Labor-saving innovations key to healthcare cost reduction

Innovations in healthcare don’t necessarily reduce labor costs, as they often do in other industries, so reducing expenditures will require a particular focus on supporting the innovations that are labor-saving advances, according to a commentary article published in the April issue of Health Affairs.

“Policy makers should focus on such labor-saving innovations; reform reimbursement systems to encourage them; tackle professionals’ resistance; and remove regulatory barriers,” wrote Michael Macdonnell and Ara Darzi, MD, of the Imperial College London.

There are a number of pressures driving healthcare spending growth, explained the authors. Aging populations and rising expectations are increasing demand. On the supply side, the cost of each episode of care is rising, and new, expensive therapies are introduced each year, which physicians are often induced to utilize. Overuse of care is an issue, particularly in a fee-for-service environment, with estimates that 60 percent of U.S. Medicare spending is wasteful, according to Macdonnell and Darzi.

While innovations in the field of manufacturing often can lead to lower costs, many innovations in healthcare don’t reduce the number one cost in medicine: labor. In the U.S., 56 percent of health spending in 2010 went to wages, noted the authors, and some innovations actually amplify the need for human resources.

“For example, new imaging technologies are not only expensive in their own right, but they also incur large labor costs because skilled professionals such as radiographers, technologists, and oncologists are required to use the specialized equipment and interpret the results.”

Some healthcare innovation, however, does reduce labor-intensity. Macdonnell and Darzi pointed to the potential of telemedicine and mobile devices, and held up the Medicall Home program in Mexico, which gives cost-effective medical advice to patients over the phone to better manage primary care, as one example.

Other labor-reducing ideas come in the form of process improvement, explained the authors. The Aravind Eye Care System in India increases volumes and lowers costs by having staff perform eye surgeries on multiple patients at the same time in the same room. Some healthcare systems are experimenting with replacing skilled providers by task shifting to less expensive employees. Macdonnell and Darzi acknowledged that while studies have shown no adverse effects on quality with this practice, evidence of cost-effectiveness is mixed.

In some cases, regulations stand in the way of allowing paraprofessionals to administer care. The authors also suggested policy makers reform reimbursement systems to promote telehealth, self-care and other nontraditional models of care delivery.

“The key is to unlock innovations that reduce instead of reinforcing the labor-intensity of healthcare,” wrote Macdonnell and Darzi. “Without refocusing reforms in this way, policy makers will not be able to contain the spiraling cost of healthcare.”