Can saving money be expensive?

family dollars health care cost savings

A basic premise of the insurance business is that denying patients access to low-value providers or services (for example, through establishing narrow networks or refusing payment for things that aren’t “medically necessary”) will save money. With respect to providers and limited networks, most of that discussion is predicated on the assumption that “low value” equals “high cost.”

On paper, this makes some sense. But in practice, it’s clear to those who have taken a closer look that there are a few more factors to consider. These factors become especially important in pediatrics, generally, and for children with special health needs, in particular.

Are we taking the long view?

Most of the reporting about cost saving to date tends to focus on a relatively small set of high-volume adult procedures (such as knee MRIs or hip replacements). I think this is far too simplistic. How much we pay for a single procedure is important, but equally important is the cost of that child’s lifetime of care. Children with congenital and chronic conditions need ongoing support (clinical, social, developmental). Understanding the long-term impact of this spending becomes far more important than the cost of a single procedure.

A major disconnect on the part of insurers is that while child health is often thought to be about investing for the long term, payors are often incentivized to think in one-year increments. Someone in the system has to take responsibility for managing the long-term investment. If we debate for a year about whether to provide autism therapy to a young child, we will miss the relatively small window in which we can make the largest impact on that child’s long-term abilities (and related health care and social costs).

Are we considering the “externalities” of cost?

As a field, pediatrics provides a sterling example, unfortunately, of how costs related to externalities quickly add up. As long as I’ve been involved in child advocacy, I’ve been forced to participate in ongoing debates about who should foot the bill when a child needs a more comprehensive set of services (frequently around behavioral health issues). “Ownership” is tossed back and forth: is the service medical? Is it educational? Which state agency should take responsibility? I constantly find myself asking, “Does it matter?” It’s all the same child—and, honestly, the money often all comes from the same source: taxpayers.

In my experience, this kind of hair-splitting inevitably leads to higher overall costs, whether due to a resulting delay in care, or children being kept in more expensive settings while these payment issues are worked out. At the same time, there’s no real incentive for the medical payors to change the current system—and the system is rife with “medical necessity” denials. For the payor, if “it’s not medical,” the result is higher costs for others (including consumers forced to pay out of pocket).

Is caring for a child different from caring for an adult—and should the prices reflect this? Is caring for a more complicated patient different from caring for a generally healthy patient—and should prices reflect this?

Are we talking about prices or the total cost of care?

Health care costs are calculated based on the amount paid for a specific service (price) and the utilization of that service (use). They’re also impacted by how services are delivered (e.g., inpatient versus outpatient versus community settings). This recognition has led to some interesting work on global payments, care bundles and episodes of care, though few have been designed for children. As noted previously, these efforts require a good understanding of patients’ underlying risk profiles; that is, an awareness that some children are simply sicker than others and can be expected to need more services.

Are we comparing apples to apples?

Comparing similar things makes an assessment easy, but what if the things you’re comparing are different? For example, is caring for a child different from caring for an adult—and should the prices reflect this? Is caring for a more complicated patient different from caring for a generally healthy patient—and should prices reflect this?

There’s no question that specialized pediatric hospitals like ours have higher personnel costs. Children admitted to centers like Boston Children’s are, on average, twice as sick as children treated at hospitals elsewhere throughout the country. And as a stand-by hospital, we have equipment like a life-saving extra corporeal membrane oxygenation (ECMO) circuit that acts as a child’s artificial heart and lung—with trained personnel to run it. Should hospitals that provide this level of care be paid the same as hospitals that don’t?

Most policymakers, and indeed most payors, would acknowledge that these differences are important and that they attempt to address them, to some extent, in the payment methodologies of contract arrangements. However, these differences are not reflected in the consumer-facing prices that show up on websites. Nor is there much counter-balancing information for consumers about the differences in pediatric capabilities, volume, clinical experience or quality.

A foundation for success is taking ownership of managing long-term costs, which we can best influence by starting early. Let’s get all the payors, providers and insurers in a room and have a frank conversation about what measures matter, and to whom, and work from there. Until we’re more coordinated and can have honest, pragmatic conversations about controlling long-term costs, with buy-in from all the players, we’ll be stuck in this game of hot potato. And in the long run, that’s a losing game for everyone involved.

Joshua Greenberg, JD, is Boston Children’s Hospital’s vice president of government relations.