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Tag: Costs

Cost, Value & Tools

Peter PronovostLike a pro golfer swears by a certain brand of clubs or a marathon runner has a chosen make of shoes, surgeons can form strong loyalties to the tools of their craft. Preferences for these items — such as artificial hips and knees, surgical screws, stents, pacemakers and other implants — develop over time, perhaps out of habit or acquired during their training.

Of course, surgeons should have what they need to be at the top of their trade. But the downside of too much variation is that it can drive up the costs of procedures for hospitals, insurers and even patients. When a hospital carries seven brands of the same type of product instead of one or two, it’s not as likely to get volume discounts. Moreover, if hospitals within a health system negotiate independently of one another, they may pay drastically different prices for the exact same item.

Carrying many brands of a given item may also increase risks for error and patient harm. Staff members need to be trained and competent in a variety of tools; the greater the number of tools, the greater the risk for error.

These physician preference items are no small contributor to health care costs. Around the year 2020, medical supplies are expected to eclipse labor as the biggest expense for hospitals, according to the Association for Healthcare Resource and Materials Management. Higher costs for physician preference items are major drivers of this increase.Continue reading…

It Cost What? Crowdsourcing Costs In An Evolving Healthcare System

flying cadeuciiCrowdsourcing is engaging a lot of news organizations today. While some journalists are nervous about crowdsourcing — “Yikes, we’d rather talk than listen, and what if they tell us something we don’t want to hear? Or something that we know isn’t true?” — we here at clearhealthcosts.com love crowdsourcing. We find, as journalists, that our communities are smart, energized, truthful and engaged, and happy to join hands in thinking, reporting and helping us make something that’s bigger than the sum of its parts. We learn great things by listening, so … now we’re going to to an experiment crowdsourcing coverage for our blog.

Our current project crowdsourcing health care prices in California, with KQED public radio in San Francisco and KPCC/Southern California public radio in Los Angeles, has been a great success, as was our previous project with WNYC public radio, and we’re looking forward to launching similar projects with other partners.Continue reading…

The Long and Short of Health Numbers

Screen Shot 2014-06-24 at 6.09.38 AMThe notable five-year contraction in healthcare spending growth comes to an end next year, but not in a way that marks a dramatic reversal—at least, not yet. The Medical Cost Trend: Behind the Numbers 2015 report released today from PwC’s Health Research Institute (HRI) projects a medical cost trend of 6.8% for 2015, up only slightly from the 6.5% projected for this year. Our analysis, which measures growth in the employer-based market, incorporates input from health policy analysts, industry executives, earnings statements, government data and actuaries from more than a dozen insurance companies, whose companies cover a combined 93 million members.

Much of this is simple and not surprising based on historical analysis: the healthcare “economic recovery” lags behind the broader economy. So we are now beginning to see the recovery—with more employed workers and more disposable income—loosen up spending on things such as doctor visits and diagnostic tests. Many Americans, after postponing care, are once again spending on their health needs.

Some underlying nuances in the health numbers are more complex and uncertain: greater total spending on health services is not the same as higher costs per person. Even as private health spending ticks upward, evidence reveals that structural changes over the past few years have produced greater efficiency in the $2.8 trillion US health industry. As with any evolution, there is uncertainty. Some of our big healthcare investments today are a financial gamble. Most notably, the burst of high-cost “specialty” drugs could result in lower treatment costs on chronic conditions in future years or signal the start of painfully expensive pharmaceutical bills.

The most durable long-term factors holding down costs are those that instill a new philosophy about care delivery.  For instance, health systems and hospitals striving for “systemness,” in which care teams seek to achieve more by working together. They are focusing specifically in two areas: streamlining administrative work and consolidating and standardizing clinical programs, which can provide higher quality care through consistent processes and outcomes.

With about 60% of hospital budgets spent on labor, personnel costs are a top priority. Since 2012, hospital employment growth has slowed and is projected to continue on this trend—evidence that providers are achieving improved efficiency with fewer resources.

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The Cost of One Wild Night

ticking clock
The clock read 9:30PM and in front of me was dozens of notes, PowerPoint slides, and practice exams to review before 8AM.

The all-too-familiar finals week all-nighter beckoned, and though I’ve had my fair share of experiences with studying until the sun rose, I decided to forgo the typical mug of coffee and take some over-the-counter caffeine pills instead.

My friend proclaimed that they would help more than any energy drink would. I laid out all my exam materials, popped in a couple caffeine pills, and strapped myself in for a wild night of allopatric speciation and coadaptation. A wild night did ensue, but there was no evolutionary biology involved.

Around 11:30PM, what could only be described as the worst headache of my life, detracted me from my desk and led me to the bathroom floor. I decided something needed to be done. Student services at the university health system were closed, so that only left me with the ER as an option.

An ER visit was outside the coverage of my standard student health insurance provided with tuition and I didn’t have a personal health insurance plan. I was wary of any costs that I might incur in the ER.

Instead of an ambulance, my best friend, Eric, drove me to the hospital.

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It’s Raining Cataracts, Hallelujah

flying cadeuciiCMS released new data, shrouded thus far in needless secrecy: how much it pays individual physicians.

Unlike the Shroud of Turin, no one will question its authenticity. But authenticity doesn’t guarantee the data won’t intrigue, confuse, anger, perplex, confound and burn a few innocents at the stakes. That is before we conclude that more research is needed, or more colloquially stated, we still don’t have a clue.

Medicare bounty hunters, the modern day witch finders, are licking their lips for their share of the looted spoils. Academic researchers will be dissecting both wings of the bell-shaped curve of variation in payment to set the next battle between good and evil. But all eyes (pun intended) are upon Florida; specifically one particular provider.

The provider, an ophthalmologist, (you can look up the name) billed CMS for $21 million.

CMS paid ophthalmologists $ 5.6 billion. That’s more than the GDP of Burundi. CMS paid over a billion dollars for treatment of macular degeneration with Lucentis (Genentech).

Take a deep breath now. The treatment of one organ in over 65 year old American citizens is equal to the GDP of one African nation. Gini would have turned beetroot with embarrassment.

Diabolical? Scandalous? Shocking? Surprising?

None of the above, actually. If you think about it.

As we age, and age we do thanks to our lives being constantly “saved” by prevention, regulation and cures, arteries harden, brain atrophies and bones thin. And eyesight falters. Lens fog. Macula degenerates, reducing central vision making it difficult to read.

As we age, we consume more medical services. Yes, take that as an economic truism. And no, I’m not applying for membership of the Death Panel.

Here’s the thing. It’s nice to be able to see when you’re 75. It’s also nice to see when 85, and damn essential when 90.

Otherwise you might trip over the walking stick, fracture the neck of the femur, develop a clot in the deep veins, then a clot in the pulmonary arteries, then a raging pneumonia in ICU, followed by septic shock and a cardiac arrest. Then perhaps you may rest in peace. But not before a few interns have fractured half a dozen ribs during a well-intentioned but hopelessly misguided cardiopulmonary resuscitation that family members lobbied for to assuage their guilt for never visiting you in your nursing home.

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ACA 101: An Employer’s Search for Objective Advice

flying cadeuciiIn ancient Athens, the philosopher Diogenes wandered the daylight markets holding a lantern, looking for what he termed, “an honest man.”

It seems since the dawn of the consumer economy that customers and buyers have traded most heavily on a single currency – trust.

Three millennia later, our financial system still hinges on the basic premise that the game is not rigged and any trusted intermediary is defined by a practitioner who puts his client’s interests ahead of his own.

Anyone responsible for procurement of healthcare may feel like a modern-day Diogenes as they wander an increasingly complex market in search of transparent partners and aligned interests. The art of managing medical costs will continue to be a zero-sum game where higher profit margins are achieved at the expense of uninformed purchasers.

It’s often in the shadowed areas of rules-based regulation and in between the fine print of complex financial arrangements that higher profits are made.

Are employers too disengaged and outmatched to manage their healthcare expenditures?

Are the myriad intermediaries that serve as their sentinels, administrators and care managers benefiting or getting hurt by our current system’s lack of transparency and its deficit of information?

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Will the Uninsured Become Healthier Once They Receive Health Care Coverage?

David OrentlicherThe Affordable Care Act might not bend the cost curve or improve the quality of health care, but it will save thousands of lives, as millions of uninsured persons receive the health care they need.

At least that’s the conventional wisdom.

But while observers assume that ACA will improve the health of the uninsured, the link between health insurance and health is not as clear as one may think. Partly because other factors have a bigger impact on health than does health care and partly because the uninsured can rely on the health care safety net, ACA’s impact on the health of the previously uninsured may be less than expected.

To be sure, the insured are healthier than the uninsured. According to one study, the uninsured have a mortality rate 40% higher than that of the insured. However, there are other differences between the insured and the uninsured besides their insurance status, including education, wealth, and other measures of socioeconomic status.

How much does health insurance improve the health of the uninsured? The empirical literature sends a mixed message. On one hand is an important Medicaid study. Researchers compared three states that had expanded their Medicaid programs to include childless adults with neighboring states that were similar demographically but had not undertaken similar expansions of their Medicaid programs.

In the aggregate, the states with the expansions saw significant reductions in mortality rates compared to the neighboring states.

On the other hand is another important Medicaid study. After Oregon added a limited number of slots to its Medicaid program and assigned the new slots by lottery, it effectively created a randomized controlled study of the benefits of Medicaid coverage. When researchers analyzed data from the first two years of the expansion, they found that the coverage resulted in greater utilization of the health care system.

However, coverage did not lead to a reduction in levels of hypertension, high cholesterol or diabetes.

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Fatal Error

Fatal Error

The janitor approached my office manager with a very worried expression.  “Uh, Brenda…” he said, hesitantly.

“Yes?” she replied, wondering what janitorial emergency was looming in her near future.

“Uh…well…I was cleaning Dr. Lamberts’ office yesterday and I noticed on his computer….”  He cleared his throat nervously, “Uh…his computer had something on it.”

“Something on his computer? You mean on top of the computer, or on the screen?” she asked, growing more curious.

“On the screen.  It said something about an ‘illegal operation.’  I was worried that he had done something illegal and thought you should know,” he finished rapidly, seeming grateful that this huge weight lifted.

Relieved, Brenda laughed out loud, reassuring him that this “illegal operation” was not the kind of thing that would warrant police intervention.

Unfortunately for me, these “illegal operation” errors weren’t without consequence.  It turned out that our system had something wrong at its core, eventually causing our entire computer network to crash, giving us no access to patient records for several days.

The reality of computer errors is that the deeper the error is — the closer it is to the core of the operating system — the wider the consequences when it causes trouble.  That’s when the “blue screen of death” or (on a mac) the “beach ball of death” show up on our screens.  That’s when the “illegal operation” progresses to a “fatal error.”

The Fatal Error in Health Care 

Yeah, this makes me nervous too.

We have such an error in our health care system.  It’s absolutely central to nearly all care that is given, at the very heart of the operating system.  It’s a problem that increased access to care won’t fix, that repealing the SGR, or forestalling ICD-10 won’t help.

It’s a problem with something that is starts at the very beginning of health care itself.

The health care system is not about health.

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For Hospitals and Health Systems: Strategies for Doing More with Less

The conversation has changed.

The old conversation: “You cost too much.”

“But we have these sunk costs, patients who can’t pay … ”

“OK, how about a little less then?”

The new conversation: “You cost too much. We will pay half, or a third, of what you are asking. Or we will take our business elsewhere. Starting now.”

“But … but … how?”

Exactly: How will you survive on a lot less money? What are the strategies that turn “impossible” to “not impossible”?

New Strategies
The old conversation arises from the classic U.S. health care model: a fully insured fee-for-service system with zero price transparency, where the true costs of any particular service are unknown even to the provider. The overwhelmingly massive congeries of disjointed pieces that we absurdly call our health care “system” rides on only the loosest general relationship between costs and reimbursements.

It’s a messy system littered with black boxes labeled “Something Happens Here,” full of little hand waves and “These are not the droids you’re looking for.”

With bundling, medical tourism, mandated transparency, consumer price shopping, and reference pricing by employers and health plans, we increasingly are being forced to name a price and compete on it. Suddenly, we must be orders of magnitude more precise about where our money comes from and where it goes: revenues and costs.

We must find ways to discover how each part of the strategy affects others. And we need some ability to forecast how outside forces (new competition, new payment strategies by employers and health plans, new customer handling technologies) will affect our strategy.

Key Strategy Questions
For decades, whenever some path to profit in health care has arisen (in vitro fertilization, urgent care, retail, wellness and the others) most hospitals have said as if by ritual, “That is not the business we are in.” As long as we got paid for waste, few health care organizations got serious about rooting it out.

And most have seemed content with business structures that put many costs and many sources of revenue beyond their control.

In the Next Health Care, the key strategy questions become:

Commentology: Actually, High-Tech Imaging Can Be High-Value Medicine

Our comments regarding this interesting blog,  and the comments to the blog, may seem tangential to the author’s points.

The blog and comments point, we think, to a confusing set of principles being considered, perhaps, out of context?

Those comments range from: ACOs will lead to better figuring out what is best (impossible) –  to mismatched information regarding a specific clinical case (reasonable).  What is striking is that we have medical students worrying about costs of care.

Instead, shouldn’t we be teaching them to understand the value of information for decision-making? Shouldn’t we be teaching them the concepts of co-dependent testing leading to all tests being less useful than we think?

Shouldn’t we be teaching students the concepts of decision-analysis, and thresholds, and patient’s being involved in the decisions? Shouldn’t we be teaching that it is better to know than to think we know? Shouldn’t we be doing studies rather than scratching at the “tragedy of the commons” (so many physicians feasting on the grassy fields of a sick patient)?

Continue reading…

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