Entries in Cost & Utilization (78)

Wednesday
Dec172014

The Convenience Truth

By Kim Bellard, December 17, 2014

The U.S. Mint reports that it now costs 1.7 cents to make a penny; nickels are slightly better, costing "only" 8 cents to make the 5 cent coin.  This is economics the way health care practices it.

According to Christopher Ingraham of the Washington Post, we could save $100 million annually by eliminating both coins.  Or we could change the metal composition to make them cheaper, but that would create havoc with vending machines.  So we just blithely chug along, mostly because we've always had them and the businesses that revolve around them don't want to change.

See how this is like health care?

What made me think about this was a recommendation from Britain's National Institute of Health and Care Excellence (NICE).   They now say that midwife-led birthing units are safest, and advised more women to consider them for low risk pregnancies.  They believe this could account for as many as 45% of live births.  Moreover, they think home births are just as safe as births in a hospital.  The Netherlands is considered the leader in home births, at a little under 25%.  The U.S. has 1.36% home births.

The literature -- often drawn on Netherland's data -- generally supports the NICE recommendation, but not everyone is convinced. It would be very easy to weigh all the factors, and conclude that even a relatively small increase in risk is not something you'd want to take for your own baby, and opt for the "traditional" OB/hospital delivery.

This is where the penny analogy starts to really apply.  These decisions on risk reduction are not without financial consequence.  A vaginal delivery with no complications averages about $10,000, whereas a birthing center costs under $2,500, according to Childbirth Connection.  I assume home delivery is less expensive.

In a piece for The New York Times, professor/physician Aaron Carroll notes that the ACA-created Patient Centered Outcomes Research Center is explicitly prohibited from considering cost effectiveness.  Its website says: "We don’t consider cost effectiveness to be an outcome of direct importance to patients."

Huh?

In theory, value-based purchasing will help us address these decisions.  In practice, though, most of the value-based purchasing arrangements I am aware of -- and that certainly is not an exhaustive list -- reward providers whose outcomes are simply what we'd hope for, may penalize them slightly for disappointing results, and are indifferent about if the care could have safely been done elsewhere for less.

I'm beginning to think that trying to reshape our health care system through value-based purchasing, cost-effectiveness, or even greater transparency may not work.  The "killer app" may not prove to be any of those high-minded strategies but rather a much more basic one: convenience.

Indeed, one of the earliest urgent care chains attributes its inspiration to the example of McDonald's.  We are, after all, the nation that invented fast-food, decided even that wasn't fast enough and so invented drive-throughs, which we use for over half of our fast food.  We liked the convenience of them so much that we've extended the approach to banks, car washes, pharmacies, even weddings and  funeral homes.  The concept of drive-throughs itself is rapidly being supplemented and even superseded by mobile apps, allowing consumers not to even have to get in their car.

Health care cannot ignore these consumer demands for more convenience.

Walgreens' chief medical officer recently noted that: "The idea of convenience ... is really becoming a dominant theme in health care."  It's no coincidence that Walgreens has been investing in in-store clinics, has a 24/7 Pharmacy Chat option, and just rolled out a direct-to-consumer physician virtual visit app, similar to American Well's Amwell service.  Not to be topped, Kaiser is now offering EMT home visits, in addition to its array of in-office and virtual visit options.

Our traditional approaches to care delivery have revolved around convenience for the providers, not the consumers.  Many consumers, especially younger ones, find ridiculous the notion that they have to call for an appointment that may end up weeks away, go to an office or facility that may not be close, only to wait there with sick people, and perhaps be sent to some other office or facility for more services.  They'd rather get their care via their mobile devices and/or in their home, and the technology is increasingly allowing that for many health concerns.  

We've come to recognize that health care is one of the few industries where technology typically not only doesn't lower costs but usually adds to them.  Maybe, though, expecting providers whose revenue is at stake to focus on cost-effectiveness is asking too much of them.  Focusing on convenience shouldn't be.

Focusing on convenience is simply a way to make sure we're focusing on the consumer (AKA "patient").  Isn't that supposed to be the point?

This post is an abridged version of the posting in Kim Bellard’s blogsite. Click here to read the full posting

Thursday
Jul102014

State Health Care Prison Spending by the Numbers

by Clive Riddle, July 10, 2014

The State Health Care Spending Project, an initiative of The Pew Charitable Trusts and the John D. and Catherine T. MacArthur Foundation, has been monitoring and analyzing prison healthcare costs for some time, and Pew has just released a new 32-page report: State Prison Health Care Spending: An Examination.

This is on the heels of their report Managing Prison Health Care Spending first released last October, which covered the period of 2001 – 2008, and found that spending sharply increased in most states during that time period. The new report analyzes spending from 2007 – 2011 and found “state spending on prisoner health care increased from fiscal years 2007 to 2011, but it is trending downward from its peak in 2009.”

The new report concludes: “Correctional health care spending poses a fiscal challenge to state lawmakers, though evidence indicates that spending peaked at the end of the last decade. The situation posed by these expenses may be particularly acute in states where older inmates represent a relatively large proportion of the prison population. Corrections officials will be better positioned to manage their systems effectively with access to rigorous, disaggregated spending and health outcomes data that can be used to identify cost drivers and to evaluate the value and impact of cost-containment initiatives.”

Here’s a compilation of various analysis and findings from the new report, by the numbers:

4 key variable characteristics that affect delivery of health care and increase costs include: (A) Prison population trend; (B)  Older inmates, greater expense; (C) Prevalence of disease and mental illness. And (D) Location and inmate transportation.

4 strategies being used to manage costs are: (A) use of telehealth technologies; (B) outsourcing of prison health care, (C) enrollment of prisoners in Medicaid, and (D) appropriately paroling older and/or ill inmates.

37% of health care spending was on general medical care (20% was on hospitalizations; 14% on pharmaceuticals; 14% on mental health; 5% on substance abuse)

39 States saw per-inmate health care spending rise from fiscal 2007-2011, with a median growth of 10%.

41 States experienced growth in their correctional health care spending from fiscal 2007-2011, with a median increase of 13%.

34 States saw their total correctional health care spending peak before fiscal 2011

40 Of 42 states surveyed experienced a rise in the share of older inmates from fiscal 2007-2011

204% increase in the number of state and federal prisoners age 55 and older

from 1999–2012

$441 million - The amount of California’s decrease in spending from fiscal 2009 to 2011 accounting for most of the national decline of half a billion dollars during that time

$7.7 billion total prison health care spending in fiscal 2011

$8.2 billion total prison health care spending in fiscal 2009

Thursday
May012014

Humana Study Measures Claims Costs and Absence Rate by level of Wellness Program Engagement

By Clive Riddle, May 2, 2014

Humana has released findings from their HumanaVitality Health Claims and Productivity Impact Study of Humana employees. HumanaVitality is a joint venture between Humana Inc. and Discovery Holdings, Ltd. That serves 3.5+ million members and “is a data-driven wellness and rewards program that motivates members to make healthier life choices.”

Humana touts that “the two-year study found improved health, as shown through lower health care costs and fewer unscheduled absences, among employees who actively participated in the HumanaVitality program.”

Here’s their specific findings:

  • Unengaged members in both years averaged $53 more per month spent on health care claims than members who were engaged in HumanaVitality both years.
  • The largest impact on health care costs was on members with lifestyle-related chronic conditions like high blood pressure or diabetes. Engaged members with these conditions had 60 percent lower health claims costs than unengaged members with these conditions.
  • Another way of stating this: Unengaged members with lifestyle-related chronic conditions had 101% higher claims costs than the total population, while engaged members with these chronic conditions had 41% higher claims costs than the total population
  • Unscheduled absences were 56.3 percent higher among unengaged members in both years than engaged members
  • Members who were unengaged the first year but engaged the second year had 29% higher unscheduled absence and an average of $28 per month in claims costs than members who engaged both years

Humana shared this about the study methodology: “This study was performed on a cohort of Humana associates that were on a Humana employee medical health plan for a full 12 months in at least two consecutive plan years over the study period. The study was conducted by Humana actuaries for the following time period: Baseline Year (July 2010 – June 2011), Year 1 of the HumanaVitality program (July 2011 – June 2012) and Year 2 of the HumanaVitality program (July 2012 – June 2013). Only Humana employees were included in the study; individuals with high cost claims (>= $ 150,000 in the Baseline Year, Year 1 or Year 2) were removed from the sample. The final sample size was 13,046 members in the Year 1 analysis and 16,296 members in the Year 2 analysis.”

Thursday
Apr172014

The Colossal Ship - The SS Rx Costs – makes a Course Correction

by Clive Riddle, April 17, 2014

Course corrections on mammoth shipping lines don’t happen in an instant – you watch them develop over a period of time. The same can be said for pharmaceutical costs as well as the entire healthcare sector, and the IMS Institute for Healthcare Informatics tells us we’re witnessing a slow correction right now.

Costs that have been stabilized this decade are gradually starting to tick upwards. The IMS Institute has just released a study: Medicine Use and Shifting Costs of Healthcare: A Review of the Use of Medicines in the United States in 2013 which found that “total dollars spent on medications in the U.S. reached $329.2 billion last year, up 3.2 percent on a nominal basis and a rebound from the 1.0 percent decline in 2012…  Total spending on U.S. medicines increased 1.0 percent on a real per capita basis in 2013, while the use of healthcare services overall rose for the first time in three years.”

This doesn’t mean that costs are about to go crazy in an upward spiral just yet – remember that this is a big ship. Instead, Murray Aitken, executive director of the IMS Institute for Healthcare Informatics, tell us  “following several years of decline, 2013 was striking for the increased use by patients of all parts of the U.S. healthcare system – even in advance of full implementation of the Affordable Care Act.  Growth in medicine spending remains at historically low levels despite a significant uptick last year, and continues to contribute to the bending of the healthcare cost curve.”

So what is driving this gradual correction? The IMS Institute identifies these factors:

  1. The reduced impact of patent expiries (“Patent expiries in 2013 contributed $19 billion to lower medicine spending, compared with $29 billion the previous year.”)
  2. Price increases for branded products added $4 billion more in spending growth last year compared to 2012
  3. Higher spending on innovative new medicines (“while 36 New Molecular Entities launched in 2013, the largest number in a decade”)
  4. Greater use by patients of the healthcare system  (“Overall utilization of healthcare services grew slightly as consumers returned to the healthcare system – primarily through more office visits to specialist physicians as well as outpatient treatments – following several years of self-rationing. “)

The IMS Institute shared these other key findings from their report:

  • The number of patient office visits to primary care physicians fell by 0.7 percent in 2013.
  • Visits to specialists increased by 4.9 percent overall and by 9.5 percent for seniors.
  • Patients filled an average of more than 12 retail prescriptions last year, up nearly 2 percent year over year.
  • Those aged 65 and over filled an average of 28 prescriptions annually, down slightly from 2012.
  • Overall spending on medicines remained concentrated in traditional small-molecule pills dispensed through retail pharmacies.
  • But higher spending growth was seen in biologics and specialty drugs – particularly in retail and mail-order settings.
  • A total of 27 new oncology drugs have launched in the past three years.
  •  Additionally, clusters of innovation are transforming patient care in hepatitis C, multiple sclerosis and diabetes, as well as stroke and acute coronary syndrome.
  • Seventeen orphan drugs – developed for patient populations of fewer than 200,000 individuals – launched in 2013, the most in any year since the passage of the Orphan Drug Act in 1983.
  • Patients with insurance are incurring higher out-of-pocket costs for healthcare services despite lower co-pays for many prescriptions and additional discounts for preventive medicines.
  • Prescription drug costs paid by most patients are declining, with average out-of-pocket costs falling below $5 for 57 percent of all retail prescriptions filled.
  • At the same time, 30 percent of total patient out-of-pocket costs relate to just 2.3 percent of prescriptions, often high-cost specialty medicines.
  • Twenty-three percent of prescriptions now carry no out-of-pocket costs, a dramatic rise in 2013 driven by common preventive medicines that include oral contraceptives.

Want to get more detail? The report can be downloaded as an app via iTunes.

Friday
Mar212014

Seated Behind a Health Plan Dashboard

By Clive Riddle, March 21, 2014

Spring has sprung, and if your fancy lightly turns to thoughts of health plans, and in fact you are driven towards such thoughts, a dashboard can be useful. You may be in luck, as Sherlock Company provides a summary from their health plan dashboard as part of their complementary publication, Plan Management Navigator.

Here’s what Sherlock Company reports in their just released March 2014 issue of the Navigator, about the trailing three months ended December 31, 2013, for health plans participating in their dashboard program. Health plans in their Dashboard universe are comprised of Blue Cross Blue Shield and Independent/ Provider-Sponsored Plans.

Health Plan reported “an increase in health revenues of 8.7%. Revenues for Medicaid grew most rapidly, increasing by 17.2%. Medicare Advantage revenue growth followed at 4.7%, while Indemnity product revenues increased 2.7%. ASO/ASC and Managed Care revenues fell by 6.2% and 4.3%, respectively. Overall, membership increased 1.1% for all health lines. Enrollment in Managed Care fell 1.1%, while increasing 1.6% for Indemnity. ASO/ASC membership declined 0.4%.”

“Membership grew in both Medicaid and Medicare by 4.6% and 4.2%, respectively. Both Managed Care and  Medicaid experienced the largest price increases, both at 3.5%. Indemnity followed with a price increase of 1.1%. Medicare Advantage products had a price decrease of 2.3%, while ASO/ASC posted a decline of 5.3%.”

“Health benefit ratios for health lines deteriorated by 2.0 percentage points to 90.0%. Managed Care and Indemnity had the largest increases of 5.4 percentage points and 4.5 percentage points, respectively. The number of scripts per person increased by 0.4 to 9.5 on an annualized basis. E/R visits per thousand members fell 13.4 to an annual rate of 241.8 per thousand, while hospital days also increased by 21.2 days to 335.1 days per thousand. The administrative expense to premium ratio increased 0.6 percentage points to 11.8%, while the administrative costs per member per month increased 2.3% to $34.76. Claims volumes increased 0.87 to 17.7 per member per year, while inquiries per member grew 0.34 to 1.9 per member per year. Staffing ratios fell 0.32 FTEs per 10,000 members to 21.1.”

You can click here if you’d like to subscribe to Sherlock Company’s complementary Plan Management Navigator, which includes additional articles full of great health plan data, benchmarks, and insights like those provided in the Dashboard Summary.

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