The more you read about healthcare delivery, the easier it is to get discouraged about slaying the healthcare cost monster. Absent huge and damaging price cuts, there aren’t a ton of quick fixes. But as you get closer to clinical care, patterns of waste emerge. Those seeing patients every day know them best. But it probably takes a push to get them questioning the dogmas of their practice. Enter this paper (gated) on a cost reduction project from UCSF’s neurosurgery residents, prompted by a hospitalwide incentive program for residents:
OBJECT: Given economic limitations and burgeoning health care costs, there is a need to minimize unnecessary diagnostic laboratory tests.
METHODS: The authors studied whether a financial incentive program for trainees could lead to fewer unnecessary laboratory tests in neurosurgical patients in a large, 600-bed academic hospital setting. The authors identified 5 laboratory tests that ranked in the top 13 of the most frequently ordered during the 2010–2011 fiscal year, yet were least likely to be abnormal or influence patient management.
RESULTS: In a single year of study, there was a 47% reduction in testing of serum total calcium, ionized calcium, chloride, magnesium, and phosphorus. This reduction led to a savings of $1.7 million in billable charges to health care payers and $75,000 of direct costs to the medical center. In addition, there were no significant negative changes in the quality of care delivered, as recorded in a number of metrics, showing that this cost savings did not negatively impact patient care.
CONCLUSIONS: Engaging physician trainees in quality improvement can be successfully achieved by financial incentives. Through the resident-led quality improvement incentive program, neurosurgical trainees successfully reduced unnecessary laboratory tests, resulting in significant cost savings to both the medical center and the health care system. Similar programs that engage trainees could improve the value of care being provided at other academic medical centers.
In a nutshell, each year UCSF offers its residents about $400 each if they can achieve the goals of a quality improvement project that they design and execute. Their neurosurgery house staff, working with their hospitalist service, found that certain lab tests they ordered rarely affected their plan of care. So they designed a protocol describing exactly when those tests ought to be used, advertised the protocol and the incentives, and within a year cut those tests’ use by 47%–without compromising their patients’ quality of care. Considering that it’s just one service with just 18 residents, the cost savings are staggering:
Amazing results. But think about who really won here. The hospital saved $75,000 in lab costs. The payers saved $1.7 million in billable charges. There’s almost no comparison. That $1.7M is actually a loss to UCSF, because if they’d billed it, they would have gotten much (if not all) of it back as revenue. Think about that for a second, because it’s key to understanding much of what’s wrong with American healthcare: this amazing project, which saves gobs of money without hurting patients, probably causes UCSF immediate financial harm.
UCSF is not the VA, or Kaiser Permanente, or the British NHS. It has just one ACO contract for San Francisco city employees, so it’s not a true accountable care model either. For organizations like UCSF–in this sense, for the vast majority of American hospitals—if they don’t do something, they can’t bill for it. Which means they don’t get paid.
Fortunately, UCSF is a forward-thinking institution. I’m sure its leaders are looking to the future and realizing that they’ll have to encourage many more of these projects to make it through the decades ahead. UCSF is an academic institution, too, where quality improvement competitions serve a valuable educational purpose. But let’s not forget what reality is like for the hospital down the street hawking its proton beam facility to patients with prostate cancer. When they save the system money, they lose.
We have reason to believe this will change. As episodic bundling and accountable care spread across the country, hospitals’ incentives will come closer to encouraging what the system needs as a whole. But we need to make sure these progressive payment models aren’t confined to Medicare, and are embraced by enough payers to bring hospitals to the tipping point where lower charges actually are a financial win. Till that happens, feel-good stories like UCSF’s will remain just that.
Karan is a student at Robert Wood Johnson Medical School and Duke graduate who previously worked in strategic research for hospital executives.