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Tag: THCB Marketplace

Improving the Harvest: Farming and Health Care

I love Atul Gawande’s writings on health care.

He has a rare talent for describing technical details of health care, insurance and finances in terms that most people can understand. His recent article in the New Yorker discussed the current health reform bills’ approach to curbing costs, using the agricultural industry as a potential model.

One of his basic points is similar to one I have made before. He describes two kinds of problems: “those which are amenable to a technical solution and those which are not. Universal health care coverage belongs to the first category . . . Problems of the second kind [referring to rising health care costs], by contrast, are never solved, exactly; they are managed.”

I would frame it somewhat differently. The two basic kinds of problems are those, which are amenable to a government solution, and those which are best addressed using decentralized market forces.

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There Be Dragons: The Fiscal Risk Of Premium Subsidies In Health Reform

Last week, the Congressional Budget Office weighed in on the biggest economic imponderable in the health care debate: how private health insurance premiums will behave under health reform. Building on its December 2008 CBO health insurance market analysis, CBO forecast largely benign effects from health reform’s private market reforms and subsidies on the vast majority of the presently insured (e.g. voting public).

According to CBO, only 17% of Americans in the so-called non-group market–largely individuals–would see premium increases in 2016 (the CBO reference year), because they would be required to purchase fatter benefits with less economic risk. CBO believes that the other 83% of the presently insured will see little or no change.

Analysis of how the health insurance market will behave under health reform has become ferociously politicized. After the infamous PriceWaterhouseCoopers study sponsored by health insurers suggested possible large premium increases, the CBO report might provide cover for members of Congress who are contemplating irreversibly tying the federal budget to a volatile “private” insurance market. I think the fiscal risks of a partially federalized private health benefit are significantly greater than CBO has suggested.

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Your Money or Your Wife

Talk about perfect timing.  Just as the last “death panel” falsettos fade into the droning no-government-  takeover chorus, along come those “faceless government bureaucrats” from the U.S. Preventative Services Task Force to stop the music in the nation’s busy and profitable mammography suites.

No more breast self-exams or mammograms for low-risk women under 50; mammograms only every other year after the age of 50; nothing for any woman over 74.  That was the thunderclap pronouncement from the acrobatically acronymic USPSTF, the dreaded “they” from the gub’mint that has the folks at Fox in full fulmination.Continue reading…

Health 2.0 – The Consumer Aggregators

The Consumer Aggregator Panel at Health 2.0 San Francisco

Featuring: Roni Zeiger MD, Product Manager, Google Health, Wayne Gattinella, CEO WebMD, David Cerino, Microsoft Health Solutions

Moderator: Jane Sarasohn-Kahn, Think-Health

Overview: With consumers turning to online sources in record numbers, competition is heating up between the giants in the field. In this segment recorded at Health 2.0 San Francisco, key players at Google, Microsoft and WebMD talk about important shifts in the industry landscape over the last year, their companies’ near term plans and the powerful trends likely to shape the way Americans – not to mention the rest of the planet – use the internet to look after their health and search for reliable health information.

Related video:

Gov 2.0: Obama administration CTO Aneesh Chopra talks about the administration’s call for innovation  in Silicon valley and broader adoption of information technology throughout the healthcare system. A must see in light of the national healthcare reform debate and growing investor interest in health IT.

The future of electronic medical records: Electronic medical records may be the most controversial technology around in an area with little shortage of controversey.  In the popular “Cats and Dogs” panel at Health 2.0, the key players in the debate over the future of this crucial technology take center stage in a culminating debate moderated by Health 2.0 co-founder Matthew Holt.  Dr. David Kibbe of the American Association of Family Physicians (AAFP), is an early proponent of electronic medical records who has since publicly reversed his position. Glen Tullman is the CEO of industry leader Allscripts and a commissioner on the board of trustees of CCHIT, the certification body responsible for overseeing much of the electronic medical records industry. Jonathan Bush is the CEO of athenahealth, a relative newcomer that has enjoyed a good deal of success challenging industry orthodoxies.

Open Letter to Athena

By SCOTT SHREEVEScottShreeve

Afterburner (af·tər′bər·nər) n.

  1. A device for augmenting the thrust of a jet engine by burning additional fuel in the uncombined oxygen in the gases from the turbine
  2. The augmentation of thrust obtained by afterburning may be well over 40% of the normal thrust and at can exceed 100% of normal thrust

Athenahealth is one of my favorite companies anywhere. I believe they have a great vision, a  highly capable team, an incredible business model, and an unprecedented business opportunity before them. However, for all the amor, I have been disappointed that even with all their blistering success (Bam, Bam, and Kabam!) they have captured less than 2% of the target market since the IPO. I am not just disappointed for them but for the entire ambulatory care space which doesn’t seem to readily get the value of the collective intelligence inherent in the network.Continue reading…

Good Intentions Aren’t Enough with Health Care Reform

Sarah-palinFormer Alaska Governor Sarah Palin’s widely publicized comments on death panels and  rationing this August were among the opening shots of an unprecedented national fight over health care reform. At the time, few sober analysts would have predicted that Palin’s criticisms would gain traction. Yet, they found a receptive audience among conservative opponents of the Obama administration’s health care reform plans, triggering an ugly battle between supporters of reform and right wing opponents.This weekend, Gov. Palin returned to the healthcare debate with another post to her official Facebook page that touches on the talking points you’re likely to hear in the months to come from Republican critics of the Obama administration’s health care reform efforts.  In the spirit of debate we are republishing the post in its entirety. — John Irvine

Now that the Senate Finance Committee has approved its health care bill, it’s a good time to step back and  take a look at the long term consequences should its provisions be enacted into law.

The bill prohibits insurance companies from refusing coverage to people with pre-existing conditions and from charging sick people higher premiums. [1] It attempts to offset the costs this will impose on insurance companies by requiring everyone to purchase coverage, which in theory would expand the pool of paying policy holders.Continue reading…

What would actually work? Driving down the cost of health care

If competition actually drives the cost of health care up rather than down, what would bring lower costs?

What provisions in a “health reform act” would actually drop costs in health care? Let’s leave aside for the moment all the myriad other arguments – some might be seen as too much government intrusion, some would destroy the health plan industry, some would be cripplingly difficult for providers, and so on – and just focus on cost. Given the real structure of health care markets in the United States at this moment, what could be written into federal law and regulation that would actually reduce cost?me of these changes are massive, some would be invisible to those outside the industry, but all could be legislated or regulated, and all would “bend the curve” toward lower costs. Choose any you like, though some are “and” choices, others are “or” choices:

  1. Single payer: Eliminates insurance company overhead, increases medical loss ratio (the percentage of dollars put in returned as medical resources) to perhaps 95%, and gives the government (probably some rate-setting commission) the power to dictate prices and availability, like Medicare on steroids.
  2. “Robust” public option: All providers must take its payments as full payment, rates tied to Medicare rates (perhaps plus a percentage), Medicare rates decided by an independent rate-setting commission.
  3. Limiting medical loss ratios: Many European countries dictate that health plans must return 85% or 90% or 92.5% of the premium paid in as medical services paid out.  U.S. health plans, in contrast, compete on (and brag to Wall Street analysts about) how low their medical loss ratio is. Some are as low as 60%.

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Interview with Al Waxman, Psilos Group

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Al Waxman is a healthcare entrepreneur who these days runs the Psilos Group, a venture firm that invests in health care services, health care IT and device and instrumentation companies. Among their better known investments are Active Health Management, Health Hero Network and Definity Health–now all acquired by publicly traded companies. This is a wide ranging conversation about Al’s investment philosophy, his desire to get VCs more involved in health care, his mistrust of politicians and where he thinks health care technology is headed. Here’s the interview.

Al will also be on a panel at Health 2.0 on October 6-7 talking about whether Health 2.0 can make health care more affordable.

Finally, A Reasonable Plan for Certification of EHR Technologies

A caution to readers: This post is about methods for certifying Electronic Health Record (EHR) technologies used by physicians, medical practices, and hospitals who hope to qualify for federal incentive payments under the so-called HITECH portion of the American Recovery and Reinvestment Act (ARRA). It may not be as critical as the larger health care reform effort or as entertaining as Sarah Palin, but it WILL matter to hundreds of thousands of physicians, influencing how difficult or easily those in small and medium size practices acquire health IT. And indirectly for the foreseeable future, it could affect millions of American patients, their ability to securely access their medical records, and the safety, quality, and the cost of  medical care.

Three weeks ago, on July 14-15, 2009, the ONC’s Health IT Policy Committee held hearings in DC to review and consider changes to CCHIT’s current certification process. The Policy Committee is one of two panels formed to advise the new National Coordinator for Health IT, David Blumenthal. In a session that was a model of open-mindedness and balance, the Committee heard from all perspectives: vendors, standards organizations, physician groups, and many others.

And then, on July 16, they released their final recommendations on what is now referred to as “HHS Certification.” The effects of their recommendations – these are available online and should be read in their entirety to grasp their extent – are potentially monumental, and could very positively change health IT for the foreseeable future.

At the heart of these hearings was the issue of who will define the certification criteria and who will evaluate vendors’ products. Among many others, we have voiced concerns that the Certification Commission for Health Information Technology (CCHIT), the body currently contracted by HHS to perform EHR certification, has been partial to traditional health IT vendors in defining the certification criteria, and in the ways certification is carried out, and thereby able to inhibit innovation in this industry sector. Despite its leaders’ claims that the certification process has been developed using an open framework, CCHT’s obvious ties to the old guard IT vendors have created an overwhelming appearance of conflict of interest. That appearance has not been refuted by CCHIT’s resistance to and delays in implementing interoperability standards, or by its focus on features and functions over safety, security, and standards compliance.

In the hearings that led to the recommendations, longtime IT watchers were treated to some extraordinary commentary, much of which dramatically undermined CCHIT’s position.

“HHS Certification means that a system is able to achieve government requirements for security, privacy, and interoperability, and that the system would enable the Meaningful Use results that the government expects…HHS Certification is not intended to be viewed as a ‘seal of approval’ or an indication of the benefits of one system over another.”

In other words, as the definition of Meaningful Use is now tied to specific quality and safety improvements and cost savings that result from health IT — among them e-Prescribing, quality and cost reporting, data exchange for care coordination, and patient access to summary health data — HHS Certification will closely follow. Rather than pertain to an EHR’s long list of features and functions, some of which have nothing to do with Meaningful Use, certification will be focused on each IT system’s ability to enable practices and hospitals to collect, store, and exchange health data securely.

Who Determines the Certification Criteria

The Office of the National Coordinator – not CCHIT – would determine certification criteria, which “should be limited to the minimum set of criteria that are necessary to: (a) meet the functional requirements of the statute, and (b) achieve the Meaningful Use Objectives.” As regulator, funder for this project, and a major purchaser of health services, the government, not users or vendors, will now determine HHS’ Certification criteria.

A New Emphasis on Interoperability

“Criteria on functions/features should be high level; however, criteria on interoperability should be more explicit.” That is, functions/features criteria will be broadly defined, but there will be a greater focus in the future on the specifics associated with bringing about straightforward data exchange.

Multiple Certifying Organizations

ONC would develop an accreditation process and select an organization to accredit certifying organizations, then allow multiple organizations to perform certification testing. In other words, the Committee recommended that CCHIT’s monopoly end.

Third Party Validation

The “Validation” process would be redefined to prove that an EHR technology properly implemented and used by physician or hospital can perform the requirements of Meaningful Use. Self-attestation, along with reporting and audits performed by a Third Party, could be used to monitor the validation program.

Broader Interpretation of HHS Certification

HHS Certification would be broadly interpreted to include open source, modular, and non-vendor EHR and PHR technologies and their components.

These bold, forward-thinking proposals from the HIT Policy Committee have not been accepted yet. But in our opinion they should be. These measures would encourage new technologies to enter the market for physician medical practices seeking EHR technology, and wrest control away from the legacy health IT vendors that have maintained barriers and delayed adoption, so you can be sure that the old guard players are doing everything possible to have them rejected.

But these are hugely progressive steps in the right direction, toward allowing HIT to enable improvements in care and cost efficiencies that would be in the best interests of users and the public at large. If implemented, the changes recommended by the HIT Policy Committee would create greater choice, more standardization, lower price, less interruption of the practices — as well as a check from CMS or Medicaid each year to help smooth the implementation, starting in 2011.

David C. Kibbe MD MBA is a Family Physician and Senior Advisor to the American Academy of Family Physicians who consults on health care professional and consumer technologies. Brian Klepper PhD is a health care market analyst. Their collected collaborative columns may be found here.

The Case for Price Ceilings for Health Services

BY DAVID HANSENDavid hansen 09

Most in the current health reform debate agree on the need to curtail health care costs. Despite this, few discuss directly how health services are priced, though clearly this a central issue. Prices have both immediate impacts and longer term impacts. Immediate impacts include dividing up who pays what burden of current costs. However, I’d like to focus below on what should be a longer term impact of price mechanisms: driving inefficiency out of business.

An economic sector, to stay healthy, needs mechanisms to kill inefficient business approaches, while either prodding efficiency improvements or moving customers and staff to better performing entities. In most sectors, lower prices adequately incent customers to drop inefficient suppliers.  In medical care, however, suppliers seem to have too much power over prices, and thereby price loses effectiveness as the sector’s cleansing agent.

Evidence of pricing’s ineffectiveness for health services is found in the huge price variations that can be observed for similar services. Where markets function well, pricing variation across suppliers reflects quality or feature differences. For example, cars of similar attributes, such as the Honda Accord vs. the Toyota Camry, are priced approximately the same. In medical care, however, prices for services vary inexplicably widely. The State of California recently published price information by hospital for a couple dozen common surgeries.  This information was for average gross (pre-discount) charges, which, when combined with previously available data on discount levels, can be used to estimate average net (post discount) charges paid by customers. The net charges for coronary bypass surgeries (CABG), as an example, vary by twentyfold between the hospitals with the lowest and highest charges. The average charge for the highest quartile of hospitals is twice that of the lowest quartile of hospitals. This pricing pattern is similar across all surgical procedures included in the California data. Note that there is no relationship between charge levels and hospitals’ apparent quality. Some hospitals with good objective ratings for CABG surgeries and excellent reputations, such as UCLA Medical Center, charge little, while lesser known hospitals nearby with no or average ratings charge several multiples more.

That hospitals offer discounts of 70%+ for large health plans, with individuals paying far more for that same service, is another issue. Price discrimination for less essential services like vacation travel is one thing, but charging multiples more when a dying individual has no market clout: Can we as a society accept the morality of such practices?

But back to my main issue: A market that functioned well would transfer patients from hospitals in the expensive quartile to hospitals of equivalent quality in the least expensive quartile. In most markets, consumers would make the decision to change to better value vendors, but consumers in medical care lack both sufficient information and incentives to do so. Most privately insured Americans are insensitive to prices paid for expensive health services, such as medical care received in years with surgeries or other major medical events. Once annual costs for a patient reach the tens of thousands—and most hospitalizations quickly bring charges over ten thousand dollars—few insured patients face additional costs. Even patients with high-deductible plans linked to medical savings accounts carry no share of medical expenses for charges at such levels. This customer insensitivity to fees gives hospitals price setting powers that vendors in most other sectors would envy, and they use this power to keep prices high and inefficient operations on life support.

There was once hope among policy wonks that managed care would have both the incentives and market clout to funnel services to the most efficient suppliers. During the last dozen years, however, health providers have effectively countered managed care’s market power by leveraging local monopolies and the stickiness of patients’ relationships with specific physicians. One useful strategy for a hospital chain, for example, is to secure a “must-have” hospital for a health plan, such as the premier hospital in a wealthy suburb to which the spouses of executives for health plans’ clients insist on having access. Access to this hospital can then be leveraged in negotiations to attain higher prices for all hospitals across the chain.

For Medicare and Medicaid, the government has used its legislative and monopsony powers to attain advantageous prices. Service fees are stipulated by the government, rather than being subject to negotiations with individual hospitals.  The result is fees that, for a given procedure, are lower than private payers are typically offered. Liberals are proposing a new government health plan available to all, and some proposals provide for such a plan to take advantage of low Medicare’s payment levels. However, a new government plan will, unlike Medicare, face competition; thus, a new government plan’s ability to dictate pricing will be reduced by competitive pressures, just as it is for existing health plans. Besides, even if a new government plan is able to attain Medicare pricing, this won’t help the rest of the market with the bulk of the currently insured population.

However, there is an alternative set of policy options that could benefit all patients: government stipulation of fee ceilings that would apply across the board. Where the market functions inadequately to determine minimum acceptable efficiency levels from care providers, the government should step in if it can and enable better market performance. Government already has a price system set up for Medicare, so limited new administrative requirements would be called for. A maximum permitted price can be set initially at, for example, 30% above Medicare rates. This ceiling would be a maximum for all payers, whether self-pay patients or insurance companies. Medicare rules would apply in terms of defining care incidents, so that providers would have difficulty tacking on charges for peripheral services to make up for revenue losses resulting from price ceilings.

Providers will universally object to a price ceiling proposal, as an effective ceiling would threaten their market power. However, only the weakest links among providers would actually see revenue reductions.  More efficient providers would gain market share as the less efficient withdraw from what is for them, as opposed to efficient providers, unprofitable service lines. By policy intent, price ceilings would push every provider toward service lines where they excel and out of others.

Another advantage of price ceilings for all in the market is to decrease barriers to entry for new health plans, such as ones started by regional physician groups or local cooperatives. Negotiating with hospitals and other care providers is expensive, and a large market share is needed before good deals are won. Ceilings on fees would reduce an advantage for large health plans, and thus many reformers’ goal of increasing competition among payers would be advanced.

An objection to price ceilings is that they would discourage innovation of medical technologies. In theory ceilings could create disincentives for new medical procedures that are of higher quality, but more expensive than those already approved for payment by Medicare for the same disease. However, this issue plagues the existing system already, as most payers refuse to pay for medical procedures with yet unproven merit. Thus, the addition of price ceilings would not create the problem. In fact, it might make it easier to address the issue, since it a standard approach could be established readily. A single approval process could be initiated for medical procedures with promising, if not yet fully convincing, evidence of better quality at higher cost.

If the health sector is to remain market based and keep costs down, price mechanisms must work to cleanse the sector of inefficiency. However, neither patients nor health plans are in a position to make price a driver of who succeeds and who fails in the sector. Government, on the other hand, could make price more of a factor in the sector, and the policy complexity for doing so is relatively low. The result would be more pruning of the inefficient and prodding of the efficient, and the health sector would be set on a significantly lower cost curve.

David Hansen has aided organizations with health care strategy, IT planning, and new venture development for a couple decades, both in Scandinavia and in the USA. He holds graduate degrees in Economics and Business Administration from the University of Bergen, Norway and the University of California. He, like thousands of other health economists, has dreamed of significant health care reform in his lifetime.

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