Healthcare Efficiency

Last Sunday, columnist Michelle Singletary wrote in the Washington Post about shopping for healthcare--for individual healthcare services, like an office visit, or a knee arthroscopy.  Several interesting points:  People underestimated the cost of healthcare.  Of course!  They are insulated from the cost, and it’s really hard to find out even if you try.  For a small fee at healthgrades.com, you can get costs for a limited set of procedures as well as ratings for some procedures at some hospitals.

She mentions a Humana site that helps families budget for healthcare.  Huh?  With a traditional employer plan, you have no idea how much healthcare is going to cost.  Let’s assume insurance pays 80%, but 80% of what.  If you need a $200,000 operation, that 20% balance suddenly gets huge.  With a high deductible plan, however, you know exactly what healthcare will cost next year--at least you know the most it could possibly cost.  That’s insurance.  

It will soon be “open season” for federal employees to select a health plan for next year.  OPM publishes a guide that compares prices and customer satisfaction ratings.  This is helpful, but not definitive.  For one thing, it’s not insurance, and a serious illness could still put a hole in your budget.  For another, coverage is not standardized:  plan A covers operations 1,2, and 3, unless you’re left handed, but plan B covers only left handed people for operation 2 and no one for 1 or 3.   In short, you never know what your healthcare is going to cost until you get the EOB.  

So, what do you do?  My condo assn. is looking for coverage for their 12 employees.  I’m recommending they self-insure for the first $5K and buy a high deductible policy for costs over $10K.  Most will thus pay nothing, and no one will pay over $5K.  I’ve heard of companies adjusting the self-insure point with incentives--higher if you don’t smoke and have a BMI under 25, get your flu shot, etc.

Posted by Dr. Robert Burney at 10:09 PM | Permalink | Comments (0)

The NQF held its annual meeting last week, and the subject of efficiency came up.  There is even a committee within NQF to work on “episode efficiency.”  By this, they mean “care of people over the course of an illness.”  CEO Janet Corrigan actually said the word “cost” in discussing this new initiative, though it’s not clear whether she meant dollar-cost or resources utilized. The difference is more than academic. An “episode of care” over the “course of an illness” may last days or months and include many individual healthcare services. A provider would be deemed “efficient” for using fewer resources, regardless of the dollar or time cost of those resources.  In actual fact, those resources would then be applied to other patients at the same price, thus maintaining the total money spent on healthcare.  The NQF approach would be blind to the actual cost in terms of dollars or time.  All of this will do little to reduce the overall cost of healthcare, because it does not put pressure on the cost per unit of healthcare service.

On the other hand, if the efficiency model looked at the cost of individual healthcare services and somehow generated price competition at the individual service level, the overall cost of healthcare would diminish.  The U.S. taxpayer currently pays for 40% of healthcare expenses, so we could even have another tax cut.  Or start another war.

True, resources cost money, but care settings vary tremendously in their ability to allocate resource costs to a given episode of care, so determining the cost of a given service is not easy today.  Cost accounting hasn’t made it to healthcare yet, and the common practice of cost shifting blurs the picture.
 
We could argue for hours about a definition of “cost” without any agreement.  Charges?  What Medicare pays?  What the hospital paid?  What BC/BS pays?  Allowable charges? Try figuring out what it costs to provide an aspirin to an ER patient with chest pain.  

Several cautioned about confusing efficient care with cheap care—a valid point but reserved for another discussion.  Some also lamented the demise of some Certificate of Need (CON) laws, but with effective price competition, the CON process becomes irrelevant.  Besides, the Soviet Union proved years ago that central planning doesn’t work.  

At present, there is no incentive in our system for providing more efficient care—either in terms of fewer resources used or a less costly service.  This is one of the factors propping up our high healthcare expenses.

Posted by Dr. Robert Burney at 02:47 PM | Permalink | Comments (1)

The Medicare Payment Advisory Commission (MedPAC) is trying to decide how much to pay physicians for Medicare services next year.  Or rather, they are trying to decide how to decide how much to pay.  (See more discussion at CMWF.) Currently, the total of such payments is defined by the Sustained Growth Rate formula, which is linked to the Gross Domestic Product.  In other words, if the economy grows, Medicare is allowed to pay doctors more.  Trouble is, it hasn’t.  And rather than pay less the following year, this deficit has just accumulated.   In a few years, doctors will have to work for nothing just to catch up.   Most of the ideas fall into the “feel-good” category, without any details about how they would be implemented or how they would actually save money.  

Measuring “resource use” has been discussed but never used to adjust payments.  When a patient sees multiple physicians, who bears the burden of the resources used?  And who will second guess the usefulness of that extra test?

Putting an added payment burden on patients only works if they have adequate information and a real choice of providers.  Try searching in your zip code for the family practice doc with the lowest cost for an office visit.  Where would you look?  Furthermore, as Medicare reimbursements fall, more physicians are opting out, leaving patients with even fewer options.  

MedPAC members seem intent on maintaining some spending cap but are less sure about how to determine it and even less sure about how to enforce it.

 
As the US population ages, the group of Medicare patients and their healthcare costs will rise proportionately.  Maybe dis-proportionately, since healthcare spending is greater as one ages.  

No one has yet suggested putting more of the cost burden on patients in relation to the impact of their personal habits.  Overweight?  Your co-pay just doubled.  Still smoking?  Don’t even bother to apply.  Why should taxpayers pay for problems that patients bring upon themselves.

Posted by Dr. Robert Burney at 09:41 PM | Permalink | Comments (0)

Washington Post article by Amy Joyce RE employer sponsored health clinics.  Freddie Mac (FM) opened a clinic (managed by Whole Health ) to provide health maintenance, flu shots, etc. for 4,300 employees. Intent was to supplement the employee's primary  provider with convenient access to blood tests, prescription renewals, health maintenance,allergy shots, flu shots, etc.  Since Freddie Mac self insures, any savings in healthcare expenses went to the bottom line.  Employees liked the convenience and short wait times of the in-house clinic.  FM liked the less expensive healthcare venue.  According to the article, FM saved $686K in direct expenses plus additional savings in employee productivity  for a total of $900K.  And that’s every year.  This approach addresses both macro-efficiency (costs for a defined population) and micro-efficiency (costs per unit healthcare provided).  It’s a win-win.

 
With healthcare premiums rising at 7.7%  last year, any story of reduced expenses gets attention.  You have to be big to benefit, but companies as small as 1,500 employees have posted savings.  Obviously, the greatest savings accrue to companies that self-insure for healthcare.  It’s interesting to contemplate combining this approach with a very high deductible policy for employees, where the company self-insures for the first $10K of healthcare expenses.

Efficiency comes from the proximity to the provider and the possibility of accessible scheduling for employees close at hand.  A healthier workforce is one of the goals and clearly benefits both employer and employee.  Comments from Julie Peterson at FM:  “We want people to take a more active role in their health and wellness.  The easier we make it, it’s like you’re running out of excuses.” 

One possible conflict is whether to authorize work time at the gym.  The military has a mission for a “fit fighting force,” so that’s an easy call for them.  Not so for civilian or other government agencies.  A leadership issue.  But even if an exercise facility is only available in non-work hours, many employees will come early/stay late to take advantage.  

The key benefit for employees seems to be convenience.  No appointments, no driving.  Less time out of life for healthcare.  And, did I mention that it’s free?

Posted by Dr. Robert Burney at 08:44 PM | Permalink | Comments (0)

Another report card.  This one from the National Committee for Quality Assurance (NCQA) includes selected data from their HEDIS dataset.  Important to realize that NCQA accredits health plans--not providers, so this is a different population from the CMWF report.  Nevertheless, there are important lessons:

• Things are getting better.  Results show improvements, year over year.

• Plans that report publicly do better than plans  that do not.  Not surprising, but it makes a small point for mandatory public reporting.

• It makes a difference.  The report calculates the performance differences between plans that do and do not report and puts a dollar value on that difference.  

You can quarrel with their accounting details, but this is what macro-efficiency is all about.  Given a certain population, how do you provide the best care at the least cost.  In this case, “best” means conforming to established practice guidelines, and a link on their website provides a calculator for employers to measure the impact of better care on their bottom line.

It’s easy to show that following guidelines on asthma, diabetes, and hypertension reduces the healthcare needs of patients with those conditions.  Now, we hear that healthcare systems that expect their providers to follow those guidelines achieve better value for purchasers.  The next question is, why doesn’t everyone do this? 

In their summary, NCQA pushes for provider-level measures as a means of increasing transparency and thereby helping patients make intelligent decisions.  It’s still not clear that patients will make those choices, and any changes will come slowly.  Unfortunately, NCQA--like others--stops short of looking at the cost of individual healthcare services, choosing to focus instead on the number of services utilized.  Both will be necessary to reduce healthcare expenditures.

Posted by Dr. Robert Burney at 09:21 PM | Permalink | Comments (0)

Fluoride in drinking water was a good thing for everyone except dentists.  As cavities became fewer, dental schools closed.  One concern about performance standards is that the same thing may happen to medical care.  Better management of diabetes will lead to fewer office visits and less revenue for physicians.  At least, that is the hope of CMS and other insurers.  To counter this concern, CMS sponsored a demonstration project that allowed participating physician groups to share in the cost savings.  Douglas McCarthy writes about the experience of the Marshfield Clinic (MC) for the CMWF.  (Ignore the title.)  Compliance with performance standards yields financial rewards.  The paper is actually about the MC’s use of an Electronic Medical Record (EMR) system plus re-designed care processes to achieve better compliance with standards and increased efficiencies in the patient care process through use of technology.  In addition to the financial rewards from CMS, MC realized:

• Improvement in clinical performance measures.  (EMR reminders and various process improvements.

• Decreased hospitalization rate among patients in the anticoagulation program.

• Improved patient satisfaction,  particularly with the use of technology.

• Improved physician productivity due to technology.

What’s not to like!  Well, the experience of other groups with EMRs has not been universally positive.  The paper does caution that the EMR is a  tool and not an end in itself.  Technology can improve healthcare, but it’s not a slam-dunk.  Small groups may have a harder time.  In fact, small groups may have a hard time just surviving in the future.

Posted by Dr. Robert Burney at 09:22 PM | Permalink | Comments (0)