Wednesday, October 31, 2007

Cost? Who Cares?

I have on occasion observed that no hospital administrator ever got his portrait in the lobby for saving money.

The Sunday, October 28 edition of the Omaha World Herald confirms that. Its lead editorial compliments Nebraska hospitals for “sound strategic thinking.” It gave five examples:

- Regional Collaboration
- Community Outreach
- Cutting Infection Rates
- Technology and Medication Delivery
- Electronic Health Records

But nary a word about cost reduction. Actually, some of those items have probably added cost.

The CEO of a major hospital in another city was recently quoted as expressing the view that people did not want cost to be reduced.

Maybe she's right.

Monday, October 29, 2007

Published Letter

AARP has a health care reform initiative going under the title “Divided We Fail.” It’s president, Erik Olsen, has a news column out about it, which was published in the October 26 issue of the Omaha World Herald. It prompted a letter to the editor from me, which appeared in today’s paper. The letter reads as follows:

AARP President Erik Olsen‘s column about that organization’s health care reform initiative (Oct. 26 Midlands Voices) did a good job of describing the problem but came up short on solutions.

Being a membership organization, AARP is understandably reluctant to tell its people things they don’t want to hear. Were that not the case, Olsen might have explained that our current system of providing health care services is outmoded, unsustainable and in need of redesign.

The changes needed include some limitation of choice of physician, some restrictions on what doctors and patients can decide about diagnosis and treatment, and holding hospital trustees and executives accountable for how physicians practice medicine.

There will be objection to those changes. But once AARP and organizations like it are able to accept them, efforts can focus on how to undertake reform in the most beneficial and least disruptive ways rather than on waving flags of alarm and hoping somebody else will take the heat.

Thursday, October 25, 2007

A Grand Delusion

I see in the papers that Presidential candidate Sentator Joe Biden has unveiled his health care plan. As I have mentioned before, I read these less as serious proposals than as indications of what the candidates think the voters either want to hear or don’t care about.

What I find interesting in these proposals is the easiness with which candidates project pouring major amounts of new money into the health care system. In Biden’s case it is between $80 and $100 billion per year. Those with experience in interpreting political rhetoric will immediately double or triple such numbers.

Polls consistently show that people rank the cost of health care high on the list of public issues that concern them. It is an economic truism that you can only incur a cost by spending money, and that the more you spend the greater the amount of cost. It follows that spending an additional $80 to $100 billion per year for health care will increase the cost of health care by more or less the same amount.

Candidates like Senator Biden apparently either don’t understand that or, more likely, assume that the voters don’t.

Perhaps there is also something else that people don’t understand. When they complain about the cost of health care, maybe what they have in mind is the cost of health insurance, not recognizing that the main determinant of the cost of health insurance is the cost of the health care that health insurance pays for.

All of which leads me to speculate that a major barrier to reforming our health care system is a grand delusion in which people are assuming that the cost of health care is unrelated to the amount of money spent on it.

Abandoning that delusion will be painful and something politicians will want no part of.

One wonders who will get the job of breaking the bad news.

Tuesday, October 16, 2007

Still Nobody’s Business

“US children get needed healthcare less than half the time, study finds”

That was the headline of an Associated Press article that appeared in the October 11, 2007 issue of the Omaha World Herald.

The article was a report of another one that had appeared that same day in the New England Journal of Medicine authored by a group of researchers from the Seattle Children’s Hospital Research Institute. The Institute is affiliated with the University of Washington, where its staff members hold academic appointments.

The summary at the beginning of the NEJM article ended with the following sentence:

“Deficits in the quality of care provided to children appear to be similar in magnitude to those previously reported for adults. Strategies to reduce these apparent deficits are needed.”

What strategies might they have in mind? I wondered. On that subject, the article was silent other than a statement at the end of the introductory summary that “Leaders must recognize that the current system does not meet children's needs and must take action. ‘
The same issue of NEJM had an editorial by James M. Perrin, M.D., and Charles J. Homer, M.D., M.P.H. from the Harvard Medical School/Massachusetts General Hospital Department of Pediatrics in Boston, MA and the National Initiative for Children's Healthcare Quality in Cambridge, MA. Here is what they had to say about the findings reported in the NEJM article:

“Their observations are shocking: the right services appear to be carried out less than half the time. Services are not delivered when they should be, or they are delivered when they should not be.”

“Improvement of the performance of the children's health care system will require systemwide change; entreaties to hard-working and deeply caring pediatricians, family physicians, nurses, and hospital staff to work harder and care more will not succeed by themselves. Effecting change will require leadership across all levels and systems involved in children's health care and a wholehearted commitment by those who deliver care, pay for care, and receive care. Leaders must recognize that the current system does not meet children's needs and must take action.”

So both the article and the editorial state that this problem should be addressed by “Leaders.” It raises the question of which leaders they have in mind. They didn’t say. It reminded me of the old adage that what’s everybody’s business is nobody’s business.

That isn’t good enough. If we are serious about making progress in dealing with the problem, we have to make it the business of somebody specific; like, for example, the trustees and executives of Seattle Children’s Hospital and the Massachusetts General Hospital. Both of those institutions are involved in providing healthcare to children.

Doing the study, reporting its results, and viewing the results with alarm are all good and the authors are to be commended.

Now what we need is for the executives of the institutions they represent to do something about it. Nobody’s business needs to become somebody’s business.

Sunday, October 14, 2007

Moving in the Right Direction

I like to read the health care plans of presidential candidates – not so much because I think anything in particular will come from them, but because I assume they represent the candidates’ best guesses on what the people want to hear, which, in turn, gives some indication of how ready people are for real reform.

The October 12, 2007 Omaha World Herald carried an Associated Press article reporting on the health care plan of candidate John McCain.

Here are the statements I found interesting, with my comments interspersed:

- “The solution….resides….with well-informed American families making practical decisions to address their imperatives for better health….”

An implied opposition to national solutions.

- “His proposal emphasizes payment only for quality medical care.”

A recognition that a significant amount of care is not of good quality and that something ought to be done about it.

- “….he challenges doctors to do a better job of managing care.”

A recognition that care is not well managed now and that something ought to be done about that, too. But doctors can only do it only as agents of institutions. People are not quite ready for that yet.

- “….Americans must work to protect their own health and the health of their children, doing ‘everything we can to prevent expensive, chronic disease’.”

A platitude that seems to reflect the persistent myth that prevention saves money. Prevention is a good thing because it is better to be healthy than sick, but it increases costs in the end by keeping people alive longer.

- “His plan calls for….supporting different methods of delivering care, including walk-in clinics in retail outlets….”

An indication that people think you can get adequate care from sources other than established health care providers.

I gather from all this that while people are not quite ready yet for real reform, they are moving in that direction.

Sunday, October 07, 2007

Competition and Ambivalence

From time to time I contribute to an organization called Citizens Against Government Waste (CAGW), not because I subscribe to all of its right wing political positions, but because I think that with all of the lobbying groups that are pressuring the federal government to spend more money, there ought to be at least one pushing in the other direction.

Recently CAGW got its knickers in a knot over a report by Medicare Trustees indicating that the Medicare Hospital Insurance Trust Fund is now spending more on benefits than it takes in. The surpluses that the Fund has realized since its founding in 1965 have been “borrowed” from the Fund by the federal government. The money has been transferred from one branch of the federal government to another and not counted as part of federal deficits.

But now that these “borrowings” have to be paid back, the Fund has moved from the income side of the federal government’s ledger to the expense side. Given the magnitude of the deficits already being incurred, that is cause for alarm, at least in the eyes of CAGW.

One of the remedies suggested by CAGW is “reforming Medicare to eliminate the deficits in the program.” After paying lip service to reducing waste, fraud, and abuse, CAGW recommends the encouragement of “true competition among private insurance plans to hold down costs.”

Being politically conservative in outlook, CAGW is comfortable with the idea of competition. I find it interesting, however, that it focuses on insurance plans and not on providers. I wonder how CAGW thinks that insurance plans are going to hold down the cost of health care unless they can get providers to do so. It didn’t suggest how it thinks the plans should go about doing that.

One answer would be to get providers to compete, as well. But CAGW apparently isn’t willing to go that far.

We continue to be ambivalent on the issue of whether or not there should be market competition among the providers of health care. Anti-trust says there should. Certificate of Need says there shouldn't.

Until we resolve that, the route to health care reform will remain murky.

Saturday, October 06, 2007

Unique Economics

Our health care delivery system includes an economic arrangement that has no counterpart that I can think of. It is this: a medical license gives a doctor the power to prescribe; i.e., “purchase,” services and products from hospitals, pharmacies, and other providers on behalf of patients. Those services and products must then be paid for by the patients (who cannot purchase them directly) or by their insurance companies.

The arrangement is subject to abuses of two major types.

One is the conflict of interest that occurs when the doctor has a financial interest in what is being prescribed. The most obvious example is drugs, which doctors have long been prohibited from selling. The situation has become more complicated in recent times. One example would be orthopedic hospitals that are owned by the orthopedic surgeons who practice in them.

The other takes place when the sellers of a medical service or product attempt to influence physicians to prescribe it. Again, drugs provide an obvious example as pharmaceutical houses offer free meals, expense-paid trips and other inducements designed to induce doctors to prescribe their products.

Hospitals depend on physicians for referrals and in recent times some of them have been found making payments or providing in-kind benefits (e.g., computers) to their doctors that are out of proportion to the value of what was legitimately received in return. That is both illegal and unethical, but given the intimate and complex relationships that exist between doctors and hospitals, there are plenty of marginal cases that are subject to interpretation.

On this past September 3, the Federal Register published a notice by Medicare that it intended to require hospitals to report their financial relationships with their physicians. It stated that the information so provided would help Medicaid administer section 1877 of the Social Security Act, known as “the physician self-referral law.” That law attempts to prevent the conflict of interest described above.

The issue is not a problem for Mayo Clinic, Cleveland Clinic, or Henry Ford Health System, all of which employ their doctors.

If that arrangement became the common one, the issue would go away.

Friday, October 05, 2007

Good Intentions Are Not Enough

Bob Ebert was Dean of the Harvard Medical School during the 1960’s and 70’s. A key initiative of his administration was the creation of Harvard Community Health Plan (HCHP). Patterned after the renowned and long-established Kaiser Permanente health plan in California, HCHP was a part of the Health Maintenance Organization (HMO) movement – the health care reform of its day.

I think that Dean Ebert is no longer with us, but if he was, he would be shaking his head over what has happened to HCHP.

HCHP was created as a “staff model HMO,” meaning that it employed its own physicians. It was thought that paying the HMO a fixed amount per enrolled patient per month (called a “capitation”) would give it an incentive to keep the patient well; i.e., maintain health, so as to avoid the cost of treating preventable illnesses. It soon became apparent, however, that while the investment in prevention had to be made now, by the time the prevented illness would have occurred, the economic benefit likely would be realized by another insurance company, to which the patient would have transferred in the meantime because of relocation or other reason.

It was also thought that replacing fee-for-service with capitation would reduce cost by eliminating the incentive to order unneeded services. That actually worked, but the savings were more than offset by an unexpected consequence of the staff model, which was that when physicians changed from private, fee-for-service to salaries, they expected to make nearly as much money without working nearly as hard. Or, as I used to say, they started going to their sons’ Little League baseball games.

The HCHP CEO who tried to solve that lost his job and shortly thereafter, HCHP physicians were spun off into a private group, called Harvard Vanguard.

While all this was going on, the idea of managed care emerged, suggesting that savings could be achieved by managing care more effectively. But managing care is something that neither HMO’s nor their physicians ever learned how to do.

When Harvard Vanguard was created, it took the HCHP patients with it, which made it look as though the HMO/managed care concept was still intact. But now, some years later, HCHP (now Harvard Pilgrim Health Care or HPHC) has decided that it also wants to insure patients who prefer to receive their care from physicians outside of Harvard Vanguard

Last Sunday, September 30, 2007, HPHC ran a full two-page ad in The Boston Globe with the statement “It doesn’t tell you where to go. You tell it where you want to go.” In other words, you pick your own physician and HPHC will pay fee-for-service.

So much for health maintenance. So much for capitation. So much for managed care.

When it comes to reforming health care, it seems that good intentions are not enough.

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