AJPM Most Read and Most Cited articles are listed on our home page. Go to www.ajpmonline.org.
January 2013
S53