Spike's Place

Fox Guarding the Henhouse

One of the most common responses to a call for greater government involvement in health care is that the government's susceptibility to fraud makes it unfit for a larger role. They say that because government employees gain nothing when a government payer spends less, they have no incentive or motivation to root out fraud and stop it. Therefore, the argument goes, it makes much more sense for private companies to administrate health care, because they would do a better job of eliminating fraud.

One problem with fraud is it's impossible to knw exactly how much successful fraud is taking place. So it's impossible to konw whether privatization has reduced fraud coming from the provider community in the form of over-treatment, improper billing practices, or billing for services that were never rendered. But thanks to the Kaiser Network and their reporting on a Wall Street Journal article from last week, we know one thing: fraud from Managed Care companies has increased:

The Wall Street Journal on Wednesday examined how as the private sector is increasingly providing more Medicare and Medicaid services, new types of fraud are "cropping up that are harder to spot, more complicated to prosecute and potentially more harmful to patients," prompting the federal government to increase scrutiny of managed care.

The state governments sending business to private companies decided that as long as the virtuous private companies were stewards of taxpayer dollars, they could scale down their own fraud prevention teams and let the Managed Care companies take care of it. Big mistake. All that happened was Managed Care companies began defrauding Medicaid instead of the providers. And hand it to the Managed Care companies, it turns out their fraud is more sophisticated than the fraud the provider community could pull off.

So now the governments are going back to the drawing board to find ways to detect the new forms of fraud. What's the lesson in all of this? The government will always need to have a strong role as a regulator of private industry. If you believe the argument that government can't detect fraud because they don't have the incentive to (if that were true, why would there be a new story practically daily detailing another fraud bust by CMS, but that's another story), then you also have to believe the corollary: private companies will always attempt fraud because that is where their incentive lies.

There needs to be a balance between privatization and rigorous government oversight. This is just one more example making the case.

Lean Healthcare, Virginia Mason wrap-up

After thinking about Virginia Mason's experience with lean process improvement, it's become even clearer to me that the simplest, most a-political solution to the healthcare mess in America is a reworking of the reimbursement model to encourage value-add services and discourage wasteful services. This, of course, is still a highly political issue and would be very difficult to implement. Any time you make a change to 1/6 of the largest economy in the world in a way that creates many winners and losers, it's a political solution, there is no avoiding it. But, reworking the reimbursement models in America would be the least ideologically-driven move we can make in health care right now. Eliminating wasteful procedures that don't add value should appeal to the liberal and conservative alike. It should appeal to everybody except for the doctors and hospitals who have been getting rich performing unnecessary services, but that's one group that can not be appeased by any solution that actually solves anything. And it's possible that a health care system that consistently delivers value instead of waste will allow providers to make as much as they were making before, but will simply result in a much healthier populace.

I know there's a lot of talk about this around the web right now. Brian Klepper, who posts from time to time at the Health Care Blog and at Bob Laszewski's Health Policy Blog, has been beating this drum for years, as has Maggie Mahar. Consider me fully in that camp.

Oh, and incidentally... one of the mysteries around the web was why Virginia Mason seemed so comfortable with their situation, even thought their Lean initiative was eliminating some of their highest margin procedures, presumably hurting their bottom line. I was tooling around the web researching general lean healthcare trends and found this:

Virginia Mason applied the principles of VMPS (Virginia Mason Production System) when designing its new Center for Hyperbaric Medicine. Originally, staff felt that larger hyperbaric chambers would require the construction of a new building. But careful analysis proved otherwise. The team not only found they were able to build the new Center in an existing hospital space, which saved $2 million in construction costs, but they were also able to design the Center so that more patients can receive treatment simultaneously, eliminating waiting time. The new Center can also accommodate emergency cases without interrupting regularly scheduled patient care. 

The Center’s location within the hospital also eliminates the need for patients to be transported via ambulance to a separate campus site for care, saving approximately $55,000 annually in ambulance expenses alone. 

When you do things efficiently, you find you're saving money in ways you didn't even think of.

Lean Hospitals - Provider reimbursement

I have at least one more post in my about the Virginia Mason lean experiment.

So far, we've talked about how reporting near misses and medical errors is a key missing piece of hospital process improvement. We've also discussed how the current reimbursement model leads to higher-than-necessary medical expenses.

The next foul piece of the American health care delivery system exposed by the Virginia Mason lean experiment is the way providers are reimbursed. One thing Virginia Mason CEO Gary Kaplan mentioned as a key reason for their ability to implement these sweeping changes is that their physicians are salaried. Meaning their individual payment is not tied to the amount or kind of services they are providing to patients. Kaplan says that they try to hire the right kind of provider who wants to improve and blah blah blah, but what really helped drive their improvements were providing the right incentives to their salaried physicians to help them want to order fewer unnecessary tests. There's a telling quote in the Health Affairs article... "It remains to be seen how VM’s cardiologists will respond to the projected margin losses from less frequent cardiac testing." Yes it does.

Along the same lines as my previous post about hospital reimbursement, non-salaried doctors tend to make more money when they perform more surgeries, order more tests and perform more services. Doctors aren't going to respond well to a lean process that eliminates unneeded services if it winds up cutting into their pay.

In sum, we need to redo reimbursement to give doctors incentive to practice medicine with less waste and more value. An improved system that truly puts the patient first and eliminates waste doesn't have to result in lower provider reimbursement if the model is corrected. Yes, there will be winners and losers in this new system. Maybe primary care doctors will see their reimbursement go up while oncologists or surgeons see their pay go down, but rewarding the true "value centers" in health care like primary care can bring us to the more efficient system we all want.

The First Sign

(I just realized I never actually posted this, but I think it's interesting, even if it is old news).

The first sign that the party may soon be over for health insurance companies came in the form of a recent article in the Wall Street Journal. As California Healthline reports, health insurers may be unable to continue raising premiums the way they have been for the past decade.

A little history is in order. In the early '90s, as HMOs began to dominate the market, cost was the single biggest factor driving health care decisions. This was a good thing in a way, because our country was in a mild recession and there just wasn't the money available to give everybody the healthcare they needed. Tough choices had to be made, and often that tough choice was to deny care. Sometimes, the choice was to deny needed care. So.... we had a public backlash against managed care. People still tell jokes about HMOs and how draconian they were, even though reality hasn't reflected that in at least ten years. Now, instead of denying care and restricting choice, insurance companies expand choice and approve almost everything. They don't want another story on the news talking about how they're denying needed care (that happens to cost $300,000) to a sick 10 year old.

Unfortunately, while this was going on, the government payors have a role as well. In the early to mid 1990s, the government was a very reliable payor for healthcare providers. Often they were overpaying for services, which meant hospitals could charge insurance companies a fair, and low, price. Then Congress passed the Balanced Budget Act of 1997 in an attempt to rein in Medicare spending. The result was hospitals started shifting more of their expenses to commercial payors to make up for the losses they were now incurring on services provided to government-covered patients.

So, health insurers were suddenly footing more of the bill for all heatlhcare services thanks to Congress's attempts to limit Medicare spending, while also being unable to limit spending by managing care more closely thanks to a blowout loss in their PR battles of the early '90s. How did they make money? By raising their premiums at absurd rates (and underwriting the hell out of their contracts to make sure they didn't cover people who had the temerity to be sick). Often over 10% per year. Inexplicably, most employers continued to pay these rates, mainly because they had no choice if they wanted to cover their employees.

And now comes the bad news from the Wall Street Journal:

59% of employers with fewer than 200 employers currently provide health insurance for employees, compared with 68% in 2000. The trend might prompt health insurers to consider reductions in price increases, but, "if they restrain price increases, or appear to, they get hammered by Wall Street," the Journal reports.

In other words, health insurers are stuck. They can't raise rates without forcing employers to drop out of the market. But they can't control spending because hospitals and patients have done such a better job in PR, that they're almost literally not allowed to say no. This is how the healthcare implosion will happen. This trend is just now becoming a serious problem, and it's only going to get worse. At this point, health insurers best bet may be to get on board with a Universal Healthcare program and hope they're one of the few payors the government picks to administrate it. And that's a good thing.

Lean Hospitals

I've been reading a lot about lean production process improvement over the past couple months. The lean model got its start in Japan where the geniuses at Toyota created the Toyota Production Process. A process is "lean" when it has no or very few steps that do not deliver value to the customer. A typical lean process improvement will look at every step in a process, determine which steps add value and which don't, and find ways to get rid of the steps that don't add value.

Since I learned about how lean can reduce costs while improving quality, it seemed to me like a natural idea to try to apply it to health care delivery. The leaders of Virginia Mason Medical Center in Seattle, Washington have done just that. Health Affairs recently published a Web Exclusive by Pham, Ginsburg, McKenzie, and Millstein analyzing Virginia Mason's results with lean. Their analysis has so many implications for the health care delivery system, I think you could devote an entire blog to "lean health care", but I'll try to touch on as many as I can.

To summarize, Virginia Mason looked at four main diagnostic groupings to try to lower the treatment costs and improve quality: 1) low back pain; 2) cardiac arrhythmias; 3) gastroesophageal reflux disease; and 4) migraine headaches. They did so many "revolutionary" things (i.e. things that would make sense in any production process but which are practically unheard of in health care), it's hard to list them all.

This post will be about just one of their improvements, with more posts to follow about others.

The article barely mentions it, but what struck me as the most innovative change they made was a "stop the line" mechanism ...in which staff immediately report instances of medical errors or near-misses."

Not to make too big a deal out of it, but this has been a main goal of malpractice reform for years and Virginia Mason just decided to do it and got all of their physicians and other clinicians on board to do it. Usually, hospitals are reluctant to have error reporting mechanisms like this because they don't want a paper trail documenting "negligence" which might come back to haunt them should there ever be a medical malpractice suit associated with the error. Documenting the error might be taken as admission of fault, so many hospitals take the approach that it's better not to document the error or admit a mistake at all.

Virginia Mason realized that this approach was hurting their quality and causing them to make more errors. Without this step, there's no opportunity to learn from mistakes and prevent them in the future. Imagine a production process without a feedback loop to deal with production errors! It would be madness, but it happens in health care everywhere.

So, good for Virginia Mason for treating errors the right way and even better for their doctors for swallowing their pride a little bit and admitting when they made a mistake or had a near-miss.

The next post will deal with why Virginia Mason might lose money with all of their improvements and why they might not.

Spend-down reform

Tucked in the end of John Holahan and Alan Weil's piece on Medicaid reform in Health Affairs (subscription required), they include this gem:

The current spend-down provisions for acute care in Medicaid require people to potentially spend a considerable amount of their income and assets before becoming eligible for Medicaid. Medicaid operates as a catastrophic plan with a potentially huge deductible, essentially requiring people to deplete virtually all of their resources. We believe that this should be reformed by requiring people to spend down to the income eligibility standard (100 or 150 percent of poverty) or to spend 15 percent of their income, whichever is less.

What a great idea. Spend-down is one of those random Medicaid policies known only by policy geeks and those cursed to work with Medicaid on daily basis. The way it works is this: The state determines the income levels people must be at in order to qualify for Medicaid. For example, in the Western region of Connecticut, if you are single, you can earn up to $574.86 a month and still qualify for Medicaid. But what about the people who earn $700 a month? Obviously they're still poor, but they're too "wealthy" to qualify for Medicaid. The spend-down program was created for those people. In spend-down, you have to accrue Medical bills up to the difference between your income and the Medicaid-eligible income level and THEN you qualify for Medicaid.

So let's look at our person making $700 a month in a six month spend-down program. We take their $700 monthly income and subtract the $574.86 poverty limit to arrive at the person's monthly "spend-down amount" of $125.14. You then multiply that $125.14 times 6 - because they've been awarded 6 months of eligibility - to arrive at the total spend-down amount of $750.84. This person, making only $700 a month has to pay for $750.84 in medical services before the state will pay a dime.

Granted, you generally don't have to pay those bills to qualify, but you do have to incur them and then you'll have those unpaid bills following you around. Spend-down works great if a person visits the hospital and uses $10,000 worth of services. The hospital will write off the first $750 of the claim and bill the remaining $9,250 to Medicaid. But what if they don't incur such high expenses? Will the hospital write off the first $750 of an $800 claim? And in some states, hospitals are required to hold patients responsible for those incurred charges and are not allowed to write them off.

For people who earn twice the poverty limit, they're being asked to accept liability on half their income before they're eligible for Medicaid. With spend-down, Medicaid is saying "sure we'll help you out, but you have to be good and poor before we do." It's almost punitive in nature, a bizarre form of torture in which the government is dangling services in front of the poor and daring them to use them, combined with the perverse incentive that if they're going to use services, they better use a lot to give the hospital incentive to write off their spend-down amount. Brilliant.

The author's suggestion to move to having a maximum spend-down amount of 15% of income is a much more just solution. In that case, a person making $1,000 a month would "only" have to pay $750 (15% of $1,000 times 6) over the six month period instead of the current $2,550.84. It's a simple, relatively cheap (the authors estimate the cost at $6 billion nationwide) solution that would improve the lives of tens of thousands of people. Which is probably why it will never seriously be considered.

Money Driven Medicine

I've begun reading Maggie Mahar's treatise on the ills of America's Healthcare system, Money Driven Medicine (currently featured over in "What I'm reading"). It is truly a sobering read and I'm only 60 pages in. Her mission seems to be to chronicle how the increasing corporate influence in the practice of medicine is making it less efficient, not moreso. This is definitely the single most frustrating thing to me about the healthcare system. In fact, the original name for this blog was "Health Efficiency", but eh, there isn't enough material to have an entire blog devoted only to this subject, so I scrapped it. In any case, what frustrates me most about healthcare in America is that everybody touts "competition" as this great thing, but what it usually results in is turf wars, resource hogging, and ridiculous inefficiency, and the people who lose out are the patients and the people footing the bill, i.e. employers and the government. So, you can imagine how gratifying it was to see a book that devoted so much space to that idea.

Yesterday Calfornia Healthline highlighted an article in Health Affairs which is along these lines. The study by Robert A. Berenson, Thomas Bodenheimer, and Hoangmai H. Pham describes how highly competitive service areas often see their healthcare costs increase, even though capitalism theory tells us that competition reduces costs. Correcting for other factors, they found that a new clinic would increase the total amount of money spent on the services performed at that clinic in that area.

For example, if a new heart hospital were to enter Cleveland, Ohio, a capitalist would say "this area now has competition for heart patients. All Cleveland area hospitals that offer cardiology services will have to reduce costs and improve quality so they can get more of the patients to their facility instead of the others. This will result in better, cheaper care for the patients." The problem with that idea as it applies to healthcare is that healthcare supply and demand do not conform to normal economic theory. In normal economics, we are told that demand drives supply. If there is large demand for a product, supply will be created to meet that demand. Unfortunately in healthcare, the suppliers in many cases are also the ones creating the demand by convincing patients they need a service they may not need at all. If you're a frightened patient with symptoms you don't entirely understand, it's not hard to imagine a knowledgeably and experienced doctor convincing you that the invasive procedure (that happens to profit the doctor handily) is the way to alleviate your troubles.

Some would say it is unfair of me to target doctors in this way. They're trying to give patients a better experience and they are still bound to the Hippocratic oath, so we should assume that their actions are ethical. Unfortunately, the results speak for themselves. If you build a new clinic, you need money to make it worthwhile.

Of course, what upsets me most is this nugget tucked in the middle of the article: "Hospitals in several CTS markets have expanded profitable service lines while seeking to reduce or eliminate money-losing mental health services." Thank God for capitalism. A thousand specialty heart hospitals, but no mental health center because "it's not profitable". These are the kinds of things that make me glad and depressed that I'm working in healthcare. Glad because it's such an important field and there is so much that needs to be fixed. Depressed because it is such an important field and there is so much to be fixed.

Fleecing

While I was waiting at the doctor's office on Monday, I came across a brochure for a particularly egregious medical plan designed to "save you money". The ARC Advantage Card. For only $20 a month, you get the privilege of a 25% discount off of billed charges! Wow!

Of course, what they don't tell you is that your average health insurance carrier gets discounts over 50% off billed charges and Medicaid often gets up to a 75% discount. And you don't have to pay the clinic anything to get those savings. The clinic gives them away just to get more business. So, I'm paying you $20 every month, even if I never visit a doctor, just for the privilege of getting a crap discount off of ridiculously inflated billed charges? Where do I sign up??

Odds are good that if you showed up with cash on hand, they'd give you the same 50% discount they gave to Blue Cross and Blue Shield without any kind of monthly fees. But why would the Austin Regional Clinic publicize that and refrain from exploiting a vulnerable population? That would be madness!

Are you insured?

I went to the doctor earlier this week with what I thought was a sinus infection. It seems I get a sinus infection every summer I've lived in Austin, and I thought this might be this year's. So, I tried to get an appointment with my Ear, Nose & Throat guy, which didn't work out because he was booked. I like going to him because I have complex sinuses, and he understands them very well because I've had so many sinus infections that he has treated. But, I had to go to my PCP.

My sinuses kind of freak me out because I have a history of getting polyps. The first was a real nasty one in high school that required major surgery to remove. Since then, I get a polyp every time I get a sinus infection. Fortunately, Nasonex spray, anti-biotics, and steroids taken in concert have always made them go away. Given my past, though, I'm extremely paranoid about my sinuses. Having a nasal polyp removed surgically is easily one of my most uncomfortable experiences, so of course I am loathe to repeat it.

Well, I went to my PCP, who was very reluctant to call what I had a sinus infection. It looked more like the trail end of my flu from the previous week than the beginnings of a sinus infection. But, my left nostril had been completely blocked for the previous day, which always makes me think polyp. I asked him if he was sure, and he said "well, I would be more sure with an x-ray." That made me pause, because those tests are remarkably expensive. I know, I've already had them twice in my life. I balked. He responded:

"You have insurance, don't you?"

Ladies and Gentleman, our healthcare crisis explained. I didn't need an x-ray, I needed him to look up my stupid nose and tell me if there was a polyp growing in there. Finally we got it sorted out, and there was no polyp. Yay. So I agreed to wait it out a week and see if things improved. Overall, I'd have felt more comfortable going to my EN&T guy, just because we've been over this drill so many times together already. But it all worked out. Sometimes it's just as hard being an informed patient as it is being an uninformed one.

The AMA and DTC Advertising

Right after I get done bashing the AMA for their stance on Universal Health Care, I'm going to throw a little praise their way. California Healthline reported yesterday that the AMA is trying to extend the period pharmaceutical companies must wait before they can start running direct-to-consumer (DTC) advertising for a new treatment. Also, they want pharmaceutical companies to wait for FDA approval before they can begin DTC ads. Doctors want this delay so they can become fully informed on new drugs before their patients begin requesting it based on commercials they see on TV.

Given that my main focus is mental health policy, DTC advertising is something I pay a lot of attention to. It's one thing if you're selling blood pressure medication on TV (either you have high blood pressure or you don't), but selling anxiety or depression medication is another thing entirely. It's well known that the purpose of advertising in the modern age isn't so much to inform potential customers of new information as it is to convince those potential customers that they need what you are selling. Then, once you've created that perceived need in the mind of the consumer, you give them what they need. How insidious to use this philosophy when selling drugs to treat mental illness.

We all have experienced times of extreme anxiety or desperate sadness. But at what point do those times of despair cross over into diagnosible mental illness? If you go by the commercials, the producers of DTC advertising for psychotropic drugs would have you believe that almost everybody could benefit from their wares. And that's the problem. You don't want psychiatrists or (worse yet) Primary Care Physicians inundated with requests for this or that drug by patients who are influenced by commercials that convince them that normal day-to-day life is a condition helped only by a drug. Giving doctors some time to get ahead of the information curve on these drugs would at least give them a fighting chance to avoid needless prescriptions.

The AMA could have gone the other way, realizing that DTC advertising probably sends quite a few patients (and thus money) to their members because doctors are the ultimate gatekeepers on the drugs we think we need. But they chose professional integrity in pushing for less DTC advertising.

Of course, none of this really matters as the last line of Healthline's article shows:

FDA spokesperson Susan Bro said that the agency believes a required delay on DTC ads for new medications likely would not "survive a constitutional challenge".

So it goes.