Cost is the Buzz at Expo

PALM DESERT, CALIF. — Cost – in all its dimensions – was on the minds and tongues of many at the 2005 International Expo of the Health Industry Group Purchasing Association, held Oct. 24-26.

Speakers and attendees buzzed not just about the cost of medical supplies and equipment, but of healthcare in general. Fresh in their minds was General Motors’ agreement with the United Auto Workers, signed Oct. 20, which allowed the automaker to reduce expenditures on healthcare for its employees and retirees. And news of an internal Wal-Mart memo, which pointed to the company’s rising healthcare costs and offered some potential solutions, hit the streets while attendees were at the Expo.

One Expo speaker – futurist Ian Morrison – cited the MTV program “Pimp My Ride” as the “perfect analogy” for what’s going on in healthcare today. In the program, a beat-up car is taken from its owner, stripped down, then equipped with the latest in electronic gadgets and a cool paint job. Everything but the engine is redone, said Morrison. The car looks cool, but what happens when the driver takes it out for a spin? Likewise, in healthcare, policymakers and providers throw a lot of technology and jargon at patients and the system, but rarely do they get to the root causes of escalating costs and unsatisfactory care, Morrison said.

Tomorrow’s buyers will be looking for value from healthcare providers, he added. They’ll want to know what they’re getting for their money. And providers had better be equipped to tell them.

Feds’ perspective
Few people understand healthcare costs better than Carol Kelly, director, office of policy, Centers for Medicare and Medicaid Services. She and Kate Witek, auditor of public accounts for the state of Nebraska, offered two different perspectives on governmental approaches to funding healthcare.

Medicare and Medicaid covered 87 million people and paid $620 billion in healthcare benefits in 2004, said Kelly. That’s about one in five total healthcare dollars, and one in two nursing-home-care dollars. Here’s the question: Who can slow down or stop the upward surge of spending? Here’s a potential answer: Patients and healthcare consumers themselves.

An emphasis on patient-focused care can help control costs and improve quality, said Kelly. “We think the future of healthcare will be patient-centered. Patients want to be more involved in making decisions about their own care.” At the same time, the adoption of healthcare information technology will help providers reduce errors and promote continuity of care, as patients move from one caregiver to another.

CMS believes that four developments will support the delivery of patient-focused care:

  • Monitoring and improvement of healthcare quality.
  • Medical advances.
  • Wellness promotion.
  • Value-driven payments.

Quality. Earlier this year, CMS unveiled its “Quality Improvement Roadmap,” whose vision is “the right care for every person every time,” and whose goal is “to make care safe, effective, patient-centered, timely and equitable.” CMS has five strategies for implementing the roadmap: 1) work with other federal and state agencies, as well as nongovernmental partners, to improve care; 2) publish quality measurements and information; 3) reimburse in a way that demonstrates the government’s commitment to supporting providers and practitioners for doing the right thing; 4) assist practitioners and providers in taking advantage of CMS quality initiatives, particularly in the area of electronic health systems; and 5) promote innovation in healthcare technology.

Medical advances. CMS is committed to speeding the adoption (and reimbursement) of proven, innovative technologies, said Kelly, who knows something about medical technology, having worked for both Premier and AdvaMed, the association for medical products manufacturers. Currently, 10 to 15 years can elapse between the time someone conceives an idea for a new medical technology, and the time when it is used and being reimbursed by the government. The idea is to create a parallel review process that would collapse the review times of FDA and CMS.

Wellness promotion. Ninety-five percent of Medicare dollars are spent treating healthcare problems, Kelly said. CMS would like to spend a greater proportion of those dollars on prevention and risk-factor modification (such as smoking cessation and weight loss). The new Medicare prescription drug benefit is a step in the right direction, because helping seniors pay for their pharmaceuticals may reduce non-compliance with drug therapy and its accompanying health problems, she said.

Value-driven payments. Already, Medicare pays more to hospitals that report quality measures than those that do not, said Kelly. “We’re looking at other ways to incent reporting and pay-for-performance.”

States’ perspective
States are suffering too, said Kate Witek, auditor of public accounts for the state of Nebraska, whose healthcare costs have been escalating 12 percent per year for some time. Since 1987, Medicaid has grown from 8.6 percent of state spending to close to 18 percent of state spending.

In states such as Nebraska, lawmakers in the past have postponed the tough decisions, but that’s no longer an option, said Witek. Among actions being taken by some states to reduce costs are the following:

Improvement of fraud units. Experts estimate that as many as 10 percent of healthcare costs are eaten up by fraud, Witek said. Add to that the cost of medically unnecessary (if not fraudulent) procedures.
Improvements in contract proposals and monitoring. States are challenging sole-source contracts, said Witek.
Changes in eligibility. Some states are lowering income eligibility for Medicaid or dropping coverage for certain classifications of illnesses and procedures.
Implementation of other cost-containment initiatives, including preferred-drug lists (to encourage Medicaid recipients to use generic drugs or less expensive brand drugs) and drug purchasing pools (essentially, group purchasing organizations comprising states instead of individual healthcare providers).

In the future, expect state legislatures to continue the fight by 1) focusing on preventive care (to cut down on the need for costly, long-term institutional care), 2) encouraging disease management programs (which, along with preventive care, “offers the greatest opportunity for the aging Baby Boomer population,” according to Witek), and 3) exploiting information technology, including the Internet, to encourage competitive pricing and the adoption of electronic medical records.

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