Small Ideas for Saving Big Health Care Dollars

Jodi L. Liu, Deborah Lai, Jeanne S. Ringel, Mary E. Vaiana, Jeffrey Wasserman

RAND Health Quarterly, 2014; 4(1):4

RAND Health Quarterly is an online-only journal dedicated to showcasing the breadth of health research and policy analysis conducted RAND-wide.

Abstract

A focused review of recent RAND Health research identified small ideas that could save the U.S. health care system $13 to $22 billion per year, in the aggregate, if successfully implemented. In the substituting lower-cost treatments category, ideas are to reduce use of anesthesia providers in routine gastroenterology procedures for low-risk patients, change payment policy for emergency transport, increase use of lower-cost antibiotics for treatment of acute otitis media, shift care from emergency departments to retail clinics when appropriate, eliminate co-payments for higher-risk patients taking cholesterol-lowering drugs, increase use of $4 generic drugs, and reduce Medicare Part D use of brand-name prescription drugs by patients with diabetes. In the patient safety category, ideas are to prevent three types of health care–associated infections: (1) central line–associated bloodstream infections, (2) ventilator-associated pneumonia, and (3) catheter-associated urinary tract infections; use preoperative and anesthesia checklists to prevent operative and postoperative events; prevent in-facility pressure ulcers; use ultrasound guidance for central line placement; and prevent recurrent falls.

Small ideas do not require systemic change; thus, they may be both more feasible to operationalize and less likely to encounter stiff political and organizational resistance.

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Small Ideas for Saving Big Health Care Dollars

January 30, 2014

Full Text

There is broad consensus that the rapid increase in health care costs is America's most vexing and most critical domestic policy problem. Victor Fuchs, considered by many to be the father of health economics, has been quoted as saying, “If we solve our health care spending, practically all of our fiscal problems go away” (Kolata, 2012). Peter Orszag, former director of the Office of Management and Budget, has written that “Rising health-care costs are at the core of the United States' long-term fiscal imbalance” (Orszag, 2011). The Congressional Budget Office has identified growth in spending on mandatory health care programs, particularly the Medicare program, as the single greatest threat to the solvency of the U.S. government (Congressional Budget Office, 2010). And a recent RAND study revealed that a decade of health care spending growth wiped out the real income gains of average American families (Auerbach and Kellermann, 2011).

Many proposals for tackling the health care cost problem have been offered. But for decades, the health policy process has been in a state of perpetual gridlock. This is, in part, because many proposed policies—for example, tort reform, pay for performance, and changing Medicare and/or Medicaid eligibility requirements—are both sweeping and controversial, and they often threaten the economic interests of one or more key stakeholder groups. Passage of the Affordable Care Act is an exception to the gridlock, but cost-reduction proposals that require legislation will clearly be difficult to implement.

In this research, we have reversed the policy perspective and tackled the cost problem by thinking small. That is, rather than focusing on large, controversial ideas for reducing health care expenditures, we explored relatively focused approaches that would, for any particular idea, generate modest cost savings. The annual health care spending in the United States is $2.8 trillion; we cannot afford to leave money on the table.

The ideas we consider are based on RAND studies. They represent a small sample of all possible cost-saving ideas and therefore may not necessarily be those that are the most promising or most feasible. However, because RAND's research portfolio spans the health policy spectrum, our list of small ideas may serve as proof of concept of the types of initiatives that are possible. The net could be widened—for example, by searching the literature, asking experts, looking at projects funded by the Center for Medicare and Medicaid Innovation, and looking at the lists created by specialty societies of evidence-based recommendations that should be discussed to help make wise decisions about the most appropriate care for an individual patient. Promising candidate ideas could be subject to the same cost and feasibility analysis we have conducted, potentially highlighting opportunities for modest cost savings.

Table 1

Small Ideas for Saving Big Health Care Dollars

Cost-Saving Idea	Summary	Key References
Substituting Lower-Cost Treatments
Reduce use of anesthesia providers in routine gastroenterology (GI) procedures for low-risk patients	The use of dedicated anesthesia providers for routine GI procedures is deemed medically justifiable only for high-risk patients. Eliminating these services for low-risk patients would reduce costs.	Liu et al., 2012
Change payment policy for emergency transport	Changing Medicare's reimbursement policy would allow emergency medical service agencies to carefully manage selected patients in alternate ways. For example, transporting patients with non-emergent conditions to alternate care locations, such as a physician's office, or treating them on scene could generate savings for Medicare.	Alpert et al., 2013
Increase use of lower-cost antibiotics for treatment of acute otitis media (AOM)	Most antibiotics used to treat uncomplicated AOM (middle ear infection) in children at normal risk have similar rates of clinical success. Amoxicillin is a less costly and equally effective alternative to cefdinir.	Coker et al., 2010
Shift care from emergency departments to retail clinics when appropriate	For certain medical services, retail clinics offer lower-cost care of comparable quality. About 8 percent of all emergency department visits could take place at retail clinics. For analytic purposes, it was assumed that patients would select the appropriate place for care.	Weinick, Burns, and Mehrotra, 2010
Eliminate co-payments for higher-risk patients taking cholesterol-lowering drugs	Reducing co-payments can motivate patients to comply with drug therapy and manage treatment of chronic illness, thereby reducing hospitalizations and emergency department visits.	Goldman, Joyce, and Karaca-Mandic, 2006
Increase use of $4 generic drugs	Only a small percentage of Medicare beneficiaries take advantage of existing $4 generic drug programs. Policies could encourage program use among beneficiaries who have not been using them or among those who could save the most; Medicare would also capture cost savings.	Zhang, Zhou, and Gellad, 2011
Reduce Medicare Part D use of brand-name prescription drugs by patients with diabetes	Medicare beneficiaries with diabetes use two to three times more brand-name drugs, at substantial costs, compared with a similar group within the Department of Veterans Affairs.	Gellad et al., 2013
Patient Safety
Prevent three types of health care–associated infections:
Central line–associated bloodstream infections	The use of recommended practices for reducing central line–associated bloodstream infection—including hand hygiene, barrier precautions, chlorhexidine use, topical antibiotic use, education, checklists, and catheter kits—can avert infections, leading to reductions in treatment costs.	Shekelle et al., 2013; Scott, 2009; Umscheid et al., 2011; Waters et al., 2011
Ventilator-associated pneumonia	The use of prevention bundles—including head-of-bed elevation, sedation vacations, oral care with chlorhexidine, and subglottic suctioning endotracheal tubes—can avert pneumonia infections, leading to reductions in treatment costs.	Shekelle et al., 2013; Scott, 2009; Umscheid et al., 2011; Waters et al., 2011
Catheter-associated urinary tract infections	The use of strategies to encourage appropriate catheter use—including education, protocols on appropriate use, hospital/unit policy for appropriate catheter placement, computerized orders and removal reminders (for example, checklists, verbal/written reminders, stickers on charts or catheter bags, e-reminders) or stop orders—can avert infections, leading to reductions in treatment costs.	Shekelle et al., 2013; Scott, 2009; Meddings et al., 2010; Clarke et al., 2013; Saint et al., 2005
Use preoperative and anesthesia checklists to prevent operative and postoperative events	The use of checklists, such as the World Health Organization Surgical Safety Checklist, has been shown to reduce surgical complications. The reduction of surgical complications is potentially cost-saving if the checklist intervention costs are less than the treatment costs for surgical complications.	Shekelle et al., 2013; Semel et al., 2010
Prevent in-facility pressure ulcers	The use of interventions to reduce in-facility pressure ulcers—including components focused on organization (teams, policies, procedures, quality evaluation, staff education, and communications), prevention (risk and skin assessment, moisture management, nutrition and hydration optimization, and pressure management), and care coordination—can reduce the incidence of pressure ulcers and the associated treatment costs.	Shekelle et al., 2013; Sullivan and Schoelles, 2013; Rosen et al., 2006
Use ultrasound guidance for central line placement	The use of real-time ultrasonography for central line placement reduces complications and associated treatment costs; effectiveness has been shown for patients in the emergency department, patients on ventilators, and critical care patients, among others.	Shekelle et al., 2013; Calvert et al., 2004
Prevent recurrent falls	Medicare benefits for patients with a prior fall including physician payment for a fall risk assessment, reimbursement for rehabilitation therapy, and payment for a follow-up visit. Payment for these benefits is cost-effective and potentially cost-saving by preventing recurrent falls among high-risk elderly.	Wu et al., 2010; Shekelle et al., 2003

Table 2

Savings Estimates for Small Ideas

Cost-Saving Idea	Estimated Annual Savings (2012 U.S. dollars in millions)
Substituting Lower-Cost Treatments
Reduce use of anesthesia providers in routine gastroenterology procedures for low-risk patients	$1,200
Change Medicare payment policy for emergency transport	$290–$580*
Increase use of lower-cost antibiotics for treatment of uncomplicated acute otitis media	$36
Shift care from emergency departments to retail clinics where appropriate	$3,500 ($1,200–$4,400)
Eliminate co-payments for higher-risk patients taking cholesterol-lowering drugs	$1,300
Increase use of $4 generic drugs	$5,900 ($4,900–$6,800)
Reduce Medicare Part D use of brand-name prescription drugs by patients with diabetes	$1,500
Subtotal for substituting lower-cost treatments	$14,000 ($10,000–$16,000)
Patient Safety
Prevent three types of health care–associated infections:
Central line–associated bloodstream infections	$18 (—$55–$200)
Ventilator-associated pneumonia	$47 (—$5–$110)
Catheter-associated urinary tract infections	$100 (—$88–$170)
Use preoperative and anesthesia checklists to prevent operative and postoperative events	$170 (—$110–$950)
Prevent in-facility pressure ulcers	$2,400 ($1,600–$4,400)
Use ultrasound guidance for central line placement	$56
Prevent recurrent falls	$900
Subtotal for patient safety	$3,700 ($2,300–$6,800)
Grand total	$18,000 ($13,000–$22,000)
* The midpoint of the range was used as the best estimate in the totals. NOTES: The savings estimates for each idea and the totals are rounded to two significant figures. A negative estimate indicates a net cost.

Table 3

Feasibility of Small Ideas

Cost-Saving Idea	Political Feasibility	Operational Feasibility
Substituting Lower-Cost Treatments
Reduce use of anesthesia providers in routine gastroenterology procedures for low-risk patients	Medium	High
Change Medicare payment policy for emergency transport	Low	High
Increase use of lower-cost antibiotics for treatment of uncomplicated acute otitis media	High	Medium
Shift care from emergency departments to retail clinics where appropriate	Medium	Medium
Eliminate co-payments for higher-risk patients taking cholesterol-lowering drugs	High	High
Increase use of $4 generic drugs	High	Medium
Reduce Medicare Part D use of brand-name prescription drugs by patients with diabetes	Medium	Medium
Patient Safety
Prevent three types of health care–associated infections:
Central line–associated bloodstream infections	High	Medium
Ventilator-associated pneumonia	High	Medium
Catheter-associated urinary tract infections	High	Medium
Use preoperative and anesthesia checklists to prevent operative and postoperative events	High	Medium
Prevent in-facility pressure ulcers	High	Medium
Use ultrasound guidance for central line placement	High	Medium
Prevent recurrent falls	High	Medium

Summary

Our focused review of recent and current RAND Health research identified a handful of small ideas that if successfully implemented could, in the aggregate, save the U.S. health care system $13 to $22 billion per year. Small ideas have the virtue of not requiring systemic change; as a result, they may be both more feasible to operationalize and less likely to encounter stiff political and organizational resistance.

The ideas obviously differ in the amount of potential savings offered. However, they also differ substantially in terms of political and operational feasibility.

Patient safety ideas have high political feasibility, and it seems unlikely that stakeholders would oppose them in principle. Preventing infections, pressure ulcers, and falls is a sign of good care, and each of the patient safety ideas encapsulates a quality-of-care goal to be pursued in its own right. However, the need for behavioral and cultural change may make these ideas more challenging to implement. For example, implementation may require changing well-established habits and beliefs of nurses and physicians.

The patient safety ideas offer only 28 percent of the savings that could result from implementing ideas in the category of substituting lower-cost treatment. But ideas in this latter category are likely to be more challenging to implement.

Consider, for example, the idea of reducing use of anesthesia providers for low-risk patients undergoing routine GI procedures. The estimated annual savings from implementing this idea are in the range of $1.2 billion. The idea is moderately feasible from a political perspective—one might anticipate pushback from some professional organizations or provider groups. However, the idea appears to be relatively straightforward to implement. Presumably, reimbursing GI anesthesia providers only for high-risk patients would provide a financial incentive for low-risk patients and providers to choose mild intravenous sedation, often administered by the endoscopy team. This was the standard procedure before the introduction of propofol in this clinical environment, and it is an option that many patients say they prefer.

On the other hand, in a generously insured fee-for-service environment, it has proven very difficult to control “treatment creep”—that is, the extension of treatments that are beneficial for some patients to other patients who are less severely ill or who have different diseases. In addition, it is hard to enforce such criteria as “high-risk patient” when it is the provider who assesses whether patients are high-risk and profits more if they are.

To take another example: Increasing use of lower-cost antibiotics for treatment of AOM offers modest savings of about $36 million annually. It is highly feasible politically, but it has lower operational feasibility because physician treatment practices may be difficult to change, given that antibiotic use interventions may be limited to guideline changes or educational materials.

Our analytic exercise highlights areas where modest savings could be generated without systemic changes. Going forward, a promising tactical approach to cost reduction, especially in a highly polarized political environment, may be to identify and implement small ideas, ultimately saving big health care dollars. We hope that this paper will serve as a catalyst to others. Our methodology could provide a model to suggest what cost savings might emerge from other studies.

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This article describes work conducted as part of our RAND-Initiated Research program and was funded by the generosity of RAND's donors and by fees earned on client-funded research. The research was conducted in RAND Health, a division of the RAND Corporation.