Reinvest savings to improve performance, lower costs for regional health systems over time, study says
By itself, the higher-value care intervention doesn't live up to its cost reduction potential, due mostly to inadequate funding, researchers say.
If regional health systems in the United States invested in a number of interventions over the next couple of decades, they could lower costs and improve performance, according to a new study published by Health Affairs.
Specifically, the authors examined four key initiatives they say would improve performance: providing higher-value care, reinvesting savings and global payment, encouraging healthier behaviors and increasing socioeconomic opportunities -- all plausible to enact individually, the authors said, but far more effective when combined into a multi-faceted approach.
Researchers used a computer simulation model created by the Fannie E. Rippel Foundation through its collaborative ReThink Health initiative to study the effects of these investments. The ReThink Health Dynamics Model extends the Centers for Disease Control and Prevention's national Healthbound model to depict the performance of a regional health system over time.
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Before showing how each approach affected the data, the authors first had to establish a baseline. The baseline was dominated by two trends: population aging and healthcare price inflation. Over time, aging leads to higher rates of chronic illness and healthcare use, which in conjunction with price inflation would cause costs to rise by 60 percent over and above general inflation between 2010 and 2040. Rising costs lead in turn to job losses, more medical debt and bankruptcies, and consequently some increase in the disadvantaged fraction of the population. As a result of the increase in disadvantage, health equity and per capita economic productivity worsen somewhat across the region; there would also be some erosion in insurance coverage, which tends to undermine the initial expansion that occurred after passage of the Affordable Care Act.
While that scenario is not a prediction, authors said current trends make it entirely possible. But interventions change the long-term picture.
By itself, the higher-value care intervention doesn't live up to its cost reduction potential, due mostly to inadequate funding. Research suggests that significant savings begin to occur when combining higher-value care with reinvested savings and expanded global payment to specialists. The global payment increase, while not universal, is enough to dampen the supply-push response that would otherwise boost the volume of services and undermine cost savings. So expanded global payment allows higher-value care to more effectively reduce healthcare costs, according to the study.
On top of that, with 50 percent of the savings now being reinvested in the effort, spending on higher-value care would remain fully funded for the 25 years left in the projection period, with money left to spare -- about $1,900 per capita accumulates unspent by 2040. The cost reductions reach 10 percent by 2040 as severe chronic illness declines by nearly 10 percent, the model showed.
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Next, researchers tacked on the addition of healthy behaviors to the first two approaches. The desired spending on these initiatives is highest during the first few years after their implementation, and consequently, funds are initially tight for all clinical and behavioral initiatives. As a result, the reduction in chronic illness lags that of the previous strategy for the first seven years, and the reduction in costs lags for the first four years. But as risk behaviors are reduced -- they drop 10 percent by 2020, and 50 percent by 2040 -- the onset and progression of chronic illness is reduced as well, and this reduction in chronic illness helps to further reduce costs. By 2040, severe chronic physical illness is reduced nearly 18 percent relative to the baseline under the model, which helps reduce costs by nearly 15 percent.
The final step is to implement, starting in 2025, the initiative to expand socioeconomic opportunities. The previous step of adding the healthier behaviors intervention initially depletes available program funds until the early 2020s, but funding then starts to recover, and by 2025 there is sufficient funding to introduce the socioeconomic opportunities intervention and keep all of the initiatives adequately funded until the end of the run. By 2040 there are still about $500 per capita of unspent funds remaining, even with the socioeconomic opportunities intervention in effect.
This intervention starts to shrink the disadvantaged fraction even during its first few years of implementation, reducing it 15 percent relative to the baseline by 2030 and 20 percent by 2040. This reduction in disadvantage translates directly into improved productive value, which grows 6 percent relative to the baseline by 2030 and more than 9 percent by 2040. Additionally, severe chronic illness is reduced nearly 20 percent relative to the baseline by 2040.
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The study acknowledges trade-offs when it comes to multi-pronged reform strategies. They tend to create a temporary shortfall in program funding, with outcomes achieved toward the middle or end of their runs, and the individual initiatives may improve certain outcomes but make others worse; the socioeconomic opportunity approach, for example, enhances population health and workforce productivity but doesn't do as much as the other initiatives to lower costs.
Regardless, the authors said that the approaches are feasible and most effective when combined, and could be funded by combining resources from hospital community benefits, community development financing, entrepreneurial investors, government, philanthropy and in-kind contributions from local partners.
Twitter: @JELagasse
