Entries in Cost & Utilization (69)


It Was Those Other Guys

Kim Bellard, July 26, 2013

A fascinating study in JAMA on physician’s attitudes towards controlling costs helps illustrate the bipolar attitudes our health system tends to generate.  The study found that physicians generally believe other players in the health system have the major responsibility for controlling costs – led by the popular culprits: trial lawyers (60%), insurance companies (59%), and pharmaceutical/device manufacturers (56%).  Patients were cited by 52%.

Only 36% of the physicians cited physicians as bearing a major responsibility for controlling costs.

When I saw the latter result, I initially assumed the respondents would simply plead ignorance about costs, or at least take the 5th, but nope: 76% agreed that they were aware of the costs of services they recommend.  Even more surprising, 73% disagree that doctors are too busy to worry about costs of tests and procedures, and 75% agree that trying to contain costs was every physician’s responsibility.  There’s a certain cognitive dissonance here that is hard to understand.

As for cost containment strategies the physicians were enthusiastic about, mom-and-apple-pie approaches dominated: promoting continuity of care (75%), the ever-popular “rooting out fraud and abuse” (70%), and chronic disease care coordination (69%).  Only 7% were in favor of eliminating fee-for-service and only 6% liked the approach of bundled payments.  I guess they haven’t gotten the memo that FFS is supposedly dying.

I was particularly disappointed that the physicians were not more enthusiastic about more empirical approaches to controlling costs, with only 51% in support of expanding access to quality and safety data and only 50% supporting head-to-head trials of competing treatments. 

Support for head-to-head trials should be much higher, based on some findings recently released by the Mayo Clinic.  The researchers reviewed ten years of articles in a “high impact” medical journal, looking both at articles studying new medical practices and ones evaluating existing treatments.  The results are disturbing: 40% of the existing treatments reviewed were no better or worse than the prior standards of care; i.e., the results recommended reversing an existing practice that was considered the current standard of care.  Only 38% reaffirmed existing practices, with the rest inconclusive.  This is medicine by ready-shoot-aim.

New treatments fared better, with only 17% failing to improve upon existing practices.  I suppose I should be comforted by that result, but it just makes me wonder if the discredited practices ended up being used anyway (especially if they resulted in higher revenue).  

Another recent survey of physicians – this one by Wolters Kluwer Health – didn’t paint a better picture than the JAMA study.  For one thing, 34% reported that it was somewhat or very likely that they’d leave their practice in the near future.  The respondents found it challenging to manage shifting reimbursement models with payors (91%) as well as their practice’s financial management (90%); as a result, 88% reported it challenging to spend enough time with patients.  Improving patient care was seen as further down their list of challenges (78%, but with the lowest result for being seen as very challenging -- only 20%). 

These physicians do think that HIT is making progress in having an impact on ensuring patient safety and in improving quality of care (both 55%), but are more skeptical that it is making progress in improving ease of use (56% disagree) or managing costs (63%). 

In terms of areas of focus for the next 3-5 years, 48% listed improving practice efficiency, 34% planned to explore different business models, while only 14% were focused on public reporting of quality metrics and only 11% wanted to concentrate on patient safety.  To be fair, 31% did hope to adopt technology to improve clinical decision-making/evidence-based medicine. 

One likes to think that it truly isn’t all about the money, but it’s also easy to be cynical about this.  The Washington Post recently wrote about how an AMA committee is driving Medicare reimbursement decisions, using some questionable assumptions.  The Post asserts that some of the committee’s assumptions grossly exaggerate the time involved in procedures, such as for colonoscopies.   The assumptions can be as 100% higher than actual time and effort. 

The Post also notes that the committee is seven times more likely to raise time estimates than to lower them, in apparent contradiction to presumed technology and productivity advances.  Despite the billions of dollars at stake, CMS only uses “six to eight” people to review the recommendations, and none of them are devoted full-time, in contrast to the “hundreds” of people the AMA and specialty societies use to develop their recommendations.

Former Medicare chief Tom Scully is quoted as saying, “The concept of having the AMA run the process of fixing prices for Medicare was crazy from the beginning.  It was a fundamental mistake.”  The Harvard researcher who originally developed the RBRVS point system, William Hsiao, says, “The AMA fought very hard to take over this updating process.  I said this had to be done by an impartial group of people.  This is highly political.”

The AMA committee’s recommendations do not directly result in higher payments, nor is it likely that most individual physicians are aware of the assumptions embedded in their payment rates, but the process is another illustration at how no one is minding the store.

I would be remiss if I failed to mention the IOM’s new report “Variation in Health Care Spending: Target Decision Making, Not Geography.”  They were asked to investigate since Congress has been considering shifting money from high-cost areas of the country to lower cost ones.  Somewhat surprisingly, IOM did not support that tactic.  They reaffirmed that geographic spending differences do exist, for both Medicare and private insurance, and that there is essentially no correlation between quality and spending.  However, they did not support geography-based reimbursement models, finding that the geography is not the issue.

For Medicare, they found that higher spending differences were most associated with post-acute care, and to acute care only to a lesser extent; indeed, post-acute care differences accounted for 73% of Medicare’s geographic spending differences.  For private insurance, spending differences were due to price markups rather than utilization differences.

The IOM’s main conclusion is in the subhead of their report’s title: “Target Decision Making, Not Geography.”  Now if only we could figure out who is making the decisions.   The physicians don’t think it’s them; the government is delegating theirs to special interests and lobbyists; the payors can’t negotiate tough enough with the provider systems (especially now that those systems continue to consolidate); the provider systems – well, they’re terrified that the physicians will stop generating all that revenue for them. 

We can continue to pin the tail on new culprits, but we need to get past blame.  I’m naïve enough to think that there aren’t many villains here (although there are, allegedly, some), but it boils down to too many involved parties not being willing to be accountable for their actions.

When it comes to increasing value – not just controlling health care costs but also improving quality – in our health care system, I think of words of the always wise Benjamin Franklin: we must all hang together, or assuredly we shall all hang separately.


CMS Pronouncements on Pioneer ACO Results and 2014 HIX Premiums

By Clive Riddle, July 18, 2013

This week CMS announced results from the first performance year of the Pioneer Accountable Care Organization (ACO) Model, along with a new report that finds premiums in the Health Insurance Marketplace will be nearly 20 percent lower in 2014 than previously expected.

Here are the Pioneer ACO results that CMS is touting:

  • Costs for the more than 669,000 beneficiaries aligned to Pioneer ACOs grew by only 0.3 percent in 2012 where as costs for similar beneficiaries grew by 0.8 percent in the same period.
  • 13 out of 32 pioneer ACOs produced shared savings with CMS, generating a gross savings of $87.6 million in 2012 and saving nearly $33 million for Medicare
  •  Pioneer ACOs earned over $76 million in compensation.
  • Only 2 Pioneer ACOs had shared losses totaling approximately $4.0 million.
  • All 32 Pioneer ACOs successfully reported quality measures and achieved the maximum reporting rate for the first performance year, with all earning incentive payments. 
  • Overall, Pioneer ACOs performed better than published rates in fee-for-service Medicare for all 15 clinical quality measures for which comparable data are available.
  • 25 of 32 Pioneer ACOs generated lower risk-adjusted readmission rates for their aligned beneficiaries than the benchmark rate for all Medicare fee-for-service beneficiaries.
  • The median rate among Pioneer ACOs on blood pressure control among beneficiaries with diabetes was 68 percent compared to the comparison value of 55 percent as measured in adult diabetic population in 10 managed care plans across 7 states from 2000 to 2001. 
  •  Pioneer ACOs performed better on clinical quality measures that assess low density lipoprotein (LDL) control for patients with diabetes. The median rate among Pioneer ACOs for LDO control among beneficiaries with diabetes was 57 percent compared to 48 percent in an adult diabetic population in 10 managed care plans across 7 states from 2000 to 2001.
  • Pioneer ACOs were rated higher by ACO beneficiaries on all four patient experience measures relative to the 2011 Medicare fee-for-service results.

CMS did disclose that seven Pioneer ACOs that did not produce savings intend to switch to the Medicare Shared Savings Program, and two Pioneer ACOs have indicated their intent to leave the program. 

The Wall Street Journal  didn’t interpret these results as rosily as did CMS. Here is the WSJ take, from their July 16th article Mixed Results in Health Pilot Plan: “All of the 32 health systems in the so-called Pioneer Accountable Care Organization program improved patient care on quality measures such as cancer screenings and controlling blood pressure, according to data to be released Tuesday by the Centers for Medicare and Medicaid Services. But only 18 of the 32 managed to lower costs for the Medicare patients they treated—a major goal of the effort. Two hospitals lost money on the program in the first year. Seven have notified CMS that they intend to move to another program where they will face less financial risk. Two others have indicated they intend to leave the program,”

On the Health Insurance Marketplace front, CMS touted findings from a just released twelve-page ASPE Issue Brief: Market Competition Works: Proposed Silver Premiums in the 2014 Individual and Small

Group Markets Are Nearly 20% Lower than Expected. CMS notes the report found that:

  • In the 11 states (including the District of Columbia) that have made information available for the individual market, proposed premiums for 2014 are on average 18 percent lower than HHS’ estimate of 2014 individual market premiums derived from CBO publications.
  • In the six states that have made information available in the small group market, proposed premiums are estimated to be on average 18 percent lower than the premium a small employer would pay for similar coverage without the Affordable Care Act.
  • Preliminary premiums appear to be affordable even for young men. For example, in Los Angeles - the county with the largest number of uninsured Americans in the nation - the lowest cost silver plan in 2014 for a 25-year-old individual costs $174 per month without a tax credit, $34 per month for an individual whose income is $17,235, and a catastrophic plan can be purchased for $117 per month for an individual.

Here a chart provided in the ASPE report, comparing the ASPE premium estimate for Individual Silver premiums compared to actual premiums for applicable states:


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.