By AL LEWIS

Politicians and pundits everywhere call for more disease prevention as a way to reduce healthcare costs. Certainly you cannot argue with the logic that “an ounce of prevention is worth a pound of cure.”

Or can you? It turns out that you can not only argue against that so-called logic, but – just as with cancer detection, which may have been done to excess in some protocols — you can mathematically prove that, at least for asthma, it takes a pound of prevention to avoid an ounce of cure.

The database of the Disease Management Purchasing Consortium Inc. (www.dismgmt.com) tracks both asthma drugs and visits to the emergency room (ER) and hospital stays associated with asthma. The average cost of an attack requiring an ER visit or inpatient stay is about $2000. The average cost to fill a prescription to prevent or recover from an asthma attack is about $100. It turns out that asthma attacks serious enough to send someone to the ER or hospital are rare indeed. In the commercially insured population, these attacks happen only about 3-4 times a year for every thousand people. (The rate is much greater for children insured by Medicaid; additional resources spent on prevention could very well be cost-effective for them.)

For a million-member health plan, that might be 3000 or 4000 attacks Yet that same million-member health plan is paying for hundreds of thousands of prescriptions designed to prevent or recover from asthma attacks. Depending on the health plan, the ratio of drugs prescribed to asthma events serious enough to generate an ER or hospital claim ranges from 60-to-1 to 133-to-1. Using those statistics of $2000 per event and $100 per prescription, a health plan would pay, on average, anywhere from $6000 to $13,300 to prescribe enough incremental drugs to enough incremental people to prevent a $2000 attack.

Averages lump together people at all risk levels. Surely some of those people really are at high enough risk of an attack that they are already inhaling their drugs regularly to prevent one, and have a “rescue inhaler” nearby. By definition their risk of attack is much greater than for low-risk people. Assume, very conservatively, that low-risk patients have a risk of attack which is half that of the average patient. This means that putting most low-risk patients on drugs costs $12,000 to $26,600 for every $2000 attack prevented.

Continue reading “Can Too Much Preventive Care Be Hazardous to Your Health?”

By ROBERT LASZEWSKI

The Obama administration just released another set of regulations, the “Draft Notice of Benefit and Payment Parameters for 2014.”

Among many other things in the 373 pages, they have announced their proposed assessments to cover the cost of running the federal exchange.

In order for the feds to administer the new insurance exchanges, they have proposed a fee of 3.5% of premium on each insurance policy sold in the exchanges (page 224).

This from the Kaiser Foundation 2011 “Primer” on Medicare:
“The costs of administering the Medicare program have remained low over the years––less than 2% of program expenditures.”

Many times over the years I have heard from advocates of a single-payer Canadian-style health plan that Medicare proves the federal government can do it cheaper than the private sector and should therefore take it all over.

So much for the notion that the feds are the model of insurance efficiency.

Under the new health care law’s Minimum Loss Ratio (MLR) provisions, insurance companies are limited to no more than 20% of premiums for expenses in the small group and individual markets.

Continue reading “Inside Baseball: Getting the Federal Exchange Right”

Many observers believe that the economic realities of the food supply chain contribute to public health problems from heart disease to diabetes. A look at the disturbing economics of the Cheeseburger economy from the Center for Investigative Reporting.

Via The Center For Investigative Reporting.

See Also: The Economist Big Mac Index

By JOHN R. GRAHAM

One of the great myths about American society is that our lack of a “universal” health plan harms our competitiveness.  The masters of this refrain, of course, are the American automakers.  Years before driving themselves into bankruptcy and the unwelcoming arms of their new owners, the American taxpayers, they used to claim that they spent up to $1,600 per car on health care.  This was more than they spent on steel, and a multiple of what they claimed their foreign competitors spent.  In her well received book, Who Killed Health Care? America’s $2 Trillion Medical Problem – And the Consumer-Driven Cure (New York, NY: McGraw-Hill, 2007), Professor Regina Herzlinger of Harvard Business School claims that these complaints are inflated (pp. 104-105).

Furthermore, we don’t hear Mark Zuckerberg complaining that Facebook’s health care costs are preventing him from competing against foreign social-media businesses.  Indeed, while all Americans complain about health costs, the argument that our health “system” reduces our competitiveness versus other countries with “universal” health care is actually quite weak.  Indeed, the percentage of all firms offering health benefits actually increased from 66 percent in 1999 to 69 percent in 2010, and a greater number of smaller firms have begun to offer health benefits, according to the Kaiser Family Foundation.

One oft-cited metric is that the United States spends far more on health than other countries as a share of Gross Domestic Product (GDP).  But this measurement can mislead.  It is a ratio composed of a numerator and a denominator.  The numerator – the real cost of medical care – has grown slightly slower in the U.S. than Europe.  Advocates of government monopoly health care point out that Canadian and U.S. health spending as a share of GDP was about the same before the Canadian government took over health care, but diverged starting in 1970, soon after the government completed its takeover.  They present this as evidence that the state can control costs better than the private sector.  However, real GDP growth in Canada dramatically outpaced U.S. growth between 1969 and 1987, meaning that the denominator of the health spending per GDP ratio grew much faster in Canada, not that the numerator grew much slower, according to research by Professor Brian Ferguson.

Continue reading “U.S. Health Care & U.S. Productivity: A Dissent”

By JOHN GOODMAN, PhD

Did you know that Hispanic Americans live longer than non-Hispanic whites? If that doesn’t knock your socks off, consider this: American Hispanics are three times as likely to be uninsured as non-Hispanic whites.

If you’re still not blown away, maybe you haven’t been following the twists and turns of the health policy debate. As I wrote at my blog the other day, the Centers for Disease Control (CDC) discovery that Hispanics (one-third of whom are uninsured) have a life expectancy that is 2 1/2 years longer than whites (90% of whom have health insurance) makes mincemeat out of the oft-repeated idea that the uninsured get less health care and die earlier than everyone else.

In support of the conventional wisdom, for example, the Physicians for a National Health Care Program (PNHCP) went so far as to claim that a whopping 45,000 people die every year because they are uninsured. That figure, repeated as though it were unquestioned fact by President Obama and most of the health care media, is almost as large as the number of American soldiers killed in the entire Vietnam War!

Families USA went so far as to make the astounding claim that 6 people die every day in Florida because they are uninsured. Eight die every day in California; and 25 die in New York. In Texas, the report implies that more people die every two months from lack of health insurance than the number killed at the battle of the Alamo (counting only losses on our side, that is). Nationwide, says the PNHCP, an uninsured person dies every 12 minutes.

Continue reading “Health Insurance and Life Expectancy”

By LUCAS RESTREPO, MD

Last week, the fire department of a small town in Tennessee called South Fulton ignored the call of a man who needed help quelling a fire near his house. The firefighters declined lending a hand because the caller neglected to pay a $75 bill, the prerequisite for deserving assistance. The caller tried to put down the fire with a garden hose, but after two hours, his house caught on fire. When the property of a neighbor who had paid the $75 became threatened by the flames, the gallant firemen promptly answered the call of duty. The brave public servants prevented the flames from spreading to the property of their responsible contributor, carefully avoiding to suppress the conflagration’s source. Someone has to teach a lesson to the free-loaders in our society, explains a high-minded commentator.

Our health care system works exactly like South Fulton’s worthy fire department: we are entitled to health care only if we have money or qualify for Medicare or Medicaid. If you don’t have money, your health entirely depends on the charity of health care providers, who, as our admirable firefighters, may refuse to help.

I wish to argue that, besides being cruel and inhumane, the “South Fulton health care model” is a latent threat to society. The cost and effort of preventive medicine and basic primary care (fire prevention, putting down a small fire) is less than dealing with instances of end-organ failure (a house in flames). Moreover, having uninsured people (not aiming water to the fire source) creates a constant economic liability to responsible costumers (the neighborhood). On the other hand, why should someone become a doctor, nurse, or health insurance company founder (a firefighter) without being an altruist? Do firefighters dream of wealth and leisure?

The costs of not doing anything about a burning house are always paid in full by society ―and some costs are not immediately apparent. Who loves the sight and smell of a charred landscape? Where will the man live now that he has no house? Will he react violently to the inaction of the firemen? Will the reputation of the fire department (and the city’s) go up in smoke?

Continue reading “Suing the Right to Life”

By ROBERT REICH

John Boehner, the Republican House leader who will become Speaker if Democrats lose control of the House in the upcoming midterms, recently offered his solution to the current economic crisis: “Liquidate labor, liquidate stocks, liquidate the farmer, liquidate real estate. It will purge the rottenness out of the system. People will work harder, lead a more moral life.”

Actually, those weren’t Boehner’s words. They were uttered by Herbert Hoover’s treasury secretary, millionaire industrialist Andrew Mellon, after the Great Crash of 1929.

But they might as well have been Boehner’s because Hoover’s and Mellon’s means of purging the rottenness was by doing exactly what Boehner and his colleagues are now calling for: shrink government, cut the federal deficit, reduce the national debt, and balance the budget.

And we all know what happened after 1929, at least until FDR reversed course.

Continue reading “Republican Economics as Social Darwinism”

By PAUL LEVY

Recent trends in radiology imaging portend a dramatic and rapid reduction in this segment of a hospital’s business plan. Even before capitated (or global) payments have come into full play, there has been a large reduction in the number of some types of imaging studies in hospitals.

Our Chief of Radiology summarizes our experience — common to other hospitals as well — and provides some of the reasons.

The biggest hit has been in CT, the modality we are most dependent on for revenue. We are about 10% down in CT cases from last year, due to a combination of patient and physician fears about radiation exposure, more prudent ordering of studies by physicians, leakage out of the medical center, and the introduction of physician incentive programs (to minimize the amount of imaging) by some insurers.

Also, and very surprising, we have not seen an upswing in ultrasound or MRI to match the CT volume drop. We have, however, seen an increase in the number of patients arriving with their scans on CD ROMS having been imaged at other lower priced vendors. We don’t bill for these interpretations even though we are frequently asked to reinterpret the studies for our clinicians, and BIDMC is paying to store these images on our PACS systems.

By the way, this occurred while our overall patient volume increased during the same period.

The result of these trends will be to reduce the number of radiologists working in hospitals, and there will also probably result in a reduction of salaries for this physician specialty.

Paul Levy is the President and CEO of Beth Israel Deaconess Medical Center in Boston. Paul recently became the focus of much media attention when he decided to publish infection rates at his hospital, despite the fact that under Massachusetts law he is not yet required to do so. For the past three years he has blogged about his experiences in an online journal, Running a Hospital, one of the few blogs we know of maintained by a senior hospital executive.

By David Dranove 

If you have read my earlier blogs, you know that I am writing a book about the organization of healthcare delivery. A recent story in the Chicago Tribune reminds me that I need to keep my nose to the grindstone. The article told of changes underway at Northwestern Memorial Hospital. In order to prepare for new payment models, the medical staff and hospital want to create something along the lines of an Accountable Care Organization. The ACO will accept an “all-in” fee for treatment of specific conditions. The ACO makes money if it can keep costs under the fee and receives bonuses if quality objectives are met. The ACO model, or versions of it, have floated around for some time, and prepayment is certainly not new. What is new is that payers will now prepay for all costs associated with episodes of care, as opposed to prepaying hospitals for inpatient stays, or prepaying primary care physicians for a year of primary care.

The ACO model tries to better align the payment modality with the “product” that patients would naturally purchase. This should, in theory, lead to a matching of incentives with production. Hospital prepayment leads to a shift to outpatient care. Primary care physician prepayment leads to too much hospital care. Episode of illness prepayment should eliminate these gaming incentives.

Northwestern Memorial and its medical staff still face a dilemma. Should they create a new third legal entity to accept the prepayment, or should the prepayment go directly to the hospital or medical foundation? More importantly, should the hospital and medical foundation become partners in the new venture, or, more radically, unite into a single entity without creating the new entity? Healthcare executives have not always approached this question in the most thoughtful manner, as this short film painfully shows. (Painfully funny if you approach it with the right mindset.)

Integration has many positive connotations, and executives who create new integrated organizations can usually keep their boards at bay. This may explain why so many executives are eager to integrate. But integration comes with numerous challenges. It will take an entire book to make this argument clear, but consider the following two questions. First, what happens when physicians switch from being entrepreneurs to being employees? Second, accepting all-in capitated payments turns the ACO into a de facto insurance company. Will the ACO have the capabilities to be an effective insurer? I hope that Northwestern Memorial does not face the future with its eyes wide shut. Many hospitals have fared quite poorly by jumping on the integration bandwagon without understanding the risks.

David Dranove is the Walter McNerney Distinguished Professor of Health Industry Management at Northwestern University's Kellogg Graduate School of Management, where he is also Professor of Management and Strategy and Director of the Health Enterprise Management Program. He has published over 80 research articles and book chapters and written five books, including "The Economic Evolution of American Healthcare and Code Red". He has a Ph.D. in Economics from Stanford University.

By DAVID WENNBERG, MD

The results are in: population-based care management doesn’t just improve patient satisfaction – it also can significantly reduce medical costs.

It is widely known that chronic disease accounts for 75% of the total cost of healthcare in the United States. In the late 1990s, the care management industry grew out of the need to combat this problem, by increasing medication compliance, reducing gaps in care, and helping individuals become more empowered to actively manage their own health.

Care management programs have long been shown to increase medication compliance and use of other preventative services, and individuals who participate in care management programs find them extremely valuable. Yet the care management industry has always faced challenges in verifiably demonstrating the effectiveness of its programs in  reducing medical costs. Several methodologies have been created to attempt to reverse-engineer a calculation of savings delivered by care management programs, but the gold standard of healthcare effectiveness measures, a randomized controlled trial, has rarely been done and none in a large population.

I’m pleased to say that this is no longer the case. A study from Health Dialog appearing in the New England Journal of Medicine today, uses a randomized controlled trial to definitively show the savings delivered by an enhanced care management program. The trial looked at 174,120 individuals over twelve months, measuring those individuals’ health outcomes and the total savings as a result of an enhanced care management program. The program included chronic condition management and patient decision support programs, and these services were delivered telephonically as well as online. Continue reading “New Study Proves Reducing Healthcare Costs While Improving Care Is Achievable”