The cost of healthcare disparities has been long and deeply felt by patients and their families, but it wasn’t until the high rates of COVID-19-related hospitalizations and deaths among persons of color made headline news that the broader societal impacts of health disparities became more widely known. In response, health systems are prioritizing health equity and leveraging new tools and data to support their work.
At a physiological level, the presence of underlying chronic disease increases the risk presented by COVID-19. The incidence of chronic disease(s) is increasing among all Americans, but the prevalence is much higher among the poor, which includes a higher percentage of individuals of color compared to the overall White population.[1] Health inequities among communities of color are further exacerbated by structural and institutional racism, which experts say “harms health” because of negative factors in their physical, social, and economic environments and a propensity to develop maladaptive coping behaviors (e.g., smoking, alcohol, etc.)[2].
A Community-Level Issue
Increasing rates of chronic disease create a self-reinforcing cycle that threatens the well-being of entire communities (and the health systems that serve them). Individuals suffering from chronic disease have higher rates of absenteeism,[3] which limits their wealth building potential, the productivity of their employers and the tax base of their communities. This, in turn, increases poverty and the impact of the social determinants of health (SDOH) that contribute to higher rates of chronic disease. The combination of chronic disease (as an inflammatory condition) and the psychological stress of racism have been shown to cause physiological changes that raise the risk of contracting additional chronic diseases.[4]
Hospital performance is also tied to economic well-being. Research documents a correlation between the quantity and quality of local economic resources and the clinical performance of hospitals, which under value-based payment models, can also impact financial performance.[5] With chronic disease responsible for nearly 90% of national health expenditures,[6] it’s continued rise threatens our national economy and the ability to fund needed healthcare for the poor and aging. In other words, this is not just a social issue; it is an economic imperative. A 2021 Institute for Healthcare Improvement (IHI) study found that 58% of healthcare executives ranked health equity as one of their organization’s top three priorities, up from 25% in 2019.
Health equity is a focus of providers, regulatory agencies, and payers as they seek ways to eliminate care disparities across race and ethnicity, gender, sexual orientation, and socioeconomic status lines. Its significance is further impacted by new quality-based care models beyond those established by the Patient Protection and Affordable Care Act of 2010.
The challenge for many healthcare organizations participating in these new reimbursement models is how to view health equity and social determinants of health (SDoH) to understand the actual value of this information. Often overlooked is that healthcare organizations’ coding and revenue cycle management (RCM) departments already aggregate information that can help better understand inequities in care delivery and health equity across their patient populations.
A Primer on SDOH Impacts
SDoH impact many health risks and outcomes, which is why this data is vital for clinical care and reimbursements. Defining factors can include anything from geography, race, gender, and age to disability, health plan, or any other shared characteristic. Of increased importance, SDoH issues are most often experienced by the most vulnerable members of society: the poor, less educated, and other disadvantaged groups.
SDoH is linked negatively with outcomes, including higher hospital readmissions, length of stay (LOS), and increased need for post-acute care. Value-based payment programs, therefore, may penalize organizations that disproportionately serve disadvantaged populations if they do not collect and respond to SDoH data.
For example, addressing food insecurity — a key SDoH data point — by connecting patients to programs like Meals on Wheels, Supplemental Nutrition Assistance Programs (SNAP), or food pantries is proven to reduce malnutrition rates and improve short and long-term health outcomes.
In the case of SNAP, which is the primary source of nutrition assistance for more than 42 million low-income Americans, participants are more likely to report excellent or very good health than low-income non-participants. Low-income adults participating in SNAP incur about 25% less medical care costs (~$1,400) per year than low-income non-participants.
By Rondy Jennings, managing director of the not-for-profit healthcare group at Goldman Sachs & Co and a founding member of the Black Directors Health Equity Agenda.
Health equity has taken years to move from the drawing board to the waiting room, but the pandemic has revealed the daunting scale and fierce urgency of moving to value-based care. Consider the cost of disparate access to care as borne in COVID’s severity among Black adults.
In cases where we know the patient’s race, the rate of COVID-19 related hospitalization for Blacks has proven to be 2.5 times that of whites. If that holds true for all cases, racial disparity has accounted for 350,000 extra Black coronavirus patients through 2021. Conservatively assuming a hospital charge of $20,000 for each patient, that translates to about $7 billion. Even that substantial cost does not reflect the implications of tens of thousands of needless deaths in the Black community.
What would it take to eliminate this disparity, and many others that could change the lives of Black populations? Clearly, a more equitable healthcare system would improve outcomes across the board by reducing the impact of infectious diseases, premature birth and chronic conditions such as hypertension and diabetes. But to get Black health outcomes in line with the population as a whole, we must examine the obstacles that stand in the way and the lasting changes a shift to a value-based system will produce in health equity.
Driving to the Center of Health Equity
First, let’s turn to the scale of the healthcare ecosystem. U.S. healthcare spending grew in 2020 to $4.1 trillion or $12,530 per person. As a share of the nation’s Gross Domestic Product, health spending accounted for 19.7%—one dollar in five. This ecosystem labors under entrenched business models that predate digital technology, data analytics and the internet. In 2020 overall, spending on hospital care reached $1.3 trillion; physician and clinical services, $809.5 billion; prescription drugs, $348.4 billion; and home health care, $123.7 billion.
High-tech entrepreneurs have been very nimble in finding opportunities at the margins. While they can’t tackle the whole ecosystem, they can go after various pieces of it and still create an incredibly successful company without addressing the ripple effects outside their domain. If we think of healthcare as a battleship fleet in desperate need of overhaul, think of the tech disruptors as repairing the hull one weld at a time, oblivious to the condition above deck. Where is the central thrust to overhaul the healthcare system as a whole in a way that creates health equity?
Fortunately, the imperative for change is gaining momentum. The Centers for Medicare and Medicaid services, for example, is developing promising, value-based innovation models that reward care for underserved populations. They revolve around taking care of people not only on an episodic basis—as with hospitalization or chemotherapy—but also over time. Costs are lowered because the focus is proactive and preventative. Value-based care is not driven by a person’s quality of insurance. It offers a financial incentive to provide preventive care, which addresses social determinants of health, as well as exposure to personal risks.
