The Truven Health Blog

The latest healthcare topics from a trusted, proven, and unbiased source.


Optimism about the Impact of Healthcare Reform

By Truven Staff
Linda MacCracken imageA recent survey of 74 C-suite executives, conducted by Health Affairs, revealed that 93% of hospital executives think that health reform will improve healthcare, and that is a testament to integrated hospital innovation that is already underway. These leaders, whose organizations on average, employed 8,520 workers and saw annual revenues of $1.5 billion, have an optimistic view and this is indicative of the continuing work undertaken by providers to make healthcare more accessible, cost efficient, and quality focused. 

The executives in this study cited three strategies as critically important to address in order to reduce costs:
  1. Reduce the number of hospitalizations
  2. Reduce the number of readmissions
  3. Reduce the number of emergency room visits
By demonstrating better cost controls and adaptations, our hospital clients have seen margin improvement from 3.5% to 5%.

For every Emergency Department (ED) visit that is seen in a physician office, there would be a cost savings of $1171 per visit. 62% of the ED visits are URGENT, and not EMERGENT. This number has decreased annually over the last five years, but room still exists to cut costs further.  By redirecting even 20% of the ED visits nationally, we could save $4.4B; a step forward that has many hospitals very engaged. Use of the ED for urgent care varies – with a range of 42% to 92% by market.  An expanded primary care network, more accessible urgent care and one-on-one patient or prospect engagement are keys to shifting the use of the most expensive outpatient program, while making room for the true emergencies. This is a cost, quality, and access focal point for hospitals to continue their innovation, in addition to benchmarked cost effectiveness and care delivery quality excellence.

Linda MacCracken
VP, Advisory Services

Paying for Volume, Paying for Value – How About Paying for What Works?

By Truven Staff
Mike Taylor imageHealthcare costs consume nearly 18% of the U.S. GDP, twice the percent of any other country in the world. In a study recently released by Truven Health Analytics, healthcare costs incurred by employers have risen by 4.3% annually since 2006. Much of that increase occurred in hospital outpatient services, growing at an annual rate of 6.5%; pharmacy costs grew only by 2.1% annually. The rate of rise has attenuated over the last several years, probably mainly due to the recent recession. As the U.S. economy recovers, one can expect healthcare cost inflation to rise again.

Clearly healthcare costs are a major issue in the U.S., and a solution must be found. In the past, employers used many approaches to control the healthcare spend. Disease management programs, health coaches, and raising co-pays and deductibles have all been tried, but these efforts have not been very successful. A large part of the problem is the way we pay for healthcare in this country. “Fee-for-service” payment rewards doctors and hospitals on the basis of the quantity of services provided. This payment method is an incentive to provide more services, with no emphasis on the quality or outcome of those services. Unfortunately we know that many of those services have no useful purpose: earlier Truven Health studies have found nearly $3.6 trillion of wasteful spending over a ten year period. New technology and the rapidly growing market of biologic drugs will continue to drive costs higher, but misuse and overuse of these technologies and drugs needs to be controlled. It’s been said that the most expensive piece of equipment in a doctor’s bag is the pen, and that is still true today.

The Affordable Care Act offers a potential solution by incenting organizations to improve the overall appropriateness of care provided to patients. Incenting higher quality of care, rather than higher volume of care, will help control healthcare cost inflation. Strategies such as bundled payments encourage more efficient use of healthcare resources, and the development of Accountable Care Organizations (ACOs) will hopefully change the way medicine is practiced in the U.S. In the ACO model, overuse of technologies becomes a cost issue, not a profit center. In an ACO environment, a hospital or health system is incented to provide more cost effective care; there are no such incentives in a fee-for-service environment. 

New advances in medicine need to improve the care we receive, but we should not adopt new technologies until they have been proven to be effective. The Mayo Clinic Proceedings recently published a list of 146 common therapies that have been shown to either not work or cause harm. For example, stem cell transplant for breast cancer was widely adopted in the late 1990s, but was later shown to not be effective. Knee lavage for osteoarthritis has been performed on thousands of patients, but we know it isn't beneficial. We should not and simply cannot afford to pay for treatments that don’t work.

Michael L. Taylor, MD FACP
Chief Medical Officer