Sunday, September 08, 2013

A Remedy for Cost

We claim to be highly concerned about the high and rising cost of health care, but we are slow to do anything about it.

The August issue of the journal Health Affairs included an article reporting on a program in California in which Calpers, the insurance company serving government employees and retirees, offered beneficiaries a health insurance policy that classifies providers into two groups – one charging higher prices and the other lower prices.   For services obtained from the low cost group, the regular co-pay and deductible provisions of the policy apply.  For the high cost group, patients also pay the difference between amounts set by the policy and what the provider charges.  The goal was to reduce cost by providing patients with a financial incentive to seek out providers that charge the lower prices.  In the article, two researchers at the University of California at Berkeley reported the results of a study they had conducted to see whether and to what extent the program had achieved its objective.

The results were significant.  The study focused on hip and knee replacements and each year studied the more than 400 patients who participated in the program and obtained those treatments.  During the first year after the program was implemented, services obtained from the low price group increased by over 20 per cent compared with the previous year.  Prices charged by the low price group went down 5.6 per cent and by the high price group 34.3 per cent.  The researchers calculated that the program saved Calpers $2.8 million in 2011. 

I have long believed that threatening high cost providers with a loss of patients would be an effective way to get them to become serious about cost reduction – more so than offering them financial rewards for doing so, as Medicare is doing.  The Calpers experience seems to bear that out. 

One would think that others would be quick to adopt the Calpers program, but apparently the fear of market forces in health care remains strong enough to prevent taking advantage of them – or at least to slow down the process to a crawl. 

Tuesday, September 03, 2013

EHR “Savings” 

Promoters of the electronic health record (EHR) tout cost savings as one of its benefits.
The August 26 issue of Modern Healthcare reports the emergence of a new category of health professional called the Medical Scribe.  It seems that doctors find it more cumbersome to make their notes in digital form than in handwriting and so they are employing individuals (Medical Scribes) to sit alongside them and enter their findings and decisions into a computer as they interview and examine patients.
The article reported the experience of one Dr. Michael Merry, an Internist/Pediatrician in Freeport, Illinois.  Before the EHR he could see 25 to 30 patients per day.  With the EHR that dropped to 20 to 24.  Now that he is using a Medical Scribe, he has “nearly returned to his pre-EHR productivity rate.”
So the “savings” turn out to be negative, consisting of the addition of the cost of the computer system, the computer software, and the Medical Scribe.  
Having the information available in digital form potentially may permit savings elsewhere in the care process, but according to the article Dr. Merry is a member of a group practice and it is hard to see how he or his group would benefit economically.
It all goes to show the folly of imposing information technology on an industry that is neither organizationally nor culturally positioned to benefit from it.

Monday, September 02, 2013

Critical Access and Politics

The Balanced Budget Act (BBA) of 1997 authorized States to establish a State Medicare Rural Hospital Flexibility Program (Flex Program) under which certain facilities participating in Medicare can become CAHs [Critical Access Hospitals.

Quoting the US Department of Health and Human Services, “Some of the requirements for CAH certification include having no more than 25 inpatient beds; maintaining an annual average length of stay of no more than 96 hours for acute inpatient care; offering 24-hour, 7-day-a-week emergency care; and being located in a rural area, at least 35 miles drive away from any other hospital or CAH (fewer in some circumstances)…. Certification allows CAHs to receive cost-based reimbursement from Medicare, instead of standard fixed reimbursement rates.”

The ostensible purpose of this program was to save hospitals in remote, thinly populated areas that were too small to survive under regular Medicare reimbursement rates.

As originally conceived, relatively few CAHs would be certified, but in government programs it is hard to avoid politics, so the program included a loophole which allowed state governors to certify hospitals without regard to the distance criteria.  The possibility of becoming eligible for cost-based reimbursement proved irresistible and so there are now over 1300 CAH’s and the cost to Medicare has passed $2 billion per year.

Now Medicare wants to clamp down, particularly on those hospitals that do not satisfy the criterion of being located within 35 miles of another hospital.  The Obama administration’s 2014 budget wants to decertify the 70 CAHs that are within 10 miles of another hospital, saving $40 million.

I can hear the screams from here.



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