Self-Examination: Industry Questioning Necessity, Cost Irregularities of Healthcare Services

Wednesday, May 2nd, 2012
This post was written by Cheryl Miller

Regardless of whether the Supreme Court overhauls health reform, the industry is seriously thinking about ways to cut healthcare spending, either by reexamining the need for commonly administered services or unraveling the mysteries of medical bills.

As we reported in a recent news story here, a coalition of nine leading physician specialty societies representing nearly 375,000 physicians have identified specific tests or procedures that they say are commonly used but not always necessary in their respective fields.

Coordinated by ABIM Foundation’s Choosing Wisely campaign, the lists of “Five Things Physicians and Patients Should Question” provide specific, evidence-based recommendations physicians and patients should discuss when making healthcare decisions. Among the tests that patients might not necessarily need are stress imaging tests for annual checkups if the patient is an otherwise healthy adult without cardiac symptoms, according to the American College of Cardiology, and chest X-rays for patients going into outpatient surgery, according to the American College of Radiology. Most of the time, the x-ray images will not result in a change in management and have not been shown to improve patient outcomes, college officials say.

A recent opinion piece from the New York Times echoes the feeling that more evaluation of health services and costs is necessary, and sheds some light on the abundance of medical tests. The article, Why Medical Bills are a Mystery, written by Robert S. Kaplan and Michael E. Porter, professors of accounting and strategy, respectively, at Harvard Business School, states that:

The lack of cost and outcome information also prevents the forces of competition from working: Hospitals and doctors are reimbursed for performing lots of procedures and tests regardless of whether they are necessary to make their patients get better. Providers who excel and achieve better outcomes with fewer visits, procedures and complications are penalized by being paid less.

The article goes on to cite a lack of uniformity for healthcare costs and reimbursements, and suggests that by analyzing costs, hospitals can save money and improve care:

Because health care charges and reimbursements have become disconnected from actual costs, some procedures are reimbursed very generously, while others are priced below their actual cost or not reimbursed at all. This leads many providers to expand into well-reimbursed procedures, like knee and hip replacements or high-end imaging, producing huge excess capacity for these at the same time that shortages persist in poorly reimbursed but critical services like primary and preventive care.

A new University of California San Francisco (UCSF) study published online this week in Archives of Internal Medicine underscores the concerns voiced by Kaplan and Porter:

The study looked at nearly 20,000 cases of routine appendicitis at 289 hospitals and medical centers throughout California. The patients – all adults – were admitted for three or fewer days. The researchers uncovered an enormous discrepancy in what different hospitals charge, ranging from a low of $1,529 to a high of nearly $183,000. The median hospital charge was $33,611. The startling cost variation reveals a “broken system,” the authors said.

“Consumers should have a reasonable idea of how much their medical care will cost, but both they and their healthcare providers are often unaware of the costs,” said lead author Renee Y. Hsia, MD, an assistant professor of emergency medicine at UCSF.

What to do? The Journal of the American Medical Association (JAMA) weighed in on ways to cut waste and improve quality in U.S. healthcare. In a recent article researchers identified six categories where cuts could result in a significant reduction in healthcare costs. In these six categories: overtreatment, failures of care coordination, failures in execution of care processes, administrative complexity, pricing failures, and fraud and abuse, the sum of the lowest available estimates exceed 20 percent of total healthcare expenditures.

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