Gore Someone Else’s Ox, Please

By Kim Bellard, March 24, 2011

News flash: health care spending is out of control. 

Sadly, this is nothing new.  It’s been “out of control” for decades.  If we are serious about controlling health care spending -- and I’m not sure we are yet -- we may need to think not just about on what services the money is spent but also about to whom it is paid.

The facts are fairly well known.  U.S. national health expenditures were estimated to be $2.5 trillion in 2009, which consumed 17.6% of Gross Domestic Product (GDP).  Another decade and health spending may account for one-fifth of the national economy.  The spending is a source of concern in itself, but it is especially so when compared to other industrialized nations.  We spend over double per capita of the average of the other OECD countries, and the country with the next highest percentage of its economy devoted to health care is France, which looks miserly by comparison at 11%.

The truly scary thing is that, despite our runaway health spending, there is ample data that we are often not getting all the services we should, and that the tens of millions of uninsured do not get as much health care as insured persons do.  Just think how much worse the spending problem might be if those problems were solved.

Last year’s federal health care reform vowed to slow the increase in spending, although the specific mechanisms for this remain murky.  Several states are taking the lead in trying to attack the problem.  For example, the state of Washington is using a Health Technology Assessment Program (HTA) to determine which services the state will cover in its program for state employees, as well as for Medicaid and worker’s compensation.  HTA tries to use effectiveness research to determine which services are cost-effective, and it is the “cost” portion of that which has raised some controversy.   Meanwhile, Arizona has eliminated coverage for several types of transplants as one of its efforts to control Medicaid spending; two patients are reported to have died as a result.   Of course, many other states are following the more typical pattern of simply slashing Medicaid reimbursement rates further.

The problem is a hard one, and it is not at all obvious what the solution might be.  In 2007 the Congressional Research Service did an in-depth study of our health care spending relative to other countries, and the report had some counter-intuitive results.  It’s not that we have too many hospital beds, nor spend too many days in the hospital.  It’s not even that we have too many doctors nor visit them too often.  On all those measures, we rank fairly low compared to other OECD countries, despite spending much more per capita on hospital and physician services.  About the only area where the U.S. seemed to clearly use more services than other OECD countries was in imaging, specifically for CT scanners and MRI…but even then we are lower than Japan, which still manages to spend much less than we do. 

CRS concluded much as Gerry Anderson and his colleagues did a few years earlier in their well known Health Affairs article: “It’s the Prices, Stupid.”  Simply put, we pay much more per unit of service, and health care professionals – at least physicians – earn much more in the U.S. than almost anywhere else. 

Many pundits point to fixing our costly malpractice system, reducing administrative overhead, and generally cutting out “waste” as the way forward.  Indeed, PwC estimated that $1.2 trillion of the $2.4 trillion in spending was wasteful.  As evidenced above in Washington and Arizona, though, “waste” is not so easy to identify.  Reformers are forgetting one key truth: one person’s waste is another person’s income.

Let’s think about spending.  The money spent on health care goes somewhere, to someone.  It doesn’t disappear down a black hole and vanish.  It ends up as revenue for a variety of entities in the complex health system ecosystem, such as doctors, hospitals, pharmacies, nursing homes, home health agencies, labs, imaging centers, and health insurers/administrators.  Controlling health care spending means some of those entities will collect less revenue than they would have collected otherwise, and that’s the rub. 

Maybe we don’t need as many specialists, or maybe don’t need to pay them as much.  Maybe more generic drugs could be used, or maybe we could pay less for brand drugs.  Maybe insurers’ medical loss ratios should be higher, or maybe we could curtail their premium increases.  Maybe spending on diabetes and bariatric surgery would go down if we identified people at risk earlier.  Maybe.  But none of the entities currently receiving the money for any of these examples will be keen to have their revenue go down.

To be sure, reduced revenue does not necessarily mean reduced income/profit.  There certainly are huge inefficiencies in our health care system, and pressure on revenues should, in a capitalism system, result in more efficient competitors.  But those pressures in that capitalism system should also result in some of the affected entities not surviving, and when it comes to health care, we don’t seem too keen on that. 

Competition should spur innovation and better value for consumers, but those are hard to accomplish.  It’s easier for at-risk organizations to fight for the status quo, at least for oneself.  It seems that every type of health care entity has its own trade association which vociferously advocates for its interests, including payment rates and eligibility of its services.  And the threat of reducing services usually alarms current recipients of those services, who are sure they not only need them but are entitled to them.  No one wants to have the dreaded R-word invoked, and yet no health care provider wants to take a pay cut.  It’s the irresistible force of health care demand against the immoveable limit of health care budgets. 

The hard fact is that whenever health care spending finally gets under control, as it inevitably must, there will either be fewer health care providers or those providers will be getting less money – or both.  The danger we face is that the reductions will be arbitrary and/or across the board.  We should be able to do better than that.  There’s nothing inherently wrong with specific health care providers making a lot of money.  One would want health care providers who deliver high quality, effective care to their patients to do well financially.  On the other hand, though, it is ludicrous to be paying the same to providers who are not doing well for their patients, whether that is not delivering appropriate treatment, making medical errors, or simply not getting good results.  It’s even silly to be paying “average” providers the same as high performing ones, yet we do this millions of times every day.  Right now, of course, it’s virtually impossible to tell which providers are which.  Where’s the data, where is the proof, and why don’t they – or we – seem to care?

Reform should mean making sure competition is based on delivering demonstrably better care and services, not on factors like geographic dominance, better lobbyists, or the simple inertia of not wanting to harm “my” doctor/hospital/pharmacy/etc.  Face it: there is going to have to be some goring, so we better make sure it is done to the right metaphorical oxen.

Consumerism: 2011 Industry Insiders Perspective

by Clive Riddle, March 18, 2011

A Consumerism e-poll, involving three brief questions, was conducted in conjunction with the recently concluded 10th Annual Consumerism Web Summit. While questions in the e-poll have changed over the years, the current survey has some recent historical basis for comparison.

Survey respondents were asked the same questions from 2008 - 2011 regarding ranking typical components of consumerism, and their perspective as a respondent. Respondents were also asked in 2010 and 2011, to what degree the success of health care consumerism initiatives depend upon provisions of health care reform.

Below are summary findings from the e-poll. As you can see, overall rankings of these components of consumerism haven’t really shifted from 2008-2011. However, insiders do feel the future success of consumerism initiatives is much less dependent upon health care reform, then they felt a year ago.

1.  Please numerically rank these typical components of Consumerism according to their value from your perspective.

(Rank 1 through 5 with 1 = highest value and 5=lowest value, and only use each ranking once; i.e. only rate one item a 1, one item a 2, etc.)

	2011	2010	2009	2008
	Mean	Mean	Mean	Mean
Price and Quality Transparency	1.76	1.85	2.00	1.83
Wellness Incentive Programs	2.86	3.03	2.65	2.86
Account Based Plans (HSA/HRA/FSA)	2.90	3.06	3.08	2.97
Web Based Consumer Patient Health Records	3.53	3.35	3.70	3.63
Retail Medicine (Convenient Care, etc)	3.57	3.69	3.57	3.71

	2011	2011
	Median	Mode
Price and Quality Transparency	1	1
Wellness Incentive Programs	3	2
Account Based Plans (HSA/HRA/FSA)	3	2
Web Based Consumer Patient Health Records	4	4
Retail Medicine (Convenient Care, etc)	4	5

2. To what degree are the success of health care consumerism initiatives dependent upon provisions of the Affordable Care Act? (in 2010, the question was phrased: "…dependent upon the outcome of any impending health care reform? “)

	2011	2010
Highly dependent	21.2%	36.4%
Somewhat dependent	47.7%	41.2%
Not very dependent	31.1%	22.5%

3. My perspective is as a: 

	2011	2010	2009	2008
Purchaser (Health Plan, Employer, TPA, Agent, PBM)	37.1%	43.4%	30.6%	37.9%
Provider (Hospital, Physician, Pharmaceutical, Other Providers)	34.4%	24.0%	27.1%	36.2%
Vendor/Other  (Vendors, Consultants, Institutions, Gov., All Other)	28.5%	31.8%	42.4%	25.9%

n = 154 for 2011, 189 for 2010, 96 for 2009, 59 for 2008

Webinar Event: A Medicare Shared Savings How-To Update

MCOL’s Healthcare Web Summit announces ACOs: A Medicare Shared Savings How-To Update, scheduled for Wednesday, March 30^th at 1PM Eastern.  Join us for a discussion on the current and future state of Medicare ACOs, the resulting impact and implications of the Medicare Shared Savings Program, and the requirements for participation and the strategic considerations that need to be made now to take advantage of the opportunities that await in the future.

Learn more: http://www.healthwebsummit.com/medicareaco033011.htm

What Happens to Those Unspent Dollars Inside an HSA?

By Clive Riddle, March 11, 2011

Eric Remjeske, President, and Jon Robb, Investment Associate, at Devenir gave a presentation during this week's Tenth Annual Consumerism Web Summit, in which they addressed Health Savings Account investment options and activity, based on their 2010 Devenir HSA research report.

Here’s some of the data Eric and Jon shared with the audience:

• National HSA assets in 2010 were $9.4 billion in deposits and $0.7 billion in investments
  
  
• This is projected to grow to $50.4 billion in deposits and $10.3 billion in investments in 2015. 
  
  
• 52% of HSA consumers were aware they had investment options for their HAS
  
  
• The average total balance (deposit and investment) in an HSA account was $11,635 for HSA account holders that held investment accounts
  
  
• The average yearly administration fee for HSA investment programs is $32
  
  
• In 2009 the average annual account activity broke down as follows: Personal Deposits $2,050; The average yearly administration fee for HSA investment programs is $32
  
  
• In 2009 the average annual account activity broke down as follows: Personal Deposits $2,050; Plus Employer Contributions $1,058; less Withdrawals $1,850; plus Interest Earnings $17; less Fees $33; yielding a net balance of $1,208.
  
  
• 61% of accounts in 2009 took a withdrawal of some amount
  
  

2010 National Healthcare Quality & Disparities Reports

Clive Riddle, March 4, 2011

HHS’ Agency for Healthcare Research and Quality (AHRQ) has just issued the 2010 National Healthcare Quality Report and National Healthcare Disparities Report. The reports are published annually, as mandated by Congress since 2003.

AHRQ tells us the “reports show trends by measuring health care quality for the Nation using a group of credible core measures. The data are based on more than 200 health care measures categorized in several areas of quality: effectiveness, patient safety, timeliness, patient-centeredness, care coordination, efficiency, health system infrastructure, and access.”

AHRQ summarizes the report findings as indicating “that few disparities in quality of care are getting smaller, and almost no disparities in access to care are getting smaller. Overall, blacks, American Indians and Alaska Natives received worse care than whites for about 40 percent of core measures. Asians received worse care than whites for about 20 percent of core measures. And Hispanics received worse care than whites for about 60 percent of core measures. Poor people received worse care than high-income people for about 80 percent of core measures. Of the 22 measures of access to health care services tracked in the reports, about 60 percent did not show improvement, and 40 percent worsened. On average, Americans report barriers to care one-fifth of the time, ranging from 3 percent of people saying they were unable to get or had to delay getting prescription medications to 60 percent of people saying their usual provider did not have office hours on weekends or nights. Among disparities in core access measures, only one—the gap between Asians and whites in the percentage of adults who reported having a specific source of ongoing care—showed a reduction.”

My impression of the state of things is evidenced in a section header entitled: “Quality Is Improving; Access and Disparities Are Not Improving.” The report states found that “across all 179 measures of health care quality tracked in the reports, almost two-thirds showed improvement. However, median rate of change was only 2.3% per year. Access is not improving. Across the 22 measures of health care access tracked in the reports, about 60% did not show improvement and 40% were headed in the wrong direction.”

Of course, patterns of care are regional, not national. The report found that “while every State was in the top 10% for some measure and was part of a benchmark, States in the New England (CT, MA, ME, NH, RI, VT) and Pacific (AK, CA, HI, OR, WA) census divisions were benchmark States most often and States in the East North Central (IL, IN, MI, OH, WI), East South Central (AL, KY, MS, TN), and West South Central (AR, LA, OK, TX) divisions were benchmark States less often.

The full 205 page National Healthcare Quality Report addresses: Effectiveness of Care, Patient Safety, Timeliness of Care, Patient Centeredness, Care Coordination, Efficiency of Care, Health System Infrastructure and Access to Health Care. The full 248 page National Healthcare Disparities Report addresses the same topic plus a section on Priority Populations. There is considerable overlap in the content of the two companion reports.

The reports are definitely worth some clicks to check them out.

A New way of Looking at Hospitals

by Kim Bellard, February 22, 2011

I’ve been worrying about Accountable Care Organizations (ACOs).

What is there to worry about?  I mean, what could possibly be wrong with entities whose purpose is to be accountable for the cost and quality of care of patients, and who are rewarded for doing a better job of delivering that care?  Aside from the pesky facts that no one is quite sure what an ACO actually is or how to make it effective, the concept is surely what our health care system – and perhaps other nations’ – needs. 

Some skeptics look at ACOs with a jaded view – been there, tried that – thinking back to the PHOs/IPAs of the 1990s or even the original concept of HMOs, especially the staff model HMOs (e.g., Kaiser Permanente or Group Health Cooperative of Puget Sound) that used to dominate the field.  Still, optimists are sure this time it will be different. 

I tend to believe that it will, indeed, be different, but in ways that are the source of my concern.  Of the many changes in health care since we last made a serious run at controlling costs in the 1990s, two are most problematic for ACOs: hospital consolidation and hospital ownership of physicians.  I’ve touched upon those in a previous blog (Saying No to Choice), citing studies of increased hospital market consolidation and estimates that over half of physicians are now employed by hospitals.  Those changes have radically changed the competitive landscape, giving hospital systems much greater negotiating power.  Last November The Center for Studying Health System Change issued a report “Wide Variation in Hospital and Physician Payment Rates Evidence of Provider Market Power” that illustrates even in supposedly competitive markets certain providers can virtually dictate pricing. 

Regulations for ACOs may give providers even more ability to band together, citing the need for increased clinical integration as a rationale.  This may, though, just further open the door to anti-competitive behaviors, and various experts are already raising concerns (see, for example, the recent New York Times article).  If ACOs have the effect of extending hospital control in already non-competitive markets or sub-markets, we may or may not get improved quality of care but it is unlikely we will achieve improved cost control. 

What is different with hospitals than with physician practices or most other health care entities is that it simply is too expensive to build new hospitals in most markets.  I.e., expecting to interject new hospitals into non-competitive marketplaces is not realistic.  In that sense, hospitals enjoy advantages similar to those that the utility, telephone, or cable companies once enjoyed.  In those cases, no one wanted to pay to connect new lines to all the potential customers, so regulators for those industries either regulated pricing or forced competition, such as when AT&T was ordered to allow other long distance carriers to use its lines.  Instead of increasing the number of hospitals, imagine if hospitals were required to lease out beds or entire floors to competitors.  That could go a long way to diminishing the kind of local geographic monopoly many hospitals currently enjoy. 

I think we may have the wrong conceptual model for hospitals.  In a retail analogy, one can view the hospital as a department store – trying to sell as many things to as many kinds of customers as it can.  Within the department store, as with the hospital, there are specialized departments targeted at specific types of customers.  Department stores often have boutique areas featuring well-known designers, and along the same lines some hospitals feature well-known specialists; both strategies aim at further improving market appeal.  Department stores once ruled the retail world; think of the huge, blocks-long Macys, Marshall Fields, or Hudson’s that once lined downtown shopping districts.  They might remind one of the huge, blocks-long urban hospitals that still dominate many cities. 

I would argue that our health care system might be better served if hospitals were less like department stores and more like malls. 

In the mall analogy, the hospital is the “landlord.”  It provides the physical space and shared services, which in the health care world would include not just rooms, light and heat but also a basic level of medical devices as well as electronic connectivity to EHRs and/or billing services.  Their “tenants” would be various ACOs, which lease the space for their patients who need inpatient care and add any differentiated equipment or staff the ACOs deem necessary.  The hospital in this model does not deliver care and does not own practitioners who deliver care, although its “lease” agreement should give the hospital an interest in assuring that their tenants are effectively providing care.  The hospital would want to ensure that it contracts with a wide variety of quality ACOs, so as to be attractive to a wide patient constituency. 

For this new approach to hospitals to work, it may be necessary to separate out the hospital-as-physical plant from hospital-as-intellectual property.  The latter may be the entities that create or partner with ACOs, while the former provides the platform for inpatient care to multiple ACOs.  Innovations developed in specific service lines could help give an ACO a competitive advantage, without locking other ACOs out from other approaches using beds in the same location.  The transition to this new model would not be simple, but hospitals would not be the first industry to have monopoly providers split up to ensure competition, so it could be done.

We still would face the core issue of how to ensure that there are sufficient numbers of ACOs to give consumers meaningful choice, as well as that those ACOs are capable of being responsible for the cost and quality of care.  Multi-specialty physician groups would seem to be one obvious solution, but they are not widely prevalent, nor easy to create or to run.  ACOs are likely to still require capital and management partners, which may include hospitals, and will take some time to develop and mature.  However, I don’t think the challenge of developing effective ACOs is any worse under the proposed approach, and not having the “Big Brother” hospital systems in the picture may actually make the challenge easier.

One alternative to making hospitals compete through a more open model would be to move to a regulated, all-payor hospital rate system, as proposed by Uwe Reinhardt and others.  This approach is certainly an option, although one that was tried in a number of states in the 1970’s and 1980’s but which only survives in Maryland.  The challenge for such systems is how well they can resist the various pressures, political and other, that seek to undermine the neutrality of the approach, especially as state and federal budgets are increasingly strained by Medicare and Medicaid expenditures. 

Personally, I prefer interjecting more competition into the system, but doing so would require a radical change in our concept of what hospitals are and how they compete.  Hospitals have always been essential community institutions, and my guess is that they are going to remain so.   We just need to make sure they don’t become monopolies, whether that is as health systems or as ACOs.  

Life in the Web: What Page Are You On? (part I)

By Laurie Gelb, February 15, 2011

A physician turns to a nurse between patients and snorts contemptuously. "Dr. Google convinced my last patient that she should stop taking her beta blocker because she might get dizzy. Why do these people believe everything on the Net and nothing I tell them?"

"Maybe because the Net isn't you," the nurse half-jokes.

She brushes past him to place some educational brochures (which include a list of URLs for patients to visit) into the waiting room rack, as he double-checks a digital database for drug interactions  while going into the sample closet for a waiting patient. 

When he returns to the exam room with a sample pack, the patient is tapping her iPhone. She says, "Should I be taking that since there's a precaution for people my age?"

As the physician fumes inwardly, he explains, "Your kidney and liver function are normal, and you're in excellent health overall. So I think on balance, this is the best choice." 

She arches a skeptical eyebrow, then opens an e-mail window to remind herself to ask the same question of her brother, a podiatrist in another state.

Meanwhile, an MCO executive is wincing at dismal performance metrics for her network's latest disease management initiative. The letters and brochures looked so pretty and inspiring in the shipping boxes, but failed to produce results. Follow-up calls found that they barely generated awareness, let alone action. 

She makes a note to consider a new vendor for next quarter's program, with a reduced budget. Her thoughts wander to text messaging and e-mails, which might be more effective. She recalls that an agency contact said something last week about a Twitter feed and puts that on the next meeting's agenda.

Shaking her head at the futility of it all, she reaches for the latest cost trend reports and considers another espresso.

--to be continued---

Looking Backward and Forward at How Industry Insiders View Trends

by Clive Riddle,  February 10, 2011

As part of the annual Future Care Web Summit, attendees as well as MCOL members participate in an e-poll on health care business trends for the coming year. The Tenth annual event concluded two weeks ago, and we’re ready to share results from the survey along with a comparison to responses from previous years for questions that have been asked each year.

Respondents were asked which of the listed health care business trends they thought would have the single greatest overall impact in 2011. This question has been posed annually. Here are the responses for the past eight years:

Trend	2011	2010	2009	2008	2007	2006	2005	2004
Advances in health care technology	8.0%	6.2%	3.4%	11.8%	7.5%	16.6%	13.6%	11.9%
Consumer Driven health plans	7.3%	7.0%	3.4%	13.4%	18.5.%	21.0%	22.7%	14.4%
Compliance issues	4.4%	7.0%	1.1%	0.8%	3.4%	0.8%	0.9%	5.9%
Effects of the Recession	13.9%	26.4%	57.3%	NA	NA	NA	NA	NA
Health Care Reform Initiatives	49.2%	37.2%	21.3%	23.6%	11.0%	28.1%	13.6%	4.3%
Increased consumer cost sharing	11.0%	5.4%	9.0%	33.9%	40.4%	25.8%	38.2%	35.6%
Population Health initiatives	3.6%	5.4%	3.4%	12.6%	7.5%	3.0%	5.5%	23.7%
Other	2.2%	5.4%	1.1%	3.9%	11.6%	4.5%	5.5%	4.2%
Grand Total	100.0%	100.0%	100.0%	100.0%	100.0%	100.0%	100.0%	100.0%

One can certainly see the ebb and flow of certain trends over time: the peaking of consumer driven plans and consumer cost sharing after the introduction of HSAs; the realignment of all factors taking back seat to the Great Recession in 2009; and the recent passage of health reform.

While respondents were generally consistent this year regarding these responses by their organization type, there were a few notable exceptions:

• 25% of vendors viewed population health initiatives as the top trend, compared to 1% of all other respondents. 
• 12.5% of providers viewed advances in health care technology as the top trend compared to 4.2% of all other respondents
• 18.7% of providers viewed the effects of the recession as the top trend compared to 9.7% of all other respondents

This year, we asked respondents to rate the ultimate anticipated impact in the marketplace of these selected health reform provisions:

• Accountable Care Organization Development (ACO)
• Health Plan Medical Loss Ratio Regulation (MLR)
• State Health Insurance Exchanges (Exchange)
• Extension of Dependent Care Coverage (Depend)
• EHR Development - Meaningful Use (EHR)
• Health Insurance Guaranteed Issue/ Elimination of Pre-Existing Conditions (Guarantee)
• Expansion of Medicaid Coverage (Medicaid)
• Mandated Coverage Provisions for Business and Individuals (Mandate)

Here’s how these provisions stacked up against each other:

Provision	Significant	Moderate	Little	None/Won't Happen	Unsure
ACO	30.6%	32.1%	23.3%	5.8%	8.0%
MLR	28.4%	38.6%	19.7%	4.3%	8.7%
Exchange	34.3%	36.5%	19.7%	4.3%	5.1%
Depend	22.0%	30.1%	44.1%	2.2%	1.4%
EHR	35.7%	32.8%	23.3%	3.6%	4.3%
Guarantee	37.5%	33.8%	19.8%	5.1%	3.6%
Medicaid	39.5%	41.7%	13.4%	1.4%	3.7%
Mandate	40.1%	35.0%	13.1%	7.3%	4.3%

The Mandate, under attack in federal appeal courts, was drew the highest level of response of any provision in both the Significant and the None/Won’t Happen categories.

Lastly, we asked respondents to rank these stakeholders as winners or losers for the coming year. It would appear Consumers and pharmaceutical organizations are viewed as the biggest winners, and employers and physicians are viewed as the biggest losers.

Stakeholder	Better Off	Same	Worse Off
Consumers	37.0%	26.8%	36.2%
Employers	15.3%	29.9%	54.7%
Health Plans	31.9%	31.2%	37.0%
Hospitals	24.8%	34.3%	40.9%
Physicians	21.2%	29.2%	49.6%
Pharmaceutical	34.6%	42.6%	22.8%

Being that respondents are a bit negative, tending to rank most stakeholders as “worse off” each year, we’ll examine “worse off: responses from a historical perspective for each stakeholder:

Worse Off	Consumers	Employers	Health Plans	Hospitals	Physicians	Pharmaceutical
2011	36.2%	54.7%	37.0%	40.9%	49.6%	22.8%
2010	65.9%	58.1%	55.0%	49.6%	41.1%	20.9%
2009	68.5%	67.0%	54.0%	61.4%	44.8%	35.2%
2008	75.3%	47.4%	12.8%	41.0%	50.0%	16.9%
2007	71.7%	34.9%	11.0%	45.2%	46.9%	29.2%
2006	69.7%	44.7%	45.5%	41.7%	11.6%	17.3%
2005	62.7%	42.7%	34.5%	38.2%	15.5%	25.5%
2004	78.0%	53.8%	33.1%	25.4%	14.4%	15.3%
2004	74.5%	61.8%	35.8%	31.2%	21.0%	13.9%

The historical perspective illustrates how dramatically respondents feel consumers change of fortune as occurred with health reform, compared to everyone else. Also interesting are the mood swings regarding health plan fortunes, and how physicians were seen as taking a turn for the worse starting in 2007.>/p>

For the 2011 Future Care e-poll, there were 137 respondents, consisting of 23% payors, 48% providers, 9% vendors and 20% others.

Entrepreneurship Trumps Bureaucracy

by Lindsay Resnick, February 4, 2011

Health care reform has thrust many industry stakeholders into survival mode. With the Patient Protection and Affordable Care Act (PPACA) in place as an enabling foundation, “new rules” are set to be written. And it will be a harsh set of rules indeed – minimum loss ratios, elimination of risk selection tools, benefit plan grandfathering, strict rate management, government run benefit exchanges, and for Medicare plans, reduced payments. And add to the mix a cadillac plan tax, insurance company assessments, and yes, even a tanning tax.

Predictions are running rampant about mass product-line exits, reduced competition due to consolidation, and distribution channel collapse.  Will these new regulations be the demise of health insurance industry and its stakeholders or, will change create opportunity?

Or put another way….can entrepreneurial spirit triumph over bureaucracy?

No one has a crystal ball but history shows us that success in transformative, threatened markets requires an ability to think and plan strategically: anticipate and absorb change, generate disruptive ideas, and act with deliberate, sequenced speed. It’s the way entrepreneurs manage through obstacles and capture opportunity.

From mega health insurance companies to small brokerage agencies, the process begins when leaders seek answers to tough questions. It means lasering-in on an organization's "reason for being" and then expanding outward to scrutinize core competencies, identify comparative market advantages, dissect customer perceptions, and determine strategic sustainability. Use this three-step approach:

BASELINE – Readiness gauge of where you stand today and what’s needs to be retooled in order to deal with shifting markets and exploit new opportunities.

TOMORROW – Scenarios and options for extending your company’s “reason for being” in a reformed market landscape. This is the “vision thing” that serves as the lifeblood of every entrepreneur.

ROADMAP – Select and prioritize specific, tangible opportunities; design a structured approach to optimize results, and; formulate an actionable, measurable business plan.

This introspective approach will undoubtedly call into question your most basic operating assumptions. It will challenge institutional bias and force debate around longstanding approaches to your markets. That’s OK. It will also yield a renewed focus on where your company needs to be in the future and lay the groundwork for navigating how to get there.

The objective is to put in motion a Health Care Reform change management process that fosters informed judgments. It will assist you to see the futurity of today’s decisions. The result will prove that entrepreneurship trumps bureaucracy.

Quis custodiet ipsos custodes?

by Kim Bellard, February 1, 2011

Don’t worry if your Latin is as rusty as mine; I’ll provide a translation of the title a little later on in case its meaning has not become clear by then.

The New York Times recently got a lot of attention for their story about older physicians, reporting that one-third of U.S. physicians are over 65, and that proportion was expected to rise as baby boomer docs increasingly begin to hit 65.  The Times pointed out that, while many of these older physicians provide excellent care, there are not strong mechanisms in place to assure continued competence of the aging physicians, and, in fact, many older physicians are “grandfathered” (pun unintended, one hopes) from efforts intended to help demonstrate physicians’ continued expertise, like tougher board certification standards.  They contrast the situation for physicians with that of pilots, who not only face mandatory retirement at age 65 but also are required to begin periodic physical and mental tests at the tender young age of forty. 

With all due respect to the Times, the issue is not age (and, by the way, their estimate of one-third of physicians over 65 appears overstated – as best I can tell, one third of physicians are 55 and older, but slightly less than twenty percent are currently over 65).  The issue is competence and demonstration of that competence, regardless of age. 

In 2009 Sidney Wolfe and Kate Resnevic of Public Citizen analyzed data from the Federation of State Medical Boards (FSMB), and found that disciplinary rates per 1000 physicians ranged from .95 in Minnesota to 6.54 in Alaska, with the overall U.S. average at 2.92.  According to their analysis, that latter number has actually been dropping in recent years, over 20% lower than the peak in 2004.  Maybe physicians are getting better, and maybe the doctors are that much worse in Alaska (or in Kentucky or Ohio, the next highest states), but one has to worry about how well problems are being reported. 

Indeed, last year Catherine DesRoches and her colleagues published an article that reported survey results about physicians’ attitudes towards peer reporting.  Only 64% felt a professional obligation to report fellow physicians who were significantly impaired or otherwise incompetent to practice.  Seventeen percent of the surveyed physicians had direct personal knowledge of a physician colleague who was incompetent to practice, although only 67% of those admitted they actually reported that colleague.

The disciplinary actions and the survey results don’t measure quite the same thing, but one has to worry that there is too big a gap between 17% of physicians knowing an incompetent colleague and yet, on average, only 0.3% of physicians with disciplinary actions.   Even if the latter number was the “right” number, the variation of the disciplinary rates between states would still be troubling.

Economist Mark Perry, of the University of Michigan and a visiting scholar at the American Enterprise Institute, has some strong views about the medical profession.  Not pulling any punches, he likens the medical profession to a cartel (see, for example, this blog entry).  He contrasts the number of law schools versus medical schools over the past 100 years.  The former has grown sharply (much to many people’s dismay!), while the latter has dropped even in the face of predictions of looming physician shortages due to population growth and aging of the population (all those baby boomers hitting 65!).  The number of schools is perhaps not the best measure, but the number of students graduating from medical school each year has not changed substantially over the past 30 years (something some blame on federal policies on residency training funding).  The number of physicians per 1000 residents has been increasing over the past several decades, but this is due in large part due to importing physicians from other countries rather than graduating more in the U.S.  Despite this increase, the U.S. still ranks well below the OECD average for practicing physicians per 1000 population.  We just pay physicians much more than other countries (as reported by the Congressional Research Service and others.  But that’s a topic for another blog.

It has always been difficult for consumers to get information on physician performance.  Sites such as Healthgrades or WebMD have some information on physicians, but to date they have still been largely demographic in nature.  The FSMB allows consumers to get some information on individual physician disciplinary actions, at $9.95 per result.  Some specialty associations are developing quality measures aimed at consumer reporting, as are NCQA and others.  Various health plans have been trying to publish data on physician quality, although not without controversy.  Most recently, Medicare launched its Physician Compare site, as it had done some time ago with Hospital Compare; the launch has its critics (see Michael Millenson’s view).  All of this is good – and none of it is enough.

The medical profession takes great pride in its work, and since the medical school scandals of the early 20^th century has fiercely kept control over medical training and oversight.  In medieval days guilds served the purpose of ensuring that trade secrets and practices in specific areas stayed within the members of those guilds.  Both the legal and the medical professions retain many characteristics of those guilds, including having de facto monopolies for their field of expertise.   Whether that is good or bad can be debated, as could how much of a monopoly either actually enjoys, but as consumers we should be able to expect demonstration of that expertise, not just have to take it on faith.   And we should be able to assume that the profession will do a good job of policing its own members and standards.

As can be inferred from my prior blog entries, I am a big believer in the importance of transparency of information and of consumers’ right to get – and obligation to use – information on the services they may receive and the practitioners from whom they may receive them.  We need our health care professionals focusing on improving the quality of care, which already is neither as high nor as uniform as it should be (see, for example, my previous entry “Gambling on Health Care”).  We shouldn’t also need to wonder if the medical profession is properly ensuring that their brethren are adhering to the adage in the Hippocratic oath -- “first, do no harm.” 

Sad to say, one only has to pick up a newspaper to realize these concerns are very real.  It certainly wasn’t the sole responsibility of local physicians to report or of the state Board of Medicine to put a stop to the recently discovered events at the abortion clinic in Philadelphia – some physicians did try, and the city and Health Departments also didn’t do their parts -- but the local medical community and the Board both evidently had some knowledge of the horrors and must bear some of the blame for not doing more to protect those patients.  Who was watching out for them?

About that title.  It has been more decades than I care to admit since I took Latin, but fortunately Wikipedia helped me find the right quotation.  For those of you similarly not fluent, it means “Who will watch the watchers?”  

Diabetes by the Numbers

by Clive Riddle, January 28, 2011

The CDC this week released significant updated data on diabetes in the United States, incorporated into their National Diabetes Fact Sheet 2011. The CDC has announced that 25.8 million American now have diabetes and another 79 million have prediabetes, up from 23.6 million with diabetes and 57 million with prediabetes in 2008.

Ann Albright, Ph.D, R.D., CDC Director of Division of Diabetes Translation tell us "these distressing numbers show how important it is to prevent type 2 diabetes and to help those who have diabetes manage the disease to prevent serious complications such as kidney failure and blindness. We know that a structured lifestyle program that includes losing weight and increasing physical activity can prevent or delay type 2 diabetes."

Here’s a laundry list of diabetes by the numbers from the CDC Fact Sheet and related documents:

• 8.3% of the U.S. population now has diabetes
• 27% of those with diabetes are currently undiagnosed
• About 215,000 Americans younger than age 20 have diabetes. 
• Percentage of adults with diabetes by age group: age 20-44: 3.7%; age 45-64: 13.7%; age 65+ 26.9%
• An estimated 1.9 million Americans were diagnosed with diabetes in 2010, 24% of them age 20-44; 55% of them age 45-64 and 21% age 65+
• 11.8% of men age 20 and older have diabetes, compared to 10.8% of women
• By race, diabetes rates were 16.1 percent for American Indians/Alaska Natives, 12.6 percent for blacks, 11.8 percent for Hispanics, 8.4 percent for Asian-Americans, and 7.1 percent for non-Hispanic whites.
• Reported rates of gestational diabetes range from 2% to 10% of pregnancies. Immediately after pregnancy, 5% to 10% of women with gestational diabetes are found to have diabetes, usually type 2.
• Women who have had gestational diabetes have a 35% to 60% chance of developing diabetes in the next 10–20 years.
• 58% of adults diagnosed with diabetes receive oral medications only; 12% receive insulin only; 14% receive oral meds and insulin; and 16% receive no medications
• Diabetes accounts for 44% of all new cases of kidney failure
• More than 60% of nontraumatic lower-limb amputations occur in people with diabetes
• About 60% to 70% of people with diabetes have mild to severe forms of nervous system damage. 
• Almost 30% of people with diabetes aged 40 years or older have impaired sensation in the feet
• Diabetes is the seventh leading cause of death in the United States. 
• Diabetes costs $174 billion annually, including $116 billion in direct medical expenses

Citation: Centers for Disease Control and Prevention. National diabetes fact sheet: national estimates and general information on diabetes and prediabetes in the United States, 2011. Atlanta, GA: U.S. Department of Health and Human Services, Centers for Disease Control and Prevention, 2011.

Inviting China and other Emerging Countries to a Medical Technology Innovation State Dinner

by Clive Riddle, January 21, 2011

China and other emerging market economies are breathing down the neck of the United States. Look no further than current headlines such as AP’s China's economic might empowers Hu on return U.S. visit, which included the lavish state dinner Hu was denied in his 2006 visit.

Evidently this applies to Medical Technology Innovation as well. PricewaterhouseCoopers (PwC) has just released their Medical Technology Innovation Scorecard, which assesses nine countries’ capacity and capability for medical technology innovation: Brazil, China, France, Germany, India, Israel, Japan, United Kingdom, and the United States.

According to PwC, the “United States continues to lead the world in its capacity to produce the latest in medical technology innovation, but emerging markets led by China, India and Brazil are catching up, and their market power is shifting innovation resources and activity overseas…While the United States is expected to maintain its leadership for the foreseeable future, even a narrowing of the gap has implications for US jobs, exports and Americans’ access to advances in medical technology.”

Michael Swanick, PwC’s US Pharmaceuticals, Medical Device and Life Sciences industry leader tells us “the medical technology field in the US has long benefited from a confluence of social, technical, political and economic forces that came together to create an ecosystem which fosters medical technology innovation. However, the balance of these forces is beginning to change, driven by global economic dynamics, governmental policies and the actions of individual companies and entrepreneurs. As the innovation ecosystem evolves, it creates challenges for those countries and companies that have ridden this wave – and offers opportunities to those, in the US and around the world, who find themselves well-positioned to adapt to new modes of innovation.”

Some key findings PwC has shared include:

• “On a scale of 1 to 9, with 9 as the highest score, the US currently has a total score of 7.1 and is the global leader in medical technology innovation.  Because of decades of innovation dominance, the US continues to show the greatest capacity for medical technology innovation.”

• “The scores of the other developed nations (the UK, Germany, Japan and France) fall within a tight band of 4.8 to 5.4. Among the developed countries included in this study, Germany and the UK demonstrate the strongest support for innovation and Japan the weakest.”

• “Israel, despite its small size, ranks near the level of the European nations, which indicates its strong capacity to foster innovation.”

• “The emerging markets lag behind developed ones. China, with its powerful economic growth engine, scores 3.4, ranking it higher than India and Brazil, each of which scored 2.7.”

• “Looking to the future, the US is expected to continue to lead in medical technology innovation, but also will lose ground to other countries during the next decade.” 

•  Relative declines are projected “for Japan, Israel, France, the UK and Germany. By contrast, China, India and Brazil are likely to see gains during the coming decade.”

• “China, which has shown the largest improvement in its medical technology innovative capacity during the past five years, is expected to continue to outpace other countries and reach near-parity with the developed nations of Europe by 2020.”

But PwC tells U.S. companies that all is not lost. “The shift away from the US to nations such as China, India and Brazil is not necessarily preordained. Factors related to intellectual property protection, difficulty of doing business in some emerging countries and weak local supplier networks could make these markets less attractive, despite their size, and could hinder these nations’ effort to assume innovation leadership.”

Annual U.S. Total Economic Cost of Overweight and Obesity Pegged at $270 Billion

by Clive Riddle, January 14, 2011

The Society of Actuaries this week an 80 page report on their study findings: Obesity and its Relation to Mortality and Morbidity Costs.

The study quantified the following economic impact:

• Total annual economic cost of overweight and obesity in U.S. - $270 billion
• Total annual economic cost in Canada - $30 billion
• Total annual U.S. economic cost of obesity - $198 billion (73% of U.S. total)
• Total annual U.S. economic cost of overweight - $72 billion (27% of U.S. total)

The study also broke down the total U.S. and Canada annual economic cost ($300 billion) by specific causes:

• Total cost of excess medical care caused by overweight and obesity: $127 billion (42.3%)
• Economic loss of productivity caused by excess mortality: $49 billion (16.3%)
• Economic loss of productivity caused by disability for active workers : $43 billion (14.3%)
• Economic loss of productivity caused by overweight or obesity for totally disabled workers: $72 billion (24%)

For the study, lead researchers and actuaries Don Behan and Sam Cox reviewed nearly 500 research articles on obesity and its relation to mortality and morbidity, focusing primarily on papers published from 1980 through 2009.  Don Behan FSA, FCA, MAAA tells us that "there is substantial evidence that overweight and obesity are becoming world-wide epidemics, and are having negative impacts on health and mortality. As actuaries, we are working with the insurance industry to help incentivize consumers through their health plan design to focus on health and wellness, which will hopefully help curb the weight and health problems we face today."

Overweight is defined as a body mass index (BMI) of 25.0 to 29.9 and obese as a BMI of 30.0+.  (Extremely obese is 40.0+). The study cited the following current percentage of population with applicable BMIs:

	USA	Canada	Combined
Overweight	19.2%	17.4%	19.0%
Obese	7.4%	7.6%	7.4%
Extremely Obese	4.2%	4.7%	4.3%

The study goes on to examine the relationships and impact of Obesity with Cardiovascular Disease, Diabetes, Cancer, Osteoarthritis, Asthma, Renal Disease, In-Hospital Infection, and other conditions; as well as disabilities and excess mortality caused by obesity, all from an actuarial perspective.

The study concludes that “perhaps the most convincing results concern the effect of overweight and obesity on cardiovascular disease and diabetes. Relative to normal weight, the relative risk of death from CVD increases significantly for overweight men and women…About 60 percent of diabetes is directly related to weight gain… Several papers provide empirical evidence that obesity is significantly related to increased risk for certain cancers (Renehan et al., 2008b). The relationship is complex and depends on the site of the cancer. Overweight and obesity are significantly related to a variety of negative effects on the body, such as delayed healing of joint injuries, increased risk of arthritis, impaired function of internal organs, and interference with hormone balances. …..The negative effects play a role in a cycle of overweight, depression and decreasing physical activity, which results in increased use of the health care system…Increasing BMI also is related to development of asthma …Many empirical studies found that obesity significantly increases the risk of death, that is, all-cause mortality … The relationship between BMI and all-cause mortality is often found to be U-shaped or J-shaped, since underweight also is associated with increased mortality. The few studies of insured groups generally agree with population results.”

Saying No to Choice

Kim Bellard, January 6, 2011

I read one of the most astounding articles last week.  It appears that the Ohio Board of Pharmacy doesn’t think much of consumers opting to shop pharmacies.  In rules that went into effective January 1, Ohio consumers will only be permitted to transfer prescriptions once a year, except for transfers within a pharmacy chain using a centralized computer system.

The Board’s rationale is that transfers can result in errors, thus making the new rules a patient safety issue.  They also note that these rules are more consistent with DEA rules on transfers of prescriptions for controlled substances.  Critics of the rule suspect that pharmacists did not like the time and paperwork associated with the transfers, much less the competition brought about by various retailers offering discounts or other incentives for such transfers. 

Consumers can switch pharmacies within the same pharmacy chain or can obtain new prescriptions from their doctors in order to go to a new pharmacy.  Staying within one pharmacy chain may miss the point of the consumer’s desire for a change, while forcing the doctor to write a new prescription simply shifts the burden to the physician, and also makes it more difficult for PBMs and insurers to monitor utilization.  And it’s not just price-conscious consumers who may be impacted; snowbirds, college students, or other individuals who have more than one residence during the year may also be out of luck. 

So much for being consumer-focused.  Rather than focusing on true patient-safety solutions like better ways to electronically enable such transfers, the Board of Pharmacy is just telling consumers “too bad.”  We should keep in mind that pharmacy has long been the envy of the rest of the health care world due to its decades-long ability to get online claims, benefits, and eligibility information.  One would like to think they could solve something like prescription transfers in a more elegant manner.  It strikes me a little like when the mobile phone companies used to tell consumers they’d have to change phone numbers if they switched carriers.  I’m sure there were some record-keeping headaches with transferring phone numbers to a competitor as well, but somehow the phone companies survived once they were forced to allow the transfers.  Telling patients they can’t take their prescriptions elsewhere just seems paternalistic; pharmacists should worry more about why consumers want to take their business elsewhere and then address those reasons.

Can anyone imagine something like this happening in any industry other than health care?  Historically, consumers have consistently rated pharmacists as one of the most trusted type of health care providers, such as in a recent Gallop survey.  It’s hard to see how this action will help pharmacists continue to earn that level of trust.  The Board of Pharmacy comes off more like a Soviet Board of Central Planning, and our health care system once again reveals that it doesn’t quite grasp the concept of consumer-focused. 

Meanwhile, the New York Times reports that drug companies are using coupons and co-payment cards to reduce the effective cost of brand names for consumers (although not to PBMs or insurers).  Consumers have been following the money these past few years, especially since more have copayments or coinsurance that encourage use of less expensive drugs, and the result has been an increase in generic drug use.  No wonder consumers are changing pharmacies.  With the coupons, consumers can get brand names as cheap or cheaper than generic, so from their point-of-view, why not?  It’s not surprising that the drug manufacturers are fighting back to regain market share, nor is it surprising that we have yet another perverse financial incentive for health care consumers. 

One wonders how the Board of Pharmacy will react to the coupons.

Still, perhaps lacking a regulatory option that pharmacists in Ohio had, some health care providers are finding their own way to limit choice.  The past fifteen years have seen waves of consolidation in hospital markets, creating effective or actual monopolies for hospital care in many markets.  According to William Vogt, Ph.D. of the RAND Corporation, 90% of the U.S. lives in “highly concentrated” hospital markets, and that hospital consolidation raises hospital prices.   The Robert Wood Johnson Foundation raised concerns about this back in 2003, noting both the trend and the impact on costs, and the trend hasn’t stopped since then.  It doesn’t even have to be a true monopoly.  Last year the Massachusetts Attorney General found that health insurers paid significantly more to hospitals and physicians with market leverage than can be accounted for by quality of care, severity of illness of patients served, or cost to deliver the care for these institutions.   These “must have” provider systems are able to dictate contractual arrangements with insurers that help assure better financial results for their system, but also help drive up the overall cost of health care and health insurance in those markets. 

Health care reform in 2010 created the specter of even greater consolidation, such as reported by Bloomberg and others.  To have even greater control of the health care delivery system, hospitals are also acquiring physician practices.  As reported by the Wall Street Journal, 55% of practices are now owned by hospitals, up from 30% five years ago.  It doesn’t take too much imagination to envision some markets where, for all intents and purposes, there comes to be only one monolithic health system, including doctors, hospitals, labs, imaging, and other services.  It could make cable service look like a hotbed of competition.

More horizontal and vertical integration may indeed be good in many cases.  Increased clinical integration between providers is going to be necessary to improve care.  The need for increased investments in Health Information Technology (HIT) is likely to be costly and is more affordable for larger organizations.  These reasons certainly provide some solid rationale for more consolidation and integration.   However, the risk is that we’ll get the reduced choice without offsetting improvements in cost-effectiveness and quality.  The goal shouldn’t just be “bigger,” it needs to truly be “better.”

Consumers should have choices in health care, as in anything else.   Reforms in the health care system should encourage competition and consumer choice, and should help make those choices be based on measurably better performance, both clinical and financial.  We should be saying “no” to actions that don’t serve that purpose. 

Five Key Trends for 2011

By Cyndy Nayer, January 3, 2011

Businesses are refocusing their efforts on the health of the workforce as new evidence shows that the right investments in the right context can drive better health and performance.  ACA, and the chaos surrounding it, had quieted down around July of 2010, but with the elections and their aftermath, the noise in the health care reform efforts became a cacophony of confusion.  And, somehow, with the approach of the holidays, the cacophony gave way to a new surround-sound system:  we have to get back to work in America.  So, while the legislators appear to be ready to fight to the knockout, America appears to be tuning out that noise.

It's imperative that the noise is muffled so that business can grow again.  Key trends that are accelerating this return-to-work philosophy can be drilled down to 5:

1.  Benefit design.  The realization is that business depends upon a healthy workforce.  Some businesses can off-shore their work to a less-expensive locale, but most cannot.  Therefore, innovation in benefit design is paramount.  And while there is some tension to leave health insurance benefit altogether, the mood appears to be softening a bit.  It's a profound realization that, with or without the health insurance benefits, business still needs a healthy and productive workforce.  So, un-managed individuals can't deliver on improved health, and insurance exchanges may offer a bit of relief to the healthcost-weary.  But the risk of the underinsured to the business is that safety incidences may rise (people engaged in their health are also engaged in their work); health costs may rise in the market, demanding higher tax revenues; and higher taxes and/or unhealthy people do not purchase products at the same rate as engaged, healthy people do.  So, benefit design, whether in-house, independent, or insurance exchange, will not go away.  And, value-based benefit designs will continue to show the improved health and reduced trends so very much needed at the business budget lines.

2.  Expansion of prevention and wellness.  As the former Chair of the Missouri Governor's Council on Health, I've never seen the rush to prevention and wellness at the speed in which it's now moving forward.  Partly it is attributable to the need to acquire healthier beneficiaries, that's true.  But it's also due to the fact that so much of the disease management efforts have delivered results only "around the edges":  rates of chronic disease continue to climb, every time one person stops smoking, another starts, and obesity is sweeping through our children like measles.  We must create a better waistlines in order to manage our business waste-lines:  obesity drives up rates of chronic disease across all populations and starts at a much younger age.  Innovation is building that will support physical activity, goal-setting and achievement, and personal health success.

3.  Acquisition of new care sources.  A quickly growing trend is the installation of onsite services and the expansion of onsite clinics into business sites in order to manage the total costs of care, reduce the barriers to early intervention, and even to treat the dependents and, sometimes, the community's health.  Using the skills of medical directors in these clinics, the rise of the medical director is reshaping the seat of power inside the business.  No longer is the medical director and his or her staff recognized only as the education director or the point person for flu shots.  Medical directors and their onsite clinics are showing phenomenal results in engagement and accountable care, and this growth will continue.  Telemedicine and medical travel will expand to competent providers with measurable outcomes.

4.  Personal Health Records will become the standard for IT.  As the use of electronic health records grows, there will be some who continue to rely on the physician and his/her office to manage "my" health.  But the real power of the first 3 trends noted here is the opportunity to create competent individuals who manage their health, health cost, and health purchases as wisely as the CEO of a business.  They record goals, strategies, measures, directional approach to targets; they use the medical system as a consult instead of the head of business at "My Health."  "My Health" becomes a tangible asset that the individual can take from employer to employer, from one physician to another.  Without it, and without putting the total information into the individual's repertoire for asset management, the rest of the IT will fail to connect all the points, because the real point of health care must be the improved health of the individual, and that only happens when the individual is engaged in the management.

5.  Outcomes-based contracting(^TM).  I'm a bit biased here, so I want to be especially transparent on this one.  The level of interest in paying for outcomes is growing rapidly.  Transparency and quality forms the comparative platform for choosing which services to buy and from whom.  Creating a contractual arrangement in which all parties share risk (usually defined through a series of desired behavior changes) and share in rewards (savings are distributed across the stakeholders, including the individual) if the best way to insure value accrues to all the participants.  OBC is growing from the focus on pharmaceutical contracting to the outcomes improvement at the health system level, the accountability for care at the clinician level, and the benefit design that most fits my family or yours. For more information on OBC, please check out: http://bit.ly/OBCtmCHVI

These are powerful trends that hold the promise of delivering more value for the money spent in health care.  But they also re-focus the conversation on units of health instead of health care.  Any business knows how to buy units of supplies to create the products they will sell.  Individuals know how to buy units of bananas, weigh them, and pay for only the weight they receive.  Purchasing health care must be the same:  we need to know the cost, agree to the terms and manage the acquisition and use.  We need to get back to business.  The ACA will continue it's march...American business needs to get back to the business of America.

Strategy Makeover for Healthcare in 2011: PwC

by Clive Riddle, December 22, 2010

PricewaterhouseCoopers annually issues prognostication regarding key health care trends for the coming year that are worth taking note of. They’ve just issued a 22 page report in this regard: the Top Health Industry Issues of 2011 which you can download from here.

Here’s the six key trends PwC advises we prepare and position for, in anticipation that “health organizations will undergo a strategy makeover in 2011 as they react to new rules and payment models, continuing cost pressures and new customer demands”:

#1: Booming business in health information technology

#2: Gearing up to redefine health insurance: From MLRs to insurance exchanges

#3: ACOs: Is this the next big thing or not?

#4: Nowhere else to cost shift: Consumers could continue to reduce utilization

#5: M&A: Deals will bond the familiar and unfamiliar as organizations look to fill strategic gaps

#6: Follow-me healthcare: Patients look to health organizations that are always on

Rather than comment on their thoughts, I’ve chosen to provide a summary of each of the above trends verbatim from PwC:

1. Booming business in Health Information Technology (HIT)

The HIT spending boom is driven by (1) federal requirements that hospitals and physicians meet at least stage one requirements for the meaningful use of electronic health records to qualify for federal stimulus funds in 2011; (2) an aggressive timetable for massive upgrades in back-office infrastructure to comply with new medical coding requirements that will add five times the number of diagnosis and inpatient codes and require providers and payers to use the new HIPAA 5010 electronic transaction format, which will require more than 1,300 system modifications by January 2012; (3) final FDA rules that will require online reporting of adverse events related to medical devices, resulting in possible new tracking technology throughout the supply chain.

Stage one "meaningful use" requirements mean hospitals and physicians must be able to provide patients with an electronic copy of their health record upon request. But consumers are not asking. Nearly half of consumers (49%) surveyed still call their doctor's office to request paper medical records. While the policy goal of EHRs is to allow consumers to participate in shared medical decision-making, only 13 percent of consumers have ever been asked for input into what they would like to see in their electronic medical records or how they would like to use them.

2. Gearing up to redefine health insurance: From MLRs to insurance exchanges

The health reform law now requires health plans to spend a minimum of 80 to 85 cents of every premium dollar on medical care and health care quality improvements, depending on the size of the plan. If health plans spend less than the minimum threshold, they must give customers a rebate beginning in 2012. According to PwC, this would require an unprecedented level of actuarial precision for rate-setting, and insurers may opt to pay rebates rather than under price their products in the first year. Many insurers already are contemplating new pricing and rebate scenarios for group plans. At the same time, many employers are contemplating the advantages of employer-sponsored health coverage as health insurance exchanges come online. PwC anticipates a high level of state legislative activity as employers, health plans and states begin to work together in 2011 to define and develop health insurance exchanges.

3. ACOs: Is this the next big thing or not?

Accountable care organizations have created buzz in the industry that this is the next big thing for population health management. But 2011 could be a make-it-or-break-it year for ACOs depending on Congressional action. In anticipation of new performance payment incentives, health organizations are positioning themselves to participate in ACOs and share risks and rewards of keeping people healthier. While ACOs hold great promise for reduced costs and improved quality, the challenge will be keeping people in the ACO and engaging them to stay healthy, which could be the difference between profit and losses. PwC's research found significant demographic and geographic differences in consumers' willingness to seek all their care within ACO-like organizations, indicating the need for consumer segmentation strategies.

4. Nowhere else to cost shift: Consumers could continue to reduce utilization

Higher health insurance premiums, steeper deductibles and larger coinsurance mean consumers are spending more out of their own pockets for healthcare, and 60 percent of consumers surveyed by PwC expect to pay even more in the future. Yet cost shifting may have reached the end of the line as increased price sensitivity has caused consumers to cut back on utilization. PwC forecasts a trickle down effect, starting with physicians and pharmaceutical companies as consumers reduce office visits and drug spending, followed by reduced sales of other medical products, fewer lab tests, imaging scans and other diagnostics. The danger lies in whether short-term cost avoidance could lead to more expensive conditions long term.

5. M&A: Deals will bond the familiar and unfamiliar as organizations look to fill strategic gaps

Mergers and acquisition activity among all the healthcare sectors are expected to continue to trend upward in 2011. Within the pharmaceutical and life sciences sectors, PwC expects deals to focus on strategic mid-market transactions valued between $100 million to $500 million; international growth could yield larger transactions. Increased consolidation is expected among payers, physicians are aligning with hospitals, hospitals are merging with other hospitals and health systems, and recent deals reflect blurring of the lines between the payers and providers sectors. Competition for acquisitions is likely to come from private equity funds investing in healthcare. Though consumers are wary of the benefits of M&A, many seem open to new provider alliances. Seventy-eight percent of consumers said they would prefer to use a retail clinic partnered with a local hospital for primary care services versus only 22 percent who would prefer an independent company owned by a retail pharmacy.

6. Follow-me healthcare: Patients look to health organizations that are always on

The mobile health market is growing exponentially as health organizations use wireless and remote technology to interact with patients anytime, anywhere. To influence patient outcomes, organizations have to engage patients and understand how to connect with them. Healthcare organizations are spending tons of resources to produce online content, yet PwC found that consumers are three and a half times more likely to go to the media and third-party information service companies for information about treatments and conditions than to any other site, especially pharmaceutical company web sites. Only 11 percent of the people PwC surveyed said they would go to a pharmaceutical company for health information. Pharmaceutical companies have typically been removed from the end user of their product, but by understanding online preferences and adopting multi-channel strategies to meet consumers on their terms, pharmaceutical companies see an opportunity to significantly increase their visibility. 

Ten Key Health Care Business Trends for 2011

by Clive Riddle, December 16, 2010

The time has come to start making a list, and checking it twice. What’s on your list of the trends that will shape how your organization proceeds through the new year? Here’s my take on some key trends that will affect the business of health care in 2011:

1. Impact of Health Reform Backlash:
A Republican House, negative public opinions and a Federal judge’s ruling on mandatingcoverage combine to have an influence on health care reform implementation in 2011.No- there isn’t a feasible way to repeal the Affordable Care Act in 2011, as a number ofRepublicans have called for. However, that doesn’t mean that various aspects of healthreform backlash won’t loom large in further development of implementing regulations,ongoing funding provisions, and how stakeholders react.

2. Medicaid Clout
As employment based health coverage shrank during the past decade, Medicaid grew,particularly once the recession kicked in. The Affordable Care Act turbo chargedprojected Medicaid enrollment for the coming years. Given that health care policy can beoften most effectively be dictated through the role as purchaser, Medicaid has increasingclout to impact policy in 2011 and beyond. Furthermore, the increased enrollment hasmade Medicaid the awakening giant for health plans and provider systems to deal with.Major health plans will increasingly look for Medicaid contracting, market expansionsand plan acquisition opportunities. Major providers will dedicate increased resourcestowards Medicaid delivery systems.

3. ACO Initiatives
No one is waiting to see how Medicare ACO pilots set forth under the Affordable CareAct will turn out. 2011 will witness continued rapid deployment of ACO developmentand operational initiatives in the commercial and Medicaid sectors.

4. ACO Naysayers
There will be a growing groundswell of warnings about getting involved with ACOs.Never has there been swooning in the marketplace over a hot new trend without theaccompanying follow-up of naysayers shortly thereafter attributing all the attention tohype, smoke and mirrors. Quite often, it can be for good reason. But by the end of 2011,we won’t know if that’s the case or not for ACOs.

5. Provider Payment Reform
The provider contracting environment will be subject to much greater change andupheaval in 2011. Whether driven by new delivery system initiatives such as ACOs,medical homes, and integration initiatives; general payment restructuring such as byepisode of care; or network restructuring initiatives such as narrow networks, 2011 willwitness significantly heightened activity.

6. Physician Integration
It isn’t just all about potential ACO development. Whether due to EHR/Meaningful Usepressures, economic pressures, perceptions of the future outlook for health care, and ahost of other factors, physicians in private practice will continue to integrate into largermedical groups, and or with health care systems at an increasing rate in 2011.

7. Wellness Incentives
Find some major employers in 2011 that aren’t deploying health risk assessments andfinancial incentives for employees to engage wellness and lifestyle health care issues,and they most likely are developing plans to do so. Those that are already involved willcontinue to roll out additional programs, particularly seeking how to reach into dependentengagement.

8. EHR Critical Mass
Broadband internet connectivity existed for sometime before it reached enough criticalmass for consumers nationwide to routinely start watching You Tube videos of twoyear olds biting their older brothers’ fingers. In 2011, there will be enough medicalgroups, hospitals, health plans and consumer portals to engage and transact a materialsegment of the consumer population with their health care, and the impact of this ongoingtransformation over time will be immense.

9. Survival of Consumer Driven Plans
HSAs and Consumer Driven Plans were written off by pundits as health care reformcoalesced during the past two years. But the plans are survivors, and reports keep comingout documenting moderate, steady growth, that over time, makes them an importantfactor in the health benefits equation.

10. Era of Uncertainty
There’s so much unknown country to drive through: how much will health carereform backlash affect reform implementation? What will be the specifics of variousimplementing regulations? Will the economy pick up steam or not? How are otherstakeholders going to behave in this environment? Often, with major uncertainties afoot,organizations can tend to hunker down for the time being. But with so much at stake,2011 will require driving forward without an up-to-date road-map.

The Insurance Mandate Conundrum

by Clive Riddle, December 9, 2010

Harris Interactive has just released results from a poll, in conjunction with Health Day, taken post-election that measures current public opinion of health care reform  (the survey involved 2,019 adult respondents online between November 19-23.)

In Harris Interactive’s words, “Americans remain deeply divided over the nation's new health-care reform package.” Certainly a plurality (40%) want to repeal all or much of the legislation. But just as polls consistently show that while American’s hate Congress in general, they typically support their own congressman; this poll indicates much of the specifics of health care reform are rated much higher than the package in general.

Humphrey Taylor, chairman of The Harris Poll, tells us "many Americans want to repeal the bill not because they dislike the specifics, but because they feel it is an expensive expansion of an already big government…. Pluralities want to repeal all or most of the law, but want to keep much of what's in it…. it's easy to believe all the bad things about the law if you don't know what's in it."

Expanding on that last point, Sara Collins, vice president for Affordable Health Insurance at The Commonwealth Fund, tells us "I think this suggests that as the public becomes more familiar with the law and how it will benefit them and their families, support will probably climb. There's just a lag while immediate provisions are rolling out like young adult coverage."

But here’s the rub: the public really, really doesn’t like the insurance mandate provision, and time probably won’t improve opinion in that area. So if the a Republican House feels pressure to take some action regarding health reform, given the unlikelihood of pushing through an outright repeal through a Democratic Senate or overcoming the President’s veto, their point of attack would be the insurance mandate.

Yet the mandate is the one provision that helps the more publicly popular provisions, such as guaranteed issue and adult dependent coverage, pencil out a little better (by decreasing adverse selection) for the health plan industry that in many cases lobbied for the Republican party in November. So the party that health plans wished for may cause them to remember the phrase, be careful what you wish for.

Here are some of the poll results by the numbers:

• 40 percent of adults wanting to repeal all or most of the legislation;  31 percent favor keeping all or most of the reforms; 29 percent aren't sure what should be done.
• 57% oppose the insurance mandate and only 19 percent support it
• Two-thirds of respondents like guaranteed issue provision (prohibiting denial of coverage to people with pre-existing medical conditions.)
• 60% want to keep the provision for tax credits so small businesses can afford coverage for employees. 
• 55% like provision allowing children to stay on their parents' insurance plans until they are 26. 
• Just over half of respondents support the idea of new insurance exchanges where people can shop for insurance.
• 81% believe reform will it result in higher taxes, could lead to rationing of health care (74%), and reduce the quality of care they will receive (77%).

Let’s Move to the Atlantic Seaboard or North Dakota: State Specific Premium and Deductible Data

by Clive Riddle, December 3, 2010

The Commonwealth Fund has just released a report with state specific premium and deductible trends for the past seven years: State Trends in Premiums and Deductibles, 2003–2009: How Building on the Affordable Care Act Will Help Stem the Tide of Rising Costs and Eroding Benefits.

The talking points the Commonwealth Fund promotes in conjunction with the report: (Premiums increase 41%! Deductibles increase 80%) are a little disingenuous as those percentages cover a seven year period (which they dutifully note) but the average ready typically relates such percentages into annual terms, and headlining the equivalent average annual increase could have been more meaningful.

The Commonwealth Fund’s theme from their report is, as Commonwealth Fund Senior Vice President Cathy Schoen tells us, “private insurance costs have been increasing faster than working family incomes. For more than a decade, families with job-based insurance have been sacrificing wages to hold on to health insurance. The good news is that the Affordable Care Act reforms provide a foundation to improve coverage and slow health care cost growth in the future."

Regardless of what conclusions you draw from the 32 page report, it contains great state specific data on average health plan single and family premiums and deductibles, further broken down by employer size. They also examine premium as a percent of median household income. The report goes on to project future increases, with and without the impact of the Affordable Care Act, thus indicating projected savings from the Act.

The report notes “by 2009, the average employer-sponsored family premium across all states was $13,027, ranging from $14,000 to $14,700 in the six highest states….to $11,000 to $12,000 in the 11 states with the lowest average private-employer family premium costs…. Average family premiums in the highest-premium-cost states were about 23 percent above those of the lowest-cost states….. By 2009, there were 15 states in which the average annual premium for family coverage equaled 20 percent or more of median household income for the under-65 population, compared with just three states in 2003 ….  In 28 states, family premiums relative to incomes averaged 18 percent or more for middle-income, under-65 households.”

The report found that U.S. average deductibles by firm size were:

Small Firm Single Deductible: $    703 in 2003 / $ 1,283 in 2009
Large Firm Single Deductible: $    452 in 2003 / $    822 in 2009
Small Firm Family Deducible: $ 1,575 in 2003 / $ 2,662 in 2009
Large Firm Family Deductible: $   969 in 2003 / $ 1,610 in 2009

Here’s some interesting state-specific data from the report. From an affordability standpoint (premiums as a percent of income) the Atlantic seaboard or North Dakota may be your best bet.

Five Highest Family Premium States

(2009 Data: US Annual Average $13,027)
Massachusetts: $14,723
Wisconsin: $14,656
Vermont: $14,558
Wyoming: $14,319
District of Columbia: $14,222

Five Lowest Family Premium States

(2009 Data: US Annual Average $13,027)
Arkansas: $10,969
Montana: $11,365
Oklahoma: $11,417
North Dakota: $11,590
South Dakota: $11,596

Five Highest States: Avg Premiums as % of Median Household Incomes

(2009 Data: US Annual Average 18.7%)
Mississippi: 24.6%
Texas: 21.9%
Louisiana: 21.6%
New Mexico: 21.5%
North Carolina: 21.2%

Five Lowest States: Avg Premiums as % of Median Household Incomes

(2009 Data: US Annual Average 18.7%)
Connecticut: 14.6%
New Jersey: 14.7%
Maryland: 15.0%
Virginia: 15.0%
North Dakota: 15.5%

Gambling on Health Care

by Kim Bellard, November 23, 2010

I heard a speech by Tom Daschle recently, and something he said really struck me: to paraphrase, he pointed out that we can get more performance statistics on virtually every athlete than we can on any physician.  He’s not entirely right, but he’s close enough for this statement to hit home.

My tablemate at the speech suggested to me that fantasy leagues in health care might help solve this problem, which I think is a great idea, but perhaps what we really need to motivate getting more information on health care providers would be to introduce gambling into the health care system.  Oh, wait, cynics might argue that we already have gambling; we call it health insurance, and the bookies are actuaries. 

I’d argue that we have a different and more insidious form of gambling: simply getting care.

The HHS Inspector General recently released a report indicating that 13.5% -- that’s one in seven -- of hospitalized Medicare beneficiaries suffered an adverse event that caused a lasting impact or even death during the month reviewed; some 134,000 patients just in one month.  Worse than that, 15,000 of those patients ended up dying due to their adverse event; just in one month, just for Medicare patients.  An additional 13.5% of the hospitalized beneficiaries suffered events that caused temporary harm.  The researchers determined that 44% of the various events were preventable, and that the adverse events cost Medicare some $4.4 billion annually.  I say again: these deaths, and those costs, are only for Medicare patients. 

Sad to say, but these statistics no longer come as a surprise.  It’s been over ten years since the Institute of Medicine produced their estimates that as many as 98,000 deaths annually are due to medical errors.  The IOM also estimated that medication errors injure 1.5 million people annually.  Various other studies, including Zhan and Miller (2003), come up with similar sorts of numbers for hospital deaths.  I previously blogged about a study reporting on adverse surgical events that should scare anyone facing surgery.  One could conclude that going into a hospital is a crap shoot as to if you’ll be walking out with both legs intact, or walking out at all.

And it’s worse than that.  A study by a study by McGlynn, et. al., indicated it’s also essentially a coin flip as to whether you’ll get the recommended care when going to the doctor’s office.  Similarly, a study by the Urban Institute cautioned that “…patients may be at greater risk of safety problems in the United States than they are elsewhere,” citing issues with surgical and medical errors, issues with safe medication practices, receiving delayed or incorrect test results as examples. 

Given all these problems, one could naively conclude that it is no wonder that medical malpractice costs are high; reimbursing patients harmed by all this problematic care would be expensive.  That would be naïve indeed.  It appears that our malpractice system doesn’t make either patients or health care providers very happy.  Studies suggest that only a very small number of patients suffering actual medical errors even filed claims (see Localio, et. al.), and that as much as 54% of every dollar spent on compensation go to administrative expenses, such as lawyers’ fees and court costs (Studdert, et. al.).  Then there is the shibboleth of defensive medicine, which everyone agrees exists but which is hard to quantify.  Mello, et. al. bravely estimates that defensive medicine accounts for about $46 billion of the estimated $55 billion spent on medical liability, while Jackson Healthcare concluded that the order of magnitude was between $650 billion and $850 billion.  Whatever the number is, we can all agree it is big.  Defensive medicine as a way to reduce malpractice risk is like trying to hit a piñata; not really sure where the target is or what will happen if you do hit it. 

Which leads me back to statistics.  Our current liability system is based on fear and blame.  Documenting and reporting on errors can indeed seem foolhardy in a system that seeks to find deep pockets, not to fix problems or improve care.  It’s no wonder better data doesn’t exist and available data is hard to find.  Reform efforts based around capping liability payments miss the point almost entirely.  We need an entirely different mindset.

We have to start with the data: what happened, what went right, and what went wrong.  We should be looking for patterns, trends, and opportunities – not for culprits. 

We have to recognize that not everything that goes wrong is malpractice.  The notion that we will ever have an error-free health care system is folly, but at least we can get a clearer idea of who is making which errors how often.  Errors need to be tracked, and used to identify processes that can be improved.  Only with that kind of data can true quality improvement efforts happen.

Just as there will always be errors, there will also always be some unexpected medical outcomes.  Those are unfortunate, but they may not be due to any errors and may not be anyone’s fault.  They should be treated and fixed, without recourse to litigation or blame.  However, expecting patients or their insurance to pay for this follow-up care can unduly reward providers in a fee-for-service system, and payment reform should address.

There will still be a small number of situations where a health care provider is practicing in a manner that is not consistent with available medical evidence or best practices, is treating patients while impaired, or otherwise not acting in the patient’s best interests.  These are the situations where liability comes into play, but one would hope in a more transparent environment there would be fewer opportunities for harm to occur.  In theory, the medical profession self-polices itself, disciplining wayward members, but it is hard to imagine how this could ever happen under the current system of haphazard and incomplete reporting. 

Collecting the necessary data, and making it public, should go a long way to ensuring that patients are getting the right kinds of care from the appropriately qualified providers.  If we’re going to gamble with our lives and our well-being, I want to know the odds and I want to make sure I’m getting care from someone who would be on my health care fantasy team.