By Jeff Goldsmith

Partisan gridlock in Washington regarding health policy has been so pervasive and bitter that any bipartisan co-operation on any important health issue should be applauded by a frustrated public.

That is why the emerging bipartisan compromise regarding the fifteen-year long policy embarrassment known as the Sustainable Growth Rate (SGR) problem needs to be taken seriously.

Remarkably similar solutions — a new hybrid physician “value-based” payment methodology — have emerged from three of the four key committees in Congress, and seemingly the only stumbling block is finding the $115-120 billion to pay for it.

Moreover, key physician interest groups, including the American Medical Association, appear to have signed off on this approach.

This makes it all the more troubling that the approach taken is unsound health policy that will damage practicing physicians in diverse settings: private practice, medical school practice plans, and hospital employment.

This is because the proposed legislation casts in concrete an almost laughably complex and expensive clinical record-keeping regime, while preserving the very volume-enhancing features of fee-for-service payment that caused the SGR problem in the first place. The cure is actually worse, and potentially more expensive, that the disease we have now.

The SGR fix would basically freeze or severely limit future physician fee updates for Medicare Part B (a serious problem for primary care), while permitting physicians to earn modest “value-based” bonuses if they can document quality measure attainment, cost reductions, participation in alternative payment schemes, practice enhancement activities, or meaningful use of EHRs.

Physicians who meet all these standards could expect to supplement their existing Part B fee by about 4 percent in 2016, going to 10 percent in 2020, with the aggregate bonuses subtracted from the pool of total Part B physician payments to preserve budget neutrality.  Non-compliant physicians would see corresponding reductions in their updates.

There are sensible opt-outs for physicians who can report in groups, virtual or real, as well as for physicians who participate in as yet unspecified “advanced payment models” (APMs).
Continue reading “Why the SGR Fix Won’t Work and Could Actually Make Things Worse”

By Jeff Goldsmith

After half a lifetime of following the Medicare program, on October 1, 2013, I became a Medicare beneficiary.  I turned 65 on October 31.   I’m part of the leading edge of baby boomers joining the program, ten thousand a day.   We’re going to change this program, both by how we use it and what we expect its keepers in Washington to do to improve it.

Here are some reflections upon joining Medicare.

1-Don’t Refer to Me as “Retired”, Please. I’m still working (hard) and paying Medicare as well as income taxes taxes every month.   Like most of my fellow boomers, I lack the financial cushion I want in order to stop working.  Additionally, for what it’s worth, like all too many boomers, I don’t know how not to work.   So my main goal, which is closely aligned with the country’s,  is to stay healthy enough to keep working long enough to be able to retire comfortably when I wish to do so.

I plan on staying a long way away from the expensive parts of our healthcare system, if only to avoid being inadvertently harmed.  Rest assured that if I know I’m dying, you won’t find me in a hospital if I have any say in the matter.

I don’t consider myself “entitled” to Medicare, or to subsidies from younger people.  I’m paying more than $400 a month in Part B fees and the special assessment on Part D that got tacked on in the Affordable Care Act.   After what I’ve already paid in, that’s not exactly a flaming bargain.  I’ve paid Medicare enough over my working lifetime to buy a  house, and will pay more Medicare taxes for years to come for each month that I work. Nothing makes me angrier than the suggestion that I’m somehow sponging off my kids by participating in Medicare.

2- The Regular Medicare Program is a Relic. There is a lot of political fog enshrouding Medicare.  Personally, I could care less about the politics of this program.  The big choice was fairly cut and dried:  either regular Medicare plus a supplemental plan or Medicare Advantage.   After logging onto Medicare.gov, I found the regular Medicare benefit completely incomprehensible- chopped up into Parts that may have made legislative sense in the 1960’s.  If you included the supplemental coverage,  there were just too many moving parts that didn’t seem to fit together into a unified benefit.

So I chose Medicare Advantage. It’s simple to understand and user-friendly, and looks a lot like my previous coverage.   My doctor is a participating physician as is my beloved community hospital, Martha Jefferson.   And the price is right:  zero dollars after my Part B premium. More than 40% of boomers are picking Medicare Advantage, largely because it’s easy to use and remains a bargain. It will eventually be half the program.

Continue reading “What I Expect From the Medicare Program”

By Jeff Goldsmith

On July 16, the CMS Innovation Center reported the first-year results for the Pioneer Accountable Care Organization program:  13 Pioneers, or about 40 percent of the participants, earned bonuses. The program saved Medicare a gross $87.6 million before bonus distributions, cutting the rate of growth in Medicare spending by 0.5 percent, from 0.8 percent to 0.3 percent annually.

However, nine of the 32 members dropped out and press reports hinted at a contentious relationship between the Pioneers and a well meaning but green and overtaxed CMS staff.  It was not an auspicious beginning for a program whose advocates believed would eventually replace regular Medicare’s present payment model. There immediately followed a blizzard of spin control from ACO “movement” advocates stressing the need for patience and highlighting first year achievements.

What was irritating about the Pioneer spin is it treated the ACO as if it were a brand new idea with growing pains. This studiously ignores a burned out Conestoga wagon pushed to the side of the trail: the Physician Group Practice demonstration CMS conducted from 2005-2010. The PGP demo tested essentially the same idea — provider bonuses for meeting spending reduction and quality improvement targets for attributed Medicare patients.  The pattern of arrow holes and burn marks on the PGP wagon closely resemble those from the Pioneer’s first year, strongly suggesting more troubles ahead for the hardy, surviving Pioneers.

The PGP Precedent. Like the Pioneers, PGP participants were not ordinary community hospitals or freshly formed physician groups or IPA’s.  Rather, most were “high functioning” organized clinical enterprises, some with decades of global risk contracting or health plan operating experience.  Particularly in light of the degree of clinical integration and care management experience of its participants, the PGP results were extremely disappointing; only two of the ten participants were able to generate bonuses in each of the program’s five years, and one, Marshfield Clinic, earned half the total bonuses.  Managed care veterans like Geisinger Clinic and Park Nicollet earned bonuses in only three of their ten program years. Two other high-quality multi-specialty clinics had even rougher sledding, with Everett Clinic getting one year of bonus ($126,000) and Billings Clinic completely shut out.

The pattern in the first Pioneer year is remarkably similar.   While thirteen of the Pioneers earned bonuses, it appears from press reports that four of them generated 2/3 of the savings.   It is likely not coincidental that three of those four participants (Massachusetts General, Beth Israel Deaconess’ physician organization, and New York’s Montefiore) either run or practice at some of the most expensive hospitals in the country, in two of the country’s highest per capita Medicare spending markets.  Orchards full of low hanging fruit (e.g. very high levels of previously unexamined Medicare spending) appear to be an essential precondition of ACO success.

Continue reading “Pioneer ACO’s Disappointing First Year”

By Jeff Goldsmith

One hesitates to make too much of a single report, but the Altarum Institute’s July Report, “Health Care Price Growth at 20+ Year Low,” certainly commands one’s attention.  According to Altarum’s analysis, the health sector pricing trend ran at a 1.0 percent annual rate in May 2013, lowest since January of 1990.  What is striking about Altarum’s health care pricing trendline is that it has declined for the last three years in spite of an alleged economic recovery.

It also runs parallel to a subsiding utilization trend, suggesting that the health sector has been unable to offset reduced utilization with price increases.  Since the beginning of the recession, pricing has subsided from double the rate of the GDP deflator to parity, and it has closely tracked the deflator with only two deviations for more than eight years. Clearly, something more than the recession is at work here.

These trendlines confirm what this observer sees from his contacts in multiple sectors of the health industry:  a widespread and durable “top line flu”.  The growth in enterprise revenue for most health providers and manufacturers has been static (e.g. very low single digits or actually declining) over the last two years.  Most investor-owned hospitals, pharmaceutical companies, device manufacturers, and physician practices (pretty much everyone except the consultants and IT vendors) have reported both revenue stasis and earnings compression.

My economist friends point to rising consumer copayments as inhibiting price increases.  The Kaiser Family Foundation has reported almost a quadrupling of the number of covered workers in high deductible health plans (from 5 percent to 19 percent) since the end of the recession.  It is also possible that a disinflationary mindset has inhibited providers and suppliers from seeking outsized price increases to compensate for lost sales volume.  For suppliers, the marked decline of “physician preference” marketing has also hurt both sales and margins.

Hospital pricing. Performance of hospital prices will provide more fodder for those concerned about hospital consolidation pushing prices up.  On the one hand, overall hospital prices rose an annualized 1.8 percent for May 2013, fractionally higher than the consumer price index (CPI) at 1.4 percent.  However, when one strips out the “administered price” portion (Medicaid and Medicare), hospital prices to privately insured patients rose 4.8 percent annualized in May, nearly five times rate of health prices as a whole.  Altarum suggests that cost shifting might explain this significant disparity.  However, even this increase to private patients was not enough to raise overall health costs significantly.

Government payment to hospitals has trended lower for multiple reasons.   Many state Medicaid plans have cut hospital rates in the past several years to help balance state budgets.  And in addition to the ACA’s mandated reductions in hospitals’ disproportionate share payments and DRG updates, the sequester took a significant further bite out of DRG payments during the winter.

Since most hospital contracts with private insurers are multi-year, it’s difficult to argue that compensating upward revisions in private health insurance contract rates would yet be reflected in national economic statistics.  Moreover, not all hospitals are part of systems capable of exerting pricing power on private health plans.  Have-not hospitals have had their prices constrained by payer contracts, compensating for the effect of leverage by market hegemons.  We’ll have more evidence in a year to confirm or disconfirm the cost shifting/pricing power hypothesis.

There’s another indicator of a tougher hospital pricing environment.  According to the Advisory Board’s Dan Diamond, hospital employment has actually contracted in one-quarter of the monthly jobs reports from the Bureau of Labor Statistics since January 2009, including a 6000 person force reduction in May, 2013.  On balance, hospital executives would much rather raise rates than lay off staff, so the fact that the nearly unbroken decades-long expansion of hospital headcounts is faltering suggests a very difficult pricing environment for hospital services.

Continue reading “Is Health Industry Price Inflation Really At a Historical Low?”

By Jeff Goldsmith

There has been a lot of controversy in health policy circles recently about hospital market consolidation and its effect on costs.  However, less noticed than the quickened pace of industry consolidation is a more puzzling and largely unremarked-upon development:  hospitals seem to have hit the wall in technological innovation.   One can wonder if the two phenomena are related somehow.

During the last three decades of the twentieth century, health policymakers warned constantly that medical technology was driving up costs inexorably, and that unless we could somehow harness technological change, we’d be forced to ration care.  The most prominent statement of this thesis was Henry Aaron and William Schwartz’s Painful Prescription (1984).  Advocates of technological change argued that higher prices for care were justified by substantial qualitative improvements in hospitals’ output.

Perhaps policymakers should be careful what they wish for.  The care provided in the American hospital of 2013 seems eerily similar to that of the hospital of the year 2000, albeit far more expensive.    This is despite some powerful incentives for manufacturers and inventors to innovate (like an aging boomer generation, advances in materials, and a revolution in genetics), and the widespread persistence of  fee for service insurance payment that rewards hospitals for offering a more complex product.

Technology junkies should feel free to quarrel with these observations.  But the last major new imaging platform in the health system was PET , which was introduced into hospital use in the early 1990’s.  Though fusion technologies like PET/CT and PET/MR were introduced later, the last “got to have it” major imaging product was the 64 slice CT Scanner, which was introduced in 1998.  Both PET and CT angiography were subjects of fierce controversy over CMS decisions to pay for the services.

Continue reading “Hospitals’ Twenty First Century Time Warp”

By Leslie Kernisan, MD

A few weeks ago, The Health Care Blog published a truly outstanding commentary by Jeff Goldsmith, on why practice redesign isn’t going to solve the primary care shortage. In the post, Goldsmith explains why a proposed model of high-volume primary care practice — having docs see even more patients per day, and grouping them in pods — is unlikely to be accepted by either tomorrow’s doctors or tomorrow’s boomer patients. He points out that we are replacing a generation of workaholic boomer PCPs with ”Gen Y physicians with a revealed preference for 35-hour work weeks.” (Guilty as charged.) Goldsmith ends by predicting a “horrendous shortfall” of front-line clinicians in the next decade.

Now, not everyone believes that a shortfall of PCPs is a serious problem.

However, if you believe, as I do, that the most pressing health services problems to solve pertain to Medicare, then a shortfall of PCPs is a very serious problem indeed.

So serious that maybe it’s time to consider the unthinkable: encouraging clinicians to become Medicare PCPs by aligning the job with a 35 hour work week.

I can already hear all clinicians and readers older than myself harrumphing, but bear with me and let’s see if I can make a persuasive case for this.

Continue reading “An Indecent Proposal That Just Might Solve the Primary Care Crisis: Meet the 35 Hour Work Week”

By Jeff Goldsmith

Most experts agree that primary care needs to be re-invented.  There are a lot of promising ingredients of practice redesign:  better scheduling, electronic medical records with patient portals, redesigned clinician workflow, and work sharing.  Linda Green’s intriguing article in the January Health Affairs simulates a strategic combination of these changes and argues if they all happened at once, we would have no primary care physician shortage.

Even if we make much more effective use of clinical time and energy, however, Green’s formula isn’t going to get us far enough fast enough.  The baby boom generation of physicians is fast nearing its “sell by” date.  In 2010, one quarter of the 242,000 primary care physicians in the US were 56 or older.  One in six general internists left their practices in mid-career.  Many more hardworking clinicians delayed retirement due to the 2008 financial collapse.

Continue reading “Practice Redesign Isn’t Going To Erase The Primary Care Shortage”

By Jeff Goldsmith

For the third year in a row, national health spending in 2011 grew less than 4 percent, according to the CMS Office of the Actuary.  However, the report said modest rebounds in pharmaceutical spending and physician visits pointed toward an acceleration of costs in 2012 and beyond.  CMS’s analysts make much of the cyclical character of health spending’s relationship to economic growth and also forecast a doubling of cost growth in 2014 to coincide with the implementation of health reform.

This non-economist respectfully disagrees and believes the pause could be more durable, even after 2014.   Something deeper and more troublesome than the recession is at work here.  As observed last year, the health spending curve actually bent downward a decade ago, four years before the economic crisis. Health cost growth has now spent three years at a pre-Medicare (indeed, a pre-Kennedy Administration) low.

More Than The Recession Is At Work

Hospital inpatient admissions have been flat for nine years, and down for the past two, despite compelling incentives for hospitals to admit more patients. Even hospital outpatient volumes flat-lined in 2010 and 2011, after, seemingly, decades of near double-digit growth.  Physician office visits peaked eight years ago, in 2005, and fell 10 percent from 2009 to 2011 before a modest rebound late in 2011 — all this despite the irresistible power of fee-for-service incentives to induce demand.

The modest rebound in pharmaceutical spending (2.9 percent growth) in 2011 appears to have been a blip.  IMS Health reports that US pharmaceutical sales actually shrank in 2012, for the first time in recorded history, and that generic drugs vaulted to the high 70s as a percent of prescriptions!

There is no question that the recession’s 7-million increase in the uninsured depressed cost growth.  But the main reason health cost growth has been slowing for ten years is the steadily growing number of Americans — insured or otherwise — that cannot afford to use the health system.  The cost of health care may have played an unscripted role in the 2008 economic collapse.  A 2011 analysis published in Health Affairs found that after accounting for increased health premium contributions, out-of-pocket spending growth and general inflation, families had a princely $95 more a month to spend on non-health items in 2009 than a decade earlier.  To maintain their living standards, families doubled their household debt in just five years (2003-2008), a debt load that proved unsustainable.  When consumers began defaulting on their mortgages, credit cards and car loans, the resultant chain reaction brought down our financial markets, and nearly resulted in a depression.

By sucking up consumers’ income since 2008, the rising cost of health benefits has weighed heavily upon the recovery.  According to the 2012 Milliman Cost Index, the cost of health coverage rose by 32.8 percent from 2008 to 2012, while family income did not grow at all in real terms.  The total cost (employer and employee contributions plus OOP spending) of a standard PPO policy for a US family of four was $20,700, almost 42 percent of the US household median income in 2012.

Continue reading “The Gold Plated Health Care System: What the New Numbers Tell Us about the State of the Economy”

By Jeff Goldsmith

There’s been a lot of recent speculation that more Americans will be taking their elective medical problems overseas. In 2008, Deloitte’s Center for Health Solutions estimated that 750 thousand Americans travelled overseas for medical care in 2007, and forecast a eight-fold increase by 2010 In a 2009 update, Deloitte found that the 2008 financial crisis devastated overseas medical travel, but still forecast 1.6 million US citizens going abroad for medical care in 2012.

Among overseas medical destinations, no facility is mentioned more than Bumrungrad (last syllable rhymes with “hot”) Hospital. Bumrungrad is a privately owned but publicly traded 550 bed acute care hospital in central Bangkok. On a recent trip to Thailand, I stopped at Bumrungrad to find out what all the shouting was about and was really impressed with what I saw.

Bumrungrad’s CEO is a courtly, silver-haired Virginian named Mack Banner, who spent most of his career in the US investor-owned sector. Though the hospital was founded in 1980, it moved into its new facility in 1997, just in time for the Asian financial crisis. The facility was Joint Commission (International) certified in 2002, and one fifth of its physicians are US Board certified in their respective specialties.

In 2008, the hospital opened a beautiful 21 story Clinic building next door, housing 30 specialty clinics and most of its medical staff. Bumrungrad’s Clinic Facility is Mayo-esque, enabling patients with particular specialty problems to be worked up, evaluated and cared for on a single floor. The hospital subsequently renovated its inpatient rooms, which resemble those of the Asian-themed Washington DC Park Hyatt in elegance. The hospital is a sunny, happy place, with apparent high morale and very high service standards. English is spoken widely throughout the hospital.

Continue reading “Accidental Tourist: Visiting the Bumrungrad Hospital in Bangkok”

By Jeff Goldsmith

After a summer of disappointing economic news, the recent Census report on the uninsured was a rare bit of sunshine.  The number of uninsured Americans declined by about 3 percent, or 1.34 million, to 48.6 million in 2011.  This was the largest one-year numerical decline in twelve years.  There were “only” about 1.7 million more uninsured in 2011 than there were in 2006, before the devastating recession.

Medicaid’s vital role. The search for policy fingerprints on these findings points directly to Medicaid. For all the controversy over this program, the safety net did its job.  Medicaid enrollment rose another 4.4 percent in 2011, or 2.2 million people, likely masking continued shrinkage in private insurance coverage.   If Medicaid rolls had not expanded by 10 million folks from 2006 to 2011, the number of uninsured would have soared due to the recession.

Digging deeper into the Census numbers, one surprise was the relatively modest decline in the number of uninsured between the ages of 19 and 25, about 540,000, or about 40 percent of the overall drop. The reported reduction in the uncovered 19-25 year olds falls far short of the 3.1 million newly covered GenY’ers claimed by the Department of Health and Human Services due to the Affordable Care Act’s mandate to retain them on parents’ health policies.

Continue reading “Behind The Numbers, A Diminishing Sense Of Urgency”