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The Healthcare Imperative: Lowering Costs and Improving Outcomes - Workshop Series Summary 9 Care Culture and System Redesign INTRODUCTION Lowering healthcare spending and improving care outcomes will not only necessitate better application of existing medical insights at the point of care, but also require significant changes to the delivery system (Center for American Progress and Institute on Medicine as a Profession, 2008; Hackbarth, 2009; Senate Finance Committee, 2009). Care fragmentation, non-value-added activities, workflow inefficiencies, and defensive medicine, among many others, reflect elements of a broken system and are highlighted in many of the earlier chapters. While the presentations in this session are diverse, all the strategies discussed throughout the chapter share the central idea of shifting the current culture to one of patient-centered care through such levers as streamlined and harmonized health insurance regulation, quality and consistency in treatment with a focus on the medically complex, sharable clinical records, and medical liability reform. Michelle J. Lyn of the Duke University Medical Center discusses refocusing the paradigm from physicians in healthcare facilities to one of multidisciplinary partnerships involving community members, nonprofit organizations, governmental health and human services entities, hospitals, and medical practices. Illustrating the impact of these community-based strategies, Lyn discusses two examples of success that have not only improved clinical outcomes and decreased acute care needs, but also yielded significant savings. She concludes that, despite limited experience transitioning to systems of care for an increasingly diverse, aging population, community-engaged system redesign must be part of healthcare reform.
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The Healthcare Imperative: Lowering Costs and Improving Outcomes - Workshop Series Summary Focusing on workflow efficiency, Kim R. Pittenger of Virginia Mason Medical Center and Sandeep Green Vaswani of the Institute for Healthcare Optimization describe different approaches to maximize the current resources in the health system. Describing the Virginia Mason Medical Center (VMMC) production system, Pittenger emphasizes the importance of flow production, mistake proofing, and standardizing work, suggesting that nationwide use of this type of strategy (extrapolated from results seen at VMMC) could yield clinical and patient safety savings of $44 billion and operational savings of over $7 billion. Vaswani describes the related process of managing variability in hospital operations and management in order to improve patient safety and quality of care. While describing successful case studies and outlining the assumptions made to extrapolate nationally, he suggests that the annual savings opportunity from application of variability methodology at the national level is in the range of $35 to $112 billion. Meanwhile, Timothy G. Ferris of Massachusetts General Hospital (MGH) discusses care coordination, specifically describing how one demonstration project has already yielded promising results. By focusing on those patients with the highest illness burden, a similar national effort could potentially save up to $1 billion for the Medicare program annually. He cautions that several of MGH’s characteristics—integration of hospital and physician services, existing electronic medical records system, extensive primary care service network—may limit generalizability of their success. However, he concludes that the apparent success of the MGH Care Management Program suggests that prospective payment for the enhanced management of high-risk patients holds some promise for reducing costs. Building on the idea of integration, coordination across providers, and information technology as central elements of care coordination, Ashish Jha of Harvard University describes interoperability of health information technology as a method of facilitating health information exchange (HIE). He reviews the literature suggesting that widespread health information exchange can not only streamline the over 30 billion healthcare transactions occurring each year within the delivery system, but it can simultaneously decrease annual healthcare spending by nearly $80 billion annually. Jha cites the formation of a national strategy and standardized infrastructure protocols as keys to driving the success of HIE. Turning to regulatory interventions, Roger Feldman of the University of Minnesota moves the discussion to the broader context of market competition and antitrust regulations. While he frames antitrust policy as an important tool for ensuring that markets provide goods and services at the lowest price to consumers, he elaborates on the reasons why it has not been as effective in the healthcare arena and provides specific suggestions to increase its impact. Frank A. Sloan of Duke University provides an overview of a strategy to control increases in capital healthcare expenditures: service capacity restrictions. After reviewing the history of certificate-of-
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The Healthcare Imperative: Lowering Costs and Improving Outcomes - Workshop Series Summary need (CON) requirements, he asserts that CON-type regulations have been hampered by major shortcomings, such as poor definition of “need” and lack of capital budgets for CON programs. However, if these issues are addressed, Sloan suggests that capital expenditure regulation may be a viable option for cost containment if used appropriately. Closing the session on system design, Randall R. Bovbjerg of the Urban Institute discusses the potential for malpractice liability reform to lower liability premiums and decrease the practice of defensive medicine. Although he calculates that tort reform could decrease medical expenditures by 0.9 percent (almost $20 billion in 2010), he believes that bundling liability reform with other reform initiatives could achieve even greater synergistic savings. COMMUNITY-ENGAGED MODELS OF TEAM CARE Michelle J. Lyn, M.B.A., M.H.A., Mina Silberberg, Ph.D., and J. Lloyd Michener, M.D. Duke University Medical Center Our nation’s healthcare system, which is predominately focused on acute care provided by physicians in healthcare facilities, has resulted in higher than necessary healthcare costs and lower than optimal healthcare outcomes for our population. Reforming healthcare financing alone will not resolve these problems. We need innovative models to provide care earlier, more effectively, and at lower cost. These models should be developed and implemented through a collaborative problem-solving approach that uses the knowledge and resources of all stakeholders and is attentive to the varying conditions of different communities. This approach requires fundamental redesign, not the creation of substitution models or “lesser” models of care. Such an approach is embodied in the community-engaged, iterative, data-driven process that has been undertaken with communities around Duke University Medical Center in response to growing concerns about access, cost, and quality. Still early in our work, we have built multidisciplinary partnerships involving community members, nonprofit organizations, governmental health and human services entities, hospitals, and medical practices to craft responses to community health needs that improve health and reduce costs. Although the resulting healthcare models are varied, they share a number of common elements. The models employ teams of traditional and nontraditional providers; they stratify the population according to risk (medical, social, and environmental); and they use information technology to coordinate community, primary, and specialty care for some of our community’s most vulnerable populations. In this brief, we share examples, describe the prerequisites of—and potential platforms for—more widespread implementation of this approach, and suggest
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The Healthcare Imperative: Lowering Costs and Improving Outcomes - Workshop Series Summary policy changes that would allow health systems and providers more flexibility in meeting population health needs, creating a match between needs and resources, and promoting dissemination, adoption, and adaptation of effective models of care. These models must be accountable for improving health, meaning they should answer the basic question: What measurable improvement can we make in improving health outcomes for individuals and entire communities? Changing Our Healthcare Models The need for new models of care developed through community engagement begins with the failings of our current system. The well-documented persistence of socioeconomic and racial health disparities (which cannot be explained away by variation in insurance status [Smedley et al., 2003]) is but one indicator of the varied healthcare needs and barriers to health in our population. We also continue to demonstrate deficiencies in preventing and managing the chronic diseases that dominate healthcare needs and costs. Chronic disease management and prevention require the patient to change what he or she does on a daily basis, a challenge that requires ongoing education and support. Physicians are expensive and in short supply, and they are not well-suited for the counseling and coaching that lead to patient behavior change. Conversely, their limited time should be employed with the patients who require their unique clinical skills and knowledge. And while the medical community is not and cannot be responsible for changing environmental conditions that affect health and healthcare use, our efforts to improve health will fail if we do not take those conditions into account to the extent possible. For example, inadequate transportation is consistently found to be one of the major nonfinancial barriers to obtaining care (Arcury et al., 2005; Baker et al., 1996). Health care must be provided in locations that are accessible (something that varies by geographic communities and subpopulations), and other barriers to patient access must be identified and, when possible, addressed. Collaborating with the community to determine what services can be most effectively provided (where, when, how, and by whom) starts with analyzing the health needs and strengths of our diverse communities. This should include small-area analyses of variations in disease burden and neighborhood-level clusters of illness and care patterns and the identification of institutional and community readiness for change. For effective and affordable health care, providers, payers, and patients have to be willing to use the right provider at the right time for the right level of care. The strategic and cost–benefit analyses should employ appropriate economic and health metrics and be iterative, as the needs and resources of communities change over time.
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The Healthcare Imperative: Lowering Costs and Improving Outcomes - Workshop Series Summary Just for Us Just for Us (JFU), is an integrated in-home program of care for the low-income frail elderly and disabled, and it exemplifies the approach just described. The program was developed in 1999 in response to data showing high levels of unmet need among Durham’s elderly population. The model grew from a collaboration among Duke (the Division of Community Health and the Nursing School), local government entities (including the county department of social services, the local area mental health entity, and the housing authority), and Lincoln Community Health Center, the area’s federally qualified health center. The JFU program deploys an interdisciplinary team of providers to serve clients in their homes, providing medical care, management of chronic illnesses, and case management. Lincoln contracts with Duke to provide the clinical services of a part-time supervising physician and mid-level providers (nurse practitioners or physicians’ assistants) who offer primary care in the home every 5 to 6 weeks for chronic disease management and as needed for acute conditions. A social worker from the department of social services and a health educator employed by Duke provide case management. Patients are assisted in accessing mental health services, personal care assistance, and other medical and support services. A review of Medicaid expenditures for Just for Us enrollees enrolled in both JFU and Medicaid over a 2-year period from (2003-2004) suggests how JFU has changed health and healthcare use for its enrollees. From the first to the second year, ambulance costs were down 49 percent, emergency room (ER) costs were down 41 percent, and inpatient costs were down 68 percent. At the same time, prescription costs were up 25 percent, and home health costs were up 52 percent (Yaggy et al., 2006). Another study, currently ongoing, shows statistically significant improvement in hypertension control among enrollees over the course of 1 year. Community Care of North Carolina Community Care of North Carolina (CCNC), a program of the North Carolina Department of Health and Human Services, demonstrates the community-engaged, team-based approach to systems change on a statewide level. Launched in 1998 for Medicaid, CCNC is composed of networks of physicians, hospitals, health departments, social services agencies, and so on. These networks form community-based delivery systems and collaboratively deploy teams of social workers, nurses, health educators, dieticians, community health workers, and others who work in concert with physicians to provide care and disease management and assure appropriate access to services. As the communities across North Carolina are different, each network has its own composition. The estimated overall annual state savings under CCNC compared to projected costs under primary care case
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The Healthcare Imperative: Lowering Costs and Improving Outcomes - Workshop Series Summary management were $150 million to $170 million for fiscal year (FY) 2006 (Mercer, 2007). Evaluating This Approach The fields of health services research and public health provide a number of tools for evaluating models such as those we describe. At Duke, sample evaluation measures include traditional Healthcare Effectiveness Data and Information Set (HEDIS) measures to assess clinical programs and ER diversion. More thought needs to be given, however, to how we would estimate the effect of the proposed approach at a national level. The challenges of access and chronic disease prevention and management are shared by all communities, but each community has its own starting point, and there is no one solution, no one team composition that fits all communities. One thing that is certain is that we should strive to measure our success by patient outcomes and meaningful indicators of system–provider interactions, rather than by adherence to a specific set of structures (e.g., how many exam rooms a clinic has) and less meaningful but easily counted measures of process. Moreover, the community focus of the community-engaged, team-based approach to system change highlights the importance of analytic questions that are always relevant but more easily ignored in a context in which the unit of analysis is individual patients and the process being assessed is the physician–patient encounter. For example, what is the best time frame in which to assess the benefits of disease prevention, evolving health behaviors, and lifestyle changes that are potentially passed from one generation to the next? What ancillary costs and benefits or larger societal effects of our healthcare initiatives do we include in our estimate? Do we include, for example, the effects on workplace productivity of improved health, worksite health care that might reduce absenteeism, and school-based health centers that allow children to receive treatment without parents having to retrieve them from school? We should be cautious about claims that any system change will rapidly improve outcomes cheaply. One study of primary care case management programs, for example, showed that many changes did indeed reduce healthcare expenditures for their enrollees. However, these savings were outweighed by the costs of the programs themselves (Wheatley, 2002). The study of Medicaid expenditures in the JFU example previously described did show a reduction in the targeted costs—ambulance, ER, and hospital. However, the simultaneous rise in prescription drug costs and personal care assistance resulted in a net increase in Medicaid expenditures. We continue to experiment with how to improve the health of JFU patients while reducing costs, such as by promoting physical activity, with the intention that this will prevent the need for personal care in some patients.
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The Healthcare Imperative: Lowering Costs and Improving Outcomes - Workshop Series Summary The Challenge of Accountability The starting point of the approach we describe is the shift we must make as a nation to developing accountable health care that improves the health of populations, not just the health of individual patients. On a daily basis, however, accountability is an ongoing challenge, especially if we have a multiplicity of models to assess and a multiplicity of places people can get care in one community. The medical home model—through which a primary care provider, together with the patient, takes primary responsibility for a patient’s health and system utilization—will provide an answer in some, but likely not all cases. When realistic, patients should be more empowered to manage their own health, while physicians need to do what only they can do—complex care and unknown illnesses, and teams of providers manage the routine acute and chronic care. The work is evolving, but the power of this approach comes from working with our communities to figure out how to develop and deploy the right providers, how to function as coordinated teams so as to deliver the right care, at the right time, at the right place, by the right level of provider. This approach shares a great deal in common with the movement toward Accountable Care Organizations and Medical Homes, and with Clinical Translational Science Awards, the goal of which is to translate evidence into clinical practice and ultimately population health, while promoting a bi-directional approach to understanding community priorities. Policy changes are needed that will permit and encourage state/local experiments to develop and implement new models of care. These include start-up funding and funding for demonstration projects, and the ability to scale demonstration projects to larger regional and national projects. Reform of the healthcare delivery system offers enormous potential for spending our healthcare dollars more effectively. Despite decades of small-scale experiments, the work of transitioning to systems of care for an increasingly diverse, aging population with growing rates of chronic disease is yet in its infancy. But we know enough to know that community-engaged system redesign must be part of healthcare reform. USING PRODUCTION SYSTEM METHODS IN MEDICAL PRACTICE: IMPROVING MEDICAL COSTS AND OUTCOMES Kim R. Pittenger, M.D. Virginia Mason Medical Center President Barack Obama’s Council of Economic Advisers estimates that 30 percent of U.S. healthcare expenditures do not contribute to positive healthcare outcomes (Romer, 2009). Inappropriate and unsafe care and waste probably make up the greater part of this estimate, representing costs
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The Healthcare Imperative: Lowering Costs and Improving Outcomes - Workshop Series Summary in the hundreds of billions nationally. In 2002, Virginia Mason Medical Center (VMMC) adopted a production system methodology, based on the Toyota Production System, to relentlessly improve quality and safety (BenTovim et al., 2008; Choe et al., 2008; King et al., 2007; Muder et al., 2008; Persoon et al., 2006; Raab et al., 2006; Wood et al., 2008). Production-system methods such as the VMMC production system reduce turnaround times of lab tests, improve accuracy of thyroid needle biopsies, and improve diabetic blood pressure control. Transformations of large departments or entire systems of hospital care reduce lengths of stay, waiting times for treatment, nurse dissatisfaction, and medicolegal events (Ben-Tovim et al., 2008; Choe et al., 2008; King et al., 2007; Muder et al., 2008; Persoon et al., 2006; Raab et al., 2006; Wood et al., 2008). The VMMC production system employs flow production, mistake proofing, and standard work to achieve these changes. Flow production Production of small lots of work take place as the needs arise, instead of batch production, which is usually associated with waiting times, delays, errors, and higher costs of work (Virginia Mason Medical Center, 2004). For example, a physician processing a large batch of lab results every half day requires more time than processing two or three results in between patient visits. Additionally, if the assistant sorts the results according to abnormal and normal values before giving them to the doctor, costly delays in action are avoided. Mistake proofing Devices and practices are refined in order to reduce errors at all levels of care. For example, a photographic “shadow board” of materials and instruments for a procedure prevents delays in procedures and mistakes in their execution. The VMMC health maintenance module sorts through each electronic chart as it is accessed and identifies disease management and preventive testing that is due or overdue. Standard work Medical steps in care are specified and healthcare team members are trained and audited for performance. The production system ingrains standard work in care processes to prevent errors and sustain savings from redesign. Many errors in medicine are believed to arise from lack of discipline in standardizing work, so providers and medical assistants receive training on standard rooming and visit initiation. They are observed and audited for hand washing, adherence to standard use of the health maintenance module, and standard procedure setup. The use of production systems to improve outcomes and reduce costs is in its infancy. Even though the literature is limited and no studies detail cost savings, our experience demonstrates that the application of production
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The Healthcare Imperative: Lowering Costs and Improving Outcomes - Workshop Series Summary FIGURE 9-1 Savings accrued from the VMMC production system. SOURCE: Virginia Mason Medical Center. system methods to healthcare delivery can indeed yield significant savings. These dollar savings can be redirected internally to reinvest or can accrue to patients, their employers, and insurers. The types of savings experienced at VMMC have taken three forms: (1) operational, (2) clinical, and (3) patient safety (Figure 9-1). Operational Savings The production system reduces waste (time, space, mistakes) and yields direct savings for VMMC. Examples include Savings of $11 million in planned capital investment over 8 years by using space more efficiently; Savings of more than $1 million (35 percent) over 2 years in VMMC liability and malpractice premium costs since 2007; Margin improvement of $5.6 million over 7 years in the department of gastroenterology as a result of flow production methods; Savings of $2 million in the same department as access to care increased by 50 percent, delaying space expansion;
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The Healthcare Imperative: Lowering Costs and Improving Outcomes - Workshop Series Summary A decrease in cost per relative value unit (RVU) in primary care by 10 percent in 2.5 years, again as a result of flow production, now focused on result reporting, incoming phone calls, and refills; and An increase in percent potential margin for primary care provider practices from 2 percent to 19 percent. Driven by this production system, VMMC is on track to reach a 2009 margin of $28 million (3.6 percent operating margin) with no layoffs during the recession—a distinction in the healthcare market. These savings can translate to the national level as well. Extrapolating Nationally Taking the example of the savings in liability and malpractice premium costs experienced by VMMC, national premiums could drop by 30 percent yielding a savings of $3.2 billion from today’s estimated national cost of $10.7 billion (A.M. Best, 2009). Another dramatic example of potential national savings is in the reduction of cost per RVU. VMMC experienced a 10 percent reduction in its primary care cost per RVU, which at the national level could translate to savings of another $4.3 billion per year.1 Clinical Savings In collaboration with Boeing, VMMC provided intensive management of 350 patients comprising the top 20 percent of Boeing’s healthcare spending. More than half had diabetes, and more than half had three chronic conditions. The Boeing Intensive Outpatient Care Program followed the VMMC production system to provide patients with standard care management in their medical home, complete with enhanced phone care enabled by a modest per member per month additional reimbursement. The results exceeded Boeing’s goal of a 15 percent reduction in healthcare costs. A 35 percent cost reduction was achieved compared to predictions based on current usual care. The VMMC model surpassed other participating deliv- 1 Using Medical Group Management Association data on cost per RVU (Jessee, 2009), a 10 percent reduction across primary care would lower the annual costs in primary care $30,000 for a provider in the 25th percentile of cost/RVU and $56,000 for a provider in the 90th percentile of cost/RVU. In a multispecialty group at the mean cost per RVU ($58) this would reduce costs by $7 million in a 200-full-time equivalent (FTE) group. Extrapolated to a national level—302 million visits for preventive care at 1.36 RVU/visit, 351 million visits for chronic conditions at 1.1 RVU per visit. A national provider force reducing cost per RVU by 10 percent would yield a savings to medical groups of $4.3 billion per year (Burt et al., 2007).
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The Healthcare Imperative: Lowering Costs and Improving Outcomes - Workshop Series Summary ery systems, which used an ambulatory intensive care unit model, disjoining patients from their primary care provider team. Focusing on redesigned care for diabetes, the VMMC production system specified standard work for diabetic visits with physicians or registered nurses, phone care, pharmacist visits, registry management and pull systems, and evidence-based drug treatment. As a result, the outcomes of this definition of standard work translated into more than just cost savings—the care for diabetic patients has improved markedly since the beginning of this program and has surpassed national averages (Tables 9-1 and 9-2). Extrapolating Nationally Continuing with the example of diabetes, where disease management programs are most evolved, national savings could be as high as $35 billion from this effort. Reduction of HbA1c, LDL, and blood pressure are proven to postpone endpoints and may reduce costs (American Diabetes Association, 2002, 2009; McGuire et al., 1998; Sever et al., 2005; Wagner et al., 2001). Additionally, the room for reduction in cost is vast; estimates from 2007 of direct medical costs of diabetes care in the United States totaled $116 billion. A 30 percent savings using integrated care like that used at VMMC might achieve $35 billion in savings. If the Boeing population is representative of the nation’s “sicker,” employed, vascular disease patients, TABLE 9-1 National and VMMC Outcomes on Quality Metrics, 2008 Metric VMMC Level National A1C measured 88% 88% LDL measured 86% 84% A1C < 7 54% 46% A1C > 9 8% 29% LDL < 100 56% 44% commercial, 47% Medicare BP < 130/80 42% 32% NOTE: A1C = hemoglobin A1C; BP = blood pressure; LDL = low-density lipoprotein. TABLE 9-2 Intermediate Outcomes for VMMC, 2007, 2009 Metric 2007 2009 LDL < 100 52% 59% A1C < 8 67.5% 73.5% A1C < 9 7.8% 7.2% A1C < 7 49% 56% NOTE: A1C = hemoglobin A1C; LDL = low-density lipoprotein.
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The Healthcare Imperative: Lowering Costs and Improving Outcomes - Workshop Series Summary Many of these deficiencies of CON programs could be remedied. CON applicants could provide cost–benefit analysis on a project-specific basis and assess uncertainties in the cost–benefit calculations. CON coverage could be expanded to include capital expenditures in physicians’ offices. State CON agencies could be provided with a capital budget out of which approved capital projects would be financed. This system would replace tax-exempt bond financing, which currently favors major healthcare capital projects over investments in other sectors. CON agency operating budgets could be increased to permit ongoing monitoring of whether promises made in CON applications are in fact kept. CON programs could gather and disseminate information on facility quality. In conclusion, we cannot know whether or not service capacity reduction will constrain cost growth until we know how the healthcare system will be structured in the future. There are circumstances under which CON-type programs are desirable. But if capital expenditure regulation is desirable, it should be not ended but mended. MALPRACTICE REFORM AND HEALTHCARE COSTS Randall R. Bovbjerg, J.D. The Urban Institute Malpractice reforms, in the form of limits on traditional personal injury rules or processes, can save almost 1 percent of total health spending or health insurance premiums over the next decade. Three types of savings are achievable: (1) lower liability premiums, (2) lower incidence of defensive medicine, and (3) enhanced savings under other reforms enacted simultaneously. In addition, reforming liability as part of health reform also adds value for patients; successful health reform can offer better ways than do traditional liability laws to promote patient safety, rehabilitate the injured, and compensate for injuries (Berenson et al., 2009). Conventional “tort reform” achieves savings by limiting traditional liability, not by fundamentally altering its approach. Other reforms would likely work better to improve the performance of the liability “system” in ity rates following coronary bypass surgery (CABG) were appreciably higher (22 percent) in states without CON than in those states with CON. The mean annual volume per hospital with CABG was 84 percent lower in states without CON, and outcomes are generally better in hospitals with high volumes. Ross et al. (2007) found rates of questionable catheterizations lower in states with CON. But Ho and colleagues (2009) reported that states dropping CON saw an increase in the number of hospitals at which CABG and angioplasty were offered. But overall volume of these procedures were unchanged, and mortality following CABG fell in states lifting CON. There was no change in mortality following angioplasty after CON was lifted.
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The Healthcare Imperative: Lowering Costs and Improving Outcomes - Workshop Series Summary achieving its three central goals of compensating injuries, deterring negligence that causes them, and promoting justice. Broader reforms include alternative compensation systems and institutional responsibility (Bovbjerg and Tancredi, 2005). An IOM committee has endorsed demonstrations of some alternative approaches to compensation and safety that hold great promise for improvement (IOM, 2002). Other reforms have not been widely implemented, however. Their evidence base is thus scant, so fiscal estimates are uncertain; and the measures are not yet “shovel ready” for implementation as part of health reform. Nonetheless, over time broader strategies are warranted to improve patient safety and achieve other goals not directly advanced by tort limitations. The following discussion details the three forms of tort-reform savings just noted and ends with consideration of broader safety-oriented reforms. Lower Liability Premiums Some state tort reforms have reduced malpractice payouts (Danzon, 1986) and hence also the associated liability premiums charged to medical care providers (Zuckerman et al., 1990). The biggest impact comes from a cap on total malpractice awards or on their nonmonetary component, that is, “pain and suffering” (Nelson et al., 2007; U.S. Congress Office of Technology Assessment, 1994). The Congressional Budget Office (CBO) has estimated that implementing California-style reforms nationally, most importantly a $250,000 cap on noneconomic damage awards, would reduce physician liability premiums by an average of 25 to 30 percent, more in states with weak tort reform than where reform is already strong (CBO, 2004). These findings are consistent with providers’ persistent lobbying for tort reforms. Changes in provider costs for malpractice insurance should thereafter be reflected in lower patient charges and hence in health insurance premiums.5 The CBO estimate implies a savings on malpractice premiums of $7 billion to $9 billion for 2007 (most recent data available)—or some 0.3 percent to 0.4 percent of national health spending in that year (CMS, 2008; Towers Perrin, 2008). 5 Tort reforms’ effects on health premiums are less well documented than on liability premiums.
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The Healthcare Imperative: Lowering Costs and Improving Outcomes - Workshop Series Summary Lower Incidence of Defensive Medicine Tort reforms also plausibly reduce the amount of defensive medicine practiced, the extra tests and procedures that medical providers say that they add to reduce the risk of lawsuit or to facilitate any needed legal defense. Practitioners have long reported such wastefulness, as early as the first congressional hearing on malpractice in 1969 (Medical Malpractice: The Patient Versus the Physician, 1969). How much have state tort reforms reduced defensiveness? The highest peer-reviewed estimate, from 1980s data, is that caps and similar reforms saved about 4 percent by cutting hospital spending (Kessler and McClellan, 1996). A more recent study found a 3 to 4 percent cut in state healthcare expenditures (Hellinger and Encinosa, 2006). However, the CBO was unable to replicate the former finding, and a recent extension of its methods that also included physician spending found no impacts (CBO, 2004; Sloan and Shadle, 2009). Most studies find savings in the range of 0 to 0.27 percent of health spending (Currie and MacLeod, 2008; Dubay et al., 1999; Sloan et al., 1997). A recent review of medical liability issues in health reform mentioned potential savings on defensiveness of 1 percent of health spending, though without documentation (Mello and Brennan, 2009). On balance, it seems plausible that savings from reduced defensiveness could equal or slightly exceed those on liability premiums, perhaps another 0.5 percent of total health spending, for a total savings of 0.9 percent. Greater changes might be feasible if defensive services were simultaneously targeted by additional strategies, such as altered payment incentives, more effective utilization review, or enhanced promotion of evidence-based practice—which have merit in their own right and are discussed elsewhere in this volume. President Barack Obama has suggested a willingness to work with physicians to reduce defensive practices by creating some liability protection for defendants in compliance with authoritative guidelines (Stolberg and Pear, 2009). This position is promising, and there is some evidence that guidelines can protect against liability. But new approaches are needed to improve on unsuccessful prior state use of guidelines (Clark et al., 2008; LeCraw, 2007; Ransom et al., 2003). Making Other Reforms More Effective The estimated savings mentioned above on premiums and defensive medicine of 0.9 percent of all personal health spending would save almost $20 billion in 2010 and almost $260 billion over a full decade (Berenson et al., 2009). Savings would be shared across public- and private-sector spending. Moreover, because malpractice reforms support other reform measures,
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The Healthcare Imperative: Lowering Costs and Improving Outcomes - Workshop Series Summary synergistic savings from bundling this effort with other reform initiatives will likely go further, as just noted (Gabel, 2009). For example, evidence-based medicine and other utilization initiatives may help promote the desired reductions in defensive practices beyond what has previously been observed.6 Simultaneously, tort reform undercuts provider resistance to utilization oversight based on fears that any change in accustomed practice could subject them to objectionable legal liability. How Inclusion Within Health Reform Makes Tort Reform More Positive for Patients Finally, apart from dollar savings, making tort reform part of larger health reform also makes changes in liability more positive for patients. Healthcare reform shifts the policy discussion dramatically from the political-legal context of prior battles over tort reform geared to benefit providers. Starting in California and other states in the mid-1970s, standalone tort limits have had a very contentious history (Sloan and Chepke, 2008). Caps and other limits have long met strong political resistance—especially from Democrats, including then Senator Obama. Stand-alone tort reforms are seen as mere takeaways of patient rights that undercut patient compensation and incentives for safety. Some courts have similarly found state caps unconstitutional, holding for example that a short-term insurance crisis does not justify legislative changes to court-made liability rules (Nelson et al., 2007). However, if tort changes help to build coalitions for comprehensive health reform (Bradley, 2009), they will benefit all patients. People permanently injured during medical care would especially benefit, as otherwise their injuries might make them difficult or impossible to insure, and very few now receive liability awards. A system that provides nearly universal coverage will ensure that individuals do not have to rely upon tort awards to finance their medical care. Legislators and judges should appreciate these broader public benefits.7 Health reform also provides a platform for redoubling federal efforts to prevent medical injury, which should form part of health reform’s promotion of better medical care. The incidence of avoidable injury remains unacceptably high, despite generations of increasing liability pressure. Patient safety efforts have the potential to reduce health 6 No estimate of savings is given in this malpractice reform chapter, as synergy is not attributable to tort reform alone (nor to any other single type of reform). Moreover, estimates cannot much rely on prior experience, as such combined approaches have not yet been enacted. The plausibility of synergistic savings under broad health reform, however, bolsters confidence in the estimates of savings from reductions in defensive practices provided above. 7 Federal legislation is also not subject to the same constitutional attacks as state legislation.
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