NEW @ THCB PRESS: Surviving Workplace Wellness. Spring 2014. Al Lewis and Vik Khanna. e-book edition. # LIGHTHOUSE Healthcare. Illuminated.

Hip Replacement


Mitt Romney’s/Paul Ryan’s premium support/voucher plan was heavily derided during the dark days of Campaign 2012, but the devil was always more in the details than the theory. While the re-election of President Obama left premium support dead on the Medicare level, health insurers are increasingly turning to the ideas that drove it – choice, competition, and the power of a (carefully regulated) market – to address high costs on the procedural level. Call it the micro-voucherization of health insurance.

This is known by wonks as reference pricing, and its recent results in California are promising: the costs of hip and knee replacements fell by 19%, with no attendant decrease in quality. Using reference pricing is an assault on the status quo that holds the promise of “bending the curve” in a meaningful way, but it faces technical and political concerns that may consign it to the graveyard of promising-but-unfulfilled ideas.

Broadly-speaking, reference pricing is the act of offering a set amount of money for the purchase of a good, where the reference is an amount that can reasonably said to offer meaningful coverage for that good. Sometimes, reference pricing is focused on a given procedure – what I’ll refer to as “inputs-oriented reference pricing”; other times, a given outcome, or “outputs-based reference pricing.”

That’s pretty vague, so let’s use the colonoscopy procedure (which has recently received a lot of attention thanks to an informative New York Times article) to help color this in. The inputs-oriented approach would see the payer asking: given the choice to have a colonoscopy – a procedure which varies wildly in cost without varying wildly in quality – what’s a reasonable price to pay? It would decide this based on some combination of price, quality, and geography, and would inform consumers of its spending cap.

Say it finds that most of its insured population can reasonably access a high-quality colonoscopy for $10,000; if a consumer choose provider that charges $15,000, he or she would pay the $5,000 difference out of pocket. Choice is preserved, but at a cost. The simple chart above shows how this may work.

But, if you read the colonoscopy article, you may be asking a separate question: why pay for a colonoscopy at all?

Continue reading “Bending the Cost Curve with Reference Pricing”

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She was 94 years old with advanced Alzheimer’s. She thought it was 1954 and asked if I wanted tea. Not a bad memory for someone in a hospital bed with a broken left hip.

She’d fallen at her assisted living facility. It was the second time in as many months. She’d broken her collarbone on the previous occasion.

Over the past year, she’d lost thirty pounds. This is natural in the progression of Alzheimer’s. But it’s upsetting to families all the same.

My patient was lucky. She’d lived to 94, and had supportive children who were involved in her care. Her son had long ago been designated as power-of-attorney for her health care. This meant officially that his decisions regarding her care were binding. She was not capable of making sound decisions, medical or otherwise.

The patient had been under the care of a geriatrician. His office chart told me that the option of hospice and palliative care had been discussed with the family. They were interested in learning more; the son had agreed that “Do Not Resuscitate” status was appropriate for his mother. Doing chest compressions on a frail 94 year-old is something none of us want to do.

The morning after her hospital admission for the broken hip, the medical intern called me with an ethical dilemma: “She’s DNR,” the intern explained. “She’s having intermittent VTach on the monitor, and I fear she won’t be stable enough to have the hip repaired. The family is open to the idea of hospice, but I don’t know whether to treat the arrhythmia or not.”

Elaine (not her real name) is one of our brightest interns. She’s thinking about going into geriatrics. Situations like this are in many ways the most meaningful for doctors. Too often we stress about minutiae at the expense of the big picture; helping guide a family and patient through a period of critical illness is of true service.

Continue reading “Building a Better Health Care System: End of Life Care – A Case Study”

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