Addressing Rising Healthcare Costs: The Role of Patient-Centered Care

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By: Pietje Kobus

Key Highlights

Healthcare costs continue to rise, according to Harriet Torry of the Wall Street Journal, with the average deductible for employer-sponsored individual coverage up 47 percent over the past decade and nearly triple what it was 20 years ago.

As health coverage becomes more expensive and deductibles climb, patients are increasingly delaying necessary care, sometimes until they’re seriously ill. Dr. Thomas Schenk, CMO at Paradigm and a board-certified pediatrician with 25 years of experience, believes the growing cost burden is shifting onto individuals in a way that undermines system-wide efficiency.

Healthcare Innovation spoke with Dr. Schenk about how these economic pressures drive patients to skip early treatment – ultimately increasing costs as conditions worsen – and how patient-centered care models can reduce expenses, close care gaps, and improve outcomes.

Could you tell our audience a little about Paradigm?
We manage very, very complex cases for people who are catastrophically injured. The workplace has been a part of the traditional history of the company. Over three decades, we’ve gotten very specific and good at that, and we’ve been allowed to do so in a value-based model, which is how we work in workers’ comp right now.

Could you tell me a bit more about the rising deductibles we’re seeing and what led to this?
Healthcare has been steadily increasing in cost in this country, significantly over 30+ years. At one point, in the 90s, early 2000s, employers who are the primary sponsors of healthcare for most people started to really push back on how expensive it was to pay for health insurance for their employees. They started to approach insurers about how to cost-shift some of that. There was this kind of decision that was made strategically; We could create deductibles, keep the premiums that the employers were paying somewhat lower, but have the individual employees responsible for some of the cost of their care, and then, not only would that keep the prices lower for employees, but in theory, would make the consumer more selective and responsible about the care they were going to get.

Then, as the cost of care has continued to increase, I think people, employers, and plan sponsors have just kind of doubled down on this idea to the point where it’s really the thing. Now, I would say, even on the exchanges, when you’re buying your own insurance as an individual, there’s still a level of first-dollar deductible that’s included in many of those plans.

Now we’re seeing a greater cost burden on patients. Does this undermine overall efficiency?
I’m a pediatrician, and my experience is that for the first 15 years of my career — I was in a general pediatric practice — I was the business manager for that practice, and then I had an opportunity to transition into working for a payer. The thing that prompted my transition was this sense, as a primary care doctor, that somebody had to go into the payer side and try to explain to them exactly what they were doing and how people were receiving care, given products like high-deductible plans in the market. I thought I knew healthcare as a business really well when I was in practice. I was a little naive about what the drivers of the development of some of those products were. I think the central issue with having individuals share in the cost of care is that most people in the United States, even those who are employed, don’t have the kind of additional savings or cash flow to easily afford out-of-pocket costs for healthcare.

The impact has been that there’s been a disruption in continuity of care. People shop doctors. They’ll go to one doctor, and they’ll get a bill because of their deductible. They won’t go back to that doctor. They’ll go to a different doctor, and they’ll just carry over these sorts of debts at a bunch of different doctors because they can’t afford to pay the out-of-pocket costs in the moment. People obviously delay care. They try very hard not to spend those dollars, which has the impact, I think, that employers wanted; that it reduces, maybe the utilization of healthcare at some level, but it does at the expense of people’s overall general health, their satisfaction with the healthcare system, their ability to get the kind of care that they need in a timely, preventative way, as opposed to sort of last minute, high cost, urgent kinds of situations.

If somebody has a catastrophic new diagnosis and cancer diagnosis…very, very often our system drives people into very unfortunate financial situations.

What can be done to address this?
An approach that you could take, that really wouldn’t disrupt the existing paradigm, but would probably help people in general, would be to take a health literacy approach to just the way that healthcare works. I think that when people sign up for healthcare or pick a plan at work, even if they’re given a little bit of information about the plan, they don’t have enough education to realize what will actually happen in real life when they need healthcare. It’s challenging because the employers don’t help. They make it available, but they don’t necessarily help educate their employees on how to plan for those eventualities. If you get a plan and it has a high deductible, you really need to sit down and determine: Okay, how much money am I setting aside each paycheck to cover that deductible if I need care? People don’t have that level of literacy around their healthcare or financial planning. It creates a lot of burden.

As a company, we offer a platform in general healthcare that addresses people considering a surgical procedure. Not an emergency surgery, but any other kind of surgical procedure. They can come onto this platform, and it’s really geared toward improving their health literacy. When they go to talk to their doctor, they know the right questions to ask. They understand what their personal health risks are relative to that. They can explore with the health plan what their out-of-pocket costs might be, how to think about affordability around those costs, and, ultimately, how to plan the whole journey so they have the outcome they want. Not a bad outcome, and tons of debt from the decision that they made. I think that there’s examples where companies try to begin to take people down that path, but this idea that you could tell people you’re just going to owe money, but we’re not going to give you any tools to understand how to navigate that, hasn’t worked well in improving efficiency or the cost of care or the quality of care that we see.

Could you explain the concept of patient-centered care models?
In the 2000s, there started to be this push toward creating a model that really put the patient at the center, and this was kind of a primary care approach, pediatrics, family medicine, and some adult internal medicine. And leading up to that, for about 15 years, insurance companies in particular had been trying to make the primary care doctor the gatekeeper. If you wanted an X-ray, you knew you had to go see your primary care doctor and get the order. If you wanted to see a rheumatologist, you had to go to your primary care doctor and get a referral. That created a substantial amount of friction. They also weren’t compensating primary care doctors for that role. Conceptually, there was this idea that maybe we’re doing it the wrong way. Maybe what we need to do is think about how we wrap all of our services around a patient and put them at the center of things? How do you create a channel so that those patients can communicate more easily with their doctor? How do you ensure that when the doctor receives information about them, they engage the patient, so that the patient knows that that information is out there? Things like sharing lab results, making sure you have follow-ups to get people in for their annual visits, and coordinating care if they’re seeing a variety of subspecialists.

The concept of that was to create a place where we could reduce the redundancy in the care that people were getting, so they wouldn’t just go wherever they wanted and have doctors ordering the same tests over and over again. To create efficiency through reducing unnecessary, wasteful care, and at the same time, trying to improve outcomes by having one hand know what the other hand is doing. That was really the root of the patient-centered model.

There have been several pilot projects by the federal government and different state governments about patient-centered models, usually called something like advanced primary care, but you also see all this investment now in things like patient-centered models in oncology or patient-centered models in kidney disease. Who should be the quarterback of care, and that’s going to be the place where everything for that person kind of sits in one place and coalesces.

There has been some research that has been a little bit of a mixed bag. I think when it’s done as intended, it creates some efficiency, changes in at least the things we use for quality measures, and some cost savings, when it’s working well.

Do you feel like this is something we should go back to?
I think we need to continue to try to. We don’t have an overarching vision nationally for what care should look like. I think we need to figure out how to take the best lessons learned from that model. Then figure out how to ensure there’s some generalization of that across different markets and states. I think every payer, for instance, tries to incentivize that kind of model in primary care, but they all incentivize it a certain way, and they use certain metrics. You might be a provider in one market, like Western New York, where I’m from, with six different payers who all want you to be a patient-centered medical home, but they each want different data to prove it. It’s very challenging for medical practices and providers to figure out how to do it one way very well because of how their reimbursement/payment model works.

What do you foresee happening in the future?
I think in the very near future, there’s going to be this sort of rocky transition period, to be honest. We’re going to see many more uninsured people in this country. And when people are uninsured, what happens is they get care when they absolutely need it, so generally emergent and urgent, and the most expensive sort of care models that you can get. Because they’re uninsured, they very often can’t pay. Then, providers and health systems go back to the folks who do pay, and they need more money from them. You start to see in contracting negotiations expectations that hospitals and doctors will be paid more by insurance companies for insured people, and that, in turn, is going to put more pressure on businesses to say, you know, we need to continue to cost-shift.

I think eventually people will be upset enough and loud enough that our politicians will have to take some action. Hopefully, you’ll begin to see some controls about how you can really structure out-of-pocket costs for a person, and what is reasonable and what is not reasonable, and also what tools you have to provide individuals to be able to understand and navigate around the cost-sharing that they have. We’re going to see some short-term worsening of the pain of this, and then hopefully, in the long run, a recognition that we need to put some real energy behind healthcare accessibility, which is ultimately what is going to happen at the end of the day. We’re going to have a reduction in access, and then we’re going to have to do some things that really support access to healthcare in a timely way, and that’s going to have to address the out-of-pocket costs.

For healthcare costs up to a certain amount, we may just break the way that it’s funded if it keeps going this way. I think a patient-centered approach is something we’ll need to focus on and adapt to specific situations.