Four ways to reduce healthcare costs

February 11, 2020

The U.S. faces a tough road to get started.

What could the U.S. economy do with an additional $1.3 trillion every year? Imagine the infrastructure that could be improved, the poor and homeless people who could be helped and the investments that could be made in education and social services.

So where would this money come from? This $1.3 trillion represents what businesses, consumers and the government could save – every year – if U.S. healthcare spending were at the comparable country average of 10.6% of the gross domestic product (GDP) instead of the 17.1% it is.[1] Our medical outcomes are no better than those of people in comparable countries, and the life expectancy in our country is slipping.

Moving the U.S. closer to the rest of the industrialized world in terms of healthcare spending and care quality requires a fundamental shift in the way we think about healthcare. But it can be done, and here are four ways to get started.

1.     Treat hospitals as last-resort providers.

Of every healthcare dollar spent in the United States, 33 cents go to hospitals. Another 20 cents go to physicians and clinics, while 27 cents pay for non-physician providers such as nurse practitioners, optometrists, chiropractor, and speech and occupational therapists. [2] When hospital-owed physicians and clinics are taken into account, it’s fair to say that hospitals control more than half of all healthcare spending.

But hospitals aren’t the best place for care in many instances. Consider the lower-cost imaging centers a walk or short drive from many hospitals or day surgery centers versus expensive hospital operating theaters. Many services are inherently cheaper than identical services in a hospital setting because of lower overhead.

Of course, hospitals aren’t going anywhere, but they shouldn’t be the center of the healthcare hub. Do you go to a physical bank branch unless you have an issue that you can’t self-serve on the bank website or app? Retailers are hurting because of the prevalence of online shopping, and even grocery stores are having to rethink their business models.

Brick-and-mortar attitudes are crumbling in many industries, but hospital thinking around infrastructure is lagging behind. Price-conscious patients are seeking out lower-cost care options, which brings me to point No. 2.

2.     Move care closer to patients.

Recall the last time you went to the doctor for a straightforward appointment, one where you spent 15 minutes or less in front of the physician. If you have a full-time job, how much time did you have to take off for that appointment?

If you’re lucky and got the first or second appointment of the day, you might have missed just a few minutes or an hour. More likely, though, your appointment was at 2 p.m. and you lost nearly half a day leaving work, driving to the office, waiting to be seen, seeing the doctor, checking out, perhaps picking up a prescription or making another appointment, and returning to the office.

Technology, changing consumer preferences and self-insured businesses are making more care options available. Why leave the office when you can seek medical help from a nurse line or have a virtual physician visit on your smartphone?

Nearly nine in 10 hospital executives agree that their organizations are at competitive risk from non-hospital competitors such as Optum, CVS Health, and Amazon.[3] The number of walk-in clinics continues to grow, and more companies are setting up worksite clinics for employees.

One-third of U.S. companies with more than 5,000 employees have on-site general medical clinics, while 38% have clinics that focus on occupational health. Perhaps more telling is the 16% of companies in the 500-4,999 employee range that had general medical clinics, with another 8% saying they’d open a clinic in 2019.[4]

There still is room for brick-and-mortar healthcare, in places where it makes the most sense.

3.     Take costs out of the system.

We’ve all heard tales about the $60 ibuprofen in the hospital, when you can pick up a 200-count bottle for 4 bucks at a big box store. A woman in New Jersey was charged nearly $5,800 for an emergency room visit where she received an ice pack but no other treatment.[5] Hospitals and other providers jack up prices on private pay patients because Medicare and Medicaid reimbursements don’t generally cover the cost of the care provided.

But there must be a happy medium where everyone pays their fair share. Consider the routine colonoscopy, a procedure that everyone 50 or over (hopefully) has undergone. Typical charges for the procedure are $2,500-$3,500, depending on the geography of the provider and the type of facility.

By my back-of-napkin calculation, the cost should be three to fives times less, or about $750. That includes well-paid medical staff using top-notch equipment in a Class A medical building who work six hours a day, seeing one patient every 30 minutes.

The move toward price transparency has the potential to create true competition among providers, with patients being able to see what is being charged for their test, scan or procedure. That surely could curtail the practice of charging exorbitantly for routine care.

4.     Focus on the continuum of care.

For a patient who needs surgery, healthcare doesn’t begin on the day of the surgery, nor does it end on that day. The surgery is part of a continuum of care that starts 30 days prior and lasts a similar period of time afterward. It might start with the patient on the couch, researching conditions and providers on a smartphone.

Technology can enable greater patient choice, allowing them to choose lower acuity settings to receive care or even participate in telehealth. Smartphone healthcare apps that can access a patient’s insurance can help ensure consumers visit in-network facilities.

Hospitals and health systems can leverage technology, too, to bring efficiencies to scheduling and increase patient compliance that ultimately leads to lower costs. The 30-day, all-cause national readmission rate is 13.9%, according to 2016 data, but the rate can vary depending on payer type, geography and individual hospitals.[6] Lowering the readmission rate by just one percentage point could save billions in healthcare costs and lost productivity.

Research from MobileSmith shows that hospitals using perioperative mobile apps can save up to $300 per procedure through a 40 percent reduction in same-day cancellations and a 7 percent reduction in 30-day readmissions.

Conclusion

The cost for family insurance coverage topped $20,000 in 2019, and medical bills comprise fully one-half of all overdue credit card debt.[7][8] Americans are drowning in medical bills, so this is no time to sit back. Hospitals face unprecedented competition from both lower-cost providers and non-hospital competitors that are challenging the traditional thinking that hospitals are the hub for the patient experience.

Solutions to curb spending are myriad, but technology to increase patient adherence and reduce no-shows for surgeries and procedures should be part of the mix to improve efficiency and reduce readmissions.

Randy Tomlin is Chairman of MobileSmith Health.

[1] Total Health Spending. Peterson-KFF Health System Tracker. https://www.healthsystemtracker.org/indicator/spending/health-expenditure-gdp/. Accessed Dec. 14, 2019.

[2] Ibid.

[3] 2019 State of Consumerism in Healthcare. Kaufman Hall. https://www.kaufmanhall.com/ideas-resources/research-report/2019-state-consumerism-healthcare-bar-rising. Accessed Dec. 14, 2019.

[4] NAWHC-Mercer 2018 Worksite Medical Clinics Survey. National Association of Worksite Health Centers. https://www.nawhc.org/Benchmarking-Surveys. Accessed Dec. 14, 2019.

[5] Kliff, S. I read 1,182 emergency room bills this year. Here’s what I learned. Vox. https://www.vox.com/health-care/2018/12/18/18134825/emergency-room-bills-health-care-costs-america. Accessed Dec. 14, 2019.

[6] Characteristics of 30-Day All-Cause Hospital Readmissions, 2010-2016. Agency for Healthcare Research and Quality. https://www.hcup-us.ahrq.gov/reports/statbriefs/sb248-Hospital-Readmissions-2010-2016.jsp. Accessed Dec. 15, 2019.

[7] 2019 Employer Health Benefits Survey. Kaiser Family Foundation. https://www.kff.org/report-section/ehbs-2019-summary-of-findings/. Accessed Dec. 15, 2019.

[8] Darby, L. How Medical Bills Bankrupt Hundreds of Thousands of People Every Year. GQ. https://www.gq.com/story/medical-debt-bankruptcies. Accessed Dec. 15, 2019.