Ad hoc efforts help cut U.S. healthcare costs

A stethoscope rests on a container of hand sanitizer inside of the doctor's office of One Medical Group in New York March 17, 2010.

Credit: Reuters/Lucas Jackson

By David Morgan

WASHINGTON | Fri Jul 15, 2011 7:57am EDT

WASHINGTON (Reuters) - At Utah-based Intermountain Healthcare, comparative research made physicians realize that inducing early childbirth in healthy women created unnecessary and costly risks for newborns.

Artificially induced deliveries had become an accepted way to make childbirth fit busy personal schedules. The practice has health risks, but the average doctor saw only one or two cases a year wind up in a neonatal intensive care unit.

"It was such a low number," said Greg Poulsen, a senior vice president with the nonprofit system. "In the physician's own practice, it would be impossible to identify a trend."

About four years ago, Intermountain started comparing data on births induced after a full 39-week pregnancy to births induced one to two weeks early. The results showed the need for intensive care in babies with respiratory problems were twice as high at 38 weeks and five times as high at 37 weeks.

"Suddenly, the data was just very clear that we were putting people at risk by doing an induction prior to 39 weeks," Poulsen said. "And once the docs saw that data, they said: Whoa! We had no idea!"

The findings prompted Intermountain to limit induced births for healthy women before 39 weeks in the 18 hospitals with maternity wards within its system. Intermountain has 23 hospitals overall.

As a result, about 500 newborns avoided breathing problems and the ICU over the following year, sparing parents the grueling sight of their infant on a ventilator and saving at least $1 million a year in unnecessary medical costs for families and insurers.

Fewer inductions also led to fewer caesarean sections. That reduced risk and brought even more savings because C-sections, the most common surgery in the United States, can cost twice as much as vaginal deliveries and lead to medical complications for children.

Intermountain, which has 360 doctors delivering babies, said the reduced C-section rate delivered about $46 million in savings compared with the national average in 2008.

Poulsen's story is just one example of the individual efforts to contain costs within the $2.3 trillion U.S. healthcare system. Employers, insurance companies and doctors nationwide are trying to find savings on medical services. But the effort is largely piecemeal so far.

Policy experts say a systemic approach is needed to prevent these costs from sinking the economy. While a new U.S. healthcare law includes provisions that might lead to lower spending -- such as a focus on preventive medicine and research grants to study the most effective forms of treatment -- it's main goal is to extend access to millions of Americans.

Analysts say the country's leaders are still years away from taking the job of reining in underlying health costs seriously, even as Republicans and Democrats argue over ways to cut government spending on healthcare in deficit talks.

BEST HOPE FOR CHANGE

"Everybody agrees, from right to left, that something has to be done. If the federal government doesn't do something, the entire economy will be at risk," said Susan Tanaka of the nonpartisan New York-based Peter G. Peterson Foundation.

Neither lawmakers nor the White House are likely to undertake a new concerted effort to find a solution until after the 2012 presidential election. They are wary of the setbacks that Democrats saw in crafting President Barack Obama's healthcare law and that Republicans faced after proposing changes to the Medicare program for the elderly.

In the interim, the best hope for change might be strategies such as those employed at Intermountain, which seeks to coordinate care through medical teams whose job is to find the best practices for keeping patients healthy and curbing costs.

Similar innovations have taken root elsewhere. An example is Group Health Cooperative, a Seattle-based nonprofit system that provides both health insurance and medical care.

Its vertical integration -- linking doctors, hospitals and insurance coverage in a single system -- eliminates the fee-for-service incentives many blame for sky-high healthcare costs elsewhere.

The cost of a C-section at a Group Health hospital can average between $7,100 and $9,400, compared with an average statewide range of $15,200 to $21,600, according to data compiled by the Washington State Hospital Association.

Health insurance companies such as UnitedHealth Group Inc and Aetna Inc are building incentives for primary and preventive care and acquiring clinics and small networks of physicians to have full control over how healthcare services are delivered.

"If we don't change, it's a bleak picture. There's no question. But there are some glimmers of hope," said Dr. Elliott Fisher of Dartmouth Medical School, a leading voice in healthcare reform.

"A year or two from now, we will have a firm foundation to come back to Congress and say there are things you could do now to move further in this direction."

2013

Healthcare costs make up 16.5 percent of U.S. GDP and are projected to equal more than one-quarter of the economy by 2035, according to the nonpartisan Congressional Budget Office. By contrast, healthcare costs were only 4.8 percent of GDP in 1960 and 9.8 percent in 1985.

The CBO's 2011 report, which notes it is difficult to make accurate long-term cost projections, warns that spiraling health costs would probably slow only as a result of higher costs, less access for most households and tighter state Medicaid eligibility for poor families, unless U.S. law is changed.

Analysts say any deal to close the U.S. government's $1.4 trillion annual budget deficit would also suffer repercussions if the government took no action to control rising healthcare costs that are driving growth in Medicare and Medicaid.

"Failure to address healthcare will make the solution inevitably more painful," said Paul Ginsburg of the nonpartisan Washington-based Center for Studying Health System Change.

"It will mean more spending cuts in other areas. It will eventually, despite what Republicans say, lead to higher tax rates. Because the alternative is a bankrupt country."

The difficulty lies in attacking healthcare costs broadly without hurting individual patients' access and quality of care. It also raises the prospect of a new showdown between Republicans, who see deregulation and market competition as the best lever for curbing costs, and Democrats who favor government intervention.

When might those battles begin?

"2013," said Joseph Antos of the conservative American Enterprise Institute. "There's going to be a hue and cry for somebody to do something. Even Republicans, who used to shy away from health, they're going to be on this whether they're the minority or not."

(Reporting by David Morgan; editing by Michele Gershberg and Andre Grenon)