Visiting the doctor can sometimes feel like being slammed down on an assembly line: Make co-pay. Check vitals. Diagnose the problem. Get a prescription. Next!
The fee-for-service model of American medicine doesn’t put much value on long doctor’s visits, which aren’t as profitable for providers as performing costly medical procedures. And that’s a problem, argues Senior Fellow Robert S. Kaplan, the Marvin Bower Professor of Leadership Development, Emeritus, at Harvard Business School.
“It becomes obvious that you can make the tradeoff to spend more time earlier to prevent high-cost incidents that could occur later”
“If doctors can’t charge for doing certain things, they tend not to do them even when they can make the patient better off,” he says. “On the other hand, sometimes doctors do things they shouldn’t, just because they can charge for them. It’s a very dysfunctional system.”
Kaplan, who has been working on a multiyear project with HBS Professor Michael E. Porter on improving value in health care, has found that often the most effective medical procedure is one that costs the least: talking.
In a recent article in the New England Journal of Medicine, titled Adding Value by Talking More, Kaplan, along with HBS project director and Fellow Derek A. Haas, and former senior researcher Jonathan Warsh, demonstrates again the old adage that an ounce of prevention is worth a pound of cure. By spending more time talking patients through procedures beforehand, physicians can cut down on recovery costs and avoid costly complications later on.
Professor Emeritus Robert Kaplan explains his research to lower health care costs and engage with practitioners.
“Once you take this perspective, it becomes obvious that you can make the tradeoff to spend more time earlier to prevent high-cost incidents that could occur later,” says Kaplan.
Incentives are misplaced
In one study, for example, Kaplan and Haas looked at the cost of joint-replacement surgery at 30 large orthopedic hospitals across the United States. In some hospitals, patients were discharged to high-cost skilled nursing facilities for their recovery, where they could learn how to walk, climb stairs, and get into a car with their new knee or hip. In other hospitals, however, those skills were discussed in a 30- to 60-minute conversation in the doctor’s office before the surgery and then practiced during the post-recovery stay in the hospital. This enabled the hospitals to discharge almost all of their patients to inexpensive home health recovery rather than to very costly skilled nursing facilities. And the outcomes were generally better with home rehab.
“Maybe that pre-surgical conversation costs an extra $100, in a physician’s or nurse’s time; but if you can save $5,000 in rehab, that’s a no-brainer,” says Kaplan. Because the post-acute care recovery costs weren’t borne by the hospitals, they had not been motivated to find the low total cost alternative. After Kaplan pointed out the discrepancy, some hospitals switched to the lower-cost pre-surgical consultations.
Kaplan cites diabetes care, also highly fragmented in the United States, as another case in point.
“Patients see their primary care physician, who advises them on insulin therapy, but no one follows up to make sure patients are taking their insulin,” he says. Why not? Doctors aren’t paid for those follow-up calls. As a result, patients can fail to comply with their physician’s instructions and subsequently have severe complications that lead to extremely costly procedures later on.
“They have heart attacks [and] strokes, they go blind, they need amputations,” says Kaplan. “It’s terrible, and from a societal standpoint, leads to diabetes being a far more expensive condition—to patients and society—than it should be.”
By some estimates, about 10 percent of costs in the health care system are due to diabetes-related procedures. “If you had a diabetes center giving patients a diabetes boot camp and then following up with them regularly, you could dramatically reduce incidents of hospitalization,” says Kaplan.
So why aren’t more physicians in hospitals and clinics talking with patients as part of the therapy? The incentives for doing so are missing.
Kaplan sets up the following example. Say you, the doctor, charge $100 for an office visit. The economics of the office dictate that to stay in business, you need to bring in $400 an hour—that’s four office visits of 15 minutes each. The length of the visit is determined “not by the benefit to the patient,” Kaplan says, “but what they must do to stay in business, given the pricing scheme.”
Adding to the difficulty is that doctors and hospitals usually do not bear the eventual downstream costs of shorter visits. “Because of the fragmented way we deliver and pay for care, no single provider internalizes the total cost of treating the patient,” he says.
Entrepreneurial efforts to fix the problem
Some clinics and hospitals are starting to learn these lessons, experimenting with new models of care that emphasize more talking up front.
Kaplan mentions Oak Street Health, a network of clinics serving a poor, elderly population in metropolitan Chicago. Its outreach program brings community members into the clinic for an upfront 45- to 60-minute consultation with a team of caregivers that reviews their physical and mental health, as well as their living situation. Each patient is then rated on a risk scale from one to four to determine the frequency of follow-up visits.
In addition, the clinics hold social events such as movies and bingo nights, providing additional opportunities to observe their patients and identify who has suddenly stopped showing up for activities, an early indication that something seriously wrong might be developing.
“Oak Street Health spends more money up front, in transportation and clinical visits, but their patients end up having 45 percent lower hospitalization rates,” Kaplan says.
Kaiser Permanente Colorado implemented a similar program with a high-risk elderly population suffering from multiple ailments. The hospital system identified the patients, counseled them in a multidisciplinary outpatient clinic, and then followed up with regular telephone calls to coordinate counseling, medications, and family support. Overall, outpatient costs went up 21 percent, but inpatient costs went down 74 percent.
And not only was the system cheaper for patients and providers, it also provided better quality of life for patients, so they do not spend the last years of their lives shuttling in and out of hospitals.
“We need more entrepreneurship within the health care system to set up these more holistic and longitudinal ways to treat patients,” Kaplan says.
Currently, Kaplan and Porter are looking closely at alternative funding models that help align incentives with better patient outcomes, especially bundled payments that strongly motivate providers along a patient’s care cycle to integrate and coordinate their care.
“If you can get one place to own the payment for treating a medical condition or subpopulation of patients, then it has the incentive to optimize total costs and deliver far better patient outcomes,” says Kaplan. “They can start thinking about what they can do to lower upstream and downstream costs, and make sensible tradeoffs to provide better overall care for their patients.”