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Tag: The Industry

GENERAL: Monday morning grab-bag

I’ll be back tomorrow (hopefully) with some interesting stuff about the argument around drug prices, but for now, here’s a varied few shorts that you can look at.

TECHNOLOGY: Physician to patient communication online continues to make slow but visible progress.  Pioneer Relay Health (the former  Healinx) continues to make sales (requires free reg).

INDUSTRY/POLICY: Harris Interactive has an interesting survey taken amongst the audience of the latest mover and shaker health conference in Washington (the Global Health Congress). The consensus is (drumroll please)
–health spending will go up fast
–uninsurance will go up to 18% and the rate of employer-based insurance will go down
–drug price differentials between the US and Europe will erode in the next 10 years
–more for-profit hospitals (as a share of all hospitals)
–more for-profit insurers (as a share of all insurers)
and by far the most significant  opportunity will be the adoption of information technology

INDUSTRY: There are fears that specialty hospitals will gut community hospitals leading to a death spiral in the non-profit sector (with consequent negative impacts on charity care for the poor).  That lead to the moratorium on new specialty hospitals in the recent Medicare bill.  But the news from that upstart sector suggests that things might not be going so well there.  MedCath, the largest player in the specialty heart-hospital lost money last quarter because of a rise in the use and price of drug-eluting stents and other expensive supplies.

HEALTH PLANS:  You know that I’m a little bearish on health plans.  While the sectors stock average is still relatively stable, Cigna had a very bad day at the office on Friday.  Despite the fact that it beat earnings expectations, Wall Street hated the fact that it’s losing enrollment at a fast rate, and looks to be losing more.  It also took a charge to lay off over 3,000 employees.  The stock tanked nearly 10%. By the way, I’ve been hunting for a stock index for the health plan sector.  Anybody know of one? Please email me.

INDUSTRY/QUALITY: Better Health Technologies DSM e-Newsletter

Just in case you haven’t seen it before take a look at the e-Newsletter from Better Health Technologies.  It’s written by a smart veteran of the DSM wars, Vince Kuraitis, and this month’s has a particularly fine analysis of recent studies on the cost-effectiveness of DSM.  The answers are, by the way, "Yes it works", "No it doesn’t", "Be careful out there", and "Just Do it Anyway", depending on who you believe. The most recent newsletter has Vince’s 7 Key Trends on DSM in 2004.  You can sign up here and the price is very good indeed.

POLICY/INDUSTRY: The value of health care–interesting issue, but appalling analysis

An interesting report was issued yesterday with loads of fanfare by The Value Group. The actual study was done by Medtap, a technology assessment shop for the pharma industry, which was spun out of the Battelle Institute (a kind of mini-SRI or RAND) a few years back. The report says that increases in health care spending are a good thing. And as Mandy Rice-Davies said, "they would say that wouldn’t they!" The consortium that paid for the report is made up of the usual suspects, including PhRMA, the AHA and their for-profit friends at the FAH,, the Advanced Medical Technology Association (AdvaMed), the ACC, and the Healthcare Leadership Council (HLC). I assume HIMA and BIO were too cheap to chuck into the pot for this one.

You can amuse yourself by going to look at this news brief, the exec summary charts or the full report. Essentially it says that although we’ve doubled real per capita health care spending in the US in the last 20 years, we’ve had so many health gains from it that we have made out like bandits from all that extra spending. To wit:

o Annual death rates declined 16%
o Life expectancy from birth increased by more than three years
o Disability rates for seniors fell 25%
o Number of days Americans spent in the hospital fell 56%

Naturally enough there’s even a ready made video that you can run straight onto your cable news show without the bother of having to do any of that journalism stuff. I particularly love the "news-type" voice-over ending "in Washington, I’m Karen Ryan reporting" Reporting for whom? I didn’t realize PR was now called reporting! (Medtap is too embarrassed to put the video on its web site but its clients aren’t!) The video uses the example of a young guy who had a heart attack and got a stent implanted in his heart.  Unfortunately a rather detailed analysis from a Stanford team published last year pointed out that stents actually are a worse deal for the patient over time than having a by-pass. So by that logic we’ve wasted all the money we spent developing stents; but what kind of sour-puss worries about a little thing like that?

And in individual disease states, even more good news. Death rates per 100,00 have dropped for heart attacks from 345 to 186, for strokes from 96 to 60, for breast cancer from 32 to 25 (although for diabetes they’ve gone UP from 18 to 25).  And the best news of all is that when you work out the cost benefit of all this good medical care, we get back $2.40 to $3.00 for every $1 spent!

And funnily enough that’s why the report was created. While I was there a report was done at IFTF (not by me I hasten to add) showing how wonderful the contribution of research-based industries was to the US economy. Although the premise was probably true, the fact that it was paid for only by drug companies made me feel more than a little uncomfortable, and no one from the health team would work on it! In fact by the time it was released the event it was designed to protect against (price controls for drugs in the Clinton health plan) was history anyway. But that’s the reason these reports are commissioned, and consequently it’s worth looking at how they came up with that statement about getting $3 back for every dollar spent.  Here’s the logic–it’s a little dry but bear with me:

    To compute the value of investment in health care, we converted the mortality or life expectancy gains into dollars.  Published estimates of the value of a statistical life (VSL) method of calculating the value of small reductions in mortality risks derived using data on risk-compensating wage differences, consumption activity which affects risk, or hypothetical markets yield values of life that range from $1 million to $9 million (Blomquist 2001). The VOI analysis in this study uses $4 million for VSL, an estimate towards the mid-point of this range. Based on this VSL, a value of $100,000 was used as the net present value of an undiscounted life-year gained and $2,455 as the annual consumption value of an increase of 1 year in life expectancy (Mauskopf et al. 1991, Nordhaus 2002). Using these standard economic values for avoided deaths or increased life expectancy, the value of investment for every $1 spent on health care ranged between $2.40 and $3.00, depending on the outcome chosen (Table 3). The value of investment in health care is positive under a wide range of alternative assumptions. As an example, for every additional dollar spent on health care, the value of the investment remains greater than $1 for all scenarios where one life is valued at >$1.4 million and for all scenarios here a life-year is valued at >$40,000. Alternatively, assuming our base case values of $4 million for the value of one life and $100,000 for the value of a life-year, for every additional dollar spent on health care, the value of the investment remains greater than $1 for all scenarios where at least 40% of the life expectancy gains are directly attributable to the additional health care expenditures. Using a similar methodology, several researchers have computed a value of investment in overall health care expenditures for the U.S. for different time periods:

     Nordhaus (2002) between $1.90 and $2.60 for every additional $1 invested between 1980 and 1990
     Murphy and Topel (2003)  $1.60 for every additional $1 invested since 1970
     Cutler and McClellan (2001)  $3.71 for every additional $1 invested between 1950 and 1990

    These figures are likely to underestimate the value of investment in health since they do not include the value of the morbidity gains from the reduction in disability over age 65 and gains in worker productivity and quality of life attributable to new treatments for specific health conditions. Over the past 20 years, significant gains in productivity and quality of life associated with health care interventions in those under 65 years have been shown for several diseases including influenza, migraine, diabetes, and depression but comprehensive national estimates of changes in U.S. productivity or quality of life attributable to health conditions are not available.

So basically by teasing out the impact of better medical care on life expectancy, then attributing an value to an extra life-year, they claim that every dollar spent returns around $3.  The problem is that this is entirely dependent on what a life is worth, and those calculations are entirely arbitrary, and are pulled from all kinds of sources.  The sum of $4m a life or $100,000 a year they use is more or less meaningless. Let me take a different crack at it.

According to the Federal government, GDP per head in the US is about $35,000 a year. Median income per household is around $45,000 meaning way less per individual than $35,000, but that’s because not all GDP is income. But let’s assume that average person lives 75 years and is worth $35,000 per year, then their life is worth only $2.3 million rather than $4m.  So immediately almost all the gains that the report finds in terms of improved life expectancy have been wiped out.  But wait, it gets worse if you consider that the expectancy gains have been added to the end of people’s lives rather than the middle–and at the end of your life you tend to be retired and earning a considerable amount less each year. Median household income for those over-65 is only $23,000, so you could argue that, instead of being worth $100,000 a year, that year of life saved is worth less than $20,000. Therefore instead of returning a positive ratio of $3 saved for every $1 spent, we are in fact getting only 70 cents for each $1 spent–a record even worse than my stock trading!

OK, my numbers are abritrary and capricious (as are those in the report) because mine are based only on what people earn instead of what a life is "worth" but how about thinking of it in another way.  All that extra spending on medical care has shown improvements in results from as high as a 100% improvement in survival after heart attacks to little more than zero (or less) in the case of diabetes.  Comparatively the computer you could buy in 1980 cost 10 times what the computer you can buy today does and the new one is probably 2000% better.  Why hasn’t all this medical technology shown that level of improvement or that reduction in price? 

Or how about it another way, we’ve spent all that more money on health care, but couldn’t we have got a better return from educating young children?  The answer, by the way is, "yes" both for the societal benefits of early childhood education and for its future population health benefits, as better educated people are substantially healthier than the less well educated.

The overall answer is that this type of analysis is more or less junk analysis and necessarily cannot get at the underlying value of what we are doing in health care.  What we spend on health care is a societal choice (of sorts) and the folks behind this report have a large say in that "choice".  The only real contribution that can be made from this type of analysis is to consider how we should best spend the dollars within the health care system to improve outcomes. In many cases this ends up being bad news for the folks represented by The Value Group consortium, as using older and often cheaper technology often has more beneficial results (as with the stent vs bypass example but also in this aspirin vs statin case). The good news for the industry consortium is that technology and services often do have a beneficial effect and their role should be figuring out which technologies have the most beneficial effects and then to produce more of them.  And to be fair that’s what most of the medical technology industry on the R&D side is trying to do–the marketing folks of course have a different agenda.

The better news for the health care industry is that increasingly people view that these improvements are necessary luxury goods and are happy to help push society’s health paymasters in the direction of paying for them. Understanding the use of health care as a luxury good/service that we "have to have" and trying to steer it in the most beneficial direction is where the real analysis in American health economics needs to be done. The junk economics in this report doesn’t get us anywhere. It might help the industry deflect a question or two about what we’re getting for all the money, but on the other hand it just might provoke a sour-puss or two to cry "bullshit".

INDUSTRY: Healthsouth soap opera reaches ridiculous stage

And just when you thought the Healthsouth mess couldnt get any more bizarre, the new management have decided that the fraud was worse than they were letting on, $4Bn rather than $2.5Bn.  One "victim" is ex-child actor, star of the Wonder Years, Jason Hervey who was hired as a PR slack by Scrushy, in a more than bizarre move.  He was given a 3 year deal in 2002 at a mere $300,000 a year and then fired last March. He was offered either a lump sum buy-out or could keep collecting every two weeks which he did.  Well funnily enough last November the checks stopped coming and now he’s gone to court to get them to resume. 

For you soccer fans this reminds me of the obscure tale of Winston Bogarde, a one time Dutch international who’s been on the payroll at Chelsea FC in London at a mere $2.5 million a year and has not featured in any first team or even reserve team game in 3 years.  No one at the club remembers why they signed him, and the coach and general manager at the time both claim the other one signed him without their knowledge, but so long as he clocks into training once a week, there’d nothing they can do other than hand over the cash…..

Perhaps the only way either Chelsea or Healthsouth can get out of their obligations is to declare Chapter 11.  Chelsea was bought by Russian billionaire Roman Abramovitch last summer and has been spending money like a drunken sailor on new players ever since, so their chances of fooling a judge are limited.  Healthsouth? Well I’m not so sure…….

PHYSICIANS/INDUSTRY: Notes from my wanderings on EBM and malpractice

• 1

Apologies for the lack of posting. When you read the first paragraph you’ll figure out why. I’ve been touring around the East Coast talking to various people in the health care business and then on Thursday went to the UK. Or more accurately got on a plane, which sat on the runway at JFK overnight before deciding that it didn’t want to go and dumping all its grumpy passengers on the next plane. I have a few observations about the state of play with physicians, and Medicare.
I spoke with a group of physicians and a separate group of managers and clinical managers in a rural health system in Pennsylvania, and with various industry watchers and participants on New York and Philadelphia. The doctors are (not surprisingly) concerned about malpractice….given the current deal in Pennsylvania where the governor has decided to pay their malpractice insurance for the current year by raising the cigarette tax. If this goes through it’s a temporary win for the Pennsylvania Medical Society, which has billboards up across the state reading “when the last doctor leaves the state the malpractice crisis will be over”. While this may solve some of their problems immediately, it doesn’t resolve the longer-term issues. In my Q&A with the doctors three major points emerged.
1) There was broad if grudging acceptance that though malpractice reform was needed (from the doctors point of view) simply saying that we need a cap on awards for pain and suffering of $250,000 is not good enough, and that some more valid solution needs to be proposed. On physician told me that 20 years ago both sides of the malpractice equation were taken care of– Anyone hurt badly by the system was looked after institutionally (e.g. a child with brain damage from a “bad birth”) Now the parents only option is to see a lawyer and go after the poor OBGYN who just happened to be there at the time. On the other side, the physician I spoke with is so scared of lawyers that he will not give any kind of a reference about a doctor or nurse, especially a bad one, for fear of being sued by that clinician. That’s one reason why it took so long for the New Jersey “Angel of Death” to be discovered). So lawyers are the problem but also for many patients the only solution. I believe that this view romanticizes the “good old days” especially as way back then doctors’ incomes were lower in real terms and the communal support for victims of poor care wasn’t that great. However, we did agree that lawyering may remain the only solution unless physicians do something constructive about it.
So what might that something be? Well, physicians, nurses and pharmacists have a huge amount of public trust. Amazingly enough, politicians, lawyers and HMO managers do not. As a profession, doctors need to spend some of that “trust capital” by developing education for the public about what evidence based medicine is, and also amongst themselves by showing that they are working to implement it. I appreciate that following evidence-based medicine is very tricky, but the profession needs to level with the public about the fact that not every doctor is practicing state of the art medicine, and that although agreeing on what constitutes EBM is complicated, physicians as a whole are dedicated to working towards that end–rather than simply telling the public that “we have the best health care in the world” and ignoring Don Berwick, the IOM and Michael Millenson.
The real issue is how to do that and to some extent whether they already are doing that. I was accused, perhaps accurately, of identifying organized medicine as only being the AMA. But of course the IOM and the IHI is composed of doctors too, and their work is beginning to have an effect. Many dedicated physicians are working hard to promote the understanding and application of evidence based medicine both among the public and among physicians. The question is how will the public understand this issue and how will that interact with the malpractice issue. If doctors are perceived as simply covering their own rears, and not seen as promoting the best science in the interest of their patients, that “trust capital” may not be there to be spent in ten years time.
2) There were several comments about how much is “too much”. The specter of the Oregon Medicaid insurance experiment (organized rationing for the poor) was invoked. I’d introduced the QALY notion in my talk and one comment I heard was that “we have to get away from the concept that any procedure, test or pill that shows a statistically significant improvement should automatically become standard practice now matter what the cost.” Cost efficiency as a rationale for new Rx introduction has been introduced in the UK, which recently said no to various new drugs for MS and osteoporosis. The concept of introducing that type of assessment to the US is still light years away–we love technology too much for that. But a couple of factors suggest that a compromise might be developing here. First is the slow growth of shared-decision making. Frequently that ends up with a less aggressive course of treatment, because the patient tends to be less interested in a heroic procedure than the physician. The other is the long range state of Medicare, which is eventually going to have too may people at too high a cost to be able to say yes to absolutely everything.

INDUSTRY: Malpractice & EBM, a modest proposal from Matt Quinn

Over at DB’s Medical Rants and at the Bloviator there’s been a continued interesting debate on Malpractice.  I suggest that you read DB’s post here, which as a bonus gets you two long comments from Ross (who writes the Bloviator).  The crux of this issue is how do you shoehorn what we theorists know about evidence-based medicine into the ill-fitting shoe of the American court system. Presumably the AMA and organized medicine should be doing something here.  Matt Quinn, who’s been absent from this column working on an interesting new project at Intermap Systems, has some ideas:

    The medical profession needs to spend its time and energy fixing the problem (i.e. care that does harm and/or doesn’t follow institutional best practices) rather than protecting itself from the consequences of bad care.

    I think that a constructive role that the AMA and the various clinical professional associations can play is in establishing evidence-based guidelines for care.  I know – easier said than done.  But every doc in the country doesn’t need to agree on what appropriate care means.  A 2/3 solution is better than none at all and professional associations – in an activist (versus protectionist) role – can drive this.  If I (or another non-clinician) were serving on a jury in a malpractice case, having evidence-based (professional) guidelines would make understanding whether care was appropriate much easier (and perhaps quicker and cheaper) to determine.  Without good (i.e. evidence-based) reasons to deviate from  guidelines – and an adverse outcome for a patient, fault is obvious. 

    Further, clinicians can use the guidelines (perhaps built into EMR systems) to know when the care that they are providing deviates from evidence-based best practices.  If they feel the necessity to deviate, they should justify themselves.  While this might increase the prevalence of "defensive medicine" in exceptional cases, it would largely eliminate the necessity for "defensive medicine" for most cases.  It is incumbent on professional organizations and the physicians who compose them to ensure that their guidelines are updated to reflect the standards by which they will be judged.   

    There isn’t, of course, a direct correlation between proper care and malpractice liability.  Most malpractice victims neither bring suit nor are compensated.  Some people who receive proper care receive malpractice awards.  Limiting liability robs justice from those who were wrongfully harmed and successfully prove their cases – while protecting the
    perpetrators.  And does nothing to address those who received a judgment but weren’t wrongfully harmed, those who were wrongfully harmed and didn’t bring suit, or the incentive for the medical profession to hold itself to its own oath.

Of course Matt nails the real reason for the rise of malpractice in the Administration’s agenda

    I view Bush’s (Rove’s) preoccupation with Tort Reform as a way to damage the political opposition and not a way to "fix" medicine.

As I mentioned in comments over at DB’s my British heart tells me that you shouldn’t be suing someone who’s trying to help you (which I assume is the case in all malpractice cases). My American head tells me that that’s the way things are here, and the end result, as Matt points out, makes a lottery of the medical system. I have no firm opinions about how to solve the malpractice problem, but I do think that a no-fault error reporting system, or a separate medical court system, should be investigated. Unfortunately this is an arena in which none of the protagonists–organized medicine, trial lawyers, both political parties and the corporations looking for immunity from litigation who are hiding behind the medical profession for political reasons–is looking out for  anything other than their basest self-interest. The public good and patient safety are way down the list.

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.

INDUSTRY: First Healthsouth sentence is a juicy one

OK. I give in and I’m talking about Healthsouth again. An assistant controller, Emery Harris, gets 5 months at Club Fed and has to pay back $100K in the first sentence of the HealthSouth scandal.  Extrapolating up, my guess is that Scrushy will get 12 years.  Meanwhile Scrushy has yet more of his own troubles even before he gets to court, where he plans to challenge the constitutionality of Sarbanes-Oxley.

But the best bit is Harris’ excuse for maintaining his silence.  He noticed that "HealthSouth was buying guns, grenades and spy equipment" and this made him too afraid to go to the authorities. This reminds me of the Monty Python sketch about the Piranha brothers gangsters.  One extortion victim (Michael Palin) was asked why after being threatened with a nuclear war-head why he didn’t go to the police.  He said "Well I noticed that the lad with the thermo-nuclear device was in fact the Chief Constable for the area!"

INDUSTRY: Tom Scully’s had enough

The New York Times is shocked, "shocked!" to find that a senior administration official is going to retreat to a bigger salary in the private sector. Even more amazingly the official concerned is Tom Scully the head of CMS. Frankly I think the NYTimes is stretching it to put this on the front page. Scully was the Washington guy for the for-profit hospital chains before running HCFA/CMS and was in the Bush pere White House before that. He’s not exactly the first official or Congressman to jump over to the "dark side" and, let’s face it, there’s barely a door to revolve through these days–it’s more like a transparent shower curtain. Anyway did the Times really expect him to sit around at CMS and implement the mess the Congress just left him?

INDUSTRY: Better fewer, but better!

This barely needs repeating but, just in case you weren’t sure, the New England Journal of Medicine article called Surgeon Volume and Operative Mortality in the United States confirms that the more surgery surgeons do, the better they are at it. And of course the less likely their patients are to die.  Medrants has some opinions and comments about this, but it’s worth remembering that to my knowledge the Brits and the Canadians (and probably others) keep their number of surgeons and specialists artificially low. This has the side-effect of keeping them very, very busy. Given this report that appears to be a feature rather than a bug.

PS Small non-cash prize awarded to reader who can identify the author of the original title of this post. (Be honest now, NO Googling please!)

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