Month: March 2009

Imagining the Possible

Mar 31, 2009• 18

By Bruce Pyenson, Sara Goldberg and Kate Fitch

The emperor we call American healthcare is wearing no clothes—or perhaps too many clothes. The United States spends too much on healthcare. More than 25% of our healthcare dollars are wasted on unnecessary utilization. With this in mind, we recently completed research that identifies where that waste resides. Our analysis offers a target for how far the country might go in weeding out waste. We used the top-performing health systems as a basis, employing actuarial models to extrapolate results for the entire country. Our “16 to 12” model is a standard you can use to measure healthcare reform proposals. It can help you quickly identify defenders of different pieces of the status quo—and defenders of the absurd. In the few weeks since “16 to 12” came out, we’ve heard an almost universal reaction: “Of course you’re right, but [fill in special interests] won’t let it happen.” That’s amazingly positive—maybe we can actually reach consensus on fixing the system.

Framing the vision

In 2006, approximately 16% of the gross domestic product was spent on healthcare. Even if the United States were to reduce its healthcare expenditures to 12% of GDP, we would still spend far more than any other country. Is this possible? Our reduction is less than many estimates of healthcare waste. It’s also more than the annual spending on motor vehicles—4% of GDP could power a new American century.

Numbers for a growing consensus

Opposition to waste seems universal, from President Obama to Senator Max Baucus. They join a chorus of other voices, from CEOs and medical trade organizations to employer groups. Let’s take them all up on this point by quantifying opportunities for reductions in waste.

The table below offers a detailed inventory of efficiencies by service category, for one year’s costs. For example, inpatient services in 2008 cost an estimated $500 billion. Our working efficiency model reduced that by 38% to $311 billion.

These reductions are based on evidence-based best practices, including reducing unnecessary imaging and surgeries, better managing inpatient admissions, increased reliance on generic drugs, embracing primary care and certain electronic transactions, and other 20th-century (not even 21st-century!) management practices.

We’re proposing that healthcare payers (governments, employers, and individuals) could reallocate more than half a trillion dollars each year to other priorities.

The saved money could be used in other sectors, such as increased wages and infrastructure investment initiatives, and possibly even toward deficit reduction, reduced taxes, funding Medicare, etc.

The money saved could also stimulate the economy. And even though we’re working with 12% as the target model, we think it can get even lower than that.

Economic stimulus programs will likely increase healthcare spending, especially by federal and state governments. The 12% target may have to fight that surge, but we’re not talking about speculative long-terms gains, such as getting all Americans to exercise and reach a healthy weight.

What will the new system look like?

Although the healthcare system is typically divided into three categories—physicians/healthcare professionals, hospitals, and prescription drugs—our vision directly benefits patients.

We point to patients consistently receiving attention and care, according to treatment plans based on evidence-based medicine. All patients’ interactions will be streamlined through administrative systems, along with expanded hours via e-mail and phone access. We also suggest that the average patient will be more informed about choosing the appropriate care due to the reduction in costs; in turn, fewer medical errors should occur.

Another big change in the desired model is the re-engineering of hospital care.

Hospitals would operate on a 12/7 (12 hours a day, seven days a week) or 24/7 basis. While many hospitals currently don’t provide diagnostic treatment services on weekends or after standard business hours, that would change under this vision.

We believe hospitals can do a much better job lowering their readmissions. A separate report estimates that 18% of Medicare hospitalizations result in readmission within 30 days. A majority of those are potentially avoidable.

Our report didn’t delve deep into prescription drugs, but we suggest that there are efficiencies to be found in improvements to the FDA approval process and in a more widespread embrace of generic drugs.

It’s important to point out that we can become even more efficient than this vision. For example, we can dramatically improve end-of-life care, fix medical malpractice, and reduce administrative costs on better than a pro-rata-with-claims basis—all things that could push healthcare spending below 12% and improve the patient experience.

Winners and losers

Given this demanding vision, hospitals and other providers who don’t adapt to an efficiency- and quality-driven system will lose out.

For the nation, this vision offers more winners than losers. Patients and consumers would be the biggest winner and the U.S. economy overall would benefit. Employers would minimize the yoke of expensive benefits that has made it difficult to compete with leaner companies in other countries.

Proposals for healthcare reform now have the glamour of springtime fashions. Our 16% to 12% vision measures what’s under these emperors’ new clothes.

Pyenson, Fitch, Goldberg, Imagining 16% to 12%. 2009. Available online at http://www.milliman.com/expertise/healthcare/publications/rr/pdfs/imagining-16-12-RR02-01-09.pdf

Lead author Bruce Pyenson, FSA MAAA, is a Principal and Consulting Actuary with Milliman, an actuarial and consulting firm with offices worldwide. Kate Finch RN serves as a Principal and Management Consultant with Milliman. Sara Goldberg, FSA, MAAA serves as Consulting Actuary with the firm.

So what’s the real usual, customary and reasonable price of care?

Mar 31, 2009• 43

By Matthew Holt

The Ingenix mess apparently won’t go away. Sen. Jay Rockefeller is now going after the health plans for using Ingenix’ database. Ingenix and some of its customer health plans have already settled with several states, but apparently it’s not enough. Now Rockefeller is after them. And the words are tough. “Fraud”, for one.

Now, health plans don’t exactly have much credibility. And when the politicos find out that Ingenix a) sells tools to help health plans cram down the amount they pay providers, b) sells tools to providers to extract more money from health plans, and c) is owned by the biggest (and not too long ago) baddest insurer on the block, this may get a little more interesting. After all, it’s kind of an arms dealer arming both sides.

But there is one thing that troubles me. I’m quite prepared to believe that Ingenix’s view about what was UCR was different from the local medical society’s view of what was UCR, and therefore that the plans were “under-paying” the consumers and the doctors who serve them.

But let’s remember what Usual, customary and reasonable fees are.

Will CIGNA Remake The Health Plan Marketplace?

Mar 30, 2009• 17

By BRIAN KLEPPER

America’s health plans are floundering. If their job has been to provide the nation’s mainstream families
with access to affordable care (let’s leave quality out of it for the moment), they have failed miserably, though they were very profitable along the way, at least until Q1 2008. In 2008, the Milliman Medical Index – an estimate of the total cost for health coverage premium and out-of-pocket costs for a family of four – was $15,609. Now it is almost certainly above $17,000, more than the total income of more than one-third of American households.

To many health plan execs, these are simply market dynamics that must be accommodated through new product and service designs. I just attended a health plan conference where the overarching themes were the transition away from group to individual coverage, and the use of incentives and touch points like texting, email, and ergonomic Web interfaces to cultivate member competency, loyalty and retention.

There are important steps forward but, to me, the discussion tiptoed
around the more glaring problem – costs this high have exhausted many
purchasers’ ability to pay, and are rapidly shrinking health plans’ commercial market and profitability.

Sustainable Healthcare Reform

Mar 30, 2009• 24

By ROBERT LASZEWSKI

Last week Senate Majority Leader Harry Reid was quoted as raising the possibility
we could take the $600 billion in new revenue projected from a
"cap-and-trade" plan to cut green house-gas emissions and use some or
all of it to help pay the estimated $1.5 trillion cost for
comprehensive health care reform.

Energy and climate change issues aside that would be a bad idea–a really bad idea.

The biggest health care challenge we face in America is the cost of health care. To really reform the system we have to bring its costs under control. The only way we can achieve sustainable health care reform
is to pay for most of the cost of any reform plan out of the savings we
achieve fixing the system and its perverse incentives to spend more
without regard to what we receive.

Leave Natasha Richardson out of the health care debate

Mar 29, 2009• 31

By Sarah Arnquist

Please don’t turn Natasha Richardson’s tragic death into a symbol for why Canadian-style universal health care is bad and the United States is better.

In the last six hours, I’ve seen articles from at least a dozen media outlets asking whether Natasha Richardson would have lived, had her skiing accident occurred in the United States instead of Canada, where the quoted commentators say universal health care means insufficient access to high-tech scans and helicopters.

I’m not advocating for or defending Canada’s single-payer health system. Merely, I ask that journalists considering doing this story ask deeper questions that get beyond the anecdote. Consider asking about the trade-offs that go along with providing seemingly unlimited CT scans and helicopters. Ask what would happen if she were an uninsured U.S. resident.

Richardson’s tragedy may represent a larger problem, but those statistics need to accompany the punditry. While not diminishing the tragedy of Richardson’s untimely death, a sample of one is not a good measure of how well a state or nation’s health system performs.

Anecdotes make great stories and can put a face on a problem, but policy should be based on scientific research that reveals truths about the entire population.

Commentology

Mar 29, 2009• 4

Steven M. Parker of Levelwing was among those who weighed in on the volatile comment thread on Rick Scott's Friday post. ("Patient-based Health Reform or Fannie Med?") Steve had this response to critics who attacked the CPR founder over his record as CEO of Columbia/HCA in the nineties …

"..one thing all of you need to consider is that you continually point
fingers at Rick for having run a company fraught with Medicare
inconsistency, overbilling and defrauding the government. However, you
lack the details on the actual investigation and from where issues
stemmed. Many of the allegations came from hospitals owned by
Columbia/HCA at the time (yes) – but there are many instances that
originated at points prior to Columbia/HCA purchasing or operating
those facilities. The local levels were ultimately at fault in this
situation. Also as an FYI – Columbia/HCA had better patient
satisfaction than most medical facilities in the country during Rick's
helm. There are many details perhaps you should consider, including the
fact that during this same time period a majority of hospitals in this
country were under investigation for the same issues."

Classified: 2009 DiabetesMine Design Challenge

Mar 28, 2009• 6

Passionate about Diabetes and product design? Whether you're an enterprising patient or parent, a startup company, a design student, an independent developer or engineer, or a pharma R&D pro. Sponsored by the California Healthcare Foundation. (CHCF). Prizes include $10,000 in cash (1st prize), $5,000 (2nd), consultations with health and wellness exerts at the global design and innovation firm IDEO. Submissions are accepted in the form of a 2-minute video to be uploaded to the DiabetesMine YouTube channel, or a 2-3 page written "elevator pitch" plus supporting graphics, also to be uploaded online. The deadline for entries is Friday, May 1st, 2009, at 11:59 pm Pacific time. Winners will be announced on Monday, May 18th, 2009. www.diabetesmine.com/designcontest

Health 2.0 Meets Ix–The Great Debates

Mar 27, 2009• 5

By Matthew Holt, Indu Subaiya and Joshua Seidman

On April 22–23 in Boston, two ideas are going to come together. Health 2.0 has been defined in different ways, but is most often considered to be the use of lightweight online technologies which allow consumers to access and exchange health information via the now familiar search, communities and tools. Information therapy (Ix or information prescriptions) involves the proactive delivery of the right information to the right person at the right time, usually as part of the care delivery process.

However, while both Health 2.0 and Ix are focused on improving patients’ participation in care, they tend to come from different backgrounds. Ix tends to be “prescribed” to the patient, often by a clinician (although system-triggered Ix and consumer-prescribed — either “self-prescribed” or recommended by a peer, caregiver, etc. is also part of the definition). Ix innovations have had the greatest penetration in organized systems of care with robust provider and patient HIT applications like Kaiser Permanente and Group Health Cooperative in Seattle.

Patient-based Health Reform or “Fannie Med?”

Mar 27, 2009• 73

By Richard Scott

Set against the backdrop of the $787 billion stimulus bill and deficit spending that dwarfs the federal outlays of FDR’s New Deal and LBJ’s “Great Society,” the idea of spending hundreds of billions – or even trillions of tax dollars – to buy universal health care coverage for all Americans isn’t much of a stretch anymore.

Faced with $30 to $80 trillion in unfunded healthcare liabilities ($110,000 to $300,000 per American under the age of 65) “health care reform” discussions are underway between President Obama and members of Congress in the 111th Congress to spend even more on health care, and Americans are beginning to hear more and more about “patients’ rights” and similar jargon.

The problem is that “universal health care” and “patients’ rights,” while sounding harmonious, are in direct conflict. The path to effective health care reform must be approached from the perspective of individual patients and their relationship with their doctors, and not from a top-down, big government perspective. Anything that interferes with an individual’s freedom to consult their doctor of choice to make health care decisions defeats the purpose of meaningful health care reform.

True health care reform centers on four “pillars” of Patient’s Rights:

Choice – Any health reform proposal must guarantee a patient’s right to choose their own doctor, and must protect a consumer’s right to choose the health insurance that best fits their needs and budget. Reform efforts should expand the choices without dictating or distorting them..

Competition – In addition to increasing patient choice, eliminating state regulations on health insurance would allow for broader competition and lower prices for consumers. Patients also benefit when doctors are free to run their practices like any other business, competing on the basis of results and price. Requiring health care providers to publicly post their pricing and results so consumers can shop and compare will make our health care system more efficient at delivering quality care at an affordable price. Effective reform must rely on market dynamics, not government controls.

Accountability – Health reform efforts must reward individuals who are accountable for themselves. Those who pay for their own health insurance should get the same tax breaks employers get. Creating one standard reimbursement form, regardless of insurance company, will reduce costs and shift accountability where it belongs – to the individual whose life is most affected by the decisions that need to be made. Rare is the politician who would argue that an insurance executive or a bureaucrat in Washington D.C.is in a better position to make critical health care decisions than individual Americans and their doctors.

Responsibility – Successful health care reform must place responsibility squarely where it belongs: on the shoulders of the patient. Encourage individuals to take responsibility for their personal health by allowing insurance companies to charge lower rates for people who make healthy lifestyle choices. Infusing personal responsibility into health care reform allows us all to maintain our cherished freedom to live our lives without government intrusion. This principle works now: a 40 year-old who has been smoking since he was 16 knows his life insurance policy is going to cost more than that of a non-smoker. A driver with a heavy foot knows his car insurance rates reflect his need for speed.

Any serious discussion of health care reform that does not include choice, competition, accountability and responsibility – the four “pillars” of patients’ rights – will result in our government truly becoming a “nanny-state,” making decisions based on what is best for society and government rather than individuals deciding what is best for each of us..

Because of budget constraints, regulators in the United Kingdom dropped pap smears for women under 25. The result – young women are dying of cancer that could have been treated if the cancer was discovered in its early stages. Many Canadians have to wait months for diagnostic tests to determine whether their tumors are malignant, giving cancerous tumors time to worsen, spread and progress to an irreversible stage.

Some of the ideas being advanced by our leaders in Washington fail to consider patients’ rights , focusing instead on “government oversight boards,” “negotiations” with drug companies, and other bureaucratic solutions that refuse to put the patient-doctor relationship first.

Worse, the danger of Washington’s recent willingness to spend inordinate sums of money on anything deemed to be a problem, is that we are conditioning ourselves to believe that our government has unlimited resources – and that any problem can be solved by simply spending vast amounts of cash. What politician wants to be in office when it comes time to admit we can no longer spend for services we have come to expect?

Fannie Mae’s and Freddie Mac’s failed experiment to improve home ownership for “low and middle income families” should be a wake-up call to those who believe more government involvement in American healthcare will help “low and middle income families”. These two initiatives resulted in politicians being accused of receiving favored treatment, low and middle income families being forced out of their homes and a federal bailout that could cost taxpayers as much as $2.5 trillion. We never envisioned politicians receiving favored treatment, the housing meltdown caused by the expansion of these programs, nor the unbelievable number of low and middle income families being evicted from their homes with their life savings depleted. It’s not difficult to imagine similar results under a national health care system.

Given the evidence, now is the time for an investment of political willpower to institute a dramatic shift away from the influence of government, and toward a patient-centric system with the principles of choice, competition, accountability and responsibility powering a revolution in American health care. The shakiness and uncertainty that permeate our economy, some of which is caused by our lack of competitiveness because of healthcare costs, argue vocally for patients’ rights as opposed to government control.

Ultimately, the decision will come down to who we believe will better allocate our limited healthcare dollars: the government or each of us. If we get this right, everyone wins. If we get it wrong, the damage to our economy and our quality of life and the quality of life for our children and grandchildren may be irreversible. The last thing America needs is for Fannie Mae to become “Fannie Med.”

Richard Scott is co-founder and chairman of Solantic Corporation, a Florida chain of 23 urgent care centers which posts prices on the internet and on a “Starbuck’s style” menu board. He’s best known for being the CEO of
Columbia/HCA which grew to quickly being the largest for-profit
hospital chain in the 1990s before he was forced out when the Federal
government investigated allegations of fraud. After Scott left, HCA settled the suits for over $1.7 billion. More recently Scott has become a participant in the national debate over health reform. In 2009, He formed the Washington-based political action group “Conservatives for Patients Rights”, an organization dedicated to market-based reform of the healthcare system.

CLASSIFIED: Yale School of Management’s Healthcare Conference 2009

Mar 27, 2009• 2

“Where is the Value? Managing Cost and Quality in a Healthcare System Facing Reform.” April 3rd at the Omni Hotel in New Haven, CT. A full-day summit of industry leaders, students, and academics discussing current topics of industry concern as Obama attempts to usher in reform. Our 16 breakout sessions will focus on answering how to unlock additional value in the current system. Our 2 keynote addresses will feature Samuel Nussbaum, MD, Chief Medical Officer of WellPoint, and Helen Darling, President of the National Business Group on Health. Registration and further details can be found at: www.yalehealthcare.com.