Oss: "Bending The Cost Curve" Here to Stay

No Matter the Politics, "Bending The Cost Curve" Here to Stay

Monica Oss  Open Minds  September 11, 2012


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Hope springs eternal that something "magical" will put a halt to all the changes in health care. Particularly, those changes that are designed to "bend the cost curve" and force more competition (and downward price pressure) on the health and human service system. In the first half of this year, I saw managers put off critical decisions about strategic alignment waiting for the Supreme Court decision (see Individual Mandate Stays - SCOTUS Puts State Medicaid Expansion In Play all members) and now managers are waiting for the results of the election.


I think delay is an exercise in magical thinking. (Please note, there is a difference between making decisions about strategic alignment and the timing of implementing a new strategy.) The forces of "bending the cost curve" are here to stay for two reasons. First, U.S. health care spending has reached $2.7 trillion in the U.S., about 25% of our GDP. On a macro level, this is unsustainable. Second, while there may be arguments about how to finance it, there is little political will among our nation's politicians to decrease access to health care. While there may be disagreement over the health care reform legislation as a whole, even presidential candidate Mitt Romney identified aspects of the current health care reform plan that he would keep, most having to do with access to care, in last Sunday’s interview on Meet the Press (see Romney clarifies policy stances).


The strategic issues for most service provider organizations and care management organizations are the same regardless of the outcome of the next election: any organization without a demonstrated "value equation" will likely lose market share. The difference is only one of magnitude and speed. The Obama Administration has an incremental approach to slowing the growth of health care costs - comparative effectiveness research, value-based payment initiatives, accountable care organizations (ACOs), transparency in performance measurement, incentivizing primary care and community-based care. The Romney/Ryan proposals would move these initiatives forward faster and through more private sector management, with a premium support plan for Medicare (see Ryan’s plan with Democrat Ron Wyden to reform Medicare and cut payments to doctors and drug companies, Guaranteed Choices to Strengthen Medicare and Health Security For All premium members), and using block grant proposals to make Federal payments for Medicaid.


The strategic alignment needed for a competitive value equation is simple in concept and difficult to operationalize in practice:

  1. Reduce unit cost of services to "market" levels (see Three Critical Tools For Unit Cost Management all members)
  2. Increase "performance" of services with performance defined by payers and consumers (see In P4P, You Get Exactly What You Pay For all members and Pay For The Performance You Want all members)
  3. Develop ability and services for non-traditional reimbursement in terms of pay-for-performance and non-risk-based options (see Under The Bundled Umbrella: The New Financing Models Shaping Health Care premium members)
  4. Create the information system infrastructure needed for both communication and decision support to support these changes (see The Growing Bandwagon For Standardizing Service Delivery all members)


Another interesting strategic development is that regardless of who wins this fall's election, the role of state government in health and human service policy (Medicaid, management of health insurance exchanges, etc.) will increase. The spotlight will continue to focus on the decisions of state governors, legislatures, and policymakers over the next five years. Tomorrow, we’ll do a recap of unique approaches that different states are taking to address their new and evolving role in health system management.


In the meantime, give your future strategic positioning a quick recap in light of the four key elements of a competitive value equation. Remember the words of Benjamin Franklin: "You may delay, but time will not."