There is an old adage in business about how 80% of your business comes from 20% of your customers. The adage is based on the Pareto Principle, named after an Italian economist who discovered that 80% of Italy's wealth was concentrated in only 20% of the population. The healthcare market is not immune to the Pareto Principle. A story from the Associated Press the other day pointed to 9 patients in Austin, TX who visited the emergency room 2,700 times during the past 6 years, representing a total of $3 million charges to the taxpayers and others. The report was generated by a non-profit group called Integrated Care Collaboration. The aim was to find out "who's using our emergency rooms...and find solutions."

While the situation in Austin may be an exaggertion of the situation nationwide, a report by the Kaiser Family Foundation (based on numbers from the Dept of Health and Human Services) reported that half of the nation's healthcare expenditures is spent on just 5% of the population. Much of this cost can be attributed to treating chronic diseases and expensive medical technologies and therapies. It is the reason insurance companies screen potential insureds for pre-existing conditions or risk factors for disease. They understand that a small minority of their insureds will be responsible for much of their outlays. So patients end up on public assistance or file for bankruptcy.

A lot has been made of electronic medical records (EMR) as a means of controlling cost -- in fact it is a cornerstone of Obama's health care reform initiative. The adoption of EMR is important since it will reduce medical errors and increase productivity, but its impact on containing costs associated with chronic disease is up for debate. In Congressional testimony provided by the Congressional Budget Office, then Budget Office Director Peter Orszag submitted that:

Improvements in medical care that decrease mortality by helping patients avoid or survive acute health problems often paradoxically increase overall spending on health care, as those (surviving) patients live to use health services through old age. New curative therapies with one-time costs could potentially reduce spending if they obviated the need for costlier treatments. Many advances in medical science, however, do not fall into that category. In fact, many of the most notable medical advances in recent decades involve ongoing treatments
for the management of chronic conditions such as diabetes and coronary artery disease.

It is critical that the limited amount of research dollars and effort be focused on understanding the fundamental causes of the increasing price tag of healthcare services in the U.S. The dialog has to be clear-eyed and evidence-based. While it is important to move the country to EMR, the expectations on how much this move will contain costs needs to be realistic. The point of cost-containment studies should not be to deny needed coverage and care, but to direct reform dollars to solutions that will provide real long-term answers.

Update on Sunday, April 5, 2009 at 5:49PM by HealthySpacesRx Editor

In a follow up to the post above, a study that was published in the New England Journal of Medicine indicated that 1 in 5 Medicare patients were readmitted to the hospital just one month after they were discharged. Some of the causes involved not scheduling a doctor visit after the discharge to adequate explanation of prescribed medications. Suggested remedies include making the doctor appointment before discharge and increased patient communication about prescription medications. Improved patient communication also has important long-term mental effects for patients who have been diagnosed with a serious illness. A recent study out of Japan, for instance, pointed to better long-term psychological coping skills of patients given a cancer diagnosis when patients were assigned to nurses who had communication skills training.

Process improvements and better communications are relatively low-cost solutions. These efforts are rightly supplemented by technology improvements such as providing information websites for recently-diagnosed patients. The stakes are high, with unplanned return visits cost Medicare $17.4 billion in 2004.