(FiDA blog bold & underline below.)
NEW YORK TIMES
OPINION
Why Medical Bills Are a Mystery
By ROBERT S. KAPLAN and MICHAEL E.
PORTER
Published: April 14, 2012
RISING health care costs are busting the federal
budget as well as those of states, counties and municipalities. Policy makers
and health care leaders have spent decades trying to figure out what to do
about this.
Yet their solutions are failing because of a
fundamental and largely unrecognized problem: We don’t know what it costs
to deliver health care to individual patients, much less how those costs
compare to the outcomes achieved.
When insurance companies or government bodies try
to control costs, they usually make across-the-board reimbursement cuts
that ultimately are unsustainable because they have no connection to the true
costs of delivering care. Providers themselves do not measure their costs
correctly. They assign costs to patients based on what they charge, not on the
actual costs of the resources, like personnel and equipment, used to care for
the patient. The result is that attempts to cut costs fail, and total health
care costs just keep rising.
Regardless of what decision the Supreme Court
reaches on the legality of the Affordable Care Act, measuring outcomes and costs is indispensable to driving improvements.
Because health care charges and reimbursements
have become disconnected from actual costs, some procedures are reimbursed very generously, while others are
priced below their actual cost or not reimbursed at all. This leads many providers to expand into well-reimbursed procedures,
like knee and hip replacements or high-end imaging, producing huge excess
capacity for these at the same time that shortages persist in poorly reimbursed
but critical services like primary and preventive care.
The
lack of cost and outcome information also prevents the forces of competition
from working: Hospitals and doctors are reimbursed for performing lots of
procedures and tests regardless of whether they are necessary to make their
patients get better. Providers who excel and achieve better outcomes with fewer
visits, procedures and complications are penalized by being paid less.
Our research and executive workshops show that
many sites are already improving their measurements of patient outcomes. But
they have done little to measure the actual costs of achieving those outcomes.
We are currently working with several health care organizations, including MD
Anderson Cancer Center in Houston, Children’s Hospital Boston, Partners
Healthcare in Boston and Schön Klinik in Germany, that are beginning to figure
out how to measure costs. They use teams of clinicians and administrators to
identify all the processes involved in care, from a patient’s first contact
with a health care provider through his or her inpatient stay and outpatient
follow-up care. The teams then identify the quantity and unit cost of each
resource — clinical staff, equipment, supplies, devices and administrative
support — used in each process and add these together to learn the total cost
of a patient’s care.
The information helps them discover immediate and
significant opportunities for improvements in care and reduced spending. MD
Anderson, for example, has studied its evaluation process for new head and neck
cancer patients. By substituting trained staff members for physicians,
standardizing processes and improving information technology, it has been able
to make care more efficient without any adverse effect on patient outcomes. It
has made changes that reduced total costs by 36 percent, and freed employees to
serve more patients without adding to costs.
A surgeon repairing cleft palates at Children’s
Hospital Boston discovered that 40 percent of the total cost of an
18-month-care process was due to the time a child spent in the intensive care
unit before and after surgery. By using a far less intensively staffed and
equipped observation room, the hospital could achieve equivalent quality and
safety at much lower costs.
Most health care providers have hundreds of these
opportunities to use time, equipment and facilities more intelligently. These
opportunities have been obscured by existing costing systems that have little
connection to the processes actually performed.
With accurate information on outcomes and costs,
providers can improve care and save money by eliminating things that don’t help
the patient, like multiple check-ins and medical histories, tests that provide
little new information and long waiting times. Many routine tasks are performed
today by highly trained doctors and nurses. These tasks can be shifted to others,
freeing the most skilled clinicians for far more productive work.
Health care providers with expensive and poorly
utilized equipment, space and staff can see the benefits of consolidating
services to improve utilization and reduce some existing capacity. They can
also perform routine services in lower-cost locations, reserving expensive
medical centers for complex care.
These opportunities will allow the health care
needs of an aging population to be met with little need to increase spending. Understanding costs could be the single
most powerful lever to transform the value of health care. This would
give payers and providers the data they need to improve patient care, and to
stop arbitrary cuts and counterproductive cost shifting.
Robert S. Kaplan and Michael E. Porter are
professors of accounting and strategy, respectively, at Harvard Business
School.
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