Americans Pay More for Healthcare - But Why?

The McKinsey report "Why Americans Pay more for health care" (free registration required for access to full report) provides useful insights into the spending patterns and some of the underlying reasons for the high cost of health care in the US

While the higher costs is expected in part due to the wealth of the country:

Across the world, richer countries generally spend a disproportionate share of their income on health care. In the language of economics, it is a “superior good.” Just as wealthier people might spend a larger proportion of their income to buy bigger homes or homes in better neighborhoods, wealthier countries tend to spend more on health care.

Despite taking account of this the US spends some $650 Billion more than might be inferred from its wealth. As for the where this spending goes

The research also pinpoints where that extra spending goes. Roughly two-thirds of it pays for outpatient care, including visits to physicians, same-day hospital treatment, and emergency-room care. The next-largest contributors to the extra spending are drugs and administration and insurance.

But do we receive value for money - not based on outcome measures as compared to other OECD countries where we lag in many areas (more here and here where the US ranked last in a group of 19 countries). The report looks at possible reasons for the additional costs including the possibility that a less healthy population would mean higher treatment costs........survey said no.

So where does this additional expenditure go? Two thirds of this goes to outpatient care and while the US is doing well by shifting care and cost from in patient treatment to outpatient (and the legacy of President Bush's community clinic outreach has been a positive component of that as detailed here) this has actually added to the cost of health care in the US because of much higher utilization. Unfortunately not only was the utilization up but so too was the cost visit in part due to increasing use of expensive diagnostic testing (CT and MRI's being major contributors). The system is structured in such a way as to incentivize this type of care with the delivery of more services offered that are more expensive.

After outpatient care the next highest contributor is pharmaceuticals and not because of increased usage of drugs but because the mix is of more expensive and and the higher cost of drugs in the US

the price of a statistically average pill is 118 percent higher than that of its OECD equivalents

Even taking account for the possible explanation that the US pays more for a "superior product" and the high prices that subsidize the R&D for the rest of the world this still does not explain the large differential

But none of these factors, by itself, can explain the gap between the price of drugs in the United States and the rest of the OECD. When we adjust for US wealth, we find that the country’s branded-drug prices should carry a premium of some 30 percent, not 77 percent for branded small-molecule drugs.

Finally administration and insurance costs are the third highest but although these costs are significantly higher than other countries, the good news it

.....we find that given the structure of the US system, its administrative costs are actually $19 billion less than expected, suggesting that payers have had some success in restraining costs

The possible solutions are wide and varied but must involve all the stakeholders. Despite the high spend the US continues to lag behind in the general health of the population and as such "reformers should therefore focus on the preventative efforts" which represent a potential big win. Community clinics as supported by President Bush's administration are one such effort. In addition the consumer must be more engaged and informed and this requires the sharing of health care information that is structured so as to provide real information and not just make the medical haystack bigger. Technology plays an important part in the sharing of data and the ability to structure and make it available quickly and in meaningful ways to allow decisions and choices to be made.

A Facebook Medical Record

What are we trying achieve with medical records....? Asides from the obligatory proof that the care was delivered (billing) and determining how much should be paid for the delivery of that care medical records are about sharing information between care givers. It has always been that way. Years back the number of care givers was lower and specialization less so the number of people needing accessing to the this information was lower. Now with the tsunami of medical information it is impossible for single care givers to deliver all the possible ranges of care and it takes a village team to deliver care.

And the latest explosion on online activity - one who's traffic can exceed that of Google and you tube is Facebook, which according to their own description

...is a social utility that connects people with friends and others who work, study and live around them. People use Facebook to keep up with friends, upload an unlimited number of photos, share links and videos, and learn more about the people they meet.

Now take this concept and adjust the wording.....

FaceBookHealthRecord is a social utility that connects patients with their care givers and others who provide diagnostic services, imaging, laboratory tests, results and pay for that care. Patients and clinical care givers use FaceBookHealthRecord to keep up with the status of their healthcare, their wellness and long term disease outlook as well as communicate quickly and effectively with specialists. All images, diagnostic study videos and diagnostic testing information can be uploaded and shared withe the clinical team allowing everyone to learn more about he care of that patient.

The interaction concept has been tested and reported on - Bob Wachter wrote an article just recently on this very concept "Creating a Facebook-like medical record" where he slams home the point on interoperability

In fact, today’s medical record virtually guarantees the silo-ization of care. Few physicians ever read nurses’ notes, even though all of us depend on the nurses to be our eyes and ears. And the situation iteratively worsens every day. Why would a nurse, realizing that no doctor ever reads her notes, even try to write them to be useful to physicians? And visa versa, obviously. Over the years, this divergence has been codified into ritual, calcified by templates, and hard wired through regulations whose original rationale no one can remember

Interestingly he points out that the spooks have gotten in on the concept with FaceBook-007 aka A-Space (I am guessing short for Analytical Space...?). Launch is set for Sep 22, 2008. UCSF back in 2003 launched a concept very much in line with the sharing of information amongst all the related parties (notably not the patient in this case) called Synopsis

As with all folklore associated with good concepts it was an rapid victim of its own success receiving requests for access, being copied and installed at other locations by users and even covered on a Web based M&M rounding on the Agency for Healthcare Research and Quality (AHRQ) site

There is work on these concepts underway and even some launches - if you live in New York you can sign up with HelloHealth from MyCA Health group who liked the approach taken by Jay Parkinson (the Hipster-MD from New York- pdf) who launched his own home made system with a similar ideal of sharing information digitally and providing easy, affordable access to patients some months ago. The NHS in the UK is getting in on the act with the "Individual Health Record" and covered in a recent article "Personal Healthcare Management" (subscription required) in my regular column in the British Journal of Healthcare Management.

There is even a Facebook application - MedCommons available today for a subscription plus monthly storage charges. Unfortunately much of what will be transferred in is likely to be scanned images and print outs. The introductory video even shows your physician office receiving access to your medical data and printing it out.....sigh! This will change but for now we are stuck with the legacy information

No doubt there will be detractors and there are bound to be issues and problems but overall you have to like the idea of sharing data on the quickly and effectively with the full clinical team. And there lies a key point.... the information must be be clinical data and should be tagged to a controlled medical vocabulary to make this information valuable for automatic machine processing. But lets not burden the clinicians with entering data in online forms but provide tools that capitalize on clinical documentation and the natural expressivity of language while still creating the structured data that can be used by these connected applications.

Consumerism and Clinical Knowledge

Providing the population with the right information at the right time to help them navigate the murky waters of health care delivery, insurance, hospitals, payors, denials, quality indicators and pay for performance statistics is going to be a key facet to the success or failure of any consumer driven revolution in health care.

The recent study by McKinsey “What Consumers Want in Health Care“ - summary here

Faced with health care decisions, consumers are concerned, confused, and unprepared. They rely heavily on personal recommendations and brand recognition, according to a recent McKinsey study

No big surprise here but if this is to change and the consumer is really to become informed and help drive change in health care delivery they need to have access to the right information

...48 percent report being prepared for common medical problems but only 15 percent for more disruptive medical scenarios...

To help satisfy this need consumers are already turning to the web in increasing numbers and estimates range from 50% to as high as 75/80% of patients use the web before and after visiting their physician. But much of the information available comes from a range of sources some less qualified than others. By providing structured data output as part of the clinical documentation process and delivering documents in a standard form that can be read but also imported into computer systems it should be possible to support this burgeoning need for clinical data as a natural part of the process - this is exactly what Clinical Document Architecture for Clinical
Clinical Documentation Architecture for Common Document Types (CDA4CDT) is intended to provide directly from dictation.

You can read more about the process and the concept in these articles
Guidelines Will Standardize Dictated Documents
HL7's first ballot in expected series under way
HL7 CDA: The Missing Link in Healthcare IT

As the McKinsey study revealed

Most people need additional guidance, education, and advice to make decisions
Innovative, cross-industry products that assist with the complex decision making will be highly valued by an influx of consumers eager for options but unsure where to turn

That's going to be difficult until we can standardize the clinical information coming out of clinicians offices and hospitals and make it available in machine readable form to consumers to aid their voyage of discovery in the new health care world of consumer driven choice