Category: The Business of Health Care

Why Nobody Believes the Numbers

Jul 22, 2012

MARKETPLACE

Did you know that the “official” industry guidelines for measuring care management outcomes are mathematically certain to overstate savings? And that about half the companies in the DM/wellness marketplace (including carriers) have invalidating mathematical mistakes right on their websites or in their brochures? And that others simply lie? And that the “gatekeepers” who are supposed to prevent these mistakes – leading benefits consulting and actuarial firms – routinely make up savings figures that are simply mathematically impossible and hope they don’t get caught?

This is the first book to treat outcomes as being math-based, not faith-based. It is aimed at the grown-up segment of the marketplace – people who really want to see how much they can save, rather than how much they can be told they can save. A dozen hilarious case studies—and we are naming names — will include:

·         Major carriers who simply make up numbers and dare you to catch them
·         Benefits consulting firms that specialize in “validating” mathematically impossible results
·         Vendors promising savings in excess of the mathematical limit of 100%
·         Carriers/vendors that are either totally clueless and/or think you are…and make up their own metrics like “reduction in undetected claims cost,” leading one to ask how they are able to detect undetected claims cost, and/or how an employee would otherwise have filed an undetected claim

Employers and Health Reform

Jul 21, 2012• 70

By MICHAEL TURPIN

“Change, before you have to…” Jack Welch

We live in a society that loathes uncertainty – particularly the unintended consequences that sometimes result from a catastrophic event or in the case of PPACA, landmark legislation. Wall Street and the private sector crave predictability and find it difficult in uncertain times to coax capital off the sidelines when the overhang of legislation or geopolitical unrest creates the potential for greater risk. Despite our best energies around forecasting and planning, some consequences, particularly unintended ones – only reveal themselves in time.

In the last decade, employers have endured an inflationary period of rising healthcare costs brought on by a host of social, political, economic and organizational failures. There was and remains great anticipation and trepidation as Congress continues to contour the new rules of the road for this next generation’s healthcare system. Optimists believe that reform is both a way forward and a way out of a mounting public debt crisis and a bypass for an economy whose arteries are clogged by the high cost of medical waste, fraud and abuse. Cynics argue reform is merely a Trojan Horse measure that offers an open invitation for employers to drop coverage and for commercial insurers to “hang themselves with their own rope” as costs continue to spiral out of control — leading to an inevitable government takeover of healthcare.

Meanwhile, leading economic indicators are flashing crimson warning signs as recent stop-gap stimulus wears off and long overdue private/public sector deleveraging results in reduced corporate hiring, lower consumer confidence and increased rates of savings. The symptoms of a prolonged economic malaise can be felt in unemployment stubbornly lingering around 9.2% and a stagnating US economy that is struggling to come to grips with the rising cost of entitlement programs. Across the Atlantic, the Euro-Zone is teetering as Italy and Spain (which represent more credit exposure than Greece, Portugal and Ireland combined) stumble toward default. Despite these substantial head winds, US healthcare reform is forging ahead – – right into the teeth of the storm.

Monopoly Anyone? The Battle To Control Health Care

Jul 21, 2012• 137

By DAVID COWLES

Like children gathered around a card table, America’s special interests are engaged in a high stakes game of Monopoly. But the winner of this game gets more than a day or two of bragging rights; this time the spoils are nothing less than control of our health care delivery system for the foreseeable future.

Let’s meet the players: on one side, Big Medicine; across the table, Big Insurance; and between them, Big Government. There’s room at the table for a 4^th player…but we’ll get to that later.

Introducing Big Medicine

To compete in this high-stakes game, Big Medicine is reforming itself into large, multi-disciplinary organizations. Independent hospitals are merging into hospital systems. Hospitals and doctors are coming together as self-regulating Accountable Care Organizations (ACOs).

Crowdsourcing, Price Formation, and Health IT

Jul 20, 2012• 49

By JOHN R. GRAHAM

From the perspective of the average patient, going about his life unconcerned about health policy or economics, what is the most frustrating characteristic of U.S. health insurance? Surely, it is the madness of the billing cycle: Never knowing how much a medical service costs until long after you’ve received it, and sometimes only after a flurry of phone calls and paperwork that can take months to clear up.

This is surely why Michaela Dinan’s “winning entry” in a national essay contest, which invited people to submit anecdotes “illustrating the importance of cost awareness in medicine,” has struck such a chord. Ms. Dinan’s story concerned a billing error for inserting an IUD. Before the procedure, the patient learned (via “a few keystrokes”) that the cash price would have been $843.60. Insured, her out of pocket cost was to have been about $200. Instead, she received a bill for $1,100 that took months to sort out. I suspect that most readers and contributors at The Health Care Blog will use this story as further evidence of the need for a massive national investment in Health IT, along with Patient-Centered Medical Homes, Accountable Care Organizations, adherence to “meaningful use” standards, et cetera.

Priorities for States as Plans for HIXs Move Forward

Jul 20, 2012

By Will Saunders

Many states are in a dash to finalize plans for a Health Insurance Exchange (HIX) following last month’s Supreme Court decision to uphold the Affordable Care Act (ACA). The scramble poses several questions – are Americans ready to participate in exchanges, and will states have enough vendor support to meet the deadlines?

Survey Shows HIX Knowledge Gap among Americans

A recent survey of more than 2,000 U.S. adults conducted online by Harris Interactive on behalf of Xerox asked if they were in need of health insurance, would they consider purchasing it through a HIX. Nearly half (46 percent) were not sure. Another 25 percent said they would not consider using an HIX, while 29 percent said yes.

This is interesting as HIXs are designed to create a more consumer-friendly experience, where people can shop and compare when choosing a health plan, much like Expedia.com finds the best travel fare. However, as consumers are reporting a hesitancy around participating in HIXs, there appears to be a disconnect between the consumer-friendly intent and the knowledge people have of the type of experience and benefits an HIX will bring. While it’s common for people to be unfamiliar with the benefits of new technology until they use it, there is a need for states to quickly fill the knowledge gap around exchanges to show consumers they will deliver the desired experience.

ObamaCare and the End of Nothing

Jun 20, 2012• 15

By JD Kleinke

“The only constant in health care is change.”

It’s one of those clichés peddled at health care industry conferences by consultants who charge by the hour for helping attendees brace their organizations for all those terrifying changes just over the horizon. Not only is this cliche not true, but it is exactly untrue. The only constant in health care is gnawing anxiety about change that never actually occurs.

The Obama Administration’s health care reform plan – we can all call it “ObamaCare” now that the Administration finally owns the label it should have from the outset – is the motherlode of anxiety over change about to storm through the health care system. That is, unless you happen to cover your ears and block out all the partisan screaming, along with the political ideology dressed as legal arguments in the Supreme Court this week, and look at the actual plan and its numbers.

Yes, ObamaCare is expected to cram 30 million uninsured people into the current non-system. Complementary elements of the law make it illegal for health insurers to kick any of us out if we get too sick or stop paying our bills if we get too expensive. And if an insurer makes too much money in the process, it needs to refund a portion. Aside from these four economically intertwined health insurance market reforms, most everything else about ObamaCare is business as usual.

You Get What You Pay For

Jun 18, 2012• 15

By David Dranove

Two recent research papers remind us that it may be difficult to cut U.S. healthcare spending without harming quality. The first, written by a research team led by University of Chicago economist Tomas Philipson, appears in the latest issue of Health Affairs and has deservedly garnered a fair bit of media attention. The authors examine cancer spending and survival times for patients in the United States and ten European countries during the period 1983-1999 (later data were not available.) Their data confirm what we already know about health spending; the average cost of treating a cancer patient was about $15,000 higher in the United States. But the data also show that the typical U.S. cancer patient lives nearly two years longer; most of the difference is attributable to prostate and breast cancer patients. The gain appears to be due to greater longevity rather than early diagnosis. Using generally accepted measures of the value of a life, they conclude that the benefits of additional health spending outweigh the costs by a factor of 4:1 or higher. The latter calculation does not consider QALYs (quality adjusted life years) and so may be overstated. The authors acknowledge that other nations may do a better job of cancer prevention, so that their overall approach to cancer may be superior to that in the U.S., but they can find no evidence of this one way or another.

Philipson’s study suggests that U.S. healthcare consumers may get a substantial bang for their higher bucks. Maybe the U.S. system is not so inefficient after all. What about efficiency within the U.S. system? Some providers are far more expensive than others. Is the higher cost worth it? A new study by a team led by MIT economist Joseph Doyle, and released as an NBER Working Paper, suggests that you may get what you pay for within the United States. Doyle and his colleagues ask whether higher cost hospitals in the United States achieve better outcomes than lower cost hospitals. It is not easy to answer this question, because higher cost hospitals may admit more severely ill patients. This results in a statistical problem known as selection bias that is difficult to eliminate with available severity measures.

A (Real) Tragedy at the CDC

Jun 18, 2012• 9

By PAUL LEVY

At the recent Health Care Quality Summit in Saskatoon, Sarah Patterson, the Virgina Mason Medical Center expert on Lean process improvement, noted, “I’d rather have no board rather than an out-of-date board. They have to be real.” She was referring to the PeopleLink Board that is placed is key locations in her hospital to provide real-time visual cues to front-line staff as to how they are doing in meeting quality, safety, work flow, and other metrics in the hospital.

Now comes the CDC, announcing in April 2012, that 21 states had significant decreases in central line-associated bloodstream infections between 2009 and 2010.

CDC Director Thomas R. Frieden, said “CDC’s National Healthcare Safety Network is a critical tool for states to do prevention work. Once a state knows where problems lie, it can better assist facilities in correcting the issue and protecting patients.”

I am trying to be positive when progress is made, and I am also trying to be respectful of our public officials — whom I know to be dedicated and well-intentioned — but does Dr. Frieden really believe that posting data from 2009 and 2010 has a whit of value in helping hospitals reduce their rate of infections?

Try to imagine how you as a clinical leader, a hospital administrator, a nurse, a doctor, a resident, or a member of the board of trustees would use such data. Answer: You cannot because there is not use whatsoever.

I am also perturbed by the CDC’s insistence on using a “standardized infection ratio” as opposed to a simple count of infections or rate of infections per thousand patient days.

The Coming Boom for Hospital Chains – and Bust for Non-Profits

Jun 18, 2012• 12

By E. Thomas Wood

For more than a year, I have immersed myself in the history of for-profit hospital chains and their associated enterprises. My goal is to produce an account of the for-profit sector that will be a valuable resource to all parties involved in the serious health care policy-making that must surely take place in coming years.

Along the way, I have begun to understand the pressures that will soon make for-profit provider chains an even greater force than they already are – and will lead to an existential crisis in the non-profit hospital sector.

Hospitals wield immense influence in every city and county in the U.S. They are always among the largest employers in town. They touch the lives of all in the community as the sites of all births, most deaths and many health events in between.

Even the smallest hospital, in the smallest town, is worth tens of millions of dollars. Thus, for example, buyers in 2010 paid $28 million for a 124-bed facility in Marion, South Carolina (population 7,000), and $86 million for a 108-bed hospital in Ottumwa, Iowa (population 25,000). And at the upper end of the scale, another buyer acquired the 2,000-bed Detroit Medical Center for $1.5 billion.

Those buyers were for-profit hospital chains, and the sellers were non-profit operators. Some of the factors motivating such transactions have been around since the advent of the for-profit chain era in the 1960s – including inadequate access to capital for charities and local governments that needed to upgrade their hospitals, competitive pressure from deep-pocketed for-profits, and crises arising from poor management and governance. Although not-for-profit hospitals have long been coping with those issues and have often chosen to solve their problems by selling out to the for-profit chains, eighty percent of American hospitals are still non-profits, with about a third of those being government-owned. Those proportions are about to change dramatically.