Shifting retiree health benefits

In a post below, I discuss the possibility that the new health care law many entice many employers to drop their company-provided health insurance plans and send their staff over to one of the new health insurance exchanges or Medicaid. Such a strategy, I noted, depends on a firm reaching a conclusion that having company-sponsored health insurance is not important to attract and retain workers.

But there is a group of people who are served by company-provided insurance whose competitive employment choices are no longer of any concern to the firm: Retirees.

Post-employment health benefits are an expensive drag for many companies. Even if the full provision of health insurance ends upon Medicare eligibility, there is the cost of covering retirees during an intervening period. This could easily be 10 years or more, since people can often retire in their mid-50s.

Hewitt Associates seems to be on top of this trend. The company conducted a survey last year of 245 U.S. companies that offer medical benefits to 1.3 million retirees and their families and "learned that six out of ten employers intend to evaluate their long-term retiree medical benefits strategy in the near future, and nearly half of these companies have already begun the evaluation process."

Look at this finding:

While the second option seems more drastic, the first option is intriguing because it still allows a company to gain financial stability with regard to the retiree health care costs. You set an annual amount that you are prepared to spend per person and let the former employees go shopping. Nothing says you have to increase that amount each year, or, if you do increase it, nothing says that you have to do so at the rate of inflation of health care costs. This could remove a huge liability from the balance sheet of many corporations and transfer the risk of future cost increases to the former employees.

A counterbalance focused on quality

Ascension Health, the largest chain of Catholic hospitals, has joined forces with Oak Hill Capital Partners, a private equity firm, "to form Ascension Health Care Network (AHCN), a joint venture that will provide an alternative funding source for the acquisition of Catholic hospitals and other healthcare provider entities. AHCN will offer these entities access to financial, operational and clinical resources."

Ascension Health is renowned for its quality and safety programs and also its commitment to the efficient and profitable operation of the hospitals in its non-profit network. Further, Ascension operates under a distributed leadership model, designed to ensure a strong local presence in all communities that are served by the national system.

The announcement is short on details as to how the business arrangement between a non-profit chain and a private equity firm will work. But this move seems to be a direct challenge to other private equity firms with little or no hospital experience. Ascension seems to be saying to hospitals in distress: "Before you sell out to someone with no track record and no demonstrated commitment to the long run, call us."

Gentlemen, start your engines . . . .

Come on in any time!

Winchester Hospital, a 229-bed facility just north of Boston, has announced that it has eliminated defined visiting hours, effective immediately. With some exceptions -- operating rooms and for clinical reasons including infection concerns for the patient or visitor, safety, clinical care and interventions, or if the patient needs rest -- people visiting patients can do so whenever they wish. "We recognize the value of emotional support during the healing process," said Kathy Schuler, vice president of patient care services and chief nursing officer at Winchester Hospital. "We hope this new policy will benefit all patients."

This is good stuff and a nice contrast to the story below. It would be interesting to know whether the initiative was driven by the staff or whether it came out of consultation with a formal patient advisory council. At BIDMC, it was the latter, as described here, after our ICU Patient and Family Advisory Council suggested to the MDs and RNs that it would help accommodate family members who work late and allow loved ones to visit at their convenience, rather than at ours.

No way to run a hospital

A friend reports on her recent experience in a New York City hospital, where her husband was undergoing a hernia repair.

They were about as un-user friendly as one could be. They called 5 times to tell him to come in between yesterday and today, all the time seeming to change the information. They gave him the wrong pick-up info to give me, so when I came up the K elevators to an empty reception area, I only figured it out by barging into the patient bay area where there was a lone nurse at the station. She told me to go back down and come up the A elevators. When I did, I couldn't find the recovery area (no signs) and had to ask somebody at the blood bank window, who pointed me to the right doors -- which were locked. You couldn't open them by pushing on the door release button and nobody answered the intercom.

So I called Sam on his cell phone, and he gave me to a nurse who couldn't seem to understand the problem: "The door is locked, can you please have some one let us in?" (There was another woman there trying to pick someone up by then.) "We're very busy right now." So we got in because some staff person opened the door with a card key and let us in, too. (He probably shouldn't have: How did he know who we were?). I felt badly for the other woman because she was old with a cane. The nurses couldn't seem to focus on talking to her, whereas they were suddenly wanting to help me.

And the elevators barely work and were crowded as hell. If we had put Sam in a wheelchair like they suggested, I think we would still be there. Of course he was walking slowly, having just had his abdomen repaired, so I basically had to body-check the elevator doors (and they were brutal) to get him in.

ObamaCare Shift

A colleague pointed this out to me recently, and I think he has it right: While more people will have health insurance as a result of the federal health care reform act, a side effect will be to reduce the number of people insured through the employer-based insurance plans that have characterized the US health care system. These people will either be insured as individuals through the state exchanges that are to be established or, if eligible, through Medicaid. There are three aspects of economic hydraulics that are likely to lead to this result.

First, the penalty to be assessed against employers for not offering coverage -- $2000 per year -- is dramatically below the cost of providing insurance. If you are an employer and can save, say, $5,000 by paying $2,000, why wouldn’t you do that? And the $2000 is not even indexed to inflation, while the annual charge for an employer-sponsored plan is likely to go up over time. Hence the differential will grow every year.

In the past, the provision of a health care benefit was viewed as competitive factor in hiring and retaining a firm's work force. But for the vast majority of businesses, that may be a less important factor than saving a few thousand dollars per employee and being able to offer a portion of those savings in higher wages and/or improving the profitability of the firm. Sure, some businesses might still want to attract workers by having their own semi-customized insurance benefit, but the power of that is likely to diminish over time.

A second factor is that the so-called “Cadillac” tax will make employer-sponsored health care even more expensive if you have a plan with generous benefits. Health coverage in excess of $10,200 for individual plans and $27,500 for family plans will be hit with a 40 percent excise tax on the amount in excess of the floor. The tax is indexed for inflation plus 1 percent.

Finally, to help avoid the excise tax, employers are going to “dumb down” plan designs by raising deductibles and co-pays. As they do so, the substantive difference between their own plans and the ones that will be offered through state exchanges or Medicaid will diminish. Even if you have a residual concern that your workers may want an employer-based plan, their desire might be diminished as you make your plan less attractive, so you lose little in competitiveness by referring them to the non-employer based plans.

There are those who believe that there was an ideological basis for this construct, that the Administration and a majority of Congress wanted people to move away from employer-based health insurance as part of an eventual movement to a federally chartered single-payer regime. Others say that it is just a natural extension of a bill that created important protections -- benefit mandates, a floor for medical loss ratios, guaranteed issue, restrictions on medical underwriting -- all of which act to increase the cost of insurance products.

Whatever the reason, we should expect that the world of employer-based health insurance that was created in the 1940s in the United States will rather rapidly move away from that system to one in which government-controlled insurance exchanges and direct government pay (Medicare and Medicaid) will rule. On the latter point, I have have now heard a couple of people estimate that the percentage of the US population covered by government payers can be expected to rise from the current mid-30s% to about 50% over the coming five years or so, abetted by the factors mentioned above but also by expanded income eligibility for Medicaid.

Snake oil, still available

While many in the health care industry are betting their strategic plan on some combination of accountable care organizations, limited networks, and global payments, there is clearly a segment that is going the other way. These are hospitals that seem to be betting on the discretionary, luxury market for care, and especially cancer care.

These hospitals advertise to a national audience in media of general circulation. I saw a few recently in an airline magazine.

What is striking about some is the modern equivalent of snake oil that they are peddling. Preying on the fear of cancer, their verbiage and offer of amenities overshadows the fact that their proposed combination of therapies has no proven efficacy greater than that found in oncology centers in communities throughout the world.

Here’s one. I am NOT making this up.

Built in Accordance with Nature

Built to Outsmart Cancer

Vastu, the ancient Indian science of architecture and building, works in accordance with the natural laws of the universe – Earth, Water, Air, Fire, and Space. A building designed to Vastu standards ensures that these elements exists harmoniously, which in turn balances the energy of the building itself. A Vastu designed building, therefore, positively affects the overall well-being of all who enter.

…[W]e are able to provide what no other cancer center in the world can offer – a healing atmosphere for any and all ailments while enhancing the spiritual, emotional, and mental aspects of the human being.

(After more of this, we find a list of services offered. Like a midrange restaurant that is trying to make its menu appear to be haute cuisine, they use capital letters on normal words to give the appearance of something special. I am especially taken with “Clinical Lab with Pathology”!)

Medical Oncology • Hematology • Radiation Oncology (Including the World’s Most Advanced Robotic Radio Surgery, The CyberKnife™ • Surgical Oncology • State-of-the-Art Imaging & Radiology, Including PET/CT, CT, MRI, Digital Mammography & Nuclear Medicine • Dedicated breast center with Genetic Counseling • Clinical Lab with Pathology • Mind & Body Medicine • Naturopathy • Skin Cancer and Dermatology Center • Clinical Research

We can laugh at this, but it feels obscene when there remain millions of people without access to health care. It also feels obscene when there is so much work to be done on reducing waste and improving the quality and safety of care in clinical settings.

This is not a revolution in North Africa

I have discussed the futility and absurdity of not permitting staff in hospitals to have access to social media like Facebook, but let us now consider the cruelty of not permitting patients and families to have access to it on the public wireless network that is made available to them. Such is apparently the case in this pediatric setting: "[T]he hospital network has decided I can’t get on Facebook anymore." Earth to hospital administrators: This is not a revolutionary setting in North Africa.

Orthogonal, towards MIT

Walking along the Charles River on the Cambridge side late this afternoon, I glanced southeast towards Boston across the river and was blinded by the glare of sunlight reflecting off the ice. How can the setting sun attack from the southeast?!

The riddle is solved when you see that the stainless steel roof structure and/or windows at 111 Huntington Avenue had caught the rays of the setting sun from the southwest (see shadow on the buoy in the river) and reflected them at a right angle towards MIT.

Rick Gilfillan on WIHI

The Newest Innovator on the Block: Center for Medicare and Medicaid Innovation
Thursday, February 24, 2011, 2:00 PM – 3:00 PM Eastern Time

Guest:
Rick Gilfillan, MD, Acting Director, Center for Medicare and Medicaid Innovation

Health reform in the US has a lot of moving parts, and sometimes it’s difficult to sort out the political ups and downs from the on-the-ground changes and challenges facing those in the trenches, seeking to make health care delivery safer, more patient-centered, better coordinated, and cost effective. As WIHI tries to keep its eye on the ball of innovation and new designs so badly needed to pave the way, it’s a sincere pleasure to welcome to the program the man behind the country’s first-ever government center dedicated solely to figuring out what works...and what could be spread widely.

Dr. Rick Gilfillan, the Acting Director of the Innovation Center at CMS, has a track record of thinking outside the box. He helped design a bundled payment system – coupled with a guarantee of quality care – for the Geisinger Health System in Pennsylvania, long before others were willing to take the notion seriously. Now Dr. Gilfillan is working hard with his staff in Washington to roll out opportunities for others to tell him, and to tell the country, about other payment models that are needed for health care. What’s the accountable care organization (ACO) model that’s good for patients as well as the bottom line? Where are providers walking the talk of the Patient-Centered Medical Home and reinventing primary care?

Join WIHI host Madge Kaplan to get the latest from Dr. Gilfillan about the Innovation Center’s plans, priorities, and programs that will enable health care providers to test new ways of delivering care and sharing the learning more broadly. There will be plenty of time for your questions and comments and we look forward to your participation!

To enroll, please click here.

Expand and acquire to prepare for the IPO

Today's story that Cerberus Capital Management has offered to buy the financially troubled Jackson Health System in Florida is consistent with an own-it-flip-it approach to investment in hospitals. Part of the business strategy is to create an organization with a larger revenue stream for when it comes time for the initial public offering in a few years. This simply creates a greater sales multiple when the IPO occurs. As we have seen in other sectors in the economy, this phenomenon is remarkably independent of the actual sustainability of the business as an operating entity in the long run. Capital markets flock to size during an IPO.

This is the same strategy being employed by Vanguard Health Systems in buying the financially troubled Detroit Medical Center. Each deal is likely to be highly leveraged, and as long as the cash flow from Jackson/DMC is positive for a few years, the strategy has the potential to yield an excellent return to the investors in the private equity fund.

By the way, you wonder why the newspaper doesn't check its own recent story on Cerberus to make sure it gets its fact right. Today's story says:

Cerberus . . . spent $895 million to buy the Caritas hospitals, including St. Elizabeth’s Medical Center in Brighton and Carney Hospital in Dorchester. As part of the deal, Cerberus agreed to assume $260 million in pension liabilities for workers and pledged to spend $400 million on new emergency rooms and surgery wards.

The one from two weeks ago, however, reports:

Cerberus paid $495 million for the Caritas system, a sum that funded its pensions and retired most of its outstanding debt. It also committed to pumping another $400 million in capital improvements into the system over the next four years, although de la Torre acknowledges that those funds may come from hospital revenues in coming years, rather than from Cerberus itself.

The dummies' guide to The Joint Commission

I received an email advertisement, and it left me saddened. It is for a book entitled The Joint Commission Survey Coordinator's Handbook. This was the text of the email:

Packed with expert advice, best practices, and sample tools and tracers, this book saves you from having to research and manage Joint Commission accreditation activities on your own.

Now in its 12th edition, this fully updated book by Laure L. Dudley, RN, MS, interprets The Joint Commission’s standards in practical, straightforward language that removes the guesswork for you. Discover what has changed in the past year, what you need to know about the standards, and what you need to do to comply.

So, I figured that this was the dummies' guide to the Joint Commission's standards. I was saddened to think that those standards are so abstruse that there is a need to translate them into "practical, straightforward language."

Then, I clicked on the book's image in the email and was taken to the real advertisement. Upon further review, I figured out that the book is not the dummies' guide only for hospital folk who are about to be surveyed by the Joint Commission. It is as much a guide for the surveyors themselves! The ad includes the following in addition to the text above:

Benefits:

• Find answers to all of your Joint Commission questions in one resource
• Remove the guesswork and hunting for the latest Joint Commission changes
• Gain confidence in your role as survey coordinator
• Become an effective communicator with staff and leadership

What’s new:

• Joint Commission Standards and CMS: Much has changed in the Joint Commission standards following the organization’s deemed status application. Find out how this affects survey preparation as The Joint Commission aligns closer to the CMS Conditions of Participation.
• The clarification process: One of the most nerve-wracking components of a Joint Commission survey is clarifying requirements for improvement. Find tips and suggestions for getting the most out of your clarification process.
• Insider perspective: This year the Handbook is written by a former Joint Commission employee and contains guest commentary by several other former staff, offering readers a distinct insider’s perspective.
• Updated Life Safety Code® for the non-engineer: Written by safety expert Brad Keyes, CHSP, discover how the Life Safety Code® is accessible to survey coordinators and other non-engineers.

I don't know if the book is an officially authorized publication of The Joint Commission. That point is blurred a bit, as there is an endorsement in the advertisement from someone putting herself forward as a surveyor. If it is authorized, it should say so. If it is not, it does not seem appropriate for a JC employee or contractor to endorse a publication by a third party.

Beyond this point, though, what does it say about hospital accreditation standards if there is a need for them to be translated or interpreted in this manner? What does it say about the training of surveyors if they need CliffNotes to do their job confidently?

Maybe this is just a clever company trying to make money from both hospital safety and quality folks and from JC surveyors. On the other hand, it is the 12th edition, so the book seems to have some staying power. And the author is a former executive director of The Joint Commission.

For years, I have been proclaiming the importance and value of JC surveys, having great appreciation for the dedication and expertise of the surveyors who visited our hospital, and noting:

I have often said that, if the Joint Commission did not exist, we would want to invent it. An objective outside review of this sort is extremely helpful to a hospital as it strives to provide better and better care to the public.

Each time I said that, though, observers from other hospitals would skeptically respond by saying that the accreditation standards are often recondite at best, but also sometimes in conflict with good clinical practice. Some of that is inevitable, and I am confident the JC is involved in its own process improvement efforts on those fronts. But, wouldn't it be nice if the 12th edition of this book were the last because it just wasn't needed any more?

Shared decision making

Along the lines of the video below, please read this article from the Health Affairs Blog by Jessie Gruman about shared decision making. The key excerpt is below, to which I would only add an equally important point demonstrated in the Dave-Danny case: Knowledge and information go both ways in a truly participatory process, not just from provider to patient.

It is important to have (and to promote) a step-by-step process to present us and our families with evidence that helps us understand the trade-offs of health decisions and to thus prepare for productive discussions with our physicians. And it is important to know that most individuals and physicians who go through this formal process find it feasible and satisfying.

But it is the values that this model embodies that justify the focus, energy and investments in it. Those values are that:

…Information and evidence about tests and treatments is a critical component of many health care decisions.

…Patients and caregivers can understand evidence and can use it to help them weigh their options.

…Providers can discuss available evidence – what is known, where it is lacking and what it means – with patients.

…Patients are explicitly invited to participate in the decisions about their care (even if that participation consists of delegating decision-making to a caregiver or physician).

…The opinions and preferences of patients – informed by their understanding of the evidence –shape and determine the tests they take and the treatment they undergo.

Dave and Danny on the big screen

Regular readers may recall that I wrote about a grand rounds presentation by Dr. Danny Sands and e-Patient Dave deBronkart. It was an impressive and moving exposition about the power of patient involvement in the delivery of health care.

Dave and Danny did a reprise of this session at the IHI Annual Forum in December, and IHI has generously made it available for public viewing. I offer it here for you. It is about an hour long, but well worth your time. (You can play it in the background while you catch up on the long weekend's emails today!)

Danny and Dave are now both active in the Society for Participatory Medicine, spreading the word and publishing research in support of "a cooperative model of health care that encourages and expects active involvement by all connected parties (patients, caregivers, healthcare professionals, etc.) as integral to the full continuum of care."

If you cannot see the video, click here.

IHI Forum 2010 Session A1: How Patient-Provider Engagement Can Transform Healthcare from e-Patient Dave deBronkart on Vimeo.

2 kidneys versus 100,000 lives

This story about a kidney transplant mix-up in California is bound to get lots of coverage. It is these extraordinary cases that get public attention. I am sure it will lead to a whole new set of national rules designed to keep such a thing from happening.

Of course, such rules already exist, and it was likely a lapse in them that led to this result.

Nonetheless, we will "bolt on" a new set of requirements that, in themselves, will likely create the possibility for yet a new form of error to occur.

This kind of coverage and response is a spin-off from the "rule of rescue" that dominates decisions about medical treatment. We find the one-off, extreme case and devote excessive energy to solving it. In the meantime, we let go untreated the fact that tens of thousands of people are killed and maimed in hospitals every year.

Those numbers are constantly disputed by the profession. To this day, many doctors do not believe the Institute of Medicine's studies that documented the number of unnecessary deaths per year.

And you never hear anyone talking about this 2010 report by the Office of the Inspector General, which concluded:

An estimated 1.5 percent of Medicare beneficiaries experienced an event that contributed to their deaths, which projects to 15,000 patients in a single month.

As the IOM notes, “Between the health care we have and the care we could have lies not just a gap, but a chasm.”

There is an underlying belief on the part of policy makers and public and private payers that the focus on quality is best addressed through payment reform. Let me state as clearly as I possibly can: That is wrong. It is a classic example of the old expression: "When you have a hammer, everything looks like a nail." Changes in payment rate structures, penalties for "never events," and the like can cause some changes to occur. Their main political advantage is that they give the impression of action, and their major financial advantage is a shift in risk from government and private payers to health care providers.

But these are gross tools and will have unintended consequences. More importantly, they do not get to the heart of the problem, the manner in which work is organized in the highly complex environment of hospitals and physician practices. This is an environment in which ineffective work-arounds -- instead of front-line driven process redesign -- are the usual answer to obstacles in patient care.

They do not address the unmet education needs of doctors-in-training, training that is a throw-back to a cottage industry in which each person is expected to be an artist, relying on his or her creativity, intuition, and experience when taking care of a patient. The resulting lack of standardization -- the high degree of practice variation -- creates an environment that is inimical to process improvement based on scientific methods.

They do not address the documented advantages of engaging patients in the design and delivery of care, nor the power that such engagement brings to both doctors and patients.

Add to this the sociology of dehumanization in medical schools documented by Linda Pololi, and you have a stewpot of well-intentioned people destined to kill and maim others.

It is up to the medical profession, not the politicians or the insurance companies, to change this. First, though, they have to be willing to acknowledge that problems exist, that the current level of harm is not a statistically irreducible amount. The need to put aside the usual responses -- "the data are wrong" -- "our patients are sicker" -- "our care is the best in the country" -- and have the intellectual modesty to recognize that the real work has just begun.

To the extent the medical profession continues to abdicate responsibility, the more will step in politicians, regulators, and payers to do it for them. If you are a doctor and already feeling a lack of control over your professional life and your relationship with your patients, just wait.

I have previously quoted experts on this field, but the most cogent imperative remains the one provided by Ethel Merman:

Now what kind of an attitude is that, 'these things happen?' They only happen because this whole country is just full of people who, when these things happen, they just say 'these things happen,' and that's why they happen! We gotta have control of what happens to us."

The infrastructure chronicles -- Volume 3.5

Back to our occasional series about infrastructure. This one is about a part of infrastructure that, oddly, often tends to be invisible: Signage.

Designing effective signs is important. After all, if there is a need for the sign in the first place -- for safety, convenience, or efficiency -- why not post one that solves the problem? But, we often see the opposite, a sign that actually makes things worse. It is at that moment that a sign becomes invisible.

In a previous post, I presented the dangers of sign congestion in a hospital. In another, I presented an example of one from the Postal Service that provides guidance that is unhelpful because it requires a person to detect the difference between 12 ounces and 13 ounces in a letter s/he is about to mail.

Here's one that demonstrates simple clutter and a bureaucratic point of view. It is posted on the "Fare Array Hut," a small structure at many MBTA transit stops that is not designated as a "Fare Array Hut." So, to start with, you might look at the sign and say, "Where's the Fare Array Hut?"

Then, you wonder, "Do I have to validate my card in the manner set forth?" The answer is no. It does make it easier to enter the train in one of the back doors, but you can also validate upon entering through the front door.

And then, you see things on the poster that simply have no relevance for you, like "Ensure all revenue is properly collected and recorded."

By the way, it turns out I am not the first person to notice this problem. After writing this post, curiously searching Google for the term "Fare Array Hut," I came upon this post by another blogger, who nicely describes the situation.

It all comes back to cost and choice

Those watching the implementation of national health care reform are advised, again, to keep an eye on Massachusetts, which began many of the same programs several years ago. As will be evident eventually at the national level, after you provide universal access to health care by creating a more broad-based insurance program, you then need to focus on two areas: cost and choice. (Remember that President Obama tried to present the case that access, lower costs, and choice were mutually consistent public policy goals. 'Taint so. Eventually, you have to deal with the other two to have a sustainable solution.)

Governor Deval Patrick today offered his legislative proposals in this arena. The key elements are control over provider rates; encouragement for capitation and bundled payment regimes; creation of integrated delivery systems; and transparency of prices and medical outcomes.

I was especially intrigued with the rate-setting aspect of his plan. For some time, I have been suggesting that a return to administrative rate-setting for rates paid to hospitals and doctors was inevitable in a state in which market power had for so long dominated the methodology for establishing those rates. This has been mightily opposed by most industry observers. My point was that rate-setting already existed, but it was in the hands of unaccountable insurance companies.

So the Governor now proposes rate-setting, admittedly through the back door, but substantively so in any event. How will it work? We will not appear to regulate rates paid to providers, except that an insurance company's premiums will not be approved unless the underlying rates paid to providers meet certain conditions. Here's the relevant excerpt from the press release:

This legislation clarifies the [Insurance] Commissioner’s authority to reject premium increases where the underlying provider rates are excessive. Specifically, the Commissioner may disapprove rates that contain provider increases inconsistent with the following criteria:

• The rate of increase in the state’s Gross Domestic Product;
• The rate of increase in total medical expenses in the region as reported by the Division of Health Care Finance and Policy;
• A provider’s rate of reimbursement with a carrier, especially in relation to the carrier’s statewide average relative price;
• Whether the carrier and a contracting provider are transitioning from a fee-for-service contract to an alternative payment contract.

So, whether you call it six of one or half a dozen of another, we are back to rate-setting.

On the choice front, the Governor adopts the religious dogma of pricing discussed here earlier, stating that "the existing fee-for-service payment system is outdated in the medical field." He apparently understands that doing so is inconsistent with consumer choice and thus he "encourages the formation of integrated care organizations (commonly referred to as Accountable Care Organizations or 'ACOs')". As discussed in the last two paragraphs of this post, insurers and providers better tread carefully here. Unless consumers are confident of getting the same or better quality of care from the restricted network serving them, there will be extreme negative feedback in the future. Transparency of outcomes will definitely help, but the power of habit and reputation is long-lasting.

So congratulations to the Governor for taking steps that are consistent with the state's policy of universal access. The key to legislative adoption of these proposals, unfortunately, is likely to be an attempt to minimize discussion of what they would mean for individuals and families, and for doctors and hospitals. Otherwise, they will be viewed as bitter medicine, even if they are in the service of an overall policy objective -- universal access -- that is clearly the right direction.

MIT Sloan BioInnovations Conference 2011

Here's an interesting conference in a couple of weeks, offered by the MIT Sloan Healthcare Club, for those of you in the Boston area:

The 8th Annual MIT Sloan BioInnovations Conference, taking place on March 4th at 8:30 A.M in the Boston Marriott Cambridge, brings together thought leaders from industry and academia to discuss important topics applicable across the health care industries.

Steve Rusckowski, CEO of Philips Healthcare, and Peter Hecht, CEO of Ironwood Pharmaceuticals will deliver keynote speeches in addition to our panel discussions about the challenges of regulatory uncertainty and R&D productivity as well as the opportunities of next generation technologies and emerging markets. Our panelists come from the top companies across pharma, biotech, medical devices and support services including Pfizer, Genentech, Merck and Genzyme, and innovative emerging firms like SmartCell and AMAG Pharma.

This year's BioInnovations conference promises to be an insightful discussion on the topics at the center of health care.

For full details on panel speakers and to register, click here.

Is this part of the death of trust?

A short time ago, I wrote with concern about the blurred boundaries between news and opinion in the lead stories of major newspapers. I did not think I would have to worry about blurred boundaries between front page stories and advertising, but this front page story in the New York Times has me wondering.

The story is about Bernard Madoff and statements he has made from his jail cell. It is strange enough that the Times would give upper right hand front page placement to comments made by Mr. Madoff. As the story notes after the page turn: "Mr. Madoff’s claims must be weighed against his tenuous credibility."

But beyond that judgment about newsworthiness, note this paragraph on the front page:

Both the interview and the e-mail correspondence were conducted as part of this reporter’s research for a coming book on the Madoff scandal, “The Wizard of Lies: Bernie Madoff and the Death of Trust,” for publication this spring by Times Books, a division of Henry Holt & Company.

Did we just see a commercial posing as part of a news story? First, who cares if the interview was conducted as part of research for a book? The interview rises or falls on its own. Second, why is the full name of the book given, along with the publisher's name?

If this was meant to be some kind of disclosure, it could have been written to make that clear. As it now stands, the only surprise is that the on-line version of the article did not have an embedded link to Amazon.

Are you taking those pills yet?

Over a year ago, I wrote about entrepreneur Eran Shavelsky, CEO of MedMinder, who has created an electronic, cell-phone connected pillbox that can help people remember to take their prescription drugs. As I noted at the time: "The pillbox has an embedded cellular phone that can send reminders by phone call, text message, or email. It also has lights that blink and sound alerts that beep. You can program it to send reminders in any or all of these formats -- but not just to the patient. The reminders can also go to a trusted family member and/or the provider. These can be easily programmed on the company website. You load up a month's worth of medications, and on you go. Or, if you forget to load up the medicines, you can have an alert about that."

I visited Eran today, curious as to how things were going. The design of the pillbox (now called Maya) has been upgraded, and it is now for sale in some retails outlets as well as through some insurers and providers. He reports that adherence to medication regimes for patients using the device averages about 92%, well above that reported by people in the pharmacy benefit field.

Eran has also developed a portable medication holder/reminder (lower picture), which also works off of cell phone signals, for when people are away from home for a short period of time.

I have no financial interest in this product or company, but I do have a personal interest as someone who wants to improve the management of patient care. It seems to me that this kind of elegant device would especially be of interest to those physician groups that have signed global or other risk contracts. The relatively modest cost of the pillbox and its cellphone service would be recovered many fold by enhancing the likelihood of adherence with prescribed drugs, avoiding the much higher cost of hospital admissions and readmissions.

Catharsis is not policy-making

If you ever needed an indication of why the public remains confused about the issue of health care costs and insurance premiums, look no further than a story in today's Boston Globe entitled, "Insurers seeking smaller rate hikes." It is not that the reporter has done a poor job. Quite the contrary. The structure of the piece is good, and the story is fair and accurately reported. It is just that the current exigencies of newspaper production make it impossible to devote sufficient space in a daily story to portray the whole picture. So, in an understandable effort to give equal time to divergent viewpoints, the story ends up as a "he said-she said" exposition, leaving out underlying facts and context that might help the public understand why we are where we are.

So, let's deconstruct and expand the story to give more insights.

When the undersecretary of consumer affairs and business regulation sets forth her view of the rightness of the Governor's intervention in the rate-setting process, she neglects to mention that the intervention was arbitrary and found to be legally deficient by appellate boards in the state government. In essence, she attempts to proclaim economic and regulatory virtue in actions that fundamentally had a political origin during the last gubernatorial campaign.

She fails to mention that the underlying costs of providing health care have not changed very much. So insurance companies, bowing to political pressure, have been forced to come down hard on those providers whose contracts happen to have come up for renewal. These have often not been those with higher reimbursement rates. In essence, the administration's intervention succeeded in increasing the payment differential between the have's and have not's among the providers, contributing to the very factors disclosed by the Attorney General that lead to higher, not lower, health care costs.

When she says that the answer to the world's problems is to move to global payments, she makes no commitment to the idea that payment disparities among providers will be eliminated as part of this move.

When the Blue Cross Blue Shield spokesperson says that the proposed premiums are inadequate to cover costs, he leaves out the fact that this insurer has systematically overpaid certain providers, relative to other providers, for their services. These divergent payments are reflective of market power, as opposed to higher quality or other measurable factors, and, as noted, are a major contributor to the cost of health care in the state. He also leaves out the fact that early contracts to persuade or reward providers to sign the company's new global contract regime were particularly generous, especially in the early years of those contracts, increasing the company's costs.

When the head of the association of health plans (which does not include BCBS) continues her long-standing practice of blaming providers for all the problems, she not only neglects the contribution of the inefficient administration of her members, but she too fails to distinguish between those providers who enjoy above-market rates and those who are paid less. Why? Because her members, too, have been forced by market power concerns into paying some providers more for no net benefit to society.

In short, the entire story consists of each party passing blame to another or inappropriately taking credit for something that deserves no credit. Over the nine years I was running a hospital, I came to see the debate often set forth in this manner. It has some cathartic value for the insiders, but it offers little to the public that is helpful. It suggests to the medical profession, too, that the people who move money around to pay for health care have little or no understanding of the underlying demographic and societal factors that are determinative of health care costs, or of the manner in which process improvement and transparency could help bend the cost curve and improve clinical outcomes and the public health.

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Aside: Some recent developments in which insurers are attempting to introduce products based on tiered networks, or charging different copay's rates based on which provider you visit, are good news. But without publicly available date on clinical outcomes, these efforts run the risk of failure because the (undeserved) reputational advantages enjoyed by certain providers will trump the price differential in people's minds. You can get a sense of that in many of the comments on this story.

It took years after the introduction of low-cost long distance service by MCI and others in competition with AT&T for the latter's market share to drop below the 60th percentile, and the service provided was identical. People's habits die hard, even in the face of accurate information. How much more so when no information is offered to demonstrate that a move to a lower cost provider will result in service of equal or better quality.

Breathing more easily

Do you remember this post from 2009, where I praised Children's Hospital Boston for an asthma intervention program that provided advice and assistance to families? The summary:

Using a combination of interventions (e.g., counseling about drug dosages, HEPA filters for vacuum cleaners, rodent control measures), they dramatically reduced the number of asthmatic incidents for the children in several of Boston's neighborhoods. A subsidiary benefit was a huge reduction in the number of emergency room visits.

Well, now comes the business issue, summarized in an excellent article by Cheryl Clark at HealthLeaders Media.

It costs about $2,600 per child, but avoids $3,900 in hospitalization costs over a two-year period, hospital officials say. Elizabeth Woods, MD, who directs the hospital's initiative, says cost analyses point to a 1.46 return on investment. The hospital has papers in press that illuminate its progress.

So, where's the problem?

"That's a saving to society, not to the hospital," Woods says.

So here's a great program, but one whose success could hurt the hospital's bottom line, one that costs money and reduces business.

This, of course, is the argument for bundled payments for chronic illnesses and/or capitated payments for all medical service. In this article, Atul Gawande leaps to that conclusion. And there is something to be said for that.

But the short term business analysis sometimes fails to account for all of the items that inure to the benefit of a hospital for doing "the right thing."

Here's a sample of that broader view, the reduction in ventilator associated pneumonia and other hospital acquired infections in a hospital's intensive care units. As above, the direct result was a reduction in costs to insurance companies, Medicare, and Medicaid, and a commensurate reduction in revenues to the hospital. But, and this is a big but:

On the business front, it has contributed to a reduction in length of stay in our ICUs. We were able to avoid the multi-million dollar capital cost of expanding our ICU capacity. Indeed, we were able to create capacity out of the existing facilities and improve throughput.

Hospitals today often face limitations on their ability to raise capital. Avoiding a new fixed expense like that, while effectively creating capacity, can make business sense even if some short-term revenues are lost.

Also, some hospital costs are variable, not fixed. Some of that $3900 saved at Children's Hospital, for example, is certain to be related to supplies that will no longer need to be purchased. Likewise, some portion of nursing and respiratory therapy resources can either be reassigned to other cases, or if the trend is long-lasting, simply avoided by having fewer staff people over time.

And, of course, as noted by the CHB official, "Some of the losses might be made up by not providing worthless or futile care."

So, before we make the leap to a new payment regime, let's be a bit more complete in our analysis.

I was not skeptical enough

A recent webinar held by Day Pitney LLP made me wonder if my previous post may have understated the skepticism that should be applied to private equity purchases of hospitals.

The session was held on February 9 and was entitled, "Recapitalizing Not-for-Profit Hospitals with For-Profit Equity Capital." It had excellent and lucid presentations by Sandford Steever, Editor of The Health Care M&A Monthly; Wayne Ziemann, Managing Director of Alvarez and Marsal Healthcare Practice Group; and Lori Braender and Bruce Boisture of Day Pitney. The slides are here.

The theme of the day was that health care reform activities over the coming years will require massive capital investments to comply with the new federal law and associated regulations and to create accountable care organizations. This is a problem for not-for-profits, which are are often locked out of capital markets or have difficult access to such markets. In contrast, for-profits have an easier time raising capital.

One panelist then reported, though, that for-profits and not-for-profits have generally earned virtually identical after-tax profit margins. He also noted that equity holders demand a high return, in the range of 25 to 30 percent.

These remarks led to a series of questions from the audience: If for-profits are identical to not-for-profits with regard to after-tax profit margins, how can those puny margins be sufficient to justify investment by equity markets? Or putting it another way, if equity holders are demanding a 25-30% return, how do they earn that return if after-tax margins are the same as not-for-profits. Does this depend on flipping the properties in an IPO or to another private equity firm?

The initial reply was startling, "It is an apparent contradiction occurring in the market today."

Expanding on that, it was noted that private equity entry in this field is different from the for-profit hospital companies that have purchased properties in the past. "Private equity firms envision exiting, and not in the far future. Betting that there will be a buyer at some time in the future is the exit strategy. It is quite a gamble. They are banking a lot of health care reform and consolidation in the industry. Beyond that there is not much that is well defined."

Beyond that, there was a suggestion that the play in the marketplace right now is a "bet on a business plan" -- hoping that access to strategic capital will give these companies a competitive edge in the marketplace and grow market share. It is a bet on a transformation in the health care industry -- different payment models, being a low-cost, efficient provider, and wringing out inefficiency and overtreatment. "It is a heck of a bet to make," noted one panelist.

We were reminded that for-profit investors believe that community-based governing bodies lead to poor business decisions by not-for-profits. (This thought parallels the "stale bologna sandwiches" comment noted in my earlier post.) This belief, though, is interesting in light of a comment by one panelist who noted that not-for-profits have done better than for-profits with regard to building integrated networks of care and coordination of electronic health records.

Finally, though, there were two sobering comments from the panelists. The one: "It is kind of like the gold rush in years past."

The other was worse: "A third possibility beyond an IPO or sale to another investor is that the firm will simply shut down."

It was on this point that I concluded last week: Investors may come and go, but the community depends on its local hospital to provide high quality service. It is the residents of the community who are left holding the bag if the hospital corporation reaches the conclusion that ownership is not financially viable.

Ropeik takes on risk

My colleague and friend David Ropeik takes on a risky subject in this op-ed in the Washington Post, and he gets it right. He points out the flaws in an EPA proposal to give more weighting to death from cancer than from other diseases. Here are some excerpts:

Wouldn't it make more sense to be more afraid of what's more likely to kill you?

Yes, but that's not how we perceive risks. Risks have psychological and emotional characteristics that make some feel scarier than others, the probabilities notwithstanding. A long, painful cancer death may not be any worse than a long, painful heart disease death, but we think it would be, and feel we can't control it, and that makes cancer more feared.

That is precisely what a new proposal at the Environmental Protection Agency is trying to acknowledge. When assessing whether a new regulation would be worth the money, the agency projects how many lives it would save vs. the costs of implementing it. But now, the EPA suggests that death by cancer is so frightening to the public, cancer deaths should carry greater weight in its calculations than deaths by other causes.

This is an approach that may have some ethical and emotional appeal, but it carries serious dangers for us all.

. . . Under its "cancer premium," the [value] of lives saved from cancer would be 50 percent more than that of lives saved from other causes of death. So this premium would incorporate our greater fear of cancer into the analysis of whether regulations are worth the cost. That may seem pretty democratic: Cancer is scarier, and shouldn't our government protect us from the things we're more afraid of?

. . . It would give an advantage to regulations to control carcinogenic chemicals in the air, for instance, and disadvantage rules to control particulate air pollution, which contributes to cardiovascular deaths - which are far more common but, we think, less scary. As unpleasant as it may seem to argue against the cancer premium, it could increase the overall environmental death toll in America.

. . . We need to recognize that, just as there are physical risks that we study and try to manage, there are very real risks from the perception gap that also need to be recognized, studied and accounted for in policymaking. Getting risk wrong is risky.

We use tools such as toxicology and epidemiology and economics to identify and analyze how to deal with those physical threats. We should also use neuroscience and psychology and sociology and economics to recognize the dangers posed by our misperceptions and to analyze those threats the same way we analyze and manage any others.

That can help us handle the gap between the facts and our feelings about the facts.

We didn't start the fire

This was forwarded by a friend. If you are of a certain generation, you are bound to like it.

Whether you are a Billy Joel fan or not, you probably remember his great song, "We Didn't Start the Fire."

Here it is, set to pictures. It's a neat flashback through the past half century. I never did know all the words. Turn up volume, sit back and enjoy a review of 50 years of history in less than 3 minutes! Thanks to Billy Joel and some guy from the University of Chicago with a lot of spare time and Google.

Top left gives you full screen. Top right lets you pause. Bottom left shows the year. The older you are, the more pictures you will recognize. Anyone over age 65 should remember over 90% of what they see. But it's great at any age.

We didn't start the fire.

Missing news from friends on Facebook?

A Facebook post by Kellie Mairs:

Have you noticed that you are only seeing updates in your newsfeed from the same people lately? Have you also noticed that when you post things like status messages, photos and links, the same circle of people are commenting and every……one else seems to be ignoring you?

Don’t worry, everyone still loves you and nobody has intentionally blocked you. The problem is that a large chunk of your friend/fan list can’t see anything you post and here’s why:

The “New Facebook” has a newsfeed setting that by default is automatically set to show ONLY posts from people who you’ve recently interacted with or interacted the most with (which would be limited to the couple of weeks just before people started switching to the new profile). So in other words, for both business and personal pages, unless your friends/fans commented on one of your posts within those few weeks or vice versa – you are now invisible to them and they are invisible to you!!

HERE’S THE FIX: Scroll down to the bottom of the newsfeed on the homepage and click on “Edit Options”, click on “Show Posts From” and change the setting to “All Of Your Friends and Pages”

Simply posting an update about it won’t do any good because lots of your friends/fans already can’t see your posts by default. You’ll either have to send out a message to everyone on your list (which I’m not even sure business pages can do and is a rather tedious method) or post an event explaining the situation like this one and invite your entire fan base and/or friend list. You can also tweet about it hoping that most of your fellow facebookers are also on Twitter.

Shame on Facebook for altering the default setting and not telling people about it!

Huge barriers to effective relationship formation

During Ernie's class at MIT, the students and I were discussing why it is so hard to implement process improvements in clinical settings. I suggested that one aspect of the problem was that doctors, no matter how well intentioned, were not trained in such matters. Further, I suggested that there is very little in the career advancement pattern of successful doctors in academic medicine that rewards attributes that are so important in most other fields of endeavor, i.e., interpersonal skills and teamwork.

Well, along comes Linda Pololi, an MD who has been doing research at the Women's Studies Research Center at Brandeis University, who today conducted a seminar about her new book, Changing the Culture of Academic Medicine. (Dartmouth College Press.) The book is mainly about the perspectives of women faculty in medical schools, but it also has observations from men. It is based on extensive surveys and interviews with faculty members from a number of prominent medical schools.

Not only did Linda confirm my hypotheses, she provided thorough documentation of a pattern among the faculty of medical schools that can hardly fail to have an impact on those trained in the system.

Here are some excerpts:

Our data show that the way medical schools are structured and the norms of behavior among faculty can create huge barriers to effective relationship formation . . . a medical school environment that could at times negatively impact patients and our system of health care as a whole.

Problems with personal interactions in the academic medical culture emerged as a central theme in our interviews. . . . Comments about relationships tended to arise spontaneously rather than be elicited by the interviewer. . . [and] both women and men spoke similarly about relationships in the interviews.

Two fundamental worrisome experiences . . . were a sense of disconnection and having few trusting relationships with colleagues and supervisors.

Interviewees described an intensely individualistic, competitive environment where rewards usually went to individual accomplishments. . . .[I]ndividuals and institutions tended to function on behalf of their self-interest, making decisions and choices that benefited themselves rather than contributing to the common good -- and sometimes came at the expense of the common good.

The system is designed to create barriers at all levels to collaboration and collegiality.

Numerous faculty complained of not being recognized as a person beyond their professional role. No attention was paid to what people were feeling. . . . [T]his refusal to engage them as individuals had a depersonalizing effect. The culture seemed to ignore the qualities that made them able to address human needs and show compassion and sensitivity to others.

We found little indication that medical schools cultivated appreciation of people's efforts. Rather, the focus was on finding fault.

Now, let's draw the connection between all this and patient care. It is obvious that process improvement is hampered when there is a lack of trust, collegiality, and collaboration among the medical staff. But sadder still, consider the implications for those being treated. Linda notes:

There is a parallel between disconnection and emotional detachment among medical school faculty and ineffective communication between doctor and patient. If faculty feel disconnected and cannot communicate among themselves, they are less likely to create good relationships with students and patients. Similarly, in a culture where faculty and administrators themselves do not receive consideration and compassion, it is less likely that they will treat students and patients with compassion.

And what about improving quality and safety and reducing harm to patients?

Research shows that physicians remember for decades mistakes they have made, feeling guilty and humiliated and isolated in their shame. Only by creating transparency, so they can discuss mistakes openly, can these destructive feelings be relieved. Equally important, open discussion enables the physician and others to learn from these mistakes and prevent them from recurring.

If the training ground of American physicians works against this common sense view of the world, is there any doubt as to why we have such problems in patient care? Clinical and administrative leaders in hospitals must strive to undo the culture that is embedded in these centers of learning and help those who have devoted their lives to alleviating human suffering to start, first, to alleviate their own suffering and sense of loneliness and isolation.

At Ernie's class @ MIT

I was a guest lecturer last night at Professor Ernst Berndt's course at MIT's Sloan School, entitled "Economics of the Health Care Industries." The students represent a variety of backgrounds, and we had great discussions about a full range of issues in hospital management.

I added a new weapon to my arsenal in the Socratic method -- a promise that anyone who made a particularly insightful comment would be featured here on this blog. You see them in the accompanying pictures.

I also had an opportunity to suggest the first of four essay topics for the class. These will be turned in on Monday, and I promised to print the best ones here. Stay tuned for those next week.

I gave them a very tough topic, but it is quite timely and represents an actual problem facing provider groups here in Massachusetts and elsewhere. Here it is:

First, read this blog post. Then, the question is: What methodology would you propose for the allocation of an annual global payment, to divide it up among primary care doctors, community hospitals, tertiary hospitals, specialist doctors, nursing homes, etc. -- all of whom are involved in caring for a given population of patients? How would you make the transition from the current fee-for-service approach?

This is investigative reporting

The Las Vegas Sun conducted an extensive investigation of the quality of care delivered by hospitals in that section of Nevada. It took two years of research by reporters Marshall Allen and Alex Richards, along with help from lots of support staff. They made use of hundreds of thousands of pieces of information. The material was presented in a multi-part series through 2010. Here is the video summary offered by Brian Greenspun, publisher and editor.



This series exemplifies the potential power of the media in focusing public attention on one of the country's major public health hazards -- being treated in a hospital. To a greater or lesser extent, a similar story could be written in most American cities. But it would take a commitment to write stories that go beyond parroting corporate press releases or believing the advertisements of self-satisfied medical institutions. Perhaps a little less coverage about the weather would free up reporters to dig through a different kind of snow job.

Congratulations to the Las Vegas Sun for showing the way.

If you cannot see the video, click here.