Managing Rising U.S. Healthcare Costs

Increasing costs create challenges for some, but opportunities for those who embrace effective analytical processes to make the best decisions. 

A recent article in the Wall Street Journal discussed the continued rise of healthcare cost in the US. By 2025 it is projected that healthcare costs will be at 18% of the GDP. Yet research has shown that among the Organization for Economic Cooperation and Development (OECD) member countries, the US has las lower life expectancy at birth and higher mortality for death from respiratory disease, coronary artery disease and diabetes than the OECD average.

A key question becomes how can we decrease the cost of healthcare while simultaneously maintaining or improving the effectiveness of treatment programs? How can an organization health system, ACO, medical group, insurer, government, measure this so as to compare choices?

This is where Cost Effectiveness Analysis (CEA) can provide clear metrics to help determine how differing approaches to healthcare programming and delivery will affect policy change. In chronic diseases such as Diabetes and Coronary Artery Disease, Markov modeling has shown to be an ideal method to determine the cost effectiveness of different treatment approaches over time. One can compare a newer method or medication, or both, to a more standard treatment and see how the cost effectiveness accumulates over time.

Since CEA uses dollars per Quality Adjusted Life Years (QALY), one can quantitatively analyze how effective different treatments or methods are toward the particular disease. This way, policies can be chosen which not only cost less, but can help patients the most over time. It takes a subjective evaluation like effectiveness and turns it into a measurable metric researchers and policy developers can analyze.

The application of CEA using Markov modeling will provide clearer guidance as to how treatment policies should be elucidated, and in the long run can help reduce healthcare costs overall while maintaining and even improving the quality of healthcare delivery and outcomes. It can also be used to quantitatively monitor the effectiveness of new policies once implemented.

If your objective is to provide the best decision-making for your organization and take a global view of your business, expanding your sights beyond ROI, and educating other decision-makers, Cost Effectiveness Analysis can make your organization more competitive and more profitable.