Tuesday, August 19, 2014
Today’s Managing Health Care Costs
Number is $8.2 billion
A trio of articles over the last few days show the devastating role that providers can play in promoting waste and fraud in medical care.
The New York Times reported on Friday on medical compounding – where pharmacists are often blending a half dozen medicines (many or all generics) into a cream or ointment – and successfully charging insurance companies thousands of dollars a tube. These medicines have never been formally tested together, and it’s not even clear the individual ingredients are effective when applied topically. The drugs have no standard NDC number, so insurance companies have paid ridiculous fees for them.
Pharmacists couldn’t do this on their own; doctors write the prescriptions. Is there a doctor who really thinks it’s OK to give people a $4200 ointment for muscle pain instead of a nickel dose of ibuprofen or naproxen?
Steroids made for injections by the New England Compounding killed over 60 in 2012. The creams and ointments in this article are far less deadly - although there was a death of a five month old boy in Los Angeles who had bounced on his mom’s medicated knee. Pharmacy benefit managers are stopping payment for these compounded medicines. They well should.
The Washington Post reported this weekend on the scooter scam – where criminals steal Medicare numbers, bundle vulnerable elderly into vans to have fraudulent medical exams that certify they need an electric wheelchair, and bill Medicare $5000 for the scooter – which usually remains in shinkwrap in their garage, and sometimes isn’t even delivered. Those fraudulent medical exams – given by physicians – were sometimes even given in second floor walk up offices.
Authorities said the doctor at this clinic was in on the scam, too. He was paid to find the same problems, every time. The patient was too weak to use a cane. Or a walker. Or even a non-motorized wheelchair. Only a motorized wheelchair would do. Instead of making lame men walk, the doctor’s job was to make walking men lame — at least on paper.
Finally, Austin Frakt reports in The Incidental Economist that in response to risk adjusted payment for Medicare Advantage plans, reporting of high risk DRG diagnosis codes went up substantially. This is because physicians in these plans coded diagnoses far more aggressively than physicians. Coding that a patient has diabetes with kidney disease can sextuple Medicare budgets. Here’s a link to a health plan “how to” guide. Health plans have even sent providers to patient homes to capture diagnoses to increase Medicare payment. It’s hard for those in Medicare Advantage plans not to encourage aggressive coding; if they do this less than competitors, their payment rates will decrease since all risk adjustment is net “cost neutral” to Medicare.
The American College of Physicians caught substantial flak for urging physicians to "practice effective and efficient health care and to use health care resources responsibly." This exhortation is more necessary than ever!
Thursday, August 14, 2014
Today’s Managing Health Care Costs
Today’s New England Journal has an article reminding us that narrow networks can be very effective in lowering costs, and regulations forcing wider access might be great for choice, but terrible for affordability. A McKinsey report says that 40% of exchange plans have narrow or ultranarrow networks (less than either 70% of 40% of area hospitals. Provider sponsored networks are likely to be the narrowest of all.
US health care costs are the highest around largely because of price (and not utilization) – and there are a limited number of ways to control provider prices
· Most developed countries have national fee schedules – which keep prices under control. They can have other insidious effects including increased volume, limited access, and decreased innovation. Price controls can even prompt the “red envelope,” required under-the-table payments to obtain care.
· Exposing patients to price differences, which could involve reference-based pricing, can also help control costs. However, the costs of some services are so high that they far exceed out –of-pocket maximums. Further, few people have the opportunity to direct their emergency ambulance to their “preferred” hospital.
· The “market” can help keep prices down – but that requires full information and real competition. Most provider markets are highly concentrated, and Medicare is such a large payer for hospitals that even large health plans have inadequate negotiating leverage when bargaining for prices with “must have” hospitals.. An exception is states with dominant health plans, that have been better able to control unit prices – although there are bad side effects of this as well.
Narrow networks work because they diminish hospital leverage – counteracting a dynamic where health plans cannot possibly exclude a hospital, so have to pay whatever it demands. Provider organizations that sponsor health insurance plans can afford to offer lower prices to the extent that they increase market penetration, since hospitals have high fixed costs, and thus increase margin even with low prices as long as they can increase volume.
The NEJM commentator notes that narrow networks can also be a mechanism to select a healthier population. That’s why premium risk adjustment is critical – so that health plans that recruit sicker patients have higher effective premiums.
The feds should be sure that narrow network plans include the full range of services patients need. This can include tertiary and quaternary services like transplants which are only available in high priced academic medical centers. But health plans should be able to offer these services on an “as needed” basis, instead of being forced to include expensive providers for all services.
Tuesday, August 12, 2014
Today’s Managing Health Care Costs
Number is 9%
Number is 9%
Some of the most heartening stories in health care are related to smoking cessation – and the effective campaign to make smoking “uncool” for teens. The New York Times reported yesterday that the American Legacy Foundation, a nonprofit initially funded from tobacco settlements, is starting a new ad campaign .
“In 2000, 23 percent of teens smoked,” it reads. “Today, only 9 percent of teens smoke. That’s less than the number of VHS tapes sold in 2013. It’s less than the number of landlines still in use. But the fight isn’t over.”
American Legacy’s previous campaign, which included young adults dumping body bags in front of the headquarters of Philip Morris, is estimated to have prevented 450,000 deaths.
Nine percent is an impressive number – this means that only half as many teenagers now smoke as Americans over 18! That’s great news for public health, but terrible news for states that have sold complicated financial instruments to get front-loaded payment on the estimated $266 billion in tobacco settlement dollars through 2025. Propublica reports in Sunday’s Washington Post that states (and DC and Puerto Rico) have agreed to future liabilities of as much as 76 times the initial payout in exchange for access to instant cash.
The financial error made by states is bipartisan. Refinancing tobacco bonds helped Chris Christie pump $92 million into a single year’s budget. This was part of a rescue of an earlier deal – and NJ has given up $406 million of remaining tobacco proceeds beginning in 2017. In Ohio, then-Treasurer Richard Cordray (now the head of the Consumer Financial Protection Agency in the Obama Administration) got a one-time payment of $319 million in 2007, and the state will owe a $6.6 billion balloon payment. Bankers made hundreds of millions in fees. Bear Stearns had 21-person “Tobacco Securitization Group”. All of these billions of tobacco bonds are now toxic debt –and these dollars are not available to help prevent future smoking deaths.
One bright spot in the Propublica report is that analysts had predicted cigarette sales would have declined at a rate of over 1.5% a year, but the actual yearly drop is 3-3.5%. That’s great news for public health and future medical expense, even if it’s terrible news for states that tried to cash in early and agreed to large future payments that will now come out of general funds instead of the tobacco settlement.
Monday, August 11, 2014
Today’s Managing Health Care Costs Number is 42
Last Thursday’s New England Journal of Medicine had another article casting doubt on the effectiveness of hospital pay for performance programs.
The United Kingdom’s National Health Service model its program after the CMS-Premier Hospital demonstration project in the US. This showed some initial quality improvement, but the benefit evaporated with later evaluations, and there was ultimately no mortality benefit.
The UK program was initiated in Northwest England, allowing for a comparison of hospital mortality there compared to the rest of the country. The program began in 2008, and there was an improvement in mortality at the 18 month mark. However, 24 months later this effect disappeared. (42 months total)
Between the short-term and long-term periods, the risk-adjusted mortality for conditions linked to incentives fell by 1.6 percentage points in the northwest region of England and by 2.3 percentage points in the rest of England.
In fact, the hospitals in the P4P program showed more improvement in mortality for conditions not covered by the program.
The researchers have done very well to compare the intervention group with a reasonable control. The mortality decreased pretty substantially in the intervention hospitals - we need the context of what was happening elsewhere to know that this decrease did not likely represent a real success.
Why don’t these programs lead to lower mortality?
They could improve processes that are not tied to mortality – and patients could have received other benefits (lower morbidity or simply better service) even while their mortality rates didn’t decline. It’s possible that the incentive wasn’t large enough, or wasn’t communicated or transmitted effectively to the clinical team that was most likely to have an impact on mortality. Of course, it’s also always easy to argue that the risk adjustment was flawed.
Extrinsic incentives like bonuses are most effective at encouraging simple transactional behavior. Lowering hospital mortality is especially complex, and requires multiple parties to change their behavior simultaneously. It’s likely we’ll need highly motivated clinicians and public transparency and accountability to lower hospital mortality – mere financial incentives alone don’t do the trick.
Thursday, August 7, 2014
Today’s Managing Health Care Costs
Number is $55.7 billion
Austin Frakt wrote in the New York Times Upshot yesterday that long-term medical and social treatment for those with opioid dependency would actually save money for society. He notes that drug abuse costs society $55.7 billion in health care, productivity and criminal justice expenses. New England alone could save $1.3 billion by increasing drug treatment by 25%.
If maintenance therapy is such a good deal, why don’t we more readily provide it? One answer is that, though treatment works, its benefits are diffuse. A great deal of the cost of treatment would be borne by insurers and public health programs. But a great deal of the savings would be captured by society at large (through a reduction in crime, for example).
On the topic of the relationship between social spending and health care costs, I reviewed “The American Heath Care Paradox: Why Spending More is Getting Us Less” this winter. The book attributes high health care costs in the United States to a lack of adequate government spending on social services.
Arnold Relman died last month, and his posthumous review of this book appears in the New York Review of Books . Relman was a giant of medical policy – late in his career a tireless advocate for single payer health care, and the first author to use the term “medical industrial complex” in the New England Journal, which he edited from 1977-1991.
Relman is tougher on “Paradox” than I was. He notes that there are many countries with lower total health plus social spending than ours which have well-regarded health systems, including New Zealand, Canada, and Australia.
The greatest opportunities for reducing unnecessary costs and improving the quality of the American health system are to be found in reforming the payment and organization of medical care rather than in expanding social welfare programs. Although these programs are of enormous importance for many reasons not only related to health, and well worth expanding, they cannot substitute for improving the effectiveness and efficiency of medical care for the sick and injured. That is where we are likely to see the most hopeful future developments.
I think the answer is "both." Effective social spending to promote public health can lead to better health -and lower costs by preventing entry into the medical system. Cleaner air has kept asthmatics at home and school, and bike paths, public transit and pedestrian walkways help combat obesity. But Relman is right that lowering the cost of medical care will require changes in our medical industrial complex - not merely higher social spending.
Tuesday, August 5, 2014
Today’s Managing Health Care Number is 161,500
|Source Note that pre-DAA is before direct acting anti-virals, and base case is with screening and use of pre-Sovaldi medications. A disease is considered rare when there are fewer than 1 in 1500 residents.|
The Annals of Internal Medicine has a computer simulation which suggests the impact of Sovaldi and other effective antivirals on Hepatitis C in the population; it also demonstrates that even without these medicines Hepatitis C was going to become a rare disease. Hepatitis C prevalence decreased from 3.2 million to 2.1 million from 2001-2013 even though there was no effective therapy during much of that time because there were more deaths than new infections. Just under ¾ of those infected died of a cause other than Hepatitis C.
Screening and treatment of Hepatitis C will prevent 161,500 deaths from liver disease compared to the screening and treatment of Hepatitis C in the pre-Sovaldi era. This will also prevent 13,900 liver transplantations (or just under 400 a year). If you’re counting, and we spend $11 billion on Sovaldi, that is a cost of $28 million per prevented liver transplant ($11b/(13,900/36 (years)). Of course, preventing liver transplants is just one of the benefits of an effective treatment for Hepatitis C.
Sovaldi represents huge progress – and great news for those infected with Hepatitis C. It will not, however, save money within the health care system. Ever. But the health care system wasn’t designed to save money – it seeks to improve quality and quantity of life. Sovaldi also represents great news for those who might have otherwise become infected if those currently infected were not cured.
The pipeline competitor drugs look quite effective. Here’s hoping that the price comes down.
Friday, August 1, 2014
Today’s Managing Health Care Costs Indicator is
(Reprint of an post from last summer)
This weekend my wife and I will ride the Pan Mass Challenge, a 192-mile, 2-day bike ride from central Massachusetts to Provincetown. It’s at once heart-wrenching and heartwarming to hear stories about the impact of cancer on the lives of so many -- patients and their friends and loved ones. This athletic fund-raiser is in its 35th year, and is targeted to raise $40million this year for cancer research at Dana Farber Cancer Institute. This will be my seventeenth year riding.
Cancer research has given life, years, and hope to many over the last decades. Chronic Myelogenous Leukemia has gone from being an 18 month death sentence to being a chronic disease. Substantial decreases in death rates from breast cancer are largely attributed to better chemotherapy and hormonal therapy – as opposed to better mammography rates. Glioblastomas are still largely incurable – but there are now medications that prolong good quality life. Same goes for metastatic melanoma. There are a handful of other therapies that are remarkably effective for genetic subgroups of patients with lung cancer. And this is just a partial list.
But should we raise money for cancer research through athletic fundraisers? Shouldn’t this be paid for through the National Institutes of Health, and through research and development funds from the pharmaceutical companies that routinely charge over $10,000 a month for novel cancer treatments?
The National Institutes for Health is starved for funds due to the sequester – and there is substantial danger that we could lose a generation of researchers due to lack of funding. The pharmas have been hit hard by loss of patent protection from blockbusters. They still invest a lot in cancer research – but they focus on drugs close to approval, and those which have a large market (either many eligible patients, chronic use, or high allowable price per patient). There is a big gap – we can make greater progress with more research dollars.
There are some problems with athletic fundraisers
· Many have very high rates of administrative cost – so the total yield for cancer research is a tiny fraction of what donors pledge. (The PMC raises money from riders and corporate sponsors to fund the costs of the event itself, so 100% of donations go to cancer research; this is unusual)
· Athletic fundraisers can drive funding toward a few high profile diseases which have captured public attention, leaving important but less attractive diseases without the funding that could make even more of a difference. Government funding for cancer research is similarly skewed, though, and we haven’t figured out a way to distribute research dollars purely on the basis of likely value of the research outcomes.
· Donor fatigue is real. My friends and family members donating to this ride might not support a soup kitchen or an environmental trust fund.
Athletic fundraisers have an additional important benefit – they personalize diseases that otherwise seem like merely grim statistics. The face of a 7 year old who died of neuroblastoma stares out at me from the back of his father’s cycling jersey–and reminds me that finding better treatments for cancer is more than a health policy exercise. These type of fundraisers also remind us that there is a huge community of those facing cancer, and can help diminish the sense of loneliness for patients and families facing a devastating diagnosis and horrifying treatment. They also help keep at least a few of us in shape, and remind us how lucky we are to be healthy enough to participate.
What do athletic fundraisers for cancer research do to the cost of health care? They contribute to an increase in health care costs through increased innovation and novel therapies – which increases value as well as cost. They also could contribute to an increase in health care costs through making more patients available of treatment options. Again, this would hopefully improve value as well. We haven’t found a good way to push forward advances in health care without profit motives for providers and pharmaceutical companies – so research funded by industry will continue to focus on accretive innovation which raises costs, as opposed to disruptive innovation that could actually lower total costs. I hope that research funded by government or charity can focus more on total value, as opposed to merely potential profit margins, although this is a hope absent empirical supporting data.
By the way - if you're not fatigued, feel free to sponsor me, and support research into treatment for neuroendocrine tumors (such as carcinoid)