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How to save $100B in health system

By Paul Metts

9/22/2009 © Health News Florida 

It is possible to reduce the cost of health care services throughout the United States by approximately $100 billion per year, or $1 trillion over 10 years. 

It’s simple: Offer routine health care in a non-profit, low-cost environment. 

In Florida, this can be accomplished by using the more than 500 existing clinics where the uninsured and underinsured can become regular patients for all their non-emergency health-care needs. These clinics are currently administered by County Health Departments and Federally Qualified Health Centers.

The bonus: People who now go without treatment until health problems become severe would get better healthcare.

Data from the Agency for Health Care Administration have shown that about 56 percent of encounters in Florida hospital emergency rooms aren’t really emergencies; they could be handled better well in clinics such as those operated by county health departments and non-profit federally qualified health centers. 

That would save a lot of money. Studies by the Department of Health, based on the 2005 AHCA Hospital ER Report, have shown that for approximately $75, such clinics can provide treatment for an episode of illness that would cost on average more than $1,000 in a hospital emergency room. 

Of course, there would need to be extended hours and more clinics, more staff, longer hours. That would create another bonus – new jobs. 

Emergency rooms would no longer be overcrowded. Patients who actually need emergency services would get more attention.
The potential savings of emergency-room diversion and avoidance of unnecessary inpatient admissions would exceed $10 billion annually in Florida.

Government doesn’t have to manage the process, only incentivize it. The framework for change is already present, it merely needs to be creatively modified. First, adjust Medicaid and Medicare payments to reward the delivery of care in a cost-effective environment. In addition, redirect $1 billion of Low Income Pool (LIP) funds to their intended public purpose ,”… to create systems of care to improve access for the uninsured.” 

Right now, that money is going to hospitals -- not the most cost-effective way to improve access. Unfortunately, many hospitals view this $1 billion dollar pool as a “slush fund” to reimburse underfunded, high cost emergency room services. 

Since a significant majority of LIP council members (15 of 17) are currently hospital administrators, this misdirected distribution of resources will probably continue. 

However, if those with vision (and some members of the council fit that description well) looked at using the funds in a way that provides incentive to redirect care to low-cost settings, hospitals could save far more than they will ever gain by trying to continue the subsidization of high cost care. 

Simply put, eliminate excess costs, and stop struggling to reimburse them. Everyone benefits when this occurs.

--Paul Metts, who lives in Gainesville, Fl., is former CEO of Shands Healthcare at the University of Florida
and former Deputy Secretary, Florida Department of Health.