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How Preventive Healthcare Services Reduce Spending for Payers

Payers that integrate enhanced preventive healthcare services into coverage offerings can cut spending on unnecessary healthcare utilization.

Payers can experience high cost savings via preventive healthcare services

Source: Thinkstock

By Thomas Beaton

- Reducing healthcare spending is a multi-faceted challenge for payers that requires creative and innovative strategies like offering a wide range of preventive healthcare services in health plans.

Payers that encourage beneficiaries to take advantage of preventive services may see decreased utilization rates and lower costs, which are an attractive incentive for treating preventive care as more than a regulatory requirement.

Under current ACA provisions, payers are required to provide preventive services such as screenings, tests, and health evaluations at no cost when consumers receive care in specific provider networks. However, if payers treat preventive services as a “want to do” instead of just a “must do,” then they can see sizable returns on spending and utilization.

What action items are necessary to see these strategies produce measurable healthcare savings?

Create consumer friendly cost-sharing that supports chronic disease management

Preventive care can help keep patients from developing costly chronic conditions, some of which are multi-billion dollar healthcare spending juggernauts.

READ MORE: How Payer Philanthropy Can Address Social Determinants of Health

According to the CDC, chronic diseases that are avoidable through preventive care services account for 75 percent of the nation’s healthcare spending and lower economic output in the US by $260 billion dollars a year. If everyone in the country received recommended clinical care, then the healthcare system could save over 100,000 lives a year.

Reducing the prevalence of hypertension in the US by just five percent would save the economy $25 billion, adds the Surgeon General’s National Prevention Strategy. Preventing permanent, long term infections and diseases like HIV/AIDS can also lower spending.

“For every HIV infection prevented, an estimated $355,000 is saved in the cost of providing lifetime HIV treatment,” says the Surgeon General’s report.

To improve chronic disease preventive care, the CDC suggests that payers should lower or eliminate cost sharing such deductibles, coinsurance, or co-pays for a broader range of preventive services.

Encouraging the use of preventives services can keep patients healthy, and stop them from getting sicker, so that payers don’t have to pay for higher cost treatments and services.

Identify community factors to reduce emergency department admissions, utilization

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Spending healthcare dollars on over-utilization of the ED is extremely problematic for payers. Payers can’t remain profitable if their beneficiaries are constantly using expensive ambulatory services or ED resources when there are other solutions to their care needs.

“If more effective approaches could be identified that reduce ED as well as inpatient spending without harming patient outcomes, that would be the holy grail — improved access and quality at lower cost,” said leaders from the Harvard T.H Chan School of Public Health and Indiana University School of Public Health and Environmental Affairs.

Payers can address social health determinants and community health factors, and collaborate with stakeholders at the community level, to create more opportunities for patients to remain in good health in their homes and neighborhoods.

A team from the University of Texas’ School of Public Health suggests that the use of community health workers (CHWs) and patient navigation can help to realize a savings opportunity of $4.4 billion per year.

“The ability to identify effective and sustainable methods to address poorly coordinated care and inappropriate healthcare utilization, particularly for medically underserved populations, will become increasingly critical as the demand for services increases in the era of healthcare reform,” the team said.

Decrease hospitalizations through provider collaboration

READ MORE: Top 10 Most Expensive Chronic Diseases for Healthcare Payers

In addition to ED and ambulatory services, the cost of hospital admissions and 30-day readmissions can add up for payers. Collaborating more closely with primary care and specialty providers may help to reduce these costs.

A study by the University of Colorado School of Public Health found providers can identify unnecessary hospitalizations, and lower them, through the Hospital Readmission Reduction Program (HRRP) under the ACA.

Under the HRRP, hospitals are financially penalized if they have more than expected 30-day admissions for certain conditions and illnesses. The research team found that HRRP reduced hospital readmissions among Medicaid beneficiaries.

To support readmissions reductions, the authors concluded that payers and providers can work together to shift away from fee-for-service models and use collaborative care services such as ACOs and bundled payments. The authors also suggested that risk assessment and measurement can help improve care efficiency in hospitals.

“For now, measuring, reporting, and penalizing risk-standardized readmission rates are an important component of efforts to transform the overall quality and efficiency of care for hospitalized patients,” the researchers said.

“If fairly adjusted for case mix, the variability seen in hospital-level risk-standardized readmission measures should primarily reflect the continuum of care delivery following hospital admission—inpatient, transitional, and early outpatient follow-up.”

The payers that effectively encourage the use of preventive health care will begin to see savings because they’re paying less for costly treatments of chronic diseases, expensive healthcare utilization, and the inflated costs of hospital stays.


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