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Cost Containment

Restoring Sight to the Poor

by Angela Sams

Can you imagine a life without sight? Those who are blind face many challenges on a daily basis—challenges that probably don’t even occur to those who can see. Enter Dr. Sanduk Ruit, a Nepali ophthalmologist who is on a mission to help the blind see, using a procedure called the “Nepal Method.” A recent article in the New York Times delves into his miraculous work.

Living blind in a country that is poor presents its own unique challenges, as access to healthcare may not even be an option. Dr. Ruit is pushing past these barriers by offering a cataract microsurgery to patients for only $25. It is a technique that he developed, and it is now being taught to medical students in the United States.

For the powerful impact the microsurgery has on its recipient, you would think it wouldn’t be so simple. That could not be further from the truth. The entire process takes about five minutes, and involves removing the cataract on a patient’s eye and replacing it with a new lens. A procedure that was once seen as something that could only be done with expensive machines, Dr. Ruit’s procedure is just as effective. The big difference is that it is much more affordable.

The cure for blindness extends beyond Nepal. A charity called the Himalayan Cataract Project helps ensure that other countries such as Ethiopia and Ghana can also benefit. The charity was started by Dr. Geoffrey Tabin, another eye specialist who has been working next to Dr. Ruit in Nepal.

In addition to removing the cataracts of the blind, Dr. Ruit founded the Tilganga Institute of Ophthalmology, which includes “hospitals, outreach clinics and training programs and an eye bank, using fees from better-off patients to support impoverished ones.” Approximately 30,000 patients will receive eye surgery from the institute annually.

It seems that the success in Nepal is just the beginning of something great. Stories such as this give us reason to believe that blindness can eventually be eradicated, one eye at a time.

 

The Price is Right? Wrong!

by Jen Jenkins, Market Analyst

The most recent case of a pharmaceutical company exorbitantly raising the price of an otherwise inexpensive drug has brought certain “Big Pharma” issues careening back into the spotlight. Turing Pharmaceuticals acquired a 62-year-old drug called Daraprim back in August. This drug, used mainly to treat a rare parasitic infection in patients with compromised immune systems such as babies, or adults with AIDS/HIV and cancer, originally rang in at $13.50 a tablet; that is until Turing acquired it and the price per tablet soared to $750. More attention is typically bestowed upon the high prices of new drugs, but this particular situation brings to light an evolving issue of mind-boggling price increases in drugs that have been around a long time and are mainstays in certain types of care.

A huge concern with these increases is that hospitals are more likely to turn to alternatives that may not prove as effective. Although high prices are known to happen within the industry due to shortages, the cases described here are happening merely due to business strategy. Other examples, just to name a few, include a drug called Cycloserine, which increased from $500 for 30 pills to $10,800; also, just last month two members of Congress investigated another incident where two separate heart drugs, Isuprel and Nitropress, were acquired by Valeant Pharmaceuticals and subsequently raised in price by 525% and 212% respectively.

The 32-year-old founder and chief executive of Turing explained the recent price hike away by saying it is now more in line with other drugs that treat rare diseases and that most patients use the drug for far less than a year anyway. The sad truth of it all is that the CEO’s unapologetic response to the backlash of the situation is far from unusual, as is the fact that his drug company is only one of many that has and will continue to unconscionably inflate prices.

Read about this  in further detail in these New York Times and Washington Post articles.

A Complicated System

by Jen Jenkins, Market Analyst

In this article, Dr. Aaron E. Carroll, a professor of pediatrics at Indiana University School of Medicine, provides an anecdotal reference to something that is too often overlooked within the American health care system. Issues about the affordability of obtaining insurance and the quality of care are constantly highlighted and debated, but how care is actually delivered is an issue all on its own.

The Affordable Care Act was passed in an effort to ensure a significant decrease in the number of people who did not have insurance. Regardless of where you stand on the topic, the fact is that having insurance is only one access point within the American health care system. What happens after you have insurance? What is the process of receiving care actually like?

In the aforementioned article, Dr. Carroll describes his difficult journey with ulcerative colitis and the obstacle of every three months obtaining the only medicine that has ever worked for him. Just reading his account is frustrating and confusing. He ends this anecdote with wonder at how the majority of people, especially anyone suffering worse problems than his, could possibly manage the often dizzying twists and turns of correlating insurance protocols, with doctor’s visits, with lab testing, with pharmaceutical companies, and more.

Reform in the medical world is long, difficult road. The Affordable Care Act was  a vehicle to get more people health insurance and it is still being vehemently argued. Once that piece of the puzzle is solved in some capacity then maybe we can look further into reforming the actual system and access to the care that is delivered.

The Cost of Medicine

by Jen Jenkins, Market Analyst

In most lines of business, the cost of goods and services is known down to the penny. Typically this information is essential in order to set prices and ensure the business is operating efficiently. In the world of medicine though, a field where everything else is succinctly measured, this is not the case.

A recent New York Times article delves into this topic using a question posed by Dr. Vivian Lee, Chief Executive of the University of Utah Health Care. Several years ago, Dr. Lee simply asked her team what the goods and services provided by the hospital system cost; no one had the answers. Due to this revelation, she initiated a project in order to get such answers, which presently are not only saving money but are also improving care.

The key element in this project at the University of Utah Health Care has been a fascinating computer program, which is continuously being developed. The program has 200 million rows of costs for nearly anything that can be thought of in the medical field as well as a way to track hospital stays and re-admissions, among other things.

The progress made here as far as determining costs of care was labeled by a Harvard economist as “epic.” In comparison, there are hardly any other medical institutions that have even a remote idea what their costs are. Fortunately as this is issue is glaringly brought to attention, more and more establishments in the medical field are following the lead of Dr. Lee and the University of Utah Health Care since there is now a tried and true way to solve what was previously labeled a serious problem.

Beating Back Opioids – Now What?

WorkComp Central published a new report,“We’re Beating Back Opioids — Now What?” this past June, by Peter Rousmaniere in cooperation with CompPharma. It narrates a 20-year story and poses some provocative recommendations, noting that we are at a turning point in treating chronic pain though the statistics remain daunting. Every workday, some 5,000 workers sustain injuries which disable them for at least a week; on any given day in the U.S. 500,000 injured workers are treated for chronic pain. The majority of treatments includes opioids, and for individuals with chronic pain, care and wage replacement can reach $1,000,000 in cost per claim.

Per the study’s author: “This report does two things. First, it chronicles the two decade-long story of how opioid use greatly expanded in workers’ comp, then halted and began to retreat in the face of fierce criticism. Workers’ comp professionals can use this story to tell their friends about a war they still are fighting.”

Rousmanier also credits several organizations in the detection and reporting on trends and solutions. They include the California Workers’ Compensation Institute, CompPharma, the National Council for Compensation Insurance, Washington State, and the Workers’ Compensation Research Institute. Read more…

 

Hepatitis C: Who Can Afford to Be Cured?

In October U.S. Food and Drug Administration approved a new pill, Harvoni, that can cure hepatitis C, which afflicts about 170 million people worldwide and annually kills 350,000 people.

The price on the new treatment will be a hard pill to swallow for most: $94,500 for a 12-week treatment course with Harvoni, manufactured by Gilead Sciences.

Hepatitis C is a chronic blood-borne infection that attacks the liver, eventually causing cirrhosis or liver cancer and leading to death if not treated. The US Centers of Disease Control and Prevention believes 3.2 million people in the United States could be infected.

Patients who receive these treatments almost never see the total cost, but their insurers do. More than two dozen state Medicaid programs for low-income patients, as well as for-profit insurers, have restricted coverage for the treatment to only those with severe liver damage. While researching the subject for this blog post, we found such distressing – and sadly accurate – soundbites as “The $84,000 Cure – Cheaper than a Liver Transplant.” Last July two members of the Senate Finance Committee, including Ron Wyden, Committee Chair, Democrat from Oregon, asked the manufacturer to defend the cost. They are not alone.

“Never before have drugs been priced so high to treat such a large population,” says Steve Miller, chief medical officer at Express Scripts, the country’s largest manager of drug benefits for employers and insurers. In December, Express Scripts announced it would reject coverage for one-pill-a-day Harvoni and instead steer patients to a less pricey rival drug that requires four to six pills a day.

Just how profitable are drugs like Harvoni and Sovaldi, a Hepatitis C medication released last year? In 2014 Sovaldi, also manufactured by Gilead,  generated $10.3 billion in sales, making it one of the most lucrative pharmaceutical launches ever. Harvoni sales totaled more than $2.1 billion in the last 3 months of the year. Gilead’s market capitalization has soared from $29 billion to $167 billion in five years. The net worth of its chief executive officer, John Martin, exceeds $1 billion. “For a long time we’ve had innovation after innovation,” Martin noted. For many patients, Gilead’s drugs are indeed miraculous. But is the U.S. health-care system paying too much for them? And with 170 million carriers worldwide, what will the impact of this transmittable disease be on governments and citizens with much less spending power?

The Problem of Unnecessary, No-Value Care

By Brian L. Grant MD

Atul Gawande, MD once again hits a bull’s eye in this incisive New Yorker article on the massive problem and challenge of unnecessary “no-value” care.

In truth, “no value” is generous, since care with no value removes value from the system by diverting resources from the economy that could be creating value, and by increasing morbidity and occasional mortality that is inherently part of health care but is accepted as part of the risk benefit calculation.

When there is no benefit, one only encounters risk. Gawande cites a 2010 Institute of Medicine Report that 30% of health care spending, or 750 billion per year in the US, is wasted. Spread across the population of patients, this would mean that 30% of the care received offers no value (while carrying risk), and 30% of the care provided by hospitals, doctors, pharmaceutical manufacturers, physical therapists and so on, are wasted. Of course, human nature being what it is, the average patient likely thinks that it is someone else receiving such wasted care and the average health professional may believe, or at least profess publicly, that all which they do or prescribe on behalf of patients is necessary and appropriate.

If we were to accept this 30% statistic and were somehow able to curtail waste without shifting or increasing costs we would not be in the crisis of cost that we find ourselves in. Our 18% or so of GDP spent on health care would be a more moderate, but a still substantial, 12%. By any reasonable standard, Gawande is describing a situation that ought to outrage every citizen. How much of our many other crises could be abated if 750 billion dollars were allocated to them? Education, poverty, social justice, homelessness, child abuse, and neglect? Or for those with more libertarian views, if this money were redistributed to the 319 million Americans for their own spending, we would each by richer by $2,351.00 per year! What would such wealth unleashed on the economy accomplish?

Why does this problem exist? I believe it is a combination of factors including ignorance, greed, and indifference. The ignorance is preventable but is largely driven by the indifference of a consuming population who have little economic motivation to be mindful of what they receive since others are paying the costs via private and public insurance. Greed speaks for itself and takes the form of deliberately doing the unnecessary or a deliberate denial of the potential that a particular intervention is not needed by ignoring the evidence or not asking the right questions. The patient population in the presence of motivation is capable of making informed decisions by asking tough questions of their physicians and doing their own research.

Fortunately, as the article describes, there are systemic alternatives that can lead to change in this pattern of behavior when one is willing to acknowledge and confront the problem.

Making up for Medicare Shortfalls?

Do hospitals need to make up payment shortfalls from Medicaid and Medicare by charging higher prices to privately insured patients? That theory, known as cost shifting, has been discussed considerably over the past few decades.  But many recent studies have in fact suggested something else: lower medicare hospital payment rates for inpatient care might just lead to lower private payment rates.

Cost shifting is based on the notion that a hospital’s costs (staff, equipment, supplies, space) are fixed, with an event requiring a specific set of resources. Therefore when reimbursements don’t meet the hospital’s expenses the cost must be met in some other way. However, in reality hospitals as with any other industry face and respond to various market forces.

As was reported to Congress in 2011, it’s been hospitals’ underlying costs, not cost shifting, that have led to differences in prices charged to insurers and to Medicare shortfalls or profits. In fact, as noted in this New York Times editorial:  “Today, hospital cost shifting is dead, and the spillover effect reigns. A consequence is that public policy that holds or pushes down Medicare and Medicaid prices (or their growth) could put downward pressure on the prices hospitals can charge to all its customers and, in turn, on the premiums we pay to insurers.” Good news indeed for consumers of health care and especially for those concerned with the long-term potential shortfall effects of reduced payments to Medicaid and Medicare.

$30 Billion and Counting

Since 2009 the American taxpayer, according to Kaiser Health News/NPR/Montana Public Radio, has spent about $30 billion on the installation of electronic records systems in hospitals and doctors’ offices. However, right now the ability of the systems to converse with one another — so that patient records can be tracked from one facility to another — is at about a 2 or 3 on a scale of zero to 10, according to Robert Wachter, a hospitalist at UC San Francisco, and to technology entrepreneur Jonathan Bush.

Wachter has authored the upcoming The Digital Doctor: Hope, Hype, and Harm at the Dawn of Medicine’s Computer Age, on information technology in health care.

Up until now, he says, there has been a financial disincentive for doctors and hospitals to share information. For example, if a doctor doesn’t have a patient’s record immediately available, the doctor may order a test that has already been done – and can bill for that test. Keeping EMRs [electronic Medical Records] from talking to each other also makes it easier to keep patients from taking their medical records — and their business — to a competing doctor.

Karen DeSalvo, the federal government’s health IT coordinator, is now working on standards for how to share digital information. 2015 might just be the time to move medicine more into the digital age. Wachter notes that as about a dollar of every $6 in the U.S. economy is spent on health care, a new IT boom in that sector means there are billions of dollars to be made.

One Procedure, Many Prices

A new report from Blue Cross Blue Shield, The Health of America analyzed the cost of hip and knee surgeries in 64 areas across the US and found that the amount charged for the same procedure in the same city varied by as much as 313%.

The amount charged by the hospital is different from the amount negotiated by an insurer, which is itself different from the amount owed by a patient. That’s one reason deciphering hospital bills can be complex. It’s also a perfect example of why people can end up buried under a mountain of confusing medical debt if they are uninsured, lack good insurance, or simply don’t understand what their insurance plans actually cover.

“If you are in a plan that charges a $30 copay to see an orthopedist, that is your cost,” explained Dan Mendelson, the CEO of consulting firm Avalere Health and a former associate director for health at the federal Office of Management and Budget. But if you have a high deductible, if your surgery isn’t covered, or if you are uninsured, your already high costs may end up being three times higher just because you chose the wrong hospital.

Would these differentials in price exist if the patients had some skin in the game and they rather than their carriers were paying the bulk of the charge? Or if “skin in the game” meant more than meeting an annual deductible.  Though higher deductibles and co-pays do prompt patients and families to track expenditures and self-ration when possible, it’s not a step in the direction of making prices readily available or easy to understand.  And the disparities begs the question of why carriers like the Blues are willing to pay the higher prices when one of their insureds choose one of those hospitals.