Solutions Proposed to Contain Health Care Spending: Food for Thought

By the time this column is in print, we will have a newly elected President of the United States and some new representatives and senators at the federal level. They will, however, have to deal with the same big problem of containing health care spending. Emanuel and colleagues (2012) wrote a “Sounding Board” column in the New England Journal of Medicine, which should be required reading for our new nationally elected officials and also for health care providers and payors. The column is titled “A Systematic Approach to Containing Health Care Spending.” At a time when health care spending is growing faster than our economy and is equal to $2.8 trillion or 18% of our gross domestic product (GDP), there is widespread agreement on the need to reduce health care spending, but little agreement as to how to do this.

The Center for American Progress (2012), an independent nonpartisan educational institute dedicated to improving the lives of Americans through progressive ideas and action, convened a group of leading health policy experts. They were charged with finding solutions to target “drivers of both the level of costs and growth in costs – and both medical prices and quantity of services” (Ezekiel et al., 2012, p. 1); also to reduce costs for both public and private payors and to root out administrative costs that do not enhance health outcomes.

Solution 1 in Table 1 involves a model of self-regulation where public and private payors would negotiate payment rates with providers and these rates would be binding on all providers and payors in the state. This state self-regulation model would be phased in with incentive grants from the federal government and would allow for bonus payments for high performance. Solution 2 in Table 1 suggests that bundled payments be used for a bundle of services. This is not a new idea, but has been used for years with obstetrics. A current example of this is the Medicare Acute Care Episode program that has bundles for 37 cardiac and orthopedic procedures (Cutler & Ghosh, 2012; Mechanic, 2011). Solution 3 builds on Medicare’s use of competitive bidding that in 2011 reduced spending on medical equipment by 42% (Centers for Medicare and Medicaid Services [CMS], 2012). Solution 4 challenges insurers to offer tiered plans. “These insurance products designate a high-value tier of providers with high quality and low costs and reduced cost sharing for patients who obtain services from these Massachusetts, one tiered product lowers copayments by as much as $1,000 if patients choose from 53 high-value providers” (Emanuel et al., 2012, p. 2).

Solution 5 in Table 1 suggests that as soon as reliable quality reporting systems exist, “federal and state exchanges engage in active purchasing - leveraging their bargaining power to secure the best premium rates and promote reforms in payment and delivery systems” (Emanuel et al., 2012, p. 3). Solution 6 highlights the need to simplify administrative systems for all payors and providers. Suggestions include: 1) electronically exchange eligibility, claims, and administrative information, 2) public and private providers should use a single, standardized physician and Advanced Practice Nurses (APN) credentialing system, 3) payors should provide monthly electronic explanation of benefits statement, and 4) electronic health records should integrate administrative and clinical functions so when a service is ordered it can be simultaneously billed to the payors. “Most important, we recommend that a taskforce consisting of payors, providers, and vendors set binding compliance targets, monitor use rates and have broad authority to implement additional measures to achieve system-wide savings of $30 billion a year” (Emanuel et al., 2012, p. 3). Solution 7 recommends price transparency to assist consumers with a choice of providers. All private insurers and states provide price information that reflects negotiated discounts with specific providers. Price information should include the price of the bundle of services, estimates of out-of-pocket costs, as well as information on quality of care and volume of patients using the services (Emanuel et al., 2012).

Solution 8 in Table 1 recommends better use of non-physician providers. This echoes the Institute of Medicine (IOM) Future of Nursing report recommendation that: “Nurses should practice to the full extent of their education and training” (IOM, 2010, p. 1). There are 34 states that still do not allow advanced practice nurses to practice without physician supervision. Emanuel and colleagues (2012) recommend that the federal government provide bonus payments to states that meet the scope of practice standards developed by the IOM. Better utilization of advanced practice nurses would also expand the supply of providers, increase access and competition such as we have seen in APN-staffed convenient care clinics and lower prices. Solution 9 recommends expansion of the Medicare ban on physician self-referrals. “The Stark law should be expanded to prohibit physician self-referrals for services paid for by private insurers. In addition, the loopholes for in-office imaging, pathology laboratories, and radiation therapy should be closed” (Emanuel et al., 2012, p. 4). Physician self-referrals to facilities in which they have a financial interest have been shown to increase costs.

Emanuel and colleagues, in Solution 10 of Table 1, also recommend that the Federal Employees Health Benefits Program (FEHBP), which provides private health insurance to 8 million, align with Medicare. Specifically, FEHBP should “transition to alternative payment methods, reduce payments to hospitals with high rates of readmissions and hospital-acquired conditions, and adjust payment to hospitals and physicians on the basis of their performance on quality measures” (Emanuel et al., 2012, p. 4). Finally, Solution 11 offers a strategy to curb defensive medical practice, which can increase costs. Emanuel and colleagues offer the ‘safe harbor’ strategy “in which physicians would be presumed to have no liability if they used qualified health-information systems and adhered to evidencebased practice guidelines that did not reflect defensive medicine” (p. 4).

Emanuel and colleagues (2012) conclude that Americans face a choice. “Payors could simply shift costs to individuals. As those costs become more and more uncomfortable, people would severely restrict their consumption of health care and might forgo necessary care” (p. 5). Or, government could impose deep cuts in payments to providers unrelated to value or quality of care. Without alternative strategies, the above could become the default choice. The IOM just released a report titled Best Care at Lower Cost: The Path to Continuously Learning Health Care in America (IOM, 2012) that echoes many of the solutions above. In The Bridge from Volume to Value-Based Payment, Morrison (2012) summarizes the drivers for bridge building and lays out some of the barriers to it. Morrison’s barriers, to name a few, include: complexity of health systems, creluctance of system leadership to change when in the past earnings have been so good, reluctance or denial of specialists (especially those in high earning procedure-orientated practices), and concerns expressed by health system leadership that “We have the anatomy of an accountable care system, but none of the physiology” (Morrison, 2012, p. 3).

So, a cost-control crisis is upon us in health care. Ambulatory care nurses need to understand the magnitude of this crisis, potential solutions, and barriers to accepting these potential solutions, as well as the dire consequences should no changes be made. Ambulatory care nurses will be able to accurately interpret discussions and changes that are or will occur in their organizations and be able to help patients understand changes as they occur, such as bundling of payments seen on their billing statements and transparency of information regarding charges for care (when in the past, little information was provided to patients regarding actual cost of care if their insurance covered these costs).

References Center for American Progress. (2012). About the Center for American Progress. Retrieved from

Centers for Medicare and Medicaid Services (CMS). (2012). Competitive bidding update – One year implementation update. Retrieved from

Cutler, D.M., & Ghosh, K. (2012). The potential for cost savings through bundled episode payments. New England Journal of Medicine, 366, 1075-1077.

Emanuel, E., Tanden, N., Altman, S., Armstrong, S., Berwick, D., de Brantes, F.,... Spiro, T. (2012). A systematic approach to containing health care spending. New England Journal of Medicine, 367(10), 949-954. Retrieved from doi/pdf/10.1056/NEJMsb1205901

Institute of Medicine (IOM). (2010). The future of nursing: Leading change, advancing health. Retrieved from

Institute of Medicine (IOM). (2012). Best care at lower cost: The path to continuously learning health care in America. Retrieved from

Mechanic, R.E. (2011). Opportunities and challenges for episode based payment. New England Journal of Medicine, 365, 777- 779.

Morrison, I. (2012). The bridge from volume- to value-based payment. Retrieved from HHNDailyDisplay.dhtml?id=590007080

Sheila A. Haas, PhD, RN, FAAN, is a Professor, Niehoff School of Nursing, Loyola University of Chicago, Chicago, IL. She can be reached at