Heathcare Cost Checkup

Understanding Health Care Costs and Provider Engagement

By Joe Martin

Spring 2019 Catalyst

Recently, I addressed the Central PA Business Group on Health at the invitation of their Executive Director, Diane Hess. The CPBGH was founded in 1984 by a group of employers concerned about the cost and quality of healthcare benefits. The organization operates as an independent, non-profit affiliate of the Lancaster Chamber of Commerce, with a focus on serving employers based in Adams, Berks, Cumberland, Dauphin, Lancaster, Lebanon and York Counties.


Although the increases in the cost of healthcare have slowed in recent years, the cost trend is still going in the wrong direction — up! Employers continue to be frustrated by the trends and continue to search for solutions by accessing and understanding health care data and then understanding the options for change. I was asked to give my perspective on cost and quality trends in the central PA area, and how those fit statewide. The meeting, attended by a sold out audience of 97 participants, also featured a panel of area providers who discussed the role they play in helping employers address cost and quality issues.


I began my remarks with an overview of PHC4, highlighting the founding role in 1986 of the PA Chamber of Business and Industry and the leadership roles played today by PA Chamber President Gene Barr, Vice President Sam Denisco and other business representatives on the PHC4 board of directors. I also noted, with appreciation, the long-standing support for PHC4’s mission by regional healthcare business coalitions around PA.


Next, I presented a bird’s eye view of health care trends in central PA, also measured against statewide benchmarks. Here are some of the highlights:


PHC4’s recently published “Hospital Performance Report” showed a significant decrease in patient mortality rates in central PA-based hospitals for six medical/surgical conditions from 2012-2017. The most significant decline was in respiratory failure, where the rates dropped from 17.4 percent to 7.4 percent. The other areas of note were stroke, kidney failure, heart failure, pneumonia and sepsis (blood poisoning). We estimate that these decreases resulted in 786 lives saved. We also know that an in-hospital death is very expensive, so there was also a significant cost savings.


We see a similar trend for patients who were re-admitted to central PA hospitals during the same time period, with respiratory failure again leading the way. The other conditions were heart attack, acute kidney failure, heart failure, stroke, sepsis and abnormal heart beat.  This resulted in an estimated 629 fewer hospital readmissions and $6.6 million in avoided hospital payments by Medicare, Medicaid or commercial insurers.


We also see reductions in the area of “super-utilizers.” These are patients who are hospitalized very frequently, typically people with a chronic illnesses like diabetes, at great expense. But central PA residents were hospitalized at a much lower rate (15/10,000 residents) than their statewide counterparts (21.6).  Central PA hospitals are also clearly having a positive effect on the opioid epidemic. So we can observe that central PA residents are receiving excellent care from their local providers, especially across these highlighted medical categories.


Orthopedic procedures presented another picture. This is an area of great concern for employers. Recent PHC4 reports have shown significant upward spikes in the rates of hip and knee replacements, as well as spinal fusion. This is especially noteworthy in the dramatic increases for those in the middle-age working population.


In carving out the central PA rates for these procedures, we can see that residents had a higher rate of hip replacements per 10,000 residents (23.4) than statewide (22.6). This variation was more pronounced for knee replacements: 42.1 per 10,000 central PA residents, compared to 36.7 statewide. With an average hospital payment of $12,500 for both hips and knees, these cost differences quickly mount up. I questioned, for the audience, why these rates would be so different, especially since they are adjusted to account for age factors. I noted that the group of business leaders could be an excellent catalyst for discussions with local providers about these trends.


My discussion was followed by a panel of local executives from Penn Medicine/Lancaster General Health, Penn State Hershey, UPMC Pinnacle and Wellspan Health. All good presentations but in my opinion, the most insightful comments were made by Jan Bergen, CEO of Penn Medicine/Lancaster General Health. Ms. Bergen referred positively to the data I presented about super-utilizers, which has been a big focus of Lancaster General, and segued to remarks about what are called “Social Determinants of Health.”


For several years now, PHC4 has included several SDOH factors in its assessment models. For example, we adjust for age and sex. We report on geographic variations, racial and ethnic disparities, education levels and socioeconomic status. This relatively new area is driving a change in the way health care stakeholders think about, measure and pay for health care — a focus on population health. This involves increasing prevention and wellness efforts to help people become healthier and avoid costly hospital stays. It involves evaluating areas like housing, transportation, nutrition, drug and alcohol addiction and so on — all of which can be potential contributors to poor health outcomes. We also need to develop different payment systems that reward providers for keeping people healthier in the first place. Ms. Bergen noted that this is a critically important effort for her health system going forward and stated that: “Poor socioeconomic conditions equal poor health outcomes equal significantly higher costs — something we all care about.”


As PHC4’s Technical Advisory Group Chairman (and founding dean of the Thomas Jefferson University School of Population Health) Dr. David Nash often remarks: “Addiction thrives in communities that don’t.” We could expand or paraphrase that to say: “High health care costs thrive in populations that don’t.” And we all pay for those costs one way or another.


The Central PA Business Group will be holding a health summit focused on social determinants of health on May 30th in Lancaster. For more information go to https://www.cpbgh.org.


Joe Martin is executive director for the PA Health Care Cost Containment Council.