Thursday, October 10, 2013

"Cost".....what's it mean to you?

It’s interesting how perspective can change the way we define things and how the same word can be used almost interchangeably, yet have very distinct meanings.  With an estimated three billion fans worldwide, “football” is the most popular sport on the planet. However in the U.S., while “football” is still hands down the most popular sports league, to the majority of the population it’s played and means something altogether different.  The healthcare industry is primarily divided up into four major groups including patients, providers, payors, and everything else.  Due to factors such as stage of life and employment we have the potential to be in different or multiple groups at any given time and as a result depending on perspective, our definition of the word “cost” will change significantly.

In the early days of the sport primarily know globally today as “football”, among the upper echelons of British society the proper term for the sport was “soccer”.  It was not until it became more popular with the middle and lower class that the term “football” slowly began dominating over “soccer”.  While there were many types of “football” sports in existence being played
eventually a standard set of rules were created and the game gradually spread throughout the world under the lower class name of “football”, rather than “soccer” as the “gentlemen” called it.

If you think about it, the term “football” makes perfect sense because with the exception of the goalie, a majority of the play involves feet.  However in the U.S., the game played almost exclusively with hands is called “football” and the game played almost exclusively with feet is called “soccer”.  While both sports are played by two teams of eleven players on a rectangular field, likely do to its derivation (American football comes from a combination of rugby and soccer), that’s largely where the similarities end. 

In healthcare, the definition of the word “cost” can have varied meaning depending on who the cost is being attributed to.  From a patient perspective, it’s the amount an individual has to pay for the care that was provided to them or what’s commonly referred to as “out-of-pocket”.  From a provider perspective, it’s the amount the organization or health care provider has to pay for the resources needed such as personnel, supplies, drugs and equipment that are required to care for a patient.  Lastly, from a payor perspective, it’s the amount reimbursed or paid to the health care provider for the care given to the patient by the government (individual states & CMS) and health insurance companies depending on the individual patients’ coverage.

Unfortunately, these perspectives are rarely aligned in such a way that promotes efficiency or creates common incentives.  As pointed out in a recent book titled The Incentive Cure, “what ails the health care in the U.S. are the incentives. They're screwed up from top to bottom and until we change them, we can't cure health care.”  The result of this disconnect is a major component contributing to the reason that health care consumes nearly 18.0 percent of the GDP or almost one every five dollars that the government spends.  Also, it’s one of the main reasons “we spend twice as much per capita than most other countries on health care and don’t get better outcomes as a result” according to the Brooking's Institute.

The terms “soccer” and “football” will likely always be interchangeable among various populations, particularly in the U.S. where the popularity of football is dominated by the juggernaut that is the National Football League (NFL) and that’s just fine because there’s enough fans for both.  If the healthcare industry is to avoid continued skyrocketing costs and sending the federal health care program into the “death spiral” predicted by National Center for Public Policy Research it’s critical for incentives to be aligned between patients, providers, and payors.  However, at this rate, the differing “costs” of healthcare is an issue that will likely have a significant impact all Americans regardless of perspective.

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