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Nov 2017

Reducing the Financial Impact of Diabetes on Providers

November is American Diabetes Month and there is no better time to take a look at the personal and financial tolls this deadly disease takes on patients, their doctors and the healthcare system.  Diabetes is the 7th leading cause of death in the U.S., claiming some 80,000 lives each year.  It is also a contributing cause of death for another 250,000 Americans annually.

At last count, over 30 million, or roughly 9.4 percent, of the U.S. population is diabetic.  Of these, approximately 7 million are undiagnosed and have no idea they are even living with this disease.  Equally alarming is that, according to the CDC  more than 1 in 3 Americans have prediabetes, and 9 out of 10 people with prediabetes don’t even know they have it.

In terms of healthcare costs, diabetes is by far the most expensive medical condition in the U.S., with total expenditures for diabetes diagnosis and treatments topping $322 billion.  The cost for this care is growing 36 times faster than the cost of ischemic heart disease (the number one cause of death in the US).

These numbers are staggering.  But what is even more shocking is most of the human and financial cost of type 2 diabetes is preventable.  Studies have shown that being overweight is a major risk factor in developing type 2 diabetes and being even slightly overweight increases diabetes risk five times, and being seriously obese increases it 60 times.

And according to a recent report from the U.S. Centers for Disease Control and Prevention (CDC), 40 percent of adult Americans over the age of 20 are obese. This is an increase from 30 percent only 15 years ago. Further fueling this epidemic that threatens our nation’s health is the 20 percent rate of obesity for children ages 6-19. In addition, 70 percent of Americans are either overweight or obese. In other words, an unhealthy weight is now the norm and normal weight is now approaching the outlier.

This means that billions of dollars currently spent on diabetes care could be re-allocated to other ends if obesity were more adequately addressed by healthcare providers and patients.

The Impact of Obesity and Diabetes on Providers

In addition to the billions spent on diabetes diagnosis and care as a result of rampant obesity, studies indicate that obese persons have more and longer hospitalizations (one study indicates that obese persons have a 3.85 greater risk of hospitalization), use more prescription drugs and make more outpatient visits than do normal-weight persons.

Some studies utilize BMI as an indicator to demonstrate these cost increases.  They estimate an increase of 2.3 percent in healthcare costs for every unit of BMI increase.  And these costs may go directly to a provider’s bottom line.

With the increase in the obesity population comes an increase in high-risk patient population for hospital and other healthcare providers. And in most instances, providers do not have the option of turning away sick, high risk or complex patients. They must render appropriate medical care.

Typically, payment for healthcare services is traditionally borne by government or private payors. In 2015, for example, only about 11 percent of health care expenditures were borne by individuals with the rest paid for by governmental and private health plans.

With this type of increase in the high risk patient population, payors will find it difficult to pay for medical services. Both private and governmental payors make or save money when they delay or deny payment of claims.  When private payors delay payment, they can take advantage of the “float.”  When government payors delay payments they control their budgets.   With denials, both payors correctly assume that a percentage of providers will not be pursue the denials and they save money from not paying those claims.

These additional costs from delayed payments and denials have always taken a toll on healthcare providers’ financial health.  Expense growth has outpaced revenue growth which is, not surprisingly, eroding the bottom line. The average operating margin for most hospital providers is currently less than 3 percent.   Now, with the increase in the obesity population, and a corresponding increase in pre-diabetic and/or diabetic patients, operating margins which have been generally low for hospital providers may decline even further.

What Healthcare Providers Can Do

Healthcare providers can address the current financial and operating challenges posed by the obesity and diabetes epidemic. From an operational standpoint, recommendations include:

  • Review and comply in a timely manner with payor contractual provisions and regulations which generally allow healthcare providers to pursue multiple denials or delays of payments. Payors secretly hope providers will “give up” after multiple denials and not pursue payment. However, the majority of these denials can be overturned with aggressive appeals and judicial intervention.
  • For those claims which private payors are not required to pay, hospitals may identify various government payors which may require that the patient be disabled as a prerequisite for payment. These include Social Security and Medicaid programs.  For example, under certain circumstances, obese individuals may qualify as being disabled and eligible for medical coverage.
  • Utilize appropriate financial forecasting which appropriately accounts for the increased costs associated with the increase in obese patients (many of whom will also be diabetic). Providers should consider negotiating reimbursement rates that will result in more reasonable compensation for medically necessary services for the complications that are likely to occur with these high risk patients.

To begin turning the tide of obesity and diabetes, healthcare providers may consider taking some simple steps:

  • Be proactive in educating patients and the community about good nutrition and the role it plays in getting and staying healthy. For example, utilize your television screens to educate patients while they are a captive audience in your facility.
  • Lead by example and remove junk food from cafeterias and hospital gift shops and substitute them with healthy foods.
  • Recommend nutritional screening for patients and make sure they learn about effects medications have on their nutrition and obesity.
  • Promote moderate exercise for patients and staff alike – every hour and a half of brisk walking each week lowers the likelihood of developing diabetes by 2 percent.
  • Include weight loss support in patient aftercare programs and employee wellness programs – the CDC estimates that losing can cut the risk of developing diabetes by 50 percent

Given their role and visibility, hospitals and other healthcare providers can play an important role in reducing the incidence of  diabetes.  This will contribute to healthier communities and healthier bottom lines.

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