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Care management can slash health costs

ALBUQUERQUE, N.M. — The state Human Services Department is cutting Medicaid spending with a meat cleaver when even a scalpel may not be necessary to save the $33 million HSD expects by slashing payments to physicians, dentists, hospitals and other medical providers.

The state plans to reduce payment for inpatient hospital services by 5 percent in general and by 8 percent at the University of New Mexico Hospital. Physicians face a 2 percent to 4 percent payment cut. Dentists would lose 3 percent.

There is no question the state’s health care industry, like the nation’s, wastes a lot of money. Faced with price reductions, providers will find a way to respond, even though the response will likely not be ideal. There is reason to be concerned that some providers will respond by avoiding treating Medicaid patients when possible or by leaving practice altogether. There is also the hope that the health care industry will look for ways to reduce the estimated 30 cents of every health care dollar that is lost to waste.

The most promising solution to health care cost reduction, however, probably lies in better care management, according to a paper, published in March, that evaluated the UNM Health Sciences Center’s Care One program. Care One manages treatment of UNM’s most medically complex and expensive cases. These cases represent the 1 percent of patients who account for 20 percent of spending on care in the UNM system.

Researchers reported that the management of Care One patients resulted in a $92,227 reduction in per-patient billings compared with similar patients who were not in the program.

This kind of thing works because, as every health care manager knows, the vast majority of expense in the system is caused by a handful of patients. Get the care of a few patients under control, or even better, keep those patients from becoming patients in the first place, and you have saved a significant amount of money.

A 2012 analysis of survey data from the federal Agency for Healthcare Research and Quality found that 1 percent of the population accounted for 20 percent of all personal health care spending. Nearly half of all spending could be attributed to 5 percent of the population. Looking just at the Medicare patient population, which includes older and disabled people, researchers found that the top 5 percent of spenders were responsible for 38 percent of Medicare spending.

The Lewin Group, a health care finance and health policy consulting firm, found, to no one’s surprise, that the biggest spenders had chronic conditions like diabetes and hypertension. Many of them also suffered from some form of mental illness.

New Mexico’s HSD asked the companies with contracts to manage the care of Medicaid beneficiaries to describe the patients who cost the program the most money. As far as I can tell, this is the first time the companies shared that information publicly, at a Medicaid Advisory Committee subcommittee meeting last April.

The plans reported that newborn children with medical problems, burn and trauma victims, cancer patients, patients with hemophilia, and patients with chronic conditions are the biggest consumers of care dollars provided by Medicaid.

Per-member spending per month on pharmaceuticals is the fastest-growing item, at 14.9 percent year over year. The companies spent $3.4 billion on medical care for Medicaid recipients in 2015 and $557.6 million on nonmedical costs like program administration, including $132.5 million in premium taxes.

A few simple things might reduce that spending in a hurry. Take problems with newborns. Insurance companies call these million-dollar babies because their care can cost a fortune. Often, these are children who are born to mothers who had inadequate prenatal care, and many of those mothers are teenagers. Public health researchers know which populations of girls are most at risk for becoming pregnant. Reaching out to these girls through school programs, church programs, social media and other avenues to get them the prenatal care they need would take very little money. If just a few neonatal cases are avoided that way, the savings to Medicaid will be in the millions of dollars.

The state’s problem, of course, is that it needs to save money right away, and care management takes time to implement and time to produce results. Meanwhile, the Legislature is trying to balance the state’s budget today. Meat cleavers do have the advantage that they do the job quickly if not elegantly.

UpFront is a daily front-page news and opinion column. Comment directly to Winthrop Quigley at 823-3896 or Go to to submit a letter to the editor.