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The Economist: A step in the tight direction

By By Ray Perryman
June 9, 2012 at 1:09 a.m.


The rising cost of health care is a concern for individuals, families, businesses, government entities and society as a whole. I recently examined the potential benefits of greater use of advanced practice registered Nurses to help deal with this problem. It is but one of many things we need to do, but it can make a significant difference.

According to data maintained by the Centers for Medicare and Medicaid Services, in 2009, total health expenditures reached $2.5 trillion or some $8,086 per person. Health expenditures have also increased markedly as a percent of U.S. gross domestic product, from about 12.5 percent in 1990 to 13.8 percent in 2000 to 17.6 percent in 2009.

These expenses are borne by employers who provide health coverage and patients and their families through out-of-pocket expenses, which have risen substantially over time.

Health insurance companies are also affected, with expenditures notably higher in recent years. In addition, outlays by Medicare and Medicaid are up dramatically, placing a strain on tight federal and state budgets.

As the population ages, demographic shifts bring more eligibility for public programs, and access becomes more broadly available, the problem of the high cost of medical care and treatment will become increasingly difficult.

Similarly, the shortage of skilled professionals is already significant, particularly in rural areas and will only worsen in the coming years.

Patient outcomes are, of course, of paramount importance. However, finding ways to increase efficiency without compromising the quality of care is crucial and, indeed, imperative.

Moreover, many actions which reduce costs, such as decreasing the need for hospital stays, also improve the health and well-being of patients. One proven strategy for both improving patient care and reducing costs is greater utilization of advance practice registered nurses, including nurse practitioners, certified registered nurse anesthetists, certified nurse midwives, and clinical nurse specialists.

This approach was recently recommended by the Institute of Medicine, and is the subject of a national initiative supported by the Robert Wood Johnson Foundation (I am co-chair of the advisory group in Texas).

A number of empirical studies support the conclusion that greater utilization of advanced practice registered nurses can both improve patient outcomes and reduce overall health care costs. In addition, many areas are facing shortages of primary care physicians; advanced practice registered nurses can help alleviate these problems.

In fact, a recent study illustrated the critical shortage of physicians within the state, and it is well known that Texas does not have sufficient residency openings to meet current and future needs. When advanced practice registered nurses are more efficiently utilized within the systems of health care provision, the economic benefits to the state are substantial.

We estimated that greater use of advanced practice registered nurses and the resulting reduced health care expenditures would generate a total current impact, which includes $16.1 billion in total expenditures and $8 billion in output (gross product) each year, as well as 97,205 permanent jobs in Texas.

This economic activity also leads to additional tax receipts and cost savings for governmental entities, including $483.9 million to the State and $233.2 million to local government entities each year.

This analysis was based on a conservative expansion of this practice, which is consistent with legislation that is expected to be filed in the upcoming legislative session.

Over time, the economic benefits of more efficient use of advanced practice registered nurses will grow. In 2020, the total annual impact (including multiplier effects) for the state of Texas would include almost $24 billion in total expenditures and $12 billion (in constant 2011 dollars) in output (gross product), as well as 122,735 permanent jobs.

Aggregate net state and local fiscal revenue gains would be $722.7 million and $322.3 million per annum, respectively.

By 2030, the annual economic benefits could be expected to reach $34.8 billion in total expenditures and $17.5 billion in output (gross product) as well as 151,462 permanent jobs. State fiscal gains for the year would be $1.053 billion, with local governmental receipts rising by $424.8 million. Annual benefits in 2040 rise to $46.9 billion in total expenditures and $23.6 billion in output (gross product) each year and 177,220 permanent jobs.

These gains would be spread through communities across Texas. The fiscal effects at this point would be expected to include $1.432 billion for the state and $538.1 million for various local taxing authorities.

Finding ways to deal with rising health care costs is crucial to long-term prosperity. To the extent that regulatory frameworks prevent the most efficient provision of care in an appropriate and beneficial manner, they should be modified.

Patient well-being is, at all times, of paramount importance, but empirical evidence demonstrates that advanced practice registered nurses can be more fully utilized without compromising patient outcomes.

Even under conservative assumptions regarding the extent of utilization and implementation, these efficiencies generate substantial economic benefits, which permeate the entire state and facilitate a broader and more effective health care delivery model.

Dr. M. Ray Perryman is President and Chief Executive Officer of The Perryman Group (perrymangroup.com). He also serves as Institute Distinguished Professor of Economic Theory and Method at the International Institute for Advanced Studies.

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