The Blue Cross and Blue Shield Association has done a very nice job on its redesigned news and opinions web site, called Health Issues. Kudos to Julie Tippet, the editor there. As I’ve been linking more and more to them I’ve duly linked to the site in my news section. You can go over there and sign up for daily newsletters and more. The price is right (i.e Zero), and you’ll be able to tell if their editorial bias creeps in–unlike over here at THCB, of course.
Above the Fold
PHARMA: Even the WSJ concedes the importation debate is lost
The Republican retreat on the re-importation bill continues. All stuff I’ve posted on before, including leading communist Chuck Grassley (R-Nebraska) introducing a bill to get the FDA to certify certain Canadian pharmacies and Tommy Thompson running his mock show trials explaining why despite everything they’ve said the Administration is going to back don on this. I don’t like linking to the WSJ too much as many of you aren’t subscribers, but in this case the BCBS Association has a pretty good summary:
- According to the Journal, the drug industry “can’t even be sure of continued opposition to drug imports from the Bush administration,” which has appointed a task force to study how to reimport drugs safely as part of the new Medicare law (Wall Street Journal, 4/13) . . . According to the Journal, the early deadline for the results of the study “has the industry braced for the possibility that the administration might propose a limited experiment with imports before the election.” An unnamed lobbyist for the drug industry said, “There’s this huge tidal wave. I think it’s just getting harder and harder even for people that have some sense to hold off this terrible crashing wave.”
This is pretty upsetting for the industry given that, as the Center for Public Integrity (a great resource that both political parties hate equally) reports, it gave over $11m to the Republican National Committee in the 2000 and 2002 election cycles, and spent more than $1 billion on lobbying in the past decade.
That’s not of course going to stop the industry’s shills, in this case the Galen Institute, telling you that Canadian imports will kill you and everyone in your town. Who are the Galen folks (apart from being on the nutty end of the Libertarian spectrum, and believing that government intervention is always a bad idea unless it involves enforcing dubious patent extensions)? Well their fellow travelers are noted in this document, and they include people from Heritage, the AEI, the Pacific Research Institute, Cato and of course everyone’s favorite academic Mark Pauly–he of the belief that the individual insurance market works well for the 80% of the people who don’t need it. I bet you a nickel that the pharma industry is a healthy contributor to Galen. And as I’ve posted before, this is all so unnecessary. The amount of political heat the industry is taking and will take far exceeds the small amount–around $1 billion out of a more than $200 billion market–they are losing to imports.
TECHNOLOGY: Cyberchondria and “online-itis stalls”–Looking back at old forecasts
Harris Interactive is out with its latest analysis of how many adults are online and who’s using the Internet for health information. After massive growth through the last decade, the number of adults online has stalled at around 69%, with 3/4 of those being online health seekers or “cyberchondriacs”–equating to around 51% overall. (The number of kids online is much greater–it tends to be the over-65s who are not online as frequently).
So the fast growth is over, and any future growth in online usage will probably be an aging out effect. Don’t forget that you just witnessed the fastest technology penetration in history, and all because the Pentagon wanted to send messages to its missile silos in the 1960s.
So this gives me a neat opportunity to remember what a great futurist I was (ha, ha). I’ve recently fessed up to several forecasts made in the Health and Health Care 2010 publication that, at the least, have to turn around to come close to matching current reality (particularly the bit about aggressive health care payers working to reduce costs over the Zeros….). Well back in 1996 in an IFTF report called Telehealth (we wish we’d called it eHealth) we had a nearly right explanation about the growth of online activity based on access to in-home appliances like PCs. Some of the technology is wrong (the Network PC never made it) but look the numbers, and you’ll see we were pretty close:
- In its potential for mass applications, then, telehealth clearly represents a new market that is likely to have new and far-reaching impacts on patient care, provider organizations, and even consumer-focused pharmaceutical provision. How important it becomes and how quickly it becomes important depends on partly on its acceptance by physicians, patients and others involved in health care, but more importantly on the information infrastructure needed to run them. The key piece is consumer access. If the home computer becomes ubiquitous, then health care functions will be found to run on it, and telehealth will have a chance to take hold and take off. Currently 38% of American households have PCs, while 20% of U.S. adults have accessed the Internet or used online services. The important question for telehealth is, how likely is the penetration of PCs and other information of appliances to grow and by how much?
We conducted an internal workshop at IFTF in order to forecast the penetration of information appliances with the capabilities of 1996 home PCs with modems into U.S. households over the next ten years. This definition obviously includes both cable modem systems and the coming Network Computer (NC), as well as anything else Silicon Valley’s late night pizza eaters dream up in the next few years. Our consensus forecast was that by 2000, 50% to 55% of American households would have these appliances, and that by 2005, 65% to 70% would be equipped. Some of our outliers felt that this was much too low and that the appliances would be as common as color TV (i.e., 95% plus by 2005).
PC penetration is now around 61% and other forms of access to the Internet (including access to appliances like web TV, PDAs, and access at libraries and internet cafes) take us to 69% of adults online), our forecast of 65-70% by 2005 looks pretty good. With the preponderance of cable modems and other new technologies, it’s a fair bet that even the 95% level of adults online will be reachable by 2010, even if many people won’t want or need to use the technology. The rest of the growth in this market will be the aging out effect as todays kids become tommorow’s consumers until, like the phone and the TV, the Internet is part of the fabric of modern life for everyone.
TECHNOLOGY/QUALITY: CPOE not enough to prevent errors?
Well we haven’t even got CPOE systems in more than a small percentage of hospitals (4%-15% depending on who you believe) and their validity as a major weapon against medical errors is already being questioned. A study in Annals of Internal Medicine looked at all medication orders in a large hospital in Chicago, over the course of one week in 2002 and tried to figure out what difference a CPOE system would have made had one been in place:
- A total of 1111 prescribing errors were identified (62.4 errors per 1000 medication orders), most occurring on admission (64%). Of these, 30.8% were rated clinically significant and were most frequently related to anti-infective medication orders, incorrect dose, and medication knowledge deficiency. Of all verified prescribing errors, 64.4% were rated as likely to be prevented with CPOE (including 43% of the potentially harmful errors), 13.2% unlikely to be prevented with CPOE, and 22.4% possibly prevented with CPOE depending on specific CPOE system characteristics.
As the authors note somewhat dryly:
- Prescribing errors are common in the hospital setting
The implications are laid out in this article in Health-IT World. Some half of the serious medication errors would not be caught by a standard CPOE system unless it had high level decision support software combined with it. In fact most CPOE systems do, even if the authors study poo-poos them.
The issue in practice is that if you set the warning levels too low, the clinicians can make errors. If you set them too high, the physicians just hit over-ride all the time, and make errors. Physicians and hospital IT folks I’ve talked to about CPOE have tended to start on the lowest levels of “warnings” and slowly ratchet up. But any computer use needs intelligence, and CPOE is no exception. That doesn’t mean that it shouldn’t be tried, and slowly it will become more common.
HOSPITALS: You know your hospital bill is out of control when USA Today tells you so!
Hospital care is expensive. And, as USA Today points out, it is getting more and more expensive. While hospital costs overall are going up fairly fast, hospital charges have been galloping ahead, up to 30%+ a year in some areas. Of course because insurers pay according to pre-negotiated case- or per-diem rates, hospital charges don’t ressemble reality in any way. Unless of course you’re one of the poor suckers who has no insurance and has to pay them directly. So the increase in hospital charges seems to be an attempt to get more out of the uninsured and the few dumb insurance companies who are paying a proportion of charges.
However, health plans have bascially given up trying to control the costs of care and are passing their costs onto employers. For the past few years, despite the fact that there’s a recession, employers have either tried to pass these costs off onto their employees, or have just sucked it up and paid them. That is of course if they haven’t sent the jobs to India. But maybe the worm is turning. Some 10 years ago Tom Elkin at CalPERS became the proto-typical “big ugly buyer” when he faced down the health plans and told them he wasn’t merely going to pay their increases. That really was a shot heard around the world, and the start of the spread of managed care as a cost containment vehicle. But by the early 2000’s, all that effort has ended, and Blue Cross of California had been beaten into submission (but not into lowering its profits) by the big provider chains. Now CalPERS is getting back into the fray, and it doesn’t seem to have much use for the health plans that should be doing this job for it.
Although the details are not specific, Sutter has agreed to cap hospital costs for CalPERS, and this could roll onto the other big chains in the state including CHW and Tenet.
- Sutter’s offer to CalPERS was part of a contract that Sutter signed Thursday with Blue Shield of California, the HMO that insures most of the 1.2 million CalPERS members not covered by Kaiser Permanente. The contract empowered Cal-PERS to purchase an HMO plan from Blue Shield that either would include the price cap for all 26 Sutter hospitals or would allow CalPERS to drop Sutter’s 15 most expensive hospitals from its HMO network. The 45 hospitals CalPERS targeted for possible exclusion from its health plan next year also included facilities owned by two other chains, Tenet and Catholic Healthcare West. Officials at both Tenet and CHW said they have tentative deals in place with Blue Shield that would give CalPERS the ability to cut some of their hospitals from its network next year.
THCB’s regular Sacto correspondent Matt Quinn has his own comment on this:
- Is this the next generation of activist employer groups? If plans can’t negotiate better rates, then the employers themselves will. Does this (further) signal the end of managed care as we knew it? Are health plans so untrusted that providers can always go to the “publicity” card in negotiations? If CalpPERS has to do (virtually) all of the work itself (including the heavy-lifting tasks of network management, rate negotiation with providers, retrospective review, etc.), what is it paying plans (other than Kaiser) for?
Leading questions indeed. I’ve been saying that health costs can’t just go up for ever, and there is now some evidence that employers are getting pretty disgruntled.
HOSPITALS: Tenet losing independents off the board
Tenet stock is back up to $11.20 at Monday’s close, up from a low of $9.15 a few weeks back when rumors of bankruptcy caused some of the weaker hands (e.g. me–curses, curses) to fold, and the stock teetered towards its all time lows. But the story is not quite over yet. The Street.com which tends to be a shill for short-sellers, but often has nuggets of truth in its analysis, reports that several external directors are leaving the board. The WSJ further reports that one of those directors, ex-Toys’R’Us CEO Robert Nakasone made public a very sour resignation letter:
- The former director said he opposed the selection in September of an insider, Mr. Fetter, to be chief executive. He said he opposed the board’s decision last July to terminate discussions relating to a possible combination of Tenet with a smaller company, which he didn’t identify. But the final straw that prompted his resignation, he said, was the board’s adoption of a 2004 executive-bonus program that could result in big payouts to about 100 executives, including a $2 million award to Mr. Fetter.
“In 17 years of service on large public company boards, I have never witnessed such a sense of executive entitlement,” Mr. Nakasone wrote. The bonuses might be paid even if financial results this year aren’t any better than those of 2003, he said.
You’ll recall that 2002-2003 wasn’t a banner year for Tenet or its stock price.
Apparently Tenet thinks that Nakasone is just a board member who was disruptive in meetings (and to be fair Bob Kerrey, 9/11 Commision member and Tenet Board member agrees with them). Of course, you can be disruptive in more ways than one. And publicly calling attention to multi-million dollar bonuses for the CEO, when things look bad financially might be seen as a little “disruptive”.
PHARMA: Oncology drugs seeing effect of payment changes
From the THCB’s Sacramento bureau, Matt Quinn has been following the changes in reimbursement for oncologists. He notes that although last week Genentech’s income rose 17%, not all is well at the onco-pharma shop. Matt writes:
Change monetary incentives and utilization changes… how unexpected (!). Rituxan and Herceptin represent a big piece of Genentech’s revenue. Avastin (and other drugs that choke off blood vessels from tumors) haven’t proven to be the "silver bullet" that they were once thought to be. Genentech’s future is heavily reliant on them as well…as the WSJ notes:
"At the same time, however, sales of another Genentech cancer drug (Rituxan) appeared to fall short, a situation company executives attributed in part to "initial caution" by physicians following a change in Medicare reimbursement practices for cancer drugs."
"Officials of Genentech, South San Francisco, Calif., acknowledged some weakness in Rituxan sales. Ms. Potter blamed lower inventory levels at drug distributors, while also noting changes in Medicare-reimbursement practices. Under the new rules, doctors aren’t any longer able to profit by prescribing cancer drugs."
POLICY: News just in…..Bill Frist is connected to a hospital chain
OK, so its not really news, but Senate Majority leader Bill Frist has played the gallant heart surgeon for a very long time, and has had clear sailing for many years despite the fact that HCA (or as it was known Columbia/HCA) has both had a disreputable past, and continues to make money off Medicare. Given his role in health care in the Senate the fact that his father founded the company, his brother is Chairman and he owns millions of $$ of its stock, seems to have gone completely unnoticed.
So why is it coming up now? Malpractice is the answer. HCA owns a malpractice insurer, which will benefit (as will HCA) if malpractice awards are limited. A pro-lawyer consumer group has accused Frist of not being as disinterested as he claims to be in HCA’s dealings. It’s odd that it’s this little piece of Frist’s HCA dealings which is proving controversial when last December he helped shepherd the Medicare bill through the Senate that will greatly improve the Medicare funding stream for all hospitals, including of course the nation’s largest hospital chain — HCA.
QUALITY: Are we getting our money’s worth?
On the very day that a fascinating article confirms that high spending does not equal high quality overall care, Pfizer-sponsored doc Mike Magee has a new presentation out based on the industry report which suggested that every dollar spent on health care returned several dollars back to society. THCB regulars will remember me losing my cool over the methodology and PR behind that report. Incidentally the PR was put together by the same actors (and I mean that literally) who were involved in faked "news releases" that promoted the Bush Medicare bill.
But there is the tacit acceptance in healthcare that more technology is better, and similarly that more specialist-based care required to use that technology is better. There’s never really been an answer to Larry Weed’s question — "if the radical prostatectomy rate in Denver is 3 times what it is in Salt Lake City, should you move to Denver to get your cancer taken care of properly or should you move to Salt Lake to avoid unneccessary surgery."
However, for the first time I’ve seen, someone has now come out and answered the question. And of course the someones are the folks from Dartmouth, who’s leader and guru Jack Wennberg really deserves much greater recognition for his pioneering work in area practice variation.
For many years it has been known that in some states Medicare (and by extension) other payers, are spending more, by a factor of up to three, on similar populations than in other states. This Wennberg presentations from 2000 shows that spending on patients in the last 6 months of life varies dramatically, with South Florida’s costs being up to three times those in Minnesota. Now Wennberg’s colleagues Katherine Baicker and Amitabh Chandra have a new Health Affairs article which shows that there is at the least an inverse relationship between spending levels and general care quality measures. Their conclusion is pretty brutal:
Higher spending is associated with lower quality of care…..These relationships are statistically significant: Spending is not merely uncorrelated with the quality of care provided. Exhibit 1 quantifies the relationship between an increase in spending of $1,000 per beneficiary (roughly the rise in average spending from 1995 to 1999) and the twenty-four individual quality measures, as well as end-of-life care and patient satisfaction……The effect of increased spending on fifteen of the measures is estimated to be negative and statistically significant, and there is no statistical effect on the remaining nine. The first row demonstrates that a state spending $1,000 more per beneficiary dropped almost ten positions in overall quality ranking (p < .001). Similarly, states spending $1,000 more per Medicare beneficiary had beta-blocker usage rates at discharge that were 3.5 percentage points lower (p < .02), and mammography rates that were 2.1 percentage points lower (p < .01) than the average usage in 2000.
They can’t overall prove that commonly accepted quality processes, such as prescribing of beta-blockers and ACE inhibitors for post-MI patients, are not being followed because spending is higher, and in fact it’s probably circular, as the patients end up back in the hospital because their follow-up care wasn’t good. But if they can’t show the cause, they certainly point out the striking collinearity. And it’s what the Enthoven’s of the world have been saying forever–poor quality care costs more money. Why? Well among other things there is of course the incentive that performing heroic interventions at the last moment is much better rewarded than good quality primary preventative care. And of course that is related to the greater pre-ponderance of specialists (as a proxy for expensive technology), which the article says is responsible for 42% of the difference in spending.
No one is going to pretend that this will be easy to change. We have a structural preponderance of specialists and a Medicare payment schedule that continues to favor increased reimbursements for procedures on the very sick rather than improving care processes for the near-sick. (To be fair MedPAC has been advising changing this for some time). And we have GOGME calling for more specialists in the future. Plus, if you hadn’t noticed, specialists make a heck of a lot more money than generalists, so why would a smart young doc become a generalist?
But this research is a clarion call for the improvement of care processes and evidence-based medicine. And it is a counter-weight to ill-informed trumpeting of the benefits of technology from health care industry groups, who should be spending much less on their PR and more on helping clinicians improve the quality of the care they deliver. In the meantime, if you intend to get old, move to New Hampshire.
TECHNOLOGY: Boston Sci winning the latest battle in the Stent war
The latest battle in the cardiology war between drug-eluting stents seems to be going decisively to Boston Scientific. Their Taxus stent has barely been on the market for a few weeks and it’s already burning up the charts, already selling at an equivalent annual clip of over $1.2 billion. On the same day that their stock rallied on the good news its competitor J&J’s Cypher is having the dreaded production quality problems. That type of shooting yourself in the foot problem plagued Schering Plough in its recent downturn, and can take a while to sort out. By no means is a company of J&J’s size and reputation going to let this continue, and because of J&J’s overall size it won’t make too much of an impact on its stock price, but for the moment this round is clearly being won by the other side.
