The 20/80 Rule in Health Care and Reducing Costs

Many health professionals will confirm that, in any given patient population, 80 percent of the work is caused by 20 percent of that population. Identifying and reducing the costs associated with this chronically sick population, has gained greater attention from the current Obama administration, according to an article published in the Boston Globe today.

The Globe reports that "in a study of 35 programs, published earlier this year, researchers found that six - including Mass. General's - improved patient care and at least covered their costs. The government extended those six projects until August of 2012."

The Mass. General's program started in 2007 focused on 200 chronically ill patients of that Hospital and extended their primary assistance from discharge into their home. The objective was to keep the patient's away from the hospital by active in-home intervention care. The total net savings reported by the Globe for Mass General over its costs was 5%, 7 to 10 million dollars in overall savings. However, only 17% of the 35 projects in this study were successful in reducing costs while improving the health care for the patient, indicating how difficult it will be for the health care industry to reduce the costs of providing care to this small but chronic group.

The industry has proposed reducing these costs by 1.5% over the next 5 years and potentially saving Medicare about two trillion dollars. This study has shown that the re-admission rate at least can be reduced through extended care beyond discharge. However, The 80/20 rule can also be applied to out-patient care, which has a much greater impact on national health costs than inpatient care. It would have been interesting to see if those 200 patients in the Mass General study were also able to reduce their visits to the hospital as out-patients. I think not because out-patient visits include lab tests such as MRIs' and X-Rays, extremely costly to Medicare.

The prospect of the industry self-reducing its costs to Medicare is not encouraging based on this two year project experience. We may be moving unrelentingly towards a single payer system.