How one city saved $42M on healthcare

In the face of runaway healthcare spending, Houston, Texas, implemented corrective measures that have saved the city more than $40 million in three years, providing an example hospitals may want to follow.

Between 2001 and 2010, the city of Houston's healthcare spending soared from $101 million to around $290 million a year. An estimate in late 2010 projected eventual expenditures of up to $315 million, which officials realized was not sustainable, Houston Human Resources Director Omar Reid (pictured right) told FierceHealthFinance in an exclusive interview.

To address the issue, Reid said, the city government moved from a fully insured model to a self-funded model, generating actual savings of $42 million. While Reid and colleagues applied the model to a city, he said, it could work with other institutions such as hospitals and health systems as well. "What we did was we started looking at a lot of different things, but we really started aggressively managing our data," he said. "The accountable care model that we moved into certainly could be adopted by multiple entities of any size."

Aspects of Houston's strategy, such as partnerships with institutions such as Kelsey-Seybold Clinic and physician groups that used coordinated, high-quality care models, are steps "any entity could do," he said.

Hospitals can also take pointers from Houston on chronic disease management, Reid said. As part of its strategy, the city provided medication for certain chronic conditions at a $0 copay to promote adherence, a strategy that he said "not only all entities could do, but I think if you are going to be smart about how you're managing your healthcare dollars, it's a necessity to do it."

The plan was not without its challenges, Reid said. "Most people are used to getting results instantaneously; we took a long-term perspective, and we knew that this was a multi-step process," he said. "If you're looking for overnight success with this type of strategy that we implemented, it's simply not going to come to fruition."