Yes, I’m still on the rising healthcare costs topic. The issue is so important that I felt it’s worth another blog since we have even more evidence that costs continue to go in only one direction–up.

This time the source is the Milliman Medical Index, produced by the independent actuarial and healthcare consulting company of the same name.

Milliman reports that healthcare costs for a family of four have doubled in the past 10 years. They rose 7.3% in just the past year. The only good news I see in the report? The annual rate of increase appears to be slowing somewhat, and actually dropped 0.5% between 2010 and 2011, the lowest rate since Milliman began the index.

I don’t know about you, but as an employer, I still find the overall data frightening and it affects the morale of my employees.

The largest increase came in hospital spending. As the report notes, while hospital spending is just 48% of total healthcare spending, it accounts for 60% of the increased costs. I find this interesting given the increased emphasis over the past decade on reducing lengths of stay and shifting more procedures to an outpatient basis. The reason? I think that the patients who are hospitalized are simply sicker; sicker patients require a higher level of care, which, of course, costs more.

The Centers for Medicare and Medicaid (CMS) have several initiatives designed to slow inpatient costs. One targets hospital-acquired infections, which occur in about 5% of all hospitalization, significantly higher in intensive care units.(1)(2,3) Infections also increase lengths of stay, deaths, and healthcare costs, with an estimated 1.7 million hospital-acquired infections resulting in 99,000 deaths in 2002, with costs ranging from $28-45 billion.(4, 5)

Now, however, if patients develop a hospital-acquired infection hospitals have to absorb the cost; CMS will no longer pay for the related hospitalization. In addition, CMS as well as many states now post infection rates on the Web for all to see. Hospitals have taken notice and are getting serious about reducing infection rates. They are implementing stricter infection control efforts and, at least in some instances, seeing infection rates fall. (6,7)

The Centers for Medicare and Medicaid have also stopped paying for readmissions that occur within 30 days of discharge. Again, hospitals are instituting efforts to reduce such readmissions, which can be as high as 25% for some medical conditions.(8)

It will take some time (and greater participation of the nation’s hospitals) to know if these efforts translate into significant cost reductions, but I’m betting (and hoping) they will.

Bob Fabbio
CEO, WhiteGlove Health