HOWTO make health-care cheaper by spending more on patients who need it

Atul Gawande's New Yorker feature "The Hot Spotters" is a fascinating look at a small group of doctors and medical practitioners who are working on reducing systemic health care costs by doing data-analysis to locate the tiny numbers of chronically ill patients who consume vastly disproportionate resources because they aren't getting the care they need and so have to visit the emergency room very often (some go to the ER more than once a day!) and often end up with long ICU stays.

The approach is marvellous because it is both data-driven (data-mining is used to identify which patients aren't getting the care they need) and extremely compassionate ("super-utilizers" are voluntarily enrolled in programs where they get 24/7 guaranteed access to doctors, nurses and social workers). The programs are successful, and even though they cost a lot to administer, they still generate system-wide savings — one patient helped with this sort of care had previously cost $3.5 million a year because of heavy ER and ICU use. In other words, providing excellent, personalized care to the small number of patients who don't fit the system's model saves far more money than making the system more stringent, with more paperwork, higher co-pays and other punitive measures. It's a win-win.

Except that it's not really catching on. Some of the doctors pioneering this approach are frustrated because they can save Medicare or an insurer millions, but they can't get funded by Medicare or the insurers — instead, they have to fundraise from private foundations.

As he sorts through such stories, Gunn usually finds larger patterns, too. He told me about an analysis he had recently done for a big information-technology company on the East Coast. It provided health benefits to seven thousand employees and family members, and had forty million dollars in "spend." The firm had already raised the employees' insurance co-payments considerably, hoping to give employees a reason to think twice about unnecessary medical visits, tests, and procedures–make them have some "skin in the game," as they say. Indeed, almost every category of costly medical care went down: doctor visits, emergency-room and hospital visits, drug prescriptions. Yet employee health costs continued to rise–climbing almost ten per cent each year. The company was baffled.

Gunn's team took a look at the hot spots. The outliers, it turned out, were predominantly early retirees. Most had multiple chronic conditions–in particular, coronary-artery disease, asthma, and complex mental illness. One had badly worsening heart disease and diabetes, and medical bills over two years in excess of eighty thousand dollars. The man, dealing with higher co-payments on a fixed income, had cut back to filling only half his medication prescriptions for his high cholesterol and diabetes. He made few doctor visits. He avoided the E.R.–until a heart attack necessitated emergency surgery and left him disabled with chronic heart failure.

The higher co-payments had backfired, Gunn said. While medical costs for most employees flattened out, those for early retirees jumped seventeen per cent. The sickest patients became much more expensive because they put off care and prevention until it was too late.