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7 Recommendations For Reining In Healthcare Costs
CEO, Atlas Surgical Group, one of the largest ASC groups in U.S. Author of "Success in Amb. Surgery Ctrs" and "The Healthcare Entrepreneur."
gettyRising healthcare costs are an alarming concern to the U.S. Economy. Our national health expenditure grew from $4.1 trillion in 2020 to $4.5 trillion in 2022, accounting for 17.3% of the country's gross domestic product.
These are unfathomable numbers for the layperson, but for an economist, these portend an upward trend that places a significant burden on both the government and individuals. Individuals and families often face high out-of-pocket costs, and many employers are facing escalating expenses, which can impact wages and job growth. Medicare spending is also projected to grow.
In a previous article, I discussed the uncontrolled healthcare costs in the U.S. As a continuation of the thought, I would like to propound measures we can take to curb them.
1. Prevention Of IllnessAvoiding or preventing illness should be at the top of the list for insurance and healthcare providers. Everything else fades in comparison. Preventive measures include encouraging better lifestyle choices, such as good a diet, regular physical activity and smoking cessation.
As a case in point, community-wide interventions that addressed risk behaviors to some extent (promoting healthier lifestyles) played a significant role in the North Karelia Project in Finland and led to reduced rates of cardiovascular disease. Prevention of disease is enormously important, and methods such as vaccination campaigns or public health measures contribute to its control. Having a routine exam can discover issues before they start, and the earlier an issue is found, the more likely there will be treatments for it at a lower cost.
2. Generic MedicineThe second possible cost savings is to increase the use of generic medicine. Bioequivalence means generic medications are as safe and effective as their brand-name counterparts but at a fraction of the cost. The U.S. Saved more than $400 billion in 2022 alone from the use of generic and biosimilar medicines, according to a report by the Association for Accessible Medicines. The prescription and use of generics, when stipulated, can facilitate large savings for the individual and the healthcare system.
3. Improved Coordination Of CareBetter coordination of care, especially for chronic disease management, can help reduce the need to repeat tests and procedures from one provider or setting to another. These savings could add up significantly over time. Healthcare providers can consider investing in the development of new, high-value treatments and technological approaches that improve outcomes while economizing on long-term costs, such as innovative practices that use minimally invasive surgical strategies.
4. Price TransparencyLeaders can also advocate for price transparency in healthcare. This gives the consumer control to manage their health-related finances. Patients can discover the cost of services and treatments before consuming them so they may compare prices between practices to determine a more affordable way.
For example, the state of New Hampshire's HealthCost website allows residents to compare the costs of medical procedures and has, over time, helped reduce prices. Competition among healthcare providers could reduce prices as well when you open that kind of competition among them.
5. Promoting TelemedicineTelemedicine and remote monitoring are growing areas of potential cost savings. Telemedicine enables patients to receive consultations from healthcare professionals remotely while preventing the increase of costly face-to-face visits.
The Veterans Health Administration has successfully used telehealth services to reach veterans with chronic conditions, improve access to care and reduce costs. Providers can consider using digitization or data innovation to remotely monitor chronic diseases, such as diabetes and heart failure, for example. This can help patients more easily manage certain healthcare issues from home and potentially reduce hospital admissions and emergency department attendance.
6. Adopting Value-Based CareThe adoption of value-based care models may offer healthcare systems solutions to reduce reimbursements from providers that align their payments in accordance with patient health outcomes versus the volume of services provided. The result could be better patient outcomes and lower costs by way of driving more effective care.
7. Health Savings AccountsAn HSA is a tool employers can offer that enables people to put money away, tax-free, for medical expenses. HSAs can be a powerful tool for saving money and managing healthcare expenses. Roughly 36 million Americans were enrolled in HSAs in 2023, which reflects their growing popularity and usefulness.
In summary, addressing the increasing costs of healthcare shall remain a challenge for multiple stakeholders. I believe we can make healthcare a lot more affordable and sustainable by concentrating on proactive care, generic medicines, system efficiency, price transparency, telemedicine and remote patient monitoring. In addition to keeping costs in check, these approaches could help increase care quality all around, which is a win for everybody.
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The Preventive Health Revolution: Insights From The 2024 Annual Lecture
One of OHE's charitable objectives is a commitment to educate and inform the public and policymakers about critical issues in the healthcare sector. OHE's Annual Lecture is an opportunity to highlight the most urgent health issues around the world, and to amplify the research and evidence that can inform how we address these challenges.
Advances in healthcare and science mean we're living longer lives than ever – but as we age, are we living healthier lives, or spending more years in poor health? And what impact does that have on society at large? In the face of this transformative demographic shift, it is all the more pressing to shift our focus from illness care to health care: being prepared to prevent, rather than react to pressing health issues. Prevention is one of the core commitments of OHE's Change Initiative, acknowledging that an optimised prevention agenda, owned not just within the healthcare sector, but across government and other stakeholders, could have a transformative cascading effect on societal health, finances and the environment.
This year's Annual Lecture was delivered by Professor Andrew Scott, whose latest book, The Longevity Imperative – Building a Better Society for Healthier, Longer Lives, is a convincing examination of the socio-economic consequences of humans living longer lives and the importance of adapting and adjusting to the reality of longer lives. He is a Professor of Economics at London Business School and Director of Economics at the Ellison Institute of Technology, has worked extensively on the economics of longevity using a farsighted, multi-disciplinary approach.
A RISING POPULATION AND AN AGING SOCIETY
Demographic change is one of the most important shapers of what our collective future will look like and its impact is on par with that of artificial intelligence and climate change. Globally, life expectancy now exceeds 70.
Professor Scott asserted that this demographic shift is a significant change in our reality – but with the right approach to developing institutions that make life not just longer, but also healthier, we can see an aging society as a transformative opportunity, rather than a problem to be solved.
THE LONGEVITY IMPERATIVE
Professor Scott reminded us that the existing narrative of an aging society underestimates the capacity of older people, and therefore the capacity of our own later years. As a result, we don't invest in changing that narrative – and as a society, we therefore fear aging and what we imagine will be the consequent loss of our health, wealth, relationships and sense of purpose and engagement.
However, this doesn't have to be the case. Professor Scott argued that a paradigm shift towards an evergreen economy could allow us to achieve a three dimensional longevity dividend: where we live healthier, more productive and more engaged lives for longer. Since a majority of us are now expected to surpass the age of 70, across the world, it is therefore imperative that we invest in a longevity society.
MACROECONOMIC GAINS FROM PREVENTION
The data shows that more than 50% of the gains in life expectancy are being driven by declines in mortality after the age of 70. However, it also shows that we live more of our later years in ill health – as the scholar Eileen Crimmins put it, we have slowed down the dying process, and now we must slow down the aging process. Prevention is a key component of that.
Aging-related illnesses currently form the largest component of the global burden of disease, and especially so in developed countries. The impact of us living in ill health for longer has significant costs to the economy. The data shows that the value of health gains is falling substantially, due to the fact that people are less healthy and therefore less productive later in life.
Historical comparisons
Source: Scott, Ashwin, Ellison and Sinclair "International Gains to Achieving Healthy Longevity", ColdSpring Harbour (2023)
Professor Scott shared the key findings from a paper he co-authored on the economic value of targeting aging: primarily, that if gains to life are spent in deteriorating health, the value of these extra years of life is diminishing. It is therefore more important to ensure that healthspan equals lifesplan than to seek further gains in life expectancy, both for individual wellbeing and for broader society. Professor Scott's research found that in the United States, one more year of healthy life expectancy is worth $51 trillion, or about 3-4% of GDP every year.
In the UK, we have very low GDP growth and nearly 3 million people out of work due to ill health. The evidence shows that in high income countries, health increasingly has first order macroeconomic effects.
Population Structure and Work-Limiting Health
Source: UN World Population Prospects 2022 & ONS Labour Force Survey
Recent research co-authored by Professor Scott shows that if the instance of six chronic diseases was lowered by 20%, we would see a 1.14% increase in GDP after 5 years. The research also shows that these diseases skew towards lower income deciles – so tackling prevention not just improves GDP but has the added benefit of reducing health inequalities. He therefore concludes that in an aging society, we need to start thinking more critically about the link between health and GDP.
Cumulative Change in GDP due to 20% Reduction in NCDs
Source: Schindler and Scott (2024) "The Macroeconomic Impact of Chronic Disease on the UK Economy"
WHAT NEXT? SHIFTING HOW WE THINK ABOUT HEALTH
Professor Scott reminded us that most of what determines health – from the air we breathe to the food we eat – falls outside the remit of the healthcare system, and that's a crucial factor to consider in a world where we must necessarily focus on prevention, not just intervention. This also means that emphasizing prevention will not lead to governments spending less: we will necessarily have to spend the same, or more, to keep us well and not just to treat us when we're ill.
The lecture urged audiences to consider how we measure health, beyond just disease. Professor Scott proposed a framework of resilience to measure health, considering one's intrinsic capacity to think and move in ways that are useful to your own individual context. If we don't measure health, he warned, we will continue to have health systems that don't deliver good health outcomes.
He proposed that in a world where we all live much longer, healthy life expectancy should be a key measure of government success – and as part of that, the state pension age should be a reflection of healthy life expectancy and not just life expectancy.
CONCLUSION
We have already surpassed the first longevity revolution, where now most of us can expect to live longer. Fewer children die in infancy. More of our grandparents meet their grandchildren. Fewer of us encounter death in middle age. That, Professor Scott said, is an incredible position for us to be in. The question that faces us now is how we reckon with the second longevity revolution: living better and healthier lives, not just longer ones.
Professor Scott concluded by reminding us that aging is malleable. There are things we could be doing ourselves to age better. Our health systems can, and should, focus on aging better, to benefit not just ourselves, but the economy and society as a whole.
Watch the Annual Lecture on-demand
Engaged Patients, Digitized Companies And Value-Based Care Reinforcing Cycle
João Mendes-Roter, VP Patient Management Solutions at Itamar-MedicalProduct-MarketingDigital Health ExpertBusiness Growth Mentor.
gettyPatient engagement seems to hold the potential to deliver significant health improvements and cost savings on a scale comparable to a breakthrough medication. Unlike traditional drugs, engagement requires not just medical interventions but also education, technology and a shift in how healthcare is delivered.
Among 950-plus companies in the ANDHealth pipeline, 29% of digital health companies are focused on technologies aimed at disease self-management, patient behavior change and medication management. Additionally, 20% offer clinical decision support as their primary objective.
Why is patient engagement such a growing mission across healthcare? How can tech leaders empower providers and payers to meet this goal in a cost-effective manner? What is a sustainable path forward?
The Engaged PatientWhen patients are active participants in managing their health, we call them "engaged patients." In 2012, Leonard Kish introduced the concept that "the engaged patient is the blockbuster drug of the century." This principle has been supported by healthcare leaders across the globe. It reflects a growing recognition that patient engagement can lead to significantly improved health outcomes.
Engaged patients tend to have better health outcomes: When patients are involved in their care and understand the importance of treatments, they are more likely to adhere to medications, lifestyle changes and follow-up visits.
Engaged patients help reduce healthcare costs: Chronic diseases such as diabetes, hypertension and heart disease are among the most significant drivers of healthcare costs, and patient engagement has proven crucial in managing these conditions. Engaged patients are more likely to adopt healthier behaviors, such as exercising regularly, eating a balanced diet and avoiding risky behaviors like smoking.
On a larger scale, governments and payers understand that when patients across a population are more engaged in healthcare, it contributes to better public health outcomes, potentially reducing the burden of chronic disease and preventing epidemics of lifestyle-related conditions.
Digitization Of HealthDigital health tools—such as patient portals, health apps, wearable devices and telemedicine—empower patients to monitor their health and communicate with their providers. These tools facilitate ongoing engagement and enable patients to take a more proactive role in managing their conditions.
Digitization streamlines operations, automates tasks and reduces manual errors. This leads to more efficient use of resources, lower operational costs and better allocation of human capital. As labor costs rise, automation becomes increasingly important. Moreover, providers and payers can collect and analyze vast amounts of data to make informed decisions. Digitization enhances the customer experience by offering personalized services, faster response times and improved accessibility through digital platforms. Satisfied customers are more likely to remain loyal, reducing churn. Furthermore, digitization can automate compliance processes and reduce the likelihood of errors, keeping up to date with changing and stringent regulatory requirements.
A recent article about digital transformation highlighted that companies effectively scaling and adopting digitization will be better equipped to handle rising industry costs. PwC's 2023 Emerging Technology Survey shows that 90% of companies plan to boost their technology budgets within the next 12 months.
Tech leaders understand that, to deploy digital health solutions, they may gain from supporting healthcare organizations to build a skilled digital workforce, positioning them as leaders for innovative healthcare solutions globally.
Value-Based CareIt has been said that healthcare is shifting from a fee-for-service (FFS) to a value-based care (VBC) model, where providers are rewarded for the quality, rather than the quantity, of care. Engaged patients fit perfectly within this model, as they are more likely to maintain good health, requiring fewer costly interventions. The unfortunate reality is that for new models to emerge, existing models need to evolve, including infrastructure and stakeholder alignment—and every component of healthcare delivery has an economic model behind it.
VBC ties reimbursement to patient outcomes, improving overall care. By focusing on prevention, coordinated care and evidence-based practices, VBC helps manage chronic diseases and enhances patient health. It also reduces costs by minimizing unnecessary tests and hospital readmissions through better care management. Tech leaders play a key role to enabling providers to track outcomes and improve care.
But transitioning from the FFS, which prioritizes volume over value, raises challenges. This shift requires complex changes in billing, incentives and coordination. Measuring outcomes is not straightforward, as defining "value" can be difficult, especially for chronic conditions. Also, infrastructure gaps, particularly in smaller or rural providers, hinder adoption and patient engagement. VBC may also risk under-treatment if cost-saving is prioritized. Lastly, the long-term return on investment may deter organizations focused on immediate financial gains from fully adopting VBC.
Playing The RealityLooking at diabetes management: A digitized healthcare company can provide patients with a mobile app to track blood sugar levels, medication, diet and exercise. The app could be linked to the healthcare EHR system. A patient's adherence to their care plan is monitored, and providers intervene when necessary based on real-time data. The patient's health improves through preventive measures, reducing the likelihood of costly complications like hospitalization, which is the essence of VBC.
Another example are telemedicine platforms that enable patients to consult with doctors remotely, encouraging engagement by making healthcare more accessible. For providers operating under a VBC model, telehealth reduces unnecessary in-person visits, helps manage chronic diseases remotely and ensures patients receive continuous care.
Lastly, insurers and providers focused on VBC may provide wellness programs that encourage healthier behaviors through apps and digital tools. We are seeing employer programs that reward patients for meeting health goals. This engagement leads to better health outcomes and lower long-term healthcare costs, aligning with the principles of VBC.
The Silver BulletThe convergence of patient engagement, digitization and VBC is shaping a more efficient, patient-centered and outcome-driven healthcare ecosystem. Engaged patients actively manage their health, improving outcomes.
Tech leaders can provide the technology that enables patient engagement and the effective delivery of VBC, with clinically significant, accessible and affordable health solutions.
Combined, these elements make healthcare more data-driven, cost-effective and aligned in delivering superior health outcomes. This synergy is the key to addressing the healthcare budget crisis, offering a sustainable path forward.
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