lso contributing to this article were director John Andrewes and manager Nicanor Rios, both of PwC US.
The continual volatility surrounding healthcare policy in the U.S. can have the effect of paralyzing decision making. At the same time, however, it is clear that improving affordability and removing cost and waste from the system are no-regrets moves that will pay dividends under virtually any policy scenario. Taking such steps can make healthcare companies of all sorts more resilient to changes.
Studies (pdf) indicate that about 30 percent of U.S. healthcare spending is wasted or unnecessary. Companies that focus on both short- and long-term measures can make significant headway toward reducing such waste. And as the healthcare system evolves into one in which providers are paid for value rather than volume, a law that impacts Medicare will provide a powerful stimulus for action — and potentially create new lines of business.
First, the short term. We believe the U.S. healthcare industry could reduce medical costs by 5–7 percent in the next 12–18 months — in the absence of significant reform. That is to say, the industry can simply do a better job of managing costs in the existing fee-for-service (FFS) model without fundamentally altering the practice of medicine. Companies can take three short-term steps in this regard. First, identify the major sources or drivers of waste in their particular areas — for example, overuse of the emergency room, avoidable readmissions, not optimizing the site of care for infusions. Second, use this knowledge to create a detailed utilization heat map — call it a “utilization MRI” — that will allow the industry to pinpoint which geographic areas, providers, particular facilities, departments, and procedures are the source of waste. Third, take aim at those specific targets using levers such as reimbursement policy, prior authorization, and provider and consumer incentives.
Although such efforts can yield results quickly, the largest margins can be gained only if the industry focuses on long-term efforts to reduce costs and waste much further. And the most likely way to do that lies in continuing to adopt and expand value-based care. The idea of compensating providers on outcomes and the quality of care, rather than on the volume of services, has been around for a couple of decades. But a significant piece of legislation passed two years ago has given a fresh impetus for one of the largest purchasers of health services to stimulate innovation in value-based care.
Read more: https://www.strategy-business.com/blog/Improving-Healthcare-Affordability-in-a-Volatile-Time