22
Getting to 10 Percent: Opportunities and Requirements

INTRODUCTION

Building on the discussions of the preceding workshops, a knowledgeable group of authorities from different stakeholder sectors convened to explore in greater detail the high-priority elements and strategies key to achieving 10 percent savings in healthcare expenditures within 10 years without compromising Americans’ health status, quality of care, or valued innovation. Participants, who drew from their experience as providers, payers, purchasers, health economists, researchers, quality analysts, and regulators, included Michael Bailit of Bailit Health Purchasing, Maureen Bisognano of the Institute for Healthcare Improvement, David M. Cutler of Harvard University, Wendy Everett of New England Healthcare Institute, Richard J. Gilfillan of Geisinger Health System, Dolores L. Mitchell of the Massachusetts Group Insurance Commission, Meredith B. Rosenthal of Harvard University, Jonathan S. Skinner of Dartmouth College, John Toussaint of ThedaCare Center for Healthcare Value, and Reed V. Tuckson of UnitedHealth Group. This chapter summarizes the discussions, insights, and perspectives offered by the individual attendees at the meeting, and it should not be construed as consensus or recommendations on specific numbers or actions.

As the participants considered the opportunities present within the current delivery system to lower costs and improve outcomes, the substantial scale of the current inefficiencies was underscored. While the attendees discussed published literature and earlier workshop presentations indicating that 20 to 30 percent of current expenditures could be eliminated without



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22 Getting to 10 Percent: Opportunities and Requirements INTRODUCTION Building on the discussions of the preceding workshops, a knowledge- able group of authorities from different stakeholder sectors convened to explore in greater detail the high-priority elements and strategies key to achieving 10 percent savings in healthcare expenditures within 10 years without compromising Americans’ health status, quality of care, or valued innovation. Participants, who drew from their experience as providers, payers, purchasers, health economists, researchers, quality analysts, and regulators, included Michael Bailit of Bailit Health Purchasing, Maureen Bisognano of the Institute for Healthcare Improvement, David M. Cutler of Harvard University, Wendy Everett of New England Healthcare Institute, Richard J. Gilfillan of Geisinger Health System, Dolores L. Mitchell of the Massachusetts Group Insurance Commission, Meredith B. Rosenthal of Harvard University, Jonathan S. Skinner of Dartmouth College, John Tous- saint of ThedaCare Center for Healthcare Value, and Reed V. Tuckson of UnitedHealth Group. This chapter summarizes the discussions, insights, and perspectives offered by the individual attendees at the meeting, and it should not be construed as consensus or recommendations on specific numbers or actions. As the participants considered the opportunities present within the cur- rent delivery system to lower costs and improve outcomes, the substantial scale of the current inefficiencies was underscored. While the attendees discussed published literature and earlier workshop presentations indicating that 20 to 30 percent of current expenditures could be eliminated without 99

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00 THE HEALTHCARE IMPERATIVE consequences for quality or outcomes (Fisher et al., 2003), certain attendees offered the view that, based on their experiences with ongoing improve- ment initiatives, the amount of waste present in the healthcare system may be even greater, perhaps in some circumstances and settings as much as 50 percent. As an example, the findings of the Health Care Value Leaders Network were discussed. Two of these findings were that: (1) 80 to 90 per- cent of steps in the care process were not value-additive, and (2) with the application of the Toyota Production System to streamline clinical services within an institution, systematic waste reduction could possibly trim as much as 50 percent of costs, while simultaneously improving quality. The attendees discussed priority areas of opportunity, such as avoid- able hospitalizations and readmissions and the provision of unnecessary services, focusing on high-yield strategies, ranging from decreasing the costs of episodes of care to medical liability reform and shared decision making, as well as on care-related costs, administrative costs, and related reforms. Several common insights were offered by multiple individual attendees as to the common elements of successful strategies: • Reorientation to patient-centered value among all stakeholders (patients, providers, payers, manufacturers, and regulators) is necessary, and eliminating the inefficiencies and waste replete in the costs of care and healthcare administration begins with the basics: better attention to patient needs and perspectives and pay- ment mechanisms that drive the delivery of value over volume. However, it was also emphasized that the rewards involved must be quite large in comparison with the income at stake for providers if the effort is to both cover the implementation costs and justify the resources involved in maintaining a coordinated effort to minimize costs and improve outcomes. • Payment reform provides a critical tool to realign economic in- centives within the delivery system. Additionally, targeting both utilization and pricing of clinical services is needed to ensure the full savings potential of any bundle of strategies to lower costs and improve outcomes. • Multimodality should characterize health reform plans because while payment reform appears to be the most likely to yield near- to midterm savings, infrastructure elements such as health informa- tion technology and comparative effectiveness research are neces- sary to facilitate and amplify the effectiveness of payment reforms. In particular, nonmedical industries provide many instructive les- sons regarding successful cost-lowering practices, including use of data to inform quality improvements, incentive structures that reward value creation, and worker-driven processes and culture.

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0 GETTING TO 0 PERCENT • Specificity with regard to policies, responsible actors, and assump- tions enables focus of initiatives, not just in legislation but also through institutional leadership and public–private partnerships at both state and regional levels. • Incrementalism—the need for multiple small savings decisions re- lated to realigned incentives and improved system efficiency—rather than a single large decision—will be necessary to achieve 10 per- cent savings. Apart from large savings likely to be possible from streamlining and harmonizing administrative claims forms and reporting requirements, success of the broad reform approaches required will likely depend on smaller gains—targeting utilization, pricing, and delivery—in each of the many strategic loci. • Transparency and accountability across public and private sectors can foster efficiency and quality improvement initiatives by pro- viders, informed provider selection by patients, and value-based payments by payers. • Collaboration among all those affected by healthcare reforms, including subspecialty provider societies, payers and patients, is required to overcome inertia and fear of change. CONSIDERING THE OPPORTUNITIES Participants reviewed the range of strategies explored throughout the workshop series and, working in small groups followed by open discus- sion, considered opportunities for strategies aimed at providers, patients, and payers. Their discussion centered on care-related costs, administrative costs, and related reforms. Within each of these broad categories, they considered an array of specific initiatives, as well as the requirements and assumptions inherent to each. In addition, the participants discussed their views on the approximate range of savings that might be achieved through implementation of these strategies, drawing on workshop presentations and their own experiences. Payment reform was discussed throughout the meeting as a necessary and potent component of a value-driven agenda to lower costs and improve outcomes. Many of the participants observed that payment reform may be implemented in a variety of forms, ranging from bundled payments to global payments and salaries for providers, but they emphasized pay- ment reform as a tool and an underlying requirement for achieving many of the goals discussed at the meeting. For example, to stimulate initia- tives to reduce medical errors, several attendees suggested that creation of bundled payments for hospitalizations include the costs of readmissions due to any cause within 30 days. Another form of payment reform akin to pay-for-performance included linking a portion of provider payments

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02 THE HEALTHCARE IMPERATIVE to documented use of decision aids to encourage shared decision making. Regardless of the form, payment reform was noted throughout the meeting by various individuals as fundamental to aligning provider incentives with quality and efficiency. In the discussions, the participants individually identified high-yield sav- ings opportunities based on their own experiences. The 10 cost-reduction opportunities explored in greater detail during the meeting focused primar- ily on care-related costs, but also included administrative costs and related reforms (Box 22-1). While acknowledging that substantial work is needed to refine and strengthen the analytics, based on estimates provided in previous work- shops on excess costs, the sum of the individual opinions of the various participants, speaking not for all in the group but to their own areas of expertise and informed by their own individual knowledge bases, resulted in first approximations of approximately $360 billion to $460 billion in annual savings, which might be achieved by 2018 (in 2009 dollars) (Ta- ble 22-1). To account for the increased primary care practice costs necessary to achieve implementation of several of the strategies discussed, several participants suggested that a one-third offset be employed, yielding a total BOX 22-1 Estimated Health Cost Savings Selected approaches: individual perspectives Estimated Savings in Year 10 Low High CARE-RELATED COSTS • Prevent medical errors $8 B $12 B • Prevent avoidable hospital admissions $44 B $48 B • Prevent avoidable hospital readmissions $16 B $20 B • Improve hospital efficiency $38 B $80 B • Decrease costs of episodes of care $32 B $53 B • Improve targeting of costly services $9 B $20 B • Increase shared decision making $6 B $9 B ADMINISTRATIVE COSTS • Use common billing and claims forms $181 B RELATED REFORMS • Medical liability reform $20 B $30 B • Prevent fraud and abuse $5 B $10 B

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0 GETTING TO 0 PERCENT TABLE 22-1 Opportunities and Strategies Discussed to Lower Costs and Improve Outcomes by 2018a Annual Savings (Billions, 2009 dollars) (Range of Participant Opportunities Estimates) Assumptions Requirements Care-related costs Reduce $8-$12 B • Overall inpatient • Metrics and transparent medical error cost = $16 B national reporting errors • 50 to 75% avoided system by 2018 • Leadership/stakeholder • Savings substantially engagement higher if outpatient • Technical assistance errors also reduced capacity • Bundled payments for hospitalizations Prevent $44-$48B • Primary admissions • Enhanced care avoidable cost for Medicare coordination and admissions = $159 B and for disease management commercial payers = • Primary care payment $130 B reform within a value- • 27% avoided focused medical home among Medicare model beneficiaries by 2018 • Leadership/stakeholder • 4% avoided engagement among commercial • Palliative care and beneficiaries by 2018 hospice integral to • Savings could be facilitating patient- augmented by centered care among expanded use of the severely chronically palliative care ill services Prevent $16-$20 B • Avoidable • Bundled payments avoidable readmissions cost for to cover all-cause readmissions Medicare = $28 B readmissions within and for commercial 30 days of index payers = $12 B hospitalization • 50% avoided • Shared savings among among Medicare providers beneficiaries by 2018 • Data base sharing • 50% avoided among all providers among commercial • Community services to beneficiaries by 2018 support enhanced post- discharge care continued

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0 THE HEALTHCARE IMPERATIVE TABLE 22-1 Continued Annual Savings (Billions, 2009 dollars) (Range of Participant Opportunities Estimates) Assumptions Requirements Improve $38-$80 B • 2018 hospital • Reengineering of hospital expenditure level for clinical services must efficiency Medicare = $420 B occur institution-wide and for commercial to maximize quality payers = $477 B improvements • Payment reductions • System-wide will create financial application would incentives to increase diminish cost-shifting efficiency • Technical assistance • Use of Toyota capacity to implement Production continuous System model can improvement substantially improve efficiency—some demonstrate 30% to 50% reduction in costs • 1% per year efficiency across the system is achievable, yielding $38B if Medicare only, $80B if also commercial Decrease $32-$53 B • Total spending for • Provider value costs of Medicare = $476 B, measures based on episodes of Medicaid = $356 B resource utilization care and for commercial and episode treatment payers = $749 B groups • Reducing the costs • National reporting of episodes of care of value metrics for by 3% for Medicare, individual providers Medicaid and • Payments based on commercial payers = measurement results $47 B, 5% = $79 B. • Patient choice • Potential savings incentives through within the value-based benefits commercial sector > design Medicare; • Cap on out-of-network • Reduce savings charges estimate by a third to allow for overlap with savings from prevention of avoidable admissions

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0 GETTING TO 0 PERCENT TABLE 22-1 Continued Annual Savings (Billions, 2009 dollars) (Range of Participant Opportunities Estimates) Assumptions Requirements Improve $9-$20 B • 20% savings by • Limited physician- targeting of reducing excessive owned self-referral costly services and unnecessary • Reset RBRVS use of imaging • Transparency on cost studies—$9 B of $43 and comparative B overall—and 50% effectiveness reduction in costs • Evidence-based from non-urgent guidelines addressing use of emergency appropriate use of departments—$11 B expensive technology of $21 B overall • Value-based insurance • Savings would be to provide further greater if other incentives costly services, such as orthopedic services and radiation oncology, were also /better targeted Increase $6-$9 B • Patient decision aids • Readily accessible shared available systemwide information on the decision for 11 conditions comparative value, making currently addressed risks, and benefits of • Average savings interventions of $2,700 per • Tailored decision tools case achieved by and aids available increasing access systemwide to palliative care • Palliative care services to 90% capacity expanded of U.S. hospitals to all hospitals and and 7.5% of all communities discharges • Payments based on • Savings would be documented use of greater if patient available tools decision aids were widely available beyond the specified conditions continued

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0 THE HEALTHCARE IMPERATIVE TABLE 22-1 Continued Annual Savings (Billions, 2009 dollars) (Range of Participant Opportunities Estimates) Assumptions Requirements Administrative costs Use common $181 B • Total 2009 BIR costs • NAIC successfully billing and = $361 B develops streamlining claims forms • Approximately • If voluntary 50% of BIR costs development and use of saved through common forms is not administrative achieved by 2018, the simplification Secretary of HHS will develop and require for participation in insurance exchanges established by health reform legislation Additional related reforms Medical $20-$30 B • Total estimated costs • State-based reform liability in 2009 = $60 B initiatives reform • About 33% to 50% • Legislative action can be saved by to institute national capping noneconomic reform of the medical damages and liability system lowering premiums • Additional savings could be gained by reducing defensive medicine Prevention $5-$10 B • Total estimated costs • Significant potential of fraud and in 2009 = $75 B savings exist in abuse • Between 7% and Medicare and 13% of costs Medicaid; creation preventable through of a central national increased detection, health insurance claims prevention and clearinghouse facilitated recoupment of by use of common fraudulently paid billing and claims claims in commercial forms to expedite fraud and public sectors prevention initiatives • Enhanced resources for detection require ongoing investment from public and private payers

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0 GETTING TO 0 PERCENT TABLE 22-1 Continued Annual Savings (Billions, 2009 dollars) (Range of Participant Opportunities Estimates) Assumptions Requirements Total savings $359-$463 B a As this table summarizes the discussions and ideas offered by the individual attendees at this meeting, it should not be construed as consensus or recommendations on specific numbers or actions. b Savings accounted for within delivery system reforms. NOTE: B = billion; BIR = billing and insurance-related; HHS = Department of Health and Hu- man Services; NAIC = National Association of Insurance Commissioners; RBRVS = resource- based relative value scale. savings of approximately $240 billion to $310 billion annually. In addition, participants pointed out that the estimates discussed had not accounted for implementation and overhead costs. Care-Related Costs Discussions on care-related costs considered several key strategies fo- cusing on improving hospital-based care, provider efficiencies, and use of evidence-based standards, each thought to have high prospects for yielding significant savings. Several attendees pointed to the need for additional col- laborative work among stakeholders to facilitate the development of new tools, including valid metrics and implementation plans. Reduce Medical Errors Given prior workshop estimates that the costs of medical errors ac- counted for over $16 billion in annual healthcare expenditures (Jha et al., 2009), several participants highlighted medical errors as an obvious oppor- tunity to lower costs and improve outcomes through systematic removal of errors in hospital care, such as adverse drug events, hospital-acquired infec- tions, falls, and pressure ulcers. Two attendees, Bisognano and Toussaint, suggested that by engaging providers, regulators, and payers, between 50 and 75 percent of the costs due to medical errors could be eliminated by 2018; that is, between $8 billion and $12 billion annually (2009 dollars) could be saved through application of best practices and adoption of an improvement methodology that builds upon actionable, transparent per- formance data. Participants were not aware of any estimates encompassing

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0 THE HEALTHCARE IMPERATIVE the costs of medical errors in the outpatient setting; all previously discussed estimates during the workshop series were of the costs incurred in a hospital setting. However, several believed that if the occurrence of medical errors could be prevented in ambulatory settings, the savings achieved could be even more significant. In addressing data requirements, attendees discussed the need for reliable, valid metrics and the development of a transparent national reporting system that could be based at the state or regional level. Engagement of leadership and stakeholders, including hospital trustees, would facilitate implementation, suggested Bisognano. Technical assistance would also assist integration of best practices and clinical improvement pro- tocols and methods into current care processes. Finally, Rosenthal pointed out that bundled payments for hospitalizations, which also cover readmis- sions, provide financial incentives to achieve benchmark goals. Several attendees identified implementation of measurement and reporting within 4 years as a feasible interim goal. Reduce Avoidable Hospital Admissions Reduction of avoidable and unnecessary hospital admissions, such as those resulting from ambulatory care-sensitive conditions, including short- term complications of diabetes (e.g., diabetic ketoacidosis), asthma, and urinary tract infections, was discussed as another priority with substan- tial potential. Assuming that the cost of an inpatient admission averaged $12,850 on average for Medicare in 2009 (MedPAC, 2009) and $13,300 on average for commercial payers, based on an estimate of approximately 20 percent greater hospital costs for the private sector and subsequent downward adjustment for a typical commercial population case-mix (es- timated inpatient spending totals of $159 billion and $130 billion, re- spectively, for primary admissions), Gilfillan suggested that a reduction in the number of Medicare admissions from 275 admissions per 1,000 beneficiaries to a best-practice level of approximately 200 admissions per 1,000 beneficiaries (a 27 percent reduction) (MedPAC, 2009) would yield a savings of approximately $42 billion annually (assuming coverage of ap- proximately 45 million lives [Kaiser Family Foundation, 2009]). Similarly, a reduction in the 55 commercial admissions per 1,000 covered lives to a best-practice level of 53 admissions per 1,000 lives (a 4 percent reduc- tion) (National Committee for Quality Assurance, 2009) would save about $6 billion annually (assuming coverage of about 178 million lives [Davis, 2009]). Thus a reduction in avoidable admissions to best-practice levels could yield savings in the range of $44 billion to $48 billion annually, suggested Rosenthal, assuming that public payers could reduce avoidable admission rates to the levels described, and commercial payers could reduce

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09 GETTING TO 0 PERCENT costs by at least one-third of the $6 billion goal initially. She added that collaborative work between providers, payers, and regulators, enhanced care coordination and disease management, such as through primary care payment reform with a value-focused medical home model, is needed to achieve these savings. Bisognano discussed palliative care and hospice as integral to facilitating patient-centered care among the severely chronically ill. Mitchell underscored the important need for investments in workforce development, especially in the education of primary care-focused mid-level practitioners (e.g., nurse practitioners and physician assistants). Reduce Avoidable Hospital Readmissions With 18 percent of Medicare hospital admissions and 10 percent of commercial hospital admissions resulting in readmissions within 30 days, many of which are avoidable (Klein, 2008; MedPAC, 2008), reducing preventable readmission rates was deemed a priority. Again, assuming the cost of an inpatient admission totaled $12,850 and $13,300 on average for Medicare and commercial payers, respectively, Rosenthal and Gilfillan noted that reducing avoidable hospital readmissions by 50 percent among Medicare (from 50 readmissions to 25 readmissions per 1,000 beneficiaries among 45 million total covered lives [MedPAC, 2008]), would yield sav- ings of $14 billion annually from the estimated $28 billion in total costs of readmissions, while similarly reducing such readmissions among commer- cial payers (from 5 readmissions to 3 readmissions per 1,000 lives covered among 178 million total covered lives [Davis, 2009; Klein, 2008]) would yield savings of $6 billion annually from the $12 billion in total costs of re- admissions. They said addressing care defects during initial hospitalizations and post-discharge care could lower costs significantly. If Medicare were able to reduce readmission rates by 50 percent and commercial payers could reduce their costs by at least one-third initially, then Cutler and Gilfillan surmised the total savings could be $16 billion to $20 billion annually. Rosenthal cited the application of bundled payments for hospital ad- missions to cover all-cause readmissions within 30 days of an index hos- pitalization and shared savings among providers as central to this strategy. To allow efficient information exchange, Bisognano suggested that an in- frastructure to permit secure data sharing among all providers is needed. In addition, Bailit and Mitchell identified community services and improved patient capacity to self-manage chronic conditions through enhanced educa- tion, management tools, and peer support as necessary to support enhanced post-discharge care. A stronger linkage between hospitals and primary care was also identified as integral to improving disease management. Through engagement of providers, payers, and regulators, several participants priori-

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0 THE HEALTHCARE IMPERATIVE tized the supportive elements of data infrastructure (including examination of episode groupers1) and community services as early goals. Improved Hospital Efficiency With non-value added activities adding unneeded costs to the health- care system (Mecklenburg and Kaplan, 2009; Pittenger, 2009; Toussaint, 2009), increasing the efficiency of hospital-based clinical care through re- engineering of clinical services by applying the Toyota Production System (TPS) model was identified as a potent strategy to lower costs and improve outcomes. The assumption underlying the estimate discussed by Bisognano and colleagues was that straightforward hospital efficiency and continuous improvement initiatives prompted by lowering Medicare hospital costs by 1 percent annually would result in savings of $38 billion annually by 2018 (2009 dollars), assuming $420 billion in Medicare spending for hospital care in 2018 (CMS, 2007). If commercial costs were included as a method to prevent shifting cost to this sector, they suggested about $80 billion could be saved in the same time period, assuming $477 billion in private sector spending for hospital care in 2018 (CMS, 2007). More efficient hospital performance and lower payments would mean savings for providers and payers, and thus, ultimately, for consumers. Toussaint also noted that the application of TPS and similar methodologies (e.g., lean, Virginia Mason Production System) to hospitals must occur institution-wide (i.e., in both ambulatory care and inpatient settings) to maximize quality improvements and cost savings. Decrease the Costs of Care Episodes Focusing on the tremendous variation in resource utilization and costs, none of which yielded any significant gains in quality (Baicker and Chan- dra, 2004; Fisher et al., 2003), participants identified increasing utilization of high-efficiency (low cost, high quality) providers as a method of decreas- ing the high costs of care episodes. If this strategy could lower the costs in the public and private sectors by 3 to 5 percent, Gilfillan suggested, then the Medicare program (assuming healthcare spending of $476 billion) could save between $14 billion and $24 billion annually, the Medicaid program (assuming spending of $356 billion) could save between $11 bil- lion and $18 billion annually, and commercial payers (assuming spending of $749 billion) could save between $22 billion and $37 billion annually (CMS, 2007), yielding prospective total savings of $47 billion to $79 billion 1 Episode groupers are proprietary software programs that organize claims data into a set of clinically coherent episodes, usually linked by diagnosis.

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 GETTING TO 0 PERCENT annually. If these estimates were reduced by one-third to allow for overlap with savings from the prevention of avoidable admissions, Rosenthal noted, the annual savings would then total between $32 billion and $53 billion. Tuckson noted that per-episode savings opportunities within the commer- cial sector could exceed those within Medicare because of the higher (and greater variation in) prices paid. Toussaint outlined several requirements for achieving the savings, including development of provider value mea- sures based on resource utilization and episode treatment groups through multi-stakeholder payment reform initiatives involving providers, regula- tors, purchasers, and patients. This would allow national reporting on the basis of individual providers, which would presumably induce changes in provider behavior. Several attendees also suggested that progress could also be facilitated by development of an all-payer database of provider value, which could be used for reporting as well as quality improvement purposes. Rosenthal elaborated that further reinforcement through incentives for use of high efficiency providers could also be achieved through payments based on measurement results and value-based benefits design. She and Gilfillan added that collaboration between payers and employers to cap out-of-network charges would provide additional incentives to use efficient providers. Bailit also suggested that there existed significant opportunity to apply known evidence on the comparative value of treatments and interven- tions to public and private payer coverage policies, while other participants considered taxation of overly generous health insurance coverage—i.e., “Cadillac” plans—as methods of lowering costs. Some participants sug- gested that implementation of measurement and reporting could potentially occur within 4 years. Improve Targeting of Costly Services Participants also considered measures aimed at application of best evidence on appropriate use of diagnostic testing and therapeutic inter- ventions to reduce overuse of inappropriate and unnecessary services. As the Medicare program and commercial payers each cover approximately 45 million and 178 million lives (Davis, 2009; Kaiser Family Foundation, 2009), respectively, Gilfillan suggested that a reduction in excessive and unnecessary use of imaging services by 20 percent in Medicare (from an estimated baseline spending of $20 per member per month on high-tech radiology services, based on his experience) and in the commercial sector (from baseline spending of $15 per member per month, based on his ex- perience) could yield a total of $9 billion in annual savings. If overuse of nonurgent emergency department (ED) services—which costs $21 billion annually (Delaune and Everett, 2008)—were also reduced by 50 percent, Everett suggested, an additional $11 billion could be saved, increasing the

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2 THE HEALTHCARE IMPERATIVE total annual savings estimate from $9 billion to $20 billion. Tuckson sug- gested that the savings could be even greater if other costly services, such as orthopedics and radiation oncology, were also more carefully targeted. Several attendees cited transparency on cost and comparative effectiveness as required to facilitate utilization and coverage determinations; they also called for initiatives targeting self-referral to physician-owned facilities. Evidence-based guidelines, which are expected within 2 years to address appropriate use of expensive technologies developed and supported by medical subspecialties, would also facilitate initiatives to address variations in provider practice patterns and consumer demand, surmised Tuckson. Value-based insurance design was also discussed as a method of provid- ing incentives for patients to increase appropriate use of diagnostics and therapies. In addition, increased access to primary care services through expanded employment of mid-level practitioners could help decrease non- urgent use of EDs, according to Everett and Mitchell. Increase Shared Decision Making Considering strategies to engender patient-centered care that fully in- forms patients of the risks and benefits of treatment options, the attendees discussed evidence that shared decision making (SDM) utilizing decision aids could facilitate patient understanding and participation in the decision- making process, which often reveals preferences for lower-cost, less-invasive treatments. Assuming that patient decision aids tailored to the clinical cir- cumstance were available systemwide for 11 conditions (coronary revas- cularization for angina, mastectomy for early breast cancer, lumbar spine surgery for low-back pain, prostatectomy for benign prostatic hypertrophy, medical stroke prevention therapy, treatment of hypertension, tube feeding in dementia patients, routine colorectal cancer screening, routine prostate cancer screening, treatment of menorhaggia [excessive menstrual bleed- ing], and use of mechanical ventilation for chronic obstructive pulmonary disease), based on published estimates in the literature, Skinner surmised that SDM could yield savings of approximately $1 billion annually (Schoen et al., 2007). Drawing on work presented during the workshop series, SDM (involving caregivers and family) was also considered in the context of palliative care for very sick patients as likely to yield better targeting of necessary interventions and additional savings, amounting to an additional $5 billion annually (assuming increasing access to palliative care services so that they were available at over 90 percent of American hospitals, were able to reach 7.5 percent of all hospital discharges, and achieve average savings of $2,700 per admission) (Meier, 2009). If the use of SDM could be expanded beyond the 11 conditions listed above, several participants suggested, an additional 50 percent could be saved, increasing the total

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 GETTING TO 0 PERCENT savings estimate from $6 billion to $9 billion annually. However, Bailit suggested that these savings could only be achieved if information on the comparative value, risk, and benefits of various interventions were readily accessible and comprehensible to providers and patients in the form of decision tools and aids. Payments based on documented use of available tools were suggested as another method of providing further incentives to engage in the shared decision-making process. Mitchell proposed that the development of infrastructure to support enhanced use of shared decision making, including workforce training and decision aid development, are critical needs that should be addressed immediately. Administrative Costs With increasing administrative complexity placing significant burdens on providers and payers, attendees considered administrative simplification a high-yield, high-priority strategy for lowering costs over the next decade. Predicated on industry commitment to lowering unnecessary administrative costs, use of common administrative processes, such as the development of common billing and claims forms for use by providers interacting with both public and commercial payers and common processing protocols, was emphasized as a key to easing the administrative burden for all stakehold- ers involved. Use Common Billing and Claims Form Given the significant resource costs of billing and insurance-related (BIR) activities, participants identified utilization of common administrative processes, such as a common system-wide form for all billing and claim submissions to public and commercial payers and use of a centralized com- mon processing center, as critical to reducing administrative complexity for providers and payers. If approximately 50 percent of the total estimated $361 billion costs of BIR activities among payers and providers could be saved through administrative simplification (Kahn, 2009), a participant suggested that $181 billion could be saved annually. Toward these savings, Toussaint noted that voluntary public–private cooperation among payers and providers could result in development and implementation of common billing and claims forms within 5 years. One approach discussed to increase the incentives was that if implementation is not achieved by 2018, manda- tory standards could be issued by the Secretary of the Department of Health and Human Services as an alternative. Participants also discussed the pos- sibility of requiring use of common forms as a prerequisite for participation in insurance exchanges established by health reform legislation as another method of stimulating adoption.

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 THE HEALTHCARE IMPERATIVE Additional Related Reforms Noting the $60 billion spent annually on defensive medicine (Chandra, 2009) and the $75 billion lost due to fraud (FBI, 2007), participants dis- cussed the prevention of fraud and abuse and defensive medicine as oppor- tunities for eliminating waste within the delivery system. Medical Liability Reform Addressing defensive medicine as a driver of unnecessary services, some participants pointed to tort reform as having the potential to save $20 billion to $30 billion annually by lowering court awards and reduc- ing malpractice premiums (Bovbjerg, 2009). Options discussed included disclosure-and-offer programs, in which providers disclose adverse out- comes to patients and offer prompt compensation in appropriate cases; ad- judication of medical malpractice claims in specialized tribunals by neutral experts overseen by judges with medical expertise; and, “safe harbors,” which insulate providers from liability if they followed evidence-based best practices in their care. To achieve these savings within the next decade, Toussaint suggested that legislative action at the state or federal levels, or both, must occur with the input of providers. Prevention of Fraud and Abuse Several participants suggested reduction of ongoing fraudulent billing, including unjustified upcoding of claims and billing for services never pro- vided, could lower unnecessary and unindicated payments to providers by $5 billion to $10 billion annually. This assumes a 7 to 13 percent reduction in the estimated $75 billion annual costs due to fraud (FBI, 2007) could be achieved through increased detection, prevention, and recoupment of fraudulent payments in the public and private sectors. Tuckson said that the potential savings in Medicare and Medicaid are significant. Creation by legislators and regulators of a central national health insurance claims clear- inghouse, facilitated by use of common administrative billing and claims forms, would expedite fraud prevention initiatives. However, Tuckson also noted that enhanced resources devoted to detecting fraud and abuse would require ongoing investment from public and private payers. ADDITIONAL CONSIDERATIONS The rising epidemic of obesity, an aging population with an increasing burden of chronic illness, and the influence of current health behaviors on future health status were also cited as considerations during the conversa-

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 GETTING TO 0 PERCENT tions. With levels of obesity projected to exceed 40 percent by 2015 (Wang and Beydoun, 2007) and over 80 million Americans expected to have multiple comorbidities by 2020 (Anderson and Horvath, 2002), Cutler and Tuckson underscored the importance of considering how health demo- graphic trends would impact future healthcare expenditures and thus the priority strategies to address them. Given the connection between health behaviors and these health trends, including the rising levels of multiple co-occurring chronic illnesses and the low rate of recommended preven- tive care, Everett and Mitchell drew attention to the issue of prevention, including community health programs that encourage healthy eating habits in schools, antitobacco legislation, and primary-through-tertiary preven- tion. Acknowledging that uncertainty exists about the cost effectiveness of many prevention initiatives, Tuckson noted that, regardless of its cost effectiveness, prevention is of critical importance to making gains in public and population health. While the participants highlighted a selection of particularly high-yield, cost-lowering strategies during the meeting, Mitchell and several others noted that many promising strategies, such as increased use of mid-level practitioners, additional ancillary providers (such as health coaches and nutritionists), salaried physicians, and a reassessment of the link between funding for medical education and hospital reimbursement, deserve further exploration and study as potential methods of lowering healthcare costs. Attendees also explored the underlying notion of accountability as critical to improving the health of the nation and to creating a culture in health care that values efficiency and quality. They emphasized that all stakeholders in health must bear responsibility if the delivery system is to be reformed. For example, while Gilfillan and Toussaint suggested that pro- viders bear responsibility for ensuring that care is delivered in the most ef- ficient, safe, patient-centered manner possible, Mitchell added that patients are responsible for improving their engagement in the decision-making process. Without a mission and common understanding of collaborative engagement and accountability, Cutler noted that successful development and implementation of policies that address stakeholder concerns would fall short of their full potential. PARTICIPANT LEADERSHIP RESPONSIBILITIES Building on the idea of accountability, several attendees cited the need to identify specific entities that would assume primarily responsibility for oversight of implementation and evaluation to ensure that the maximum savings potential were realized. Within the context of ongoing efforts to enact healthcare reform legislation, participants pointed to the public sec- tor, including government at the local, state, and federal levels, as critical to

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 THE HEALTHCARE IMPERATIVE providing oversight and ongoing support to the overall healthcare system infrastructure. Gilfillan stated that the role for government extended be- yond the legislative branch to the executive branch as well. The Department of Health and Human Services and the Centers for Medicare & Medicaid Services (CMS) were specifically viewed as setting important examples in payment reform and coverage, inasmuch as spending on the Medicare and Medicaid programs account for almost 40 percent of national health expenditures (CMS, 2007). Mitchell suggested that the increased provision of Medicare claims data as a public good to purchasers, plans, researchers, and the public would be a vital aid in analyses of cost and quality. Bailit termed the government, especially at the state and local levels, as critical to efforts at organizing providers and payers to affect changes in concert with the ongoing national initiatives and in improving public and population health, including the physical and social determinants of health, such as education and community safety. In addition, several participants observed that state governments play a critical role in overcoming problems in commercial insurance markets through insurance regulation. For example, Rosenthal suggested that states could adopt all-payer regulations that could align the basic structure of pay for performance or risk-sharing methods in a marketplace. Several participants highlighted the responsibilities that healthcare pro- viders—ranging from nurses and physicians to acute, intermediate, and long-term care facilities—and commercial payers must bear to successfully reform the delivery system. For example, Tuckson cited the Healthcare Administrative Simplification Coalition, a collaboration between providers and payers to streamline administration by simplifying the credentialing process, standardizing data exchange, and leveraging health information technology. Providers, payers, and purchasers were also seen as playing important roles in improving patient health behaviors by encouraging pre- ventive care and educating consumers on both the value of receiving care and the impact of individual health decisions on personal and population health. Patients and consumers were also said to bear significant responsibili- ties for their care. Opportunities to participate in a shared decision-making process that stimulates patients to fully understand the risks and benefits of the diagnostic and therapeutic options specific to their clinical condition could increase consumer awareness of the value of alternative treatments, suggested Bailit and colleagues. In addition, consumers need to gain better understanding of the evidence indicating that more is not always better, suggested another participant. Regardless of the specific stakeholder engaged, several attendees em- phasized that none of these stakeholder groups should act in isolation without consideration of the other groups. It was suggested that effective

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 GETTING TO 0 PERCENT policies that result in short- and long-term beneficial changes will require that all affected sectors of the healthcare system share leadership responsi- bilities grounded in accountability and motivated by the goals of improving quality and value. CONCLUSION In their conversations, multiple participants emphasized that: (1) the amount of waste and inefficiency in the current delivery system is substan- tial, and (2) a multitude of strategies exist to lower expenditures over the short- and long-term. The discussions focused on three specific areas— care-related costs, administrative costs, and related reforms—which were identified by individual discussants as presenting significant opportunities to realize cost savings while improving quality. The estimates and savings goals offered by individual attendees were based both on published evidence and the practical, on-the-ground experiences of the individual participants with healthcare improvement initiatives, and thus preliminary in nature. While a select number of particularly high-yield, cost-lowering strategies were discussed, several attendees suggested that many strategies, such as increased use of mid-level practitioners, have the potential to lower costs and improve outcomes, but the evidence base for cost savings requires ad- ditional exploration. Finally, many discussants emphasized the importance of accountability and leadership responsibilities among all stakeholders as critical components in the drive to successfully reform the nation’s health- care delivery system. REFERENCES Anderson, G., and J. Horvath. 2002. Making the case for ongoing care. Princeton: Robert Wood Johnson’s Partnership for Solutions. Baicker, K., and A. Chandra A. 2004. Medicare spending, the physician workforce, and ben- eficiaries’ quality of care. Health Affairs (Millwood). Suppl Web Exclusives:w184-w97. Bovbjerg, R. 2009. Medical liability reform. The Healthcare Imperative: Lowering Costs and Improving Outcomes, Strategies That Work, an IOM Workshop. July 16, 2009. Chandra, A. 2009. Personal communication: costs of defensive medicine. December 20, 2009. CMS (Centers for Medicare & Medicaid Services). 2007. National health expenditure pro- jections, 200-20. http://www.cms.hhs.gov/NationalHealthExpendData/downloads/ proj2008.pdf (accessed December 16, 2009). Davis, K. 2009. Compassionate and challenging changes in health care. http://www.common wealthfund.org/Content/From-the-President/2009/Compassionate-and-Challenging- Changes-in-Health-Care.aspx (accessed December 18, 2009). Delaune, J., and W. Everett. Waste and inefficiency in the U.S. health care system. 2008. New England Healthcare Institute.

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