By Mike Lundberg, Spreemo Health Chief Client Officer | July 2017
The headline is not a typo: you really can’t afford low-quality healthcare. The costs—not only in dollars spent, but also in lost time and productivity for employees on your company’s health plan as well as lessened patient health and well-being—are simply too high.
According to PricewaterhouseCoopers (PwC), American healthcare costs are steadily rising, accounting for an ever-larger percentage of the gross domestic product and the average annual income. Patients and payers alike are spending more on healthcare than at any point in our country’s history.
But all of that spending isn’t buying us better quality care. According to a report from the Commonwealth Fund, our healthcare system ranks last in quality among 11 industrialized nations.
With PwC projecting that costs will continue to rise at a rate of more than 6 percent per year, roughly three times the current rate of inflation, it’s only fair to ask where all of the money is going.
PwC’s analysis of historical data from the Bureau of Labor Statistics shows that recent increases in employer health benefit costs owe to increases in price, not utilization. Moreover, they report, “roughly half of employer health costs are from hospital inpatient and outpatient spending.”
Taken together, those figures might seem to suggest that belt-tightening managed care plans should look to cut costs by shopping for the lowest prices on the services they use the most.
That is exactly the wrong approach.
That’s because studies have found no correlation between cost and quality of care. Healthcare is not a commodity and providers are not interchangeable parts.
If you always look for the lowest price, you might get some high-quality care, but you’ll also get some low-quality care. And if you pay for low-quality care—no matter how much you spend—there will almost certainly be another bill to come.
Trying to cut healthcare costs on the front end is therefore counterproductive.
The best way to control costs is to insist on high-quality care. Even if that means paying a bit more upfront, quality is always worth the investment because it results in significant downstream savings of money, time, productivity, health, and well-being.
How? In many cases, the difference is diagnostics. A misdiagnosis can result in wasted and potentially dangerous treatment even as the original condition worsens.
And diagnostic errors are much more common than we think. A 2017 study from The Spine Journal found error rates of over 43 percent. A 2017 Mayo Clinic study found that as many as 88 percent of patients who seek a second opinion receive a new or refined diagnosis, concluding that referrals for second opinions from advanced subspecialists can have a life-changing impact.
The problem of misdiagnosis is particularly relevant in spine care because, relative to national averages, high-quality care can yield vastly improved patient outcomes and huge cost savings. Unnecessary spinal surgery is the epitome of low-quality care.
And yet, as reported by Harvard professor and surgeon Atul Gawande in The New Yorker, “doctors [at national centers of excellence for spine care] are finding that around 30 percent of the spinal procedures that employees were told they needed are inappropriate” and therefore not performed.
That finding alone means thousands of employees would have undergone expensive, unnecessary surgeries, risking complications and racking up significant workers’ compensation bills during their recoveries, had they not gotten a high-quality second opinion before it was too late.
Cutting healthcare costs doesn’t mean looking for the lowest-priced surgeon for your employee. It means finding the best surgeon—and then making sure your employee needs the surgery in the first place.
Walmart, for one, is doing exactly that. In his New Yorker piece, Gawande describes how one Walmart employee was flown to Seattle for a spinal fusion that the doctors at the world-class Virginia Mason Medical Center decided he didn’t need. Instead, they gave him a simple injection and sent him home, where he made a full recovery.
For that patient, getting the right diagnosis made all the difference. And for Walmart, it saved thousands of dollars in surgical costs and workers’ comp payments.
High-quality diagnostics thus help to avoid unnecessary care. It seems counterintuitive to say that you can’t afford low-quality care. But the truth is that low-quality care is a bad deal at any price.
In contrast, given the demonstrated prevalence of diagnostic errors and the cascading impact of incorrect diagnoses, the return on investment for high-quality care—and high-quality diagnostics, in particular—has proven compelling.
By steering patients toward providers who have demonstrated the ability to arrive at more accurate diagnoses, we improve the chances those patients will receive all of the care they need—and none of the care they don’t, which we’ve found can save up to 35 percent on total claim costs.
That figure serves as proof of concept, corroborating the value of focusing on quality over price when seeking to cut healthcare costs.
Gawande argues that unnecessary care stems from misaligned incentives. Doctors often make more for doing more, he says, whether it’s necessary or not. They may not be specialists in the diagnosis and treatment of any given condition. And they may fear the consequences of inaction—health consequences for the patient, legal and financial consequences for themselves.
But those misaligned incentives have created financial consequences that ripple through our entire healthcare system. Healthcare spending has gotten out of control even as the quality of the care we receive remains suboptimal. To fix our broken system, improving quality even as we control spending, we have to start by insisting on high-quality care—and refusing to pay for anything less.
When the alternative is costs that continue to rise with no corresponding improvement in outcomes, we really can’t afford to do anything else.