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Friday, February 29, 2008

Nice Try but No Cigar

On the one hand, we would like to think of health care as ministry rather than as business.

On the other hand, we know that the health care system is not as efficient as it should be and that it responds to financial incentives. This attracts us to the possibility of using them to improve quality and control cost.

So we keep trying to have it both ways.

Sometimes it works. For a time, Medicare paid hospitals for each day of care, each lab test, each x-ray, etc. In the 1980’s it changed its system and started paying a flat amount per admission, based on the patient’s diagnosis. Sure enough, the length of stay came down and hospitals started to do something about excessive utilization of lab, x-ray and other services.

The latest stratagem is called Pay for Performance or P4P for short. Under P4P, a provider that meets or exceeds defined performance standards gets paid more than if it fails to do so. Medicare is making noises about doing that, with the reward being in the range of 2% to 5% of regular payment.

I have my doubts about P4P. For one thing, we are paying too much for health care already and P4P sounds like paying even more. Then I see that Medicare wants to avoid that by doing P4P on a “budget neutral” basis. It proposes to hold back part of what it ordinarily would pay, and then release the “bonus” only to providers who meet the performance standards. That sounds more like Penalty for (Inadequate) Performance.

Supposedly, the idea of P4P is to improve quality. But the extra payment is based on meeting specified standards, which can be a very different thing. Hospitals can be very good at meeting the “letter of the law” while ignoring its purpose.

Finally, there are the costs of collecting the data needed to prove compliance with the standards, which some already claim eat up most or all of the financial reward.

So here’s my verdict on P4P:

Nice try, but no cigar.

Thursday, February 07, 2008

Putting the Cart before the Horse

Yesterday I had three related experiences that seem to me to speak volumes about the current situation in health care.

One was a short Internet video forwarded to me by my friend Bill Busby. It told the story of a Canadian who went to Buffalo for an MRI and, later, surgery for a malignant brain tumor in order to avoid a three month wait for the MRI, another three-month wait for an appointment with a neurosurgeon, and then goodness knows how long a wait for the surgery itself. Canada has single payer universal coverage and prohibits private medicine.

Another was an article in H&HN Online (the Internet journal of the American Hospital Association) by well-known health writer Emily Friedman in which she related her recent experiences of seeking treatment for a failed root canal and a creaky joint. Being self-employed, her health insurance is on the skimpy side and covered neither the tooth problem nor office visits to the orthopedist. Without going into detail, suffice it to say that her experiences were not happy ones. At the end of the article she concludes that “As high-deductible health plans, underinsurance and lack of insurance spread through the middle class, a great many more people who thought they were safe are going to experience the same thing.” She then went on to say “And people wonder why I refuse to use the term ‘consumer-directed health care.’”

The third was a column by Steve Bailey that appeared in the Business section of the Boston Globe. The column was in response to the recent announcement that the cost of the newly enacted Massachusetts program of universal health insurance coverage is now projected to be twice the original estimate – quite possibly beyond the financial capabilities of the Commonwealth.

In preparing for his column, Bailey had interviewed Jon Kingsdale, head of the Massachusetts department responsible for running the new program. Kingsdale was quoted as saying that “This [the Mass. Program] is not sustainable if we don’t deal with affordability.” Paraphrasing, Bailey wrote “Broadening coverage without slowing costs is not a sustainable model….In the end it will break the bank.”

The three experiences confirm what I have been saying all along. Something has to be done about our economically unsustainable system of providing health care. Focusing on coverage puts the cart before the horse.

Tuesday, February 05, 2008

Popular Ideas Die Hard

It is always gratifying to find one’s beliefs confirmed by experts.

In earlier postings, I have disputed the assumption that the cost of health care could be reduced if people lived healthier lifestyles. My argument (which I learned from Larry Mathis and others) has been that healthy people lived longer and ended up using more health care.

Now I see that this belief has been confirmed by research. A news story appearing in various places on February 4, 2008 reported the results of a study conducted by Pieter van Baal, an economist at the Netherlands’ National Institute for Public Health and the Environment. The study involved three groups of 1,000 people each. One group was thin and healthy. A second group was fat. The third group smoked.

Following each group from age 20, the study found that the average lifetime cost of health care per member of the thin and healthy group was about $417,000. The comparable number for the fat group was $371,000 and for the smokers $326,000.

I don’t take that as an argument against healthy lifestyles. The thin and healthy people lived four years longer than the fat ones and cost $46,000 more, or about $11,000 per year of added life. They lived seven years longer than the smokers and cost $91,000 more – or $13,000 per year. I consider both to be bargains.

But people want very much to believe that healthy living saves health care dollars. For example, while the report on health care costs recently published by the federal Congressional Budget Office stated that “….proposals that encourage more prevention and healthy living can help promote better health outcomes, although their net effects on federal and total health spending are uncertain,” it went on to elaborate ways to encourage healthier living, ending with the statement that “There could be great value in exploring these and other mechanisms that offer the potential of constraining health care spending without diminishing the quality of care that people receive.”

So I predict the van Baal report will be widely ignored, at least for awhile.

Popular ideas die hard.

Monday, February 04, 2008

The Constraints of Culture

bev M.D. commented as follows on my recent posting titled Unmanaged Care:

“I have no knowledge of what Kaiser, Mayo or Ford do, but what leads to your supposition that they don't impose the necessary discipline either? I am asking because that would be a blow to my pet theory that a "shotgun marriage" of hospitals and large physician groups, a la Mayo, Cleveland, etc., would go a long way to ameliorate the total lack of coordination and continuity in our present system.”

Managing care means deciding the best way to deal with a certain type of case and then being disciplined enough to get it done that way.

That runs counter to the prevailing culture that proscribes interference in how individual physicians treat their individual patients. It is the culture that leads politicians to be in favor of “putting medical decisions back into the hands of doctors and patients.”

Kaiser, Mayo and Ford are not immune from that. Their doctors were trained like all other doctors and their trustees and managers reflect the culture of the society of which they are a part.

This unwillingness to tolerate interference in the doctor/patient relationship is one of the tenets of our culture that stands in the way of meaningful reform of health care. It might work if people paid for care from their own pockets, but with health insurance a sacred doctor/patient relationship says that doctors and patients can do whatever they want, but the insurance company has to pay for it. That is the equivalent of a blank check.

That is changing – as it eventually must – but ever so slowly. One hopes that organizations like Kaiser, Mayo and Ford are in the vanguard of that change.

But there is a limit to how far those organizations can get out ahead of the prevailing culture and so far there has not been enough change to allow Kaiser, Mayo, Ford or anybody else to impose the discipline needed to effectively manage care.

Saturday, February 02, 2008

Nice Try but No Cigar

On the one hand, we would rather think of health care as ministry rather than as business.

On the other hand, we know that the health care system responds to financial incentives and would like to use them to improve quality and control cost.

So we keep trying to have it both ways.

Sometimes it works. For a time, Medicare payments to hospital were based on cost. In the 1980’s it changed its system and started paying a flat amount per admission, based on the patient’s diagnosis. Sure enough, the length of stay came down and hospitals started to do something about excessive utilization of lab, x-ray and other services.

The latest stratagem is called Pay for Performance or P4P for short. Under P4P, a provider that meets or exceeds defined performance standards gets paid extra. Medicare is making noises about doing that, with the reward being in the range of 2% to 5% of regular payment.

I have my doubts about P4P. For one thing, we are paying too much for health care already and P4P sounds like paying even more. Then I see that Medicare wants to avoid that by doing P4P on a “budget neutral” basis. It proposes to hold back part of what it ordinarily would pay, and then release the “bonus” only to providers who meet the performance standards. That sounds more like Penalty for (Inadequate) Performance.

Supposedly, the idea of P4P is to improve quality. But the extra payment is based on meeting specified standards, which can be a very different thing. Hospitals can be very good at meeting the letter of the law while ignoring its purpose.

Finally, there are the costs of collecting the data needed to prove compliance with the standards, which some already claim eat up most or all of the financial reward.

So here’s my verdict on P4P:

Nice try, but no cigar.

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