Entries in Cost & Utilization (75)


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.


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.


Effectiveness of SMS in healthcare

By Krista Burris, January 28, 2014

Healthcare is at a tipping point and as such, unprecedented efforts are being made to improve health outcomes and foster efficiencies in healthcare delivery. What seems promising with the current reform and transformation efforts is the convergence of existing mass markets influencing healthcare innovation. For example, leveraging mobile phones to track, monitor, and engage patients in lifestyle and self-health management. Mobile text messaging communication in particular has proven to be an effective way to foster desired behavior change in patients and improve the way in which care is delivered by capturing important data that is actionable.

The need for improving outcomes and creating efficiency becomes increasingly important in the context of the coverage expansion in the Affordable Care Act where millions of Americans will enter the system, utilizing more healthcare resources. In particular, the Medicaid expansion is projected to result in a total of 75.6 million enrollees for 2014, an increase of roughly 19.5 million as a result of the ACA[i]. Leveraging mobile text message communication to facilitate convenient and efficient communication among patients and providers, as well encouraging desired behavior change by providing patients with educational tools to improve health outcomes, is encouraging to achieve on the triple-aim objective of healthcare reform[ii].

The opportunities to innovate using mobile technologies among the low-income and underserved populations are robust. A review of several research publications as well as surveying key constituents within the healthcare ecosystem serving these populations[iii], it is clear that the unmet needs plaguing the healthcare safety-net and contributing to waste include poor appointment attendance[iv], poor medication adherence[v], and poor health literacy[vi].

Extending the successes of current mobile text message patient engagement strategies to each of these unmet needs has the potential to reduce waste and inefficiencies in the system by improving health literacy and self-health management of low-income and underserved populations.

SMS text-messaging has shown a positive impact on fostering the desired behavior change in patients. A review of existing studies show that text messaging can support improvement in appointment attendance, increased medication adherence, and enhanced literacy through educational content outreach.

SMS text message appointment reminders

Patients failing to attend their scheduled doctor visits contribute to inefficiencies and misused resources[vii]. In general it is found that a reminder, whether it be by text or phone, is helpful in improving attendance, however SMS technology is a more cost-effective approach[viii].

A 2012 study analyzing the effect of SMS text reminders to reduce nonattendance for hospital outpatient visits found a significant difference in the attendance rate of patients who received a text reminder compared to patients who received no reminder[ix]. The results concluded that the attendance rate for patients who received text message reminders over the 4 month period were significantly higher (79.2%) compared to the attendance rate of those who received no reminder (35.5%).

Another study measuring the impact of SMS appointment reminders for outpatient clinic visits in Brazil found that text message reminders reduced nonattendance rates, improving patients’ care and ensuring the right care at the right time[x]. The nonattendance reduction rates for appointments at the four outpatient clinics studied were 0.82% (p= .590), 3.55% (p= .009), 5.75% (p= .022), and 14.49% (p= < .001).  These results suggest that text is an effective and efficient way to ensure patients attend their scheduled clinic visits and do not have interrupted care.

SMS text message medication reminders

Patients’ failure to adhere to their medication regimen can lead to unnecessary disease progression and complications. This contributes to waste in the healthcare system including preventable visits to the emergency room and increased utilization of other healthcare resources. Researchers have evaluated the impact of SMS text reminders on promoting medication adherence. The results are promising, suggesting text as an efficient and effective way to ensure patients take their medication.

The World Health Organization conducted a review of trials and studies that evaluated the effectiveness of mobile text medication reminders for HIV patients on anti-retroviral therapy drugs[xi]. The overall conclusion was that patients who receive text message reminders had a significantly higher adherence rate to their medications compared to patients that did not receive any kind of reminder. For conditions such as HIV where medication adherence is critical in preventing or stalling disease progression towards AIDS, as well as other comorbidities, the use of SMS technology can enable proper compliance of medication needs.

A study reviewing SMS reminders for diabetic patients concluded that text reminders improves adherence to oral antidiabetics[xii]. In the study 56 patients were confirmed to receive text reminders to take their medication, compared to 48 patients who received no reminder. Medication of both groups was measured using Real Time Medication Monitoring (RTMM) of oral antidiabetics in terms of (1) days without dosing; (2) missed doses; (3) doses taken within predefined standardized time windows. Patients' experiences were surveyed through questionnaires. The results found that patients who received reminders had a higher rate of adherence including a higher rate of taking their medication in the predefined time interval of receiving the reminder. The study also concluded through the patient survey questionnaire that patients found the reminders helpful.

SMS text message delivering educational content

SMS text-based education is emerging as an effective way to engage patients in better self-care. Lack of education around basic health information leads to approximately $106 billion to $238 billion in economic burden each year[xiii].  Text message outreach with educational content can be an efficient way to improve patients’ health literacy.

The Center for Connected Health in Boston reported in a study that text messaging improved treatment adherence and self-care for dermatology patients suffering from atopic dermatitis[xiv]. In the study, 25 patients received daily text messages over a period of six weeks. The text messages included treatment reminders and educational content pertaining to their health condition. At the end of the six week study, patients reported and improvement of treatment adherence of 72% and roughly 68% of the patients reported an improvement in self-care behaviors to help their conditions.

Two other studies evaluated the use of text messaging in improving self-care and desired behavior change for Type 1 diabetic patients[xv]. One study tailored text message communication to self-management goals, as well as untailored content such as newsletters and tips from other patients. The results showed that the patients enrolled in the text program were engaged in interacting with the technology. The participants seemed to enjoy the community aspect of the technology through the ability to connect with their provider and peers. The second study evaluated the use of text message technology among families of children with type 1 diabetes. In this study, the parents received informational messages pertaining to their children’s care needs. The study results concluded that the text messages were helpful and aided in better dialogue between parent and child around the disease condition.

Ensuring proper self-care is important for patients living with chronic disease as much of the care needed to manage these diseases occurs outside of the clinic and provider supervision. Providing patients with easy and consistent access to information to better understand their conditions and comply with proper care practices can lead to improved health outcomes.


Mobile text communication can be a cost-efficient and effective way to engage patients in the desired behavior change to improve appointment attendance, medication adherence, and self-care management of disease. As the healthcare system transitions to a focus on improving health outcomes, engaging patients in the management of their health is critical. SMS text messaging is a low-cost way to facilitate engagement and enhance the health literacy of individuals living with chronic conditions and other health challenges.

[i] National Health Expenditures Projections 2010-2020. Forecast Summary. http://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/NationalHealthExpendData/downloads/proj2010.pdf.

[ii] The triple-aim is a framework developed by the Institute for Healthcare Improvement to address experience of care, population health (improving outcomes), and per capita cost of healthcare services; It is generally accepted that the Affordable Care Act uses the triple-aim as a core principle to design healthcare transformation: “Moving toward the “triple-aim”: The Affordable Care Act and the implications for payment and quality reform”. http://www.ehcca.com/presentations/pfpsummit6/dentzer_1.pdf.

[iii] Feedback from the healthcare community includes discussions with senior leadership of San Francisco Community Clinic Consortium, including St. Anthony’s Foundation.

[iv] Kaplan-Lewis, E. Percac-Lima, S. “No-show to primary care appointments: why patients do not come.” Journal of Primary Care and Community Health. July 2013. http://jpc.sagepub.com/content/early/2013/07/26/2150131913498513.abstract.

Anecdotal feedback from St. Anthony’s Foundation reported an approximate $250 loss in revenue from each no-show appointment.

[v] Nichol, M.B. Knight, T.K. Priest, J.L. Wu, J. Cantrell, C.R. “Nonadherence to clinical practice guidelines and medications for multiple chronic conditions in a California Medicaid population.” Journal of the American Pharmacist Association. 2010. http://japha.org/article.aspx?articleid=1043767.

[vi] Somers, S. Mahadevan, R. “Health Literacy: implications of the Affordable Care Act.” The Institute of Medicine, Center for Health Care Strategies, Inc. 2010. http://www.iom.edu/~/media/Files/Activity%20Files/PublicHealth/HealthLiteracy/Commissioned%20Papers/Health%20Literacy%20Implications%20of%20Health%20Care%20Reform.pdf.

[vii] Hasvold, P.E. Wootton, R. “Use of telephone and SMS reminders to improve attendance at hospital appointments: a systematic review”. Journal of Telemedicine & Telecare. 2011. http://www.ncbi.nlm.nih.gov/pubmed/21933898.

[viii] Chen, ZW. Fang, LZ. Chen, LY. Dai, HL. “Comparison of an SMS text messaging and phone reminder to improve attendance at a health promotion center: a randomized controlled trial.” http://www.ncbi.nlm.nih.gov/pubmed/18196610.

[ix] Prasad, S. Anand, R. Use of mobile telephone short message service as a reminder: the effect on patient attendance.” International Dentistry Journal. 2012. http://www.ncbi.nlm.nih.gov/pubmed/22251033.

[x] da ,Costa TM, Salomão, PL. Martha, AS. Pisa, IT. Sigulem, D. “The impact of short message service text messages sent as appointment reminders to patients' cell phones at outpatient clinics in São Paulo, Brazil.” 2010. http://www.ncbi.nlm.nih.gov/pubmed/19783204.

[xi] Sharma, P. Agarwal. P. “Mobile phone text messaging for promoting adherence to antiretroviral therapy in patients with HIV infection.” The WHO Reproductive Health Library. The World Health Organization. 2012. http://apps.who.int/rhl/hiv_aids/cd009756_sharmap_com/en/index.html.

[xii] Vervolet, M. van Dijk, L. Santen-Reestman, J. “SMS reminders improve adherence to oral medication in type 2 diabetes patients who are real time electronically monitored” In J Med Inform. 2012;81(9); 594-604. http://www.ncbi.nlm.nih.gov/pubmed/22652012.

[xiii] Vernon, JA. Trujillo, A. “Low Health Literacy: Implications for National Health Policy.” Rep. Washington: George Washington University, 2007. http://sphhs.gwu.edu/departments/healthpolicy/CHPR/downloads/LowHealthLiteracyReport10_4_07.pdf

[xiv] Pena-Robichauz, V. Kvedar, J. Watson, A. “Text Message as a Reminder Aid and Educational Tool in Adults and Adolescents with Atopic Dermatitis: A Pilot Study.” Dermatology Research and Practice. 2010. http://www.connected-health.org/programs/dermatology/research-materials--external-resources/text-messages-as-a-reminder-aid-and-educational-tool-in-adults-and-adolescents-with-atopic-dermatitis-a-pilot-study.aspx.

[xv] Franklin, V. Greene, A. Pagliari, C. “Patients’ engagement with ‘Sweet Talk’- A text messaging support system for young people with diabetes.” Journal of Medical Internet Research. 2008. http://www.ncbi.nlm.nih.gov/pmc/articles/PMC2483928/#!po=2.50000.

Wangberg, SC. Arsand, E. Andersson, N. “Diabestes education via mobile text messaging.” Journal of Telemedicine and Telecare. 2006. http://www.ncbi.nlm.nih.gov/pubmed/16884582


A Stitch In Time…Will Cost A Lot of Money

By Kim Bellard, December 5, 2013

It almost seems like piling on to pick on hospital pricing anymore, following such incisive articles already this year such as Steven Brill’s Time article “Bitter Pill” or Elizabeth Rosenthal’s “The $2.7 Trillion Medical Bill” in the New York Times, but there just continue to be more examples of how irrational health care charges are in the U.S. health care system. 

Jillian and Joseph Bernstein just published a study in JAMA Internal Medicine, focusing on the difficulty in getting hospitals’ prices for electrocardiograms (ECGs) – and comparing that with the ease of obtaining those same hospitals’ prices for parking.  This followed a study published earlier this year that looked at the difficulty of getting hospitals to quote prices for hip replacement.  The Bernsteins were testing the hypothesis that perhaps hip replacements included too many variables, thus making quoting prices difficult, and so chose the more standardized ECGs. 

The results will probably not surprise anyone.  They contacted twenty Philadelphia area hospitals to ask for the two kinds of prices.  Nineteen of the hospitals were easily able to provide the cost for parking, but only three could come up with a price for the ECG (and don’t you want to know what hospital couldn’t even quote its own prices for parking?).  It’s also interesting to note that the three ECG prices they got ranged from $137 to $1200, almost a tenfold difference.

The authors conclude that “hospitals seem able to provide prices when they want to; yet for even basic medical services, prices remain opaque.”

Meanwhile, Ms. Rosenthal of The Times was at it again, this time in “As Hospital Prices Soar, a Stitch Tops $500.  The article points out not only simple stitches that cost $500 in ERs but also IV bags that cost under $1 but for which hospitals charge $137, or $20 neck braces for which that hospitals want $154.  And these are not the most egregious examples cited. 

Few people pay full charges, of course – except for the people without insurance, who are probably least able to pay them – but the hospitals build their charge structures due to what one physician told The Times was the Saudi sheikh problem: “you don’t really want to change your charges if you have a Saudi sheikh come in with a suitcase full of cash who’s going to pay full charges.”  That’s what passes for pricing strategy in U.S. hospitals?

The Times attributes the seemingly unfettered hospital pricing to increasing market dominance, using Sutter Health in California as a prime example.  Indeed, a recent study in JAMA found that price increases – not increased demand or aging of the population – accounted for 91% of the increases in overall health care costs since 2000, with market consolidation blamed as one of the key drivers of these price increases. 

We’ve been waiting for patients to care about prices for some time, especially with the advent of high deductible plans, and there is some evidence perhaps that is starting.  A survey by TransUnion Healthcare found that 55% of insured consumers have started to pay more attention to their medical bills in the past year, and that 67% claim they want to know not just how much services cost them directly but also how much their insurance is paying on their behalf. 

The TransUnion survey also found that, when it comes to choosing providers, consumers rated “makes it easy to see the cost of services” right below “world class specialists and technology,” and – amazingly -- above high quality scores or proximity to home.  Even more interesting was that the survey found some correlation between consumers’ perception of quality of care with their satisfaction with the billing experience, a fact to which one hopes providers are paying close attention. 

Ironically, health plans now are expressing some concern over exactly what type of transparency they support.  AHIP, their trade association, indicated that calls for an all-payer claims database, which would facilitate comparisons between providers and across payors, could backfire, raising the spectre of lower paid providers demanding higher reimbursements once they started seeing what other providers were being paid.  Having once led transparency efforts for a large health plan, I can affirm that this concern is very much on the minds of provider contracting staff.

At the same time, many physician specialty organizations, including the AMA, continue to balk at many forms of transparency.  Lately they have questioned the wisdom of a proposal to make public the Medicare payments to physicians, something the Wall Street Journal, among other organizations, has long been pushing for.  They worry that the data could be confusing or misleading to consumers, although it’s hard to see what could be more confusing or misleading to what we’re doing now.

Still, not everyone is a fan of transparency, at least not as it has been attempted so far.  The ever-quotable, always insightful Uwe Reinhardt, writing recently in JAMA, throws cold water on many previous efforts.  In his words, “[T]he idea that American patients should 'shop around for cost-effective health care' so far has been about as sensible as blindfolding shoppers entering a department store in the hope that inside they can and will shop smartly for the merchandise they seek,  In practice, this idea has been as silly as it has been cruel." 

Reinhardt does think that health IT can change the game by more easily making pricing available to consumers, citing such innovators as Healthcare Blue Book and Castlight Health.  He likes the reference pricing approach (which I discussed recently), which involves setting a uniform payment limit and making providers compete for anything they want to try to charge above those limits. 

Of course, simply disclosing costs is only a necessary, but not sufficient, change to bring about true competitive pressures for pricing.  We’re moving to ICD-10 codes, and a cottage industry has emerged to find the funniest examples.  For example, there are separate codes for being struck by a turtle, orca, or duck, not to mention for walking into a lamppost.  You know that in back offices of provider organizations and health plans, diligent bean counters are coming up with prices for each of these. 

If we merely made visible the existing pricing structures, which are built for billing and diagnostic accuracy rather than for consumer understanding, it’d be liking going to Dr. Reinhardt’s metaphorical department store and finding that each item showed the cost of every party involved in the manufacture, marketing, and distribution of the item, plus costs for a variety of additional variables based on the consumer’s needs.  No exactly an Amazon one-click kind of experience.

Despite the big challenges ahead for it, I do believe that, whether it is AHIP, AMA, AHA, or any other providers making a living in the current arcane system, there is a danger that if they don’t get on the transparency bus, they may get run over by it.  The Saudi sheikh strategy can’t last.


“Health Care Productivity” is an Oxymoron

By Kim Bellard, September 26, 2013

It has long baffled me when politicians and others trumpet job growth in the health care sector, while at the same time bemoaning rising health costs, as if there was no connection. Some Rust Belt cities like Pittsburgh and Cleveland have bet a large portion of their economic future on their growing health care industries, and some economists attribute much of the nation’s recent economic revival on the growth in the health care sector. But job growth in itself is not always a good sign. An insightful piece by Robert Kocher suggests that the situation is even worse than I already suspected.

Kocher concluded that productivity is actually dropping in health care, with hiring outstripping output. He figures that the health care workforce has increased 75% since 1990, with almost all of the growth coming from non-doctor workers. There are 16 non-doctor workers for every doctor, and only 6 of those have a clinical role. As Kocher says, “[T]he problem with all of the non-doctor labor is that most of it is not primarily associated with delivering better patient outcomes or lowering costs.” So what the heck are they doing?

Health care professionals would be quick to note that there are ever-more administrative demands, driven by the multiplicity of payors, health care plan designs, and the number of hoops through which they are expected to jump in order to justify payment. Fair enough; it is hard to think of many other industries in which there is so little standardization. Payors want more standardization from providers in how the deliver care, providers want more uniformity from payors in coverage and requirements, and patients are stuck in the middle with neither side listening to them very well.

The latter, at least, may be starting to change. Hospitals are now facing big Medicare penalties for poor scores on HCAHPS, and physicians have to be looking forward to that future. There are some signs that hospitals are paying more attention, such as reported for California hospitals. One of the initiatives mentioned was simply to ensure patient rooms are cleaner. It’s sad that in 2013 it takes the threat of penalties to make this a focus.

Providers may be going overboard on trying to improve patient satisfaction by focusing on amenities. The New York Times’ recent article “Is this a Hospital or a Hotel?” discussed this issue, and included a series of photos that dare the reader to determine which is which. I know I had a hard time distinguishing them. Is this really where our health care spending should be going, and is this improving productivity – or patient care?

Perhaps this kind of focus on amenities partially explains both our high costs and the productivity issues. Ironically, it’s not at all clear that patient satisfaction is directly tied to quality. A recent study found statistically significant correlations between the two, but with only a weak association. Another study from Johns Hopkins similarly found that patient satisfaction does not necessarily reflect the quality of surgical care patients receive.

Moral of the story: patient satisfaction is important, but we shouldn’t let it be a substitute for better empirical measures of quality and outcomes.

A crucial component of improved standardization – and, with it, increased productivity -- is with the data. HITECH is most commonly known for being the stimulus for EHR adoption, but it also spurred the development of health information exchanges (HIEs), which are critical for the sharing of all that desired electronic information. Progress certainly has been made, with HIEs now funded in every state, but a recent report by HIMSS Analytics reminds us that the war is not yet won. Although 73% of surveyed hospital IT executives indicated they participated in an HIE, only 20% indicated that it had improved patient safety, and only 12% believed it saved time for clinicians. The biggest challenge, voiced by 49%, was that other organizations were not sharing data robustly; 64% admit to still relying on faxing to get around this problem.

It is typical health care: spend lots of money – billions in this case – but do not use it to drive ruthlessly towards improving care or cutting costs. To make things worse, providers aren’t able to eliminate the old, paper-based processes, which means work flows can’t become more uniform, and all those new costs become additive.

I have a hard time believing Walmart, Apple, or GE have this much trouble transmitting and using data across their supply chains.

Indeed, David Cutler – former health aide to President Obama – argues that health care will be much more like Walmart once the effects of the information technology “revolution” is more fully realized. He likens health care to the retail industry of the early 1980’s, full of solo practitioners and lacking useful information technology. As companies like Walmart and Amazon have demonstrated, he sees the future as being made up of larger, more integrated institutions, and able to drastically cut administrative expenses through more effective information technology.

Cutler also believes the patient has to become more central -- connected to the most appropriate health resources and providers via technology and finally becoming a more equal contributor in his or her own care.

The lack of a patient-centered system is one of the key barriers Michael Porter names in a recent blog (and article). As he and co-author Thomas Lee say, “[P]roviders are organized and reimbursed around what they do, rather than what patients need.” This is not exactly news to anyone, but it is nonetheless a profound insight. The seemingly haphazard, provider-centric structure of our health care system goes a long way towards explaining both our high costs and the difficulty in improving productivity.

Porter’s solution is that health care must focus on value; again, hardly a unique proposal, but one that is hard to argue with. Porter outlines the barriers he believes is preventing our system from improving value. In addition to the previously mentioned provider-centric structure, he also cites the following barriers:

  • Free-agent physicians operate independently, rather than as part of an integrated team.
  • Patient volume is fragmented, making every patient a special case.
  • Massive cross-subsidies in reimbursement for individual services have distorted care and stalled care integration.
  • No participant in the system has good information about patient outcomes and the cost of care.
  • Information technology has often made care integration and value improvement harder, rather than enabling it.

Today’s health care “system” simply has too many entities pursing too many distinct goals, and limited ability to measure what is happening. None of these entities is particularly happy with the current situation, and most would agree that there’s too much waste in the system. Porter believes we can get to a value-based system, but it will take some radical changes in delivery systems, payment, and measurement. His article even includes a nifty infographic to illustrate. I hope I live long enough to see that future realized.

Cutler compared health care to 1980’s retail, and I would extend this to say that the productivity gap in health care is akin to what happened when personal computers became more widespread in offices in the 1980’s and 1990’s. Economists kept wondering where the productivity gains were. It wasn’t enough to simply add computers to existing business practices; business had to truly re-engineer their processes to take advantage of the new capabilities in order for productivity to soar, as it started to do in the late 1990s. Health care is not there yet.

Maybe the problem with productivity in health care – or even measuring its productivity – is that we’re too vague about exactly what we want to have happen. Process measures and patient satisfaction measures are all well and good, but what matters is what actually happens with the patient. When we can track that more effectively, maybe we can finally start identifying and attacking productivity more effectively.

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