MCN | Medical Consultants Network

The Power of a Second Look

Home / MCNTalk / Tag: Cost Containment

Viewing items tagged:

Cost Containment

Fighting Over Obamacare Won’t Solve Our Trillion Dollar Problem

By Vanessa Radatus

Despite the  Supreme Courts’ decision to uphold Obama’s Affordable Care Act this month, heated debate over its future blazes on.

Opponents of the Act vow to “repeal and replace” the mandate and claim they will continue to provide the same improvements,  yet refuse to explain how they will pay for such improvements. On the other hand, supporters of the law propose that 30 million uninsured Americans will gain coverage and the policy will eventually reduce health care spending. But this is only the first step to curbing health costs and improving the quality of our health care system.

Christina D. Romer, an economics professor at the University of California, Berkeley provides a valid perspective in her New York Times article, “Only the First Step in Containing Health Costs.” As the former chairwoman of President Obama’s Council of Economic Advisers, she explains that while Obama’s healthcare plan is a step in the right direction the law must be expanded and built upon.

“Despite Republican claims that the law is a budget buster, the Congressional Budget Office, the nonpartisan, official scorekeeper on budget matters, estimated it would actually reduce the deficit over the next 10 years. Such fiscal responsibility is in stark contrast to the last major health care legislation, the Medicare prescription drug benefit passed in 2003, which was projected to add nearly $400 billion to the 10-year deficit,” writes Christina Romer.

The fact is, the U.S. spends substantially more on health per capita than many other developed countries but we don’t have superior health system performance, according to the Organization for Economic Co-operation and Development (OECD).  Even more, other developed countries actually enjoy the benefits  (longer life expectancy and health) even though they pay a third less.  Read more at “5 Reasons Why Health Care Costs Continue to Rise.”

Romer writes, “Sadly, serious debate over further cost-savings measures may be a long way off. Some Republicans seem more interested in just limiting the government’s share of health care expenditures than in slowing overall spending. And some Democrats seem more interested in just preserving existing government programs than in making the entire health care system more efficient.” Read More…

In an US News article “Bickering over Affordable Care Act Gets Us Nowhere,” David Brodwin, cofounder and board member of American Sustainable Business Council, agrees that our government is wasting time arguing over the mandate and should be focusing on finding a solution together.

David Brodwin writes a list of what he believes a true fiscal conservative would do to solve the healthcare challenge:

  • Stop making promises you can’t keep to win the vote. Pretending that we can maintain the coverage improvements that Obamacare brings without a plausible plan to pay for these improvements just won’t work.
  • Address the “free riders” who drive costs up. There has been significant discussion about our nations’ uninsured who consume healthcare services paid for by others. “But an equally damaging free rider problem allows the rest of the world to ride free on what Americans pay for their drugs. It’s well known that U.S. residents pay far more for prescription medicines. The extra revenue, arguably, goes to finance the tremendous R&D costs for advanced medications and devices. As a result, the rest of the world gets to enjoy the new and better drugs but not pay their fair share of development costs. This needs to stop. The American public cannot finance the world’s healthcare,” Brodwin says.
  • Be willing to challenge overutilization. ” Doctors continue to prescribe drugs and procedures that haven’t been shown to work. We can debate whether we want a “government bureaucrat between you and your doctor” or an “insurance company bureaucrat between you and your doctor.” We can’t solve the underlying problem without seeking quality  cost-effective treatments.
  • Recognize that we can’t improve health care spending unless we wring excess cost out of the system. “The level of marketing and administrative overhead in our system far exceeds the spending elsewhere in the developed world… Either we must stimulate more direct competition among providers and insurers, or we must regulate to ensure that the money charged goes toward care, not overhead.” Read More…

What our nation really needs is to put our partisan driven views aside and agree on a solution that meets our nations’ enormous medical spending challenge. We spent $2.7 trillion on health care expenditures last year and it’s projected to rise in the coming decade. With or without the Affordable Care Act, the U.S. health care system will remain broken until an altruistic agreement is made.

Join the Conversation!

How would you fix the United States Health Care System?

What Are They Thinking!

By Brian L. Grant, MD

The article “Silicon Valley’s Surgeons of Fortune” from Business Week should amaze and enrage our readers. It is a compelling read and it certainly got my attention. It describes a chain of surgical centers operated by Bay Area Surgical Management of Saratoga, California that have successfully extracted massive profits for owners and investors, at the expense of insurance carriers and those who pay the premiums – typically employers.

The article is a must read for those wishing to understand one of the many ways that money is made in medicine and how a system, where there is nobody minding the store or watching costs, can be exploited by smart entrepreneurs.

After reading the article, consider where the fault lies, if you agree that something is deeply wrong. Is it the entrepreneur founders who devised a system to entice doctors into their facilities, select patients with rich insurance carefully, and charge multiples of in-network facility charges? Is it the doctors who have lost their ethical compasses by their decisions to sign up and at times, invest? These doctors have been given very low risk investment opportunities that are returning gains stated to be 805% per year! They are referring into facilities that they have a financial interest in, which many consider questionable, especially if they are in essence receiving kickbacks by below-market rent and other enticements. These returns come with strings attached; that one will refer high pay patients into the facilities. And the returns are paid for by the employers who buy the policies.

Or is it the insurance carriers, who accede to paying massively higher rates to such facilities than in-network options, rather than just capping what they are willing to pay by way of benefits and just saying no? Is it the employers who buy such policies that do not police their payouts in out-of-network scenarios?

Patients deserve to make choices, but these choices should be accompanied by fiscal responsibility to pay a significant portion of the differential between available options in-network and their out of network options. One person’s rights stop at the next person’s wallet, or should. In this story, the facilities further abuse the system by writing off the higher co-pays that patients would owe, that might serve as a disincentive towards going out of network because they might feel the pain and consider using in-network doctors and facilities. In a similar move, many drug companies provide coupons to patients taking expensive brand name drugs, to neutralize the higher co-pay they would pay at the pharmacy, while charging the carrier a much higher rate than the available generic or formulary options.

Those who pay for coverage should maintain the right to set reasonable parameters as to how much they will pay, and hold the line when a patient elects to obtain more expensive care. Patients deserve to be educated on the different fee structures well in advance of receiving care, and bear the responsibility themselves when they make more expensive choices. Would these clinics be able to carry on if insurers were not ultimately footing the bills for their charges? It is doubtful that there are enough patients who are indifferent to price. The facilities, if they lost the deep and willing pockets of the carriers, would have to come down to earth in their fees or be empty. Likewise the doctors, whose own charges if out-of-network, have not been described in the article relative to their network peers.

The article describes current litigation by Aetna and other. We will follow it with interest.

Abusive charges by outpatient surgical centers are hardly unique to Silicon Valley but remain a national issue. A side issue is the fact that facility charges have become common in less egregious but similarly irrational and usurious manners. One writer recalls bringing a child to a dermatologist clinic at a well-respected Seattle hospital. He was dismayed to find that he was being charged a facility fee in excess of $100.00 for a basic office visit merely because the office was located in a hospital-owned building connected to the main hospital. No value was obtained by such proximity. A subtle disclosure was made but the implications of this only set in when the non-covered expense was presented. It was the last visit to that doctor and clinic.

Below are two articles that provide additional examples of this issue:

Virginia Mason Agree to Refund “Facility” Charge

When Hospital Fees Catch You Off Guard

Does Our Health Care System Provide Better Value For Money: The Data Suggests Not.

by Brian L. Grant, MD

Rhetoric abounds in defense of the U.S. health care system. The rhetoric tends to focus on access, freedom, and choice. But critics of change are generally quite silent when it comes to the measurements of health that count the most in the public health world, including lifespan.

Data supports the fact that the U.S. spends more per capita than any other country on health care, while at the same time our lifespan lags. Among the Organization for Economic Cooperation and Development (OECD) countries studied , the US stands at 28th, at 78.2 years, just behind Chile, and well  below the OECD average of 79.5 years.

Reasons are complex and include many factors that one might argue fall outside of our healthcare system, including lifestyle factors such as obesity. But if this is part of the answer, it further argues against directing massive funds into healthcare rather than potentially more meaningful social and public health focus.

We attach two news articles and one paper that detail this information:

U.S. Ranks 28th in Life Expectancy While It Pays the Most for Health Care

U.S. Health Care Costs More Than ‘Socialized’ European Medicine

Health at a Glance 2011: OECD Indicators: Why Is Health Spending in the U.S. So High?

Military Psychiatrists Under Fire for Doing Their Jobs

by Brian L. Grant, MD

In recent months, forensic psychiatrists in Washington State have been pummeled in the media for taking on the task of reviewing PTSD diagnoses. Based upon media accounts rather than any specific knowledge of individual cases, purported statements implying bias by psychiatrists as well as reversal of some prior PTSD diagnoses, have landed some clinicians and the work of the unit in political hot water. The alleged statements were a common sense remark that claims of PTSD cost money and should be evaluated carefully. This is obvious and acknowledging the cost of such claims does not imply bias against proper diagnoses, but merely places it in a social context by the person making the comment. Diagnoses should be evidence based and any clinician who has familiarity with PTSD may be quite aware that the diagnosis can be made in a sloppy and inaccurate manner by those who lack expertise or possess strong biases. Washington’s Senator Patty Murray has perhaps been the loudest in her criticism of the forensic unit. We attach two articles from the Tacoma News Tribune that address the controversy. The long investigative piece does a nice job of laying out the many issues. We look forward to learning more about the outcome of the investigation and the outcome of the careers of the clinicians under fire. Those who dare to challenge popular wisdom do so at their peril.

Madigan Psychiatrists Who Made PTSD Calls Had National Renown
Senator Murray Begins Investigation into Hospitals’ PTSD Designations

Blue Cross Blue Shield of North Carolina fights hospitals and providers for overcharging patients

Blue Cross Blue Shield seems to be on the forefront of health news lately and it seems they are especially  interested in reducing waste in the health industry. Last week BCBS of North Carolina entered into a high-stakes battle with the state’s hospitals, doctors and medical professionals saying “providers were overcharging patients and their insurers by $16 million dollars.”

Blue Cross is claiming that providers are “unbundling” procedures like radiology imaging and blood and urine test procedures and charging an identical fee for every image taken or for multiple tests done to the blood/urine even though there was only one procedure conducted.

In the article, “Blue Cross battles NC hospitals, health care providers over ‘wasteful’ radiology charges,” Gerard Anderson, director of the Johns Hopkins Center for Hospital Finance, called the radiology billing method a classic example of “unbundling,” a widespread practice in which hospitals and other medical providers bill multiple times for a service that in reality is provided only once.

The uninsured and underinsured are the patients hurt worst by the practice, Anderson said. “If you don’t have someone negotiating on your behalf, they’re going to unbundle to the maximum extent possible,” he said. This radiology dispute is a small but revealing example of how arcane billing practices can drive up health care costs, which have been rising faster than inflation, even during the Great Recession. In particular, major urban hospitals in North Carolina have made record profits in recent years, raising their prices each year and exerting growing market power to negotiate higher payments from insurance companies. Read More…

Blue Cross Blue Shield Plan May Reduce Health Care Expenses

Finding ways to cut rising healthcare costs has become a national priority, especially as an influx of newly insured members will be integrated into the industry in the coming years. It’s no surprise then that the Blue Cross Blue Shield Association (BCBSA) implemented the Alternative Quality Contract, a program that promotes quality care in order to cut costs in the healthcare industry.

In a recent study published in the journal of  Health Affairs by Chernew, Mechanic, Landon, and Safran, the BCBS of Massachusetts program found that the 4,800 doctors working with the alternative quality contract spent “3.3 percent less in 2010 (the second year of the program), compared to non-participating doctors, amounting to a $107 savings per patient. Some doctors spent almost 10 percent less than their counterparts operating under fee-for-service contracts,” reported The Boston Globe.

Physicians in the program are rewarded for cutting cost and reducing waste while providing quality care. The study showed that “the Blue Cross monitors quality indicators, such as whether doctors control patients’ blood pressure, provide regular check-ups to children, and prescribe appropriate and timely medications for depression. Compared to the control group, doctors with the alternative contract improved care for chronically ill adults and preventive care for both adults and children more quickly, the researchers found.”

The study suggests that global budgets with pay-for-performance can begin to control medical spending while improving quality of care. The Affordable Care Act uses a similar budget payment program for Medicare providers, and Massachusetts lawmakers are pushing the same strategy in legislation they plan to finalize this month.

“If these results and improvements continue, the health care system can be put on a sustainable path,” said Michael Chernew, the senior author of the study. Chernew noted that the findings about the quality of care in the AQC may not be conclusive because “quality measurement is an evolving field.” But BCBS is hopeful. Read More…

So while this type of innovative thinking is exciting news if it continues to produce cost-effective results, to what extent is it realistic? What other efforts are being made by private sectors to thwart rising health care costs?
Join the conversation! #MCNTalk

5 Reasons Why Health Care Costs Continue to Rise

In 2011, the U.S. spent $2.7 trillion in health expenditures and while we can all agree that the rise in costs must be controlled, there is much dispute over the driving factors.  According to a recent CNN article and Kaiser EDU, here are the top 10 reasons health care costs are on the rise:

Source: Martin A.B. et al., “Growth In US Health Spending Remained Slow in 2010; Health Share of Gross Domestic Product Was Unchanged from 2009,” Health Affairs, 2012.

1. Hospital care: The U.S. spends approximately 31% in hospital care annually- that’s approximately $837 billion.

2. Doctor visits/Clinical services: according to the American Medical Association, the cost of physician care, both to insurance and patients has risen 1.3% during the past year

3. Technology and prescription drugs– For several years, spending on prescription drugs and new medical technologies has been cited as a primary contributor to the increase in overall health spending; however, in recent years, the rate of spending on prescription drugs has decelerated.  Nonetheless, some analysts state that the availability of more expensive, state-of-the-art medical technologies and drugs fuels health care spending for development costs and because they generate demand for more intense, costly services even if they are not necessarily cost-effective. New technologies, such as robotic surgery, are growing rapidly. More than 36% of hospitals already perform robotic surgery, according to a report from  Pricewaterhouse Coopers Health Research Institute.

4. Rise in chronic diseases – according to Kaiser EDU’s Issue Module on U.S. Health Care Costs, “Longer life spans and greater prevalence of chronic illnesses has placed tremendous demands on the health care system.  It is estimated that health care costs for chronic disease treatment account for over 75% of national health expenditures. In particular, there has been tremendous focus on the rise in rates of overweight and obesity and their contribution to chronic illnesses and health care spending.  The changing nature of illness has sparked a renewed interest in the possible role for prevention to help control costs.”

5. Administrative costs – The module also shows that at least 7% of health care expenditures are estimated to go toward for the administrative costs of government health care programs and the net cost of private insurance (e.g. administrative costs, reserves, taxes, profits/losses). Some argue that the mixed public-private system creates overhead costs and large profits that are fueling health care spending.

Will the Affordable Care Act change this growing cost in the foreseeable future?

What alternatives must our nation implement in order to stop this trillion-dollar expense?

Getting Lost in the Labyrinth of Medical Bills

Imagine you went to the local market for food for your family. But this market has no prices on the food and you have no history of knowing or understanding such prices as they have never been posted.

You get to the checkout and are presented with a bill for $1000.00 the basket of goods – a basket that today you might pay $200.00 for in a competitive shopping environment.  The bill has a total amount with no breakdown. So you don’t know if the soup is more than the bread and by how much.

Imagine there are other people in line with you who bought the exact same basket. One is charged $2000.00, one $600.00 and one $1400.00. As others pass through the line with the same basket that day, each is billed differently.

When you learn about this issue, you call the manager and ask why. You are first asked why do you ask, since your food insurance is covering it? But you press on and are told that each food insurance company has cut a different deal with the market. And that the shopper charged $2000.00 has the misfortune of having no food insurance at all, so she will have to pay the entire amount out of her own pocket.

And by the way, you don’t get to choose your food. You went to the market hungry and they decided which food was best for you. But different “doctors” decided differently for the same level and quality of hunger, some influenced by the food literature and others selecting foods that they had been marketed by food sales professionals who visited their offices and sponsored expensive advertisements and “studies.” And the doctors are paid by the amount of food prescribed, so they are incented to overfeed you. The conservative doctor who gives you only the food you truly need, is paid less than his colleagues who overfeed.

In essence, this describes in part the irrational and unsustainable state of health care economics and payments as described in this New York Times article.

What kind of system can or should survive such irrationality. It would seem that true price transparency, where patients can understand and by mindful of price, and have some incentive to do so, or price controls by a central authority (the Government?) are two options that would have a chance of improving this irrational status quo. Whether patients are capable or willing to shop for care wisely and make good choices combining quality and price is a questionable proposition given the complexities of health care. Whether doctors and hospitals are capable or willing to consistently provide rational treatment based upon best practices and cost is certainly not in evidence. And whether payers and society are willing to voluntarily change a system to one with transparency and cost consistently is certainly questionable based upon current practices. Read more…

The Economic Necessity of Universal Health Care

Two interesting reads: an article in the Boston Globe and an editorial in the Seattle Times.

Our health care system is broken. Excess and escalating costs are unsustainable, uncovered individuals are being paid for by the rest of us, and the beat goes on. The new normal is our abnormal, perverse and out of control system. Care is all too often driven by factors other than best practices and rational use of resources.

Employers have somehow found themselves being responsible for paying for health care. Regardless of the historical antecedents to this reality, it lacks rationality. Employers do not directly pay for food, housing or education for their employees and their families – all equally essential to society. Why is healthcare alone an employer mandate? Why do we ignore what works elsewhere, or at least offers some interesting tradeoffs, when it is not invented here?

 One can reasonably argue about the best solution, but one is hard-pressed to claim that our current system is viable for any constituency on the mid-and longer term.

 Change is inevitable and overdue. One day we will look back on our times and wonder what were they thinking!

Painkillers May Delay a Return to Work

At MCN talk we frequently blog about the opioid problem nationwide. Here’s a good reason why we do so: as per this article in The New York Times, the way that certain types of pain killers such as Oxycontin are prescribed for specific injury types may actually delay a return to work.

It’s important to establish that there is little question that strong pain medications can help some patients return to work and remain productive.  The ability to return to work is a major event in a person’s life—this is not about a perception of “slacking off” (i.e. the injured party is just malingering and really ought not to be a drain on someone else’s dime) but rather it’s a sign of improved health and functionality. Returning to work is an important step for a person in returning to their pre-injury life. Pain medication is meant to aid in reaching that step in the recovery process, not hinder it. So what’s going on?

Workplace insurers spend an estimated $1.4 billion annually on narcotic painkillers, or opioids. But they are also finding that the medications, if used too early in treatment, too frequently or for too long, can drive up associated disability payouts and medical expenses by delaying an employee’s return to work.

Workers who received high doses of opioid painkillers to treat injuries like back strain stayed out of work three times longer than those with similar injuries who took lower doses, a 2008 study of claims by the California Workers Compensation Institute found. When medical care and disability payments are combined, the cost of a workplace injury is nine times higher when a strong narcotic like OxyContin is used than when a narcotic is not used, according to a 2010 analysis by Accident Fund Holdings, an insurer that operates in 18 states. Read more…