In an article in The Times on Sunday, I look at whether there is more than meets the eye in the slowdown in health care costs.
Economists anticipated that the recession and sluggish recovery would depress the rate of growth. But the slowdown was more than they expected, prompting a debate about whether doctors and patients are doing the seemingly impossible: bending the cost curve years before the most aggressive cost-saving provisions of the Affordable Care Act, the Obama health care law, come into effect.
Many economists and health policy specialists think that changes made by insurers, hospitals and doctors to emphasize the quality of care rather than the quantity of care is a major factor, and Children’s Hospital Boston offers a good test case.
Children’s is a Harvard-affiliated research institution that treats many of the region’s sickest children and spends a lot of money doing so. But about four years ago, the hospital recognized the growth in costs as unsustainable — as many institutions in Massachusetts did after the state passed an individual mandate law.
“We knew that by design the coverage law was not intended to focus on the cost or affordability issue,” said Andrew Dreyfus, the president of the nonprofit Blue Cross Blue Shield of Massachusetts, the state’s largest private provider of health insurance. “Massachusetts was both an expensive state and a state where health care costs were growing rapidly — we had a high base and a high trend. We knew that if we were going to be able to sustain the reforms, we needed to deal with the cost issue.”
Children’s went on a campaign to scrub unnecessary costs from the system while maintaining its renowned quality of care. It first tackled internal costs, said Sandra Fenwick, the chief operating officer of Children’s. It looked at things like space utilization and spending on energy, and made the operation more efficient.
Then, it tackled patient care, trimming unnecessary procedures and focusing on efficiency and preventative care. If you are a child with asthma, a nurse might come inspect your house and advise your parents to look into new mattresses, that could reduce the chance that you will end up in the emergency room with an attack. If you are a teenager with cancer, doctors might recommend that you receive intravenous hydration at home, rather than in a care facility. Children’s also opened satellite offices to keep patients out of the higher-cost downtown hospital.
All in all, the hospital made more than 100 changes and cut tens of millions of dollars in costs, Ms. Fenwick said. It not only reoriented itself to focus on quality, rather than quantity. It has started renegotiating its contracts with insurers to move away from fee-for-service medicine.
In January, it signed a contract with Blue Cross Blue Shield that pays it for how well it cares for patients, rather than the number of procedures performed. This year, the deal includes a zero percent rate increase — and the hospital is meeting its benchmarks thus far, Ms. Fenwick said.
Children’s is not the only hospital making such dramatic changes in how it approaches costs and care. Indeed, doctors providing care to about 77 percent of Blue Cross Blue Shield of Massachusetts members have signed on to such “alternative quality contract” agreements, giving them an incentive to prevent readmissions, cut out unnecessary procedures and otherwise reduce spending.
“We’ve had to convince skeptical institutions that we’re not taking away their margin,” Mr. Dreyfus said. “We’re just saying, ‘Don’t make your money on volume. Make it on quality.’”
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