Monday, September 17, 2007

Simple questions? Simple answers?

"Simple questions" looking for answers:

If medical costs experienced by insurance carriers in Massachusetts are rising at a pretty constant 12 percent per year, driving premium increases of similar magnitude, but economic activity is rising at a rate of 3-4%, at what point does the situation become untenable for the businesses in the state?

If the medical cost increases are caused about 50% by unit cost increases for providers and 50% from increases in utilization (especially utilization of tertiary care) by residents of the state, what countervailing forces might come into play to help alleviate the situation?

If the unit cost increases for providers are driven in great measure by salary pressures from health care workers, what might offset those increases?

Some possible "simple answers":

Self-driven and/or payer-stimulated structural changes by providers to increase efficiency and productivity, i.e., reduce dollars per episode of care delivered.

Decoupling of insurance payments from volume to reduce providers' incentives to increase volume.

Support by insurers to enhance the primary care portion of the system, to enable better preventative care and early diagnoses and intervention (aka, attempt to shift the delivery of services away from high end tertiary care back towards the primary end).

Enforced rationalization of care by insurers based on actual outcomes data (including financial incentives to patients) to encourage patients to go to higher quality providers.

Exclusion by insurers of providers who do not offer sufficiently high quality service, either overall or in particular specialties.

Creation of a strong consumer movement to demand disclosure of outcomes data to help drive process improvement.

Creation of a strong employer movement to demand disclosure of outcomes data to help drive process improvement and to create demand for insurers to offer new networks of high performance providers.

What are your questions and answers? If we narrow these down, maybe we can help set the agenda.


Anonymous said...

As always great post!

There is many factors in the market that can be controled and some will just happen. As for hospitals such as your's I think the key will be to take an aggressive stance to every operational issue possible and fight for every quality improvement and measurable costs savings possible.

I have an interesting perspective because I work at so many different hospital's around the country and find that it is very difficult to enact change at any hospital. I guess you could call it the "Inertia of a Hospital" that is hard to slow down and enact change too.

My point is, hospital need to enact change faster no matter what. It is intersting the buzz you hear when the hospitals will not get paid for patients who develop infections from their hospitals. Shouldn't that have been a given in the first place? Or like the JCAHO, all the hospitals would rush around the month before getting ready for the Joint Commission and used to stop my work at the hospital that month because they were "Getting Ready" for their inspection. Once again, I used to always think, shouldn't this be a given?

Anonymous said...


Your list is quite comprehensive. The underlying theme of your questions and answers, I think, is that the current system gets too many of the incentives wrong, and there is a lot that we can do to move them in the right direction. Here are my thoughts.

1. Robust price and quality transparency would be extremely helpful. If PCP's had this information in a user friendly, easily accessible format, including actual insurer reimbursement rates for most procedures, they could make much more cost-effective referral decisions. A lot of work still needs to be done regarding the comparative effectiveness of various drugs, devices and therapies, and we should get started on doing it. To the extent that insurers can identify high quality, cost-effective doctors and hospitals, they could encourage members to use them via differential or tiered copays vs less cost-effective providers.

2. Hospitals should implement interoperable electronic medical records as soon as is practical in order to reduce or eliminate duplicate testing and adverse drug interactions. For procedures that lend themselves to it, hospitals should work with doctors, physical therapists and others to provide package pricing for a complete episode of care and take the risk that complications in a particular case may drive up costs. If priced properly to incorporate that risk and if there is a culture of continuous process improvement, there is no reason why this can't work, in my opinion.

3. Primary care doctors should be paid enough to properly supervise care in nursing homes in order to reduce physical and other therapies that are often of dubious value for the patient but are done to drive revenue for the nursing home.

4. Living wills and advance directives should be a condition of having insurance and should be honored by hospitals and doctors. There should be strong legal protections for hospitals who follow directions to only provide comfort care, if that is the patient's wish, in an end of life situation. Such protection is especially necessary when middle age children arrive threatening to sue if everything possible isn't done to keep mom or dad alive. Conversely, to the extent that hospitals provide care beyond the patient's wishes, they probably should not be paid for it.

5. Specialized health courts should replace the current capricious malpractice system to, over the longer term, reduce defensive medicine. If doctors perceived the dispute resolution system as fair, objective, consistent and based on sound science, they might be more willing to forgo defensive tests to protect against suits based on a failure to diagnose a disease or condition.

6. The medical profession should do a better job of weeding the comparatively small number of less competent doctors, who account for a disproportionate share of malpractice suits, out of medicine.

Unknown said...

Here's a fun idea, make big pharma go into the health insurer business as well. Make them balance between driving profit up on the pharma side, and cutting costs down on the payer side.

Just a fun little idea. I do realize that it's more than pharma companies driving costs. I always hear my conspiracy theorist friends say that pharma company mantra is "it's more profitable to treat than to cure."

Anonymous said...


As always, enjoy the read and you present some interesting solutions. However, you may be devoid of one additional thought.

At what point in time do individuals become accountable for their own health care? Should we not incent, or possibly dis-incent, a persons health behaviors that affect their own utilization of health care? Why have we not, as a nation, embraced wellness as one of the most critical components in health benefit modeling? People should be aware of their high risk factors, preventive measures and routine medical exams - and how their compliance or lack of compliance drives overall utilization and cost. Coupling this solution, which basically holds us as individuals accountable, and some of your solutions sets a strong agenda.

Anonymous said...

nice, concise analysis. I notice that none of your conceptual solutions (with which I mostly agree) are facilitated by any existing policy proposals on the table. Also (and I will write about this in a near future post at my blog) that 50% volume of service increase looks to be consumer/technology driven from down here in the trenches; not so much the result of complications/bad outcomes/inefficiency. That means that the real solution is some sort of rationing, most appropriately based upon balancing personal and societal utility (i.e. no double valves in 80 year olds with dialysis dependent renal failure) Given political realities, such rationing will have to be done sub rosa, or at least, at a remove. A good example is the relatively paltry provider reimbursement for medicare cardiac; young surgeons are not going into cardiac, which will dry up supply, which will result in supply-side rationing with no fingerprints...

Anonymous said...

As always, a thought provoking post.

I agree with Mike Hulburt in that patients need to be also held responsible for their care. While I cannot be certain of the actual statistics, I am guessing that there could be a large decrease in health care costs if patients were more involved in their own care. A simple example, taking ones blood pressure medication as directed and implementing the necessary lifestyle changes however moderate will reduce if not elimate, costs of treating a heart attack later on down the road. Being knowledgable about our bodies and our own health so that the doctor does not spend a whole day and several tests later just to tell me that my heart palpitations are due to the diet pills I forgot to mention that I am taking. Doing annual womens gynocologic exams so that should disease occur (and disease WILL occur), we can get it earlier with better chances of recovery and less treatment costs.

Drinking 'responsibly' as opposed to drinking my self into a liver condition reduces/eliminates the costs of treating liver cirrhosis down the road.

Understanding what constitutes an emergency... so that we do not clog the ER needlessly and so that even the employers who pay for a large % of insurance costs are not frustrated by 'unnecessary' ER and absent employee costs.

Seeing the doctor in a timely manner. Do not wait until your whole foot turns green to seek treatment for an infected ingrown toe nail!

These are simple suggestions and pale in comparison to the ones cited by Paul but if I as a patient was doing what is expected of me, then it would be one road block less to reducing health care costs. We need to educate the populace and yet sometimes even the doctors do not do this.

Anonymous said...

It seems like there could be a lot of ways to cut some of the "fluff" out of health care costs. As a patient without any major health issues at present, here is a description of a typical experience for me and where I see ways that we should be able to ease up on waste.

This happened with my PCP but it seems like something similar would happen at a hospital.

I wake up one morning with UTI symptoms. I recognize them because I have had a UTI before. I call my doctor's office for an appointment. I spend 5 minutes of this person's time looking up an appointment time that works for me and for one of the NPs in the office.

I go to the office at my allotted time. I check in with the person who goes over my insurance with me, as it's been a while since I've been there and my insurance has changed. This takes 10 minutes of her time and she has to call up and confirm that I am insured.

I get sent upstairs to wait with a nurse. Then, I meet a nurse who takes my temperature, bp, asks me a few questions, etc. This takes 10 minutes of her time.

Then, the nurse leaves and the NP comes in and spends 10 minutes asking about my symptoms, explaining a urine test, etc.

I go take the urine test, and bring it back to the NP. She runs a test and preliminarily finds white blood cells, and explains to me that this means UTI (another 20 minutes in all).

She sends my sample down to a lab to test what strain it is or something. She hands me a prescription and an info sheet to take down to the lab to go with the sample she has already sent.

I go to the lab. They spend another 10 minutes verifying my insurance there. They also had to put my info into their computer (which was not connected to my doctor's office computer because they are technically independent of each other even though that lab and that doctor's office always work together).

Finally, I go to the pharmacy which is also in the building. They spend 20 minutes filling my prescription and checking (again) with my insurance.

I end up with the antibiotic I need an I'm happy. I don't really mind the bureaucracy of it all. It's all for my safety. And I'm glad the tests got done just to make sure it wasn't anything worse.

But seriously, my insurance paid for all of these people's time (albeit indirectly!). For a problem this common, you would think I could go directly to the lab, they could do a test, and hand me the antibiotic, saving a lot of people's expensive time. The lab doesn't even require appointments - you just walk in, so this would save some administrative time, too.

It seems hard to save time and costs for care that involves major illnesses but people's time on these minor things is expensive, too. It seems like there is a lot of red tape from a patient perspective that looks like a waste.

However, maybe someone will tell me that I'm looking at this wrong. The insurance companies are spending so much money just on people checking that we are insured! And on moving us from one provider to another.

Anonymous said...

On the personal responsibility point: While of course I agree that it would help, I know of no effective program that has accomplished this. Does anyone out there have examples?

Anonymous said...

Ok, so if insurance companies drive the ratings of physicians, won't they be labelled as the fair, good, better, best xyz insurance companies and set rates accordingly? Company X only carries the best quality physicians so they will charge the highest rates because people want the best physicians.This leaves the lowest quality physicians to the lowest cost health insurance, ie to the working poor or the uninsured /unemployed.
How is this avoided?
I would like to see patients able to make these physician choices based on transparency( which I support), instead of having the insurance companies decide for us, but I don't think patients will have the knowledge to find the information. It would take a HUGE public awareness campaign over time to educate the public.Who pays for this?

Rob said...

When confronted by the "personal responsibility" argument, I get queasy. Here's why: at the heart of it, treatment is not an individual endeavor. Nor are a lot of people able to educate themselves as to the consequences of their choices. Nor, for that matter, are those consequences anywhere near instant, so market incentives would be a very stretched thing indeed. Bring into this the fact that "responsible behavior" changes with each generation. Smoking used to be acceptable. There are any number of examples of "fad findings." Then there's the wholesale invention of disorders for the sake of selling treatments. Frankly, for example, I don't care if my toenails are yellow.

It still returns to the fact that we're not doctors. Medicine is not entirely a deterministic and mechanical act, unlike automotive or computer technologies, and yet these two latter are far from completely scientific when pressed to a level of complexity.

It sounds awfully heartless to me to go down the road of blaming an individual when, in fact, medicine is a partnership, a dyad, between provider and patient. There are providers who are lousy at incentivizing patients to act well. Who gets the blame then?

Indeed, it does seem to come down to those who wish to assign blame, doesn't it?

No. That's the wrong footing to think on this. It is the wrong argument. It isn't "how do we make this cheap," it's "how do we get patient and doctor to be able to work efficiently and effectively." Crude adjustments like punishing the weak really don't belong in the argument. Fundamentals do.

Anonymous said...

Is there evidence that preventative care reduces total costs for a state/country. I have heardt that it increase total costs.

Anonymous said...

I think that marginal healthcare (say the last 50%) does have some benefit but that if we knew how small it was and had a mechanism too exclude it we would not buy it. So IMHO what we need is a scheme that allows people to determine how much marginal medicine they want to buy and a mechanism to allow them to decline care above that level AND RECEIVE THE BENEFIT FOR DECLINING IT THEMSELVES. Living wills are great but do nothing for the person who has one. They benefit the insurance company and medicare but not the person who declines the extra care. Perhaps the insurance companies should give discounts and Government should give tax breaks to those who sign living wills.

Also you could take for example the cancer that is most expensive to treat per year of life gained and offer people to exclude that type of cancer from their insurance policy and see how many people would choose the lower bill and that type of exclusion. An impossible to implement way to handle this would be: If the doctor looks on your lab results and sees that you have that type of cancer he does not even tell you that you have it.

Another idea is that perhaps the insurance companies could offer a buy out. It could work like this: the insurance company offers to pay for your treatment or pay you say $100,000. You could leave that money to your family and friends or you could spend it or maybe use part of it to get care in India from Apollo healthcare.

Anonymous said...

Two thoughts on personal responsibility.

First, if I don't take care of myself and die of a heart attack at 55, my medical costs stop. If I exercise, eat sensibly, and take my medications, I might spend ten years in a nursing home 20 years from now with dementia or Alzheimer's. I think it is far from clear whether patients with heart disease and/or diabetes, for example, who follow their doctor's recommendations incur lower lifetime medical costs than those who don't. It is quite probable that the compliant patients live longer which is a good thing, of course.

Second, I believe the very large increase in cigarette taxes in recent years did far more to reduce smoking in the U.S. than smoking education programs or doctors' exhortations. We might be able to reduce obesity and the associated medical consequences by imposing meaningful taxes on soda, candy, ice cream and other unhealthy foods. Our society and our economy are likely to achieve more efficient resource allocation if the price of all goods and services reflects the full social cost of producing them. While I don't have a problem charging smokers higher insurance premiums in addition to high cigarette taxes, I think taxing unhealthy foods would be the best way to reduce consumption of those and improve health.

Anonymous said...

This is a great brainstorming session. It just goes to show that some of the most interesting ideas come from those outside the profession.
As an insider, however, I must reluctantly agree with rob. Reluctantly because I think there is no excuse for smoking, above all other risky behaviors. However, 'personal responsibility' starts to lead us down a slippery slope of where to stop. For instance, should parents carrying a baby known to have Down's syndrome be forced to have an abortion because the child's care will cost too much? Or should 2 cystic fibrosis carriers be prevented from marrying because they might have an affected child?
Also as rob points out, "evidence-based medicine" is still a better concept in theory than fact; the evidence changes all the time. No, I have to say we cannot go that route, much as I would like to.

Anonymous said...

MKEAMY ------ Can you post the link to your blog?


Anonymous said...

Anon 3:50pm

"For instance, should parents carrying a baby known to have Down's syndrome be forced to have an abortion because the child's care will cost too much? Or should 2 cystic fibrosis carriers be prevented from marrying because they might have an affected child?"

I had never thought that far and you and Rob are right. The Personal Responsibility slope is one to avoid.
However, we still need to educate the public and the question is how.

On living wills - I do not think that the main reason for living wills is the financial aspect. And the person who declines the extra care does benefit - s/he does not linger in a vegetative state unwillingly. The benefit is that the patient makes their own medical decisions even when they 'cannot' because they are brain dead, etc.

Anonymous said...

You make lots of good and useful points on cost control. Many of these ideas are contained in legislation supported by Health Care For All. You can read a report summarizing these ideas here.

The legislative hearing on the bill will be on Thursday, Oct. 4, at 1:00 pm in the State House. We'd encourage everyone who wants to see a serious cost-control effort to come and voice their opinion.