“Why is medical overutilization such an important issue, and where should an ACO look for opportunities to address it?”
I started noticing overutilization when I was a medical resident between 1985 and 1988. Patients in the hospital got the same panel of blood tests every day – complete blood count, electrolytes, blood sugar, and often, a chest x-ray. I noticed that the results of these tests barely varied day by day, though patients who stayed long enough often became anemic from all the blood draws. If they got too anemic, they got a blood transfusion.
Why did we do all these tests? Certainly it wasn’t about the doctors making more money, as we were all salaried anyway. What I came to understand was that this daily ritual of bloodletting was part of a medical culture that is averse — downright allergic — to any bad news. Of course the reality of this approach was that daily blood draws did more harm than good, rarely displaying a surprise finding.
I am starting with this vignette because it is emblematic of a huge problem in U.S. healthcare today – overutilization: the ordering of tests, medications and procedures that are not medically necessary, or could be substituted for with an equally effective less expensive alternative.
In today’s article I am going to demonstrate the magnitude of the problem and offer some possible approaches to tackling it. It is my contention that “all in” we waste somewhere between 30-40% of everything in the U.S. healthcare system, not even including the major waste on administrative costs that add little to no value to the care of patients.
Is overutilization really a problem?
If you do not think medical overutilization is a problem, please consider the following facts:
- The U.S. currently spends about $3.3 trillion per year on health care, now above $10,000 per person per year. This is 30-50% above what our friends in Europe, Japan, and Israel spend per person, and they have as good or better health outcomes than we do.
- Family health insurance in the U.S. is now running at around $25,000 per year, not including several thousand dollars of co-pays and deductibles. These costs of health insurance weigh down every company small and large, and also weigh down states and towns with the cost of healthcare benefits for their municipal employees, resulting in higher local taxes and lower services.
- Spending on healthcare now absorbs 18% of the gross domestic product of the United States and healthcare is now the largest employer category in the U.S.
Part of understanding how we got to where we are today is by looking at the “supply side” and “demand side” of the healthcare equation.
Supply side versus demand side
The supply side argument demonstrates that when geographic areas have an oversupply of any type of specialist, those specialists will “manufacture demand” for their services and provide more care than is medically needed. This was first illustrated by the Dartmouth Medical School in the Dartmouth Atlas of Healthcare under the guidance of Dr. Jack Wennberg in 1988 using the Medicare database. (Personal note – he was one of my professors when I was a student at Dartmouth Med School 1981-1983)
They showed, for example, that areas that had more otolaryngologists per capita performed more tonsillectomies per capita and areas that had more urologists performed more prostatectomies per capita. It was well proven that a significant percentage of those procedures were not medically indicated. So, oversupply of specialists leads to unnecessary utilization.
On the demand side of the equation, patients ask for medical services that are not medically indicated. Examples of this include patients requesting expensive drugs advertised on television that are no better than older generic drugs, or insisting on an MRI for a minor headache, back ache or knee pain when the results will not impact ongoing care.
Overutilization as a cultural phenomenon
I believe there is an interesting cultural underpinning to this demand side as well. Americans came predominantly from hearty and hardy immigrants who in the 17th, 18th, and 19th centuries had little access to much meaningful medical care. But starting in the 1960s with the explosion of new medical technology, the idea began to filter through the media that American medicine could solve all problems, including every ache, pain, or twinge of anxiety. The pharmaceutical industry certainly got on this bandwagon, as did the medical device industry and medical specialty societies.
Of course we do a lot of wonderful things for patients as we should. But we as a medical culture have enabled Americans in the false belief that every complaint is diagnosable and treatable. We have even gotten to the absurd point of advertising drugs that treat the side effects of other drugs – take the example of Movantik for treating opioid-induced constipation. Also, note that the United States is only one of three countries in the world that even allows direct to consumer advertising of drugs on television.
What completes the perfect storm of overutilization is the structure of our insurance industry. Commercial insurance is the most prevalent form of health insurance in the U.S., followed by Medicaid and then Medicare. Patients with insurance never see the true cost of the medical care they are consuming because most of the cost is covered in an entirely opaque fashion by their insurer. If you do not agree with my use of the word “opaque”, take a look at the last EOB (explanation of benefits) you or a family member got from a hospital stay, or even a moderately complex ambulatory visit. The costs and payments and covered services are usually inscrutable.
Where should ACOs focus?
So now that we have all that theory out of the way, let me list the categories of utilization and expense where ACOs should focus:
- In-patient stays. Hospitals usually charge around $1000/day.
- Skilled nursing facility (SNF) stays. SNFs usually charge around $500/day.
- Medications. The proliferation and cost of expensive drugs has exceeded the rate of rise of costs of any other sector in the medical world.
- Procedures. Joint replacements, cardiac stents, colonoscopies, arthroscopies, biopsies to name a few. There is a great deal of overutilization in this area.
- Lab tests. High rates of unnecessary testing abound, e.g. thyroid and Vitamin D levels and many other lab tests.
- Radiology exams. High rates of unnecessary CT scans, MRIs and PET scans.
- Emergency department visits. ED charges are usually around $1000 per event. Often high incidence of unnecessary ED visits.
- Specialist visits. These are not so expensive in and of themselves, but as stated above, specialists like to do procedures which are very expensive.
So now that I may have depressed you with this dreary litany of problems, how can I lift your spirits back up? The good news is there is hope – and evidence — that the shift from fee for service models of care to value based care (also called global payment or capitation) has shifted the cost curve down.
A recent study commissioned by the National Association of ACOs (NAACOS) and discussed in the blog Health Affairs demonstrated that between 2013 and 2015, MSSP ACOs reduced federal spending by $542 million after accounting for shared savings payments earned by the ACOs.
The movement towards value-based care has also provided a silver lining of bringing individual physicians into the team-based model of care. The team, consisting of a doctor, maybe a nurse practitioner, a nurse and a medical assistant, and perhaps a social worker, is in my opinion, a more holistic and comprehensive way to deliver care, better for the patient and superior to the old model.
Addressing overutilization requires a data asset
The ability to understand and then improve patterns of overutilization requires a sturdy and reliable data asset. As doctors often participate in organizations with multiple EHRs with multiple contracts and multiple sources of claims data, a process must exist that allows for the accurate aggregation and curation of all that data. This data asset then serves as the substrate for a set of analytics that allows medical directors, chief medical officers, quality officers, and individual providers to understand areas of overutilization and variation within their own network and opportunities for improvement. In a subsequent article, I will discuss techniques and strategies for reducing specific areas of overutilization.
In summary, the problem of overutilization is legendary in U.S. healthcare, but we now have excellent tools to diagnose and treat this problem. Turns out the technology part of the solution is easier than getting the behavior change needed to wring out the overutilization!
We’re always happy to talk about value based care.
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