After months of congressional efforts to repeal and replace the Affordable Care Act (ACA), it appears we now have an opportunity for a broad and much needed dialogue about our system of health care financing – as well as new clinical delivery models. The acute health care affordability crisis we now face has never been more challenging.
In the US, households now fund 27 percent of the total health care tab. Federal and state governments finance 29 percent and 17 percent, respectively, and employers contribute 26 percent.1 Health care cost increases are forcing each of these groups to make tough choices about what they need to give up to pay for health care. We likely have to make changes if we are going to create sustainable improvement in health care. We may no longer simply cut provider payments, restrict eligibility for government programs, or shift greater financial burden to employers and employees. And we can’t ask providers – who already foot the bill for uncompensated care – to help their patients deal with escalating out-of-pocket costs.
Albert Einstein is often credited with saying, “insanity is doing the same thing over and over again and expecting a different outcome.” It seems such an understanding is desperately needed in health care. The clinical delivery system in the United States has fundamentally used the same basic operating model for the last 100 years, primarily because we continue to rely on the fee-for-service (FFS) payment methodology, which is based on face-to-face interactions between a patient and a doctor.
Why do we spend more and get less?
While the FFS model might have worked fine during the 20th century, we are in the middle of 2017, and this archaic system could benefit from change. The US spends more money on health care per capita than all other industrialized countries, but often ranks near the bottom for several measures of health.2
Our health care costs aren’t higher because we over utilize services, but rather because our cost per service is much higher.3 The way to reduce unit costs could be to help care providers boost their productivity. We could do that by moving some care to lower-cost settings. We could reduce professional costs through a team-based approach that incorporates lower-cost clinical resources, and we can provide effective care through virtual options such as telemedicine, phone and email.
Einstein is also credited with saying that we cannot solve our problems with the same thinking we used to create them.
The journey of care transformation
I see many opportunities for improvement along patients’ collective experience of care. Chronic care management is one area where we could see immediate results. As you likely know, 5 percent of the total population accounts for half of health care spending in this country.4 And the vast majority of this spending is for patients who have a chronic condition – diabetes, congestive heart failure, chronic obstructive pulmonary disease, or asthma – that is manageable, but not curable.5
Unfortunately for those patients, and for the long-term financial well-being of our economy, the FFS payment methodology was not designed for chronic care delivery models, and does not adequately, or effectively, align the needs of patients to the services that can be provided cost-effectively. To be paid under the FFS model, the doctor – not a nurse, or technician, or team member – has to lay hands on the patient. That methodology limits access and services that can meet the needs of chronically ill patients, and it actually constrains innovation.
Some organizations are innovating advanced chronic care delivery models using teams that patients can access in person, or virtually. Apps and collaboration platforms also exist to integrate and engage the patient and family members in one place. Moreover, many providers are relying on remote monitoring devices, such as wearables, that can provide important information about a condition without requiring the patient to travel to an office to meet with a doctor.
But to make this model work, the provider needs to be reimbursed each month – based on a bundle or prepaid lump sum – that covers all of the costs. Such prepaid and risk-sharing payment models should not be constrained by the rules and limitations of the FFS model. Clinical models focused on chronic care, and supported by the incentives of prepaid and risk-based payment, provide greater access for patients, and can produce better outcomes at a lower cost. This result is what I define as innovation – more value for less cost and lower complexity.
As we embark on this transformative journey of care, the science of innovation can move us toward a new model through which we can achieve better outcomes at lower costs. Innovation at its core requires these three imperatives to create value:
- Leveraging enabling technology to create new capabilities
- Redesigning the operating model to take advantage of new capabilities
- Breaking the constraints of the old system that restrict adoption
The science of innovation may be the cure for an ailing health care system, which we can resuscitate right now by focusing on the largest opportunity – chronic care management.
Albert Einstein knew that logic will get you from point A to point B…but, “imagination will take you everywhere.6
1 US Centers for Medicare and Medicaid, National Health Expenditures, 2015 Highlights
2 OECD Health Statistics, 2017, http://www.oecd.org/els/health-systems/health-data.htm
3 The Commonwealth Fund, October, 2015, www.commonwealthfund.org/publications/press-releases/2015/oct/us-spends-more-on-health-care-than-other-nations
5 Centers for Disease Control and Prevention, https://www.cdc.gov/chronicdisease/overview/index.htm
6 Smithsonian magazine, February, 1979