Monday, December 8, 2008

Acute and ambulatory care - If Health Care and Life Were a Movie

If health care and life were a movie, it would be split into two parts – acute episodic care and chronic epic care.

Acute Episodic Care

Acute episodic care is care you receive in hospitals. It often features procedures or operations – orthopedic procedures to fix or replace hips or knees, cardiac procedures to put in a pacemaker, zap patient to restore a cardiac rhythm, insert a stent, or bypass a blocked coronary artery, or any other surgical operation. Increasingly it also involves use of expensive cancer drugs. Interventional care is the financial lifeblood of hospitals, accounting for as much as 80% to 90% of hospital revenues.

Big Part of Medicare Expenses

Procedures, operations, and cancer drugs comprise a big part of Medicare expenses. That’s why Medicare has embarked on a demonstration project to bundle bills for Acute Care Episodes for 28 cardiac and orthopedic procedures. The idea is to combine hospital and physician costs, issue one bill to one hospital-medical staff entity, and make hospitals and doctors “accountable.”

Theoretically Bundling Makes Sense

Theoretically, this approach not only makes costs more predictable but saves money by “integrating” and disciplining the unified entity. Also Medicare can better judge the performance of hospitals and medical staffs. If the new approach saves money and results in superior performance, the hospital and its doctors could share in the savings, hence, the concept of gainsharing. Finally, Medicare can get a better “fix” on costs, which currently go about 80% to hospitals and 20% to physicians.

Chronic Epic Care

In our movie, chronic episodic care is but a preview or highlight of what is to come. Acute episodic care is just a piece or a slice of the epic and sweep of life – and of an underlying chronic disease. The true costs lie in chronic epic care. As George Halvorson, CEO and Chairman of Kaiser Foundation and Hospitas, and champion of looking at health care as a system, points out, five chronic diseases – diabetes, coronary disease, chronic heart failure, asthma, and depression – account for 80% of all health costs.

How Much is Acute Episodic Care Worth?

How much acute episodic, or interventional, care contributes to the 80% is hard to estimate, but episodic costs are a huge part of costs. There is now an active debate in the U.S, and other developed countries, where government pays much of the health care freight, just how much a procedure – even if life-saving - a gain in the quality of life, or life itself, is worth to society. This debate has focused on a concept known as QALY (Quality of Life Years) gained. In the United States, a figure of $50,000 per QALY is often used as a threshold to assess the cost effectiveness of an intervention. i.e. providing good value for the buck. In Britain, NICE (National Institute for Health and Clinical Excellence), a government-funded organization, puts its estimate for QALY at $34,400. But, alas, NICE has found it isn’t nice to say no to desperate ill patients seeking life-saving drugs or procedures. Saying no takes courage – and provokes outrage.

To return to our movie, acute episodic care is popular for patients and doctors alike because it often has a happy or hope-filled ending. But chronic epic care usually ends sadly – not happily and not popular with the public, for everyone wants to live another day. Chronic epic care does not make for a good movie.


1. G. Hackbarth, R. Reischhauer, and A. Mutt, “Collective Accountrailbity for Medical Care, Toward Bundled Medicare Payments, “ New England Journal of Medicine, July 3, 2008.
2. G. Halvorson, Health Reform Now, A Prescription for Change, Jossey-Bass, 2007

3. R. Steinbrook, “Saying No Isn’t NICE – The Travails of Britain’s National Institute for Health and Clinical Excellence,” New England Journal of Medicine, ”November 6, 2008.

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