Innovation must be part of the cost evaluation of healthcare

Arguments can be made on both sides about access and quality, when comparing our healthcare system to the rest of the industrialized world.  But, few would dispute that American healthcare is the most innovative in the world.

In fact, the creativity and expertise of American manufacturers, doctors, hospitals and Academic Medical Centers, laboratories, drug companies, health IT companies, and other participants set the standard for the world. The system that produced minimally invasive surgery and organ transplantation, the Pap test and the sequencing of the human genome – the industry that built the foundation of the modern practice of medicine – paid for it by treating healthcare as a calling, a service, and a business.

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But could that innovation now be at risk? In the valid effort to control the enormous cost of healthcare, could we be jeopardizing the very healthcare funded innovations that previously contributed to our nation’s well-being?

Unfortunately, the answer is yes.  Yes, because we have yet to establish the balance between managing the cost to provide and access healthcare with maintaining the ability for development at all levels of the care spectrum. Only healthy companies can innovate.

The need to manage cost is clear. Health spending has grown faster than incomes and overall economic output for decades, with annual increases of 8 percent throughout the early 2000s.  And, according to the data recently released by the Center for Medicare and Medicaid Services (CMS) we’ve already seen successes in that area. 

American spending on healthcare is slowing. The 2012 numbers show historically low increases in medical prices and the use of medical services. Health spending only rose 3.7 percent – although slightly up from 2011, it is far less than the increases of the early 2000s. And, 2012 marked the second year in a row in which health expenditures shrank slightly as a portion of the economy.

The CMS report makes clear that lower costs and reduced utilization of service is due to multiple factors. These include doctors prescribing fewer services that may not be necessary, and several blockbuster drugs coming off patent, providing consumers less expensive generics. But it also includes people losing their jobs during the recession and therefore access to health insurance.

Of course, the reduction also is due to the fact that Medicare, the nation’s largest payer of healthcare expenses, is simply cutting what it pays to hospitals, doctors, laboratories, and other providers of care.

But some cuts are counterproductive because they save small amounts of money but lead to outcomes that are very expensive. For example, clinical labs represent 2 percent of annual Medicare spending and are an inexpensive tool to control costly conditions such as chronic diseases like Diabetes.

More precise laboratory tests, many developed in just the last 10 years of genetic medicine, help to precisely identify disease and to select the best treatment for each patient. Such tests allow doctors to target treatments with the best chance of working the first time. That begins the healing process faster and reduces costs in both the short term and long term.

For example, a subset of breast cancer patients has a genetic mutation that can be specifically treated.  Avoiding dangerous trial and error, it is the HER2/neu diagnostic test that allows physicians to determine a breast cancer patient’s eligibility for such life-saving drugs as Herceptin, or if another more suitable treatment is available.  That savings and increased quality of care would not be possible if clinical labs are no longer able to perform the necessary development for future life changing diagnostic tests.

Disproportional cuts to lab reimbursements proposed by CMS now will reduce the ability to innovate and develop more accurate, faster ways to precisely diagnose illness. Physicians will need to rely on trial and error, adding redundancy and cost, while impacting quality.

Achieving a responsible federal budget is important, as is reducing the cost of healthcare in the Medicare Program, but not at the cost of quality care and critical innovation in diagnostic development. Make this part of that cost analysis. Congress and CMS must realize the cost benefit of such innovation and reevaluate the negative impact inherent in planned cuts to the reimbursement of laboratory services in this nation.

Grodman is CEO of Bio-Reference Laboratories, Inc.

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