George C. Halvorson, chairman and CEO, Kaiser Foundation Health Plan and Kaiser Foundation Hospitals

CHICAGO—The U.S. healthcare system needs to quickly implement widespread, systematic reform to improve patient outcomes and reduce massive costs, which are currently approaching 20 percent of the gross domestic product (GDP), according George C. Halvorson, chairman and CEO of Kaiser Foundation Health Plan and Kaiser Foundation Hospitals.

"While we are living in challenging times, while the country seems to be moving in a series of good directions in healthcare reform, those movements are accompanied by a lot of resistance and frustrations," Halvorson declared during his keynote presentation at the Healthcare Information and Management Systems Society (HIMSS) conference this week.

Healthcare has been the fastest growing segment of the U.S. economy, consuming $2.5 trillion dollars over 10 years, and on a path to consume 20 percent of the total GDP. Many economists predict that "unless we slow its growth, healthcare costs are going to have a crippling effect, preventing the economy from sufficiently recovering," Halvorson said.

"Despite all these expenses, 50 million Americans remain uninsured and 20 million are underinsured, and we need to cover everyone in America, as part of the recovery package" he added. "In the process of implementing universal healthcare, we need to fix the delivery of care."

He said that the current healthcare system is inconsistent, uncoordinated, unmeasured--a marginally accountable non-system of care in which care is purchased by the piece, not the package. There are 18,000 billion codes for procedures, and not one billing code for a cure. "We sell pieces of care, with fees for individual units of care," Halvorson noted.

Several recent studies have highlighted the inefficiencies in the U.S. healthcare system:

• A Commonwealth Fund study examined five million insurance claims over five years to examine how much was spent on avoidable considerations, such as hospital-acquired infections.
• A Milliman analysis reviewed what U.S. healthcare expenses would be if best practices were implemented uniformly.
• A Wenneburg study identified the geographic regions with lowest cost, highest-quality healthcare, and discovered the distinct variations between regions for procedures like cardiac surgery.

"Each of the studies concluded that if the United States practiced better healthcare, we could save half a trillion dollars a year--which was determined to be the cost of not getting care right," Halvorson said. "Each of the studies came up with 20 to 30 percent savings against the cost of care." However, he dismissed suggestions of cost-shifting or rationing care as a solution. "Before we ration care, we need to improve care," he said.

Halvorson advocated for a systematic approach to replace the current localized model. In his estimation, a systematic approach includes medical best practices, caregiver coordination, consistent follow through for individuals and real-time computers to improve care delivery to help coordinate the caregiver towards best practices.

"We reward our best institutions for doing things well by giving them less money," he said. "For example, facilities performing less imaging are rewarded through fewer reimbursements. Conversely, a hospital which unintentionally imparts an infection, bills for a $100,000. It's really hard to encourage healthcare facilities to alter their current methodology when the only reward is less money."

The Rand Foundation examined the medical records of 20,000 Americans to observe their treatment, finding that adults are treated properly close to 50 percent of the time and children are treated properly 46 percent of the time. In looking at diabetes, the fastest growing U.S. condition consuming 32 percent of Medicare costs, the Rand Study found that diabetics were treated properly approximately 8 percent of the time.

"If 8 percent was raised to 80 percent, we would cut the amount of kidney failure in half," he noted.

Halvorson also said that cost distribution of care is not evenly distributed because 1 percent of the population is responsible for 35 percent of healthcare costs. "This is a relatively small number of people, spending all of the care dollars. For example, if we completely eliminated breast cancer, it would eliminate 3 percent of the total costs to healthcare," he added. "Patients with five co-morbidities see approximately 17 doctors within separate practices, which typically means separate medical records, separate care coordination."

Paper medical records still store most care data in America. "Paper records are incomplete, inactive, illegible, inaccessible, inert and completely inadequate as a basis of care. This is tragic way to deliver healthcare in this country," Halvorson said.

"We need computerized, interactive data, which is constantly available," he said, adding that simply putting data on a computer is not enough because that data also needs to be patient focused, complete, accessible and linked to care improvement programs.

Regarding the American Recovery and Reinvestment Act, he noted that while investing more money into heath IT and EMRs, it would be "breathtakingly stupid" to put healthcare data on the computer to end up with the same sets of isolated, inaccessible, unconnected data that we now have with paper records.

"Caregivers need all the data on all patients all the time," he concluded.