Since the Affordable Care Act first came to the American stage, great strides have been made to make healthcare accessible. Now, healthcare policymakers are turning their focus to healthcare affordability.
Despite ongoing efforts to make healthcare affordable, costs continue to rise. What other levers could be moved to make a difference in healthcare costs? The answer is to look further upstream to the social determinants of health.
We see four key drivers of healthcare costs that providers and payers are focused on: affordable coverage, healthcare accessibility, healthcare usage, and patient journeys. Understanding these four drivers explains why providers and payers have paid so much attention to transforming operations in acute care and inpatient settings.
Affordable Coverage. According to Healthcare.gov, the official Affordable Healthcare website, a job-based health plan covering only the employee (“self only”) that costs 9.56 percent or less of the employee’s household income is considered “affordable.” This guideline means if you make an annual salary of $65,000, a health plan that costs you a little less than $6,500 annually for only yourself is considered affordable by federal standards.
However, your healthcare costs will rise if you need more care than what that annual spend accounts for, especially when a large part comes from the premium you pay every month, or you need coverage for more than yourself. Affordable coverage is an essential driver that continues to be watched.
Healthcare Accessibility. This is the availability of health services, along with where or when it can be accessed. There are three components to accessibility—gaining entry into the healthcare system (coverage), accessing a location where services are provided on an ongoing basis (geography) and providing healthcare quickly after the need is identified (timeliness).
If you don’t work for a company that provides healthcare and you are not eligible for the State’s Medicare or Medicaid offerings, or you live in an area where getting the care you need is challenging on an ongoing or immediate basis, then accessibility to healthcare is likely a source of higher healthcare costs than average.
Healthcare Usage. This refers to how often, what type and when care is used. There are three determinants of utilization—how much healthcare people use (frequency), the types of healthcare used (chronic disease treatments vs. wellness prevention) and the timing of that care (stage of life, for example, whether you’re a baby boomer or a millennial).
If you are relatively healthy and get your routine exam once a year, you are not likely to “use” healthcare very frequently and costs may remain low on a regular basis unless there’s an emergency. On the other hand, if you face a chronic disease, your situation is likely to cause you to use healthcare regularly, and costs are constant and enduring. And when you think of these two scenarios from the stage of life you are in, an aging population can be a predictor for higher costs incurred later in life vs. early in life.
Patient Journeys. A patient’s journey refers to what a patient (or who we now refer to as a consumer) experiences when healthcare is accessed. When you think of the type of “transactions” you experience across the continuum of care for a broken leg vs. a chronic disease, that journey may be very different and so will its associated healthcare costs. At the same time, some components in that journey may be similar, such as a focus on improving health outcomes, patient registration, billing or discharge processes.
This means that when multiple providers and payers together focus on increasing efficiencies across the care continuum, the chances of reducing costs in the long term is higher and will ultimately translate down to the patient. This effort to streamline patient journeys refers to “connected care.” And connected care refers to not just existing providers along the continuum of care, but the connections in the healthcare and life sciences ecosystem (biopharmaceuticals and medical devices).
As healthcare costs continue to rise, payers and providers are increasingly examining the healthcare value chain for cost reduction possibilities. We know most of a patient’s health journey occurs in settings other than the hospital. In fact, 80 percent of a person’s health experiences occur outside of inpatient settings. This is not a new insight, but it is receiving more attention.
Looking further up the healthcare value chain to the social determinants of health could have a significant impact on healthcare costs, especially in cases where patients have a high incidence of repeat hospital visits.
The social determinants of health—safe and secure housing; English-language proficiency and cultural understanding; health literacy and educational level; transportation access; access to healthy, nutritious food choices; public safety and interpersonal violence; social support and caregiver availability—can offer additional insights to healthcare costs.
For example, without consistent access to transportation, provider appointments are regularly missed, leading to episodes in the emergency department for an exacerbating issue that could have been handled by the routine visit. The discovery and treatment of this issue earlier could’ve prevented the high costs incurred by the emergency department visit.
The key question is, how far do we think providers and payers should go in taking responsibility for these social determinants of health? The answer lies in the data. When payers and providers alike join forces to track the social determinants of health and their impact on clinical outcomes, the chances of moving healthcare to a value-based care model is higher. From there, reducing healthcare costs is even more possible because the aggregated data will reveal trends and high-risk areas to impact.
Additional insights are also more readily available to providers and payers. Providers who track the social determinants of health have more visibility into how to care for their population's welfare holistically, and that focus leads to greater success in overall quality measures.
At the same time, payers that are increasing their connection to a community’s social structures provides benefits not just for an individual’s health but for an entire population’s health.
Providers and payers may not be responsible for addressing the social determinants of health, but if they had access to the data, they would have another opportunity to drive health costs down.
Nina Miranda is a healthcare expert at PA Consulting.
Our new value-based care research shows why putting patients at the centre of healthcare is important and how to do it