Money & Finance

Breaking Down Healthcare Costs

Consumers and employers alike are all too familiar with the woes plaguing healthcare in the United States, but a scenario that plays out repeatedly in waiting rooms across America underscores the crux of the issue.

The Best Care at the Best Price

Consumers and employers alike are all too familiar with the woes plaguing healthcare in the United States, but a scenario that plays out repeatedly in waiting rooms across America underscores the crux of the issue.

Just a few years ago, when patients came in for surgical procedures, their questions trended along themes tied to medical care: “How quickly can I get back to my normal activities?” But these days, it’s a bottom-line query that dominates: “How much is it going to cost?”

The changing tenor of the conversation alone is alarming. But what’s worse – few people, if any, can provide the answer that patients clearly deserve to know. Even administrators at medical facilities, overwhelmed by the exponential increase in the number of insurance plans in today’s marketplace, often can’t tell patients which procedures are covered because they don’t know the details of a patient’s plan.

Meanwhile, the current “fee-for-service” system inundates patients with multiple bills for their surgical services – meaning doctors, surgical facilities and anesthesiologists will bill the patient separately, and none of them are able to quote the total cost of the procedure. More troubling, this disjointed approach provides little accountability for managing costs.

Though it is easy to point blame at the healthcare industry at large, it is more important for employers and consumers to recognize that there are progressive medical providers who understand that the current system is evolving. They are championing reform concepts that the private sector should explore, too, if not actively support.

One of the promising experiments is the use of “bundled payments,” which was first advanced by the Centers for Medicare & Medicaid Services. Far more than a mere payment method, it is essentially a new business model that incentivizes medical providers to work cooperatively with their partners to ensure a continuum of care and better management of costs. The goal is to bundle all the services involved in select procedures and deliver to the patient unprecedented customer service: one simple bill with no hidden costs.


How Does It Work?

Typically, the lead is taken by a medical provider, for example, a large orthopedic practice aligned with an outpatient surgical facility and anesthesiologists. The partners collectively strive to establish a best-care, lowest-cost procedure (i.e. carpal tunnel surgery) by eliminating pervasive flaws. Indeed, healthcare is a complex system that, for decades, has been shielded from market forces that would otherwise have shaped our industry far differently, according to a 2013 report in Orthopedics Today. The same article cites per capita expenditure on healthcare in the United States is twice the amount spent by any other industrialized nation.

The bundled-payment approach promises to generate savings, which would be shared by providers, employers and/or insurance companies. Similarly, these parties agree to share risks as well: if costs exceed expectations, they are absorbed by the participants in the bundle. In theory, providers who operate more efficiently and deliver greater value stand to gain increased market share, in part, from employers or insurance companies that drive business their way.

Bundled payments represent a radical departure from existing practices that misguidedly reward providers for the quantity of services they offer rather than the quality of care they deliver.


Redefining Outcomes

Another major change occurring in the marketplace is the growing effort of medical providers to not just deliver better outcomes, but to redefine them to better satisfy customers.

In the past, providers viewed outcomes rather narrowly – within the parameters of any particular procedure’s success or failure. But increasingly, they are hearing the request to report outcomes and responding appropriately. For example, providers are communicating more effectively with employers to better understand their expectations. Formal surveys are being used to identify employers’ top priorities and establish criteria – such as return-to-work, patient satisfaction scores, and report readmission rates – to define successful outcomes.

By gathering and analyzing such feedback, providers now have an opportunity to measure their performance against industry-wide best practices and address shortcomings. Changes are resulting in revamped workflow and greater focus on customer service.

These changes mark the metamorphosis of U.S. healthcare. It is a process that inevitably involves a journey through an uncomfortable state of flux. But ultimately, it also is an opportunity to implement innovations that will deliver what is coveted: the best quality care at the best price possible.

Jeanetta Lawrence_BWJeanetta Lawrence is chief operating officer of Jewett Orthopaedic Clinic and can be reached at JLawrence@jewettortho.com.

This article appears in the May 2015 issue of i4 Business.
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