MCN | Medical Consultants Network

The Power of a Second Look

Home / MCNTalk / Tag: Cost Containment

Viewing items tagged:

Cost Containment

Medical Tourism – Another Example of a Seriously Flawed US System

This article on hip replacement costs and the experiences of a medical tourist in Belgium highlights any number of issues. Yet most readers would yawn at the obvious – that we pay in the US multiples more for equal or lower health outcomes. The story describes a patient who was quoted a price of $78,000, NOT including surgeons fees for a hip replacement from a local US hospital. The patient was able to receive the same operation INCLUDING round trip air, for $13,660 at a private hospital in Belgium, including the surgeon’s fee. And the hip joint was made by the same US company that sells the device in the US for more than the cost of the entire procedure in Belgium.

Interest groups and politics (including partisan bickering), lack of courage at confronting and tackling the matter,  government indifference, and lack of economic skin in the game by patients mean we all get less for more. Government interference is decried by many, but it seems to work in the case of Belgium and others in Europe and elsewhere that regulate the medical market. The alternatives in settings like the US where healthcare is largely regarded as “free” by those who receive it has resulted in what we in America experience. We patients pay little more than a copay or deductible with the rest covered by private or government insurance. We have no incentive to shop, price compare and demand price transparency. But the cost borne by government and private payers is very real and the billions of dollars in excess GDP means that these funds are not available for other productive uses.

If cars, electronics or food were five times the price in the US than Europe, regardless of the logic, there would be a grey market and a hue and cry by those individuals footing the bills. Where is the outrage at the metrics described in this article? It is inconvenient and in the case of emergent situations, impossible to get on a plane and travel abroad for much cheaper care. And the patient who has no economic driver to do so has little reason to consider it.

In the end, we all pay via lower salaries, higher taxes, or both – fueling a bloated health care system enabled by indifference and ignorance.

Benefits suspended for Long Island Railroad retirees

MCNTalk previously discussed the abuse of the disability system at the Long Island Rail Road. With this follow-up we see hundreds having their benefits cut off and reference is made to one doctor going to jail. While we have not followed this story closely, the article begs a number of questions:

  • Who else if anything was held to account for this glaring abuse? Reference is made to another defendant in the case going to trial soon? How many defendants are there?
  • For the Railroad Disability Board to not know or have reason to suspect abuse long ago is not credible. Is the leadership still in place? Ultimately the Board had to approve each application and there were individuals working there along with management who were fully aware of the nature of the claims. They were fully capable of using their heads to review and challenge. How many of the L.I.R.R. applicants had their claims reviewed and denied? What about other Railroad employees at other companies? Are their claims being similarly approved?
  • Are managers at the L.I.R.R. who were involved in this travesty still working there and are any of them facing charges?

Lastly, let’s look to the 600 retirees losing their benefits. In the original Times article, we note the following:

Virtually every career employee — as many as 97 percent in one recent year — applies for and gets disability payments soon after retirement, a computer analysis of federal records by The New York Times has found. Since 2000, those records show, about a quarter of a billion dollars in federal disability money has gone to former L.I.R.R. employees, including about 2,000 who retired during that time.

The L.I.R.R.’s disability rate suggests it is one of the nation’s most dangerous places to work. Yet in four of the last five years, the railroad has won national awards for improving worker safety.

“Short of the gulag, I can’t imagine any work force that would have a so-to-speak 90 percent disability attrition rate,” said Glenn Scammel, long one of Capitol Hill’s top experts on railroads. “That defies both logic and experience.”

Said Dr. J. Mark Melhorn, co-editor of a book on occupational disability published by the American Medical Association: “No one has a rate that high — that just doesn’t happen.”

Clearly those who applied for and received disability included a significant number of individuals who were engaged in fraud and theft from the government – from all of us. What is their punishment and account? To lose future benefits! How many if any will face prosecution and restitution? Just because everyone does it does not make it right. These individuals were not forced to apply for benefits and they were not forced to see particular doctors. They applied for benefits and most were fully aware of the scam they were engaged in.

The State of US Health

This important article from the Journal of the American Medical Association outlines the state of health in the US, comparing and contrasting it to other countries. Given our health spend, the data is not pretty, nor is it surprising. The US News and World Report article summarizing the study notes that our lifestyle is a major culprit contributing to morbidity and disability. As the author Harvey Fineberg MD said:

 “We spend, on average, twice as much as the rest of the countries. Approximately 30 percent of all health expenditures in the United States, which would amount to $750 billion a year, don’t actually contribute to better health…We have a big job ahead of us to create a health care system that really adds value and doesn’t just cost and waste a lot of money.”

This editorial in the Journal of American Medical Association provides further context and thought on the situation.

Diagnosis: Insufficient Outrage

There is no shortage of legal and government sanctioned abuses that are flagrantly displayed in our health care system. One is hard pressed to know what to be more concerned about — the abuses, or the complacency of the average consumer. This article on hospital pricing describes the normative practice of variable fees in health care for the same service, with little logic and no link to quality or efficacy. That payers are willing to tolerate so-called facility fees, where significantly higher charges are paid for a service that is performed in a hospital vs. in a non-hospital location, is difficult to understand or justify. Unfortunately the average patient cares not at all about this sort of abuse. After all, they don’t pay directly. They just expect that insurance should cover whatever charge is leveled for their care. The average patient does not ask about price on services costing thousands, but likely scans the prices on mayonnaise at the grocery store to ensure the best deal. Of course they produce their own hard-earned cash for the latter.

Health care reform does nothing to change consumer behavior with respect to caring about cost. The burden and duty to address these abuses must be assumed by the payers, including employers and government. Be assured that those who benefit from the current regime will politicize efforts to control abuses and excesses, as has already taken place in the partisan attacks against health care reform.

Interestingly, the problem has been largely defined as excessive costs. However as the article references, excessive utilization is of equal importance. An overpriced procedure costs nothing to the patient who not only does not need it, but does not undergo it. Patients should follow the money and be ready to question the need for procedures recommended on their behalf. Will one really learn much from a particular study or test? Is that surgery really necessary and is that drug likely to make a difference? Our health care system is very good at driving utilization and consumption. There is little difference in behaviors between many non-profits and for profit systems when the underlying economic model is fee for service. If one provides the service, one generates a fee. The good deed of restraint and judgment, when it leads to non-consumption, is rewarded with virtue but little else.

Learning from the Swedish Health Care System

This short article describes a health care system that works according to the article. It costs half as much, is not for profit, engages in entirely different financial incentives, is not employer based, and is associated with better health outcomes. Note this last fact being one of association not causation, as Sweden has a population who engages overall in healthier lifestyles.

The naysayers make a lot of noise about life as we know it being incompatible with fundamental system change. The question is do they seek input that might not support their beliefs, are they curious, do they travel with open eyes, and do they really enjoy spending so much of their hard earned dollars on health care? The US is not Sweden to be clear, but just as imitation is the norm in so many endeavors, when it leads to improvement, does it not make sense to analyze and study other systems with eyes open, learn and adapt? Read more.

HIPAA Compliance in the Cloud

This short article in Forbes on-line summarizes concerns with compliance to — and related costs — updates in HIPAA (Health Insurance Portability and Accountability Act). As noted, security and privacy are getting more serious with each iteration.

This is no small concern:

The Department of Health and Human Services estimates that the cost of compliance with the final rule will be somewhere between $114 and $225 million (first year) and about $14 million for each year thereafter… the rule qualifies as an “economically significant” one under Executive Order 12866.

The reason for this new level of security is pretty fundamental. Healthcare has had some serious deficiencies through the years and it’s a prime target for identity theft. Not so much for the actual healthcare information but for financial fraud – which is a companion problem in healthcare (to the tune of about $70 billion a year in Medicare fraud alone).

Read more…

Hospital Billing Varies Wildly, Government Data Shows

As this New York Times article details, data being released for the first time by the government on Wednesday shows that hospitals charge Medicare wildly differing amounts — sometimes 10 to 20 times what Medicare typically reimburses — for the same procedure, raising questions about how hospitals determine prices and why they differ so widely.

The data for 3,300 hospitals, released by the federal Center for Medicare and Medicaid Services, shows wide variations not only regionally but among hospitals in the same area or city. For instance, in Saint Augustine, Fla., one hospital typically billed nearly $40,000 to remove a gallbladder using minimally invasive surgery, while one in Orange Park, Fla., charged $91,000. A hospital in Livingston, N.J., charged $70,712 on average to implant a pacemaker, while a hospital in nearby Rahway, N.J., charged $101,945.

Hospitals submitted bills to Medicare that were, on average, about three to five times what the agency typically pays to treat a condition, an analysis of the data by The New York Times indicates. And variations between what hospitals charge may be even greater.

The data covers bills submitted from virtually every hospital in the country in 2011 for the 100 most common treatments and procedures performed in hospitals. Medicare does not actually pay the amount a hospital charges but instead uses a system of standardized payments to reimburse hospitals for treating specific conditions.

Private insurers do not pay the full charge either, but negotiate payments with hospitals for specific treatments. Since many patients are covered by Medicare or have private insurance, they are not directly affected by what hospitals charge.

Experts say it is likely that the people who can afford it least — those with little or no insurance — are getting hit with extremely high hospitals bills that may bear little connection to the cost of treatment.

Read more…

How Budget Conscious Doctors Can Lower Health Care Costs

When shopping, people tend to search for the best deal with the greatest value. But when it comes to receiving health care services, why is the price tag never a clear part of the discussion?

After TIME Magazine featured the report “Bitter Pill: Why Medical Bills Are Killing us,”  Cleveland Clinic CEO Dr. Toby Cosgrove argues that one potential cause of  out-of-control healthcare costs may be that doctors often have no idea how much medical procedures actually cost. He argues that by informing doctors about the specific costs of health care procedures, doctors may try to find more cost-effective alternatives.

And in a new study by Johns Hopkins published in the journal, JAMA Internal Medicine,  researchers showed that informing doctors of the cost of tests, services, and supplies they use actually can lead to hefty medical savings.

The researcher split physicians into two groups over the six-month experiment to see if showing the tests prices would change a physician’s decision about services.  One group was given the tests with prices on them, while the other group’s tests did not have a price.

The researchers compared the buying behavior of the physicians and found that showing the pricing information resulted in a 9% cut in use of the tests overall and a savings of over $400,000 over the six months. By comparison, there was a 6% increase in the use of the tests without pricing information over the same time period. Read More…

The researchers say the savings can be largely credited to the simple principles behind comparison shopping.

To challenge this theory, CEO Dr. Toby Cosgrove decided to make it a point to deconstruct the costs of their top three procedures, record the price of sutures, the number of instruments uses and record how long patient’s spend in post-anesthesia care.

“Take, for example, nitric oxide, a drug commonly used in heart, lung and chest surgeries to keep tissues well-supplied with oxygen during the operation. When it’s effective, it’s very effective, but it doesn’t help all patients. When we realized we were spending $2 million a year on the drug, we drilled down to see who was using it and why.

We found that doctors and OR staff did not have a standard protocol to guide them on when and how much to rely on nitric oxide; we had to educate them that if the drug didn’t work within a half hour of being administered, it won’t work at all, so repeated doses were wasteful. The result: nitric oxide use dropped by half, saving $1 million without any adverse effect on patient care,” Dr. Cosgrove said.

Read More…

When his team saw where they could easily cut costs, they made a goal to save $100 million in a year by focusing on what and how they use equipment and supplies they purchase. Within a year, they topped their $100 million goal and after three years have saved $155 million.

And while it’s crucial that quality of health care services always comes before price, it is equally important to realize that even the smallest cost saving practices create a monumental difference in our costly health care system.

A New Kind of Care for Adults

New York City may be facing a predicament as the prevalence and popularity of social adult day care centers is on the rise, especially in the Brooklyn area.

With the largest Medicaid budget in the country at $54 billion, the city is trying to find a way to balance spending for institutional care with less expensive care methods that allow people to remain in their communities.

These spending concerns arise as the number of social adult day care centers has grown from eight programs to 192 centers across the city.

Why has the number grown so much so quickly? The answer lies within their aggressive marketing tactics. To entice people, a facility may offer $50 for a referral, money each week, free food to take out, a grocery coupon, or an unlimited MetroCard.

Medicaid indirectly pays for the cost of attendance. Managed care companies pay the adult day care centers to provide services to its clients. In return, the centers refer new clients to these companies.

“Centers collected $25 million for managed care plans in the first nine months of 2012.” The rate per month for each member is about $3,800 or $93 per session. Read More…

Furthermore, these care centers are fairly inexpensive to operate because they are minimally regulated, do not require a license and only require a staff of two people, one of whom can be a volunteer.

Those who receive treatment are supposed to be impaired enough to need at least 120 days of help with everyday tasks. However, the The New York Times article,“Day Centers Sprout Up, Luring Fit Elders and Costing Medicaid,” reports that healthy individuals may be reaping the benefits of a superfluous Medicaid budget.

“The idea that people are bicycling home from managed long-term care is a complete misnomer…The idea that they’re playing Ping-Pong — I guess they could be wheelchair-bound Ping-Pong players, but otherwise it’s fraud and they are not eligible,” said Jason Helgerson, the state’s Medicaid Chief.

Trends with Benefits: The Growth of Federal Disability Benefits in the U.S.

One of MCN’s favorite radio programs is “This American Life” from National Public Radio. The March 22, 2013 show, “Trends With Benefits,” was on the massive growth in federal disability benefits in the U.S. Much of this is no surprise to those of us who work in the sector. To quote their blurb:

“The number of Americans receiving federal disability payments has nearly doubled over the last 15 years. There are towns and counties around the nation where almost 1/4 of adults are on disability. Planet Money‘s Chana Joffe-Walt spent 6 months exploring the disability program, and emerges with a story of the U.S. economy quite different than the one we’ve been hearing.”

Well worth a listen. This American Life: Trends With Benefits

And additional information in available from the author on the web at:

http://apps.npr.org/unfit-for-work/