Worried about rising healthcare costs?
Here’s the least surprising fact you will read in the Business Record this week: Health care costs too much and those costs are rising too fast. Perhaps you’re only surprised that you’re reading it in a column penned by a health system CEO. Don’t be. The rising costs of health care, its causes and its solutions are the focus of a great deal of time and effort at Mercy Medical Center and Mercy Health Network.
We are acutely aware, for example, that health-care expenditures in the United States now stand at 15 percent of gross domestic product. Even more troubling is the projection that those costs will reach 18.4 percent of GDP in eight short years. The cost of health care per person in the United States is expected to increase by 84 percent during that same period. These are staggering and troubling figures that are driven, unfortunately, by some very powerful forces including:
A growing and aging population. Sixty million Baby Boomers are getting older and thus will need more health-care services. For example, chronic health condition cases are projected to grow by 50 million in the United States. in the next 17 years.
National shortages of nurses, physicians and other professionals. Hospitals’ labor cost increases average 50 percent higher than other service industries.
New, higher-cost drugs and a dramatically increasing demand for them. For example, the number of prescription drugs used in the United States increased by 74 percent from 1992 to 2002. During a similar period, U.S. spending for prescription drugs tripled to $140.6 billion.
Advancing medical knowledge and technology. Decades of effort and billions of dollars in investment are paying off with medical advances that allow doctors and hospitals to more successfully treat more types of health problems, and do so for people at increasingly older ages. This is wonderful for patients, but adds tremendously to the costs and demands for services. Example: the costs to hospitals of orthopedic implants, such as hip replacements, increased 115 percent in 12 years.
Medical liability insurance. Mercy-Des Moines’ bill for liability insurance increased from about $1.8 million to $4.3 million in just two years. The liability environment also takes its toll through “defensive medicine,” as doctors order more tests and generate more costs in their efforts to avoid potential lawsuits.
Administrative costs. The costs of record-keeping, billing and complying with 130,000 pages of government regulations are staggering. Brookings Institute economist Henry Aaron recently was quoted in the New England Journal of Medicine as saying our nation’s health-care system is “an administrative monstrosity, a truly bizarre mélange of thousands of payers with payment systems that differ for no socially beneficial reason.” We hear resounding agreement from patients, staff, physicians and employers who are increasingly frustrated by rising costs and an overwhelming burden of paperwork.
General inflation. The health-care system experiences the same inflation as other businesses in the cost of energy, food and other supplies.
All of these forces and others combine to create the health-care-cost environment in which we find ourselves today. Why is Mercy concerned and determined to play a leadership role in addressing this issue? There are four fundamental reasons:
As corporate and individual citizens, we are concerned about our governments’ fiscal health at all levels: national, state, county and city. Through Medicare and Medicaid, government is the largest single purchaser of health care, and the forces listed above present ever-increasing budget challenges.
As a business that employs more than 6,000 people in Central Iowa alone, we are concerned about the tremendous impact in the cost of providing health-care insurance to our employees and their families, and the negative impact on them as costs continue to escalate. Mercy’s health insurance bill for employees increased by more than $5 million this year, to a record $22.8 million.
As a health-care system that is committed to providing the highest-quality services, we find it increasingly difficult to meet and exceed our patients’ and communities’ needs, while managing skyrocketing input costs and payment rates from government and other payers that are not keeping pace.
As a religious-based ministry, we are concerned about our ability, long-term, to continue to meet the needs of the poor and to provide critical services that lose money, such as chemical dependency treatment. We also are concerned about how our nation will meet the needs of the estimated 44 million Americans who have no health insurance.
What can or should we do to address this crisis? Like most complex problems, it will require multifaceted short- and long-range solutions. There is no “magic bullet” to solve it, but dramatic improvements can be made. Here are some examples of specific initiatives that are under way at Mercy:
Six Sigma. Mercy is committed to improving processes to ensure the best possible patient experience. Six Sigma is a method, proven in other industries, that helps eliminate errors and unnecessary process steps, thereby reducing costs and improving quality. Mercy has trained full- and part-time Six Sigma leaders and has a goal of taking $2 million in annual costs out of the system in the next 14 months.
Chronic disease management. Led by Bill Wickemeyer, M.D., at the Iowa Heart Center and Dave Hickman, a registered nurse from Mercy Health Network, we learned firsthand that caring for people with chronic diseases can be improved dramatically with some relatively simple clinical management techniques. Through the Congestive Heart Failure Tele-management Project, Mercy Health Network in Iowa has reduced readmissions of participating CHF patients by 85 percent. Similarly, Mercy Clinics physicians and staff have demonstrated remarkable improvements and have lowered costs in the care of diabetes patients and others through improved management of their diseases. Mercy now is collaborating with Des Moines University, Iowa Health System, the Iowa Farm Bureau Federation and the Iowa United Auto Workers in the Iowa Chronic Care Consortium. This group is dedicated to finding more ways to improve care and lower costs, and to replicate them at other health-care providers across Iowa.
Information technology. A leader in improving quality and reducing costs through the use of computer technology, Mercy has implemented a fully automated and filmless system in medical imaging. Today, X-rays, CT scans, MRIs and other medical images are taken, analyzed, stored, retrieved and delivered to those requiring them – all electronically. This has improved care and saved hundreds of thousands of dollars. The next step at Mercy is a new initiative called ACIS: the Advanced Clinical Information System. This multiyear, multimillion-dollar project will bring automation to many more hospital processes and will improve quality and patient safety. It eventually will become a completely electronic medical record.
Facilities. Mercy-Des Moines’ facilities-improvement initiative, called Mercy Momentum, is an investment of capital dollars for the purpose of retooling aging facilities. These improvements will allow further process improvements and efficiencies that cannot be created in an overcrowded, 30-year-old building. With facilities improvements throughout the metropolitan area, in inpatient and outpatient facilities, Mercy will further its efforts to provide the right care in the right place at the right time.
These are all important initiatives at Mercy. I am proud of the successes achieved by our employees and physicians, and by their commitment to do more. Of course, we all understand it still is not enough. To address our nation’s health-care challenges for the long term, there must be many other efforts. For starters, government must address, through public policy, the cost drivers noted above that it can influence: the 130,000 pages of regulations, the unfettered liability environment, the need for more health-care professionals, and the large and growing portion of the population that is uninsured. Second, we must take more responsibility for our personal health, and we must find ways to encourage and finance prevention, wellness and proactive management of chronic care. Third, we must find ways to encourage and finance the simplification and automation of both clinical and non-clinical processes in all parts of the health-care system, from hospitals and doctors, to insurers and government, to employers’ health plans.
Lastly, we must work smarter, we must be more innovative, and we must do it together. If we follow the same path as Billy Tyne, George Clooney’s character in “The Perfect Storm” – forge ahead into the converging storm fronts, determined to prevail by just working harder – we are doomed to the same fate that befell him. The only chance to succeed is for employers, employees, payers, health-care providers and government to work together to find meaningful solutions that can be implemented and sustained across the entire system.
David Vellinga is the president and CEO of Mercy Medical Center-Des Moines; chairman and CEO of Mercy Health Network, Iowa; and president and CEO of Trinity Health International, Novi, Mich.