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Cost Containment

An Unsuitable Trajectory

MCNTalk reads Forbes. Mainly for great business articles but even for opinions, which are predictably free market and generally anti-government and Obama. That said, Forbes agrees that US Health care is high priced and advocates a consumer-driven solution. As we have opined elsewhere, consumer engagement that led to citizens shopping in a competitive market for care and coverage might have benefits.

Most startling is the reference to Swiss health care spending being 45% of the US levels. Having traveled in that marvelous country, one can’t credibly claim they are anything but more robust and wealthier per capita than the US. We deserve to understand and respond to such massive differences. Not having been to Singapore, where spending is said to be at 20% of US levels, this 5x spread is incomprehensible and we wonder if it is a typo or some major relevant facts are missing. Even Forbes agrees that things are way out of whack with our system’s cost.

As a thought experiment, imagine that rather than health care, the media reported that cars, smartphones and flat panel TVs cost twice or more as much in the US as they do in Switzerland. Since we pay ourselves for these goods, how much rhetoric and justification would we tolerate in explaining the differences? Or would we rather have a flurry of innovative efforts to ensure that US consumers are able to pay the same or less than others for similar products and services? The difference of course is who is paying. When employers or government pay, we the consumers basically have little reason to care. When on the other hand we have to pull out our own wallet, the impact and visibility is immediate. Unfortunately, the ACA and other reforms that don’t truly engage the consumer in feeling some pain or gain, have a basic flaw that impedes price competition. Furthermore, as many have pointed out, the ability to make an informed choice when it comes to complex health issues is questionable, not to mention the ability to shop when one is bleeding or in the process of an acute condition needing immediate intervention. Informed buying requires both the ability to have good information and enough time to decide.

The question is when do we stop debating and engage in the truly tough decisions that will send us in the right direction. We are not optimistic because any system that represents almost 20% of our GDP will not give up turf easily. For the US health spend to approach benchmarks of other industrialized and healthy economies would displace many jobs, institutions, revenue streams, and profits.

The Impact of Community Health Workers: Cutting Re-Admissions and Creating Healthier Communities

Community health workers can support, guide and encourage patients to manage their health over the long term. Many poor countries use CHWs on an enormous scale. This is a crucial role in a country where vast numbers of people are sick with chronic lifestyle-related diseases. Doctors can’t help patients change their behavior in the 15 minutes they spend with each patient. But community health workers can.

In the United States, in 2010, researchers from the University of Pennsylvania began interviewing patients who lived in high-poverty neighborhoods about what they saw as barriers that kept them from getting health care, and kept them sick. Those responses — from long interviews with 115 patients — became the basis of the Penn Center and IMPaCT, which stands for “individualized management for patient-centered targets.”

The Penn Center is one of several new models hospitals are trying to make CHW programs sustainable. Another is program is Grand-Aides. Unlike the Penn CHWs, Grand-Aides don’t help with social or logistical issues. They are nurse extenders who get hundreds of hours of medical training. Each patient visit is supervised in real time by phone by a nurse, who makes all the decisions. A pilot at two pediatric Medicaid sites in Texas showed that the program cut readmissions by at least two-thirds. Learn more…

$1,600 for a Diaper Rash Treatment?

Alarmed by a rapid increase in spending on compounded drugs, like a $1,600 baby balm, insurers and others are acting to control their use.

Drug compounding involves a pharmacist making medicines for a patient who cannot be helped by mass-manufactured drugs. Compounded drugs do not require FDA approval, though Congress recently has moved to enact regulatory legislation. They might be used when a patients is allergic to an ingredient in a commercial product, or a patient needs a liquid formulation of a medication rather than it being in pill form.

Pharmacy benefit managers say there is scant evidence that these combinations of ingredients are safe or any more effective than conventional drugs. Express Scripts, the largest PMB, has said it will stop paying for more than 1,000 ingredients used in compounding, cutting spending by its health plan clients on such medicines by 95 percent. It said such spending had grown to $171 million in the first quarter of this year from $28 million in the first quarter of 2012.

The Happiness Calculation for Smokers

How do you quantify happiness levels? The question has relates to a longstanding requirement — first codified under the Clinton administration — that every set of federal regulations with more than a $100 million effect on the economy needs an analysis to prevent the adoption of regulations with high costs and low benefits.

Now it is being applied to the government’s new tobacco regulations proposed this past April, specifically to a cost-benefit calculation which assumes that the benefits from reducing smoking — fewer early deaths and diseases of the lungs and heart — have to be discounted by 70 percent to offset the loss in pleasure that smokers suffer when they give up their habit.

Is this a problem? Well, yes, according to many, as the proposed regulations could water down the agency’s ability to regulate tobacco products. If the formula for assessing costs and benefits remains unchanged in the final version of the regulations, it could set a dangerous precedent that would constrain public-policy making for years to come.

“This is the single biggest obstacle facing the F.D.A. in executing the job Congress gave it,” said Matthew L. Myers, president of the Campaign for Tobacco-Free Kids, an advocacy group. “There’s no way the F.D.A. can do its job if this is applied.”

An F.D.A. spokeswoman, Jennifer Haliski, said that there was “still a great deal of uncertainty” surrounding the calculation, and that the agency was helping fund research to explore the issue. So far the Food and Drug Administration has received at least 69,000 public comments on the new regulations, some quite high profile. Earlier this month a group of economists, including one Nobel Prize winner, weighed in, asking that the calculation be changed before the ruling takes effect. Read more…

What Happens When Hospitals Buy Clinics?

One thing that happens is that the prices increase for services at these clinics. According to hospitals, one reason is that because hospitals (unlike individual doctors) must maintain 24-hour emergency room coverage and cannot turn away patients, they need to raise revenue elsewhere to help absorb this expense. Thus hospitals charge higher rates for many items than do private practices. Nationally, hospitals are buying more and more clinics, where they are also charging higher rates.

As the Affordable Care Act attempts to steer people away from pricey inpatient admissions, hospitals have begun buying up doctors’ offices in hopes of increasing their revenue and market share. The number of oncology practices owned by hospitals, for instance, increased by 24 percent from 2011 to 2012.

Cancer drugs often double in price when hospital systems charge for them. A treatment of Herceptin, a breast cancer drug, costs private insurers $2,740 when used in an independent clinic and $5,350 in a hospital outpatient setting, according to an analysis of 2012 claims by PricewaterhouseCoopers’ Health Research Institute. The price of Avastin increased from $6,620 to $14,100 when used in a hospital setting, the Health Research Institute says.

In some instances conflicts have arisen between insurance companies and hospitals over how much to pay for treatment. In one case, the insurer says reverting to lower payments for roughly 20,000 Pennsylvania chemotherapy patients should $200 million a year.

Steven Weiss, spokesman for the American Cancer Society’s Cancer Action Network, said in an e-mail. “For years, patients have paid different prices for the same procedure or drug, depending on where they are treated,” he said, and “long-standing trends like this one continue to threaten patient access to lifesaving care.” Read more…

How Health Plans Refusing Coverage Can Be of Benefit

by Brian L. Grant, MD

As noted in this New York Times article, more health plans are refusing to cover certain drugs unless the companies charge less for them.

Imagine a world in which food, housing, clothing, cars or other items we consume increased in price by 14% or more per year? What keeps this from happening in general is the pressure of the free market, responding to the pain that we feel every time we pull out our wallet to pay for something – motivating us to shop smartly, consider alternatives, and sometimes make a choice that is not what we would select if money were no object. How many of us work in companies where we can raise our prices by double digits annually, or see our pay increase by similar amounts year over year?

Not so in the world of specialty pharmaceuticals. We have been shielded from price by the impact of insurance payments and convinced that nothing but “the best” is good enough for us patients and that the insurance company writing the check (after our employers or government pay for the insurance), has no business exercising its economic power and “interfere” in what doctor thinks is best.

Nonsense! So long as we have abrogated payment to a third party, these third parties, be they government or commercial, have an obligation to introduce competition and create some pain and perhaps friction in the system. The days of patients paying for their own care are not likely to return. Kudos to the creative efforts to weigh cost and benefits, create formularies, and hopefully drive down some of the egregious pricing that appears to be in play.

Some drug companies choose to do end runs around co-pay requirements by giving rebates to patients, while still getting the big dollars from the carriers for the higher priced drugs. The move to escalate the fight by deleting certain drugs from formularies, forcing patients to pay the entire cost if they or their doctor refuse the alternatives, is a rational and needed escalation.

Boeing’s Flight Plan for a New Era of Health Care

In the fall, 30,000 Puget Sound-area Boeing employees and retirees will be able to choose between two accountable care organizations (ACOs) for their personal and family health plan, a coverage option Boeing is calling the “Preferred Partnership.”

There were more than 600 ACOs nationwide at the start of the year, and they are being touted as a key strategy for curbing U.S. health-care costs.

The fundamental idea is that doctors and hospitals are rewarded for keeping and making patients healthy, rather than a “fee for service” approach where they earn more for prescribing lots of tests or scheduling appointments regardless of how a patient fares.

The contracts also include quality goals that matter to patients, such as the ability to schedule appointments in a timely manner and maintaining patient safety and satisfaction.

There are additional benchmarks tied to costs, including reducing readmissions to hospitals after treatments and effectively managing chronic conditions such as diabetes and heart disease.

Dr. Elliott Fisher, director of the Dartmouth Institute for Health Policy and Clinical Practice in New Hampshire, is hopeful the ACOs can help heal an inefficient health-care system. “There is so much waste,” Fisher said. “ACO arrangements are intermediate steps toward more fundamental reforms.”

Read more…

Veterans Administration Wait Lists — What Can We Learn from This?

Brian L. Grant MD

This editorial from the Seattle Times by Roger Stark raises a number of issues worth discussing. The recent controversy about the VA has been long in the making. It is about culture and corruption. But it also allows us an opportunity to look more closely at the fundamentals of the VA, ask tough questions and perhaps make some basic changes.

There is a lack of understanding about the VA and people tend to mix up and confuse issues. And the reverential manner with which it is spoken by most elected officials makes it difficult to have meaningful conversations.

My time in the VA is quite dated, going back to several rotations as a resident physician in the 70’s and 80’s. Back then I was struck by a number of observations:

  • Most admissions and patients were there for conditions that had nothing to do with military service. And a number of them were receiving permanent pensions because their conditions were identified in the course of service. Chronic Schizophrenia comes to mind. We now know that this is a biologic condition, not environmental, coincidentally becoming symptomatic in late adolescence and early adulthood when individuals may be in military service. If one lasted long enough in service, an early discharge and a lifetime of benefits would result, though the disease would have developed irrespective of service. Other medical admissions were often older Veterans with the usual maladies of age and lifestyle that one encounters in any hospital, such as heart and lung diseases, often flowing from lifestyle issues like tobacco use and diet.
  •  These hospitals were large institutions, often in the same vicinity as other facilities and clinics that offer excellent care options.
  • The staff were of high quality and some, like the Seattle VA, were teaching institutions affiliated with an excellent medical school, and helped train medical students and residents. They cared about their patients.

Setting aside the current controversy, we should ask several questions about the VA and where it should fit in the US Healthcare system:

  • What is the social contract between the VA and Veterans? Who should it serve and why? What is the distinction between those injured in the course of duty and those not? Should those who have served but have no injuries from their service be entitled to free health care via the VA system?
  • Does the current VA disability system work and when should an injury translate into economic benefits vs. treatment for the condition?
  •  What are the moral hazard and political implications of tying an injury to compensation? How does compensation muddy diagnoses like PTSD and traumatic brain injury?
  •  Assuming care is owed or committed, is a free-standing government run system the best way to accomplish this? What are the alternatives?

Readers of this blog know that the current healthcare system is not defended in terms of its economics. It is expensive and costs inflate far in excess of other countries with quality systems or the overall US economy. And there are inherent problems in a system where doing and procedures are rewarded while prevention and thinking is not. Furthermore the system is one where the patient is generally ignorant and disengaged on costs and treatment options and believes or acts as if the details and cost of care is an entitlement owed to them by their employer or government. This trend may be changing as cost sharing via copays and deductibles is growing under many policies. Most of us spend more time shopping for a TV set than a medical procedure or hospitalization that will cost 20-50 times as much or more, because with the TV and other personal expenditures, our interests lie in getting the best value for price.

Once we decide which Veterans to serve, could this not be better accomplished without a massive VA treatment bureaucracy? We have perfectly workable if imperfect government payment schemes including Medicare that can easily be ported to the VA and allow eligible Veterans to receive care from the facilities of their choice in the community.

Centers of excellence providing care for conditions unique to combat could be formed in partnership with high quality medical schools and research institutions for conditions such as amputations and combat-related PTSD.

Current VA resources and staff could be re-deployed into the private sector, where shortages exist presently and where demand would increase with Veterans entering the same system.

Is the current system inherently flawed and rather than focusing on current corruption, are bigger questions needing to be asked and answered?

What Childhood Asthma Treatment Rates Can Tell Us About Healthcare Reform

As this New York Times opinion piece notes, cost-sharing (e.g. co-payments and deductibles) is used to decrease health spending. Cost-sharing may be effective  in prompting people to think twice before seeking medical care or when selecting among options, but is it helping us reach the end goal of reducing the overall spend in the long run?

Treatment rates for childhood asthma are a particularly useful indicator, as having asthma inherently requires medical care, and preventive care is more effective and cost-efficient than treating someone during an attack. In other words, having to pay a large co-pay or deductible may discourage necessary treatment which only prolongs problems and makes them more expensive and more difficult to treat. A study just released in JAMA (Journal of the American Medical Association) Pediatrics indicates that poor families who have private insurance with higher cost-sharing are more likely to skip recommended care than those with lower cost-sharing or Medicaid. As the piece opinions:

In the United States, we have adopted a system where those who use the most care pay the most out of pocket. That may seem “fair” in some way, but cost-sharing isn’t about fairness. It’s about reducing health care spending without negatively affecting health outcomes. It should be a scalpel. We’re using it like a club.

Read more…

Will Transparency in Cost Help Force Competition?

Washington State lawmakers are hoping so – during the recent legislative session, they approved new transparency rules by January 2016. The belief is that transparency will force providers to be more competitive – cutting unnecessary spending such as ordering diagnostic tests which aren’t needed, or prescribing name brand drugs when generics work as effectively.

Washington’s largest insurance providers initially fought the proposal, objecting to disclosing their negotiated prices. So the database will contain only costs from Medicaid and insurance covering state employees, though supporters hope it eventually will be expanded. The Everett Clinic, north of Seattle, has so far posted prices for imaging services with the on-line encouragement for patients to call and ask for information on other services as well. Read more…