Monday, April 22, 2013

Reducing Health Care Labor Costs In the United States: Lessons from Overseas

Now that the Affordable Care Act has increased access to health insurance, progressive-minded policymakers are now turning their attention to increasing access to care.  Costs are going up and there isn't enough to meet demand.

Unfortunately, as Disease Management Care Blog readers are well aware, a host of inconvenient truths are getting in the way.  They include population growth, increasing age, insatiable yuppie expectations, underlying inflation, supply-induced demand, administrative costs, pricey new drugs and technology, misaligned provider incentives and unrelenting labor costs.

While each represent a significant challenge, the DMCB suspects the most vexing has been labor costs. That's because health care remains a retail and "high touch" business.

Which is why this Health Affairs article on the merits of "frugal" labor-saving innovations that are being used outside of the U.S. is interesting.  Can they overcome the short comings of a "labor stagnant" economic sector being afflicted with Baumol's "cost-disease?"

Authors Michael Macdonnell and Ara Darzi describe four areas ripe for innovation:
Telephony: in Mexico, "Medicall Home" provides advices and referrals to over one million households for about $5 a month.  It's charged right to the cell phone bill. In India, a similar service costs about fifty cents a call.

Work flow process innovations: While hospitals in India can do many more heart catheterizations with the same number of personnel and square feet, how about performing multiple eye surgeries in the Aravind Eye Care System in same operating room, conveyor-belt style? 

Task shifting to paraprofessionals: In India, a 3 1/2 year training program is enough to qualify as a primary care provider.  In other settings, nurses and pharmacists can do some of the tasks previously relegated to physicians only.  In Brazil, teams under the direction of a general practitioner provide primary care semi-autonomously to defined geographic areas.

Self care: patients can be taught to take care of their own diabetes, asthma, COPD and other chronic conditions.

While the DMCB has been well aware of the innovations, what it didn't appreciate was the extent of their uptake outside of the United States.  Brazil, India and Mexico's solutions may not fully apply to Boise, Indiana or Manhattan, but our labor costs are considerable. Perhaps there are lessons that we can apply here. 

While the prognosis of conveyor-belt surgery in the U.S. is unknown, the labor costs problem bodes well for the telephone-based and face-to-face care management industry. It may also speak to the inevitability of expanded reliance on non-physicians.

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