Healthcare Efficiency

Debate focus

Sun, 28 Jun 2009 16:24:37 -0600

Today's Washington Post carries a front page story on healthcare legislation. There has been a lot of discussion on various issues, but now the focus is on the politics of the possible--what sort of legislation can we pass. Here are some quotes and comments on that article. "...cadre of liberal activists...against Democratic senators who (sic) they accuse of being insufficiently committed to the cause." OK. But what exactly is "the cause?" In the next paragraph, we see "comprehensive health-system overhaul." Where is the Devil when you need him. Reading on .... How about "true healthcare reform?" Not yet. There is next a list of those doing the criticizing and (at last) a specific criticism of Mary Landrieu (D-LA) for reluctance to back the government-sponsored insurance option. Is this the Holy Grail? Is the focus on "Medicare for everyone?" Many fear this would morph into "Only Medicare for anyone" as the government gradually becomes the sole insurance provider. But on (to page A-4) with the quest. There is a suggestion that time is running out to do anything, as the debate gets side-tracked into irrelevant issues. Next comes Andrew Stern (president of the Service Employees International Union) who urges Dianne Feinstein (D-CA) to "put her foot on the gas, not the brake." Feinstein wisely responded, "The gas pedal to go where?" and questions how an expansion of health insurance coverage will be paid for. If insuring the uninsured is the "true cause," the twin "cause", as Sen. Feinstein points out, is how to pay for it. So far that answer has been elusive. OMB chief Peter Orzag has consistently pointed with alarm to the rising amount Americans are spending on healthcare--an ever increasing percentage of the GNP that will eventually crowd out all other spending (if you believe in endless extrapolation). Other scholars have examined the causes of healthcare spending and created plans to modify one or another cause. The Dartmouth crew suggests making all of the U.S. look like the lowest spending geographic sector. Others point to "overuse," and the way to end overuse is rationing. At the end of the day, however, when comparing U.S. healthcare with that in any other country, the bottom line is that it just costs too much here. Even allowing for cost of living, standard of living, etc., it just costs too much. We pay our doctors and hospitals too much for each unit of care provided. So far, no politician has wanted to attack that cause, although Obama did mention "bringing costs down" as one of his key goals for healthcare. (The other two were free choice of a health plan, and insurance for all.) There have been calls to reduce Medicare payments, but this seems counter-productive in an environment where many think Medicare currently pays too little. If you reduce payments further, the result would likely be fewer providers who would accept Medicare payments, with no overall effect on the amount spent. In this town (Washington, DC), it's all but impossible to find a physician who will accept Medicare or any other insurance. If you want healthcare in DC, you have to put money on the table. Even local medical schools (we have three) don't accept insurance. Well, yes, Congress could pass a law that everyone has to accept insurance payments. That would go over big. The AMA has previously staked out a firm position against compulsory insurance payment. Want to take them on? We could, however, induce efficiencies that would lower prices by instituting competition. If Medicare sent out RFPs for the 10 most common procedures in a geographic area, institutions and individual providers would find ways to do it cheaper in order to make competitive bids. Is this possible? Doing it cheaper, I mean. Other industries have done so. Think what your computer would cost if there were no price competition. Or your car. Or a TV set. There are even examples within healthcare of the same procedure being done in different settings at different prices. Yeah, it's complicated. But it's also deceptively simple. Besides, have you seen a better idea? So the battle intensifies. The war of words will also likely become more sophisticated. Drew Westen writes an interesting essay on how specific terms conjure emotions, sometimes beyond the literal meaning of the words. If you're into selling a program, it matters what you call it. For example, "a doctor for every family" trumps "universal healthcare." In the end, he advises the administration to "stand up and say what they believe, clearly and with conviction." They're good at that.

Yes!

Tue, 23 Jun 2009 12:10:48 -0600

It's not often these days that I can read something I pretty much agree with 100%, but a recent column by Robert Samuelson comes very close. He display remarkable perception regarding the basic problems with U.S. healthcare. (It costs too much.) And he is correct that all of the current discussions about "reform" will only make this worse. There's a wonderful Tom Toles cartoon in the Washington Post that's relevant here--representatives from insurance companies, drug companies, and doctors are shown sucking cash out of a patient while one of them is saying to uncle sam, "Which "unnecessary procedures" would you be referring to?" The thought behind this is not that these groups have nefarious motives, but that they are just NOT interested in reducing healthcare spending. Quite the opposite. All of them would benefit from more spending on just about any aspect of healthcare. On the other hand, a newspaper reporter/columnist has no such axe to grind, so common sense prevails. Well, usually. It's like pointing out that the Emperor has no clothes. All those things that everyone accepted as true are suddenly called into question, and most of them are not really true. Like, IT will reduce costs. Wrong. Like prevention will reduce costs. Wrong, well, at least in the short run. Like doctors and hospitals and insurance companies want to reduce the amount of money spent on healthcare. Wrong. There is a lens or litmus test for any comments about healthcare reform. First, accept that the single biggest problem is that U.S. healthcare costs too much. It's not the uninsured. It's not the lack of IT. It's not excessive care. It's cost. Second, when someone talks about reform, ask how their suggestion will reduce cost. If that is still difficult, ask how they will personally benefit from their suggestions. If they start talking about improving quality, just turn the page and look for ways to reduce cost. And it's the cost of individual services that's key. If we can cut 20% off the cost of every service, we could do 10% more of them and still pay less for the package. And yes, it can be done. All sorts of other industries have done this, mostly to address competition. There are books about Lean Six Sigma in healthcare. It can be done. There are even a few examples of healthcare organizations that have put their toes in this water. A joint report by the National Academy of Engineering and the Institute of Medicine noted that few resources "have been devoted to improving or optimizing the operations" of the U.S. healthcare system. Healthcare as an industry has failed "to take advantage of the tools, knowledge, and infrastructure that have yielded quality and productivity revolutions in many other sectors of the American economy." That was 2005, and it's still true today. American industry did this as a response to competition. American healthcare has no competition.

Insurance is not the villain

Sun, 14 Jun 2009 16:01:35 -0600

One of the key issues under healthcare reform is the roughly 45 million uninsured. The implication is that these people are totally without healthcare, and purchasing health insurance for them would solve the problem. On closer analysis, neither premise is quite true. Some are without insurance by choice--the young and invincible. In our system of employer-sponsored health insurance, when you lose your job, you also lose your health insurance. Many people are in that position today. Actually, that's not quite true either. There's always COBRA. Now there's another problem that needs to be solved. If you elect the COBRA option, your health insurance costs skyrocket, first because you are now paying the employer's part of the premium also, and second because you are no longer part of your employer's group. You are an individual buying an individual policy, and that's very expensive. Other reasons for being uninsured are many and varied. A few defy any solution. The biggest problem with just buying health insurance for the uninsured is the cost. In fact, the biggest problem with U.S. healthcare is that it costs too much, and buying insurance for another 45 million people would compound that problem. In a speech in Green Bay, WI, today, Obama said, "The single biggest problem we have with the debt is Medicare." As is traditional in our culture, we look for someone to blame, and a frequent target is insurance companies. The administrative costs of private insurance have been attacked by comparing them unfavorably to Medicare. (I hope no one still believes that Medicare has lower administrative costs.) A letter to the editor in June 13th's Washington Post cites ". . . insurance companies that make tremendous profits while interfering with patient care." And another letter mentioned ". . . an unregulated insurance industry. . . " These two letters day sought to deflect blame from doctors in response to an earlier article by Steven Pearlstein. Pearlstein was commenting on a New Yorker article by A. Gawande about the small Texas town that has the highest per capita healthcare costs in the U.S. This well written article demonstrates once again that when entrepreneurship is pressed beyond limits, it morphs into greed. This change is gradual and usually imperceptible to those involved.  I'm sure those in the insurance industry will be surprised to learn that their industry is "unregulated." What these writers and others fail to appreciate is that health insurance mirrors the cost of healthcare. If you want to reduce the cost of healthcare insurance, just reduce the cost of healthcare. Unlike the healthcare industry, there is competition in the health insurance industry. Yes, they all make money, and I hope that continues. The first year that health insurance companies fail to make a profit is the last year there will be any health insurance companies. Even federal programs, like Medicare must operate at a profit. That is, they must take in (taxes) more than they spend (benefits). In the case of Medicare, there is a Trust Fund (retained earnings) to cushion any disparity for a while. But ultimately, the piper must be paid. Pearlstein makes this point repeatedly in comments on his article. It is unrealistic to expect insurance companies to reduce their premiums while still paying the same benefits. That said, however, there are things that could be done. The problem with COBRA could be solved thru legislation. (Risky!) Those who cannot obtain insurance because of pre-existing conditions or other high risk factors could be added to a pool to be insured jointly. We do this with auto insurance. And what about personal responsibility? When someone with a BMI of 40 develops diabetes, why should his insurance be expected to pay for his care? Some employers are developing risk stratification for their employees and adjusting health insurance premiums accordingly. We are not passive victims of our own bad habits. We can change, if we want to, and our health insurance costs will go down as a result. One of my gym buddies told me last month, "If you want more muscle, you have to put more iron on the bar." OK. I can do that.

Old Movies

Fri, 05 Jun 2009 15:22:54 -0600

Things were different then. I'm thinking 1920 to 1950. For one thing, people smoked in movies. (Maybe that's why they're all dead now.) They also drove cars without seat belts. Neither would be PC today. Bathrooms had no toilets, and married people slept in separate beds. "The Moon is Blue" was banned, because a man and a woman who were not married walked into a hotel together. But the other striking difference that's relevant to healthcare is that people were thin. The movie stars were thin, and the crowds on the sidewalk were thin. Yes, there were a few overweight actors (Andy Devine, Charles Laughton), but in general, the average BMI seems well under 25. Not true today. Even players in the National Collegiate womens softball championship are mostly overweight. A recent posting by RAND Health highlights the prevalence of obesity in the U.S. population and its likely effect on future healthcare costs. It is commonly accepted that the primary driver of healthcare costs today is technology--the fantastic capabilities of our healthcare system. That may soon be overtaken by the secondary effects of obesity. A study cited here previously noted that Americans are not sicker than people in other OECD countries, except for the higher prevalence of diabetes in the U.S. The assumption was that obesity leads to diabetes, and diabetes means more need for care. That's true not only for the care of diabetes per se, but also for other associated disabilities--think about joint replacement, for example. Bottom line, as the RAND posting notes, "greater disability translates into higher healthcare spending. Medicare spending on an obese person is 35% higher than spending on a person of normal weight." How big is this problem? One estimate on the RAND page has expenses related to obesity reaching 20% of total healthcare expenses. For better or for worse, it's not clear that obesity leads to a significantly higher mortality. Unlike smokers who die faster from every cause, the obese just sit there and soak up healthcare. So, what's a poor employer to do? Can he just hire thin people? Some employers have done this with smoking and are still defending discrimination suits. Can we charge them more for health insurance to reflect their higher costs? Again, smoking is the poster child for this, but the basic concept of tailoring premiums to risk is an anathema to the concept of "insurance." Genetic testing could turn this into an art form. The best solution seems to be to attack the basic problem of obesity itself. Tough problem, but not hopeless. Everyone knows someone who . . . . Remember the small town in France that successfully reversed a childhood obesity epidemic? They implemented everything anyone suggested, and it worked. Remove food from the environment and promote physical activity. In concert with our primary theme, it would be more efficient to combat the root cause than to provide better healthcare to the obese.

INTELLECTUAL RATIONING

Sat, 30 May 2009 18:49:11 -0600

The IHI quotes an estimate that 30% of healthcare costs could be eliminated “without reducing quality.” The problem, of course, is figuring out exactly what care to eliminate.

One approach is to eliminate the care you want and only allow the care that I want. Various privileged groups use rationing to restrict the amount of healthcare provided to some segment of the population. This was part of the rationale behind the HMO movement. We could erect enough barriers that most people just wouldn’t be able to get healthcare, so the total amount supplied would be less. It worked. The annual expenditures on healthcare dipped after the introduction of HMOs. But the population rebelled and we have gradually returned to business as usual.

Another barrier was “precertification.” You had to call the insurance company to get permission to go to the hospital. They pretty much always said ‘yes,’ but if you didn’t call, they didn’t pay. This saved the HMO some money, but eventually, everyone learned to manipulate the system, and this tool has fallen into disuse.

Now, we’re moving toward “intellectual rationing.” The IHI is borrowing a theme from the National Quality Forum’s National Priorities Partnership and sponsoring a forum on “unwarranted procedures.” And what exactly does “unwarranted” mean? Well, it refers to procedures that an expert committee has deemed “unwarranted.” And, of course, no expert committee could be wrong. And there’s no room for a difference of opinion once the experts have spoken. For one example of this sort of thinking, look at the panel of public health experts that decided the PSA test (for prostate cancer) was “unwarranted.” They were right, of course. From a public health or government point of view, it’s hard to justify spending money on a test of uncertain value to relatively few people. Not everyone agreed, and there were editorials in newspapers and medical journals denouncing the opinion.

So where do you draw the line? How much money should we spend to save a life or add a year to the life of a dying patient? The Brits put a price on a year of life of $46,000, and they have a truth commission to rule on what drugs and procedures the National Health Service will allow within that envelope. (It’s called the National Institute for Clinical Excellence. Work out the acronym.) This is actually economic rationing, because those with money can pony up and have whatever they want.

Writing in the March The Atlantic, Virginia Postrel talks about rationing cancer drugs in
the U.S., Britain, New Zealand, and Canada. All except the U.S. have NICE squads to decide which drugs their patients can receive and which are too expensive. Peter Orzag, new chief of the Office of Management and Budget, favors establishing a similar organization in the U.S. to do "Comparative Effectiveness" research. The concept is attractively simple: a panel of experts will evaluate treatments for various conditions and rule on which ones are cost effective and which are not. Insurance companies (including Medicare) would, of course, only pay for those that are blessed by the NICE squad. This approach has been called “Welfare for Academia,” because academics would be paid for their opinions. It is also a fool’s errand. For any given condition, there is usually an array of treatment options, and the choice for any given patient depends on patient factors as well as local factors where he is being treated. Take, for example, the choice between stents and surgery for coronary artery disease. If the Truth Commission has said, “stent,” then there is no choice. Also, there is the time factor. Look back two years and talk about treatment of breast cancer. Anyone want to rely on treatment options available two years ago? No “comparative effectiveness” committee can possibly keep up with current developments in every field. The inevitable result would be a lag time for implementation of new treatments and a less attractive market for them.

There is also one basic principle of the universe that must be considered regarding “Comparative Effectiveness” committees: They may be wrong. Yep. Very smart people sometimes make mistakes. They have all the facts before them but just make the wrong choice.

Healthcare-Industrial Complex

Wed, 20 May 2009 22:17:35 -0600

President Eisenhower warned against the military-industrial complex. meaning those in the Pentagon who were too close to their suppliers in industry. The result, he warned was ever increasing military budgets to purchase ever more expensive toys. Fast forward to now. We have a healthcare industry that produces ever more expensive treatments and an ever more expensive electronic record system to keep track of them. The most significant driver of healthcare costs today is technology, meaning every more expensive tools and treatments. Those in government or advocacy groups who should be sounding the alarm or injecting rational thought are instead part of the problem, advocating electronic record systems without economic benefit.

The Washington Post last week detailed some of this pattern in an article about relationships in the health records debate. Electronic records are certainly of some benefit. Perhaps some economic benefit in some cases. Perhaps there is an economic benefit that will trickle down to the average taxpayer who is being asked to pay for it. Perhaps. But is does make one nervous when everyone at the table has some ties to the providers of the service.

Not that advocacy is necessarily bad, but if EHRs are so good, why isn’t everyone doing it? If the answer is that it’s too expensive, well maybe that means it isn’t really so good. Billion dollar fighter jets and attack submarines are marvels of American technology. We just don’t need them anymore. Bottom line: technology is a potent tool that needs to be applied where it’s needed.

The eHealth Initiative, an IT advocacy group, states that “IT is not an end unto itself but a means to an end.” Their position paper on “A Higher Quality System” discusses the uses of IT at various points in the healthcare system. The ensuing discussion, however, focuses heavily on clinical information exchange, with no mention of the use of IT for operations management of healthcare processes.

Cost of healthcare continues to receive a lot of press. The Health Affairs blog
reports on an interview with Harvard economist David Cutler in which he speculates that there may be “a serious chance of being able to finance reform” (through savings). It’s still not clear what the industry groups will do or exactly what they promised. Note that everyone at the table that day stands to benefit from more money spent on healthcare. Hard to imagine they will opt for any reductions in healthcare expenses without firm prodding.  

Backpedaling Already

Fri, 15 May 2009 18:49:28 -0600

The ink is scarcely dry on the “agreement” among healthcare provider groups, and now they’re all issuing “I didn’t say that” statements.
The NY Times chronicled statements by the six healthcare provider organizations, although these statements are not available on the organizations’ web sites. At issue is whether the groups actually agreed to “cut the rate of growth of national health care spending by 1.5% each year” or just promised to think about that issue over the next ten years. The AHA statement reportedly said, "The groups did not support reducing the rate of health spending by 1.5 percentage points annually." But weren't they all standing there when the President said exactly that?

All this backpedaling was apparently precipitated partly by anger and angst among the organizations’ members. No one who takes money from the pot wants to see the pot get smaller. These organizations all have a vested interested in seeing the healthcare finance pot grow. Remember, of course, that the agreement, as expressed by President Obama did not call for a reduction in healthcare expenditures—only for a reduction in the rate of growth of those expenses. Even that, however, seemed untenable for the provider groups. One remarked that the 1.5% figure was a target for ten years, not a promise for each year. Some of us would say that a 1.5% reduction in a 6+% growth rate is an ineffective gesture, but if that’s the source whence all your blessing flow, you don’t want to see any reduction at all. The American Hospital Association does not want to see less money spent on hospital care. And so on. Even with this reduction, the annual pot would continue to grow—just not quite as fast.

Yes, 1.5% of a very large number is still a very large number, but in terms of solving the key problem with healthcare, it’s nothing.

The Washington Times quotes Donald Danner of the National Federation of Independent business as saying,”(these healthcare organizations) clearly have been a major part of the problem, and they have been slow to come to the table to fix it." He also said, “The starting point must be cost, cost, cost. If legislators don't address cost, whatever else they do is not sustainable." Seems obvious that these organizations that have historically been part of the problem are not now going to be part of the solution. The phrase, “kicking and screaming” comes to mind. One thing physicians in particular fear is that Congress will pass a law that prohibits them from charging any patient more than Medicare allows.

An added impetus for cost control came with the announcement that the Medicare Trust fund will be exhausted by 2017, even sooner than expected.

If you tell me that my slice of the pie or indeed, the entire pie must get smaller, I will resist every way I can. Once it happens, however, I will work hard to become more efficient, so my bottom line will not be affected. It's up to Congress to make it happen and force the eefficiencies that will reduce cost. If you want to reduce the cost of healthcare, you need to attack the cost of healthcare. Forget diversions like quality or IT or prevention. Keep your eye on the prize. Focus on cost.

Is this Good?

Mon, 11 May 2009 20:47:00 -0600

Depending on how you pronounce the title of this piece, the meaning changes. And indeed, there are several meanings that follow here.
Today, President Obama announced an agreement by several key players in the healthcare field to reduce costs. All the usual suspects were there: the AMA, American Hospital Assn, America’s Health Insurance Plans, etc. And when you’re in the desert, any water is good. So this is a good thing. Right? In their letter, these organizations pledged to “do their part” to decrease the annual healthcare spending growth rate by 1.5%. Did you catch the nuance there? They are not going to reduce the cost of healthcare, just the rate of increase in the cost of care. This trivial change will not make any noticeable difference in healthcare costs in our lifetimes, and will not materially affect the amount of money going to any of these organizations. But, I guess that’s what allowed them to agree.

They said they are “developing consensus proposals” but offered none in their letter. (The Devil’s busy just now.) They did offer four broad categories of effort:

1. “...administrative simplification, standardization, and transparency that supports effective markets.” There is actually some hope here. How about doing away with a-la-carte pricing for hospital care. Many of us have been calling for price transparency and standard fees for given procedures. Let’s see what happens here.
2. “Reducing over-use and under-use of healthcare” the traditional whipping boys. Who could be in favor of over-use? Of course not. We’re all against that. But by the way, exactly what do you mean by “over-use?” The classic definition of over-use is the healthcare that someone else gets. As long as that “someone else” is you, I’m perfectly happy to say you shouldn’t have had whatever healthcare you had last year, and we’re not going to pay for it. As with “under-use” the problem is with the definition and who decides. When academia or the government decides, the patient has no voice. Which system do you want? The government, of course, is much better at controlling costs. When the country spends too much on healthcare, Canada just cuts the healthcare budget.
3. “...adherence to evidence-based best practices and therapies that reduce hospitalization, ...” and apple pie and motherhood. Not clear, however, how any of this is going to reduce costs. But that was never the real aim anyway.

So this was mostly a photo-op. A bit of fluff to toss out and give the appearance that something is happening. A feint. A gesture in one direction (cost reduction) while you’re planning to move the other way (status quo). All of the players here stand to benefit from more insured lives--expansion of health insurance benefits. All have an interest in preventing the administration from taking any action that would limit the fees doctors or hospitals could charge patients. Insurance companies don't want the government competing with their health insurance offerings. So all these players benefit from convincing the government that they can handle the problem themselves.

The bottom line is that something will happen. This year. And it will probably increase the overall cost of healthcare in America. Let’s see what the Devil comes up with.

Singin’ my song

Mon, 20 Apr 2009 20:37:25 -0600

According to CQ HealthBeat, CMS has announced that a competitive bidding process will be utilized for durable medical equipment. Interestingly, they did this by issuing an “Interim final regulation” and publishing a press release, which you can find on a web page that says it was last updated in 2007. That, of course, was before the enactment of the Medicare Improvements for Patients and Providers Act of 2008 (MIPPA). No, I don’t make this up.

The important thing here is that they are going to have a competitive bidding process for leasing or purchasing durable medical equipment for Medicare patients. Comments received urged that the process for receiving and evaluating bids be “fair and open.”
Still, not everyone is ecstatic over the prospects. According to the Kaiser Daily Health Policy report, 28 home-care groups asked CMS to eliminate the program because it would “lower quality and reduce access.” And 84 lawmakers asked for further delays in implementation. The American Association for Homecare predicted that “some businesses will be forced to close, limiting customers’ choices.”

The bidding process will include “Competitive Bidding Areas” (CBA) which will correspond loosely with Metropolitan Statistical Areas (MSA). Only certain MSA’s will be involved in the First Round, and others will follow in 2011. More details can be found on the CMS web site.

It’s a toe in the water, but it is a beginning and it’s scalable. This is a logical place to start, because it is easier to describe or specify a wheelchair or an oxygen cylinder than an office visit or a knee arthroscopy. But hopefully, this too shall come.

There is growing sentiment that the MA program of providing health insurance for everyone is not sustainable without serious new cost control efforts. (Read: “rationing.”) The same point has been made about trying to provide healthcare for the currently uninsured population in the U.S. as a whole. Trying to do this without some concomitant plan to reduce overall spending by an equal amount would eventually sink the ship. The good news is that it can be done, and competitive bidding is a logical first step.

The bad news is that Congressional hearing start this week, and results from the above competitive bidding process will not be available until next year. Should be an interesting week.

Quality as a False God

Wed, 08 Apr 2009 21:42:56 -0600

It seems axiomatic that everyone should want to improve the quality of our healthcare. It’s a motherhood issue. Who could be against it. The Institute of Medicine famously pointed out our foibles and sold a lot of books about how to make it better. Medicare (CMS) an other payers want providers to do those things that will improve care, so it was logical to add the carrot of higher payment for conformance with CMS standards. Numerous studies have shown that this approach works. If you pay people more, they will do what you say. Some people require more convincing, but ultimately, everyone will toe the line. But, is this good?

Groopman and Hartzband write in the WSJ that the Emperor has no clothes. The bandwagon of Pay for Performance (P4P) had so many passengers that it became mired in the mud--a victim of group-think. As these authors point out, many of the performance criteria have been shown to be suspect on careful examination. This questions the arrogance of thinking that we could sit in Washington and decide how a physician in Peoria should treat his patient.

Standards of care, yes. Practice guidelines, yes. But when you pay practitioners to follow one path, you coerce bad behavior when that path is not the best one for the patient. It is one thing to require conformance to current standards of practice, but it is quite another to require conformance to specific standards that you have written today, even with the best of intentions. Linking payment to those standards merely compounds the error.

Times change, and practitioners must be free to change how they do things in response to new thoughts, drugs, and procedures. Innovation and creativity thrive in such an environment to the benefit of all.

The biggest problem with P4P, however, is that it is the wrong approach to the wrong problem. The biggest problem with U.S. healthcare today is that it costs too much. Yes, we could improve many things. Yes, patient safety is an issue. But U.S. healthcare is arguably the best in the world, and the biggest problem with our care is not its quality but its cost. To bring cost down, you must attach cost directly. You cannot improve patient safety and expect costs to decrease. They may, someday, but as a side effect of your primary effort. Yes, reducing catheter infections in the ICU did reduce costs to the hospital, but did that result in reduced charges for an ICU day?

In some cases, documentation of conformance costs more than the intervention. Aspirin is cheap, and giving one to patients with chest pain is on the current recommended list. However, documenting that you gave an aspirin to every ER patient with chest pain is not free.

No one comes to work intending to do a poor job. If you demonstrate that performing a task with your left hand produces a better result, people will do it left handed. Not everyone, and not immediately, but eventually that will become standard practice.

With a focus on cost, providers (individuals and institutions) will strive to become more efficient in order to compete in the market. That’s assuming, of course, that there is a market and that it works to some extent. The “quality of care” may be assumed, because of several factors, tho none is perfect or absolute:
Peer pressure to conform with community standards
Improvements in the process of care generally save money.
The market will not tolerate poor care.
Regulations at various levels require demonstrated quality of care.

The JCAHO standards require a mechanism for consistently improving the care provided. ISO 9001 requires metrics, analysis, and improvement in key processes.

We must shift our emphasis to the serious problem of the cost of care. Healthcare as an industry has never stressed efficiency, so there is considerable room for improvement. We can provide more care at less cost, but only if this behavior is rewarded by larger market share.

Business Roundtable

Sun, 15 Mar 2009 10:43:18 -0600

President Obama addressed this group last week and actually used the “E” word, efficiency. He said we can’t just dump 47 million uninsured people into the current healthcare system without doing something to reduce the costs of their care. He then repeated some thoughts of his OMB chief that the current inflation rate for healthcare will bankrupt the nation unless it is stopped. As ideas to make it more efficient, he made passing mention of IT and prevention as potential mechanisms for savings. However, he failed to mention improving the individual processes of care.

For its part, the Business Roundtable released a study, the “Health Care Value Comparability Study” that talks a lot about money. Key points in that study are:

We pay a 23% premium for healthcare over our G5 economic competitors (Britain, France, Germany, Canada, Japan). This means that we pay more for the same healthcare services. One might argue about their metrics (I have problems with some), but most of them are credible and appropriate. OK, so life expectancy isn’t really related to healthcare, but you can cross that off and still have a lot left. Face it. We pay more than we should for healthcare. Another argument is that all these other countries have socialist systems where the government owns the means of production in healthcare. Should we give up our free market economy and let the government run healthcare? Why isn’t the free market delivering better value for our healthcare dollar?
American industry is seriously disadvantaged in the world marketplace because of the high health insurance costs for our workers. In hard numbers, that’s 73 cents more per hour for each worker, just for healthcare. It’s hard to compete with that burden in your payroll. Also, return on investment is poor--especially for metrics on worker health of interest to U.S. companies.

Ivan Seidenberg, Chairman and CEO of Verizon Communications, is quoted in the study; regarding the U.S. healthcare market: “it leaves major consumer needs unmet, costs unchecked by competition and basic practices untouched by the productivity revolution that has transformed every other sector of the economy.” That about says it all. We don’t need to reform healthcare so much as we need to reform the healthcare market. Introducing price competition would prompt providers to consider improvement techniques that have proven valuable in other industries. The Institute of Medicine published a book several years ago with the same theme--there are standard engineering and management tools that could improve the efficiency of healthcare operations. All we need is a reason to employ them.

In discussing this study, John Iglehart, at Health Affairs blog, cites another study by McKinsey Global Institute that reaches many of the same conclusions. Interesting tidbits from this latter study:

We spend twice as much on healthcare as we do on food.
We spend more on healthcare than the Chinese spend on everything.
We spend more than could be expected, based on per capita GDP.
Healthcare spending has grown faster than the GDP almost forever.
Outpatient care is the fastest growing component. (7.5% vs 6.0% for inpatient care.)
Specialists comprise 64% of U.S. physicians vs 66% in OECD countries.
U.S. specialists earn 6.5 time per capita GDP vs the 3.9 % OECD average.
Healthcare spending in Japan may double in the next two decades, driven by technology, wealth, and demographics.

The bottom line picture you come away with is that healthcare expenses in the U.S. are higher than any other country, and the reasons are everywhere. We get more healthcare, pay more for every aspect of care, and lack any control on costs--either from a top down government ownership or market competition. And this situation may well sink our economy unless we correct it soon.

Still more on money

Tue, 10 Mar 2009 21:35:58 -0600

One word from the recent Summit on healthcare was surprise at the agreement by many parties who have opposed previous attempts to revise healthcare. One must realize, however, that 1)There were few details, and 2)The chief effort described was throwing more money into the system. Of course anyone in the system would like more money in the pot.

The other word, tho, was that the conversation is turning more and more to how to pay for it all. Providing health insurance for the currently uninsured will cost money, and the Administration has offered a down payment of $600B. Now, everyone is scratching for the balance. One proposal (borrowed from John McCain) is to tax everyone else’s health insurance. Not directly, of course, but by reducing the tax deductibility of premiums. This intrinsically bad idea keeps coming up, probably because it harms a group with no lobbyist. (Everyone.) The corollary is that any other idea would attack some identifiable group. So we’re still looking for money, but no one yet has thought of efficiency.

Essentially all of the proposed changes to the healthcare system advertise “saving” money, but the actual money is more theoretical than something you can take to the bank. Technology (meaning computers) offer a number of advantages and should make the provision of healthcare safer (prescriptions) and faster (knowledge). That’s after we find someone to buy the computers. If you’re still unconvinced, pretend there are two hospitals in your town: one operates in a totally paperless environment but the other has computers only in the billing office. Which hospital charges less for an appendectomy? Answer: they both charge the same. Charging less would offer no advantage to either institution. If there are any savings at the paperless provider, they disappear into other inefficiencies.

The same analysis can be done for other proposals. Prevention is a good thing that deserves considerably more attention. I get a flu shot every year to prevent me from getting the flu. But my share of the financial benefit of everyone getting flu shots is probably equivalent to my cost for the shot. Prevention pays in many ways, but it’s probably not an effective strategy for reducing the healthcare expenditure of the country. And that’s what we need.

A friend of mine in Madrid sent me a link to the Organization for Economic Cooperation and Development (OECD). The U.S. belongs, and it’s a great resource for economic data from 30 countries on various economic issues, including healthcare. There is a special report onfinancing healthcare in Germany. One problem is that the U.S. doesn’t contribute data on healthcare. The OECD has standards for definitions of data on healthcare expenditures, and the U.S. cannot supply that information. Our healthcare accounting systems do not track data that way.
The expenditures for healthcare as a percent of GDP for the non-U.S. countries ranges between 7 and 11 percent. For the years reported (2003-5), these numbers have been remarkable stable. One way to limit expenditures is just don’t provide care. And you can do that in a governmen-run system.

The healthcare package calls for a 10 year return on investment--if you advocate a change today, we want to see the return within 10 years. Some in the healthcare industry are now lobbying to repeal that condition. Just give me the money.

Here's the Money

Thu, 26 Feb 2009 20:21:46 -0600

The games have begun. The new federal budget sets aside a $634 M reserve for reforming healthcare. And everyone wants a piece of the package.
Prior to the budget release, Obama vowed to make “reforming the U.S. healthcare system” a top priority. Further defining that issue, administration officials at the summit on fiscal responsibility specifically mentioned the high costs of healthcare. OMB director Peter Orzag has long championed this cause and has said that Medicare alone could sink the federal budget. So it is obvious that healthcare costs will receive a lot of attention. What’s not clear is what’s going to be done about the problem.

Several approaches have been mentioned, but there doesn’t seem to be any commitment yet.

Orzag has mentioned “Effectiveness Research,” which some view as welfare for academics. The idea is to gather smart people to evaluate various treatments and sanction those that seem to work. The implication is that Medicare would only pay for those on the official list. Strange as it might seem, no one has defined what “work” means. For example, look at the discussions on PSA. An “expert panel” recommended against this test. Indeed, on a population level, it doesn’t pay. There are false positive (high) PSA tests, and these may lead to unnecessary biopsies--all of which costs money. However, physician groups that actually treated patients strongly disagreed. A long time ago, someone showed that it would be cheaper to forgo PAP tests. It would be cheaper to let some women develop CA Cx than to test everyone, so it depends on your point of view. Actually, we already have effectiveness research. It’s called “clinical research” and the results are published in refereed journals at no cost to the taxpayer. Implementing the findings is another problem.
Technology is also mentioned as a mechanism for reducing costs. However, in the next breath, we hear a plea for federal money to finance healthcare IT. Am I missing something here?
Prevention is always mentioned, and it’s a motherhood issue that’s hard to oppose. However, the numbers don’t support this as a means of lowering overall healthcare expenditures.

According to conventional quality theory, remedies should be based on root causes. So, what are the root causes of high and escalating healthcare costs?

1. Most experts cite technology as a primary cause. The gee whiz factor. New and better and more expensive scans or procedures. However, bang for the buck isn’t always there, particularly if these are used indiscriminately.

2. Elliott Fisher (NEJM) thinks the physicians who order the technology are the real villains. He cites regional variation in healthcare expenses without variation in technology availability. This is a valid point, but he has to also posit that the doctors in Miami are somehow different from the doctors in Salem, OR. His article doesn’t take into account possible differences in patients. What kind of people live in Miami? Might they be more demanding than those in OR? Are doctors just responding to customer expectations?

3. Drugs have to be mentioned, tho not first on anybody’s list. There will be increasing pressure on prices here but unlikely the fed will do any direct intervention.

4. Age is mentioned to exclude it. True, costs do rise with age, and this will become increasingly important over the next ten years. However, at present, it’s a blip on the radar.

5. Personal habits and personal responsibility are not mentioned. As Pogo said, “We have met the enemy and he is us.” Obesity, inactivity, and smoking are undisputed factors in most chronic diseases in the U.S. population. Perhaps there should be a line on the 1040 to record your BMI. What if we quit paying for TKR or THR in patients with a BMI over 27?

6. No one has yet mentioned my favorite villain--WASTE. Muda. The fluff in healthcare processes. The silent thief that adds imperceptibly to the cost of doing business. A conservative estimate might be 20% of all healthcare processes. Do the arithmetic.

IT--The White Knight

Tue, 10 Feb 2009 19:53:35 -0600

It seems that everyone’s favorite charity has a piece of the stimulus package, and healthcare IT is no exception. With that much money involved, something’s bound to happen--maybe something good. Lots of people have been pushing healthcare IT for lots of reasons. There was even a healthcare IT Czar in the last administration, but he left when there was no money for his programs. In a parting shot, former HHS secretary Mike Leavitt wrote a Washington Post column espousing the virtues of IT for healthcare. His main push was for interoperability, and in keeping with that administration’s approach to life, he used scare tactics to promote it. “Critical information will remain trapped.... Doctors cannot share information or add lab results or send electronic prescriptions....” Sounds terrible, even if none of it is true. My personal health record is at www.ihealthrecords.com, and I can share it with anyone. Also, I subscribe to www.RxNT.com which allows me to write electronic prescriptions for any patient and send them to any pharmacy, without any paper involved.

None of this, however is “interoperable.” That means no one can peruse my records and send me an ad for a drug they sell that’s similar to one I’m taking. No employer can reject me, because I have some disease that might be expensive for his company. The bank won’t reject my mortgage if they discover I have cancer or heart disease. These are the scenarios that worry privacy advocates. On the other side are the American Hospital Association, health insurance companies, and drug companies. Interoperability means that these companies (and the federal government) would be able to look at your record and use the information for marketing or research. Medicare already supplies claims data, but the fed statisticians would love to study actual health records.

Technology is also promoted as a way of “saving lives.” Certainly e-prescribing corrects most errors with prescriptions--a major source of medical errors. Making information more readily available keeps every consultant informed of what everyone else is doing, providing they look.

Some suggest that electronic records would save money. Peter Orzag (new head of the Office of Management and Budget) questioned this in a Congressional Budget Office report last summer. You might expect that processes would go faster and time would be saved with electronic records. That’s hard to translate to the bottom line, but it does expand system capability without additional investment.

One problem bothers me: if electronic records are so great, how come everyone’s not doing it? Why is it that we’re expected to take tax dollars and buy a computer for the local hospital or doctor’s office? Even my tire dealer has a computer. And he bought it himself, because it made economic sense for him to do so. The same thinking should apply to healthcare. If it doesn’t make sense, don’t do it. Hospitals do, of course, have computers to do billing. But this has rarely morphed into clinical care. Some large systems have electronic records. The Veterans healthcare’s VISTA program is well liked. Kaiser has an exemplary system. One reason for the imperfect implementation is that many physicians were technologically challenged. However, as this illiterate cadre moves on, the new generation will twitter and text their way into electronic records with ease.

Ellen Nakashima has an article in today’s Washington Post that summarizes the state of debate on this issue. The big money is with interoperable records. The moral high ground is with privacy. Let’s see who wins.

Common Sense

Sun, 08 Feb 2009 16:35:12 -0600

On 26 Jan, Walgreens published a full page letter in the Washington Post titled, “A Common Sense Approach to Healthcare Reform.” In it, they outlined how Walgreens is dealing with the three biggest problems in the U.S. healthcare system: access, quality, and cost.

ACCESS. You have to think big here. Most people associate “access” with having insurance, but there are other issues. First, does an office exist? There is growing concern over the supply of primary-care providers. Insurance doesn’t help if there is no provider who will see you. Are the office hours convenient? If you work 9 to 5, how are your going to get to an office that has the same schedule? How long does it take? To get an appointment? To be seen once you are there? For the round trip from your office. This latter factor may be of more interest to your employer, unless you’re self employed or don’t have sick leave benefits. Walmart (and other companies) put clinics within the workplace to minimize the sick time necessary for common office visits. Can you find the office? Don’t try to visit me. The address on my business card is a mail drop and doesn’t exist. What about parking? Or instructions RE public transportation? Those who champion Accessible Scheduling or Lean processes would ask why there are chairs in the waiting room? Patients sitting in chairs is the definition of waste. “If you can’t see me at 0900, why did you ask me to come at that time?” And while we’re asking why, I can schedule an airline seat or a rental car on line. Why do I have to talk to a clerk to schedule an appointment with my doctor? (Airlines actually charge more if you call.)

COST OF CARE. The letter addresses only the dollar cost of services provided and ignores the time cost to patients and employers. They use mid level providers and limit services to a defined list. This moves their operation further from the job shop, where each patient visit is different, toward an assembly line where like things are processed together. Operational efficiencies are obvious and result in lower costs for the provider and lower charges for the patient. Walgreens states that some third parties are lowering or eliminating copays for this setting to encourage patients to obtain care in this lower cost environment. Some physician offices and large clinics see this as a threat to their business, and for some, it may be. In reality, it is a threat to business as usual. A signal that we must change the way we deliver healthcare, or someone else will change it for us.

QUALITY OF CARE. One key principle of quality is consistency. The enormous variation in healthcare services is testimony to the need to improve quality, regardless of how you define it. Half of Americans don’t receive recommended healthcare. There are arguments over whether prevention saves money, but it doesn’t do anything unless the patient receives it. All patients, everywhere. Any corporate provider has the opportunity to provide consistent care through command and control, but making that part of the culture is a leadership challenge. The Shouldice clinic is an interesting example of applying this principle to the repair of inguinal hernias. Decide on the best way and then do it that way every time. Actually, it doesn’t have to be the absolute “best” way--only acceptably good. It’s the consistency that counts.

Walgreens isn’t the only company in the retail clinic business--just the only one with a full page ad in the Washington Post.