Four Steps to Cure Surging Health Costs

In Massachusetts, we have much to be proud of when it comes to health care. We have a highly successful health coverage law that is financially sound and viewed as a national model. Second, the quality of our medical care is arguably among the best in the nation, and major advances in the understanding and treatment of disease, discovered here in Boston, are transforming the lives of patients. Finally, health care is an economic engine providing jobs for some 300,000 residents, and spurring a growing biotech industry that is the envy of other states.

Progress costs money, and that has many citizens, elected officials, and business leaders worried. The federal Agency for Health Research and Quality reports that health care costs rose an average of 8.8{06cf2b9696b159f874511d23dbc893eb1ac83014175ed30550cfff22781411e5} per year between 1996 and 2006 nationally, and 8.7{06cf2b9696b159f874511d23dbc893eb1ac83014175ed30550cfff22781411e5} average annually in Massachusetts. So we are not the only state experiencing health care cost increases; this is a national issue, and there are no villains or easy answers to the problem.

What can we do to control health care costs? We could take a blunt approach, adopted by other nations, which sets specified rates for all providers. This heavily regulatory approach can control costs, but it can also lead to indirect rationing and limiting services to patients. If the economic crisis forces steps this severe, it should be done nationally so we all share in the sacrifice.

States, however, can also successfully assume leadership roles in solving national problems. We are fortunate to have had extraordinary leadership among elected officials and from the health care, business, and advocacy communities in enacting health coverage reform. I believe we should take a rational approach to control costs, and recommend these four steps:

Reimbursement reform. Our current, open-ended, fee-for-service reimbursement system is an engine for inflation — the more you do, the more you are paid, and there are no explicit incentives for quality or efficiency. Partners HealthCare has pay-for-performance in its contracts with all the major payers in Boston and with Medicaid. These goals have enabled Partners to reduce inpatient and pharmaceutical utilization in the pay-for-performance contracts. The important work begun under Sen. President Therese Murray’s bill, which established the Special Commission on the Health Care Payment System, has the potential to make Massachusetts a national leader in rewarding prevention and efficiency.

Electronic medical records. Building and using a system of electronic records with decision support features to prompt and guide physician behavior is critical to controlling costs and improving quality and efficiency. At Partners, all primary-care physicians use electronic medical records; they are already seeing some results in reducing unnecessary medical expenses. For example, software is being piloted at Massachusetts General Hospital that automatically searches for a similar exam when physicians order a high-cost radiology test. In early experience, this decision support has reduced follow-up tests by 10{06cf2b9696b159f874511d23dbc893eb1ac83014175ed30550cfff22781411e5}. There is more to do in utilizing the full cost-control capabilities of this technology and in working with other hospitals and physicians to expand the use of electronic records and make systems interoperable.

Disease management. Guided by the knowledge that 10{06cf2b9696b159f874511d23dbc893eb1ac83014175ed30550cfff22781411e5} of patients account for 70{06cf2b9696b159f874511d23dbc893eb1ac83014175ed30550cfff22781411e5} of costs, we must do more to focus on these sickest patients. Early efforts at Partners HealthCare hospitals with diabetes and congestive heart failure have achieved measurable success in reducing emergency department use and readmissions, and must be expanded to other conditions.

Effectiveness review. The national Commonwealth Fund Commission and President Obama have recommended an approach to review the effectiveness of drugs and procedures as they are used in the health care system. Ultimately this may work best at a national level, but there is no reason why Massachusetts could not begin this work now.

At Partners, the Center for Drug Policy uses evidence-based guidelines on appropriate use of new and existing medications. This has enabled Partners to eliminate or restrict the use of some drugs in its register of approved medications, and an estimated $4 million was saved last year alone. Encouraging physicians to prescribe generic drugs has resulted in savings to Partners hospitals of about $2 million per year and to patients of up to $300,000 annually in co-payments.

Achieving success in each of these four areas will not be easy, but Massachusetts has never been afraid to take the lead on challenging issues. Working together, we can lead the way on coverage and cost.-

James J. Mongan M.D. is president and CEO of Partners HealthCare and chair of the Commonwealth Fund Commission on a High Performance Health System.