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What will it take to shift the 80-20 rule for healthcare?

In healthcare, we have our own Pareto principle: 80% of healthcare costs are attributed to 20% of the populace: the chronically ill.

Entrepreneurs will tell you 80% of their profits come from 20% of their customers. Customer service reps will tell you they spend 80% of their time dealing with 20% of complaints. There’s even a fad diet based on eating wisely 80% of the time and cheating the other 20%. The 80-20 rule, called the Pareto Principle, simply says that 80% of effects originate from 20% of causes.

Healthcare has its own Pareto principle: 80% of healthcare costs are attributed to 20% of the populace: the chronically ill. According to a 2012 study by the Deloitte Center for Health Solutions, healthcare spend in the United States is expected to eclipse $4 trillion this year. Put another way, the top 20% most expensive patients in the country each account for about the same amount on spent healthcare each year as the average American earns before taxes.

Why haven’t advancements in medication, access, technology and education impacted more favorable odds, and what can we do about it?

Healthy lifestyle adoption is too weak.

Despite improvements in efficacy of care for chronically ill patients, we continuously replace them with new ones.

The CDC estimates that as many as 1 in 3 Americans could have diabetes by 2050. Tools like the Internet, coupled with organized prevention programs, have made access to nutrition information more available than ever before, but diabetes is still expected to skyrocket. Why?

According to Harvard University, healthy diets in the U.S. cost $1.50 per day more than unhealthy ones. Therefore, the average savings of eating an unhealthy diet is $547 per year. The average lifetime treatment cost for a patient with diabetes is $85,000, so it takes over 155 years for the savings of eating an unhealthy diet to outweigh the cost of treating diabetes — not including the other health costs associated with obesity.

Newly approved PCSK9 cholesterol drugs carry a $1,000 per month price tag for an indefinite therapeutic duration of use. One of the top causes of high cholesterol is diet. That’s an easy line to draw. Improve lifestyle choices, reduce the numbers and associated costs of chronically ill patients.

Include higher levels of preventative reimbursements within the shift to value-based care.

Until this year, Medicare has reimbursed provided care based on volume, with no significant incentive for preventative care. This year’s repeal of the sustainable growth rate (SGR) formula is the most meaningful step forward in Medicare’s move toward value-based care.

But it has room for improvement. “Value” is still too loosely defined. Our company defines value as outcomes divided by costs. Medicare, managed care organizations and plan sponsors should implement greater reimbursements for preventative services that have been shown to improve outcomes while reducing costs. Medication therapy management protocols proven to increase medication adherence and reduce hospital admissions to impact the 80-20 rule is just one example.

Use the longest lever: medication adherence.

According to a 2013 IMS Health study, $105BN out of $213BN in wasted healthcare spending is directly attributable to medication non-adherence. If Pareto holds, more than $80BN is attributable to chronically ill patients. This is the longest lever available to improve outcomes and reduce costs immediately.

Breakthroughs in medication therapies have ushered in hope for diseases once thought incurable and largely untreatable. We can now keep viral loads undetectable in a large portion of HIV patients and cure many instances of Hepatitis C in weeks with a single drug. But the efficacy of many therapies is dependent upon outstanding medication adherence.

A 2012 study of HIV infected patients showed that adherence to prescribed highly active antiretroviral therapy increased the percentage of those showing undetectable viral loads from 28% to 66% within six months. This resulted in savings of $3,000 per patient per year.

Payer, provider and pharma cooperation is key.

An end to Hepatitis C (HCV) is finally in view as new treatments eliminate the virus in many patients. It takes 12 weeks, but comes at a cost of $94,500 (Harvoni®). Naturally, payers are leery of authorizing high-cost treatments without some assurance of adherence and efficacy. But $94,500 for a cure versus $577,000 for a liver transplant is an easy value proposition to understand.

When it comes to new, high cost medication therapies for chronically ill patients, cooperation among payers, providers and pharma companies early in the pharmaceutical development process can align the industry and attack the problem from all sides. Lowering gross therapy costs, securing payment authorization for patient access and driving adherence helps realize the full value of new therapies, improving outcomes and lives while reducing total healthcare costs.

It’s going to take a very large village.

It’s going to take more than improvements in medication therapy and medical technology to move the needle on healthcare’s 80-20 rule. Doing so will require a combination of healthier lifestyle adoption and incentivization, improved access and adherence to medication therapies for chronically ill patients and higher levels of physician reimbursement for preventative services to name a few. We have the science, tools and knowledge. What’s going to get us there is the collective will and collaboration.

Photo: Flickr user R/DV/RS


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Marc O'Connor

Marc O’Connor is chief operating officer of Curant Health, a medication therapy management firm focused on improving outcomes for people living with chronic diseases including HIV, Hepatitis C, rheumatoid arthritis, diabetes and more. He is a member of the board of directors of Team Type 1 Foundation which is focused on increasing awareness and support for Type 1 diabetic patients around the world. More info:Curant Health

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