Insights into Slowdown in Healthcare Spending

I have an insatiable personal and professional interest in the transformation of healthcare delivery and its impact on our economy and citizens. At the heart of the Affordable Care Act (ACA) are payment reforms that will drive a transformation in how healthcare is delivered. Additionally, rising healthcare costs have immediate effects on the economy as they take a larger proportion of workers’ wages. Recently, economists estimated that growth in healthcare costs would slow due to the recession and the slow recovery. However, healthcare costs have slowed more than estimated raising questions as to the reasons why.

The Kaiser Family Foundation conducted a study to understand how the recession contributed to the slowdown in healthcare spending, and what other factors contributed to the slowdown as well. The study found…

• 77% of the cost slowdown is due to the recession 
• The remaining nearly 23% is due to…
• Continuing changes in the way healthcare is delivered
• Rising levels of patient cost-sharing in private insurance plans that discourage patients from using healthcare services

To further understand the changes in the way healthcare is delivered, Annie Lowrey, of The New York Times published an interview with Drew Altman, president of the Kaiser Family Foundation. Mr. Altman described the nearly 25% reduction in healthcare spending as “the whole ballgame” in holding down costs in the future. He went on to say, “It’s more than just ACA reforms, it’s just the beginning. But in the long run, those are the most important ones, because they have the force of Medicare and national policy behind them.” That’s a powerful and insightful statement, and one I think most early innovators in transforming healthcare delivery share.

As the Kaiser Family Foundation study point out, changes in healthcare delivery are contributing to the decrease in healthcare spending. Accountable care organizations (ACOs) have been forming rapidly and I’m very interested in insights into how they are performing. On Tuesday, April 23, The New York Times published an article on how Advocate Health Care, based in Oak Brook, Illinois, has established an ACO with Blue Cross and Blue Shield of Illinois. The article provides an overview of how they are taking steps to control costs and improve quality.

Under the agreement, Advocate Health Care has seen…

• Hospital admissions drop by 6%
• Days spent in the hospital are down 9%
• The average length of stay has declined, and many other measures show they are providing less care

I hope you find these resources helpful and insightful. I’d love to hear your thoughts on the Kaiser Family Foundation study and articles on Advocate Health Care’s ACO. Please share other resources you’ve run across on transforming healthcare delivery.

Why Now?