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HOSPITALS: Can Tenet really afford $1 billion to settle?

Those dumb speculators who gave up on Tenet when its stock fell to $9, should have hung on. In the past week it’s been up as high as $13. However, that may all change with the reports that Tenet is discussing a global settlement with the Federal government of around $1 Billion to settle claims that it defrauded Medicare. Even if it sells all its California hospitals (for a guestimated $600m) and it dips deeply into its credit line (which is around $800m), this certainly puts Tenet in a very tough spot. If the number required to keep operating and to be allowed to stay in the Medicare program is that high, you have to suspect that the company will have trouble surviving. And back when I was losing money on its stock it allegedly had only $30m put aside for this settlement.

Meanwhile not many questions about the settlement were raised at the Tenet shareholders meeting, which Matt Quinn reviewed recently in TCHB. Perhaps shareholders should have been paying more attention.

PHARMA/POLICY: Kaiser FF reports on Seniors views on the Medicare bill

In a vain attempt to clear THCB’s backlog — I tend to save every interesting story and lately there have been too many — I’m just posting a quick link to the Kaiser Family Foundation’s recent focus groups with Medicare recipients. Lots of good stuff here which the wonks among you will dive into (if you haven’t already) but the top line is that seniors think the new law is confusing and a bad deal. Seems to be proof that while Tom Delay and Denny Hastert can please the drug companies, PBMs and HMOs all at one, it indeed could all cause their good friend George W. Bush some dis-pleasure come November. Not that he hasn’t got his hands full elsewhere.

Note another senior (Ted Kennedy)’s line on the matter–(I can’t find it so I’m paraphrasing…please send it to me if you have it) "Who do you trust, the Republicans who fought against Medicare every step of the way and are now giving your money to the drug companies and the HMOs, or the Democrats who founded Medicare and will fight every day until it covers every senior completely"

POLICY: Craziness and deception from the College of Pediatricians

So the American College of Pediatricians has come out in unanimous favor of a constitutional amendment to ban gay marriage. In their terms this is based on "the firm knowledge that the basic father-mother family unit, within marriage, is the optimal setting for childhood development". So how many of you reading this think that the leading national association for Pediatricians has just gone off its rocker?

Don’t worry it hasn’t, or at least not completely. The actual mainstream organization is the American Academy of Pediatrics. And although they too have some very dubious policy reccomendations, such as this one promoting the ban on marijuana for adults because this will supposedly help children (whatever the cost to adults or society, if indeed prohibition does help children, which it doesn’t),they’re unlikely to move into the firestorm of the gay marriage "debate". Not that I’m an expert but it seems to me that kids brought up in gay families do OK, and plenty brought up in heterosexual ones don’t!

However, my real concern is that when the wider public hears this news, how are they supposed to know that the American College of Pediatricians is a bunch of radical fundamentalist wingnuts who bitterly oppose abortion, gays, sodomy, contraception, and probably opening hours for supermarkets on Sunday? (OK I made the last piece up, but it’s probably true). Their web site demands that their members "maintain high ethical standards personally and professionally". Pity that the organization itself is prepared to be completely deceptive in its very name!

PHARMA: A quick update on the GSK Paxil probe, by The Industry Veteran

The Industry Veteran has a quick contribution to the Paxil story, gathered from the home town press of GSK.

    The London press claims that the British Healthcare Regulatory Agency is too cozy with GSK and that it took an outsider such as Eliot Spitzer to initiate a probe of the company’s Paxil malfeasance. It looks to me as if the Brits are already less inclined than the American press and government to swallow Big Pharma’s propaganda. If they decide to really get off their asses, the industry better set aside billions in litigation reserves.

HEALTH PLANS: CDHPs saving money! Really? by MATT QUINN

The recent report from INSIDE CONSUMER-DIRECTED CARE cites an impressive 12.7% drop in PMPM medical claim costs in St. Luke’s Hospital’s first year of implementing a consumer directed health plan (CDH) for its employees. This seems especially impressive in a healthcare environment in which health-care spending per privately insured person increased 7.4% last year, down from a 9.5% rise in 2002.

But the question that the story begs is: Did PMPM costs decrease because members made “better” healthcare decisions (cost and quality transparency) or did they drop because fewer dependents of members were covered, out of network care was no longer covered, and members avoided care because of higher out of pocket costs?

Yesterday’s HSC report attributes the drop in overall spending to a reluctance for consumers to spend money on care and cost-shifting in pharmacy:

    The rate of growth in health-care spending fell for the second year in a row in 2003 as demand for health services dropped because workers were forced to pick up more of the tab for their care and a surge from a change in managed care policies ebbed….The cost shifting was most prevalent in prescription drug plans…

This seems to be borne out in the St. Luke’s case where the hospital saw its employees pharmacy PMPM expenses plummet 20.4%, further proving the point that consumers are quite sensitive to differences in formulary cost (Enrollees at St. Luke’s have a $5 copay for generics, and 20% copay – $20 minimum and $50 maximum – for name brands).

While the CEO for St. Luke’s views the replacement of paying 100% of premiums for PPO coverage for its employees AND their dependents with paying premiums for CDH coverage (in a tight EPO network) only for employees as a way to “to enhance the hospital’s image as an employer of choice,” the result, according to Bruce Davis, a principal with Findley Davies, the consulting firm that designed the plan, was that many dependents of employees dropped coverage through St. Luke’s:

    Prior to implementing the CDH plan last year, St. Luke’s employees – and their families – had rich health benefits. The PPO plan carried a low $150 annual deductible. Employees, even those with family coverage, weren’t asked to contribute to their premiums. Davis says one of the first steps to getting costs under control was to charge employees who wanted to provide coverage to a spouse.

    ‘We decided we didn’t want to be that generous any more because a lot of employed spouses had opted out of their own [employer’s health plans] and had coverage through St. Luke’s,’ Davis says. The result of the policy change was a 13% decrease in covered dependents.

The CDH plan has, however, taken steps to help employees make better health decisions by access and incentives for employees to use web-based health management tools and by making select preventative care exempt from the $20 office visit co-pay. While it is clear that these will cost Medical Mutual of Ohio, the administrator of the St. Luke’s EPO, less than the paper and phone-based health risk assessments and disease management programs, it remains unclear whether online HRAs and counseling will be more effective than their offline predesessors.

While St. Luke’s doesn’t know how much of their savings came from providing better or less care, it doesn’t seem to much care:

    “After the first year with a CDH plan, utilization and claims costs have decreased significantly at St. Luke’s. Davis notes, however, that some of the change could be the result of fewer spouses who receive health coverage through the hospital. He says he has not yet determined how much of an effect the change has had.”

This begs some other questions:

If employers (like St. Luke’s) are achieving impressive decreases in costs through cost-shifting, tightening networks, and dropping coverage for dependents AND the national average spending per employee is increasing at a rate much north of inflation, how much is spending for employers who choose not to cost-shift, tighten networks, and drop dependents really increasing?

What will be the effects of CDH – in the medium and long term – on clinical outcomes?

While employers see impressive initial (year 1) gains by replacing traditional coverage with CDH, how will they manage costs in the future (when there is, presumably, not much else to cut/shift to employees)? (NOTE from Matthew: A question TCHB has asked before!)

TECHNOLOGY: The state of play at America’s leading health systems

More musings from the Healthtech meeting. Given that this is a somewhat private meeting, and I’m an invited guest, I’m not going to name names, but suffice it to say that the health systems here include many of the largest (predominantly non-profit) regional hospital systems in the US.

So from my non-scientific surveillance, where are they and what are the challenges they are facing? In general the last few years have been about automating their laboratory, pharmacy and PACS (radiology) systems. At least in some hospitals, this has led to reducing costs in testing , and getting results back much faster (in 6 minutes in one case). This of course promotes quicker decisions which filters into lower ALOS and increases ROI. The rest of the effort in the last few years has been about creating the wired and wireless infrastructure that’s needed to support the next stage of their plans–in fact wireless is a major focus.

The new challenge is CPOE and bedside medication records. Now they are starting at varying rates to move to clinical documentation at the bedside and also at the nurses station. CPOE (i.e. getting the physician ordering, particularly medication ordering, in the loop) is the major push many of the systems are working on now. This somewhat tracks with various studies showing that CPOE use is pretty low (of course it’s existed at some hospitals such as Brigham & Womens and Intermountain for several years).

Some of these systems are creating big time process improvements (so long as the medical team is bought into the decision process). But by no means do the medical staff appear to be so compliant in all cases–in one case there was no improvement in several basic process measures. So putting the system in is only part of the battle, and the medical culture still seems to be the biggest hurdle.

One big system (which has introduced a lot of new technologies) is very rigorous about incubating a test-lab learning environment before any new technology is moved into different facilities. This is part of an extremely detailed planning process, which needs exceedingly high levels of buy-in from clinical and operational staff, and rigorous assessment at all levels of every roll out. In other words there’s no organic growth of IT use, its all carefully designed. Nor are new or innovative, but untried, technologies allowed into the system. Instead the IT group makes sure that any devices or applications they introduce does not distract them from their total focus with keeping the network up for Five Nines reliability (99.999% up time). So their priority is keeping the mission critical network up. Their system hasn’t gone done unscheduled in 2 years. Some time ago Paul Saffo at IFTF said that eventually computer downtime (like phone downtime) would start killing people. Plenty of these hospital CIOs seem to believe it. So as IT becomes more integral to other parts of the hospital (ie. lab/pharmacy first, nursing next, then physicians) many hospital systems are looking for incredibly (and justifiably) high levels of network/application uptime and reliability.

And don’t mistake that putting this all in is anything other than damn hard work. The words Six Sigma and Process Improvement were heard alot. All in all they are probably not having as much fun as we technology futurists have looking at all the new toys. But in terms of creating the environment for process-driven hospital-based care, at least some of the leading systems in America are making progress.

TECHNOLOGY/QUALITY: The Digital Delivery System

Yesterday I was at Healthtech’s conference on The Digital Delivery System. Healthtech is a non-profit research consulting group which conducts research on information and medical technologies, and how their emergence and use will impact hospital systems. Healthtech is led by health care superstar Molly Coye, who’s been in both the public and private sector, and is one of the authors of the recent IOM reports on patient safety and quality. The meeting attendees are IT folk from large hospitals systems that care about how they’re going to use technology to change their clinical processes, while not being shot by their medical and financial staff in the process.

The key issue being discussed at the conference is how do you get standardized clinical procedures used uniformly across a system. IT clearly helps and is a driver, but non-IT solutions work too. The keynote speech was by Brent James, from Intermountain Healthcare (IHC) in Utah, who have long been EMR pioneers. Most of the rest of this is my take on James’ speech. Of course apologies are mine if I misconstrued information, but there was much good stuff in it. James introduced his talk with three quick stories.

a) a color coded discharge tool for severity assessment at Primary Childrens hospital was developed by the residents and was taken up by the management. During a viral outbreak that happens every so often in Utah, they had been so swamped that they had to close the OR for 18 days. When the next outbreak hit, using the discharge tool they were able to reduce ALOS by one day and the OR was only shut for 1 day.

b) Traditionally a general internist plus 2 assistants can manage 600 patients on Coumadin/Warfarin. With a virtual lab seeing the results of patient measurements taken across the Intermountain system, one 50% time Nurse Practitioner plus one assistant can now monitor and look after 1400 patients.

c) James’ dad enters info on an IHC website that monitors his CHF, and monitors his care every day. If any of his measures go downhill, a nurse calls and schedules follow up. He is doing well and is healthier than he’s been for a long time.

James introduced the story of how well medical care has done in improving life and health. Then James got into the nitty gritty of how poorly we’ve done to move that scientific marvel over the context of all care provided to a population. He displayed some grimly amusing charts that showed that Beta blockers were used on discharge for acute MI patients 48% of the time by major teaching hospitals (and only in the 30% range for community hospitals). And this had direct results on mortality 2 years later–mortality was higher in the community hospitals. But more to the point, as he said: "We get it right 50-55% of the time and we achieve miracles. What would happen if we got it right 70% of the time?".

Medicine is much more complex now than it used to be. Back in the 19th century there were 6 active medications; by 1970 60-100 medications. Now as a general internist you should know 600 drugs.

So can you make this complexity better? Traditionally medical practice says you can’t– the mistakes and missing the best care protocols are just the price you pay for complexity. But IHC showed that with a simple check sheet on discharge that the nurse fills out, IHC got beta blocker use from 56% up to the high 90%s! So it is possible to do better than the 55% appropriate care that RAND showed we currently expect! In the IHC system this saved 331 lives per year for CHF and reduced hospitalization rate by 551 admissions. Brent believes that closing that gap represents the future of medicine. But he didn’t want to talk about who gets the money!

Another area IHC has used IT is in avoiding ADEs (medication errors). "Voluntary" incidence reporting reveals less than 1% of actual ADEs. At IHC ADEs went from 15 per year in the 1980s (detected by incidence reporting) to 580 in 1991 (when they started counting using an IT system) but came down to 280 by 1999. At IHC they found that 66% of these ADEs were preventable–hence the reduction. And all this saves money, on average $2,400 per ADE. James thinks their error rate is still too high. But nonetheless he says if you are sick, you should come to IHC in Utah because you are going to have significantly lower chance of getting a complication!

Diabetes care is another area of concentration. (IHC is in top decile for HbA1c control in HEDIS/NCQA). Every quarter their docs get a report card on diabetic care, and IHC gives them a notification of any patient off the protocol–before the patient comes in. This can also work off the EMR, and any time a diabetic comes in a new chart front is printed out with a whole worksheet so that the patient is checked in their visit for all that’s needed according to the protocols. This measurement system is backed up with a home glucometer and an interactive website for the patient. IHC has seen care rates again improve to make them better than the top decile.

Overall the IHC experience, which has been well known within the medical quality and EBM circles needs to still get more publicity. As another speaker said later in the day, no other industry would get away with this level of safety violations. But perhaps if consumers really knew not only that appropriate care was provided just 55% of the time, but there is a real live American example of a place getting it right more than 90% of the time, the reaction would force the system into much faster change.

More on my sense of where the IT folk are on creating the infrastructure for that change tomorrow.

HEALTH PLANS: Wellpoint pay-out word is out, and the PR is not good, with UPDATE

So as a consequence of the Wellpoint/Anthem merger some two hundred plus top execs are going to get payouts that total between $150m and $350m, depending on whether or not they are kept on for three years by the new company. As you may have guessed this money won’t necessarily be shared out evenly. Len Schaeffer, the outgoing Wellpoint CEO (and former HCFA head in the 1970s) is likely to get a package of $76m, not of course counting the $184m in stock and options he’s already got.

Now the cynics among you might be thinking that ex-Wellpoint exec Ron Williams who went over to Aetna a while back and got a nice payout, should have stayed in southern California. But the real issue is that the California legislature, influenced heavily by the CMA and the Foundation for Taxpayer and Consumer Rights, is not happy! California legislators need to approve the deal, and that won’t happen with this kind of publicity.

UPDATE: California insurance commisioner John Garamendi hinted pretty strongly at yesterday’s hearings that he won’t approve the deal. It’s hard to believe that the whole thing will be scuppered, especially as there aren’t any real anti-trust issues in local markets because the two companies don’t really compete at present. But maybe Len will have to toss some of his pay-off back into the pot to make nice with the state.

POLICY/SYSTEM: Costs increases slowing slightly

The Center for Health System Change is out with its assessment of cost increases for 2003. And believe it or not, they say costs increases are slowing, down to a mere 7.9% from 9.5% in 2002 and 10% in 2001. This is worrying news for the health care system which is having trouble making its price increases stick with the rest of society slowly improving news for the economy which is being suffocated by increasing health care costs, which result in more un and under-insured individuals and more trouble for government and employers in these cash-strapped times.

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