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St. Luke's Blogs

Population Health: the U.S. Healthcare Delivery System’s Cost Problem

By Dr. David C. Pate, News and Community
April 21, 2015
Editor’s note: This is the second part of an eight-part series that previously appeared in an abridged form in Becker’s Hospital Review.

There has been much written on this topic, but for purposes of this series, I want to look at costs in three large buckets that will help explain why our traditional approach to health care will not solve the cost conundrum and offer why I think population health management just might.

Bucket 1

For the most part, we are addressing illness and injuries and not health. Traditionally, U.S. health care involves patients seen in offices, imaging and surgery centers, hospitals, and post-acute care settings. For the most part, we haven’t been involved with people who are not yet patients, because fee-for-service reimbursement doesn’t pay us to do that.

And because families, schools, employers, providers, and other organizations either don’t promote the health, wellness, and fitness of children and families or cannot sufficiently meet the need, we have a large population of people who are not ill or injured yet, but who have developed health behaviors that are putting them at high risk of becoming patients in the future, at which time there will be a reimbursement system that will make it possible for us to become involved in their care – long after health behaviors have been established and health problems have been set in place. Now, in a 15-minute office or hospital visit, somehow we are to deal with a behavior that has become a coping mechanism, a social norm, a habit, or an addiction.

And for all the gains hospitals are making in avoidable readmissions, the funnel of prospective patients is becoming larger and larger.

Take just one health behavior in just one area that St. Luke’s Health System serves, where 22.1 percent of third-graders are obese. We all know the increased health risks and costs associated with obesity, but how can the traditional healthcare delivery system address this problem until these children become patients?

Bucket 2

It has been estimated by the Institute of Medicine and others that 30 percent of healthcare spending in the U.S. is for low-value or even no-value services. Some believe that the true number approaches 50 percent. Regardless, it is spending we cannot afford. Many of these services are procedures that may end up hurting patients, and some tests or procedures that should not have been done in the first place may lead to additional testing, procedures, morbidity, and even mortality.

These services are often rewarded within the fee-for-service reimbursement system and an environment in which fear of liability for having missed something is pervasive. I am proud of the many organizations that have stepped forward and joined the Choosing Wisely Campaign in an effort to address this problem.

Bucket 3

Even spending for traditional healthcare services is not uniform. For one of the populations St. Luke’s Health System manages, 1 percent of the patients account for 29 percent of the total healthcare costs, 10 percent account for 68 percent of the costs, and 30 percent account for 89 percent of total costs.

Those consuming a disproportionate share of the costs are more often older patients with multiple chronic illnesses, accompanying mental or behavioral health issues, and socioeconomic disadvantages.

Controlling their illnesses, reducing costly duplication in tests and medications, preventing medication interactions, providing a safe environment, ensuring adequate patient and family education, arranging for timely physician follow-up, and avoiding preventable readmissions requires significant care coordination among many physicians who often are not on the same electronic health record, don’t always have access to the patient’s medical records and medication lists, and who are not paid to spend the extra time and effort it takes to coordinate care among the multiple caregivers and to manage transitions of care from one setting to the next, at times when slips in the continuity of care are most likely to occur.

By addressing these three areas of healthcare costs, we would be well on our way to achieving better health, better care, and lower costs. Unfortunately, the financial incentives to do so are inadequate under the traditional fee-for-service model.

Clearly, the business model must be transformed, so that we can promote health, not just care for illness and injuries; so that we can eliminate or at least reduce low-value/no-value services to be accountable for the cost of care; and so that we can coordinate care and manage care transitions in order to be accountable for the outcomes of care. Population health management has emerged as a potential solution, and I’ll explore how that can work in the following parts of this series.

About The Author

David C. Pate, M.D., J.D., previously served as president and CEO of St. Luke's Health System, based in Boise, Idaho. Dr. Pate joined the System in 2009 and retired in 2020. He received his medical degree from Baylor College of Medicine in Houston and his law degree from the University of Houston Law Center.