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HOSPITALS/POLICY: For-profits cost more, but that’s not the point!

In a publication that (hat-tip to Jacob at Family Medicine Notes who is also to be congratulated on the excellent upgrade to Medlogs) comes from the Journal of the Canadian Medical Association a meta-analysis confirms that in the US for-profit hospitals charge about 20% more than non-profits. This is not new news by any means. In fact I remembered reading almost exactly the same thing when I first learnt about the US hospital sector back in 1990. What the Canadians have done is to do a really thorough evaluation of every and any study of the topic, and it basically confirms my (often faulty) memory. Unsurprisingly Steffie and David go almost apoplectic about this in an accompanying opinion piece.

    “Investor-owned hospitals charge outrageous prices for inferior care.” said Dr. Steffie Woolhandler. “That’s not just an opinion, it’s now a proven fact. The for-profits skimp on nurses, but spend lavishly on their executives and paper-pushers.” Previous research by Drs. Woolhandler and Himmelstetin, based on financial filings by virtually all U.S. hospitals, found that administration accounted for 24.5% of total costs at non-profit hospitals vs. 34% at for-profits, while payroll costs for clinical personnel were 7 percentage points higher at non-profits.

    Dr. Woolhandler also noted that: “Previous studies have shown a consistent pattern – investor-ownership compromises care and raises costs. For-profit dialysis clinics have higher death rates. For-profit nursing homes deliver lower quality care. For profit hospices give dying patients less care. For-profit rehab facilities cost Medicare more. And for profit HMOs deliver poor quality care and have extraordinarily high overhead costs.”

Indeed their article quotes many very well known instances of for-profit companies caught with their hand well inside the cookie jar, usually that belonging to Medicare, and yes Messrs Scott, Barbakow and Scrushy know who they’re referring to! But what I’m going to say now probably will stun many of my readers who still think I’m an unreconstructed Lenninst, even though I voted for Maggie Thatcher twice in the 1980s:–I don’t believe that it’s the for-profit nature of the hospitals that’s the problem.

While it’s impossible to judge from the Canadian meta-analysis, I don’t think that these studies are necessarily apples to apples comparisons. Now get ready for some gross THCB oversimplifications here, but follow my line of reasoning. In the US there are basically three types of hospitals: a) big academic teaching hospitals, which often are in the inner cities but have a strong reputation for excellence and receive massive cross-subsidies from Medicare; b) smaller inner-city or rural hospitals that cater to a poorer population; and c) suburban hospitals that have a wealthier population. In crass terms, the first group muddles along financially cross-subsidizing from a variety of funding sources, the second group lives in the financial toilet (and is the venue for most hospital closures) while the third group tends to do very nicely thank-you. Almost all for-profit hospitals are in that group (of course) but that doesn’t mean that they are necessarily much worse offenders in terms of how much they charge, how much they upcode Medicare DRGs, and how little they give away in charity care/or fail to recover bad debts than their non-profit neighbors. Non-profit hospitals in the suburbs tend to act very like their for-profit equivalents and have tended historically to be fairly profitable. It’s not entirely a joke that Ian Morrison called one of his clients “The Sisters of Sustainable Competitive Advantage”.

I stand to be corrected on this but my guess is that if you directly compare for-profit hospitals with non-profit hospitals of the same ilk, rather than a random selection of all non-profits, you’ll most likely see that the for-profits charge slightly more and give slightly less charity care, but not by the huge amounts suggested in this study. So in other words, there’s not too much wrong with for-profit hospitals per se. Yes they tend to be in chains that centralize decisions and centralize profits, and yes more often than not they get involved in dubious practices like upcoding and paying their CEOs way too much. The problem with that line of argument is that many of the same things happen on a lesser scale in many other hospitals. And as the vast majority of hospitals are independent or are in very small non-profit systems, if you multiply up the minor “infractions” at each one, you might end up with a total in dollars that rivals the big nauseates we see in the newspapers from a Columbia or a Tenet.

Now, I do believe that these infractions are indeed a problem. So who do I blame? Most of the problem lies with the incentive system that we put hospitals under. And that system (as I’ve been saying since my very first ever post on THCB) is mostly controlled by the graduated fee-per-episode system that Medicare uses to reward hospital care. A very similar system also incents physicians and other providers to do as much as they can (and in some cases to commit outright fraud). Whether they are officially for-profit or not, everyone in the system likes extra income, and if you set up a payment system that incents more activity at a higher price and has no corresponding checks or balances, then you are going to get higher costs. This could be fixed by changing the way Medicare pays providers (and its HMO intermediaries). Potentially the very baby steps CMS is taking down the Pay for Performance path might help in that direction. But focusing on purely the role of the for-profits is like blaming the guy who owns the bar for making a profit off his patron being an alcoholic.

BLOGNOTES: Jeanne Scott’s website coming to life, and Bloglet

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The wonderful Jeanne Scott of TheJeanneScottLetter is getting her newsletters back up. The most recent two are up on her site health-politics.com and she promises that the rest will follow. So go read! And subscribe if you haven’t already by emailing her.

On an unrelated Blognote, I finally went back through my archives of "drafts" (of which there were over one hundred remnants of things I wanted to comment on that I’d saved but never gotten to) and I’ll be trying to knock some out over the coming days. Of course it would help if current healthcare events stopped too!

Finally, I (hope that) the bloglet email service down on the right of your screen is now working with an accurate daily teaser of what’s in THCB. I tried to email those of you who have subscribed to that (free shareware) service about it the other day, but as I got zero responses either the email didn’t work, your spam filters kept me out, or I’m just not worth replying to! Please tell me it’s not the latter!

INTERNATIONAL: Tight elections and the Canada/US comparison

Up north they are having an election in the land where they no longer ever win the Stanley Cup, (although it should be noted that like the “Swiss” who won the Americas Cup over the New Zealanders mostly because the Swiss had a Kiwi crew, most “American” hockey teams are stuffed with Canucks). And the election is going to be very close. Go to this chart and follow the polls along from 2000 to today — interesting stuff and a potted history of Canadian politics in the last 4 years.

So what does this have to do with health care in the US. Well you’ve guessed it, the old chestnut of health care systems comparisons has reared its ugly head in THCB. As I mentioned a couple of weeks back, the Canadians are not planning on moving to an American system. That includes the newly resurgent Conservatives. Even if they win (and its about even in the polls now) both they and the governing Liberals are promising more cash for the current system, rather than changing course. In fact at the bottom of this news story in which (Liberal PM) Martin is trying damn hard to paint the Conservatives a shade of Republican–with references to gays and abortion–the health care issue is made clear:

    Harper (Conservative Leader, BTW) said on Friday he would inject C$10.4 billion ($7.7 billion) to C$15.2 billion into the ailing health-care system over the next five years. He pledged C$600 million to $800 million to cover drug costs over C$5,000 a year, and C$2 billion to C$3 billion a year for general health costs.

    On Thursday, Martin pledged C$26 billion to C$28 billion in new spending — including plans for a national day-care program and an expanded military — which he said could be done without driving the federal budget into the red. He too has pledged to inject more money into the public health-care system.

So basically they are outdoing each other for who will spend more on health care. And don’t forget that the Liberal government under Chretien in the 1990s actually cut healthcare costs and reduced healthcare as a share of GDP–not something that Americans have ever seen happen here!

So given that the Canadians are not heading our way, why bring this up? Well funnily enough a new report from both Federal Governments is out comparing the two countries’ health care systems. And what were the findings? Well no surprises. Insured Americans had a slightly better time in the system than all Canadians, while uninsured Americans had a worse experience. Cost was a big issue for Americans, while not one for Canadians, while waiting times were an issue for a large minority of Canucks.

    Americans were more likely to report that the quality of their health care services in general was excellent compared with Canadians (42 percent compared to 39 percent.) Among uninsured American respondents, 28 percent said the quality of the health care services they received was “excellent,” 44 percent “good,” and 28 percent “fair” or “poor.” When asked about their satisfaction with health care services in general, 53 percent of Americans and 44 percent of Canadians said they were “very satisfied,” while 37 percent of Americans and 43 percent of Canadians said they were “somewhat satisfied.” Among uninsured Americans, 39 percent were “very satisfied” with the services they received, and 40 percent were “somewhat satisfied.”

    Unmet medical needs during the past 12 months were reported by 13 percent of Americans and 11 percent of Canadians. Among those with an unmet need, Americans were more likely to identify cost as the primary barrier to health care (53 percent of unmet needs cases), while Canadians cited waiting for care as the primary barrier (32 percent of cases). Among the 11 percent of American respondents who were uninsured, four out of every ten reported an unmet medical need. Likewise, only 43 percent of the uninsured respondents said they had a regular medical doctor, compared with 80 percent of total American respondents and 85 percent of Canadian respondents.

So the message is fairly clear. With 40% of the uninsured with an unmet medical need, and less than half having access to a regular doctor, if you’re going to be uninsured in the US, move up north! Alternatively, maybe you should vote down here?

QUALITY: More evidence on the scantity of EBM

In this post, a little more from last week’s IFTF meeting. The variation in practice of evidence-based medicine was described in a speech by Bern Shen, as one of the major "impediments" to health and healthcare. THCB readers, MedRants readers and all health policy wonks (via Wennberg’s work at Dartmouth) have long known about this problem. A typical example was in the Journal of the ACC (here’s the abstract) last week, showing that heart patients usually don’t receive appropriate post-discharge drug therapy:

    Dr. Javed Butler from Vanderbilt University in Nashville, Tennessee and colleagues assessed ACEI (ace inhibitor) use among 960 hospitalized heart failure patients. They discovered that 55 percent of the patients were discharged with an ACEI order. By postdischarge day thirty, 77 percent had filled their ACEI prescription, but by one year only 63 percent were still taking the medication. "Although we expected the rate of long-term use to go down over time, we were surprised at the magnitude to which it did," Butler said in a statement.

    Moreover, if patients are not prescribed an ACEI at discharge, the chance of initiating one in the outpatient setting is "very unlikely," Butler told Reuters Health. For patients with no discharge order for ACEIs, only about 12 percent had been prescribed one by 30 days. By one year, only 19 percent of were current ACEI users.

Of course, as I’ve blogged about before, the solution is not that simple. It’s very hard for physicians to practice the "right" way all the time and even harder for them to communicate this to their patients. It requires education of physicians and patients, and the installation of sophisticated tracking information technology. None of these three are particularly in evidence in the US, although as I’ll describe in a post later this week, the Brits are marching down this path, at least for primary care.

At the meeting Dr. Catharina Maulbecker Armstrong described a service she’d been involved in running in Switzerland, where high end executives were advised about what their course of treatment should be based on the latest protocols. The service consulted with the patients’ doctors about their clients’ treatment course, but soon found that the doctors were calling them asking advice about treatment protocols for other patients. As she put it, the doctors otherwise were relying on their 20 year old memory of their medical school professors’ 20 year old memory of what to do! OK, so that’s a little over-simplified, but it does reflect the underlying the problem–physicians are taught to be independent actors relying on their memory, working on one area of the body. Moving to a medical education system based on doctors leading a team (which includes the patient), using information systems to apply the latest medical knowledge and viewing the care of the patient holistically is a non-trivial challenge.

However, Michael Millenson,author of Demanding Medical Excellence and the quality bete noir of many doctors, was also at the meeting. Although he had some uncharacteristically charitable words for some hospital folks who were making the effort to improve quality across the board (in the pursuit of reduction of medical errors), he was a little scornful of their pleas for grant funding to help them do it. As he pointed out, the folks in the room from GM and other big manufacturers probably didn’t rely on Foundation grants to improve their quality–it’s part of what the market demands. It’s the interference with that "market" demand by the medical profession that has radicalized Millenson. (I’ll be reporting on his upcoming speech to a bunch of doctors at the end of the month, or maybe I’ll be carrying back his body to his family!)

PHARMA: The New York Times opinion on GSK and Spitzer

I’ve refrained from getting too much into the Spitzer versus Glaxo legal shenanigans over Paxil, and whether results were withheld deliberately or not. However, suffice it to say that yet again Pharma’s PR is not exactly going to be helping the Republicans in an election year when you see editorial pieces like this from The New York Times.

TECHNOLOGY: Biomimetics

Robert Mittman has another iHealthbeat article out in his technology Foresight Series. This one is on the connection between nature and human technology, known as Biomimitecs. Well worth a read.

POLICY/HEALTH PLANS: What’s the end game of all these premium rises?

I spent the last couple of days at an IFTF conference which looked at impediments to improving health and creating a better health care system–a small topic as you may have guessed. I’ll report a little more about the conference in due course but one of the most interesting talks was from Brad Kimler from Fidelity Investments, who laid out then projected future costs of health care, and the consequent impact on what a couple retiring at 65 would need to have saved to pay their premiums for Medicare and cover their out of pocket expenses. The number was $175,000! And if you are 45 now, you’ll need $650,000 by the time you’re 65. And neither of these included long term care. In fact for a retired couple with a good pension plan, and retiree insurance from their company, by 2015 80% of their income will be going to pay their health care premiums. There was a certain amount of shock and awe around the room. While Brad admitted some self-serving interest in getting people to save more (and have Fidelity manage that process), we still have an enormous challenge facing us as a society. Currently the average 401K account retiree at Fidelity has under $100,000 in it, and of course there are no real funds in dedicated health care retirement accounts yet.

What’s even more intriguing is that Brad based his calculations on an 8% increase in costs. Of course recently we’ve seen even bigger increases in costs. Hewitt Associates yesterday came out suggesting that employers will face premium increases of up to 14%. Unless we generate some amazing productivity miracle and get much richer very quickly, there are only two ways that this can go, as the baby boomers start moving into their 60s (starting next year). Either we start dropping more people into un- or underinsurance, or we add more people to something like the Medicare program. That of course that eventually means either higher taxes for working people or lower incomes for the people providing health care services and products.

From the THCB Sacramento office Matt Quinn, who wasn’t at the conference, seems to be thinking in similar ways:

    Hewitt Associates estimates that health insurers will seek 14% premium hikes from employer groups, but probably won’t get all of it. The survey notes that all of the major insurers surveyed seem to be "pricing rationally": they are reflecting increases in medical costs as increases in premiums. And – at least before they get into negotiations with large employers – none of them seems to be playing the "take a loss / make it up on volume" ponzi scheme of the past. What the survey doesn’t note, however, is how much of these premium increases employers will pass onto their employees (or how many employers will simply drop coverage for some or all employees).

    So that leaves us with the current state of affairs: Employers (purchasers) expect to pay double digit premium increases each year, but can only "afford" single digit increases. Health insurers expect that their medical costs will increase at a double digit clip each year – and faster when the baby boomers hit. Hospital and drug costs are rapidly increasing, while almost all physicians expect – and most non-primary care physicians are receiving – annual pay raises. And consumers continue to want the "best" (i.e. newest and most heavily advertised) care at low or no cost.

    The recent CalPERS showdown with Sutter (and other "expensive" hospitals) illustrates the growingly activist role of purchasers in managing costs, but their efforts are clearly not stemming the tide. And, as we have seen at GE, SBC, and Safeway, employee tolerance for healthcare cost increases is quite low.

    I think that only one question remains: Who – other than the federal government – has the market clout to manage the cost and quality of care?

Several of the representatives from large employers at the meeting yesterday were starting to mouth the same opinion. Don’t expect anything big to happen with this Administration or Congress, so realistically even with a Kerry presidency this won’t be on the front burner till 2008-12. But absent a 1990s type productivity boom, this question is not going away.

TECHNOLOGY: Has the time come for low-cost, standardized EMRs? by Matt Quinn

Not long ago, I postulated about the idea of giving Don Berwick the $100M the federal government has set aside for healthcare IT to develop an open source enterprise EMR system.

It seems that CMS is going down that road with this $100,000 grant to the AAFP… although I can’t imagine that $100K will get them far at all (perhaps a requirements document?). Ideally, a project like this should be a public /private partnership: the government has money, trade organizations (are supposed to) understand the needs of healthcare workers (the "voice of the customer") and healthcare IT vendors / consulting firms (are supposed to) know how to develop and deploy scalable, reliable software/web-based applications.

TECHNOLOGY: WebMD probs continue

I’ve blogged over time about WedMD’s role as a business (three variant parts plus a plastics company looking in vain for synergies) and it’s role as a potential analytics player. However, in its role as a claims transaction clearinghouse and processor (the former Envoy-NEIC), WebMD does not appear to be out of the woods from complaints about its inability to route and process claims.

Given that we are nine years on from Jim Clark’s vision of a transaction system in the middle of health care routing all that paper to the right place in the blink of an eye, the fact that the most hyped health care IT company of all time cannot get its systems to work is a little disappointing. Even the pessimists among us meeting Healtheon for the first time in 1995 might have hoped for a little better by now!

PHARMA: Overdosing on ED

In case you were worried that Pfizer was losing some lead from its pencil–and there have been some rumors about new scripts for Levitra and Cialis doing pretty well– MedAdNews reports that apparently Viagra is staring down its rivals. Of course, there is some controversy, as has been replayed (to excess) over at the Pharma Marketing News list serv, that the number of men with ED in the US seems to be expanding to meet the number of men over 16 (100m was one number quoted!) but it does seem as though this "lifestyle" drug will remain a cash cow for Pfizer until it comes off patent.

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