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.
They write, “So why has the cost problem been reframed as one of high-cost patients rather than low-value decisions? If new payment models reward providers for reducing wasteful spending through any means, why has managing high-risk patients’ care so dominated responses to these incentives? Clinicians are drawn to patient-focused solutions because they routinely manage patient care, not the systems shaping clinical decisions,” they state. “But high-risk care management is also appealing because reduce wasteful care for all patient can cause substantial fee-for-service losses. Even if all providers enter risk-sharing contracts with all payers for their primary care patients, large multi-specialty organizations—particularly those with hospitals—would continue to serve many patients covered by the contrasts of competitors who provide the patients’ primary care.”
So, what to do? The researchers see three fundamental paths forward: either move away from ACO-like global budgets, and towards “more piecemeal models such as bundled payments that place episodes of care under budgets,” which they concede could weaken incentives to eliminate wasteful episodes of care outside bundles; or allow provider consolidation to the point that a single organization provides the bulk of care in each market; or ensure that smaller provider greats “get a fair shot.”
That third approach, the authors say, holds promise, but, they add, “[I]t could be quashed in its infancy by advancement of the first two.”
Part of the fundamental problem with ACO-like structures, they argue, is that building accountable care structures inevitably “encourages acceptance of expansive organizational structures that halt providers who are hesitant, with one foot dipped in payment reform and the other planted on the fee-for-service dock. Perhaps,” they conclude, “smaller provider groups with stronger incentives to eliminate waste could emerge as a competitive force under new payment models. Until somebody jumps into the water,” they write, “high-cost patients may continue to be high-cost.”
I found the authors’ arguments to be fascinating, and worth considering. Fundamentally, they are saying that, rather than pushing ahead with ACO contracts that involve very large, consolidated patient care organizations and superstructures, focused primarily on the highest-risk patients they can identify, a much broader set of efforts around eliminating wasteful utilization across the board in healthcare, especially at the level of smaller physician organizations.
The challenge embedded there is that it is precisely the smaller physician practices that are the least efficient right now, operationally and informationally. They have fewer risk contracts, lower operational efficiency, a lack of IT infrastructure, and a lack of staff who are skilled at deploying and using analytics on an ongoing basis, to improve efficiency and intervene effectively across the board to reduce unnecessary utilization. Indeed, in the fee-for-service system that still provides the bulk of the income on which practicing physicians rely, there are still powerful incentives to resist engaging in these optimizing activities.
In addition, few physicians in clinic practice have any experience with Lean management and other continuous performance improvement strategies and tools. One could even say that physician practice is the “Wild West” of utilization management in this context. But could that change?
Inevitably, I think it would or will require tremendous literal and energy investment in clinical performance improvement efforts on the part of the leaders of the integrated systems with which physicians in practice are affiliated, or by whom they are hired, to make this concept work in practice. And what motivation would there be for the leaders of integrated health systems to do this? Inevitably, business relationships involving shared risk would have to be present.
In addition, there is a huge IT/data element here. Indeed, none of this can possibly work without the intensive leveraging of data and data analytics to power the clinical performance improvement that could make all of this function effectively. In that, CIOs, CMIOs, and other healthcare IT leaders could be true heroes in this narrative, as they would be the people who could figure out exactly what kinds of data, data analytics, and other tools would be needed here, and how to bring them in and implement them.
I certainly agree with Drs. McWilliams and Schwartz that the closer we can get to the choices that physicians make in their office-based practices that impact these utilization patterns, the better. But to do that, we’ll need for everyone to be rowing in the same direction, under the more or less the same incentives, and with matched sets of tools. Then perhaps this idea could work. In the meantime, I salute these researchers for their trenchant analysis of some of the more granular issues facing us as healthcare system right now, around utilization and utilization management. We continue to need analyses like this one; they will definitely be helpful for the road.