Cost Effectiveness of Health

Addressing U.S. healthcare system challenges requires a focus on improving health, not just care

October 22, 2021 9:55 pm

To successfully meet the financial challenges facing our healthcare system, our nation needs a change of focus — from focusing primarily on improving healthcare delivery to reduce healthcare expenditures to focusing more broadly on improving cost effectiveness of health on a societal level, which also will promote improved health of the population.

HFMA has been a leader in calling for such a shift in perspective because it gets to the core of the challenges the U.S. faces in maintaining a healthy population at a fraction of the cost we are now paying for healthcare. Indeed, our nation in not alone in moving toward a focus on cost effectiveness of health. It has become an international goal, embraced by all G20 nations.

In describing HFMA’s underlying rationale for a focus on cost effectiveness of health, Todd Nelson, FHFMA, MBA, the Association’s director of professional practice and partner relationships, said: “The question we need to ask at every point is, What’s the best outcome possible and how can how can that be delivered with the greatest value?”

Here, Nelson expounds on the compelling reasons why improving cost effectiveness of health is such an important goal for the healthcare industry and our nation overall.

Todd Nelson, FHFMA, MBA


Why is HFMA so committed to this goal? Why is the focus on cost effectiveness of health so important?


HFMA started with the value project a decade ago as a way we could work with other stakeholders — not just financial folks — to talk about a shift to value in the eyes of a purchaser, by which I mean whoever’s paying for care. And the work was excellent. We came out with strategies for value-based care even as federal government and state and local government were also developing value-based care strategies. But the effort missed an important component, which has come more into the forefront in the past few years: the notion of focusing on health and not just care. And we want to push that notion even further.

When we think about cost-effectiveness of health, part of it is doing things like investing in social determinants of health — food and nutrition, housing and transportation, for example — that are essential for helping folks maintain a healthy lifestyle so that they don’t need care. It’s thinking through investments in the healthiness of a community, because the most effective way to think about costs is through preventing the need for care in the first place.

The other part of it is looking for the optimal outcome based on cost. And that could be choosing a different methodology when there is an unavoidable need for some care intervention — say, looking at physical therapy or exercise for a patient instead of hospitalization or surgery. It’s about evaluating the full range of appropriate options for someone once they become a patient from an outcome and total cost perspective.


And what does HFMA see as being its role in this effort?


HFMA sees an important role for itself in being a credible convener, bringing in all the various areas through the continuum, just like we did for the value project or for our thought leadership retreat, where we nurse, physician, health-plan and IT leaders joined us at the table. And just as we’ve done with many other projects where we bring the players to the table to talk about issues that sometimes can be tough to discuss, it’s the right thing to do. And that’s because for all of us, it’s the patient who is in the center. That’s the key here.

Remember, when you’re talking with clinical colleagues about improving the health of the community, that is their sweet spot. That’s what they went to training for — to improve the health of a patient or the community. And frankly, many IT professionals working on the EMR are clinical in nature, trying to harness the data for decision making and better health, as well. So if you can start the conversation with talking about improving workforce and satisfaction by investing in things that improve the health of the patient and the community, that’s the win-win that helps open up the door for conversations on all these issues. Because none of these issues are easy.


And getting everybody at the same table gives  everybody an opportunity to start to understand the pressures each stakeholder group  is experiencing.


Absolutely. And the pain points or concerns. There’s a lot of shared understanding that we have little opportunity to talk about these issues enough because we are fighting those fires. And this is a way we can take a step back and think about the bigger picture — something different from a pandemic or a financial crisis.


I’ve also heard cost effectiveness of health referred to as not just an issue for healthcare and healthcare’s stakeholders to solve, but it’s really our society at large that has to be engaged in the efforts. So there might be some advocacy required. How should the hospitals and health systems get involved in that?


Hospitals and health systems should start by working with community organizations. Some are already in the very local community, but also there are large employer associations, like the Pacific Business Group on Health, they can work with to engage your employers. They also can reach out to national policy leaders who represent folks in the area of patient advocacy, and they have AARP from a retirement perspective. It’s about changing behavior and getting everyone involved.

In the pandemic, for instance, we saw telehealth explode for two reasons:  It was the only way to get essential care for a lot of people who couldn’t come into the facility, and the payment models and the payment rules changed to help access be affordable for patients and their families. That was a policy decision.

Those are the kinds of national policy and regional policy discussions that need to happen around looking at paying for prevention and investing in community health differently from how we have approached it in the past, which was typically an afterthought rather than being funded in the forefront. We have a great opportunity for stakeholders to come hand in hand and say, “This is important. If we’re going to change the focus from American healthcare to American health, then we’ve got to all work together.”


What can organizations do to get started?


There’s a lot that can be done right now to get things moving in the right direction. There are organizations working on benefit design that rewards healthy employee behaviors, which has led to better health outcomes and lower costs. And there are organizations that have stood up for food pharmacies or that have formed foundations that invest in housing within their communities. It’s happening right now.

Hospitals and health systems also have done a good job of providing education to encourage healthy behaviors, but it’s usually after an episode of care happens. They certainly do community prevention and community wellness programs, and it’s part of their mission to provide that education – but many of these are unfunded initiatives, so it’s a balance.  

But they’re not in the home. And it’s not enough to just send out a flyer or wait for patients to come to the hospital or health system. You need to partner with other community organizations to reach people. The effort needs to go through the schools and the education system, and every other community organization can play a role — religious and athletic organizations and community leadership. Hospitals and health systems can play a role in banding those groups together to think about what those healthy behaviors are and how best to reinforce them, because if you wait to reinforce them until there’s an issue, you are too late.

And it’s at the front line where you need to have that discussion about health — whether it’s reaching out through primary care with various prevention methods, or whether it’s in the schools where you can reach out and talk about things like prevention, positive habits and screenings. The front line is the place to do it. We have excellent proceduralists, but when the patient is on the operating table, that’s not the time to say to them, “You know, this would have gone a lot better if you dropped 20 pounds.” We need to start those conversations sooner and, as a society, make some of those habit changes.


What role should healthcare finance leaders play in advancing this effort? How should they view it?


This pandemic has finance leaders looking at huge pressures on the bottom line — taking care of staff, workforce development, all those pressures right now. And people just have limited bandwidth to do much else. At this point, they might be thinking, “How can we justify thinking through this again?”

But it’s important to remember that most hospitals, health systems, physician practices and even health plans actually have been working on this for a long time. They’ve been investing in these things, but there hasn’t been a coordinated effort among all of them to work together. Hospitals may be doing it in a silo, for instance, or they might be saying, “I think that’s a health plan problem  —  of course, it’s important to do that, but it’s really not our issue.”

But that doesn’t mean people haven’t been working on it.

The point is, this is not an issue for our health finance leaders alone to tackle. What’s really needed is sharing knowledge and collaborating  —  working with physician leaders and nurse leaders; working with pharmacists; working with dieticians; working with IT staff to collect the data, analyze and disseminate; working with health plan leaders to talk about benefit, design and investments in community. And then it’s also working with local public health agencies and other community agencies.

It’s really more about saying, “Hey, we got into healthcare as health finance leaders not just because of finance  — we also got into health, and we have a mission focus, and that’s the important part of it that sometimes we don’t get to focus on as much. This is an initiative that helps you get involved with your heart by not just focusing always on the finance piece, but also getting into that collaboration and mission focus that can provide a lot of personal fulfillment.


If there’s one piece advice you might have for healthcare finance leaders, what would it be?


As finance leaders, we are too often the brakes in a project — we’re the ones who are put in a position to have to say no. We hardly ever get to be the accelerator — the one who is the investor who puts our foot on the gas. So this is an opportunity for finance leaders to take a leadership role and make some investments in improving the nation’s overall health. That’s why all of us are in this field. It’s to make people better once they’re unwell, but even before that, it’s our mission-based focus to improve the health of the population. And the focus on cost effectiveness of health gives us a great opportunity to do that and collaborate with our peers in other parts of the industry.

As long as we have a system focused primarily on care, there will continue to be pressure on healthcare finance people to focus only on lowering costs, because the payments related to the care our organizations are delivering will continue to be ratcheted down. And that’s because the costs are unsustainable. The opportunity for us as healthcare finance leaders is to lead a shift in thinking to invest in earlier actions, to not let the overall costs of care, which contribute to higher and higher costs of health, get even more out of control than they are right now.

Cost effectiveness of health and value-based payment: Are they the same or different?

Value-based care and cost effectiveness of care are related, and indeed the focus on the former is a component of the focus on the latter, says Todd Nelson, HFMA’s director of professional practice and partner relationships.

“Value-based payment is a component of cost-effectiveness of health because it is focused on how you pay to incentivize value, which is based on quality metrics, patient experience, metrics and cost,” Nelson said. But it’s the care component of it — it’s not the health component, where the focus is on improving the healthiness of your community and avoiding or preventing episodes of care. Think of it this way: If you don’t see patients come into the hospital for care, and you’re under the value-based payment model, you don’t receive payment. But it still incentivizes patients to come in to get the care they need, and that’s important. And you won’t promote  health in a population cost effectively if patients aren’t getting care when they need it. So value-based payment has a role to play.”






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