Commentary
10/14/2014
12:30 PM

Busting The Myth Of Uncontrollable Healthcare Costs

Healthcare expenses are as manageable as any other business expense, with the right data.



25 Years Of Health IT: A Complicated Journey
25 Years Of Health IT:
A Complicated Journey
(Click image for larger view and slideshow.)

A year ago, the launch of HealthCare.gov ushered in our country's most significant attempt to overhaul the healthcare system, expand access, and control costs. A recent report from the Centers for Medicare and Medicaid Services (CMS) suggests that these efforts have been partly successful, noting that healthcare spending growth in the United States slowed to just 3.6% in 2013.

But these broad, national numbers leave out a crucial part of the story. For large, private employers -- the ones who provide health coverage for roughly half of all Americans -- costs are still increasing. Premiums keep going up, and individuals and enterprises alike are footing ever larger bills.

Unfortunately, many business leaders and policy makers continue to believe the myth that, along with death and taxes, rising healthcare costs are an inevitable fact of life. There are any number of excuses given for this phenomenon -- the aging of the population, expensive medical devices, expensive prescription drugs, expensive lawsuits by expensive lawyers -- but there are two major problems with accepting this assumption at face value.

First, it has created a situation in which healthcare is a top-five business cost, but it isn't a top-five area of focus for enterprises. In what other area of business would a CFO accept the idea that one of the company's largest annual expenses is beyond its control?

Second, it is completely false. American enterprises spend $620 billion on healthcare annually, and of that spending, more than 30% is wasted. From overutilization of care to overpaying for lab tests to choosing higher-cost providers who deliver no better care, unnecessary costs can add up from all sides.

[Want to get software right? Read HealthCare.gov: Lessons From Continuous Software Delivery.]

Fortunately, there is a solution, and it's something that American businesses already use every day: data. At the same time as healthcare costs have been rising, enterprises have been learning how to apply data analytics to virtually every other area of their operations. From shipping and logistics to customer service and sales, data is now driving most of the core business decisions made in this country every day -- and enterprise technology platforms like Salesforce, Workday, and Zendesk make it possible for companies to manage this data effectively.

Yet healthcare is still being managed through faxes, handwritten forms, and standalone websites. The information flows in the same direction as the money: out. As a result, though plenty of data about healthcare cost and utilization is being generated every day, companies do not have insights into what they are spending.

This asymmetry of information has led to a merit-free marketplace in which the providers -- doctors, hospitals, labs -- have been able to charge whatever prices they want without regard to quality or competition, while those footing the bill -- enterprises and employees -- have had no way to compare prices or find the best value.

Our team at Castlight analyzed the numbers, and the results are exactly what you would expect in this situation. Take one procedure in one city, for example. In Chicago, the cost of a CT scan of the head and brain ranged from $323 to $1,817 with no correlation to quality or outcomes.

How the price of a head/brain CT varies across the country.(Image: Castlight)
How the price of a head/brain CT varies across the country.
(Image: Castlight)

In no other part of business would we tolerate this situation.

Thankfully, that's starting to change. Today, for the first time, enterprises finally have the ability to actually take control of their healthcare spending -- and to stop wasting 30% of it every year. Using the power of data analytics and the cloud, enterprises can fully understand and control their healthcare spending while improving outcomes for employees. Human resources and benefits managers can see where their cost drivers are, identify opportunities for savings, and reduce costs for everyone involved.

Taking control of this data also makes it possible to start engaging employees as active consumers by providing them with full transparency, offering the information they need to make better healthcare choices for themselves and their families. When an employee can easily see which doctors provide the best care at the lowest price, they are both more likely to get care they need -- saving costs down the line -- and to choose higher-value providers.

At the same time, by providing employees tools and incentives to easily access other benefits -- like wellness programs, telehealth services, onsite clinics, and health savings accounts -- employers can increase participation in programs they already pay for, improving the health of their workforces and maximizing the value of company healthcare spending.

Ultimately, healthcare costs are a business problem like any other, and this problem can be solved with enough information and the right tools. That's a good thing, too, because for American enterprises, this is not just an academic question; it's a fundamental matter of competition and survival. Surveyed this year, most business leaders said that, if they could reduce the cost of healthcare, they would invest the savings in employee wages, innovation, and technology.

That's not just good for business; it's good for America as more dollars can be invested (rather than wasted), growing our economy and keeping our people healthy.

The owners of electronic health records aren't necessarily the patients. How much control should they have? Get the new Who Owns Patient Data? issue of InformationWeek Healthcare today.

Giovanni M. Colella, MD, co-founded Castlight Health Inc. in 2008 along with Todd Park (former US CTO and co-founder of athenahealth) and Bryan Roberts, PhD (partner at Venrock). Gio brings more than 25 years of experience as a health technology entrepreneur, business ... View Full Bio
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