This is Part 3 in a five-part series which presents a creative solution for today's health care crisis. Additional articles in the series can be found here: Part 1, Part 2, Part 4, and Part 5.

How Much Does Hospital Utilization Vary Anyway?
If higher hospital utilization rates are associated with less affordable health care, one might wonder how much hospital utilization varies from one region to another. Table 3 shows some interesting statistics about this.

Table 3
Hospital Utilization Levels by State
(commercial under-age 65 bed-days/1,000)

Inpatient hospital utilization ranges from a low of 72% of the national average in Oregon to a high of 144% in New York, a significant variation. Based upon industry best practice performance of highly efficient health care programs as documented in the AHP Best Practice Norms™, ideal inpatient hospital utilization rates for the typical population described in Table 3 is about 159 bed days/1,000, about 50% of national observed average of 316 days/1,000. This suggests that as much as 50% of the current utilization might be eliminated if potentially avoidable days could be eliminated. The potential reduction ranges from 30% in Oregon to 65% in New York. The ability to achieve these reductions in these communities is impacted by many factors:

• Willingness of providers to change to more efficient practice patterns
• Willingness of patients to comply with more efficient delivery system changes
• Availability of and access to alternative care settings (i.e., sub-acute beds, skilled nursing facilities, rapid treatment units, etc.)
• Maturity of local managed care plan market
• Access to evidence-based practice guidelines focused on efficiency

For our three targeted states, California and Minnesota show a 41% opportunity for improvement with Washington showing a 35% opportunity. This shows that significant opportunity exists to improve the affordability of health care services in these states even though they enjoy favorable affordability already.

Since actual hospital inpatient utilization rates vary so much by community, the opportunity to improve the affordability of health care varies significantly by market. During the late 1990s and continuing into the next two decades, there has been a considerable negative market reaction to programs focused on reducing inpatient utilization. Although much of this has been based upon very few highly publicized cases, a general fear of the unknown, and a significant lack of hard facts supporting the opinion, the realistic potential for such improvement has decreased. The actual potential is as large as ever; however, the willingness to pursue such changes is minimal. Continued higher than average increases in health care costs combined with the ongoing affordability concerns described earlier in this paper have encouraged many more organizations to take a second look at the opportunity for reduced utilization.

How Much Does Provider Supply Vary by Region?
Provider supply varies significantly by region. Table 4 shows that supply varies from 70% of the average to almost 150% of the average.

Table 4
Relative Provider Supply by State

Lower supply doesn't always imply under-supply, and in many cases might imply "right" supply. Table 1 (from Part 2 of this series) shows that California, Washington and Minnesota have more affordable health care. Of these three states, two have lower than average supply rates. Minnesota's higher than average provider supply is partially caused by significant in-migration of patients to both the Twin Cities and Rochester. Both California and Washington have a much lower hospital bed supply rate and a more normal physician supply rate. Local efficiencies drive down the hospital bed supply rate much more than the physician supply rate.

How Much Does Employee Affordability Vary?
In addition to being one of the three factors used to derive affordability index values, individual employee affordability itself is highly correlated with health care affordability. Regional personnel practices, labor negotiation practices and trends, individual and corporate expectations all influence how much cost is passed on to employees in the form of both premium sharing and cost sharing. Table 5 shows the variation in the AHP Employee HCAI™ by state.

Table 5
2008 AHP Employee Health Care Affordability Index

Values range from .73 to 1.33 showing a wide range of employee affordability by state. For the three states we have been tracing we find that both California and Washington have much more favorable than average employee affordability at .82 and .87, respectively. Minnesota's employee affordability is much higher at 1.14. Minnesota's employees pay a much higher portion of the costs of their health care than similarly situated employees in California and Washington.

How Much Does the Government Health Care Affordability Vary?
By design we would expect the government affordability index to vary significantly from one state to another. Certain states regularly pay into the system far more than they consume. Indices range from .48 to 1.74 a very wide range.

Table 6
2008 AHP Government Health Care Affordability Index

The results from the three states we have been tracking show California at .89, Minnesota at .59 and Washington at .75. These metrics have a 1/3rd weight in determining the overall affordability index. Minnesota's .59 significantly drives its favorable overall score, offsetting some of the higher than average affordability of the employee index.

Intermediate Observations
It is informative to draw some intermediate observations from the above information to potentially identify broad initiatives and/or issues that might improve overall affordability. Some of these are:

• Affordability varies significantly by state.
• Local conditions significantly impact affordability potentially limiting national/universal solutions
• Even in our three "favorable" affordability states significant uniqueness emerge demonstrating divergence of concern
• Improvements in hospital inpatient efficiency continue to be a major source of improvement, with potentials for at least 30% improvement.
• Provider supply management doesn't provide an obvious and clear solution. Many areas continue to have unfortunate undersupply
• Employee participation in the cost of care and its related affordability impact varies widely by region. More affordable regions tend to be associated with lesser employee cost sharing.
• The role of government has a major impact on affordability and has great variability by state.
• The results do not present a logical solution, we need to look elsewhere.

Authors
David Axene collaborated with Nicholas Yphantides in writing this series of articles. Dr. Nicholas Yphantides serves as the Consulting Chief Medical Officer for San Diego County and is the National Director for Health & Wellness with Axene Health Partners. He is a cancer survivor and is an advocate for those in his community who need it the most. For nine years, Dr. Nick served as Chief Medical Officer of one the largest network of Community Clinics in San Diego County.