Wednesday, November 25, 2015
Today’s Managing Health Care Costs Number is $580 million
Another case of the medical system behaving badly.
The former chief financial officer of a Long Beach, California, hospital, two orthopedic surgeons, a chiropractor and a health care marketer have been charged with illegally referring more than 4,000 patients for spinal surgeries and generating more than $580 million in fraudulently submitted bills during an eight-year period Source
Back injuries are terrible – and spinal surgery is occasionally helpful –but often leads to lingering disability and trouble. Many estimate that between 1/3 and ½ of spinal surgery that is performed in the US should not have been performed.
It’s exasperating that there are physicians or a hospital that were paying for referrals. All are apparently pleading guilty and will serve jail time.
Atul Gawande had a great description of a second opinion service that saved a WalMart employee from unnecessary back surgery in the New Yorker this May.
Today’s Managing Health Care Costs Number is 25
KQED reported earlier this week about the efforts to keep Mendicino Coast District Hospital (MCDH) in Fort Bragg California from closing its doors.
Mendocino is a 25 bed rural acute care hospital. It lost $3.2 million on $43.7 million in net operating revenue in FY 2013. It employs about 215 FTEs (245 for the health system overall, which includes 25-30 at a community health system). Of note the system has an exceptionally high cost of fringe benefits (about 38% of total employee compensation; most health care systems are under 30%).
On one hand, Mendocino Coast District Hospital sounds like a dismal place to get medical care. Here’s a description from the KQED reporter:
It’s like stepping back into 1971. The main patient floor is lined with painted cinder-block corridors and drab brown carpets. The smell of Salisbury steak spills out of patient rooms.
The hospital gets a single star in either in-hospital or 30 days post hospital quality in five of ten measures of clinical care according to HealthGrades. (Single star is “worse than expected” in a five star scale). The hospital scores below national averages on all ten measures of patient experience, and it’s less than half as effective at giving appropriate surgical antibiotics as national averages
On the other hand, the nearest hospital is 35 miles away –and Mendocino Coast District Hospital is one of the few good employers left in Fort Bragg. It’s no surprise that the residents of the town are fighting to keep their hospital open.
MCDH faces a number of existential challenges. The rural population is dwindling, leading to decreased demand. Federal funding for critical need hospitals, which are paid based on ‘cost’ rather than bundled payment by admissions (DRGs) like other hospitals, has decreased. Recruiting physicians to a decrepit hospital hours from a big city is getting tougher, and the average age of physicians is probably increasing. The hospital has had 4 CEOs in the last year, and the leadership physicians are squabbling, to put it politely. The current facility needs to be rebuilt to meet California’s new earthquake code, and there is no endowment to tap.
The CEO and CFO want to raise revenue, and the leadership physicians want to cut (administrative) costs. Increasing charges for the few people covered by private insurance doesn’t seem like a likely way to become a viable business. The hospital will probably have to reconfigure its (generous) benefits and slim down further even if the county increases its subsidies.
The county will vote on whether to raise taxes to keep its hospital afloat in fall, 2016. It will be a terrible blow to the community if this hospital closes – but it might be that funding primary and specialty care and transportation to better equipped hospitals in neighboring towns would be a better investment than keeping this facility open.
Thursday, November 19, 2015
I joined about 2000 others at the annual Kenneth Schwartz Center for Compassionate HealthCare dinner last night. Kenneth Schwartz was a health care lawyer who died at age 40 of lung cancer in 1995. He was a tireless advocate for compassionate care – and worried openly that efforts to lower health care costs would interfere with how much time physicians got to spend with their patients. He published a seminal article, “A Patient’s Story” in the Boston Globe. Creation of the Schwartz Center is one of his legacies.
The Schwartz Center helps hospitals and other care organizations establish Schwartz Rounds to discuss cases where there was opportunity for a higher level of compassion – much as traditional “morbidity and mortality” rounds allow clinicians to reflect on how care could have been improved. Schwartz rounds are now held in 375 hospitals in the US and 120 in the United Kingdom. The cases discussed usually represent missed opportunities. Compassionate care isn’t important only for the dying – one of the physicians at my table talked about a Schwartz Rounds topic of children who are hospitalized during the holidays
The annual dinner is an opportunity for storytelling – narrative helps really. The dinner featured a middle school lacrosse player diagnosed with glioblastoma. She was supported by her friends, her family, and a nurse who has since bonded with the family. Medical care couldn’t save her life, but what she wanted from what was left of her life was to remain a full member of her middle school community. She achieved that.
Atul Gawande talked about the importance of asking patients what they really want. He told the heartbreaking story of a dying woman whose only wish was that she could bring her grandchild to Disney World. Unfortunately her caregivers asked this question when her disease had progressed too far. A few months earlier she could have had her wish. She died in the hospital two days later. Here’s a link to the Frontline film based on Atul’s book, Being Mortal.
The Schwartz Center honors one compassionate caregiver each year – and this year is the first that the Center sought nominations from across the country. The award was given to a pediatrician who runs the palliative program at the University of Mississippi. He told of an infant who died of meningitis – and how he felt impotent as a physician, but the family was grateful for his empathic tears. He also reported that when he attended a child’s funeral, the funeral director told him that he was the first physician he had ever seen at the graveside.
I’m pretty sure compassionate care means we’ll spend less in the medical system – less on futile interventions, and less on care people really don’t want. There is good evidence that improved communication lowers the risk of malpractice action. Giving providers “room” to be compassionate, especially enough time, can be a challenge as we try to constrain health care cost increases – but we must not inhibit clinicians from displaying their natural empathy.
Compassionate care is what all of us want – whether we are close to death, or even when we feel that our mortality is far away. The Schwartz Center rounds have helped increase compassionate care given by thousands of providers, and the awards have helped shine the light on providers who serve as a model to us all.
Addendum The NPR Hidden Brain podcast has a 20 minute segment on compassion from late October that’s worth a listen. Turns out that being compassionate isn’t just good for the beneficiaries of compassion -- it actually leads to increased happiness for the person showing compassion. A virtuous cycle indeed.
The managing health care cost number will return with the next post.
Tuesday, November 17, 2015
Today’s Managing Health Care Costs Number is $124
Kevin Schulman and colleagues wrote last month in the New England Journal that the cost of the new PCSK9 inhibitors, injectable biologic drugs that dramatically lower LDL (bad) cholesterol, could be huge.
We estimated the magnitude of additional costs per beneficiary in a typical insurance pool by applying a 25% reduction (negotiated discount, cost sharing, or both) to the list price of alirocumab, accounting for the estimated $600 in savings due to fewer cardiovascular events, and varying clinical criteria for use of these therapies. If 5% of the estimated 27% of U.S. adults 40 to 64 years of age who have high LDL cholesterol levels were eligible for a PCSK9 inhibitor, annual insurance premiums would increase by $124 for every person in the insurance pool.
$124 is more than half as much as we pay for all primary care office visits!
The insurance pool of those with employer sponsored health insurance is about 49% of the population – or 159 million. This means the cost of these medications could be almost $20 billion. This doesn’t count the cost of PCSK9s for the Medicare population, where prevalence of hypercholesterolemia is higher.
Note that the potential savings if these medications eliminated ALL heart attacks entirely is accounted for in these figures. Even if these drugs are highly effective, they are priced at far more than their value. The Institute for Clinical and Economic Review (ICER) estimated the value of these drugs at between $3600 and $4800 annually – as opposed to the $14,000 list price.
The most recent JAMA predicts four decision errors likely to lead to vast overprescribing of PCSK9 medications
1. We will start diagnosing more people with intolerance to statins. These people will then be candidates for PCSK9 inhibitors. Muscle aches with statins are common - and most who suffer from these could simply try a different statin or even try the same statin again. Statin intolerance should be a rare reason for PCSK9 use – and then only in patients at very high risk of cardiovascular disease.
2. We’ll return to LDL targets – and many people won’t be able to achieve these with statins. These targets are likely to be chosen without nearly enough attention to “number needed to harm.”
3. PCSK9 inhibitors will be prescribed for statin “failure,” even though it’s hard to define “failure” for meds which lower (but cannot eliminate) risk.
4. PCSK9 inhibitors will be prescribed for nonadherence to statins. The new drugs are injected every week or two weeks – as opposed to taken orally daily. Keep in mind that statin adherence rates were 27% (!) in the control group of a recent study.
There is a long history of physicians warmly embracing heavily-marketed new drugs and new technologies. There is every reason to believe this new class of drugs will be overused. At best, this will buy us better outcomes at an exceptionally high price. At worst, we’ll discover that these drugs have unexpected side effects and we will have spent unnecessary billions of dollars and diminished health care quality.
Friday, November 13, 2015
Today’s Managing Health Care Costs Number is 12
University of Pennsylvania researchers published a carefully designed study in JAMA this week assessing the efficacy of patient and physician incentives to lower LDL and improve adherence to statin medications. The study was big (1500 patients), well designed, and lost no patients to followup over 15 months. The incentives were meaningful – over $1000 per patient for physicians and patients who participated.
The results are sobering.
There was statistically better adherence (measured by electronic pill bottle caps that track opening) for those patients randomized to both physician and patient incentives. However, this difference was small – and not likely to be clinically significant. The cost was large – if all patients and physicians participating in this research in the group with incentives for physicians and patients and achieved adherence goals, the cost would have been over $2 million. That doesn’t count the considerable administrative costs of the program, including the electronic pill bottle caps, tracking, and incentive fulfillment. On average, this would have led to decreases in LDL of just 12 mg/dl compared to the control group.
The most striking finding to me is the low rate of medication adherence in all groups. Adherence was taking medication as prescribed 80% of the time; only 1 in four of the control group achieved this, and only 4 in 10 with physician and patient incentives were assessed as adherent.
It’s also especially disappointing that patient incentives alone didn’t nudge LDL levels down at all compared to the control group. Patients control whether or not they take their meds – and it would be nice to be able to aim interventions squarely at them rather than at physicians.
We should keep on trying various incentive programs to influence the behavior of patients and physicians. We should measure the results carefully, as Asch and colleagues did here, since real life results are not always what we’d expect. Extrinsic incentives are most likely to work when they are awarded quickly for simple activities (like patients taking a pill), as opposed to when they are awarded later complex behaviors without clearly visible outcomes (like physicians encouraging patient adherence).
For all of human behavior, intrinsic motivation is all important.
Adherence by Group Assignment
Wednesday, November 11, 2015
Today’s Managing Health Care Costs Number is $25
Nicholas Kristof reported in Sunday’s New York Times on Dr Sanduk Ruit, an ophthalmologist in Nepal who has cured blindness by removing cataracts in about 120,00 Nepalis. The operation takes 5 minutes, the lens he inserts costs a mere $3 to manufacture, and the total cost of the operation is about $25. (Note that based on Purchasing Power Parity, this is the equivalent of about $117 in the US)
In the United States, it’s pretty hard to even find out how much cataract surgery would cost. Even the Centers for Medicare and Medicaid Services says
For surgeries or procedures, it's difficult to know the exact costs in advance because no one knows exactly what services you'll need.
Medicare professional fees for cataract removal are about $1000, and they have come down substantially in the recent years. Total allowable fees for cataracts done on non-Medicare beneficiaries are probably over $3000.
Cataract surgery is readily available to patients who need it in the US, because those over 65 almost always are eligible for Medicare which covers the procedure.
Why can’t we have $25 cataract surgery in the US?
1. Cost of living is higher – so all staff are better paid, and real estate in medical areas in the US is much more expensive than for Dr. Ruit’s operatory
2. We are far richer than Nepalese. Our GDP is over $53,000 per person; in Nepal this is $694. Those who are poorer are far more price sensitive – so prices must be much lower in developing countries
3. US ophthalmologists use expensive machinery and operate in facilities which are equipped for a wide range of contingencies. Some ophthalmologists in the US use even more expensive lasers that CMS doesn’t cover – and charge Medicare beneficiaries extra fees.
4. Companies that manufacture lenses for use in the US must gain FDA approval. That can cost millions – which is reflected in the price.
5. Insurance coverage decreases consumer price sensitivity, making it easier to charge higher prices.
We don’t need to have cataract surgery for just $25 – but getting excellent outcomes for far lower prices could help us tame our health care inflation. Ruit’s new (simple) procedure and his inexpensive lenses are a disruptive innovation compared to existing technology used for cataract removal – why won’t hospitals and ophthalmologists who are getting a fixed fee move to this technology?
· Ophthalmologists are doing quite well with the current system, thank you. Their average incomes are high; they see relatively few off-hour emergencies, and they are comfortable in the current ecosystem. Ophthalmologists are beloved users of ambulatory surgical facilities, and they are wooed by salespeople from laser and lens manufacturers. Their patients are grateful that they have regained the ability to see
· Patients do not demand lower prices (since someone else is paying).
· The regulatory hurdle for the cheaper lens is real - but a lens that cost $30 instead of $200 would still help make cataract surgery more affordable in the US. However, the existing companies which manufacture lenses have already built the infrastructure to gain regulatory approval, manufacture lenses, and sell and distribute them. These companies are not likely interested in introducing lenses that cost 85% less.
Incumbents virtually never embrace disruptive innovation – which is instead brought forward by new companies which operate outside of the old system. But it’s difficult to start a new entity that operates outside of the existing system. There are regulatory hurdles and patients rarely have robust information on price or outcomes that would lead them to choose a disruptive innovation. Price sensitivity helps nurture disruptive innovation – but insurance coverage limits patient price sensitivity. Capital needs to become a new entrant in health care rule out the smallest and potentially most innovative new entrants.
I believe that the environment continues to improve for disruptive innovation. The growth of high deductible health plans has increased price sensitivity, and cloud services decreases capital requirements for new entrants. Transparency on prices is improving, too. But I would not hold my breath for cataract surgery that costs under $125!
Monday, November 9, 2015
Today’s Managing Health Care Cost Number is 67%
Hidden away in the budget bill passed and signed into law by President Obama last week is a provision eliminating the additional fees paid to hospitals which acquire private physician practices. The bill only eliminates this incremental payment prospectively, so hospitals that purchased physician practices in the past can continue to garner the higher fees. The example above is from a MedPAC analysis in 2014 – on the average, the conversion factor for the outpatient prospective payment fee schedule is 67% higher than the resource based value scale paid for ambulatory services delivered outside of hospitals.
Patients are often shocked by the costs of seeing physicians just after their offices have been acquired by hospitals. Here’s a report of a patient shocked by a $1525 facility fee charge associated with removal of a minor skin lesion what looked to him like a simple outpatient dermatology office. Elizabeth Rosenthal of the New York Times has written about surprise facility fees to see a psychologist. Of course this billing is mostly invisible to patients as it’s folded into what the insurance company pays, most often on behalf of employers.
There are certainly reasons why it’s more expensive to deliver care in a hospital – and even why it’s more expensive to deliver care inside a doctor’s office owned by a hospital. Hospitals tend to spend more money on their real estate, and they offer better compensation and benefits to their staff than private offices. But this is not a reason to pay hospitals more – it’s a reason to dissuade them from acquiring physician practices, or to encourage them to be thrifty in their operations.
Elimination of this incremental payment is good for at least four reasons.
· Medicare's costs will go down
· Patients will face fewer unexpected facility charges
· Physicians will have less reason to sell their practices to hospitals, since hospitals cannot offer as large a bounty for private practices if they can’t jack up the prices
· Commercial payers will likely follow Medicare's lead
The incremental ambulatory office visit fee offered to hospital-owned practices has been inflationary and has led to provider consolidation. I won’t mourn its passing.
h/t to Nathan Punwani for bringing this to my attention.