Production Function 1

Production Function in Healthcare: An Analysis

Are the outcomes (output) of diabetes care determined by a person's compliance?

By Dr. Susan Dorfman, The University of Phoenix Online

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Introduction

The basis of this paper draws on the theory of health production functions and the

hypothesis that each person has control over his or her health outcomes through various

healthcare behavior choices. More specifically, the assumptions in paper were that the outcomes

(output) of diabetes care are determined by a person's compliance (input) to his or her medication

regiment. One key factor of compliance, as shown in the studies presented herein, are the costs

associated with compliance – primarily the cash payments (co-pays) that patients must pay for

every prescription. Of particular interest is the understanding of the health outputs provided in

the studies presented herein relate to the patient health input, which in this case is non-

compliance due to co-pay, and if and how they can be associated and applied to the production

function.

Analysis of Articles

A health production function relates physical inputs to physical outputs, where health is

an outcome produced by a number of varying inputs. One such input is patient compliance and

non-compliance, which in itself has a series of other inputs contributing to patient behaviors –

both good and bad.

Patient non-compliance has devastating consequences, such as causing. It is especially

revealing that estimates of the total annual healthcare costs in the U.S. resulting from patient

non-compliance vary from $100 billion to $170 billion to $300 billion. It has been shown that

that there is a link between increases in healthcare costs and low medication adherence in

patients who suffer from diabetes (Mahoney, 2005). Diabetes is a chronic disease, and patients

need to comply with medication regiments, be compliant with their doctor’s orders and refill

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their prescriptions for diabetes medications on a monthly basis. Due to co-morbid conditions that

exist such as blood pressure, kidney problems, depression and others, multiple medications may

be required to be taken regularly in addition to those that help treat diabetes. The implication of

these co-morbid conditions causes greater burden on out-of-pocket expenses for patients. “Direct

medical costs for diabetes and related complications are notoriously high” (Mahoney, 2005).

Evidence has shown that drug co-payment are adversely impacting adherence to a number of

desired healthy behaviors (Herman, 2006).

From the U.S. employers' perspective, the burden of diabetes brings with it an estimated

$40-billion annual cost for expenses related to the disease, including early death, work absence,

loss of a job and disability (Mahoney, 2005). Additionally, Mahoney (2005) believes that

absence from work and disability of patients with diabetes make up one-third of that employees

total cost to the company. Due to non-adherence, plan participants less then optimal refill rates

(nice or fewer) within a one year period were most likely to be considered a high-cost group.

Patient compliance with diabetes treatment has been shown to not only save lives, but also

healthcare dollars (Edlin, 2005). The lack of compliance to therapy has been recognized to

contribute to the complications associated with the disease (American Diabetes Association,

2005), with an estimated cost of $92 billion per year; which is triple the cost an average patient

(Mahoney, 2005).

The Findings and Implications on Health Production Outcomes

A health production function is a function that summarizes the conversion of health

inputs into health outputs. This paper was based on the theory of health production functions and

the hypothesis that each person has control over his or her health outcomes through various

healthcare behavior choices. More specifically, the assumptions in paper were that the outcomes

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(output) of diabetes care are determined by a person's compliance (input) to his or her medication

regiment. The findings from the articles presented demonstrate that the input of positive patient

compliance has direct impact into positive health outcomes and patient non-compliance has

direct input into negative health outcomes.

Literature exists (Mahoney, 2005) to support the fact that high co-pays are related to

patient non-compliance due to patients’ less-then-optimal use of necessary medications. A recent

study reviewed by Mahoney (2005), found that increasing the co-pay for “diabetes drugs led to a

23% decrease in per-member per-year drug days supplied.” Investing in aggressive diabetes

control model that factor in reductions in co-pays can help improve patient medication adherence

while also improving the glucose levels in the blood, reducing the costs and possible

complications associated with the disease, and increase productivity at work while lowering the

number of days employees are absent. This type of adherence has been shown to not only save

lives, but also healthcare dollars (Edlin, 2005).

Because diabetes is a chronic disease, patients need to comply with medication regiments

regularly. These patients must therefore adhere to their doctor’s instructions for care and refill

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their prescriptions for all necessary prescribed medications on a monthly basis. The conversion

of their health inputs directly relates into their health outputs, and many of these diabetes patients

must rely on several different medications to keep their condition under control. These

medications cost a great deal of money and even insurance drug plans are not effective enough in

reducing the cost of these medications because the co-pay is still prohibitive. As a result, many

diabetic patients do not take the medications as prescribed.

Diabetes is a chronic disease, and patients must comply with medication regiments and

refill their prescriptions for diabetes medications on a monthly basis. Due to co-morbid

conditions that exist such as blood pressure, kidney problems, depression and others, multiple

medications may be required an a monthly basis – causing greater burden on out-of-pocket

expenses for patients. While patient adherence and proper use of medications are necessary to

control diabetes and the lives of patients with the disease, the recent trends in pharmaceutical

benefit design within managed care have been to increase patient co-pays thereby passing on the

increasing costs of medications to their members in order minimize the visible growth of the

healthcare costs. In the cases presented, non-compliance, has been linked with a patient’s

inability to pay associated medication co-pays, and was directly related to negative patient

outcomes. Because today’s healthcare systems, techniques, and professionals are so complex and

interdependent, the impact of patient non-compliance should not only look at and analyze the

implications of compliance and it’s positive effect if implemented. In the cases described above,

negative health outputs were directly linked to negative patient health input. If this is not

managed, the high co-pays may become not only financial barriers but health barriers within

diabetes care (Mahoney, 2005) for many patients who have private employer-based insurance, as

financial and disease burdens will be caused by the lack of adherence to medications.

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Concluding Remarks

Patient compliance with diabetes treatment or the lack of it has been recognized to

contribute to the complications associated with the disease (American Diabetes Association,

2005), with an estimated cost of $92 billion per year; which is triple the cost an average patient

(Mahoney, 2005). As such, it can be concluded that the health outputs provided in the studies

presented herein relate to the patient health input. In the cases presented, non-compliance,

primarily due to inability to pay associated medication co-pays, was directly related to negative

patient outcomes. Because today’s healthcare systems, techniques, and professionals are so

complex and interdependent, the impact of patient non-compliance should not only look at and

analyze the implications of compliance and its positive effect if implemented. Additionally, our

society and the healthcare industry and nation as a whole should look at non-compliance and the

negative outcomes (outputs) and multipliers, some of which are obvious while others are

invisible, as those which can easily increase the potential costs for our nation and even our

universe.

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References

American Diabetes Association. (2005). “Third-party reimbursement for diabetes care, self-

management education, and supplies.” Diabetes Care, 28(supplement 1), S62-S63.

Centers for Disease Control and Prevention. (2005). National diabetes fact sheet. Available

online at: www.cdc.gov/diabetes/pubs/estimates.htm.

Edlin, M. (2005). “Complex issues of compliance continue to make an impact,” Managed

Healthcare Executive, Sept.

Herman, W. (2006). Can reduced co-pays boost outcomes, lower costs in diabetic patients?

Disease Management Advisor, 12(8): 94-95.

Mahoney, J.J (2005). “Reducing Patient Drug Acquisition Costs Can Lower Diabetes Health

Claims,” The American Journal of Managed Care, August: S170-S176.