The Toughest Questions in Health Care: Why Is the Cost of Health Care So Expensive?

If you’ve ever received medical care, you’d likely agree the cost of care can be expensive. According to the National Health Expenditure Accounts, U.S. health care spending grew 4.1% in 2022, reaching $4.5 Trillion. 

For the fifth episode of our “The Toughest Questions in Health Care” series we're asking the question, "why is the cost of health care so expensive?" ChristianaCare Chief Financial Officer Rob McMurray and ChristianaCare Chief Population Health Officer Dr. Chris Donohue-Henry share insight on health care economics. Hear how challenges are being met with pioneering solutions to reduce cost while simultaneously boosting the quality of care. 

Rob McMurray is the Chief Financial Officer, responsible for the direction and oversight of all financial operations at ChristianaCare. He also has oversight of supply chain operations.

Dr. Christine Donohue-Henry, M.D., MBA is the Chief Population Health Officer at Christiana Care. She is also the President and CEO of eBrightHealth ACO.  Prior to her current role, Dr. Donohue-Henry was the Chief Medical Officer, Community Care at ChristianaCare from 2017 to 2019


Links

• ChristianaCare Price Transparency
• ChristianaCare ChargeMaster  
• Delaware Medicaid Partners 
• eBrightHealth ACO
• National Health Expenditure Data 

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Transcript

Megan: 0:15

Hospitals will lead the way in driving costs down for overall health care spend into the future Megan McGuirman.

Jason: 0:20

And I'm Jason Tokarski. Welcome to another episode of For the Love of Health brought to you by Christiana Care.

Megan: 0:26

If you've ever received medical care, you'd likely agree the cost of care can be expensive. According to the National Health Expenditure Accounts, US health care spending grew 4.1% in 2022, reaching $4.5 trillion.

Jason: 0:43

It's a complicated topic with a lot of contributing factors. So for the fifth episode of our toughest questions in healthcare series, we're asking the question why is the cost of healthcare so expensive?

Megan: 0:54

Here to help us tackle that question are Christiana Care Chief Financial Officer, rob McMurray, and Christiana Care Chief Population Health Officer, dr Chris Donahue-Henry. Rob and Chris, thank you both so much for your time today.

Rob: 1:07

Megan thanks. Thanks for having us here.

Chris: 1:08

Yeah, we're glad to be here.

Megan: 1:10

Obviously, the cost of care is a complex topic, hence why it's one of our toughest questions in healthcare. How can we explain it to the general audience so that they truly understand how cost of care works?

Rob: 1:23

You know, when we talk about the cost of care, really what we're referring to is health spend and those numbers that you mentioned a moment ago refer to national health spend. There's a lot of components of that. Hospitals, which is what we are most familiar with. Hospitals represent about 30% of that spend. So across the country, we may think when we think about healthcare, we think hospitals right, because it's what we may think when we think about healthcare, we think hospitals right Because it's what we associate with. We see them, we go to them, we know where they are, they're important to us as a community. Hospital care is only 30% of that spend. Physician care is roughly 14% to 15% of the total health spend. So combined hospitals and physician care is less than 50% of the total spend. So it's really important to maybe unpack what those numbers are and those increases.

Rob: 2:08

You mentioned a 4.1% increase and really what's interesting to me, when you look at the data and the four years leading up to the pandemic, 4.1% is lower than any of those year increases. When you look at, then, the different types of spend, hospital spend went up about 2.2% this past year, so 4.1% in total. 2.2% was hospitals and I think physician was closer to 2.5%. So 45% of the total spend increased between 2% and 2.5%. So the other 55%, what's in there? That's really important to unpack as we want to analyze spending. So what might be in there? You have things like skilled nursing facilities, home health. There may be insurance costs. Pharmaceuticals is in there, right, and when you look then at other increases, you see that this past year pharmaceuticals increased eight and a half percent. So it's important, while we talk about an important spend like health care across the country, to unpack those and then really see what the drivers are, because that helps shape our strategy at Christiana Care and define some of what we're going to do about it.

Megan: 3:21

So if those are the components of cost, how is health care paid for?

Rob: 3:26

In several ways. There is insurance. Most of us who are employed have some type of employer-sponsored insurance. There's also governmental payers, like Medicare or Medicaid, and then there's a small portion of the country that goes without insurance. So those are the, I'll say, the categories of insurance, or how health care is paid for.

Jason: 3:45

Obviously, there are multiple payers involved when it comes to paying for healthcare. What is the current mix of payers? What does that look like in the system?

Rob: 3:53

At Christiana Care, what I can speak to, what we reflect, is somewhat what you see across the country. Two-thirds of our payer is governmental programs, medicare or Medicaid. About 30% is commercial insurance or employer-sponsored insurance. So if you're an employee, you have an employee health plan that typically carries commercial insurance. That's about 30% and then the remainder again is those who may not have insurance. And what's really important to note from my perspective is to think about those different payer categories. So for ChristianaCare, two-thirds of the work our caregivers do taking care of patients, two-thirds of the work is for people who have governmental insurance, medicare or Medicaid predominantly. And why is that important? Insurance, medicare or Medicaid predominantly. And why is that important? Well, when you think about things like the cost of care and the cost to provide care, medicare and Medicaid on average, this past year raised our rates, our reimbursement rates, less than 2%. So the cost of care to ChristianaCare is really important and we have a lot of strategies in place driven at the quality of care and the cost of care.

Chris: 5:07

That's exactly right, rob. In fact, we've had our Medicare ACO since 2016, really focused on our Medicare patients. Similarly, our Medicaid ACO launched in 2021. And that is really an alternate payment model by which we can better address a patient's quality outcomes and total cost of care, really by focusing on care coordination and how we transition patients through the system and, ideally, really care for them in the outpatient setting.

Megan: 5:39

So those ACOs, accountable care organizations, what kind of success have you seen?

Chris: 5:44

with those. So in our Medicare ACO we have saved CMS $54 million since we started and then similarly with the Medicaid ACO. We actually started with a significant downside arrangement with Medicaid in 2019. And through now from 2019, we have saved the state $7.7 million.

Jason: 6:08

So what are the key drivers of costs in healthcare plans at this point?

Rob: 6:12

You know, the drivers for the cost of anything really come down to two broad components. There's the cost to provide that service, whatever it may be, and then there's the demand for that service, the usage of that service, or in healthcare, what we like to say is the utilization of those services. That's really important. When we investigate the cost of care and why healthcare is expensive, how does that play out? Well, you think about a patient. A patient has insurance, whether it's governmental or employee-sponsored, whatever it may be. They're making decisions. They're making decisions either on their own or, preferably with the advice of a physician, on where they're going to get care, what care they're going to get and when they're going to get that care. Those three pieces right, we like to say right care, right place, right time. It's really important. It's not a cliche, because that will drive costs of care.

Rob: 7:05

Where I think it's important to investigate or consider is what drives human behavior. When you look at things like utilization, there are employers who have sponsored health plans that do not have that creativity built into their health plans. There are no incentives or disincentives for their population and, as a result, their experiences are higher cost of care, they have higher utilization, they have a higher cost trend and ultimately they have less healthy employees and dependents, and it's because they haven't designed their health plan accordingly to drive the right results. You can put design functions in place so that employees, consumers of care, will likely see their primary care physician, maybe on an annual basis, depending on the features of the plan. Maybe they'll have programs like tobacco cessation, for example. Maybe there'll be disincentives that will essentially pass more of the cost of an emergency department visit to that plan participant or that employee, because you don't want somebody that doesn't need to go to the emergency department to go to the emergency department.

Chris: 8:18

With our benefits team here at Christiana Care. We sat down probably three years ago and talked about the health risk assessments that many employers do for their employees and the fact that there's really no evidence to show that that drives down the cost of care. What does is that the is connection to a primary care provider, it improves screening for health conditions and it improves the total cost of care. So we actually changed our benefit design here at Christiana Care in order to incentivize that primary care visit and saw significantly increased use of primary care through doing that and, as a result, a decrease in our total cost of care. So it absolutely played out here and continues to. So what?

Rob: 9:05

I hear you saying is by shaping those those benefits the behaviors we're driving care to a lower cost setting, avoiding a higher cost setting, driving down cost overall. And I think what I hear you also saying is we have healthy people, healthier people as a result. So the benefit of that, the overall benefit of that, is healthier people utilizing the right care at a lower cost, greater productivity out of those healthier people as well.

Megan: 9:34

As you're having these internal conversations, you're also focusing on value-based care. Can you walk us through?

Chris: 9:40

that Sure so value-based care. Can you walk us through that Sure so value-based care essentially is population health, so how you manage a population of patients and generally we think about a population as a population under a payer so Medicaid, medicare or different commercial insurance and in that model there are expectations to meet, quality measures and then expectations around total cost of care. So if you're able to decrease cost year over year while maintaining or increasing quality for that population, there's an opportunity for both the health provider and the payer to share in that savings. And ideally that share in the savings that the payer receives also goes on to improve the dollars back to the employer, so it helps the affordability of that care as well.

Megan: 10:31

Chris, you are a primary care physician. How does this improve care?

Chris: 10:36

for the patient. The way that this improves care is it drives primary care docs to engage regularly with their patients. And we talk about not just visits with patients but the time between visits when patients may have questions, may have concerns about medication, may have side effects that they need to talk to a clinician about. And what we're really working on at Christiana Care is building that infrastructure for the between-visit care, working to build care management patients between those visits, which ultimately leads to better chronic disease management, better cancer screening, better control of behavioral health conditions, which also are significant factors here, but overall leads to improved health of our populations we serve.

Megan: 11:38

So in the national conversation of value-based care, I've heard the term risk associated with this. How is it a?

Chris: 11:45

risk. Well, it's risk in the sense that if you commit to decreasing the total cost of care and you don't achieve a decrease, then that loss, if you will, is shared between the payer and the provider.

Jason: 12:00

So we've talked a lot about quality of care and efficiency and wellness. Dive a little deeper into that. What are we doing here, specifically at Christiana Care, to get further into this controlling of cost?

Chris: 12:11

So over the last many, many years Christiana has been focused on our inpatient quality, driving to centers of excellence in our hospital, working with hospital-acquired infections, zero harm, and that work has been tremendous. At the same time, we've been building our capabilities in the outpatient space to better manage patients to keep them out of the hospital. Our next horizon is really to bring the two together to think about how the whole care continuum is focused on population health and that means length of stay. How are we getting patients who do need to be admitted in the door the right care as quickly as possible and have them go home at a reasonable time frame? And really focusing on efficiency overall and Project.

Rob: 12:58

Bedrock overall and Project Bedrock. Project Bedrock is an enterprise-wide project that is focused on driving operational performance right. So it's across the clinical spectrum, it's across the administrative spectrum, all across the organization, in really driving down overall cost and looking at ways that we can be more efficient changing what we do, changing how we think, changing how we work right to become more efficient.

Rob: 13:31

At Christiana Care we launched this project about a year and a half ago. We've paired up administrative leaders with clinical leaders and gone after projects to say what can we do differently about, let's say, efficiencies in an operating room? And we have a very formalized, rigid structure to identify what these opportunities are. We measure them and then we report back. This happens on a weekly basis. There's other work streams as well. One of those is supply chain right. So we look at ways that we can get better contracts with our supplier providers, use products more efficiently and so forth, looking to drive efficiencies to drive down that cost. We've realized we have a responsibility at Christiana Care to help control that cost of health spend. Even though the hospitals are only 30%, we are looking broader across all of healthcare to drive that down.

Jason: 14:24

Recently, ChristianaCare was ranked as the number five health system by Money Magazine, which is awesome. Congratulations. Money Magazine gave ChristianaCare an A for price transparency. What does that mean? What is price transparency and how does that benefit the community?

Rob: 14:39

And aside from Money Magazine, there is an independent price transparency verification provider called Turquoise. Turquoise gave us their highest level, their highest rating. We were the first hospital and health system in Delaware and in the region to get that highest rating. It is about making transparent the costs for the services we provide to patients, so that could be on a procedure by procedure or visit by visit, Whatever those services are. We've posted those charges and then mapped it against the major insurance providers to say this is what you can expect to pay when you come to Christiana Care for that service.

Rob: 15:20

At Christiana Care there's a key word in our mission and that's called value, and we want all of the people that we serve in all the communities we serve to understand that value, but it's the value through their lens. So we'll give them tools like posting our charges online to show that transparency. And we also offer ability for patients or members of the community to give us a call and we have counselors and other assistants to help with understanding what the costs of care are, because they are complex. It goes beyond price transparency but it really supports it. When you look at the ways that we bill people, we are looking at friendly billing options, and some of those are electronic. So if you go to your doctor at Christiana Care, you can have the opportunity to have your bill sent to you via text or an email.

Rob: 16:09

And what's really interesting in this, and where I see the value, is that there's a feedback loop with this transaction. So if I'm a patient and I get a bill from my doctor, I can pay it online on my phone and then I can review or provide feedback about my visit. I can provide feedback about the payment. We had a patient and she used this transparent payment system and provided feedback, and her feedback was I didn't realize that I could take advantage of a payment plan for my services. What really was important and what this patient said was I have trouble paying for my care. I was going to avoid care. I was not going to go back to the doctor because I didn't think I could afford it, but with a payment plan, I realized that I can and I'm going to get that care. That's transparency in action. That is the value of transparency, whether it's on a website with charges, whether it's a phone call or whether, if it's the way we can help bill people and provide that feedback loop, is really important.

Chris: 17:15

Rob, that is so important. I can't tell you how many times I've had the experience of having a patient bring in a bill from an inpatient stay and be very, very concerned about the charges. They're not understanding this was in the past and another health system, but it really has the potential to get in the way of healing for that patient just having been admitted and really goes such a long way to promoting their wellness long term.

Megan: 17:42

And Chris, let's dive a little bit deeper into that your experience in primary care. Why is this so important, at the end of the day, for the average listener right now?

Chris: 17:52

I went into primary care because I believe in prevention, I believe in wellness, I believe in keeping people healthy. I believe value-based care is the way we can do this together because it allows for a different payment model that doesn't incentivize frequent hospital utilization. In these type of payment models, it incentivizes us building infrastructure to keep patients healthier and out of the hospital.

Jason: 18:20

This is part of our series of the toughest questions in healthcare, and it's not just about what's happening right now. It's using the crystal ball to look a little bit into the future. So what does the future of healthcare costs look like to each of you?

Rob: 18:34

I wish I had the crystal ball to tell you, but what I will say is I am optimistic about the cost of care going forward. We shared some stats earlier. We talked about that 4% increase year over year. Hospitals and physicians are at 2% to 2.5%. What we are doing is starting to make a difference, as Chris mentioned a moment ago.

Rob: 18:53

When you talk about value-based programs, you talk about the investments we are making right, whether it's a project bedrock internally that's focused on efficiencies, or where we are making investments for places to get care. What do I mean by that? We recently announced neighborhood hospitals that we are investing in. So you're talking about a lower cost setting to provide care. We have partnered with some private physicians on ambulatory surgery centers. In the area we have three of those that takes a surgery that could be done in a higher cost environment in an acute care facility into an ambulatory surgery center Same quality, lower cost, better experience.

Rob: 19:34

Right Now, there's always a reason to have certain surgeries in the hospital, those that can be moved out. We are doing that. That is less revenue for us as a health system, but we know it's the right thing for the patient and it drives down cost. We are also investing in technologies. We're talking about things like hospital at home. We're talking about things like virtual nursing, skilled nursing at home. Right, these are right care, right place, right time. This is about getting care in a home. It's cheaper, it's better experience, it's better in the long term.

Chris: 20:04

I am highly optimistic and confident that hospitals will lead the way in driving costs down for overall health care spend into the future being successful in population health and doing the things we need to do, making the changes, making the commitments we need to propel us forward. I can tell you that our clinicians are also very invigorated by this model, thinking about how to care for patients in a different and a better way, and those are the conversations that we're having across the organization and really just see unlimited potential in the future.

Megan: 20:48

Rob and Chris. Thank you both so much for your time today. Thank you.

Jason: 20:51

We'll have more information on the cost of care, including a link to Christiana Care's price transparency site in the show notes at christianacareorg.

Megan: 20:59

And while you're there, you can subscribe to For the Love of Health on Apple Podcasts or Spotify and follow Christiana Care on social media. We'll be back in two weeks with another great conversation.

Jason: 21:10

Until then, thanks for joining us for the Love of Health.