Controlling Costs, Improving Outcomes for Health Care Programs

As health care costs continue to rise and the future of the federal government’s Medicaid matching formula is made uncertain by the upcoming election, states are looking for innovative ways to improve health care outcomes while controlling costs. Possible solutions and promising programs were presented at the Getting More Bang for the Buck session Dec. 11 at the 2015 CSG National Conference.

“Every state can have its own solutions but there is a common key—you pay differently for health care,” said Joshua Sharfstein, associate dean for public health practice and training at the Bloomberg School of Public Health at Johns Hopkins University. “You align your financial incentives with improved health care outcomes.”

Faced with a system that was close to imploding on Jan. 1, 2014, Maryland ended its fee-for-service system in hospitals. The state gave every hospital a global budget for the year that was not dependent on quantity of service provided. If hospitals could prevent admissions, they got to keep the difference.

After the new system was put in place, Sharfstein, who is the former secretary of the Maryland Department of Health and Mental Hygiene, visited a hospital in Cumberland, Md.

“I almost went home it was so quiet,” he said. The hospital was only 60 percent full.

The hospital put a team in place that worked with each patient to create a transition-of-care plan to prevent readmission. Their campaign to educate staff on patient care was nicknamed “we hope to never see you again.”

Another Maryland hospital took over the school health program because they were losing money every time a child was admitted to the hospital due to asthma complications.  

“Most hospitals make money when kids can’t breathe,” said Sharfstein. “Their financial incentive is for kids to be sick. That’s not a moral judgment; that is just a fact.”

Tennessee made a similar pivot from a floundering system in the 90s to a system that is considered one of the strongest in the country, said Darin Gordon, deputy commissioner of the Tennessee Department of Finance and Administration. The state moved from a fee-for-service to a managed care system in 6 months, although Gordin cautioned against making such a hasty shift and instead encouraged legislatures to make gradual changes.

“It is the tale of two decades,” said Gordon. “The first decade we perfected how not to do things and the second decade we learned from those mistakes.”

Gordon said good data is key to figuring out where the problems in the system lie and how to best use limited resources.  Although many states offer managed care for children and pregnant women, those populations are not the cost-drivers in health care. Rather, it is disabled and over-65 populations that require the most costly care.

“Know where your money is going,” he said. “If you legislate around your lower-cost drivers, it is not going to make a big difference.”

The state also focused on things that won’t show up on a hospital bill, but have an impact on health care costs. Health care coordinators tracked patients with high hospital admissions and were empowered to make decisions to help them address the causes. In one case, a coordinator tracked a 92 year-old woman who was regularly going to the emergency room despite no underlying health issues. The case worker was able to determine that the woman was lonely and going the ER for company. She helped the woman adopt a cat.