Health inequities account for about $320 billion in annual healthcare spending, according to recent research from Deloitte.
The healthcare sector is facing enormous pressure to reduce spending while improving care, and one of the biggest contributing factors to this excessive spending is health inequity.
It’s no secret that there are biases in healthcare related to race, socioeconomic status, and gender that prevent some patients from seeking and receiving care. It is critical for hospitals and health systems to address the healthcare industry’s inequities, not only because it will provide patients with more options for care, but also because it can have a lasting, positive impact on the organization’s bottom line. There are several strategies hospital leaders—particularly CFOs—can implement to eliminate bias and improve their hospital’s financial well-being.
“Looking through a particular frame, you can argue that part of the stickiness around resolving these issues is because bias, unfortunately, has been profitable for the system as a whole,” says Neal Batra, a principal in Deloitte’s Life Sciences and Health Care practice. “When you get paid on a fee-for-service–type dynamic, more activities mean more money, and so poor care means more activity.”
Health inequities account for about $320 billion in annual healthcare spending, according to recent research from Deloitte. If something is not done to address this problem, that figure could rise to over $1 trillion by 2040.
“If the United States reaches this threshold, we could see a direct impact on affordability, quality, and access to care beyond the challenges that already exist,” the Deloitte report says. “The projected rise in health care spending could cost the average American at least $3,000 annually, up from today’s cost of $1,000 per year.”
The average person, family, or health system is not equipped to handle that kind of inefficiency, expense or the consequences that will inevitably result—even greater restrictions to healthcare, especially for already underserved communities and the additional loss of lives, according to Deloitte.
How can CFOs make a difference?
Planning to address the inequities within the healthcare system should be a key part of any organization’s future planning, according to the Deloitte report. There are five areas where healthcare incumbents, industry disruptors, community organizations, and government agencies can come together to remove the barriers to healthcare and improve the financial health of patients and their own systems. The first is intentionality, make equity-based thinking part of the organization’s overall business model. This also means removing any barriers that keep patients from accessing the services hospitals and health systems offer, eliminating unnecessary tests, and creating a welcoming environment for patients.
“Interventions to offset disparities cannot be imposed on a population,” Pierre Theodore, vice president of health disparities for Johnson & Johnson Global Public Health told the Deloitte researchers. “Interventions should instead be designed collaboratively in direct consultation with representatives of the population experiencing health inequity.”
The second area for hospital leaders to consider is forming cross-sector partnerships. True healthcare equality means collaborating with agencies, organizations, and coalitions that work on initiatives to address the root causes of health inequities.
“You need to look outside of healthcare for the mechanisms,” Samantha Artigia, director of racial equality and health policy program at Kaiser Family Foundation, told the Deloitte researchers. “Understanding the drivers outside of healthcare and working with the partners and sectors outside health care, will be key.”
Third, organizations need a concrete way to measure progress. There are significant data gaps when it comes to healthcare inequality because measuring healthcare inequality has not been a priority. But, if organizations want to truly tackle this issue, they will need to invest in programs and algorithms that will provide data, insights, performance indicators, and continuous evaluation of their progress.
“There is no agreed-upon framework on how to talk about bias in healthcare,” Batra says. “There are no agreed-upon algorithms, there is no agreed-upon way to calculate it. So, teams have to develop a methodology that can stand up to the rigor and fairly calculate the cost of bias in the system.”
Addressing bias can be uncomfortable, especially when it requires admitting your organization has been part of a larger systemic problem, but by addressing individual and community level barriers—Deloitte’s fourth tip to healthcare leaders—organizations can advance health equity. Up to 80% of health outcomes are affected by social, economic, and environmental factors, according to the Deloitte research. This step is going to require further investments in data, technology, and public health infrastructure at the federal, state, and local level.
“CFOs, it’s time to put aside the shame and put aside that aspect of not wanting to know about it and measure this,” says Andy Davis, a principal for Deloitte Consulting’s healthcare practice. “Once you understand bias and can measure bias it allows you to then unpack where it occurs and why it happens. Because of the risk associated with consumer response and reaction, frame this as reducing risk, rather than an enterprise. The best case is this will enhance outcome and enhance quality. And that, frankly, should enhance your competitive positioning especially as virtual health and other options that are creating enormous leakages for hospitals, come online and become more accessible to consumers.”
Finally, healthcare leaders must build trust. It will be difficult for organizations to rebuild the trust with the people and communities they serve. Being sure hospitals and health systems understand the different needs of the people in their communities, asking for consumer feedback, and making sure their employee population represents the patients coming through their doors can help organizations earn the trust of the people they serve.
“Having these conversations gives [CFOs] a reason for investment,” Davis says. “It shows that this can now generate ROI. Oftentimes, [addressing bias in healthcare] feels like it’s the right thing to do, but [CFOs] have to feel good about it because [they must] prove that [they’re] managing the cost of care more effectively. This shows you that the dollars are worth the investment and that includes community investment outside of your four walls.”
Amanda Schiavo is the Finance Editor for HealthLeaders.