Tuesday, December 11, 2018
Blog Page 1031

INDUSTRY: Boutique medicine emerges as an on & off-line niche. Will it be turbocharged by HSAs?


I’m preparing a speech I’m giving next week and I’ve gone back to some of my old charts which essentially said that over time Americans would have less time and more money to deal with our health care (and lives as a whole).  The cause of the less time and most of the "more money" is the disappearance of the (voluntary) stay-at-home spouse.  The additional cause of the more money is the growth in incomes and wealth of higher paid Americans versus the average.

As part of the medical profession’s attempt to deal with the new reality of a higher-end consumer, and as part of the rejection of managed care, some of those physicians who can have made the move towards "boutique medicine". Essentially what that means is they charge an upfront fee for some set of enhanced services to patients that is not billable to an insurer, and thus is paid in cash by patients.  The leading example of this is Howard Maron, M.D., MD2’s founder and ex-team doctor for the Seattle Supersonics who apparently has enabled himself and three colleagues to bill over $1 million each annually by taking care of 100 people at $10,000 each (or $20,000 depending on who you believe)–the patients still carry insurance for labs, hospitalization and other expensive stuff.

    MD2 physicians deliver care not available elsewhere, such as appointments often lasting an hour, extensive preventive care, thorough annual physicals, and even advocacy for patients with payers and other providers. MD2 doctors practice a "proactive, preventive" approach to health, he adds. They also provide the full range of primary care.

    MD2 doctors don’t bill insurers or participate in insurers’ networks, Moses notes. "We encourage the patients to have insurance for everything else" besides primary care, he continues, including hospitalization, specialists and drugs. "This is not a replacement for insurance in any way."

 It sounds great for the docs as the overhead is lower and the revenue is higher than typical primary care.  It doesn’t sound so great for the patients, unless the price of doctor visits is much higher in Seattle than I’ve understood.  But if they can get people to sign up for it, good luck to them–it’s the American way.

More realistically The McKinsey Quarterly had an article a while back about Virginia Mason (also in Seattle) which charges $3,000 a year and has over 850 people signed up.

    For $3,000 a year, it offers individual subscribers 24-hour access to internists by mobile telephone or e-mail, as well as house and office calls by physicians. In addition, the Dare Center’s doctors who see 3 to 8 patients a day, compared with 20 to 25 for their colleagues at health maintenance organizations (HMOs) spend more time with each subscriber. Revenue from subscriptions easily fills the gap between the higher fees charged for the longer, off-hour, off-site consultations and the insurers’ reimbursement payments, which are based on the standard charge for an office visit to an internist during normal hours.

    About 850 people, mostly over 60 years of age, have subscribed, far exceeding expectations, and the Dare Center plans to expand. On average, members use it 7 or 8 times a year, while people in their US age cohort make an average of 6.8 visits to clinics a year.

This may work for some clinics and systems, and they may manage to sail around Medicare laws that ban balanced billing.  But it strikes me that that’s a little too much money to become mainstream.  Some other clinics are offering similar services at a lower price–you can get extended phone and email consults, plus the promise of an appointment the next day from GreenField Health Systems for a mere $350 a year, so long as you move to Portland, Oregon! That seems to me to be closer to what most people might find reasonable to pay, if they are regular visitors to their doctor.  For those who want these type of "concierge services" a company like Health Dialog, which uses the Wennberg technique of Shared Decision-Making. Shared Decision Making "presents patients with evidence-based, unbiased views of their healthcare options, and encourages patients to work with their doctors to choose the healthcare options that are right for them". It also tends to make patients use less health care, and so health plans and employers are happy to pay for it, which is why Health Dialog is growing quite fast and why the other DSM companies like LifeMasters and American Healthways are growing quite fast.

There’s a very limited market of people who can or will pay $10,000 or even $3,000 a year for primary care services.  But $1,000 or $1,500 which covers, say, 10 doctor visits, emails, phone calls, and all the hand-holding you can eat, may be attractive to consumers–especially if doctors stop making phone calls for free (mine does, thanks Dr…no I won’t say his name!). The question I don’t know the answer to is whether people will be able to use their yet to be set-up HSA or Consumer-directed health plan accounts to pay for these boutique care services.  But if the fees counts against the HSA and the deductible, then anything else (more or less) hits against the catastrophic insurance.  So the boutique service is more or less free (assuming that the patient would be making those visits any way). And if a primary care doctor can get 3-400 patients to pay it, well that’s a nice bonus.

So watch this one shake out as doctors try to set up to get into the boutique game at a bargain price and make it work for CDHPs and HSAs. Of course the insurers will try to wriggle out from having these payments count as co-pays or against deductibles.

The bigger question is that, as employers and plans push "consumer choice" onto patients (what Ian Morrison calls "You’re on your own pal!"), how big a phenomenon will boutique medicine be? Or will consumers/patients who are already getting aggravated with having to contribute more for their insurance at work, get really mad when they are asked to pay more for the services that they thought they were already getting from their physicians?

INDUSTRY: Malpractice at Wampum, with UPDATE


An interesting little storm is brewing over at Wampum about malpractice and its role in the latest Tort reform issue. There’s a lot of lefty and righty rhetoric in the comments, and I stuck my 2 cents in about the lack of attention to the defensive medicine issue–which is the only really meaningful and substantial part of the whole debate.  Of course, legislation doesn’t always get passed in this country because of keen insights into meaningful or substantial issues.  However, you should read the whole thing in order to see where the political arguments lie (pun intended).

While you’re there the Koufax awards are a great source for intros into some of the best political blogging on the left side of the American spectrum. (I’m a Brit so I have to use that qualifier!)

UPDATE: DB’s Medical Rants has a quick comment on Wampum’s piece, but the most intelligent pieces are in his comments.

QUALITY: Appendix surgery, too often needless but inevitably so?


I am determined to get back to the conversation on evidence based medicine that I was having with Robert Cantor over at Medical Rants before the holidays. Sadly I’m too gummed up with other work to finish the thoughtful response his last reply to me deserves–although I have subsequently interviewed Michael Millenson, the bete noir of the EBM-deniers (if that’s a term!), who’s last piece The Silence took a pretty hard line with the IOM for not being as aggressive as it should be on the topic.  More to come on that later.

But I remind you that I started this by discussing why evidence-based medicine was so hard to achieve in real world  practice.  This balanced article from the Boston Globe shows that big city hospitals which do lots of procedures on kids do better on reducing the false positive rate for pediatric appendectomies than lower volume hospitals. It seems that it’s pretty hard to get the mistake rate of the big city med centers (still up at around 4.8%) at the local hospital where they don’t see so many and have twice the error rate. The key point in the Pediatrics abstract that’s not in the write up for the lay reader is that two thirds of these pediatric appendectomies are done at the lower volume hospitals, and therefore have the worse results. Yet how many parents want to drive an extra hour or so to a distant hospital when their child is in pain? Does the "centers of excellence" concept make sense for this relatively trivial level of surgery? Is an 8% error level acceptable when the cost is more likely to be financial than medical?  It’s still a tough subject. 

I shall vent later mostly about information use, and this study provides useful information on how we should be tackling this type of procedure.  But it’s a bigger system change to move this type of surgery than to get all the transplants, say,  to high-volume physicians.

HEALTH PLANS: Goldman analyst reads THCB, BusinessWord


OK the headline is bogus, but sometimes I should believe myself. Not too long ago I posted about health insurance and in the middle of that post I wrote this:

    How do health plans make their money?. …..it helps if you are at the top of the underwriting cycle. Sadly for plans we are now somewhere near the top. At least HSC also reports that, in the first half of 2003, health costs only went up 8.3% as opposed to 10% for the last half of 2002. Given that for health plans the last few years have mostly been "cost-plus" actors, there’s slightly less "cost" to "plus" onto.

So my gentle conclusion was the health plan stocks were at the top. Unfortunately I don’t work for Goldman Sachs and so no one noticed. (I know that Don Johnson at The Business Word agrees with me, note what he says about the Wellpoint-Anthem merger, story number 3 in his excellent year end roundup).  However, yesterday (Monday 4th Jan) Matthew Borsch, who does work for Goldman Sachs, figured out that the non-profit Blues were making loads of money and may be pressed to reduce rates next year–a rollback which will create price competition with the for-profit carriers. So the health plan stocks are down heavily, with for example United off 6% and Humana down 7%. And yet again I was too wussy to go short . . . . .

TECHNOLOGY: CSC, Accenture Win Regional Pacts for NHS System


The remaining contracts in the UK’s NHS Care Record Service are being awarded.  The latest contracts are for the east and northwest regions and the big winners are CSC and Accenture. These are huge contracts of over $1.6bn each. In the 1990s Accenture (then known as Andersen Consulting) developed a bit of a bad reputation for not delivering as promised on IT contracts developing claims systems for various Blues plans.  And to be fair they were by no means the only systems house that dissapointed their plan client (for instance EDS as noted in this article). But those expenditures were in the tens of millions not the billions that the NHS will be spending. Now to be fair these huge projects are very difficult to run and manage, so you can’t always expect perfect results.

The UK is not unaware of the risks they’re running and the contracts come complete with fairly aggressive penalty clauses. As it’s such a prominent contract dealing with the UK’s most sacred political cow, you can bet that the government will be paying close attention.  And for those of us on this side of the Atlantic, well, we’ll be looking for clues to see if there are lessons for slower development of clinical records infrastructure in the US.

Meanwhile the NHS story is Health-IT World‘s top story for 2003.  Here are the rest of the Top 10

PHARMA: Drug stocks low risk in the new year?


The AP reported on New Year’s Eve that the rough consensus of analysts is that 2004 will be a reasonable but not great year for the pharma stocks. Those stocks have of course underperformed the S&P over the last year but actually haven’t done too badly over the last 2 years compared to the S&P after their plunge 18 months ago. One potential major problem has been dodged, with a Medicare bill that’s as friendly to the pharmas as possible.  The longer term problem is the paucity of the pipelines, so I’d look for more deals in the biotech sector like the one Pfizer did with Esperion Therapeutics. But of course some time after 2006 when the Medicare coverage comes in, the likelihood of more governenment interference is a risk in the much longer term.

In the shorter term the most interesting stock remains Astra-Zeneca. Since its beautiful technical double bottom in February and March last year A-Z has rallied over 65%.  THCB has reported at length about the potential problems with both Crestor and its struggles with Lipitor. This past weekend the influential finance magazine Barrons essentially came out  warning that A-Z’s rally was overdone, but if you’d shorted A-Z a few months ago when this discussion started, you would be under water. Is it any different now?



Welcome to 2004 at THCB.  I hope to do a revamp to the site in the next few weeks, but I don’t think you’ll see too much change to the way things are run. I don’t think I’ll be adding comments, but please keep those emails coming and please feel free to write pieces that fit into the spirit of THCB. I’ll keep posting them if they’re suitable, whether or not I agree with them. Also please let me know if there are other topics you’d like to see covered in the future.

And in the spirit of New Year Renewal for some years now I’ve written an end of year letter suggesting some charities and issues that I’m supporting. It has nothing to do with health care, but if you’ve got some time I’d be delighted if you took a look and supported some of the charities and causes I feature.



Thanks for reading THCB in 2003. I’m off to see if my knee will hold up to a little gentle snowboarding.  See you next week and happy 2004.

INTERNATIONAL/INDUSTRY–British Surgeons’ Private Fees Highest in World, really?


And in a fun story at the end of the year, Reuters claims that in their private practice British Surgeons charge the Highest fees in the World.  Now I know a little about this given that my father was, until his retirement last year, one of those NHS surgeons who worked 20% time in the private sector.  No question that the private sector was where he made the majority of his income (usually more than double there what he made in his relatively paltry NHS income), and there’s always been some controversy over this arrangement.  But although private fees were high there I’m very surprised that they were really higher than in the US, and specialists there make overall nothing like what specialists here do.  Last year the surgeon fee alone for my serious knee operation was, list price including assistant,  $21,500, and after I negotiated it down to roughly UCR, it was still around $12,000, or $10,000 for the surgeon’s fees alone.  Of course this didn’t count the tissue graft acquisition which was another $5,000 which I’m sure the surgeon’s office made a pass thru on. That was a for a three hour major but relatively routine surgical procedure.

So I asked my dad if he made 6,000 GBP equivalent of $10,000 for the average 3hr period he spent on this private operations and here’s the transcript of his response. "No (bleep) (bleep) (bleep) (bleep)(bleep) (bleep)ing (bleep), and you can (bleep) (bleep) in your (bleep)ing (bleep) and if I did I’d have (bleep)(bleep) (bleep)ing Ferrari, (bleep)(bleep) yacht (bleep)(bleep) house in south of France (bleep)(bleep) private jet (bleep)ing too".  So as they say in the medical literature, perhaps more research is needed!

TECHNOLOGY: Paying for online consults


This fairly routine article about the very slow growth in online (email) consults had one line that made me sit up and pay attention.

    The payment obstacle may be lowered Jan. 1, when the American Medical Association creates a reimbursement code for online communication between doctors and patients.

At the least the more dubious online pharmacies can now double bill the insurers of the patients they’re already charging for the "consults" that get them prescriptions. OK that was just a wisecrack, but one day we may just wake up and find that the adoption of the online email visit as a compensated service just kind of happened– because of this new CPT code.