In an article in Pediatrics Carroll and Christakis report that 35% of pediatricians use a PDA at work. So for that 35%, what do they actually do with them? 80% use it for a drug reference and 65% for scheduling but as this chart shows only 22% kept patient information on the PDA and few wrote scripts (8%) or used it for billing (4%). So, as I surmised in my earlier piece on PDA use, the tools are out there, but they are not integrated into the wider clinical workflow. Integrating these tools which are entering via the "backdoor" into the overall clinical workplace IT strategy is the challenge for CIOs.
Above the Fold
POLICY/EMPLOYERS: All you need to know about health care is in this article
Everything you ever wanted to know about the US system is buried in this article in the NY times article called Whose Problem Is Health Care?. The interesting core paragraphs tell you that
After corporate income taxes, employee benefits are the second-largest structural cost for American manufacturers, adding 5.8 percent to costs, according to the study. In all major economies, paying for health care means a combination of public and private money. But in the United States, businesses pay a larger chunk than do their European and Asian counterparts.
"In Canada, for example, a lot of the expenditures for health are funded out of general revenues," said Jeremy Leonard, an economic consultant for the Manufacturers Alliance, and the report’s main author. In Canada, the private sector spends 2.8 percent of gross domestic product on health care; in the United States, the private-sector figure is 7.7 percent. And American private-sector spending falls disproportionately on big employers like manufacturers. Some 97 percent of members of the National Association of Manufacturers provide health care coverage for employees. In 2002 alone, General Motors, which covers 1.2 million Americans, spent $4.5 billion on health care.
Uwe Reinhardt, an economist at Princeton, has referred to General Motors, Ford and Daimler-Chrysler as "a social insurance system that sells cars to finance itself.”
And as Uwe knows, the US government is a mutual insurance company with large military wing struggling with its debt repayment package.
All the other salient facts are that over 95% of companies with more than 200 workers provide health insurance, and only 65% of those under 200 employees do. And those that do not are the ones paying low wages (i.e. it’s not the law firms or boutique investment banks). So that’s where uninsurance comes from and why 85% of the unisured are the working poor.
The other side of the story is that the US private sector spends 7.7% of GDP on health care. (I think that’s the same as saying that of the GDP, 7.7% goes on health care that is privately funded). If I recall it rightly some 15% of private sector payroll goes on health care costs. But the overall issue is that although costs are a big deal for employers, they are not the biggest deal and are a realtive low percentage of total expenditures. Contrast that with the role of the health minister in most European countries. His or her health care bottom line is 100% of what s/he cares about, and also has to be defended from both other government departments and the central treasury in governments that budget centrally, not at the whim of a parliament that can create programs without caring about the overall government budget (as does the US Congress). Hence, no-one in the US is responsible for overall health care costs.
This is not in itself good or bad. It’s just different, and certain parties, such as large employers, the uninsured and anyone buying their own health insurance, do way worse than they would in a system that didn’t rely on employment-based insurance and had some central cost control. But don’t worry, if you’re reading this and you don’t fit into that category–perhaps because you work in the health system–it probably means that you’re doing better than you would in one of those nasty single payer countries!
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.
TECHNOLOGY: Spending and adoption in the clinical IT market — Is the S curve getting up off the floor?
You know that all technology diffuses in an "S" curve, and the trick is figuring out when the line goes up from snaking along the floor and starts heading up sharply–the "hockey stick" growth phase. Whisper it quietly but in terms of health care clinical IT, we may be about to enter that state. The Dallas Business Journal reports that interest in IT spending is on the rise amongst health care CEOs. Meanwhile, on the eRX front there are a couple of interesting developments with industry giant Mckesson getting together with Surescripts to help round out the pharmacy systems integrated into Surescripts’ ePrescribing network. In a similar vein, small but feisty handheld vendor PatientKeeper won another contract which "gives physicians real-time access to patient lists, consultation lists, the previous three days of laboratory data (with built-in alerts for labwork of critical value or results out of normal range), and dictated radiology data." PatientKeeper is also trying to move physicians to enter and update charge-capture information, which in turn should increase their revenue. In addition to this news, quite the good day was had by Cerner, which despite going 0 for 4 in its quest to win any regional UK contracts, upped profit expectations based on increased business in the US (including its recent contract with large Catholic chain Ascension Health) and was rewarded with a 15% rise in stock price yesterday.
On the plane last night I met a senior sales exec from Allscripts. We swapped eHealth war stories, and he told me essentially how grim life had been in the trenches trying to get some sales going in the late 90’s and early Zero’s. Allscripts was really the only eRx vendor that was left standing and that was partly because it IPOed a little sooner than iScribe, ePhysician, Parkstone et al which never got out and all died. But in the last 18 months, things had turned around and every significant medical group he was talking to had decided to do something in the clinical/physician IT space. Allscripts after some tough times is now up to 10,000 docs at around 150 sites, and maybe one of the companies poised to actually benefit from the "S" curve take-off.
Are we really entering the two to four year hockey-stick growth phase for clinical and physician IT use? I don’t know, but to quote Ian Morrison, "if something’s going to be a big deal it’s got to start sometime."
INDUSTRY: Medicare reporting may add to Tenet’s woes.
Medicare is apparently going to be getting into the game of paying (very modestly) for quality measures, or more accurately modestly punishing for the lack of reporting on it. According to Health-IT World:
The government said it would begin punishing hospitals by cutting Medicare payments to nonreporting hospitals by 0.4% if they failed to provide adequate quality data. The threatened punishment is slated to begin in fiscal year 2005. The new effort, part of the Medicare Prescription Drug bill, offers an inducement for hospitals to collect data on 10 different measures in three different therapeutic areas: heart attack treatment, heart failure treatment, and pneumonia care. Hospitals will need to begin submitting data by July 1.
It’s not the first effort to gather quality data — the Joint Commission on Accreditation of Healthcare Organization (JCAHO) requires data for hospital accreditation, and the Leapfrog Group has a payment-for-quality effort — but it is the largest, touching all hospitals that deal with the government. Initially, submission of the data on the 10 measures is all that will be required to avoid getting docked the 0.4%, but healthcare watchers expect additional measures to be added as time passes. Additional incentives will be put in place to reward not only the reporting of data but also the quality of care.
Well funnily enough this may have yet more impacts on our old friends at Tenet. Remember back when I told you about Tenet’s ending its JACHO reporting contract with Perot and giving the contract to a small company with 20 employees and one DSL line? Well apparently the small company received a scathing two page email from another company for whom it provides a JACHO reporting application. That’s 3/3 on irate emails from companies that it’s doing that for. My source suggests that the soon-to-start Tenet operation is a train wreck in the works, which suggests that Tenet’s reporting to Medicare is also going to have the same potential problems. At least it’s likely they’ll have fewer hospitals to deal with, I suppose! A fact that pummelled Tenet’s stock the other week after it also took a $1.4 billion charge connected to the sale of those hospitals.
POLICY: Too many physicians? UPDATE midday Friday
We’ve been told by COGME no less that there’s an impending physician shortage, and today I reviewed a whole bunch of material for a hospital that looked like it was true. However, to put a spike in this balloon, an article published online in Health Affairs by Jonathan Wiener showed that even with extra recruitment over the 1990’s, the large prepaid group practices like Kaiser and HealthPartners still managed to serve their populations with far fewer physicians per 1,000 patients than already exist in the US, let alone the number that will be practicing in 20 years time. And all this with physicians allegedly working shorter hours and seeing fewer patients than in the wider FFS world.
I’ll update my thoughts about this later (It’s late and I just got off the plane!) BUT go give the article a read.
UPDATE. OK I’m off my 3 hours early morning call and can spend a moment extending this post, especially as it has a passing relevance to the project I’m working on. Here’s the argument:
Way back in the early 1990s those forecasting the physician workforce made some assumptions that the US would move closer to gatekeeper/managed care model. This type of a model assumed a split between specialists and generalists that’s close to 50-50, and in many countries it’s closer to 20-80. The model also assumed that there would be fewer surgeries and procedures as the model unfurled. At that point consultants wondering around with bed days per enrollee of Medicare managed care plans in southern California became a familiar feature of the hospital boardroom (yes, I admit I was one of them). Essentially if you played out that model nation-wide we had about 75% too many hospitals and a few too few generalists and 50% too many specialists. That future never happened for a variety of reasons, mostly connected with the death of managed care. However we did see a reduction in the number of residency slots, including some teaching hospitals being paid to not train residents.
Instead we started seeing a rash of new procedures and technologies, especially in the unmanaged Medicare population, and the newly unmanaged HMO-lite population. Meanwhile there was a rash of hospital consolidation and bed reduction in the 1990s (although only about 10%). Then the prognositcators started to notice the impending arrival of the baby boom, the leading edge of which hits 60 next year and Medicare in 2010. So we can do more things to more people and will have an increasing number of people to do them to. They also noticed that medical school applications had fallen (although not the number of those in med school, just fewer candidates for each place) and some surveys showed that most physicians wouldn’t recommend medicine as a career to a new student. Yet we didn’t fundamentally change our system in the last two decade. So about a couple of years ago you started seeing articles like this one warning that we had a shortage coming and that we needed more doctors, and in fact late last year COGME recommended that we increase the level of residency slots 15%.
Weiner’s article simply points out that we can give appropriate care to a given population with a physician-to-population ratio that is 22-37% below the current national rate. How do the bigger PGPs do it? Not apparently by working their doctors harder–in fact they probably work fewer hours. Not by adding more primary care doctors–over the years primary care doc numbers in these groups grew less slowly than those of specialists, although the share of primary care docs remains higher than in the overall physician population. In fact specialty position growth in these PGPs exceeded that of the national average. Instead they use more physician extenders (nurse practitioners and physician assistants) for between 17% and 25% of primary care providers–as opposed to the 10% they represent in the overall primary care provider population. Kaiser in particular uses specialty care nurse practitioners–their growth was 16% annually in the 1990s. They also use more preventative care and disease management programs, probably work their procedural specialists harder (this is certainly the case abroad), and probably do less surgery
Meanwhile Solucient projects strong demand for cardiologists, GI and orthopedics docs while the folks at the Advisory Board (who’ve been known to extend a chart line well beyond breaking point in their time–anyone remember their forecast of 90% capitation by 2005?) believe that there’ll be a shortfall in specialist hours of between 35% for intensivists and up to 70% for cardiologists by 2030. They also have a neat chart in their recent report on physicians which correlates GDP per head in the US with MDs per thousand — in other words the richer we get the more money we want to spend on doctors? (Well that’s one interpretation!)
So how will this play out? One thing to remember is that thanks to the expansion of med schools in the 1960s and 1970s we are still pumping out docs out of residency programs at about the rate of 20,000 a year, with only about 8,000 a year retiring, and that growth will continue until about 2015. So the number of active non-federal doctors per 100,000 population, which is about 225 now, will peak at 235 in 2010 and only fall back to 230 in 2020. In a chart which includes NPs and PAs, Wiener shows that while the US now has a total of 230 MDs, DOs, NPs and PAs per 100,000, the big PGPs get by with 145-175. So although the rest of US health care lives in a different world than Kaiser and Group Health, anyone wanting more money for medical school and residency places is going to have to make a pretty convincing argument that they’re really needed–especially with $500 billion deficits out as far as the eye can see. So, as it takes 8-10 years for a policy change to show up as the first "additional" doc in practice, I believe we’ll work with what we’ve got at least out until 2030 and probably beyond.
Medicare will inevitably have to slowly change its payment arrangementss to reflect this–although that’ll be a touch battle. Private plans are already working on similar ideas, such as pay for performance, and the folks at Leapfrog and IOM are also pushing for changes in the model of care delivery. So slowly over time expect the obvious:
–More use of phsyician extenders, such as other clinical professionals.
–More and better use of technology to make physicians more efficient and patients better at self-care
–Innovative patient-centered practices that get around the "broken chassis" of the 8 minute office visit, and require less physician intervention
–Longer waits (eventually) for the real hard-core sub-specialists, higher salaries for those guys and more struggles between hospitals for the revenue generating superstars.
–Concominant rationing of the really expensive stuff. Don’t worry–you wouldn’t be able to afford it by then anyway!
TECHNOLOGY: Boston Scientific’s new stent near market
Boston Scientific is having a good run. Its sales are up and its new drug-eluting stent Taxus, which has been doing well outside the US, is close to approval here. J&J’s Cypher stent is likely to be the main loser when Taxus is approved here, but the arms race between these two and Guidant will continue. Of course everyone’s ignoring what the Stanford study said about the value of these stents last year.
Boston Scientific’s stock is up nearly 30% in the last 3 months.
PHARMA: Public Image continues to go downhill
You may remember the story from the Industry Veteran a few weeks back about the massive price increase in Abbot’s HIV drug, Norvir. Well the Sacramento Bee notes that things are close to going thermonuclear now.
In a Jan. 20 letter to the company, more than 150 doctors who specialize in HIV care said they will resign from Abbott advisory panels, refuse to participate in Abbott drug trials or attend Abbott-sponsored lectures. They will ban Abbott representatives from their offices and consider alternatives to Abbott drugs when possible for their patients.
Also today there was an editorial in Eye for Pharma which suggested that the reason for pharma’s poor levels of public trust were to do with its opaque practices:
Perhaps the industry simply hasn’t revealed enough of its inner workings to adequately earn the public’s trust. What lurks behind the manicured lawns and lights in the windows of pharma campuses is largely a mystery to most of our customers.
There is no easy answer. But maybe it’s a matter of working hard to push the black curtain aside and help the public better understand complicated matters like R&D costs and effort and how that translates to retail drug prices. Perhaps "open houses" and public outreach events would give the communities we live and work in a glimpse of the "inside" of pharma.
Nice try, but it’s price gouging like the Norvir incident and the blocking of imports from Canada that is really riling the public. And this is in advance of the Democrats taking on the Medicare bill as a big give away to Pharma. MoveOn is already starting to run those ads, that clamor is sure to grow. If I was in pharma, I’d be quickly thinking about what good things I could do to improve my image. Enhanced DSM and drug programs for poor kids might be one place to start and publicize what was being done.
INTERNATIONAL: Money’s tight at the NHS?
According to this piece of gossip masquerading as a news story British Surgeons have taken to closing wounds with paper clips. I grew up in Britain and to this day I use paper clips instead of cuff links when I wear a dress-shirt. I’m glad that my erstwhile compatriots have found other uses for that essential technology!
PHARMA/GENOMICS: Incyte throws in the towel
When I went to a conference on Genomics at Northwestern University in 1997 there was great excitement that the human genome project was going to be finishing quicker than anticipated. There was also widespread controversy that one company, Incyte Pharmaceuticals, had patented a vast number of genes, or at least the ability to do anything with them–the academics in Chicago were worried about the effect this would have on their research. Incyte’s business was based on selling its library of genes to pharma companies for their R&D. A couple of years after that Incyte’s stock got caught up in the 1999-2000 craziness and at one point the company was worth $25 billion, give or take a billion.
But soon a combination of Craig Ventner’s Celera Genomics joining the gene sequencing arms race and the increased public domain access to genetic information brought that business back to earth. Yesterday Incyte shuttered its Palo Alto offices and with it the proprietary genomic data product lines, LifeSeq and ZooSeq and will concentrate on its own drug development work instead. Its market cap is now back below $1 billion and actually looks generous at this level.
