Thursday, August 25, 2011

Hotspots for Healthcare Savings

A fascinating story came up on PBS' Frontline in July.  Dr. Jeffrey Brenner started analyzing billing data for healthcare utilization in Camden, NJ.  He was able to detect "hotspots" of high healthcare utilization.  He found that 1% of Camden's residents account for 30% of its healthcare costs and that 5% of its residents account for 60% of the costs.  By focusing extra attention on these high utilizers Dr. Brenner has been able to cut their costs by 40%-50%.  And the story goes on to ask the obvious question: what if this could be applied to the entire nation?

As you can see from previous posts I've been playing around data from the Medical Expenditure Panel Survey (MEPS) and I thought it would be interesting to see if these same kinds of "hotspots" could be found nationally.  In fact, MEPS actually looked at this themselves several years ago, and they also have their own very informative report on healthcare costs using the same 2008 data I used for the charts below.

One thing I found interesting is that 16% of Americans produce no healthcare costs whatsoever, while the other 84% of us cost $1.15 trillion in 2008.


Next I looked at who is paying for what and for who.  I thought it was interesting that private insurance and private individuals paid for more than half (57%) of the total bill.  Also, while the pharmaceutical industry gets a lot of bad press, hospitals (29% or $330 billion) and physicians (24% or $271 billion) receive a larger share of the pie than pharma (22% or $247 billion).
As for Dr. Brennan's observations, it appears that the national picture is somewhat different - though still quite attractive from a "hotspot" perspective.  Here the top 1% of utilizers generate $211 billion or 18% of all healthcare costs, and the top 5% of utilizers generate $504 billion or 44% of the bill.  If Dr. Brennan's methods were to achieve similar success nationally then between $84 billion and $106 billion in savings might be achieved.  That's 7.3%-9.2% of the total bill, not too bad.

However, the doctor's program has costs.  It costs $225k to save 40%-50% of $10 million in his case.  So the cost is between 4.5% and 5.6% of the savings which would work out to be somewhere between $3.4 billion and $6.4 billion at the national level.  Taking the program cost into account reduces the savings to between $78 billion and $103 billion, or between 6.8% and 9.0% of the total bill.  I'd say that's money well spent.

But one of the points the doctor makes is to use the data to find the ripest areas for intervention.  So, who are these top 1%?  What do they look like?  Luckily the MEPS data has lots of information about its participants.  Here's a profile:


The chart compares the top 1% to all utilizers across a number of dimensions.  Perhaps not very surprisingly, the top 1% are much more likely to have an activity, cognitive, social or walking limitation.  So they are going to have trouble doing lots of things the rest of us might take for granted, like getting around, interacting with people, and understanding what's going on.  They are far more likely to assess themselves as having fair or poor health or mental health.  This does seem like a sober self assessment given the amount of healthcare they consume.  Finally, they are far more likely to be obese (BMI>30) which certainly can't help.

Demographically speaking, they are more likely to be in the low income category rather than in the middle or high income categories.  Perhaps related to their lower incomes, they are less educated - less likely to have made it through high school or college.  It isn't surprising at all to find that more than half of these top 1% are 55 or older, since prevalence of many diseases is higher in older populations.  Ethnicity outside white and black are under-represented among the top 1%, and they are just slightly more rural. I did not expect to see that they are more likely to be found in the West, given the healthy stereotype usually enjoyed by the West in the popular media.

Dr. Brenner's plan seems like it could be an important component of an overall effort to bring healthcare costs down.  I certainly hope it spreads outside of Camden!