Healthcare Efficiency

Thomson Healthcare thinks you can do a good job and spend less money doing it, at least in the area of hospital cardiovascular care.  They identified 100 hospitals out of 1,000 studied that, compared to peers, had:

• hospital stays 12% shorter

• Costs 13% less.

This good news must be tempered by at least two footnotes:

1. Thompson Healthcare sells software and services to help do this.
2. Many of the hospitals in their top 100 list are their clients.

Thomson has a contract with University Healthcare Consortium to furnish benchmarking software.  The other interesting observation is that a disproportionate number of top hospitals are specialty hospitals.  This is hardly surprising.  As the saying goes, “if you do the same thing every day, learn to do it well.”  Specialty hospitals have been described as the focused factories of healthcare, and they could be expected to do it faster, better, and cheaper.  Not everyone, however, thinks the playing field is level, and comparisons with full service hospitals may not be entirely fair.  Congress, at the urging of the AHA, placed a moratorium on construction of new specialty hospitals.  But then, when was the last time Congress did something intelligent (other than adjourn).  Hospitals accuse them of siphoning off relatively healthy and insured patients, and there is probably some truth to that.  But not a lot.

At any rate, maybe it’s time to look at what these 100 hospitals are doing.  And to wonder why anyone goes elsewhere.  Shorter stays, lower costs, and superior performance on performance measures of technical quality.  There were no measures of the service aspect of care, but the bean counters should be happy.  Not clear from this report who benefitted from the 13% lower cost.  Or how that was measured.  “Cost” in healthcare is an elusive concept, particularly in large hospitals (as many/most of these are).  Lots of questions about how costs are allocated--or maybe they used “charges.”  But charges to whom?  As the CMWF has commented, the uninsured get charged more than insured patients for the same procedure.  Or maybe they looked at payments.  But no, if an insurance company will pay $1,000 for a procedure, it would be foolish to charge less.  (and in the case of Medicare, it’s illegal to charge less.)  Well, let’s assume they used the same measure at all hospitals and we have a true “Benchmark for Success.”

If true, then we must conclude that it is possible to do things better.  Wow!  Now, 13% is a modest gain, but that’s just a first pass.  Another year, and I’m sure we could reach 20%.  And if that could be applied to all patients admitted for CHF, MI, CABG, or angioplasty, we would be talking about real money.  

How would that work?  First, the lights would have to go on at CMS.  (There’s a challenge!)  They would have to say, “Since these 100 hospitals can do it for 13% less, we’re going to pay 13% less next year for that procedure.”  The other 900 hospitals would lose money or get out of the business, unless they are quick imitators.  And, presto!  We’ve just reduced Medicare costs for next year.  As other payers follow suit, our health insurance premiums would go down, and the % or GDP America spends on healthcare would decrease--or at least stop rising.  Then, we’ll transfer these lessons to another specialty.  

Efficiency at work.  What’s not to like. 

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

Who will be the savior of healthcare?  Many point to technology, meaning computers, and there is no doubt that healthcare is behind other industries in tapping the benefits of IT.  However, to believe that IT will bring about a sea change in healthcare costs or quality demonstrates a lack of understanding of this tool.  Things will improve, at some cost, but the difference will not be dramatic.  

Transparency is the new God.  Well, actually not new but resurrected--something that Gods do.  The thought is that if the finances of healthcare are transparent to patients, they will make choices based on the market value of the services provided--the cost/quality equation.  This works well in other industries, tho better with things than services--particularly personal services.  Do you shop for price for a lawyer?  Tax accountant? Baby-sitter?  Well, maybe, a little, but reputation and personality trump cost at the margins.  

The Commonwealth Fund  has published several papers on the subject and recently published a “Survey of Opinion Leaders” on the subject of transparency.  Respondents were primarily academics and administrators (n = 241), and the results are published in a series of charts. Here are some highlights:

Figure 2: Most think transparency will have little effect on price (<5%), tho business leaders were more positive about this than academics.  
Figure 3: 82% felt that transparency efforts should be focused on “clinical quality” (the technical aspect of healthcare) and only 53% voted for the “patient experience” (the service aspect).  Price came in last at 38%.  These numbers probably reflect the bias of the respondents and demonstrate a lack of interest in the rising cost of healthcare.
Figure 4: “Objectives of Enhanced Transparency on Quality and Price” did not mention price or cost in the list.
Figure 5: How likely are consumers to use price and quality data in their decisions?  53% = Not Likely, 35% Somewhat Likely.  Wonder why a system that works so well with automobiles won't work in healthcare.  Could it be that “HC Opinion Leaders” don’t want that to be true?  Or is this the vestige of paternalism, “Patients aren’t capable of understanding the data and can’t make intelligent decisions.”  
And, of course, everyone thinks everyone else should help pay for collection of data, and everyone thinks “technology” will be the magic bullet to achieve transparency (rather than an implementation tool).  Finally, if you have an idea you believe in (transparency), you want all the presidential candidates to come out in favor of it.  

Robert Galvin MD (a board member of CMWF) supports the notion that bad data is better than no data--a fact that Andrew Cuomo recently learned.  Pretty good data is OK with consumers in the absence of something better.  He also notes the plethora of meaningless data (% of patients admitted with chest pain who get an EKG) while standards organizations ignore data that would be more meaningful to patients, like “how long do I have to wait?”  
In another commentary on the CMWF website, Paul Ginsburg makes several good points about healthcare markets:
Hospital charge data are not terribly useful.  Our system of charging for hospital services is bizarre at best.  Charges bear no resemblance to what insurers pay, and patients who pay are charged more than insurance companies.  And don’t try to offer discounts, or Medicare will put you in jail.
Some needs are too urgent or too complex to allow comparison shopping.  As he points out, 10% of people account for 70% of spending, and these patients have little/no incentive or ability to economize.  True, but most healthcare encounters are routine and amenable to choice, if only there were a basis for choice.  If there were price pressure on these few encounters, perhaps the cost reductions would spread to the remaining 70% of spending.  
Insurance has diluted incentives to consider price.  If someone else is paying the bill, why would anyone care about cost?  This is less true in the US than in the rest of the world (we pay more of our healthcare bill), but the mentality persists.
There are benefits to choosing providers that provide better value.  In this, he defines value as a mix of cost and quality.
He also reflects a common theme that insurers should be the agent for consumers.  In one sense, they are--but only if you limit “consumer” to the company that purchases the insurance, not the patient.  Provider networks are usually chosen for providing the lowest price to the insurance company, not the best value to the patient.

 

Bottom line:  Would transparency make healthcare more efficient?  Well, maybe, but not all by itself. 

Posted by Dr. Robert Burney at 08:04 PM | Permalink | Comments (0)

http://content.healthaffairs.org/cgi/reprint/22/6/27  

There is considerable angst about rising healthcare costs in this country as our population ages--particularly as baby-boomers are added to the Medicare population.  Healthcare expenditures do rise by decades, particularly after age 75.  As the chinks in our armor begin to show, we realize we are no longer invincible and consider visiting the doctor.  It’s natural to suppose that costs would rise as Medicare Man gets joints replaced and a pacemaker installed.  CQ Healthbeat News reviewed a study by CMS showing that in 2004, those over 65 spend $14,797 on healthcare--three times as much as those in the 19 to 64 age group.  However, this had a negligible effect on overall healthcare spending.  The primary drivers were technology and an increased volume of services.

A similar note was sounded by Peter Orszag, Director of the Congressional Budget Office.  Healthcare expenses for the average individual are growing faster than the GDP, and this factor accounts for 90% of the increase in healthcare spending, leaving the remaining 10% for aging.  Currently, our HC expenses are expected to be about 17% of GDP in 2007, but that may grow to 31% by 2035.  I say “may,” because the further out in time you predict, the greater uncertainty of your estimate.  Give the alarm generated by the current spending, it seems unlikely that HC spending would ever be allowed to go above 20% of GDP.  

The trick, of course, is to maintain the health of the population without spending so much money.  It’s popular to point to other countries that spend less and seem to have better results.  However, as pointed out here too many times, the “results” cited frequently have little or nothing to do with healthcare.  Longevity, for example, is more related to pollution than to healthcare.  Want to sell life insurance in Beijing?  Anyone want to name the capital city with the worst air pollution?

So, what levers do you pull to reduce spending?  Efficiency, as described here would help, but more is needed.  The HMO approach was to limit access, but that was not popular with patients.  Prevention is one aspect of Demand Management, and we have had fair success with smoking cessation programs in the US.  Now, about obesity . . . .  Some companies use a carrot and stick approach--preventive care is free, but illness related to personal habits costs extra.  Suppose you got on a scale before picking up your paycheck, and every extra pound deducted $10 from your pay.  

The other efficiency that is more commonly talked about--efficient management of chronic conditions could help also.  Protocols for disease management.  Eliminating the extra procedures and studies that fall into the category of unnecessary care.

Technology is touted as a magic bullet--mostly by those who know nothing about it.  Computers are not free, and represent a tool to facilitate prevention or disease management rather than an independent strategy.  

Finally, we’re left with the conclusion that stuff just costs too much.  There’s got to be a better way.  Why does it cost so much to see a doctor or get a hernia fixed?  I can schedule a rental car or a plane ticket on line.   Why must I talk to a receptionist to see my doctor?   Why does it take two clerks to tell me to go to the second floor of the hospital?  Where is the Toyota Production System when you need it.  

There is enormous potential for efficiency and cost reduction in healthcare.  The only thing missing is the will to do it.  And that won’t come without pressure on prices.

Posted by Dr. Robert Burney at 09:33 PM | Permalink | Comments (4)

The Commonwealth Fund (CMWF) quoted several articles from the CQ HealthBeat newsletter of 29 Oct.  One focused on a statement by John McCain that not everyone wants health insurance, and thus we shouldn’t compel everyone to have it.  First, he said that cost is not the reason many don’t have insurance; it’s because they choose not to have it.  Then, he is quoted as saying, “if we bring down the cost, I’m convinced more and more will take advantage of it.”  Only a politician could say those two sentences in the same speech.

There was one quote we could agree on--that the biggest problem in American healthcare is not the quality, but the cost.  Unfortunately, in subsequent sentences, it became obvious that he was talking about the cost of health insurance, not the cost of healthcare, per se.  As noted here long ago, there are three separate expense items in my personal budget:  Health, Healthcare, and Health Insurance.  Health is what I spend on tennis shoes, exercise membership, toothpaste, and flu shots.  Healthcare is what I get when health fails (a situation that increases with age.)  And Health Insurance pays for some of healthcare, when they can’t find an excuse not to.

The good news in all this is that no one really cares what McCain thinks.

And speaking of things that don’t matter, CMS finally decided to reduce physician payments by 10% next year.  Congress will, of course, negate that decision, as they have done in the past.  The most unfortunate part of all this is that it erases any impetus to increase the efficiency of physician practices.  If you get paid for doing things poorly, why improve?  The AMA, in all its wisdom suggested that physicians would just decrease the number of Medicare patients they see.  No thought of improving the efficiency of care from them.  

Someone from the Federation of American Hospitals pointed out to McCain that premiums for a family of four now top $12,000.  Interestingly, another article in the same newsletter points out that insurance in Switzerland for a family of four costs $10,200 a year.  The thrust of this article was that health insurance costs are rising everywhere.  

We are not alone, and soon we will have company.  (I could be a politician!)  The same factors that affect US healthcare operate everywhere, with the same effects.  The one basic strategy that will work everywhere is to make healthcare cheaper.  No one wants cheap healthcare (HMOs tried that years ago).  We want the same healthcare, but at a lower cost.  And yes, it’s possible.  But you have to try.

Posted by Dr. Robert Burney at 09:12 PM | Permalink | Comments (0)