Friday, October 24, 2014

Kickback Friday


Today’s Managing Health Care Costs

Number is $389 million


Today’s Wall Street Journal has another episode in their continuing series on self-dealing urologists.  In this instalment,  21st Century Oncology, a radiation therapy provider that includes 95 urologists, is responsible for ordering 1/5 of all the FISH (fluorescent in situ hybridization) bladder cancer screenings tests in the country.  By the way, that’s 1% of the urologists ordering 21% of the tests.  The two 21st century urologists collected over $4 million for this test in 2012 – all the other urologists in the country combined collected under $20 million. 

For the urologists, who were paid more by 21st Century based on lab volume, this was a double win.  FISH is not proven to better at detecting bladder cancer than older tests that cost 1/10 as much – but it has a higher false positive rate.  This higher false positive rate means more (unnecessary) cystoscopies to do biopsies to confirm that the patient does not have bladder cancer.   Double win!

It wouldn’t be kickback Friday without another story.   Davita settled a dialysis center kickback case for $389 million Iwithout admitting guilt).  The allegation here is that the company set up illegal joint ventures to provide payment to nephrologists for exclusively referring to their centers.

The common thread here is that Medicare pays way too much for some services. When the margin for a service is ridiculously high- it’s pretty much natural for providers (and others) to seek to deliver more of the service.   Here’s the pathologist wil billed $5 million to Medicare for the bladder cancer test (who should have known better than to talk to the WSJ):


“If you’re going to be the beneficiary of testing that you order, and you’re going to order a test for $50 and get an answer…or maybe somewhat justify ably order a similar test for $1,000,” he says, “it might be reasonable to think that some individuals would be swayed by the test that is more highly compensated.”

Maybe the answer is to lower the price of these overused tests.  Medicare cut the price of the FISH test from $100 to $430 in 2012 – but this apparently still left too much margin.  

The WSJ’s lawsuit to force Medicare to divulge recipients of payments makes it much easier to report on patterns that suggest overbilling or even frank fraud.  That could diminish the number of kickback Fridays in the future.

Wednesday, October 22, 2014

Castlight publishes data on how its transparency tool saves money


Today’s Managing Health Care Costs

Number is $124.74

 
Source
Note that savings are for those who searched within 14 days of service; savings were smaller for those who searched earlier


Castlight published data in todays JAMA on cost per unit for those who used its search tool, compared to those insured by the same employers who did not use its search tool.    The results show pretty substantial savings in advanced imaging, modest savings for laboratory tests, and miniscule savings for physician office visits.  The savings in advanced imaging and laboratory tests are statistically significant; the savings in office visits are not.

Castlight has published its data in a peer reviewed journal, and taken pains to identify potential sources of bias. The database is robust – 500,000 patients, about 3 million lab tests, 120,000 imaging services, and 2.6 million office visits.  They were beneficiaries of 18 employer sponsored health plans, some of which were high deductible and some of which weren’t.  The actual number of beneficiaries is probably higher – since the “searchers” and “nonsearchers” equal about the number of stated eligibles – and it’s likely that not every single eligible beneficiary needed one of these three services.

Searchers were more likely to be women, and came from zip codes with significantly lower income.  Searchers and nonsearchers had similar cost sharing.  Counterinutuitively searchers with plans without cost sharing  saved more than searchers who had plans with more cost sharing.  A much higher percentage of office visits were associated with searching, even though the office visit savings were tiny.  Those who used the search tool had similar previous utilization – which might mean that they were not better “primed” to shop based on past experience. There’s no indication of how the total cost savings compares to the total cost to implement Castlight’s solution – but prices are proprietary so we wouldn’t expect that.

Here’s my scorecard from this report. Note that the authors did not include enough data to assess savings from these procedures over a defined population - they had data for up to three years, and we don't know the total number of eligible members.   The total savings by my calculations look modest. These could be higher if one included additional services, or if a better communications program led to higher use of the Castlight tool.



Transparency of prices is good.  It’s most effective for elective procedures that are commodities like imaging tests which feature high prices and robust competition within a market.   Castlight and other tools will be even better when they incorporate meaningful patient experience and quality measures.  Castlight now has the data to show the return on investment from its intervention.

H/T to Jason Millliman of Wonkblog who published an assessment of this article yesterday.

Tuesday, October 21, 2014

Specialty Cancer Drugs – The Problem is Worse Than It Looks


Today’s Managing Health Care Costs

Number is 25%

This chart shows that inpatient care represents the largest portion of total cost of those with advanced cancer, and also has the largest amount of variation .  Source 
This month’s Health Affairs has a series of excellent articles on the costs of specialty drugs. Specialty drugs, those aimed at a very narrow portion of the population, often designed based on genetic testing and often biopharmaceuticals, represented 25% of all drug costs in 2013 and are expected to quadruple by 2020.  

An article on variation in the cost of cancer care (Brooks) suggested that the cause was much more likely to be inpatient care rather than high costs of specialty medications. 

Acute hospital care was the largest component of spending and the chief driver of regional spending variation, accounting for 48 percent of spending and 67 percent of variation. In contrast, chemotherapy accounted for 16 percent of spending and 10 percent of variation.

On the other hand, another article (Conti) notes the high cost of recently approved oral cancer medications:

Our results suggest that spending levels and trends are driven by the use of new brand-name oral oncologics. Many of these drugs represent significant therapeutic advances over the standard of care for the treatment of specific cancers.


How can we square these two articles?

The Brooks article is focused on those diagnosed over 65 with just four cancers (lung, prostate, breast, colorectal, and pancreatic) which were incurable when diagnosed (metastatic and generally Stage IV).   This isn’t necessarily applicable to those under 65, or those with other cancers.   New specialty drugs for hematologic malignancies (leukemia and lymphoma) are excluded.  

Ironically, chemotherapy administered in the hospital was not distinguishable from other inpatient costs; hence some of the variation in hospital cost was likely due to specialty drugs, too.  Even more oncology specialty drugs have become available since the conclusion of the study period.  The authors also only focused on variation --- so that if a new expensive oncologic agent was almost universally used, the increased cost would be real, but not measurable through variation.

Both hospital care and specialty medications are driving costs and cost increases in cancer treatment among the elderly.   We ignore the impact of specialty drugs at our own financial peril.  



Friday, October 17, 2014

Corn Rows, White Teeth, Manicures, Taxis and Telemedicine



Today’s Managing Health Care Costs

Number is $6 billion


A young man wants whiter teeth in North Carolina.  A young woman wants cornrows in Utah.   I want a cab to the airport from Manhattan in the late afternoon.  Executives want to get manicures without leaving the office. A woman has pain when she urinates in Idaho.

What do these all have in common?

State regulatory boards have historically restricted competition – and left important consumer needs unmet.   These regulatory boards, often populated by those who are regulated, promulgate rules that make it difficult for upstarts to compete with entrenched interests.

The Supreme Court just heard oral arguments in North Carolina State Board of Dental Examiners v. Federal Trade Commission ; the North Carolina dental board keeps on trying to shut down tooth whitening kiosks. It says it’s protecting public health – but it’s really protecting high margin business for dentists.  Why shouldn’t people get their teeth whitened at a kiosk in the mall?   

Planet Money (#381) covered the Utah Cosmetology Board’s decision to prohibit Jestina Clayton from doing hair braiding at her house in 2012, and just re-aired the episode this week.   The Board would have had her take a 1 year $16,000 training course before it would grant her a license.  (She later won a court suit, and Utah changed the law).

Municipalities across the country and around the world have tried to erect regulatory barriers to prevent Uber from offering car sharing services – arguing that the smartphone-summoned taxis, limos and private cars should be regulated by the Taxi and Limousine Commission.  But before Uber it took over ½ hour to find a taxi to LaGuardia at 5pm.  With Uber it takes under 15 minutes, costs less, and I can track every element of my ride.  In San Francisco, taxi rides are down 65% - but I’m sure total use of car services has increased dramatically.

Manicube offers office manicures – and I can’t tell you how popular they are.  Massachusetts just sent them a cease and desist letter – they use licensed manicurists, but don’t have inspectors visit each site.  The Massachusetts Board of Cosmetology sent notice to Manicube that it couldn’t offer manicures at offices.   The company only has licensed manicurists – but that’s not good enough. You can imagine how much owners of manicure shops support these regulations.

Which brings me to telemedicine.  No one would argue that physicians, nurse practitioners, and physician assistants should be licensed and regulated.  But Idaho argues that even physicians with a valid Idaho license cannot prescribe medicines unless they physically examine the patient.   As a result, residents of Idaho have no access to telemedicine services.

And why shouldn’t a doctor who is licensed in California and has proper insurance be allowed to practice telemedicine in other states?   Companies offering telemedicine services could prevent emergency department visits and diminish access problems in primary care offices by addressing acute self-limited issues.  There are concerns that they overprescribe antibiotics (the same concern applies to emergency departments and urgent care centers and PCP offices) – but this data can be readily tracked, and at the very least, telemedicine providers can’t order unnecessary tests!

Towers Watson estimated that telemedicine services could save employers $6 billion a year.


It looks like the Supreme Court will side with the tooth whitening kiosks and against the self-interested North Carolina Board of Dental Examiners.   Uber is winning the battle for customers,  and Jestina Clayton is back in business braiding hair. Manicube was in my office yesterday.  I’m hopeful this will show the way to lowering the barrier to cross-state medical practice and telemedicine in the coming years.

Tuesday, October 14, 2014

Reference Pricing: Simulation Shows Limited Potential Savings


Today’s Managing Health Care Cost

Number is 5.4%



The National Institute for Health Care Reform reported on a simulation on reference pricing  - leading.  The finding is similar to a post here in 2013

The authors point out that not all medical services are “shoppable,” and even for those services that could be sKaiser Health News to the headline “Study Finds Savings Low For Employers Capping Their Payments For Treatments.” Reference pricing is where the insurer (or employer) sets a “reference price” and provides full coverage for services at providers which agree to this price, while patients foot the bill for any excess amount billed ubject to reference pricing there are not always providers likely to compete in a given local marketplace.   Their 5.4% is likely to represent the high end of potential savings from reference pricing, because

·         Many services are simply too small to be worth the transaction cost of asking people to shop.   Laboratory tests cost a lot in aggregate, but each blood count should cost under $20 – making shopping not feasible
·         Most medical services are delivered locally – and many local markets are not big enough to sustain more than one or two providers in a service line. OIigopolies don’t lower their prices easily
·         The authors estimated patients changing providers at the upper end of the CalPERS experience.   CalPERS and the insurer did an enormous amount of patient education around the two procedures covered by its reference pricing approach.  It’s not clear that the same effort could be mounted if reference based pricing extended to a third of all services.

From the white paper:

One question is whether a reference pricing program can steer patients to lower-price, adequate-quality providers. The answer, based on the CalPERS experi­ence, appears to be yes. But, that may not be the right question. A better question may be why private health plans would ever pay negotiated prices over $30,000  for inpatient knee and hip replacements. The CalPERS reference pricing pro­gram seemingly took a hard line against hospitals charging unreasonably high prices—$30,000 or more—for knee and hip replacements. But, is $30,000 really a reasonable price for an inpatient knee or hip replacement? To put that amount in perspective, the Medicare program on average paid $14,324 for inpatient knee and hip replacements in 2011.

The answer is straightforward – the commercial health insurance plans don’t have the leverage that the Medicare program enjoys.  Medicare takes care of the old and the very sick – who represent a large portion of those who require medical services (especially joint replacements).  Medicare can dictate prices –and any physician or hospital can either accept those prices, or eschew seeing Medicare beneficiaries. That’s not a viable option for most providers. It’s hard to run a big hospital without Medicare beneficiaries!  Commercial health plans lack such leverage – that’s why they pay such high prices.

Reference pricing can help pressure providers to lower their prices – but that’s only true for a small number of procedures or services, where there is genuine competition.

Monday, October 13, 2014

Jean Tirole wins Nobel Prize. He has no connections to health care. Yet.


Today’s Managing Health Costs

Number is Two


Jean Tirole, a French economist (who has roots at MIT), won the Nobel Prize in Economics this morning.    He’s spent his career studying “difficult to regulate” markets, especially utilities such as telecommunications, water, postal services, and highways.  He has used game theory and contract theory – and has concluded that the optimal regulation for any given market depends on the characteristics of that particular market.


…Many markets are dominated by a few firms that all influence prices, volumes and quality. Traditional economic theory does not deal with this case, known as an oligopoly, instead it presupposes a single monopoly or what is known as perfect competition. The … regulatory authority lacks information about the firms’ costs and the quality of the goods and services they deliver. This lack of knowledge often provides regulated firms with a natural advantage.

Sounds a lot like health care, doesn’t it? 

Tirole has not addressed health care directly I can quickly find (there are two articles in pubmed for instance.  One is a theoretical article on individual and collective moral behaviour (2011; Link Harvard Link), and the other is a practical article about developing standards that could include patents, and not letting the patent-holders collect too much “rent”, 2014 Link  Harvard Link)

I imagine that many health policy wonks will be thinking in the coming months about how Tirole’s insights into regulating oligopoly markets applies to health care.


Thursday, October 9, 2014

Promote Competition to Address Generic Price Spikes


Today’s Managing Health Care Costs

Number is 8281%





The New York Times reported yesterday that oversight committees in the House and Senate are looking into shocking increases in the cost of certain generic medications.  Doxycycline, which is used to treat uncomplicated Lyme Disease as well as many other infections, increased by over 80 times!

This counters expectations- brand name drug prices generally decline by 90% or more when they become available generically.

The critical issue is that the real price drops happen when drugs are manufactured by 5 or more competing generic firms.   When there is only a single generic, prices go down by only 10-20%.Some long-time generic medications are only manufactured at this point by a handful of,or even a single manufacturer – and that’s when prices spike.

Some would suggest government price controls – but I’m skeptical of this.  Limits to inflation rates for some intravenous medications has led to withdrawal of some manufacturers from this market – leading to shortages of inexpensive generic oncology medications.  In the end, more competition will be more likely to lead to sustained lower prices. 

Government can play an important role.  It should vigorously enforce antitrust laws, to be sure that generic manufacturers aren’t padding their margins by agreeing not to compete with each other.   The FDA could also consider requiring a production commitment when it initially approves each manufacturer’s generic formulation.

The generic manufacturers, like the brand name manufacturers, have discovered that the fastest way to higher profits is higher prices.