The High Cost of Healthcare: Perverse Incentives

cost-of-healthcare

The fourth of a four part series

Welcome back to our “High Cost of Healthcare” series. In this fourth article we will focus on perverse incentives, in part due to unintended outcomes of healthcare reform.

Examples of unintended consequences in healthcare include:

  • Doctors may be financially-incentivized to order more procedures and acute interventions rather than providing palliative treatment. For example, Cancer patients are often prescribed Chemotherapy – even when it has almost no chance of prolonging their lives.
  • Mega-hospitals are gobbling up doctor practices; private practice has declined 50 percent since 1980 giving hospitals more control over medical care and fewer options to consumers. In many cases, insured employees may pay higher premiums, yet still lose access to their primary care physicians due to in-network criteria.
  • Doctors may be pressured to see more patients in less time to remain cost-effective. Likewise, practices may be utilizing physician assistants for routine visits, or passing patients onto specialists without adequate collaboration, creating fragmentation in care. This results in the delivery of unnecessary or duplicate care. In 2014 the Massachusetts Health Policy Commissionfound that 21 to 39 percent of the state’s medical expenditures were wasteful. In fact, hospital readmissions for those who should have had better discharge plans and instructions may account for $700 million of the state’s unnecessary medical expenditures.
  • Insurers may have care restrictions that reflect limited understanding of diseases involved. Case in point: They may have tight restrictions on the number of blood glucose monitoring test strips a Diabetic patient can obtain each month. Sure, test strips are expensive, but their cost is minimal compared to the cost of a leg amputation that results from poor blood sugar control.
  • Hospitals may place too much emphasis on keeping beds full to generate revenue. One example: Most Americans say they prefer to die at home, yet the majority still die in the hospital, many in the intensive care unit, according to healthaffairs.org.

Potential solutions

An article published in Standard Social Innovation Review proposes revolutionary yet practical tactics to provide high quality care at a lower cost. Taking lessons from successful programs run in countries such as Haiti, where providing high quality care for minimal cost is essential, programs adapted for the U.S. have proven effective in Boston and other cities. By expanding our definitions of where medical care takes place, what “good healthcare” means and addressing patient life conditions, overall health can be improved and costs reduced without sacrificing care.

An excellent Harvard Business School article explores bundled pricing as a potential solution for Cancer treatment. It also provides a list of 12 Key Action Steps for Employers who wish to promote a value-based healthcare agenda.

Better data integration may also play a role in the solution. When systems are integrated, healthcare providers have more complete data on which to base their decisions, and pricing transparency is easier to achieve for everyone involved. While the application of Electronic Data Warehouses made it possible to synthesize software platforms used by multiple entities across the industry, it was not a complete solution. However, a better technology is now coming into play. Compiling cross-industry information, Transparent Cost Networks standardize comparisons of market, price, type of care and quality rating. A common base fee schedule eliminates comparing apples to oranges, allowing consumers to accurately evaluate cost and quality of care.  With this new technology, healthcare providers can finally operate under the same rules of pricing and accountability as other businesses.

At BeaconPath we are dedicated to helping employers gain control of business costs, streamline benefit processes and increase quality by offering tools that provide a positive impact on your people and your bottom line. Check us out online to learn more about our patent-pending tools for employers.

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