Time to Rethink Cost Reduction Strategies Focused on the Highest-Cost Patients? | Mark Hagland | Healthcare Blogs Skip to content Skip to navigation

Time to Rethink Cost Reduction Strategies Focused on the Highest-Cost Patients?

March 7, 2017
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Medical researchers look at what’s really fueling over-utilization of unnecessary healthcare services

I read with great interest a careful analysis by researchers at Harvard Medical School and Brigham and Women’s Hospital, in Boston, that appeared in the March 2 issue of The New England Journal of Medicine. In their article, “Focusing on High-Cost Patients—The Key to Addressing High Costs?” J. Michael McWilliams, M.D, Ph.D., and Aaron L. Schwartz, Ph.D., offer a fascinating thesis: what if the focus on high-cost, high-utilization patients, as a core focus in the context of work to lower overall costs and improve outcomes of populations, is not correct? Instead, what if an overall focus on eliminating unnecessary, wasteful utilization for all patients, might work better?

“Given the rampant waste in the U.S. healthcare system, evidence that a large proportion of healthcare spending is concentrated among a small proportion of patients has galvanized a focus on high-cost patients,” the authors write. “On the surface, this response may seem sensible: in terms of clinical outcomes, the system fails the highest-need patients the most, and insofar as its failures can be addressed through better care coordination and management, devoting resources to high-risk patients could enhance these efforts’ cost-effectiveness.”

And yet, the researchers argue, “If the objective is to reduce wasteful spending, however, that logic may not hold. For providers participating in payment models rewarding lower spending, such as accountable care organizations (ACOs), interventions focused on specific patients might facilitate spending reductions for patients covered by the models without eroding fee-for service- revenue for other patients. Beyond this appeal, however, viewing the cost problem through a patient-centered lens may not offer clear resolution, for three related reasons. Targeting patients with high spending may not effectively target the spending that should be reduced. Longitudinal patient-specific investments that are important for coordinating care and improving quality may be less important for curbing wasteful spending. And potentially more effective system changes that reduce wasteful care for all patients have different cost structures that may not require patient target to maximize savings.”

In other words, Drs. McWilliams and Schwartz say, “In considering ways to reduce wasteful utilization, it’s instructive to contrast patient-focused strategies targeting high-cost patients with systems-focused strategies intended to reduce low-value services for everyone.” They’ve done a detailed analysis looking at these two approaches. One key element in their findings: “Intensive case management for high-cost patients… requires predicting which patients will generate high spending,” and, perforce, “Such predictions are fraught with error because healthcare needs fluctuate randomly.” So, for example, their analysis found that 75 percent of Medicare spending was concentrated among 17 percent of beneficiaries in 2013, but that those patients determined to be high-risk ended up accounting for only 42 percent of Medicare spending. Meanwhile, in 2013, 17 percent of the highest-risk Medicare patients received nearly twice as many services deemed to be “low-value” services, as did lower-risk patients, but those low-value services accounted for only 27 percent of the 11 million low-value services provided to Medicare patients, and 13 percent of spending on those services. As the researchers write, “On the basis of these figures, if a provider organization could reduce low-value service use by 20 percent through system changes affecting all its patients, it would have to achieve a 74-percent (20 percent divided by 0.27) reduction in the high-risk group to achieve an equal reduction in the total number provided. Targeting a smaller high-risk group would necessitate an even greater reduction.”

In other words, put very simply, the amount of cost savings that could be achieved simply by reducing low-value services to all patients far outweighs the value of attempting to reduce such services to high-risk patients.

And what are the “low-value services” that the authors are referring to in their article? “Low-value services,” they w rite, “could include unnecessary procedures, tests, hospitalizations, and referrals, and care that could be provided in lower-cost settings without worsening quality.”

What’s interesting about this is that these unnecessary procedures, tests, hospitalizations, and referrals are phenomena that have long been documented and are very familiar to the leaders of patient care organizations. Many, in fact, have been working for many months, if not years, to reduce unnecessary utilization across the board. The core point that Drs. McWilliams and Schwartz make is that reducing utilization on the part of high-risk patients has been perceived as being of relatively higher value than this—broad, general over-utilization of services that should be reduced in volume to begin with.

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