Compassionomics

  Let’s just say that it is unusual in this emergency department for a paramedic to talk with the attending physicians, let alone tell them what to do. And let’s just say that in this emergency department if that did happen it would be unusual for the attending physicians to listen.

  But this physician decided to take a different approach. After all, he did not have a good explanation for the patient’s blackout, so he was willing to listen to suggestions. And he had not considered carbon monoxide. Also, in his more than ten years of working in that emergency department, he had never seen a paramedic care so much about a patient’s well-being that she would come back specifically for the purpose of checking on a patient. That was special care. So, the physician agreed to do the test.

  There was definitely some eye rolling from the nurses when the physician ordered the test. And then the result came in…

  The nurse and the physician just stared at each other in disbelief. They repeated the blood test, thinking it must be a lab error, and got the same result. His carbon monoxide level was through the roof. It was more than ten times higher than the upper limit of the normal range for carbon monoxide level in the blood. It was a wonder that Joe was alive at all, let alone awake and talking.

  A level that high is such an emergency that they immediately started a special treatment called hyperbaric oxygen therapy to drive down the carbon monoxide level. Even though Joe survived the initial event in the workplace, he still could have suffered severe long-term side effects of a carbon monoxide level that high. The special care from the paramedic—going the extra mile for a patient—made all the difference.

  The physician went to thank Layla, but she was gone. But the story does not end here. Since the accident happened at work, the hospital toxicologist immediately called local authorities to check the warehouse to determine if others were at risk. When they arrived, the carbon monoxide meter read “error.” They could not even get a reading. That’s because the number—the carbon monoxide level in the air—was too high. They had to open up all the windows and doors to ventilate the area for quite some time before the meter would actually register a number. It was off the charts.

  Somehow, carbon monoxide was spilling unchecked throughout the warehouse. But here’s the most striking part: at the time that the authorities arrived to measure the carbon monoxide level, there were actually several people working in the warehouse who did not (yet) start to show symptoms.

  If it hadn’t been for Layla, a paramedic that cared enough to go the extra mile for a patient and come back to the emergency department with her revelation, many people could have died in that warehouse that night. And, in some sense, Layla’s special care had a major impact on the physician, too. How, you ask?

  Imagine being that physician at home later that night after he completed his shift and was sitting down to catch the local news headlines on television. What if he heard then that multiple people died from carbon monoxide exposure in a warehouse?

  The news reporter would have discovered that one of the employees was rushed to the emergency department earlier in the day, but that no one at the hospital put “two and two together” to identify that the employee was suffering from carbon monoxide poisoning and then check everyone else who was working in the warehouse that day.

  To this day, that physician swears that if they had missed that in the emergency department, and people died because of it, he would have been so devastated by his failure that he would have had to quit practicing medicine. He would have felt responsible, and there would be no way to recover from that kind of guilt.

  Never underestimate the power of going the extra mile for a patient. The ripple effects from this one act of compassionate care by Layla truly changed multiple lives.

  CHAPTER 7:

  Compassion Drives Revenue and Cuts Costs

  “Show me the money.”

  —Rod Tidwell

  You’ve seen the evidence that compassion can dramatically improve the quality of clinical outcomes. And yet, some may still be skeptical that compassionate care will ever truly become the new standard of care. After all, it’s really finance that drives change within the health care industry, right?

  Anything that is to become widely adopted needs to make good financial sense. No matter how strongly one might feel about the value of compassion from a moral standpoint, the health care industry will only see impetus for meaningful change if the dollars also add up.

  So, the next question is: Does the evidence show that compassion can make a difference when it comes to financial outcomes? The answer is an unequivocal yes. Compassion actually drives higher revenue and reduces cost for health systems and providers. The potential benefit is huge, when you consider the scope of the cost problem.

  We’re Drowning in Health Care Costs

  While it’s no surprise to any of us that health care is expensive, let’s take a quick look at some of the specific financial challenges the industry faces so we can fully grasp what we’re up against here. Then you’ll understand why the potential for compassionate care to “move the needle” on health care costs is such an important topic.

  If you were a person who had lived your whole life in a single town—someone who still took your kids to the very same pediatrician’s office you visited as a child—you would likely be struck by two things on a visit today, if you could compare it side-by-side to your visits as a child.

  First, you might feel comforted by how some things have remained the same. The office where your pediatrician practiced over the last twenty or thirty years might look very much the same, with the very same art on the wall and those slightly uncomfortable seats in the waiting room. You might smile as you watched children reading those familiar issues of Highlights magazine in the waiting room, just as you once did.

  But you know what would seem quite different? You wouldn’t see a lot of people writing personal checks and exchanging money as they checked in or out of the doctor’s office. Nope.

  You would also see a lot more staff behind the front desk than you remember from back in the day. What do all those new people do? They manage the huge tangle of insurance pre-authorizations and the bureaucracy of reimbursement that defines the U.S. health care system today.

  The practice of caring for patients has not changed much over the years, but the business of caring for patients has changed dramatically. And that business is incredibly complex and growing.

  Typically, something that’s growing means it’s becoming more profitable, but that is not necessarily true in health care. There are so many stakeholders and so many aspects of practice administration that, while overall spending is increasing at an alarming rate, some parts of the health care system are doing better, and others are not.255, 256

  Just as in the case of the pediatrician’s office described above, when physician offices—particularly in primary care—add more staff, they are responding to an increased administrative burden in order to collect revenue that does not always bring in more profit.

  The administrative costs of physician practices have grown sharply over time.257 A study from ten years ago showed how—even then—efforts around billing and insurance were eating away at 14 percent of physician office revenue. That same study also showed that 27 percent of office operating revenue was already going towards other administrative overhead.258 Again, that was more than ten years ago. Things have not improved since then.

  In reality, all those new people in that pediatrician’s office are just hemorrhage control. Their goal is just to stop the bleeding of lost revenue. And the end result of their efforts is that the practice will likely be stagnant or declining in profitability, compared to the previous year.

  It’s not just outpatient offices that have been forced to add administrative costs to deal with the complexity of the health care system either. It’s all across the healthcare industry. According to a Kaiser Family Foundation analysis of national health expenditure data from the Centers for Medicare & Medica
id Services, between 1970 and 2016, the percentage of health care costs attributable to administration more than doubled.259

  That can be difficult to appreciate, though—what “doubling” means for a problem of this scope. So, let’s bring a little perspective to the size of the U.S. health care system in terms of cost and money, courtesy of Steven Brill.

  Brill is a lawyer, journalist, and founder of the television channel CourtTV, the monthly law magazine The American Lawyer, and the news reliability service NewsGuard.260 In their March 4, 2013 issue, Time magazine, for the first time in its history, dedicated an entire feature section to a single article: Brill’s piece entitled “Bitter Pill: Why Medical Bills Are Killing Us.”261

  In the report, Brill tackles the complex, and often absurd, pricing schema that has developed within the U.S. health care system. However, it is his overview of the scale of the U.S. health care system that serves our purpose here:

  “According to one of a series of exhaustive studies done by the McKinsey & Co. consulting firm, we spend more on health care than the next 10 biggest spenders combined: Japan, Germany, France, China, the U.K., Italy, Canada, Brazil, Spain, and Australia. We may be shocked at the $60 billion price tag for cleaning up after Hurricane Sandy. We spent almost that much last week on health care. We spend more every year on artificial knees and hips than what Hollywood collects at the box office. We spend two or three times that much on durable medical devices like canes and wheelchairs, in part because a heavily lobbied Congress forces Medicare to pay 25% to 75% more for this equipment than it would cost at Walmart.”261

  So yes, costs are seriously high…and still getting higher.

  The U.S. spent 17.9 percent of the gross domestic product (GDP) on health care in 2016—that is $3.3 trillion, or $10,348 per person. It is projected to grow to $5.7 trillion by 2026 and, since health spending is expected to grow faster than GDP per year, the health share of GDP is expected to grow from 17.9 to 19.7 percent by 2026.262

  This growth in spending is driven by a number of factors, but an interesting one to note that is a change from prior decades is the so-called “Silver Tsunami.” That refers to the ten thousand baby boomers that turn 65 years old every day and, therefore, move from private insurance to government insurance (Medicare).263 That’s why Medicare is expected to grow in spending 7.4 percent each year until 2026.262

  Medicare is expected to grow in spending 7.4 percent each year until 2026.

  There is a similar situation that is also challenging state Medicaid programs as it struggles to limit the growth of costs. While Medicare covers those over age 65 (as well as the disabled), Medicaid covers individuals below a designated poverty level. Medicaid is expected to grow at 5.8 percent per year through 2026. The primary driver here is spending per enrollee (rather than enrollee growth).262

  As you might imagine, the politics surrounding Medicare and Medicaid are intense. Meaningful efforts for change—those that would impact the elderly, the disabled, and the poor—make major overhauls of these programs somewhat unlikely. Therefore, program costs will continue to gallop upward.

  Spending is rising throughout the health care system, and since so much of the private health insurance in the U.S. is tied to employment, it is causing employers—and consumers, too—to buckle under the pressure of being asked to absorb more and more of the health care tab. Measures that can help control costs, without cutting access or hurting quality, would likely be welcomed by all stakeholders.

  Health care costs have been growing for decades. While we are used to inflation as we look at costs over a timeline, the cost curve for health care is much steeper than it is for other items.256

  Figure 7.1: Rise in Health Care Costs Relative to Other Goods and Services (1960-2017). Health care costs are not only growing faster than all other costs in the economy, but they are outpacing them at an alarming rate.

  Source Labor Department

  (Walker 2018)

  Figure 7.2: Components of Rising Health Care Costs (2000-2016). The sharpest rise in health care costs is seen in prescription drugs and hospital care.

  Source Centers for Medicare and Medicaid Services

  (Walker 2018)

  Let’s put this into perspective. If the costs of all other goods had grown as quickly as health care costs since 1945, a gallon of milk today would cost $48! If that doesn’t make the point clear enough, let’s complete the breakfast analogy: You would need to shell out (no pun intended) $55 for a dozen eggs and $134 for a dozen oranges.264 That’s a pretty crazy cost escalation.

  So why has there not been more public outcry or outrage? The answer is that, even though we each feel our own medical pain acutely, very few of us actually feel much of our own pain from medical bills. We may pay co-pays or fill out paperwork, but several factors insulate us from feeling the full force of the rising costs.

  First, according to the Congressional Budget Office, as of 2016, almost 92 percent of Americans have some form of health insurance. So, while there may be a rise in premiums, the insurance model helps absorb and redistribute a portion of the cost burden. Secondly, and perhaps more importantly, health insurance does not pass on rising costs to individuals in the same way that individuals feel rising costs with consumer goods and services.

  The government regulates what individuals actually pay, when it comes to the 45 percent of Americans that have some form of government insurance (i.e., Medicare, Medicaid, or military). The 48 percent of Americans that have employer-sponsored insurance do see some costs passed along, but often employers absorb the majority of a rise in premiums to remain competitive for workers in the marketplace.265, 266

  Even the 6 percent of Americans that get insurance through the individual exchanges mandated by the Affordable Care Act are eligible for subsidies relative to their ability to pay. So they, too, are insulated from portions of rising costs.

  However, this pattern of accelerating costs (and subsequent insulation from them) cannot be sustained indefinitely. Between 1999 and 2009, the average American saw a 38 percent increase in salary, as health care premiums increased by a whopping 131 percent!267

  That means that either employers are absorbing those costs, they are being passed on to employees, or some combination of the two. Of course, if employers are absorbing the rising costs, this affects their ability to raise wages and salaries, so workers are being negatively impacted in an important way, whether they realize it or not.

  Health Care Costs Are Rising Faster than Revenue

  If the above scenario isn’t worrisome enough, consider this: Expense growth is outpacing revenue growth for most American health systems (and many health care providers) today. That’s the reason why Moody’s Investor Service, the bond credit rating agency, downgraded the whole health care sector from stable to negative in 2018.

  Expense growth is outpacing revenue growth for most American health systems.

  When analysts looked at the combination of the industry’s rising pharmaceutical, medical supply, and labor costs (the steep curve in Figure 7.1) next to lackluster volumes, the future for the health care industry just didn’t inspire confidence (despite overall growth in spending).256

  Why is revenue for organizations that provide health care diminishing? For one thing, people are putting off expensive procedures. For another, payers—who are looking to cut costs—are increasingly cutting their reimbursement to health systems for services rendered.

  At the same time, there is currently a shift in medical care from more costly settings (such as in the hospital) to less costly settings (such as an outpatient site) as technology and the advancement of medical knowledge about the safe practice in outpatient settings continues to improve.

  It’s also worth noting that 60 percent of Moody’s downgrades went to smaller hospitals and health systems.268 That’s because analysts know it’s easier for larger systems to absorb losses from a lower performing facility through a more profitable one. They can better offset any losses without a thr
eat to the whole enterprise.

  Small rural hospitals obviously don’t have that advantage, and they’re in serious trouble. In fact, in 2016, 50 percent of Pennsylvania’s rural hospitals operated at a net loss (compared to 29 percent of hospitals overall).268 These are also hospitals that have disproportionately large Medicare and Medicaid patient populations, so they get reimbursed at a lower rate than they would through commercial payers.

  When it comes to cost, the health care industry is teetering dangerously at the edge of a precipice. You might even call it a tipping point.

  Here’s why: In 2016, for the first time, costs eclipsed revenues in a major way. Sure, in the past, there were some lean years for the industry. There were even a few years when costs were a bit higher than revenue for the industry as a whole. But now the gap is widening like never before.269 There’s no sign of the cost escalation slowing down anytime soon.

  Figure 7.3: Revenue and Expense Growth Rates (Median) For Non-Profit Hospitals in the U.S. (2009-2017). Between 2015 and 2016 costs for non-profit hospitals began to rise faster than revenue, and eclipsed the growth in revenue in 2016 for the first time. The growth in expenses was a full 1% higher than growth in revenue in both 2016 and 2017. This means that the gap between cost and revenue in the health care industry is increasing. Figure prepared by Kevin O’Leary, Cooper University Health Care.

  In health care, there is a saying that is repeated quite often: “No margin, no mission.” It refers to the noble intent of many health systems to serve patients, particularly underserved populations, and the importance of money to succeed at it. Put simply, the only way to keep the doors open to serve patients is for revenue to outpace costs. The math is unavoidable. Otherwise, there is no way to pay the bills and keep the lights on.