Some Notes on a Healthcare Scorecard on Return on Investment (ROI)

There is no ROI bang for our healthcare buck in the United States.  The cost of healthcare has increased. The usual way to track the cost of healthcare is either as a percentage of our Gross National Product or per-capita (or per person) spending. Gross national product (GNP) is an estimate of total value of all the final products and services turned out in a given period by the means of production owned by a country’s residents.

health expenditures chart

US Health Consumption Expenditures as a Percent of GDP (1970-2017)[1]

What Drives Healthcare Cost?

1) Healthcare Services, or Variability in Provider billing

2) Healthcare Services, or Variability of the cost of Procedures

3) Medical Technology, or Variability of the cost of Medical Devices

4) Pharmaceuticals, or Prescription Drug Prices

5) Patient Compliance

6) Social Determinants of Health

The first four items on the list could really be described as waste. It is predicted that it is these four areas that drive the waste. And what is the projected increase over time? Perhaps 2.5% by 2020 but up to 9.3% by 2025.

PERCENTAGE OF GNP[2] versus PER-CAPITA SPENDING[3]

percentage of GNP

*expected/projected[4]

And what drives this waste? [5] “In 2012, Berwick and Hackbarth delineated six categories or ‘wedges’ of waste in health care and assigned ranges of potential costs to each: failures of care delivery, failures of care coordination, overtreatment, administrative complexity, pricing failures, and fraud and abuse.”[6] Based on current data projections in 2019, we may have under estimated the increased growth of waste in our current broken For Profit Health Care Insurance Model.

Proposed “Wedges” Model for US Health Care, With Theoretical Spending Reduction Targets for Six Categories of Waste

proposed wedges healthcare model

How do we measure the Return on Investment for reducing waste? In the diagram below, the Social Determinants of Health (SDOH) fall under the category of non-medical drivers of health care. We can add Patient Compliance there as well.

return on investment

And how is the “Health Care Dollar” spent?  Looking at the where the premium dollar goes will give us some insight here.

A word about the importance of each of these.[7]

impacts return on investment

The Institute for Healthcare Improvement puts a slightly different spin to this by proposing the business case for reducing “waste.”

SDOH and ACCESS chart

And how is the “Health Care Dollar” spent?  Looking at the where the premium dollar goes will give us some insight here.

where does dollar go

So, how does IHI propose to reduce waste?[10]

reduce waste chart

three party system

FOOTNOTES:

[1] Macfie, Helen and  James Leo , “Call to Action: Reduce Waste in the US Health Care System and Return the Cost Savings to Patients and the Economy,” Institute for Healthcare Improvement, 2019, www.ihi.org/Engage/collaboratives/LeadershipAlliance/Documents/IHILeadershipAlliance_CallToAction_ReduceWasteUSHealthCareSystem.pdf

[2]  “U.S. Health Expenditure as GDP Share 1960-2018 | Statistic.” Statista, 2018, www.statista.com/statistics/184968/us-health-expenditure-as-percent-of-gdp-since-1960/

[3]  “National Healthcare Spending In 2016: Spending And Enrollment Growth Slow After Initial Coverage Expansions.” Health Affairs, 6 Dec. 2017, www.healthaffairs.org/doi/abs/10.1377/hlthaff.2017.1299.

[4] “How Much Is Health Spending Expected to Grow?” Peterson-Kaiser Health System Tracker, 12 Dec. 2018, www.healthsystemtracker.org/chart-collection/much-health-spending-expected-grow/#item-annual-percentage-point-difference-growth-rates-makes-large-difference-spending-time_2016.

[5] D. Berwick and A. Hackbarth, “Eliminating Waste in U.S. Health Care,” Journal of the American medical Association, 2012; 307 (14): 1513-1516

[6] op cit.  Macfie, Helen and James Leo ,“Call to Action: Reduce Waste in the US Health Care System and Return the Cost Savings to Patients and the Economy,” Institute for Healthcare Improvement, 2019

[7] I added this one as it seemed a good place to put it.

[8] This was already there, and I interpret it to mean paying attention to the SDOH.

[9] This is all about Access

[10] op cit.  Macfie, Helen and James Leo ,“Call to Action: Reduce Waste in the US Health Care System and Return the Cost Savings to Patients and the Economy,” Institute for Healthcare Improvement, 2019

By | 2019-11-05T15:14:38+00:00 February 25th, 2020|Categories: Healthcare|0 Comments

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