Last week, CMS unilaterally released chargemaster data from 300 hospitals around the country. As David Dranove summed up well in his recent piece, this is an old hat. Yes, there are big variations in hospitals’ chargemasters. And yes, there is a lot of buzz around consumer price shopping.
A Kayak for hospitals is all well and good, but hospitals are cash-strapped as it is and there is only so much money to be saved by driving down the costs the hospital charges the health care plan unless the waste within the hospital is addressed. I would like to highlight perhaps one of the most exciting things going on under the radar in US healthcare today: using price transparency data within the hospital.
Hospitals are now reimbursed a capitated amount according to each patient’s diagnostic-related group. Capitated payment means, essentially, that the hospital receives a set amount of dollars for each patient that walks through its doors with a given diagnosis — say, $X for a patient with pneumonia or $Y for a patient with MI. Regardless of how many drugs, tests, or scans the hospital uses for the patient, it will still get the same compensation from the insurance company.
Yet, the physician up until now still acts as a kid in a candy store, running up a bill without awareness of cost or value. This is largely because the doctor is ordering from a menu without prices. I have talked to many physicians, in both out-patient and in-patient settings across seven health care systems around the country — they want a menu with prices.
I have seen firsthand the motivation for this, as pay-for-performance model is beginning to take over with my own practice. Gone are the days where doctors’ salaries are unhitched to the cost-effectiveness of care. Everyone is now in the same boat.As a neurologist, I want to share a few examples regarding stroke care that illustrate the potential savings available from educating physicians regarding cost, and also some pitfalls to avoid that could compromise patient care.
Q: Have hospitals improved since the first Hospital Safety Score last year?
A: We saw an incremental improvement in the scores, though it is not as rapid or as dramatic as we would like. For the Spring 2013 Hospital Safety Score, there were more than 2,500 general hospitals scored, including 780 “As,” 638 “Bs,” 932 “Cs,” 148 “Ds” and 16 “Fs.” Those hospitals that lowered their grades demonstrate how patient safety can be seriously impacted when hospitals don’t stay vigilant. Safety is a 24/7, 365-day effort with all hands on deck; there is no time for excuses when it comes to preventing errors, injuries and harm. On the other hand, hospitals that showed improvement should be celebrating. They have clearly accepted the challenge to improve and have proven that any institution can make significant advances in patient safety over a short period of time. Now, they need to work on sustaining that achievement into the future.
Q: How is the Hospital Safety Score different from other hospital ratings?
A: The Hospital Safety Score is the standard assessment of how well hospitals perform at protecting patients from accidents, errors and injuries. The Score is 100-percent transparent, and the only hospital safety assessment to be (favorably) peer-reviewed in the Journal of Patient Safety. Unlike any other rating, you can see all the data that was applied to every scored hospital, as well as the entire methodology. Also unlike many other ratings, the Hospital Safety Score highlights both the best and poorest performers on safety in an effort to educate consumers on the hospitals they rely on for care.
The Hospital Safety Score assesses hospitals strictly on patient safety. Each “A,” “B,” “C,” “D,” or “F” score assigned to a hospital comes from expert analysis of infections, injuries, and medical and medication errors that frequently cause harm or death during a hospital stay.
The recent Medicare report on variation in hospital “prices” is not exactly news. In fact, I wonder why anyone (including the NY Times and NPR) covered it, let alone make it a lead story.
As you probably know, Medicare reported that hospital charges for specific treatments, such as joint replacement surgery, greatly vary from one hospital to another. (This includes charges for all services during the hospitalization, including room charges, drugs, tests, therapy visits, etc.) Everyone in the healthcare business knows that charges do not equal the actual prices paid to hospitals, no more than automobile sticker prices equal the prices that car buyers actually pay. Except that for the past thirty years, the gap for hospitals greatly exceeds (in percentage terms) the gap for cars. This is not just a nonstory, it is an old nonstory.
So reporters tried to give it a new spin. One angle concerns the uninsured, who may have to pay full charges. I will write about this in a future blog. Another angle is that by publishing these charges, Medicare will encourage patients to shop around. That is the subject of this blog.
I suppose it is okay to tell patients that the amount they might have to pay out of their own pockets may vary from one hospital to the next. But the published charge data is useless for computing out of pocket payments; in fact, it may be worse than useless. As even the NY Times noted, insured patients make copayments based on prices that their insurers negotiate with hospitals. These prices are essentially uncorrelated with charges. So a patient who visits a hospital with low charges may well make higher out-of-pocket payments than a patient who visits a high charge hospital. It is a crap shoot.
A trio of groundbreaking publications on healthcare came out this April. They are my required reading list for CEOs. First is a study published in last week’s Journal of the American Medical Association (JAMA) by Eappen and colleagues (including among them Atul Gawande). The study found infections occurred in 5 percent of all surgeries in an unnamed southern hospital system. For U.S. hospitals, this is not an unusual rate of error — even though it is about 100 times higher than what most manufacturing plants would tolerate. No automaker would stay in business if 5 percent of their cars had a potentially fatal mechanical flaw.
If that’s not bad enough, the second finding is where we enter the realm of the absurd: according to the study, purchasers paid the hospital to make these errors. Medicare paid a bonus of more than $3000 for each one of the infections; Medicaid got a relative “bargain,” paying only $900 per infection. But the real chumps were the commercial purchasers (CEOs, that’s you). Employers and other purchasers paid $39,000 for each infection, twelve times as much as your government paid through Medicare. Most companies could create a good job with $39,000, but instead they paid a hospital for the privilege of infecting an employee. How many good jobs haven’t been created so businesses can pay for this waste?
Most employers are far more hard-nosed about managing their purchase of, say, office supplies than they are in purchasing health care — even though, unlike healthcare, paperclips never killed anyone and no stapler can singlehandedly sap a company’s quarterly profit margin. Yet, according to the Catalyst for Payment Reform, only about 11 percent of dollars purchasers paid to healthcare providers are tied in any way to quality. The results reflect this neglect of fundamental business principles for purchasing: Quality and safety problems remain rampant and unabated in health care, while employer health costs have doubled in a decade. Continue reading…
It was bound to happen.
By “it,” I mean that the small group of speciality hospitals (usually orthopedic or cardiology-focused) across that country that are owned by doctors were going to have their “See! We Told ‘ya so!” moment.
Doctor-owned hospitals: How many are there? Two hundred and thirty-eight of them in the whole country (out of more than five thousand)–somewhere between four and five percent of the total in the U.S. (numbers courtesy TA Henry from this excellent piece).
What are the issues?
- ObamaCare effectively bans doctors from owning hospitals in the U.S.
- Those already in existence are grandfathered in under the law.
- We know that doctor-owned hospitals have higher average costs–hence the rationale for banning them under a law with the intent of “bending the cost curve.”
Cue the iron-o-meter:
In the most recent Medicare data (December 2012 report on “value-based purchasing“), doctor-owned hospitals did well in terms of achieving quality milestones.
Really well. Physician-owned hospitals took nine out of the top ten spots in the country. And in spite of their low relative number, forty-eight out of the top one hundred.
“No aspect of health IT entails as much uncertainty as the magnitude of its potential benefits.”
A few years into the Meaningful Use program, it seems this quote from a 2008 Congressional Budget Office report entitled “Evidence on the Costs and Benefits of Health Information Technology” may have been written with the assistance of a crystal ball.
Fast forward to 2013.
“Just from reading a week’s worth of news, it’s obvious that we don’t really know whether healthcare IT is better or worse off than before [Meaningful Use incentives],” popular blogger and health IT observer Mr. HIStalk wrote earlier this year.
So, perhaps RAND was hypnotized by Cerner funding when they created their rosy prognosis (hearken back, if you will, to 2005 and the projected $81 billion in annual healthcare savings). Maybe they were just plain wrong and the most recent RAND report stands as a tacit mea culpa.
Either way, we’re left with hypotheses that, while not incontrovertible, are gaining traction:
- Health IT benefits will manifest gradually over an extended timeframe.
- Those benefits will not quickly morph into reduced costs, if they ever do.
- Because of 1 and 2, investing in a hugely expensive electronic health record system is potentially risky.
How risky? Without question, massive health IT expense and the predominant proprietary IT model are threats to a hospital or health system’s financial viability, to its solvency.
We’re seeing some examples even now.
Everybody hates curbside consults – the informal, “Hey, Joe, how would you treat asymptomatic pyuria in my 80-year-old nursing home patient?”-type questions that dominate those Doctor’s Lounge conversations that aren’t about sports, Wall Street, or ObamaCare. Consultants hate being asked clinical questions out of context; they know that they may give incorrect advice if the underlying facts and assumptions aren’t right (the old garbage in, garbage out phenomenon). They also don’t enjoy giving away their time and intellectual capital for free. Risk managers hate curbside consults because they sometimes figure into the pathogenesis of a lawsuit, such as when a hospitalist or ER doctor acts after receiving (non-documented) curbside guidance and things go sideways.
There is some evidence to support this antipathy. A recent study published in the Journal of Hospital Medicine examined 47 curbside consultations by hospitalists, in which formal consults by different hospitalists (unaware of the details of the curbside encounter) were performed soon thereafter. Conducted by a team of researchers from the University of Colorado, the study found that the information given to the curbside consultant was incomplete or inaccurate roughly half the time, and that management advice offered via the two forms of consultation differed 60 percent of the time. (In those cases in which the consultant was given inaccurate or incomplete information, the advice differed more than 90 percent of the time!) This is not the first warning about the dangers of such consults (see also here and here), and it won’t be the last.
Dear Tech Guys:
So today I’m doing anesthesia for colonoscopies and upper GI scopes. Nowadays we have three board-certified anesthesiologists doing anesthesia for GI procedures every single day at my institution. I’ll probably do 8 cases today. I will sign into a computer or electronically sign something 32 times. I have to type my user name and password into 3 different systems 24 times. I’m doing essentially the same thing with each case, but each case has to have the same information entered separately. I have to do these things, but my department also pays four full-time masters-level trained nurses to enter patient information and medical histories into the computer system, sometimes transcribed from a different computer system. Ironically, I will also generate about 50 pages of paper, since the computer record has to be printed out. Twice.
No wonder almost everyone I know hates electronic medical records! I don’t know anything about computers, and I don’t know what systems other hospitals have. I may be dreaming of a world that doesn’t exist or that world is here and I haven’t heard about it. Nevertheless, here’s my wish list for a system that doctors would actually want to use:
1. Eliminate the User Names and Passords: You can’t tell me that in this day of retinal scans and hand-held computers that there isn’t a better way to secure data. What if each person had their own iPad that you only have to sign into ONCE a day that automatically signs your charts. If you’re worried about people leaving them sitting around use a retinal scan or fingerprint instant recognition system.
2. Eliminate the Paper: If you’re going to have full-time people entering data for you, why print it out? It’s on the computer for anyone to access.
3. All Data Systems Must Be Compatible: You can’t have patient data entered in one place that doesn’t automatically import into another place. If my anesthesia record can’t talk to the hospital OMR, I have to RE-TYPE everything in, which is completely ridiculous.
4. Everybody Has to Use the Same System: Everybody, state-wide. Right now, electronic records from a nearby hospital are not available at my hospital, even though the two hospitals are right across the street from each other.
5. Don’t Make Me Turn the Page All the important information about a patient should be on the first page you open when you look up a patient. I shouldn’t have to click six different tabs. Specific to anesthesia, all the relevant data about the patient including what medications they have received during the case should be automatically displayed on the screen when you start a case. Specific to primary care, all the latest labs and data, recent appointments with specialists, current med list and anything else the doctor wants to see commonly should be right on the first screen.
I have two sons, both healthy happy boys, both brought into this world in very different ways. I work in healthcare and like many readers of THCB, the business of healthcare is often viewed through the business lens. When we become the healthcare consumer, and are knee deep in the conundrum that is our healthcare system, the perspective changes dramatically.
Ezra was born in a major medical center, under the supervison of state of the art OB/GYNs, with all of the greatest technology, and under the care of the best nurses. My wife wanted a “natural birth”, so natural that I affectionately describe it as a “granola birth”. We were active duty military at the time so our choices were limited. She hired a birth doula, read Ina May’s “Guide to Childbirth”, chose to see a Women’s Health Nurse Practitioner for her wellness visits, and was adamant that she did not want an epidural.
As we approached 40 weeks the adventure began. At 36 weeks she could no longer see the NP, she had to now see the OB/GYN. The OB/GYN began to make reference to not allowing us to go past 40 weeks, it would “endanger the child”. My wife began to feel very uncomfortable and that she was slowly losing control of the experience she wanted to have. At the 40 week visit, the OB/GYN gave a very stern warning that an “induction was now necessary for the safety of the baby” regardless of there being no indication that Ezra’s wellbeing was compromised. We resisted as much as possible (with the help of no beds in the maternity ward) but at 41 weeks and 2 days, doctors’ orders brought us into the hospital for an induction.
There’s a high-profile and important paper in JAMA this week by Sunil Eappen and colleagues. The study looked at surgical discharges during 2010 from a single 12-hospital system and came to the conclusion that admissions that include a surgical complication were associated with a higher profit (defined as the contribution margin) than admissions without complications. The authors conclude that this creates a disincentive for hospitals preventing surgical complications since they might see reduced profits as a result. This is a very provocative finding and it’s getting a lot of well-placed media attention, as you might expect. There is an important caveat with the study that I would like to highlight.
In the study, the authors report that admissions with surgical complications result in $39,000 higher “profits” if the care is reimbursed via a private payer and $1800 if Medicare is the payer. However, as Dr. Reinhardt correctly noted in the editorial,
“Allocating profit and loss is exquisitely sensitive to the many assumptions made in economic modeling and must be performed carefully to provide useful evidence about the financial ramifications of surgical complications and other services.“
His concern dealt mostly with how the authors allocated fixed costs in their calculations. My concern has to do with what the authors assumed happens to an empty bed once a patient is discharged in a US hospital.