4 Ways to Reduce Healthcare Costs in the US

Posted on May 15 2018 - 6:13am by Editor

It is an urgent time to be thinking about how America can recover from its healthcare problems. As per the Institute of Medicine of the National Academies, $2.6 trillion was spent on healthcare alone in 2013, and as much as$765 billion of thiswas allocatedto wasteful spending—i.e. on low value-care, excess administration, and healthcare fraud.

Healthcare Costs

In a study published by the Public Library of Science (PLOS), overtreatment was cited to be a cause of preventable harm and waste in healthcare; up to 65% of the physicians surveyed from the American Medical Association cited that up to 30% of medical care is unnecessary to patients. The question remains, then: how can we reduce wasteful expenses on our healthcare, and what models and solutions can we employ toward this?

One of the most compelling answers may be in the model of value-based healthcare. In value-based healthcare, as opposed to a fee-for-service or capitated approach, healthcare providers (e.g. hospitals and individual physicians) are paid based on the fulfillment of patient health outcomes, measured against the cost of delivering the outcomes—hence the root of the word “value” in the term. That means that providers are incentivized for minimizing instances of chronic disease, cutting down precious time and money spent on repeat visits, and generally being able to improve patient health and reduce risks of illness.

Thus, the onus falls on the healthcare providers to identify the best treatments and routes of care for patients. Innovation to do this has accelerated via means such as artificial intelligence for healthcare management. AI software solutions will fit very well into the adoption of value-based healthcare systems, as they can adequately manage a large pool of patient data, identify patient groups that have similar risks, and predict outcomes for risk based on a nuanced assessment of the population health.

As someone who has a stake in the American healthcare industry, do you want to know more about how we can reduce national healthcare costs? Here are some ideas from the perspective of value-based healthcare.

Commit to spending less money on managing chronic diseases. Healthcare providers could advocate spending less time and expenses on hospitalizations and emergencies, which could very well be prevented. America spends almost 18% of its GDP on healthcare; both providers and patients could shave off part of those expenses by minimizing unnecessary and repetitive care, and instead adopting a more intelligent value-based model.

Emphasize the upcoming rewards of prevention-based patient services. There’s no denying that the shift to a new model will be costly at first, and will seem to shave off opportunities for livelihood, especially in the profit per episode of care. But overall, higher quality of patient engagement and lower expenses for chronic disease management will translate to higher—and more meaningful—profits for patient treatment.
Adopt a risk-reduction mindset for new innovations. Risk reduction among patients—resulting in a healthier population, with less claims for healthcare treatment—will also ultimately ensure consistent and definite payment from clients, based on a more regular payment deadline.

Tighten hospital protocols and uphold the value of premium service. Adopting the value-based model highlights the value of good work to be done in the hospital. With it will come the reduction of healthcare errors that obstruct a patient’s treatment, as well as their corresponding penalties; greater transparency in hospital processes; and the proud capacity of a hospital’s to provide high-quality care at lower overall cost to the healthcare sector.

On the benefits of switching to a value-based healthcare system, some crucial evidence is provided by the example of insurance company Humana. According to its report titled “Making Progress, Seeing Results,” which surveyed participants under the Medicare Advantage program, the value-based model yielded a decrease of 15% in total healthcare costs as compared to fee-for-service Medicare costs. In addition, clients taking advantageof the value-based agreements benefited from a 7% decrease in emergency department visits, and a 6% decrease in inpatient admissions.

In the end, the tradeoff is not only in the service to American patients—but in the service of the healthcare industry at large, as well as the national economy.