Three Areas Where Quality Could Save Costs in Health Reform

Early last year in the healthcare reform debate, the public health insurance option was seen in various discussions as a way to improve the quality of medical care—while delivering it at lower cost. It could become a "nimble purchaser of healthcare"—getting more value for each healthcare dollar, according to House Energy and Commerce Committee description of the program.

Flash forward to now, and it has become apparent that a public option found in the House reform bill is only hanging by a thread—not very likely to find its way into the reconciled healthcare reform bill. So will achieving quality healthcare at lower cost still be possible? The answer is yes—in some areas.

This past weekend, the Centers for Medicare and Medicaid Services (CMS) Office of the Actuary gave some insights where efforts to improve quality could save costs in the long run. Here are a few examples:

Hospital-acquired infections. Beginning in 2015 under the Senate bill, Medicare could decline to pay hospitals for infections incurred by individuals in the facilities. During the first year when the rule would go into effect (2015), the amount projected to be saved on HAIs is $520 million—rising in 2019 to $750 million, and eventually saving $1.9 billion over the next decade.

Hospital readmissions. Last year, a study in the New England Journal of Medicine reported that one in five Medicare patients released from the hospital returned within 30 days for either the same or different reasons. According to the report, the estimated cost of unplanned hospital rehospitalizations in 2004 accounted for $17 billion of the $102 billion spent by Medicare for hospitalizations.

If implemented, a focus on hospital readmission reductions could save, beginning in 2013, approximately $540 million annually—rising to more than $1.6 billion annually in 2019. Over a 10-year period (between 2010 to 2019), that could amount to $8.2 billion saved by Medicare.

Physician Quality Reporting Initiative. In 2006, a law was passed that would establish a physician quality reporting system—including an incentive payment for eligible professionals who satisfactorily reported data on quality measures for covered professional services. PQRIs, as found in the current version of the Senate bill, could save $190 million in 2015—rising to $530 million annually by 2019.