By Brian Klepper

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”

By Brian Klepper

For a large and growing number of us with meager or no coverage, health care is the ultimate “gotcha.” Events conspire, we receive care and then are on the hook for a car- or house-sized bill. There are few alternatives except going without or going broke.

Steven Brill’s recent Time cover story clearly detailed the predatory health care pricing that has been ruinous for many rank-and-file Americans. In Brill’s report, a key mechanism, the hospital chargemaster, with pricing “devoid of any calculation related to cost,” facilitated US health care’s rise to become the nation’s largest and wealthiest industry. His recommendations, like Medicare for all with price controls, seem sensible and compelling.But efforts to implement Brill’s ideas, on their own, would likely fail, just as many others have, because he does not fully acknowledge the deeper roots of health care’s power.

Continue reading “Why Only Business Can Save America From Health Care”

By Brian Klepper

On January 7, a federal appeals court rejected six Georgia primary care physicians’ (PCPs) challenge to the Centers for Medicare and Medicaid Services’ (CMS) 20-year, sole-source relationship with the secretive, specialist-dominated federal advisory committee that determines the relative value of medical services. The American Medical Association’s (AMA) Relative Value Scale Update Committee (RUC) is, in the court’s view, not subject to the public interest rules that govern other federal advisory groups. Like the district court ruling before it, the decision dismissed the plaintiffs’ claims out of hand and on procedural grounds, with almost no discussion of content or merit.

Thus ends the latest attempt to dislodge what is perhaps the most blatantly corrosive mechanism of US health care finance, a star-chamber of powerful interests that, complicit with federal regulators, spins Medicare reimbursement to the industry’s advantage and facilitates payment levels that are followed by much of health care’s commercial sector. Most important, this new legal opinion affirms that the health industry’s grip on US health care policy and practice is all but unshakable and unaccountable, and it appears to have co-opted the reach of law.

The RUC exerts its influence by rolling up the collective interests of the nation’s most powerful medical specialty societies and, indirectly, the drug and device firms that support and benefit from their activity. The RUC uses questionable “methodologies,” closed to public scrutiny, to value medical services. CMS has historically accepted nearly 90 percent of the RUC’s recommendations without further due diligence. In a damning October 2010 Wall Street Journal expose, former CMS Administrator Tom Scully described the RUC’s processes as “indefensible.”

Continue reading “How the RUC Escaped a Challenge to Our Deeply-Flawed Reimbursement System”

By Brian Klepper

Last week veteran analyst Vince Kuraitis reviewed a report from the consulting firm Oliver Wyman (OW), arguing that the trend toward reconfiguring health systems to deliver more accountable care is more widespread than any of us suspect.

“The healthcare world has only gotten serious about accountable care organizations in the past two years, but it is already clear that they are well positioned to provide a serious competitive threat to traditional fee-for-service medicine. In “The ACO Surprise,” our analysis finds that 25 to 31 million Americans already receive their care through ACOs-and roughly 45 percent of the population live in regions served by at least one ACO.”

OW provides a well-reasoned analysis and conclusions, but I’m skeptical. In discussions with health system executives around the country, I hear some movement toward change, but relatively few organizations are materially turning their operations in a different direction. The specter of policy change is looming, but it is still abstract. As I’ve described before, market forces are intensifying, but they’re mostly still scattered and immature.

Fee-for-service remains the prevailing paradigm, and there is no palpable threat to the health care excess that is business-as-usual. Several health system CFOs have told me: “Why should we take less money until we have to?”

There’s no question that Medicare’s ACO programs have the bulls-eye on reimbursement for health systems, which are a convergence point for a large percentage of appropriate and inappropriate health care costs. But there is a silver lining. American health care is so replete with waste – on the order of half or more of all health care expenditures – that any system that tries could deliver dramatically lower costs and improved outcomes.

Continue reading “ACOs: We’re NOT There Yet”

By Brian Klepper

At our first meeting years ago, Tom Emerick, Walmart’s then VP of Global Benefits, told me,

“No industry can grow indefinitely at a multiple of general inflation. It will eventually become so expensive that purchasers will simply abandon it.”

He said it casually, as though it was obvious and indisputable.

Health care is playing out this way. From 1999 to 2011, health care premium inflation grew steadily at 4 times the general inflation rate. During that same period, the percentage of non-elderly Americans with employer-sponsored health coverage fell from 69.2 to 58.6 percent, a 15.3 percent erosion rate.

Health care’s boosters like to argue that it has buttressed the economy, and that it means more jobs and economic prosperity within a community. A February 2011 Altarum Institute report estimated that private sector health care jobs now account for nearly 11 percent of total employment. Since the recession began in December 2007, health care employment has risen by 6.3 percent while employment in other industry sectors fell by 6.8 percent.

But there’s a darker side. Health care’s ever-increasing revenue growth has come at the expense of individuals and firms that pay its bills, directly through health plan premiums, and through taxes, often instead of buying other goods and services. It transfers wealth to health care from everyone else. Like the finance services industry, health care has become a disproportionate “taker” industry, sapping economic vitality from America’s communities.

Continue reading “Irresistible Forces”

By Brian Klepper

Walmart’s sheer size makes almost any of their initiatives newsworthy. That said, despite being a lightning rod for criticism on employee benefits and health care, they have introduced initiatives with far-reaching impacts. Their generic drug program began in September 2006 – more than 300 prescription drugs for $4/month or $10 for a 90-day supply – and was widely emulated, disrupting retail drug markets and generating immense social benefit. Imagine the difference it made to a lower middle class diabetic who had been paying more than $120 per month for medications, and suddenly could get them for about $24.

Yesterday Walmart announced that “enrolled associates” – covered workers and their family members – needing heart, spine or transplant surgeries could receive care with no out-of-pocket cost at 6 prominent health systems around the country: Mayo Clinics (Rochester, MN and Jacksonville, FL); Cleveland Clinic (Cleveland, OH); Geisinger Clinic (Danville, PA); Mercy Hospital Springfield (Springfield, MO); Scott & White Memorial Hospital (Temple, TX); and Virginia Mason Medical Center (Seattle, WA).

Walmart’s Center of Excellence (COE) program builds on its own and other organizations’ pioneering efforts with similar programs. Walmart developed a relationship with Mayo Clinics in 2007 for transplant and lung volume reduction surgeries. In March 2010, Lowes reached a similar arrangement with Cleveland Clinic for heart surgeries and, last December, Pepsico announced a global pricing deal with Johns Hopkins for cardiac and joint replacement surgeries.

Continue reading “Walmart Moves Health Care Forward Again”

By Brian Klepper, et al.

Three months ago a post argued that America’s primary care associations, societies and membership groups have splintered into narrowly-focused specialties. Individually and together, they have proved unable to resist decades of assault on primary care by other health care interests. The article concluded that primary care needs a new, more inclusive organization focused on accumulating and leveraging the power required to influence policy in favor of primary care.

The intention was to strengthen rather than displace the 6 different societies – The American Academy of Family Physicians (AAFP), the American College of Physicians (ACP), the Society for General Internal Medicine (SGIM), the American Academy of Pediatrics (AAP), the American Osteopathic Association (AOA), the American Geriatrics Society (AGS) – that currently divide primary care’s physician membership and dilute its influence. Instead, a new organization would convene and galvanize primary care physicians in ways that enhance their power. It would also reach out and embrace other primary care groups – e.g., mid-level clinicians and primary care practice organizations – adding heft and resources, and reflecting the fact that primary care is increasingly a team-based endeavor.

We came to believe that a single organization would not be serviceable. Feedback on the article suggested that several entities were necessary to achieve a workable design.
Continue reading “Strengthening Primary Care With A New Professional Congress”

By Brian Klepper

This week the American Academy of Family Physicians (AAFP) issued a new report describing its vision of primary care’s future. Not surprisingly, the report talks about medical homes, with patient-centered, team-based care.

More surprisingly, though, it makes a point to insist that physicians, not nurse practitioners, should lead primary care practices. The important questions are whether nurse practitioners are qualified to independently practice primary care, and whether they can compensate for the primary care physician shortage. On both counts the AAFP thinks the answer is “no.”

AAFP marshals an important argument to bolster its position. Family physicians have four times as much education and training, accumulating an average of 21,700 hours, while nurse practitioners receive 5,350 hours.

It is unclear how this plays out in the real world but, intuitively, we all want physicians in a pinch. Researchers with the Cochrane Database of Systematic Reviews reviewed studies in 2004 and 2009 comparing the relative efficacy of primary care physicians and nurse practitioners. They wrote “appropriately trained nurses can produce as high quality care as primary care doctors and achieve as good health outcomes for patients.” But they also acknowledged that the research was limited.

There is no question that nurse practitioners can provide excellent routine care. For identifying and managing complexity, though, physicians’ far deeper training is a big advantage. In other words, difficult, expensive cases are likely to fare better from a physician’s care.

Continue reading “The Wrong Battles”

By Brian Klepper and Paul Fischer

Excessive health care spending is overwhelming America’s economy, but the subtler truth is that this excess has been largely facilitated by subjugating primary care. A wealth of evidence shows that empowered primary care results in better outcomes at lower cost. Other developed nations have heeded this truth. But US payment policy has undervalued primary care while favoring specialists. The result has been spotty health quality, with costs that are double those in other industrialized countries. How did this happen, and what can we do about it.

American primary care physicians make about half what the average specialist takes home, so only the most idealistic medical students now choose primary care. Over a 30 year career, the average specialist will earn about $3.5 million more. Orthopedic surgeons will make $10 million more. Despite this pay difference, the volume, complexity and risk of primary care work has increased over time. Primary care office visits have, on average, shrunk from 20 minutes to 10 or less, and the next patient could have any disease, presenting in any way.

By contrast, specialists’ work most often has a narrower, repetitive focus, but with richer financial rewards. Ophthalmologists may line up 25 cataract operations at a time, earning 12.5 times a primary care doctor’s hourly rate for what may be less challenging or risky work.

Continue reading “The Most Powerful Health Care Group You’ve Never Heard Of”

By Brian Klepper

Several years ago I had dinner with a woman who had served in the late 1990s as the national Chief Medical Officer of a major health plan. At the time, she said, she had developed a strategic initiative that called for abandoning the plan’s utilization review and medical management efforts, which had produced heartburn and a backlash among both physicians and patients. Instead, the idea was to retrospectively analyze utilization to identify unnecessary care.

This was at the height of anti-managed care fervor. A popular movie at the time, As Good As It Gets, cast Helen Hunt as the mother of a sick kid. When someone mentioned an HMO, Ms. Hunt’s character let fly a flurry of expletives. America’s theater audiences exploded in applause.

Apparently, the health plan’s senior management team bought into cutting back on medical management but saw no need for retrospective review. After all, if the health plan abandoned actions against inappropriate services, utilization and cost would explode. Fully insured health plans make a percentage of total expenditures, so more services, appropriate or not, meant the plan’s profits would increase.

And that’s how it played out. Virtually all health plans followed suit, dismantling the aggressive medical management that had been managed care’s core mechanism in driving appropriateness. In the years following 1998, health plan premium inflation grew significantly, for a short period reaching 5.5 times general inflation, but averaging 4 times general inflation through today. Medical management became all but a lost, or at least a scarce, discipline in American health care, which is its status now.
Continue reading “Why Medical Management Will Re-Emerge”