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Famed Palo Alto industrial design firm IDEO is taking on the challenge of designing a more-patient friendly hospital process. Many of the ideas they are talking about are similar to the quality circles that the Japanese used to successfully destroy threaten the US auto industry. Don Berwick has been promoting these ideas in health care for many years, as I posted about here.

The most interesting idea the IDEO team comes up with is rapid prototyping.  They changed many things about the process, did it very quickly, and then observed the results immediately.

    Ordinarily the hospital spends a year or two in committee, create what they think is the perfect team process, and then goes out and tries it and fails. At IDEO we say, "fail early to succeed sooner." So after a half hour bringing into the field, we see how colleagues use it. Then we come back and revise it. So we get rapid prototyping in place. Previously it was death by committee.

On a side note, IDEO made its name in part on its design of the Palm V PDA (on the left in the picture).  What’s not so widely known is that IDEO stole assumed its role in the design process from a smaller design firm (for reasons that were totally unrelated to the design work). The smaller firm had already come up with this design, which IDEO if anything made less attractive in the final product. So it just shows that even the best and brightest amongst us have skeletons in our closets.

INDUSTRY: Employer health costs moderating slightly

Hewitt Associates report on their annual survey on health costs for employers. They found that the 2004 premiums will be up an average of 12.6% next year as opposed to 14.7% in 2003. They also note that HMO costs continue to rise a little more than PPO and POS plans (13.5% vs 12%) which is one reason that HMO enrollment has been declining (although HMOs and POS are pretty similar these days). Don’t forget that these costs are for employers and are not really the same as overall health costs which are also paid by government and consumers. Employers are continuing to respond by imposing more costs onto their employees, which is leading to contentious labor relations in many industries, such as retail and public services (via The Bloviator). Hewitt expects some of the following tactics:

    Higher payroll contributions (from employees), lower subsidies for dependents, and increased office, hospital inpatient and emergency room copayments. (For drugs), implementing higher copayments, coinsurance models, mandated low-cost substitution provisions for certain therapeutic classes and generic incentives. (For chronic care)
    contracting with organizations that offer specialized or disease management programs. Offering new consumer-driven health plans.

In other words pay more and probably get less.

There are a couple of implications here for health plans serving the commercial market. One is the slow but steady emergence of the "consumer-directed health plan".  While this doesn’t appear to be any more than another fancy benefit-set such as the HMO, PPO or POS were in their day, it is making an appearance as this news from Siemens suggests. Expect consumer directed plans to mean employees choosing between a diminishing set of benefit options.

The other implication is that the slight reduction in cost increase may translate into lower revenue increases and therefore lower margins for health plans. Health plans (and insurance companies) ride out something called the underwriting cycle. Simplisticly put they charge more in some years to make up for losses in past years and they make big profits in those years–so big premium increases as we’ve seen in the past few years equal big profits for insurers.

Two of the biggest insurers, United and Wellpoint, have seen their stocks rise over 50% in the past 2 years, and beat the S&P500 by way more than that. This may not continue for much longer if costs are coming slightly more under control, which may have consequences for the vast amount of money with which United’s senior management have been rewarded, mostly with the approval of an exceedingly compliant board led by ex-New Jersey governor, Thomas Kean .

QUALITY QUICKIE: Blue Cross’ Pay for Performance strategy

California Blue Cross (Wellpoint) is one of the plans participating in the California wide Pay for Performance (P4P) scheme, which rewards physician groups for improving a variety of quality scores.  The scheme is administered by the IHA, a provider/payer talking shop that’s seized on quality as an issue that might help improve the antagonistic relationship between plans and providers. This article from MD Practice Alert describes the way Blue Cross HMO is using pay for performance. The article is a little confusing; despite what it says there is no monolithic P4P standards.  All the health plans involved have slightly different metrics. The key thing is that they are all paying bonuses based on some performance measure and making those measures and bonuses publicly available.  For more information on differences between the plans, see here.

Like the other plans Blue Cross is rewarding the groups on the more preventative HEDIS-type measures that are the core of the current P4P. However, one difference between Blue Cross and some of the others is that it’s rewarding physician groups that have utilization management systems that track care given to the group’s patients outside the group’s walls, and especially that given to long-term inpatients in hospitals, rehab centers and skilled nursing facilities. In addition, Blue Cross is paying out more money ($28m) and a higher percentage of its overall payment budget (10%) via its version of P4P.

DISEASE MANAGEMENT: Health-e-technologies Initiative launches

At the tail end of last week the RWJ-funded Health-e-technologies Initiative organization gave out its first round of grants.  Many of the subjects looked familiar to those of us who’ve spent time in the (nominally) for-profit eHealth sector.  For instance, Kate Lorig at Stanford who’s already running a huge study on self-treatment among arthritis patients will do a clinical trial by randomizing a sub-set of diabetics into either a web-based set of self-management classes or a control group.  Barbara Rimer at UNC is studying the effectiveness of cancer lit-servs.

Back in the mid-1990s several people were looking at these kinds of interventions having heard good things anecdotally about their effectiveness. For example, back in 1996 I had a cancer patient who was active online come and talk to my health care IT client group to show them what was happening in the on-line patient community. There is also lots of anecdotal evidence from work being done with online self-management programs, and even some real studies. So in some ways these studies are old news.  However, theoretically a health care product or service’s introduction  should go in the order A) Initial use and pilots, B) Clinical study (if possible RCT) C) Market development and adoption.

In the case of these  IT-based self-treatment technologies, by 1997-8 the eHealth market fever had taken over and soon there was a software package and web site for every condition. No one did any clinical trials to see what worked (mind you that’s equally true for most new surgical procedures).  Now it looks like the clinical trials are going to get done.  Presuming that they show that eHealth self-care works, hopefully the lack of funding from Medicare and private insurers that delayed the emergence of eHealth in practice (rather than its emergence on the stock market in the bubble years) will be resolved. (Some companies like Lifemasters and American Healthways have been growing recently, but it’s been a decade of tough sledding, and most of their business is call center-based). After all, if web-based self-care makes patients better and saves money, it’ll be that much harder to deny it a CPT code.

Meanwhile, the Health-e-initiative has launched a discussion-based web site. It’s worth taking a look, and you can post if you like (not that I’ve got round to doing that yet).

POLICY: Fraud in Medi-Cal, by Matt Quinn

Guest contributor Matt Quinn reports from THCB’s Sacramento Bureau.  After reading his article, cogitate on this question. D’you think that a newcomer to the California political scene, elected Governor on a "platform" of cutting government bureaucracy, might find this information the basis for some (assume thick Austrian accent here) "full auditing"?

On Thursday a grand jury indicted two LA residents on Medi-Cal fraud charges totaling $40 million, the largest fraud case ever filed by the U.S. attorney’s office in Sacramento. The couple are charged with "stealing doctors’ and patients’ identities to bill the programs for laboratory tests, drugs and medical supplies that were never provided and for services that were exaggerated or provided by unlicensed personnel from 1996 to 2000. According to the indictment, ‘[a]lthough the patients did not see a doctor or receive any treatment or services,’ the defendants submitted bills ‘as if those individuals had been to an office visit.’ "

While this might seem like a momentous blow against the forces arrayed to defraud Medi-Cal, it hardly amounts to a drop in the bucket.   A recent study conducted by the Orange County Register estimates that 10-35% of the $29.2 billion Medi-Cal budget, which provides coverage to about 6.8 million residents, could be fraudulent.  And that most of the fraud was conducted by providers (or "fake providers") and not beneficiaries.  As in this case, the most common Medi-Cal fraud tactics include "inflated bills, false tests and bills for services not performed", according to the Register article. 

So why is Medi-Cal so easy to defraud…or at least get away with defrauding?  First, there are many, many Medi-Cal providers and not enough people to oversee them.  Within the Department of Justice Bureau of Medi-Cal Fraud and Elder Abuse, an agency that deals with fraud, 411, or 42%, of the current 973 pending fraud probes are not being investigated.  They report that anti-fraud efforts are "underfunded or overwhelmed, or both."

Next, Medi-Cal fraud is often not readily apparent, even with the recently revised enrollment guidelines and routine of provider re-enrollments and on-site reviews by the Department of Health Services, the agency that administers Medi-Cal.  When enrolled Medi-Cal providers correctly bill for services not actually performed on legitimate Medi-Cal enrollees and have the (legitimate looking but fake) purchase records for supplies and (legitimate looking but fake) medical records to back them up, it takes in-depth investigation, interviews with beneficiaries – in other words, plenty of resources – to find most fraud.  A 60 Minutes broadcast a couple of years ago exposed the industry that provides (mostly DME providers) with the fake billing records to back of the millions of dollars for orthotics and braces that they were billing Medi-Cal.  Sophisticated criminals, lots of money and not enough oversight  results in lots of fraud.

Finally, (and perhaps most disturbingly), the report detailing the billions of dollars of taxpayer money being looted by Medi-Cal fraud "went all but unnoticed in the Capitol," according to the Register report.  While I’m sure that the state of California couldn’t use an extra $3 – 10 billion right now (not that Gray Davis did, as I remember, propose to beef up the funding/staffing for investigators), I wonder why this isn’t a bigger issue.  As this case demonstrates, tens (hundreds?) of millions of dollars can be found without even looking into how doctors practice medicine (i.e. the realm of clinical quality, evidence-based medicine, and other touchy subjects).

UPCOMING: Clinical wireless and PDA use

This is the first in an occasional post to let you know what I’m working on behind the scenes. I’m trying to get to grips with the huge topic of wireless computer use by clinicians.  If you have access either to any recent data about this topic, or are privy to (or actually using) any interesting use of clinical PDAs, tablets, laptops, etc, etc, in a clinical setting, especially if it combines Wi-Fi with WAN, please email me.  Thanks.

I’m hoping to get this piece out on THCB  in the next week or two (i.e. if I impose a vague but public deadline upon myself, it might actually happen!).

INDUSTRY: Healthsouth–Scrushy speaks out

I’ve commented (perhaps too much) about the Healthsouth affair and how the vagaries of Medicare reimbursement led many different types of for-profit (and probably also non-profit) providers to go well over the top in attempting to cash in. The difference between the for-profits and the non-profits is that Wall Street demands continual growth in the numbers for the for-profits, and once the initial savings an ancillary company makes moving care out of hospitals to lower overhead facilities are assumed, growing "same-store" revenues and profits is very hard. See my earlier synopsis of that problem here.

The reason I bring this up again is that yesterday Richard Scrushy went on 60 Minutes to defend himself. Remember for a second that this wasn’t just a case like at Tenet of unnecessary upcoding (although they were billing group sessions as individual sessions so Healthsouth was doing that).  This was straight fraud–telling investors and the world that revenues and profits were one number while knowing that in reality they were lower, and changing thousands of documents so that the lies added up. Scrushy’s story is that all FIVE of his CFOs and a bunch of other senior staff lied directly to him about the numbers, and are lying now when they say Scrushy told them to alter them. Furthermore, he say that his stock sales at 3-4 times the current market price, netting him around $100 million, were mere coincidence, even though they did happen a month before the numbers finally started to tell the truth. (Actually this reminds me a little of another southern CEO’s protestations).

How will he do in court? Well, the fact that he hired a former actor from The Wonder Years who was 29 years old and had no corporate experience as his Chief Marketing honcho, and allegedly funded a series of Christian rock groups (see the third story down here!) and his wife’s habadashery company with Healthsouth money does look a touch suspicious. Meanwhile he was suing not only one poor sap on the Yahoo message board who claimed to have had an affair with his wife (he lied), but also Kim Landry, an ex-employee who suggested that Healthsouth’s stock would collapse.  Sounds like she had it about right! However, OJ Simpson is still walking the streets.

About the only thing I can think of in Scrushy’s defense is that there doesn’t seem to have been anyone prepared to go to the Feds to become a protected whistleblower.  I guess one of those CFOs wishes he’d thought of that now! Anyway, enough from me on this whole appalling issue, even if it is quite funny.  There’s a whole lot more here

Disclaimer: I had surgery at a Healthsouth ASC facility in San Francisco in March 2002, everyone treated me very well, there was no sign of the Wonder Years or any Christian rock at any time, and the drugs were great!

POLICY & PHARMA: Opposing drug re-importation is political loser for big Pharma

All that you need to know is in today’s Harris Poll. 77% of Americans think that it’s unreasonable for pharma companies to try to make it impossible for American consumers to buy drugs from Canadian pharmacies over the Internet. Yet only 7% of Americans have done so.

If I was running a public policy group at PhRMA I’d be thinking of ways to try to beat a graceful retreat here. After all, do you think President Dean’s FDA will be quite as helpful as the current one? Better to have Canadian prices on imports rather than get this far enough up the American political consciousness that we end up with Canadian-style pricing here.

QUALITY QUICKIE: Another study on medical errors

AHRQ, the Agency for Healthcare Research and Quality has put out another study on medical errors This one has a slightly different methodology than the IOM’s 1999 "To Err is Human" study. The researchers estimated that the study’s findings mean about 32,600 deaths result from various specifically defined medically-caused injuries in the U.S. each year.

The IOM’s estimates are of 44,000 to 98,000 deaths.  Some of the difference is due to the AHRQ’s methodology and choice of data set. (Here’s the abstract).  Their data set was much larger than those used by the IOM, and was based on administrative and billing data but didn’t include chart review.  The IOM study was based mostly on various other studies that included chart review.  In addition the new data focuses on "injuries" resulting from specific procedures and as far as I can tell doesn’t include adverse drug reactions, so the actual number of total deaths is likely to be much higher.

It’s also worth noticing that the attempts to find the truth in what’s really going on are hampered by the age of the data, and the type of data collected. But the direction in which all the data points is very clear. It’s dangerous in that big white building, and going into hospital can be very hazardous for your health.  Thankfully, from all anecdotal evidence I’m hearing about/seeing, providers are getting the message and are working on getting the CPOE systems, drug databases and workflow systems into the hands of clinicians.  Hopefully, this will mean that those error or "injury" rates will start coming down.

On a childish aside, if you check out AHRQ’s URL you’ll notice it used to be called the The Agency for Health Policy and Research. Think about that for a moment.  Shouldn’t research come before policy, you say?  Well they were going to name it that way until someone noticed it’s acronym would be AH-CRaP).

PHARMA: The orphan blockbuster costs $800m

Forbes is pumping out a lot of interesting articles on the pharma market these days.  In an article called The Diagnosis For Medical Diagnostics they raise the issue of pairing diagnostics with drugs.  The basic problem is that as drug development becomes more specialized, genetic-based diagnostic testing pinpoints who the drugs will work for.  So the drugs will be more likely to work in those patients and have better results. This is a good thing! 

However, if we know who the drugs will work for, we’ll also know that the same drug won’t work so well for other patients. It’s likely therefore that newer drugs will only work for a smaller share of patients with any particular condition. For the drug to be profitable either the it must cost more per patient or less to develop.  The CEO of Genta quoted in the article doesn’t believe that the cost of drug development–the $800m in the title–is going to come down, which means that their drugs (and presumably many others) are going to cost significantly more per patient than currently available less effective drugs.  And as Jane Sarasohn Kahn mentioned in this recent post, "It’s not clear really who will be willing to pay for innovation". Given that patients are gong to want these new drugs, this leaves both the pharma cos and the rest of us with a big problem–particularly if Medicare is going to pay for drugs (uncertain, but likely) and seniors are going to vote (damn certain!).


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