Sunday, December 07, 2008

Reducing Healthcare Spending Without Rationing

Many people are convinced that the only way to significantly reduce healthcare costs is by some type of rationing — limiting the kinds of services that health insurance will pay for.  But there are ways to significantly reduce healthcare spending without taking away anything that consumers want.

A perfect example is hospital readmissions.   Research studies and quality-reporting initiatives around the country show that 15-25% of people who are discharged from the hospital will be readmitted to the hospital within 30 days or less.  Many of these readmissions are for a complication or infection arising from the initial hospital stay.  In many other cases, they are simply a repeat of the same situation that led to the first hospitalization — for example, a patient with a chronic disease such as asthma, chronic obstructive pulmonary disease (COPD), or congestive heart failure who doesn’t understand how to manage their condition properly.

The patients certainly wouldn’t mind having fewer hospitalizations.   Billions of dolllars in spending on hospital stays could be saved if these hospitalizations could be avoided.    In other words, reducing readmissions is a win-win for both cost and quality, without a hint of rationing.  And study after study has shown that very simple, low-cost interventions, such as patient education about chronic disease management, can dramatically reduce hospitalizations. 

So what’s standing in the way of success?  Answer: the broken healthcare payment system.   In many cases, health insurers won’t pay for the services that would keep patients out of the hospital, even though they will pay every time they go in to the hospital.   (Many people believe that hospitals don’t get paid for readmissions, but in the vast majority of cases, they do get paid by both Medicare and commercial payers.)  And because of that, both hospitals and doctors would see their revenues decrease if hospital readmissions rates were reduced. 

Medicare and some commercial payers are now discussing whether to reduce or eliminate payments to hospitals for readmissions in order to create an “incentive” for them to reduce readmissions.   But this assumes that the cause of the readmission is under the control of the hospital.  In some cases it is, but in many cases it is not.  That doesn’t mean the readmission isn’t preventable, but rather that the change in care has to happen outside the hospital — often in the primary care practice.   And unfortunately, the payment system is broken there, too.

The solution?  Marrying the Patient-Centered Medical Home and Readmission Reduction.  More on that in a future post.



  1. […] From the payer’s perspective, it’s win-win-lose, not win-win-win.

  2. Pingback by Healthcare Quality and Payment Reform » Win-Win-Win Solutions in Healthcare Quality Improvement — December 8, 2008 @ 11:15 am

  3. […] held around the country about ways to reduce preventable hospital readmissions.

  4. Pingback by Healthcare Quality and Payment Reform » Marrying the Medical Home and Hospital Readmissions — January 25, 2009 @ 10:34 pm

  5. Colorado Public News has done some interesting reporting on healthcare reform. They’re also hosting a breakfast on Tuesday Jan. 25th. Dr. Michael Pramenko, President of the Colorado Medical Society will be discussing how Fort Collins has created one of the highest-quality and most affordable healthcare systems in the nation. For more information visit:

  6. Comment by Mandy — January 21, 2011 @ 5:19 pm

  7. The home health industry is one of the primary methods of preventing re-admissions, especially with acute and chronic cases, however the funding on this side of town is drastically decreasing. On the one hand, regulations are multiplying, presenting further strain on the fixed costs of home health agencies as they need more and more staff to track all the additional requirements. On the other hand, home health is expected to see about 14% reimbursement reduction over the next 4 years. The expected impact is that 40% of agencies just won’t survive the blow. How then to prevent hospitalizations and re-hospitalizations with such a strain on access to care?

  8. Comment by Mariam — March 26, 2014 @ 4:12 pm

  9. There are many other ways the cost of healthcare can be reduced. One is to have more people on health care as insurance works on numbers. The more the people insured the more spread the risk is and the cheaper it becomes. Secondly insurance fraud is a cost to the insurer that needs to be reducded much more or even eliminated. This are just tow example. I am sure there are other options if we really put our minds to it. for example insured persons that do not use their insurance for a whle year can be rewarded by paying lower premuims or they can get bac a portion of their paid premuims etc.

  10. Comment by Health insurance — January 9, 2016 @ 5:44 am

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