Entries in Cost & Utilization (67)


Study finds fewer office visits, prescriptions with CDHPs | Home Channel News

By Cyndy Nayer, July 1, 2013

There are more studies being translated for consumer sites and broader business reach.  Small and large businesses alike know that up to 20 cents of every revenue dollar goes toward health care.  Understanding what works, what appears to work, and what really isn’t hitting the mark is crucial for business success.

This article echoes the findings of studies from Employee Benefit Research Institute (EBRI),  Kaiser Family Foundation, and others.   When folks have to choose between paying out of pocket for appropriate care and paying the rent, the care falls behind.  Study after study have shown that, over the past 5 years, fewer prescriptions have been filled, more prescriptions have been subject to non-compliance (pill splitting, etc.), fewer follow up physician visits and tests/labs have been performed, all of which hinder outcomes.

AHIP recently published an infographic showing the increase in CDHP plans.  These increases appear to dovetail with the lower adherence to protocols that could prevent rescue treatments and avoidable inpatient days.  

The opportunity in value-based design is to follow the high-value protocol and treatments.  These can be place on special designs that encourage the appropriate behaviors.  Further, direct contracts with providers, urgent care centers, and pharmacist coaches can help to manage high-cost chronic care, even within account-based consumer-directed plans.

Let’s spread the word:  consumer-directed can work, but the insurance plan design and contractual arrangements for appropriate, outcomes-based quality providers, are essential.


Hiding in Plain Sight

by Kim Bellard, June 18, 2013

I saw two recent articles in The New York Times recently that I thought merited further discussion.  One attracted a fair amount of attention, the second not quite as much.  They deal with the high prices in the U.S. health system and the trend towards provider consolidation, respectively.  Both problems are well known, yet they describe continue to get worse, not better.  

The first article – The $2.7 Trillion Medical Bill: How Colonoscopies Explain Why the U.S. Leads the World in Health Expenditures – focuses on the wacky world of charges and overuse of expensive procedures, especially as they relate to colonoscopies.  It will come as no surprise to anyone who has been paying attention, but their analysis indicated that charges for the procedure varied dramatically between providers, and were much higher than in other countries.  The U.S. also does them more commonly than many other countries, preferring the expensive surgical approach to other screening options.  

The boom in the number of colonoscopies has been great for gastroenterologists, anesthesiologists, and surgical centers; for patients, perhaps not so much.  The article’s discussion of how many gastroenterologists have invested in surgical centers to reap more of the profits from the procedure is disturbing, and they are far from the only specialty to have discovered this financial gimmick.  It’s part of what drives our health care bill.  

The article notes that insured patients typically shrug off the inflated charges, since their insurance has negotiated rates that are far lower, but, of course, uninsured patients get stuck with the full bill, kind of like having to pay those absurd prices on the back of hotel room doors.  Arbitrary and inconsistent as charges may seem, they’ve nonetheless helped lead to “allowed charges” that are still much higher than anywhere else in the world.  We all end up paying for the costs, of course, through higher insurance rates or as taxpayers.  

Meanwhile, the second article – Health Care’s Overlooked Cost Factor – centers on market consolidation, particularly through mergers of health systems.  It starts off with the FTC’s first successful antitrust case against a hospital merger since 1990 (!!), blocking the merger of two neighboring Chicago hospitals.  A victory of sorts, but the case was done post-merger and it is not at all clear that the ruling actually rolled back pricing with the payors to the levels they would have been sans merger.  

Earlier this year the FTC did move to block the acquisition of Idaho’s largest physician group by its largest hospital provider, so perhaps they’re starting to wake up to the problem.  With all the health system merger activity in the past 10-15 years, these isolated victories lead one to wonder why the FTC has been so asleep at the wheel. 

The article cites research by Gaynor and Town, done for the Robert Wood Johnson Foundation last year, which concluded that hospital consolidation generally raises prices, often dramatically, and that physician-hospital consolidation has not led to improved quality or reduced costs.  Their research is not the first to reach these conclusions, and of course the American Hospital Association has a different perspective.  Earlier this month they released a report that which indicated that only about 10% of hospitals have been involved in a merger in the past five years, that most mergers aren’t happening in concentrated markets, and don’t necessarily result in higher prices.  Uh-huh.  

AHIP was quick to rebut the recent study’s conclusions. 

These are well-known problems.  The insight on prices goes back at least ten years to Gerry Anderson’s Health Affairs famous article “It’s the Prices, Stupid.”  Steve Brill wrote a similar article in Time (“Why Medical Bills Are Killing Us”) earlier this year.  The state of California and the Commonwealth of Massachusetts have both publically been concerned about the consolidation issue, and there was the great quote from consultant Robert Murray: “Finally the evidence is catching up with the reality that we have a humongous monopoly problem in health care.”  Even I’ve previously written on both prices and market consolidation.  So, no, these shouldn’t catch anyone by surprise. 

Many experts cite greater transparency as an important way to attack prices, and there are numerous companies purporting to provide consumers transparency tools.  Indeed, a recent report from the Aite Group claims transparency itself will be a $3 billion industry by 2016 – up from $540 million in 2012.  Of course, someone – i.e., consumers – ultimately will pay for that increase.  Only in the American health care system does creating a business to provide information on prices lead to greater costs for the system, as to date the data is inconclusive at best that consumers will actually change their behavior based on transparency information.  And in a consolidated market they may find few options to price shop even if they want to. 

We need more competition, and we need it on the right things, like value.  I’m not sure any of the metrics we use now are going to get us there anytime soon.  Some claim that this is the era of “Big Data,” and its application in health care will provide revolutionary insights.  McKinsey & Company issued a report that says use of Big Data in health cae could save $450 billion a year.  Do a search on Big Data in health care and you’ll find a plethora of eager companies, from behemoths like IBM to upstarts that specialize in health care, like ExplorysGNS Healthcare, or Health Catalyst, to name a few.  Hidden in the morass of health care data, it appears, are gems. 

Much has been made of the recent scandal over the NSA pulling unimaginable reams of data from telephone and internet records, and using their Big Data capabilities to mine it – hopefully only to detect terrorists.  Meanwhile, when I read articles like the one Bloomberg News recently reported about how one Chicago hospital has literally been cutting patients’ throats – e.g., performing tracheotomies -- unnecessarily to increase revenues, I kind of wish we did have some Big Brother looking at the data better.  

In a series of articles over two years ago the Wall Street Journal showed (see here or here) the kinds of fraud can be detected through proper analysis of the Medicare claims data – and it makes one wonder why CMS hasn’t done the same.  Perhaps now that the Wall Street Journal has forced CMS to release Medicare claims data on individual doctors someone else can detect this kind of abuse on an ongoing basis.  That data is still not freely available, but at least the door is open wider.  

Some say pricing can be addressed via greater transparency, others want more bundled payments, and yet others like reference pricing, which essentially limits payor liability to a fee schedule.  I’m old enough to remember when health insurance often had set fee schedules, with charges above those scheduled amounts the patient’s problem, and I don’t recall people being too crazy about them.  On the other hand, costs were a lot lower, so maybe there is something there, just as we’re also going back to the old idea of big upfront deductibles.  

Personally I think the source problem is that we’ve allowed our pricing structures to become so complex, so piecemeal, and so jargon-filled that no consumer – and few professionals – can really be expected to understand them, much less shop based on them.  Step one has to be to greatly, greatly simplify how we price health care services. 

One of my pet peeves in health care are those financial responsibility forms providers try to get everyone to sign upfront.  They say, essentially: we don’t know exactly what we’ll do to you, or how much it will cost, and we may get some other people to do some other things to you too, and we don’t know what that will cost either, but whatever is done to you and however much it costs, you are obligated to pay.  I’m no contract lawyer, but that sure doesn’t seem like an enforceable contact to me, given the vast asymmetries.  I’d sure love to see the ACLU or Public Citizen or maybe even AHIP take this on in court.  Pricing would get a whole lot more rational if there had to be more upfront disclosure and agreement. 

As for the market consolidation, if health systems are going to create monopolies or virtual monopolies, they may need to be treated more like public utilities, facing rate and spending review.  I’d hate for that to happen, and much prefer that we reimagine the role of these capital-intensive structures.  Why do these big buildings with all those beds and all that equipment still make sense in the 21st century?  Can they be reinvented with something that allows more competition?  I offered one conceptual approach some time ago, but would welcome other proposals to address the issue. 

There is a lot of “reform” happening in health care these days, but if they just end up incorporating these two structural problems I doubt we’re going to actually see much real improvement to our health care system.


More Arrows Out of the Cost Management Quiver?

By Kim Bellard, May 31, 2013

Even as health costs seem to have dramatically slowed in recent years, some recent studies now question whether some commonly proposed methods of attacking those costs – reducing geographic practice variations, increasing patient shared-decision-making, and employee wellness programs -- actually have the potential that proponents have claimed. 

Let’s start with the geographic practice variations.  It’s been over thirty years since Jack Wennberg first mapped out the sometimes startling variations in health care costs and utilization.  The Dartmouth Atlas has continued and expanded on his work, and it has become almost dogma that such variations exist.  The belief has been that they could account for as much as 30% of care that is inefficient/unnecessary, which could be cut without harming patient safety.  Respected experts like Atul Gawande have written eloquently on these variations, and then-CBO head Peter Orszag popularized the idea to the extent that President Obama seized upon it in his campaign to pass the Affordable Care Act.  Turns out the conventional wisdom may be wrong.

New research from Jack Reschovshy and his colleagues indicates that health status, not geographic practice variations, drive 75-85% of apparent geographic cost variations.  They took a new approach to case mix adjustments and concluded that, for the most part, higher cost patients were, indeed, sicker.  The researchers took pains to note that their conclusion is not to suggest that significant waste and inefficiency do not exist in our health care system, but simply that those are not easily boiled down to geographic practice variations.

I’m not sure how this research squares with, say, the differences in hysterectomies or C-sections that have long been known, but, to be fair, the researchers did only focus on the Medicare population.

Then there is patient shared-decision-making.  This is at the heart of consumer-driven plans, with the belief that once patients are more involved in their care, and more exposed to the costs and trade-offs inherent in that care, they will become more prudent purchasers.  The latest issue of JAMA Internal Medicine included several studies and articles on this topic – one of which, a study by Tak and colleagues, throws cold water on the idea of SDM saving money.  They found that while over 70% of patients preferred to leave decision-making to their physician, patients who did actively participate in that decision-making had longer hospital lengths of stay and costs (the study only focused on hospital patients). 

One could easily see how more vocal patients might demand more care, or we can speculate that these patients became more involved in their decision-making because they were sicker.  Correlation is not, after all, causation.  We should also keep in mind that Tak’s results are somewhat at odds with recent research by Hibbert that suggested higher patient activation predicts lower costs.  As researchers always like to say, more research is needed. 

It’s not good days for SDM.  Another of the JAMA Internal Medicine studies, by Fowler et alia., was a nationwide survey of adults 40 years or older on their experiences with being involved in medical decision-making.  Patients reported more discussion of pros than cons, and more balanced discussion about surgeries than cancer screenings or medication treatment.  The authors conclude that “discussions about these common tests, medications, and procedures as reported by patients do not reflect a high level of shared decision making.”  A third study, by Wachterman and colleagues, found a lack of congruence between expectations of hemodialysis patients and their nephrologists, with the patients being much more optimistic about their prognosis, and conclude better communication is needed. 

A fourth study, by Krumholz, surveyed patients with Acute Myocardial Infarction, and found that over two-thirds wanted active involvement in decision-making, but the authors admit that “…shared decision-making is not yet integrated into routine medical care.” 

Face it: the winners in the health care system have been hospital systems and pharmaceutical companies.  These are important institutions, which employ many caring and well-intentioned people, but whose historical orientation is treating sick people – the sicker the better.  As comedian Chris Rock puts it, “Ain’t no money in the cure, money’s in the medicine.” 

Hospitals are consolidating and buying up physician practices at record rates in order to improve their clinical integration – or improve market clout – and the pharmaceutical industry has been off to the races ever since DTC advertising has been allowed.  As proof, consider the fact that Americans take, on average, 4 billion prescriptions per year.  That’s 13 prescriptions per year for each and every one of us, and many of those are for “lifestyle conditions” that arguably could largely be avoided if we simply ate better and got more exercise. The answer may be less in changing what we do to sick people than in simply having more healthy people. 

That is one reason why many employers have instituted employee wellness programs.  According to Aon Hewitt, 83% of large and mid-sized firms have some employee incentives in place to help them be more active in maintaining their health.  ACA not only permits such programs but expands how much they can incent employers.  Under new rules, employees will be able to reduce their health insurance contributions by up to 30% -- up to 50% if smoking cessation is included – by participating in such programs.   The oft-cited success story in employee wellness programs is that of J&J, which was so happy with its success that it turned the programs into a business line, part of the $6 billion wellness industry. 

However, even the success of wellness programs is not quite clear-cut.  Reuters reports that a recent report from RAND to DOL and HHS found at best only modest successes – and the report was mysteriously pulled from public availability within hours of its release.  Looks like some other people have some explaining to do…

Sometimes it seems like we really don’t know anything, or that the things we thought we knew aren’t true.  For example, for decades the gold standard for treatment of appendicitis was an appendectomy; now it appears that surgery may not be called for at all, with antibiotics doing the trick.  And doing even get me started on the controversies about cancer screenings, like PSA tests.

I wonder if years from now we’ll look back on this age of medicine much like we might regard medicine of the 19th century: well-intentioned but almost comically primitive in its misguided notions about how to treat conditions.  E.g., maybe the future is in the microbiome rather than in our prescription medicines and surgical approaches.  No one can tell me that any clinical studies for a given drug are truly taking into account the other 12 prescriptions a user might also be taking, nor fully take into account what havoc the cocktail of prescription drugs will have on the body’s natural defenses. 

We are starting to realize the importance of our internal bacteria, but we still don’t really know exactly what they do or how we can take best advantage of them.  Then again, we’ve been studying geographic practice variations, shared-decision-making, and employee wellness programs for a long time, and we don’t seem to know as much about them as we thought we did either.  Based on these new studies, there are a lot of consultants, disease management companies, and wellness firms that may have a lot of explaining to do.  

When push comes to shove, I still believe that there are unnecessary practice variations, that getting patients more involved in decision-making is the right thing to do, and that efforts to focus on health rather than on illness are the way to go.  Whether we know how to do any of those correctly, though, is an open question.


Health Sector Economic Indicators – Altarum Institute

By Clive Riddle, April 12, 2013

Altarum Institute each month issues Health Sector Economic Indicators Briefs through its Center for Sustainable Health Spending. The brief cover health care spending, utilization, prices, and employment, and are worth perusing each time. 

Altarum’s Charles Roehrig, Director of the Center, had this to say about their current assessment of health care in the economy:  “Health spending has remained at about 18 percent of gross domestic product since mid-2009, but health employment continues to slowly increase as a share of total employment.  Expanded coverage under the Affordable Care Act should push these figures upward, but an improving economy will push in the other direction as non-health spending and jobs accelerate. We look forward to tracking how these forces play out.”

Here’s the current pulse of the health care economic sector from Altarum’s just issued April briefs, which incorporate February and March 2013 data:

  • National health care spending in February 2013 grew 3.9% relative to February 2012
  • Health care price growth rose to 1.7% in February 2013 compared to February 2012, two-tenths above January 2013 reading
  • This was still the second lowest rate of price increase since 1.3% growth recorded in December 1997.
  • The 12-month moving average price growth at 1.9% in February 2013 is the lowest since the same figure recorded in November 1998.
  • In February 2013, health spending increased to a seasonally adjusted annual rate of $2.89 trillion, slightly higher than its value of $2.88 trillion in January.
  • The health spending share of the gross domestic product was steady at 18.0% in January 2013, up from 16.4% at the start of the recession in December 2007.
  • Health spending by category in February 2013: Hospital – 32%; Physician & Clinical – 19%;  Prescriptions – 10%; Nursing Home – 5%; Dental – 4%; Home Health – 3%; Other personal healthcare – 11%; Other health spending – 16%
  • Year-over-year, hospital prices rose to 2.6% in February (from 2.0% in January). Physician and clinical services rose 0.8%, barely above the low 0.6% January print.  Prescription drugs saw price growth tumble to 0.8%, from 4.0% as recently as August 2012, and the lowest since 0.7% in June 2007.
  • Implicit per capita health care utilization averaged 1.3% growth over the last 12 months.
  • Health care employment rose by 23,000 jobs in March 2013, somewhat below the 24-month average increase of 24,000
  • Health care represented 10.74% of total employment in March 2013, compared to 10.67% a year ago and 9.49% in December 2007.

If Kaiser Is Not the Answer, What Is the Question?

by Kim Bellard, March 28, 2013

The New York Times recently published an interesting article, “The Face of Future Health Care,” that raised questions about whether even a model like Kaiser is delivering what we need to reform our health care system.  It’s the old “be careful what you wish for…” dilemma.

After all, Kaiser could be considered a prototype for what ACA wanted when it created Accountable Care Organizations (ACOs).  It is a fully integrated hospital-physician organization, delivering care and managing risk with salaried physicians and other health care practitioners, and its own hospitals.  Hospitals all over the country are rushing to build their own versions, buying up physician practices at a record pace – one survey indicated that 52% would do so this year, while another predicted 75% of physicians would be so employed by 2014.

Kaiser may not have been the first integrated delivery system, nor are they the only one, but they certainly are the largest and have been around for decades.  With all those decades, though, one would expect they would be dramatically lower in cost, and that is not generally the case.  San Francisco public radio station KQED did a report “Why Isn’t Kaiser Less Expensive?” last spring.  In their report, critics accuse Kaiser of shadow-pricing, while Kaiser’s CEO George Halvorson insists they don’t and are usually at least 10% cheaper.  That’s nothing to brag about: with even 1% lower annual trend, they should have gotten 10% cheaper in these early years of the 21st century alone.

All this is not to pick at Kaiser.  I have long admired models like Kaiser, Geisinger Health System, Group Health Cooperative of Puget Sound, Intermountain Healthcare, or The Mayo Clinic.  It just seems intuitively obvious that like an integrated system, without the same incentives to overtreat that are pervasive elsewhere, should produce better results.  Each of the systems has been fairly successful in their core markets, although less so the further away from home they get, yet none are delivering radically different cost or quality results than other providers.

And, really, why should they?  They only have to be a little better each year than their competition.  The new mantra in health care is “value-based purchasing,” but we’re a long way from there.  The Catalyst for Payment Reform reports that only 11% of payments to doctors and hospitals are based on performance, while the Commonwealth Fund reports that less than 1% of health insurance premiums was spent on quality improvement in 2011.  This is disappointing but hardly surprising.  Most purchasers are buying with essentially house money; that is, someone else’s money. 

The biggest sources of health coverage are Medicaid, Medicare, and employer-sponsored health insurance.  The persons covered under all of these are largely shielded from the true cost of that coverage.  Medicaid is funded entirely by taxes, Medicare is also largely tax-funded, even when considering beneficiaries’ lifetime contributions, and, of course, employer coverage has the tax preference.  The “tax expenditure” for employer health insurance is, by far, the largest such expenditure – more than twice as large as the mortgage deduction, for example.  It’s all just compensation to employers; money “contributed” to employee benefits is simply money not spent on employee wages.  The tax preference helps shield employees from how much is being spent on their behalf, and it creates a huge disparity with people buying individual coverage, who receive no tax break.

ACA doesn’t equalize the tax preference, but it does introduce a vast set of new subsidies for individual coverage.  The Society of Actuaries has recently reported that individual premiums may be 32% higher due to ACA, joining the chorus of warnings about what may start happening in 2014.  Even HHS Secretary Sebelius now acknowledges they may be higher, but notes that the new subsidies will offset much of these.  While I think it is good public policy for more people to be covered and for economically disadvantaged people to get assistance in making coverage affordable, I worry greatly about creating a large new class of people sheltered from the true cost of health insurance.  It’s making a bad situation much, much worse.

Steve Brill has gotten much deserved attention for his lengthy and insight Time article “Why Medical Bills Are Killing Us.”  Brill painstaking walks through the crazy world of health care prices, especially their inconsistency between payors.  Some have used his work to call for single payor or other rate-setting, while I would argue that the system is a symptom of what happens when no one is paying enough attention to prices.

Frankly, I question whether the ACO/integrated delivery system is going to be the solution to our health care mess.  Hospitals are like factories: full of capital-intensive equipment and expensive to operate unless run at capacity.  Yet they aren’t really run like modern factories in terms of management practices, as a recent study in JAMA pointed out.  Similarly, physicians and other health care providers have some definite income expectations and fixed overhead obligations. 

All too often, combining hospitals and other providers in integrated delivery systems may be more about consolidating market power or assuring current revenue levels than about improving the cost and quality of the care for patients.  One AEI scholar recently pointed to the “humongous monopoly problem in health care,” and that’s with ACOs still in an early stage.  AEI is not the first to cite this issue, as I’ve written about previously, but I still don’t think enough attention is being paid.

We’re moving quickly to a health care system that features geographic provider monopolies or cartels, consumers too shielded from costs, and a regulatory environment that creates larger barriers to entry for new competitors in either delivery or financing of care.  That’s the perfect storm for a disaster. 

For radically different results, we’ll need radically different approaches.  Clayton Christian wrote about disruptive innovation in health care over ten years ago, and yet we’re still waiting to see it.  It may mean breaking the health/medical connection that HMOs led us to try to integrate in health coverage, giving consumers more fiscal accountability for the former while still protecting them from catastrophic expenses that can result from intensive medical interventions.  It should mean putting more of the data and technology – like mobile apps -- in the consumers’ hands, as advocated by people like Eric Topl (The Creative Destruction of Medicine) or Joe Flowers, and using that data to measure performance and help prescribe treatment. 

We’ve had a very paternalistic health care system, with health care experts telling us what care we need and other experts choosing coverage for us.  Let’s hope we can change that.  We need consumers engaged, taking responsibility, and demanding accountability from providers.  We need new types of competitors, using 21st century technology and science, to help consumers manage and finance their health needs.

We have to make sure that legislation and regulations focus on what’s best for the patient, not necessarily for existing health system entities, in order to help ensure we don’t stifle innovation (e.g., FDA regulation of mHealth).  The facts that traditional Medicare benefit design is still largely based on 1960’s Blue Cross Blue Shield designs, or that, generally speaking, you can’t use telemedicine to consult with an expert physician in a different state due to licensing or coverage restrictions, amply illustrate the problem. 

Whatever the future health system looks like, it won’t look like what we have today.  Dinosaurs were remarkable effective for hundreds of millions of years, but the environment dramatically changed and they became extinct.  A lot of the dinosaurs that have historically been the basis for our health care system will become extinct in the new health care environment, or evolve beyond recognition.  As with evolution, it will be messy, proceed with many false starts, and produce unexpected winners.

Personally, I can’t wait to see what the future looks like.

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