Since 1973, when Jack Wennberg published his first paper describing geographic variations in health care, researchers have argued about both the magnitude and the causes of variation. The argument gained greater policy relevance as U.S. health care spending reached 18 percent of GDP and as evidence mounted, largely from researchers at Dartmouth, that higher spending regions were failing to achieve better outcomes. The possibility of substantial savings not only helped to motivate reform but also raised the stakes in what had been largely an academic argument. Some began to raise questions about the Dartmouth research.
Today, the prestigious Institute of Medicine released a committee report, led by Harvard’s Professor Joseph Newhouse and Provost Alan Garber, that weighs in on these issues.
The report, called for by the Affordable Care Act and entitled “Variation in Health Care Spending: Target Decision Making, Not Geography,” deserves a careful read. The committee of 19 distinguished academics and policy experts spent several years documenting the causes and consequences of regional variations and developing solid policy recommendations on what to do about them. (Disclosure: We helped write a background study for the committee).
But for those trying to make health care better and more affordable, whether in Washington or in communities around the country, there are a few areas where the headlines are likely to gloss over important details in the report.
And we believe that the Committee risks throwing out the baby with the bathwater by appearing, through its choice of title, to turn its back on regional initiatives to improve both health and health care.
What the committee found
The report confirmed three core findings of Dartmouth’s research.
First, geographic variations in spending are substantial, pervasive and persistent over time — the variations are not just random noise. Second, adjusting for individuals’ age, sex, income, race, and health status attenuates these variations, but there’s still plenty that remain. Third, there is little or no correlation between spending and health care quality. The report also effectively identifies the puzzling empirical patterns that don’t fit conveniently into the Dartmouth framework, such as a lack of association between spending in commercial insurance and Medicare populations.
Continue reading “Making Sense of Geographic Variations in Health Care: the New IOM Report”
Filed Under: Economics, OP-ED, THCB
Tagged: ACOs, Costs, Dartmouth Atlas Project, Economics, Elliot Fisher, Geographic variation, IOM, Jonathan Skinner, Medicare, Population Health, Quality, The ACA, Triple Aim
Jul 24, 2013
What’s behind the recent EHR public relations blitz and our passionate debate in The Health Care Blog? It’s fear for the Affordable Care Act’s future. Oh, the ACA can weather political challenge in the short term, but in the long run, only health cost containment will matter. EHRs are the ship that institutions are counting on to navigate payment reform and, from the institutional perspective, physicians and patients are just along for the ride. From the citizen perspective however, cost containment will be seen as rationing unless patients and physicians are appropriately engaged in the most costly decisions.
The impact of yet more regulations, such as Stage 3 Meaningful Use, could be too late to save the ACA. For now, the administration and those of us that hope the ACA succeeds must work to shift EHR vendors and their institutional customers toward patient engagement using the tools of policy guidance, public relations and federal procurement.
First, a crash course in health economics. If you have a few minutes, read Accountable Care Organizations: Can We Have Our Cake and Eat It Too? by Jessica L. Mantel. Otherwise, just struggle through the next two paragraphs summarizing why EHRs are the lynchpin of health reform via the ACA.
Cost containment requires either cost controls or a shift away from fee-for-service payment. The ACA is based on accountable care as an alternative to fee-for-service. Accountable Care Organization (ACO) is shorthand for the new health care payments regime. By paying ACO institutions instead of individual service providers, health insurance companies and Medicare provide direct economic incentives to reduce waste, lower costs and, if we’re not careful, withhold needed care. An ACO is by definition an organization or institutional construct.
The EHR is is not the Jedi knight’s lightsaber, it is an institutional tool designed to bind the individual service providers into the Federation’s collective. Not surprisingly, patient engagement is an afterthought.
Continue reading “The Affordable Care Act Will Fail Without Patient Engagement”
Filed Under: OP-ED, THCB
Tagged: ACOs, Adrian Gropper, Blue Button Plus, EHR, HIT, patient engagement, Patients, The ACA
Jul 22, 2013
The Next Health Care calls for very different strategies and tool sets. Many systems are acting as if they read a manual on how to do it wrong. How many of these critical strategic and tactical mistakes is your system making?
So I was beta testing FutureSearch, this cool new Google add-on app I’m writing with a coder, and I found an article that I wrote in 2025. My first thought was, “Cool! It works!” My second thought was, “I’m still working at the age of 75?” It was only then that I focused on the title of the article: “Fail: The 16 Steps by Which Hospitals Failed in the Post-ACA Risk Environment — An Analysis.”
The article detailed a dispiriting history from 2013 to 2020. More important, it listed the 16 most common mistakes that hospitals and health systems made while trying to navigate the new risk environment of the Next Health Care.
I found this interesting because of course right at this moment much of the health care industry, in many different ways, is trying to move away from the traditional fee-for-service payment system, which has given the whole industry adverse incentives, leading to much higher costs, poorer quality and restricted access. The rubric of the day is “volume to value.” And I see many different institutions and systems across the country making exactly these mistakes already in 2013.
As you read this list, ask yourself in what way you and your institution might be making the wrong decisions, and ask yourself what they will look like looking back from 2025.
Stick with fee-for-service. Though they included various incentives and kickbacks, most accountable care organizations and ACO-like structures built in the 2012–2014 period were based on a payment system that remained stubbornly fee-for-service. Systems continued to make more money if they checked off more items on the list (and more complex items), rather than solving their customers’ problems as well and as efficiently as possible.
Continue reading “How to Fail at the Next Health Care”
Filed Under: OP-ED, The Business of Health Care
Tagged: ACOs, Costs, Fee-for-service, Hospitals, Joe Flower, The ACA, the business of healthcare
Jun 11, 2013
Just back from the Health Datapalooza confab that took place last week – an event now in its 4th year hosted by the federal government. I had a few lingering thoughts to share. First, on the event name: I’m guessing it came out of my old business partner and current national CTO Todd Park’s experience in Washington, where trying to get any single distinct thought through “the interests” could knock the “palooza” out of a grown stallion.
You’d think the federal government would be the last ones to host a Datapalooza, but the fact is NO ONE ELSE has stepped up!
So they did.
And complain as I might about the G-men and G-women being industry conference conveners (makes me want to bathe with a wire brush) they pulled it off pretty darn well. The Department of Health & Human Services (HHS) attracted hundreds of serious entrepreneurs… and hundreds more wannabes (who real entrepreneurs desperately need in order to feel cool).
And boy were there some great bloopers…
Kaiser came blistering onto the scene with an open API—to the location and hours of operation of its facilities! Kinda sounds like Yelp to me…I’d be surprised if developers will come a runnin’ to that one. Kaiser’s CIO (a very cool guy whom they or anyone in health care would be lucky to get) broke this news in a two-minute keynote speech. Imagine President Obama announcing, in a State of the Union address, that the green vegetables in the White House cafeteria were now much crunchier!
HHS Secretary Kathleen Sebelius applied similarly excessive fanfare announcing the release of cost data for 30 ambulatory procedures. The whole idea that Toddy (Park) was trying to get going with this Palooza was not to release REPORTS on things but to release the SOURCE data so that anyone with proper security and privacy clearance could INVENT a million reports that no one had ever conceived before!
So here are my thoughts on all of this, some of which I shared at the conference in my way-longer-than-two-minute keynote:
1. Release the data!! Secretary Sebelius announcing the release of cost data for 30 ambulatory procedures during her keynote felt like the Secretary of Energy serving up a can of 10W30 to oil companies to drill into.
Her words were great. To wit: “The fact that this [unlocking the data] is growing by leaps and bounds is a good indication that we can leapfrog over years and decades of inaction into an exciting new future.” YES! GO GIRRRL! OK, so…where’s the data?
Continue reading “Knocking the Palooza Out of the Data”
Filed Under: Tech, THCB
Tagged: ACOs, athenahealth, Data, Health Datapalooza 2013, health information exchange, HHS, Jonathan Bush, ONC
Jun 7, 2013
Historically, the physician has been viewed as the leader of medicine, with responsibility for the care and outcomes of patients; in iconic photographs and paintings, the physician is seen as a lone, heroic figure. Such a view has led to natural interest in the measurement of individual physicians’ performance. It is therefore not surprising that some information brokers, including the U.S. News and World Report and many city magazines like the Washingtonian, provide ratings of “top doctors,” often based mostly on reputation, warranted or not.
However, this focus on the individual is flawed for most measures of quality and presents substantial technical challenges. Systems-based care is emerging as a key value within health care and a vital component of high-quality care, while the notion that an individual health professional can be held accountable for the outcomes of patients in isolation from other health professionals and their work environment is becoming an outdated perspective. For example, better intensive care unit staffing sometimes mitigates the evidence that surgeons who perform more procedures achieve better outcomes .
The communication and coordination of services across providers is required to ensure that patients, many of whom have multiple conditions, are assisted through various health care settings . For some aspects of care, such as diagnosis errors and patient experience, measuring at the individual physician level might be considered. Nevertheless, focusing measurement on an individual runs counter to our goals in promoting teamwork and “systemness” as core health care delivery attributes.
Continue reading “3. Measure quality at the level of the organization, rather than the clinician.”
Filed Under: Uncategorized
Tagged: ACOs, Featured Posts, Harlan Krumholz, Peter Pronovost, Physician Ratings, Physicians, Robert Berenson, RWJF
May 26, 2013
We recently participated in a program at Columbia Business School’s Healthcare Program on whether ACOs (Accountable Care Organizations) will fail. For those of you that don’t know, ACOs are one of the structures promulgated by PPACA (aka Obamacare) designed to encourage better cost control and quality improvement in the healthcare system.
The current zeitgeist among the commentariat is that ACOs will fail (examples: here and here). We think the reason for the one-sided nature of the question is that those of us who lived through the healthcare upheaval in the early and mid “90s” saw first hand the failure of PHOs, PPMs and IDNs (and all of the other acronyms now relegated to the dustbin of history). When ACOs are touted as a saving grace for the system, you can almost hear the collective groan of the industry veterans.
Ever the contrarian, however, we took the side of the debate that said ACOs will NOT fail. The premise of our argument was that since we already have a good idea of why the structure will fail, we can, a priori, fix the shortcomings, and though likely, ACO failure is not inevitable.
There is an extensive list of why list of why ACOs will fail. We put them into four general buckets.
Infrastructure: The system has mis-allocated resources so we have too many of some things and not enough of others leading to inefficiencies.
Technological/telecommunication: For a number reasons the healthcare system has not adopted technology as fast as other industries.
Cultural: Providers are habituated to fee-for-service payment mechanisms and patients aren’t likely to change their own healthcare behaviors.
Inertia: The well known system problems (e.g. asymmetry of information, the Pareto nature of patient demand, unexplained variation of care, counterproductive incentives) have been around forever and are difficult to overcome.
Because we spend most of our time identifying private healthcare companies with investment potential, we often get a view into what is happening in the entrepreneurial space under the punditry radar.
Continue reading “The ACO Failure Hypothesis: Likely But Not Inevitable”
Filed Under: OP-ED, THCB, The Business of Health Care
Tagged: ACOs, Asymmetry of Information, Columbia Business School, Les Funtleyder, Obamacare, The ACA
Apr 28, 2013
What is the path forward for physicians who want to remain in private practice, outside the constraints of health system employment? How will the environment change and what new demands will that place on practices and physicians? What follows are the observations of one industry-watcher who has worked on all sides of health care, but who now spends most his time focused on the interests of those who pay for it. No crystal ball, but several trends are clear.
There are now concrete signs that health care’s purchasers are exhausted and seeking new solutions, that a competitive marketplace is emerging and getting increasing traction. As they abandon ineffective approaches, the paradigm that has dominated the industry for the past 50 years will be upended. The financial pressure felt by buyers will transfer to the supply side health industry that has come to take ever more money for granted.
For decades, fee-for-service payment, inclusive health plan networks, and a lack of quality, safety and cost transparency have been enforced by health industry influence over policy, effectively neutralizing the power of market forces.
Without market pressure, physicians have felt little need to understand their own performance relative to that of their peers. The variation of physician practice patterns within specialties has been high, with some physicians’ “optimizing their revenue opportunities” by veering wildly away from evidence-based practice. Even so, until recently in this dysfunctional environment, it has been nearly impossible to identify high and low performers.
Continue reading “How Physician Practices Can Prepare for a Health Care Marketplace”
Filed Under: Physicians, THCB, The Business of Health Care
Tagged: ACOs, Brian Klepper, Fee-for-service, Physicians, practice management
Apr 24, 2013
Now that President Obama has been re-elected and the Supreme Court has upheld the Accountable Care Act, healthcare reform is here to stay. So what does reform mean for healthcare investors? I believe it will usher in a new fertile period for innovative,venture‐backed companies that can navigate the brave new world of healthcare delivery and management.
The Accountable Care Act impact on healthcare IT investing is already being felt.Venture investment in 2013 is showing significant growth from last year. In 2012,according to PWC, a global accounting firm,the life sciences sector which includes healthcare IT accounted for 25 percent of all venture capital dollars invested which totaled nearly $1.2 billion in 163 deals,more than double the $480 million in 49 deals in 2011 and almost six‐times the $211 million in 22 deals in 2010.
Now is the time to make order out of chaos and to set the stage for a next‐generation healthcare system that can effectively service our nation. At Psilos Group, we have just released our fifth Healthcare Economics and Innovation Outlook and identified the following four areas as the most promising opportunities for healthcare investors in 2013 and beyond: Private health exchanges, consumer‐focused insurance programs, 21st century healthcare technologies, and innovations that reduce error and waste.
Investing In Exchanges
The healthcare insurance marketplace—and the way insurance is bought and sold—is facing massive change.Healthcare insurance exchanges, both public and private,promise to create a more organized and competitive market for buying healthcare insurance, which could moderate price increases that are currently spiraling out of control.
From our perspective, exchanges are an intelligent place to invest. Software and services will power the exchanges. Psilos envisions massive opportunities for technologies that enable operators of both public and private exchanges to build high functioning platforms, including the shopping software and back‐end administrative technology and service products needed to serve tens of millions of people efficiently.
Continue reading “The Affordable Care Act: Like It Or Not, It’s Catalyzing a Golden Age In Health Care Investing”
Filed Under: The Business of Health Care
Tagged: ACOs, Al Waxman, Health Insurance Exchanges, HIT, Innovation, Investors, Psilos Groups, The ACA, venture capital
Apr 18, 2013
Walgreens, the country’s largest drugstore chain, announced on April 4th that its 330+ Take Care Clinics will be the first retail store clinics to both diagnose and manage chronic conditions like asthma, diabetes, high blood pressure, and high cholesterol. The Nurse Practitioners (NPs) and Physician Assistants (PAs) who staff these clinics will provide an entry point into treatment for some of these conditions, setting Walgreens apart from competitors like Target and CVS whose staff help manage already-established chronic illnesses or are limited to testing for and treating minor, short-lived ailments like strep throat.
A one-stop shop for toothpaste, prescription drugs, and a diabetes diagnosis? The retail clinic phenomenon has its appeal: it allows patients convenience and better access to care through longer hours and more locations than our health care system now provides. Walgreens leaders bill their latest offering as a complementary service to traditional medical care. They envision close collaboration with physicians and even inclusion in Accountable Care Organizations, according to reporting by Forbes’ Bruce Japsen (though it’s not clear how the retailer would share the financial risk or savings in such a model).
Filed Under: THCB
Tagged: ACOs, non-physician experts, Physicians, primary care, Scope of Practice, The ACA, Walgreens, Wellness
Apr 12, 2013
Writing in the March 20 issue of JAMA, Drs. Douglas Noble and Lawrence Casalino say that supporters of Accountable Care Organizations (ACOs) are all muddled over “population health.”
This correspondent says the article is what is muddled and that the readers of JAMA deserve better.
According to the authors, after the Affordable Care Act launched the Medicare Accountable Care Organizations (ACOs), their stated purpose has morphed from Health-System Ver. 2.0 controlling the chronic care costs of their assigned patients to Health System Ver. 3.0 collaboratively addressing “population health” for an entire geography.
Between the here of “improving chronic care” and the there of “population health,” Drs Noble and Casalino believe ACOs are going to have to confront the additional burdens of preventive care, social services, public health, housing, education, poverty and nutrition. That makes the authors wonder if the term “population health” in the context of ACOs is unclear. If so, that lack of clarity could ultimately lead naive politicians, policymakers, academics and patients to be disappointed when ACOs start reporting outcomes that are limited to chronic conditions.
Continue reading “Accountable Care Organizations Can Change Everything, But Only If We Get the Definition Right”
Filed Under: OP-ED, THCB, The Business of Health Care
Tagged: ACOs, Care Continuum Alliance, Douglas Noble, Jaan Sidorov, JAMA, Lawrence Casalino, Outcomes, Patient-centered care, Population Health, Quality, The ACA
Mar 20, 2013