Healthcare Efficiency

HHS secretary Mike Leavitt announced that as part of his “Payer Power” initiative, Medicare would soon begin to post its payments for several common procedures.  This is part of an effort to make healthcare costs more transparent and return purchasing power to consumers.  Part of this includes HSA accounts and shifting payment for healthcare back to consumers from insurance companies.  Currently, consumers have little knowledge and less interest in what their healthcare costs.  They also have relatively little choice.  Secretary Leavitt wants to change that and make purchasing healthcare more like buying a new car.  Sounds like a good idea, no?  Who could oppose such a plan!  Well, as Machiavelli tells us, those who benefit from the old system.  Let me count a few:

1. Insurance companies.  Those high deductible insurance policies that would be coupled with HSAs will be cheaper, hence less insurance business.
2. Academics.  Insulated from reality, they focus on what “should” be done, without attention to cost.  The IOM (in “Crossing the Quality Chasm”) specifically rejected cost as a consideration in healthcare quality, even tho listing “efficiency” as one of their aims.
3. University hospitals.  They are the least efficient, most expensive places to obtain healthcare.  In any cost-sensitive scenario, they would lose business.
4. Federal agencies, AHRQ, HHS, etc. Their incestuous relationship with academia makes them sensitive to lobbying, but mostly, it’s aversion to change.  No real problem with the current system.
5. American Hospital Association.  Now everyone will want to pay only Medicare's relatively low rates.

Medicare is the largest but not the only payer.  Not clear that others would follow suit.  Also not clear which of their various payment schemes CMS would list.  But let’s be hopeful rather than cynical.  At least we’re talking about costs.  That’s new.

Posted by Dr. Robert Burney at 05:36 AM | Permalink | Comments (1)

Sorry Betty, any legislation proposed by a democrat will be ignored, at least until the election.  So healthcare costs will not become transparent soon.  Why do hospitals not publicize their charges?  “Get your appendectomy here!  Lowest prices in town.”  Because the patient doesn’t pay.  His insurance company does, and the patient doesn’t really know or care what it costs, and he doesn’t make purchase decisions.   Car dealers advertise this way, because their customers do pay for the cars.  You don’t look to your car insurance to finance your new car, but you do expect your health insurance to pay for your appendectomy.  
Does anyone want cheap healthcare?  We tried that once.  Remember HMOs?  Some are still around, but they have changed dramatically.  Originally, they reduced costs by limiting access and contracting with cheap providers.  The Brits and Canadiens do essentially the same thing--they keep costs down by restricting resources, both institutions and providers.  If there’s a 5 year wait to get a hernia fixed, probably 10% of those on the list will die before their name comes up.  Another 5% will pay for it themselves.  In both cases, the government saves money.  
Americans generally don’t want cheap care, if it means restricted access.  They want to see the doctor of their choice and have whatever operation he suggests.  They just want someone else to pay for it.  And that’s why transparency won’t make a huge dent in costs right away.  It must be coupled with personal financial responsibility.  Funny how that works.  I don’t care about cost, unless I’m paying for it.  Is that strange or what.

Posted by Dr. Robert Burney at 07:42 PM | Permalink | Comments (0)

John brings up a key point about the lack of transparency in healthcare charges.  This will be a real problem for consumers who wish to make choices based on cost, although healthcare is not different from other industries.   Next time you fly, ask the person sitting next to you what he paid for his ticket.  
One problem with the a-la-carte billing process in hospitals is that you can’t know in advance what an operation will cost, making it impossible to comparison shop.  The one exception is ambulatory surgery centers.  They can tell you exactly what your bill will be, and you can safely assume that it will be 20 to 40% less than the charge for the same procedure at a hospital.  The difference is largely due to efficiency, but also to cost shifting.  The hospital charges more for a procedure and uses that excess revenue to support the ER that typically loses money.
Here’s an interesting payment scam to watch out for:  Let’s say you come to my surgery center and the bill is $1,000.  You have an 80-20 health plan with Blue Cross (BC), and you think that means they pay 80% and you pay 20%.  Here’s how it works:  The charge is $1,000, so you pay $200 up front.  We send the bill to BC, but they write back, “No, our contract with the surgery center gives us a 50% discount.  On a bill of $1,000, our charge is $500. Since the patient has paid $200, we only owe you $300.”  At the end of the day, you paid $200 and BC paid $300.
All of this confusion and obfuscation comes about largely because the patient is removed from the payment process.  When Americans regard their health plan as an insurance policy and pay for their own healthcare, things will improve.

Posted by Dr. Robert Burney at 07:52 PM | Permalink | Comments (2)

There is a new posting on the AHRQ page concerning a pilot project (Ambulatory Care Alliance, or AQA) in ambulatory care.  Mark McClellan, CMS administrator is quoted as saying, "...this pilot will ...provide a clear picture of quality and cost for providers in a region."  Later, the blurb suggests that the project will "identify providers who are able to deliver efficient care to patients, avoiding unnecessry complications and costs."  And finally, that the project will provide "meaningful information (consumers) can use to make choices about which groups meet their needs."

Missing from all this hype are details about how they are going to measure costs and whether they will provide consumers any information about relative costs for the same healthcare service.  I suspect the answer is 'no.'  From other conversations, I know that AHRQ is not interested in measuring costs of healthcare services.  They focus exclusively on "quality" which is defined (by them) as conformance to standards.  The cost of providing the aspirin in the ER is irrelevant to them.  There will be no comparative information about costs--either time or money--for an ambulatory care visit.  How long does it take to get an appointment?  How long must you sit in the waiting room?  What is the cost of the visit to this group vs the one down the street?  These are the questions that purchasers of healthcare should examine.

If healthcare can be assumed to be a commodity, then the only remaining distinguishing factor is cost.  But, is healthcare a commodity?  Largely yes, tho the true answer is unknown and unknowable in the current environment.  Those who care work hard to provide the aspirin in the ER withing 30 minutes.  Those who don't generally lie aout it, so all the numbers all look good.  

If the Republicans are intent on shifting more of the cost of healthcare onto patients (not the worst of their ideas), then patients need information on cost to make those decisions.  Patients don't and can't know about technical aspects of the quality of care.  They depend on regulatory agencies for that.  They ask their friends and neighbors about service quality, and soon the will be asking about cost.  Where will the answers be?

 

 

Posted by Dr. Robert Burney at 09:12 PM | Permalink | Comments (2)