Observation Deck: Cost – Deal with it

It’s ironic to me that with healthcare costs steadily rising to what appear to be unsustainable levels, people are afraid to talk about how to cut them. Remember when last year’s stimulus bill allocated $1.1 billion to comparative-effectiveness research? Comparative effectiveness research, as in studying the relative merits of medical procedures and technologies. Sounds like a plan to me. But it was assailed as rationing of care, and as the first step toward death panels. I recalled this while preparing this month’s article on health technology assessment.

Cost is the elephant in the room. My understanding is that Medicare isn’t allowed to consider cost when deciding whether to reimburse for a procedure or not. Certainly the FDA doesn’t look at it when it grants a new device 510(k) or PMA marketing clearance. Meanwhile, our nation’s healthcare budget is bleeding.
In the United Kingdom, a government agency studies how much money it costs to keep a person alive – maintaining a certain quality of life – for a year, using a particular drug, medical technology or procedure. On that basis, the country decides whether or not to pay for it. Pretty rough stuff. But really, what’s the alternative? Not to examine the health outcomes and costs of new technologies? That doesn’t sound like much of a solution to me.

Many efforts are being made to study the comparative effectiveness of new medical technologies, stimulated in part by the federal government in its role as payer of Medicare and Medicaid. No doubt Journal of Healthcare Contracting readers are becoming more aware of them every day. There’s a good chance those studies will affect what technologies you acquire on behalf of your facilities. But incorporating cost into your decisions won’t be easy.

“As long as there are opportunities to substitute more cost-effective clinical strategies for less cost-effective ones, costs can be lowered without adversely affecting health,” write the authors of an article in the January 6, 2010, article in the New England Journal of Medicine called “Comparative Effectiveness and Health Care Spending – Implications for Reform.” “But at some point, difficult choices must be made.”

Rather than ignore studies of the clinical effectiveness and costs associated with new or existing medical technologies, maybe it’s time we embrace them. As the authors of the article point out, an inefficient health delivery system is one in which cost-effective health services are underutilized. Why not identify cost-effective ones and try to maximize their usage?

“Is it possible to contain health care costs without causing worse health outcomes?” ask the authors in the New England Journal of Medicine? “The answer, we suggest, is no and yes.

“If health delivery areas that are expensive and inefficient were to cut back without reordering their priorities from less to more cost-effective services, then they, too, could have worse outcomes. Thus, if Medicare spending per enrollee in Miami ($16,351 in 2006) were cut back to the national average ($8,304), the residents of Miami might suffer if health care providers cut back on cost-effective as well as ineffective treatments. If the expensive technologies that they use compensate, in part, for their failure to utilize cost-effective primary or secondary preventive services…then these areas may have even greater losses in outcome than the efficient areas would if they cut back on the same services.

“But the answer is also yes – we can save money without compromising outcomes – if we can induce providers to cut back on cost-ineffective services and replace them with more cost-effective but underutilized services.”

Let’s not kid ourselves. Cost is a factor in healthcare delivery. A huge one. Let’s deal with it, intelligently, thoughtfully.

About the Author

Mark Thill

Mark Thill is the Editor of The Journal of Healthcare Contracting and has been reporting on healthcare supply chain issues since 1985. He is a graduate of Dominican University in River Forest, Ill., and he received a master’s degree in journalism from Northwestern University in Evanston, Ill.