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Archive for February, 2009

It’s Unsustainable

by Jaan Sidorov

Health care reform is gaining even greater urgency thanks to a highly informative release of a Health Affairs web exclusive written by actuaries from the Centers for Medicare and Medicaid services. They’ve have two numbers that are driving reform: 2.4 trillion and 6.2%. The former is attracting a lot of attention. The latter isn’t. The former is big and makes the stimulus package pale by comparison. The latter sounds small. Don’t let that fool you, however because, of the two numbers, it’s the 6.2% that is really really scary.

The first number is the amount of money that will be spent on health care in 2008. That comes to over $8000 per person in the United States. As testimony to the huge size and strength of our economy, we can currently afford to spend that on ourselves every year. John Goodman in the prior posts notes one reason for our willingness to put up with the cost is because much is hidden.

Unfortunately, whether it is hidden or not, we can’t afford the second number. That’s the rate of spending growth that is projected over the coming years. It contrasts with the 4.1% growth projected for the gross domestic product (GDP – or the sum of all goods and services produced in the course of a year). The mismatch means that year over year, more and more of both our collective individual income will be spent on our own and others’ health needs. Right now, that is about 16% of GDP. It could grow to a total of 20% in less than 10 years.

6.2% is known as ‘trend.’ While us mortals think about absolute numbers, actuaries lay awake at night worrying about the rate of growth. Successful insurers recognize that increases in the rate of health care costs are part of the business. Their job is to predict those increases and advise what the health insurance premium should be. The DMCB is no actuary, but it bets the Fed’s actuaries are telling their bosses that this kind of trend is this.

According to the Health Affairs article, the number 1 and 2 drivers of the cost inflation is ‘medical prices’ and ‘growth in the use of services,’ which accounts for about 2/3 of the growth rate – not the aging of the population. Interestingly, the ‘administrative costs’ of private insurance are projected to continue to decline from over 13% to 12%, making it less likely that insurance company’s ‘profiteering’ can be blamed for our cost woes.

Now comes the hard part - where we see the difference between oratory and reality, bombast and bipartisanship, gimmicky delay versus the day of reckoning.

It’s called hard choices.

Health Care Cost: $8,160 per Person

by John Goodman

John Goodman is the President of the National Center for Policy Analysis

That’s $32,640 for a family of four, according to the latest Health and Human Services report. But average family medical bills are nowhere near that amount. Why? Because most of these costs are hidden. About half is hidden in the taxes you pay.

The burden of health care will become even more disguised if the Commonwealth Foundation and health advisors to Barack Obama have their way. They want to increase the hidden (tax) burden in order to limit the visible expense to no more than 10% of income [here].

Of course, they have it exactly backwards. We should limit everyone’s tax burden to no more than 10% of income and let people have direct control of everything else.

Research in Disease Management Meets the Real World. Both Are Better As a Result

by Jaan Sidorov

Many readers may recall that the DMAA took the lead in developing a ‘real world’ approach to evaluating the economic impact of population-based care management programs. Since prospective, randomized clinical trials are not reasonable in business settings and parallel control cohorts may not be available, the ‘DMAA approach’ allows for a pre-post design, including the cost trend of a ‘non-chronic’ population to predict what the cost would have been absent the intervention. It also recommends that the costs measured pre and post be generally based on persons who are ‘requalified.’

Confused? You don’t have to be:

The ‘trend of the non-chronic population’ is based on the observation that, from year to year, there is a baseline rate of health care cost inflation. If health care costs among persons without chronic illness climbs 10% per year, then a 9% cost increase in the disease management population from year 1 (pre) to year 2 (post) implies you saved 1%. It may be counterintuitive (versus relying on the trend among persons with chronic illness), but a lot of background work has shown this is a conservative and better approach.

The term ‘pre and post be based on persons who are requalified’ is also counterintuitive. In any insured population, there are persons in the pre or baseline year with one or more insurance claims for chronic illness care and then there are persons in the post or follow-up year with one or more claims for chronic illness care. The ‘requalified approach’ says that you are only allowed to include the costs of persons with active claims in the year of measurement. So, if a person with a claim for diabetes in year 1 (pre) turns out to not have a claim for diabetes in year 2 (post), that person’s costs are not used to measure cost in year 2. They are taken out.

Which is why a paper by DMCB colleague Soeren Mattke and colleagues (Seth Serxner, Sarah Zakowski, Arvind Jain and Daniel Bold) appearing in the latest issue of the American Journal of Managed Care should be of great interest. It not only is another carefully conducted study of the impact of disease management but it’s a good exercise in what you should look for when you read studies like this.

The authors used insurance claims data to assess the cost impact of unnamed vendor-owned case management, disease management, medical advice telephone line and wellness programs sponsored by two large unnamed employers. The employers were probably self-insured and the program designs were of the usual type, including HRAs and predictive modeling. Two year baseline costs ‘pre’ were compared to costs one year ‘post’ baseline and the programs’ own predictive modeling was used to statistically adjust for other factors that could have influenced the numbers.

So, now that you know about the outlines of ‘non-chronic trend’ and the ‘requalification’ method, you probably want to know about that too. The non-chronic trend was not explicitly mentioned by Mattke et al; rather they used a ‘nonpurchased trend.’ It also appears that there was not a requalification but an ‘intention to treat’ approach that probably means all persons eligible in year 1 were included in the year 2 cost analysis.

Bottom line? The programs in aggregate were associated with a non-statistically significant $13.75 increase in the per member per month (PMPM) claims expense over what was expected, based on (the ‘non-purchased’) trend. Case management dropped costs by $1.35, disease management increased them by $8.63, the advice line increased them by $21.71 and wellness increased them by $20.14; only wellness was statistically significant and it went in the wrong direction. Ouch.

This is a first-rate study for the following reasons:

1. This probably started out as a standard inquiry into the performance of a disease management vendor for a purchaser. It was disciplined, methodologically rigorous and turned out to be not that far from being good enough for peer-review publication. It marries the real world and evaluation science. Bravo. The disease management industry has come a long way.

2. It offers up a template that could be used by purchasers to economically assess the impact of their wellness, nurse-advice lines, disease management and care management programs. Yes, we can debate the merits of the trend that was used and whether the lack of a requalification was important (and it probably is), but that can be swapped in or out depending on the preferences of the purchaser and its actuaries. Dr. Mattke and colleagues have given purchasers a public-domain benchmark on how these analyses could be conducted.

If you work in the disease management/population care management arena, do you think you don’t have the time/resources to bother with publication? If you perform an adequate evaluation, you should be 90% there. The other 10% is the cost of doing business.

3. Think we’ll ever get to a standard methodology to assess disease management programs? Think again. As testimony to this, Mattke et al strengthened their paper by conducting other analyses that had their own merits (and didn’t really change the overall conclusions).

4. Don’t generalize the findings from this single study to the entire industry. Other purchasers are discovering savings, or they wouldn’t be buying into these programs. The conclusion is not that disease management doesn’t work, but that more DMAA members need to publish their findings. And by the way, in addition to quibbling over the methodology, we don’t know enough about the study’s employee population or their insurance benefit design or about how the disease management programs worked.

5. However these disease management programs worked, it would appear that the package of interventions purchased by these unnamed employers did not give them their money’s worth. Maybe the vendor should be fired and a new RFP should be issued with the warning that another analysis based on the methodology above will be used to assess their performance next year.

Hopefully, that will be shared in a peer-reviewed setting.

More about Stimulus

by jingemi

I feel I can now give an opinion on the final version of the stimulus. First, will it create jobs right away? It will not. However, I never felt Health IT was stimulative in nature but rather an investment. It will yield jobs and better healthcare in the future.

However, the Health IT investment proves addresses alot of my concerns. It provides funding for education for Health IT workers to fill what is sure to become a skills gap. More importantly, it partners rather than smothers the private sector. It utilizes two committees to create standards and policies, much like the Pro(Tech)T Act rather than the Stark Act. So the private sector will have a voice in shaping policies.

Finally, there is a line that mentions the creation of data banks. Specifically, banks of patient data could be used (with consent of patients) for public health and other research. This aligns with many large employers such as Intel and Walmart have been attempting to do to evaluate the cost-effectiveness of healthcare. When used in this way, data banks could be the foundation of pay-for-perfomance funding of healthcare. Second, with patient consent, pharamceuticals could use data for clinical research purposes. Not only would this increase the pharmaceutical pipeline in the U.S. but also give patients better access to experimental drugs. Ironically, these databanks are similar to something that Sen. Brownback proposed several years ago.

So, the stimulus is great step for Health IT. However, I hope that some of the controversial items do not overshadow this achievement.

Unintended Consequences for Health IT

by jingemi

Two things have transpired in the last several weeks: the stimulus passed and former Sen. Daschle withdrew as HHS nominee. I think that what we in the Health IT community are not realizing is that these events are related and affect us. The purpose of the stimulus is to create jobs. Although Health IT, specifically the NHIN, is a good investment. The immediate job creation value is dubious. We simply do not have a workforce that is trained and ready to move forward.

There is a more presssing problem. Alot of discretion is given to the HHS Secretary and the Director of the Office of the National Coordinator. With the delay in appointing a HHS Secretary (and lower positions like ONC Director), the immediate distribution of money is jeopardized. However, if resources are not distributed immediately, there is the potential that Health IT may be deemed a failure through the lens of the stimulus.

This could jeopardize future funding and appropriations.

Website Helps Patients and Physicians Determine Fair Healthcare Pricing.

by Martin Trussell

Jeffrey Rice, MD, JD, trained at Duke University as a radiologist, but while still in residency his career took an atypical turn. Rice got involved in the project of linking the Duke University Health System with an insurance company to put together a managed healthcare plan.

That experience caused Rice to become interested ways of helping consumers learn how to talk about the quality of medical care that they received. That led to the development of CareSteps.com, a technology company that was eventually acquired by Healthways, the country’s largest disease management company.

With two successful company launches under his belt, Rice said he realized something about healthcare that had not been clear to him before. He said he began to understand that “when healthcare providers did not complete on price, they also didn’t compete on quality either”.

Rice said that the obvious examples of heath care providers competing on price are those who are generally not compensated through insurance plans such as cosmetic and lasik eye surgeons. Rice said that these two areas of medicine compete on price which also forces them to compete on quality.

So, Rice reasoned, if we can get providers to compete on price, it just might also raise the standard of care. Out of this line of thinking came HealthcareBlueBook.com, a free online guide to fair health care pricing.

Rice said, “If you pay for your own healthcare, have a high deductible or need a service your insurance does not fully cover, we can help. The Blue Book will help you find fair prices for surgery, hospital stays, doctor visits, medical tests and much more.”

The concept is simple, just enter your zip code and the type of physician’s visit or medical procedure that you need and the Blue Book will return the “fair” price for that service in your area.

For example, enter Colonoscopy (no biopsy), and the zip code 66210, and the Blue Book will return the following prices for each of the components of the procedure:

Physician fee: $476

Facility Services: $373

Anesthesia Services: $439

Rice said that the pricing is based on a mid-level price that a typical Preferred Provider Organization (PPO) would pay for the service after taking a discount from billed charges.

“Heath care pricing has a problem,” Rice noted. “Providers give their best prices to their worst customers. The lowest discounts are given to health plans that require the provider to do a large amount of paper work and then wait for reimbursement. The Healthcare Bluebook is a way for consumers and providers to quickly determine what a fair cash price would be for any particular service.”

Rice said that since the Healthcare Blue Book was released in early January, he has received very positive feedback from consumers and providers alike. “We know that people are using the site both before and after obtaining medical services.”

Rice said that he has also received interest from large employers who have embedded the Healthcare Blue Book into the benefits portals that their employees access for healthcare information.

Another group showing interest in the website are physicians who view the site as a potential source of new patients who are willing to pay cash for services if they are able easily negotiate a discount from full billed charges. The Healthcare Blue Book provides an easy an independent way for both the provider and the patient to determine a fair price.

Rice said he is already working on new ways to use the data and to create tools that will push this information to consumers at the time they need the information most. In the meantime, Rice still hasn’t gotten around to starting that medical practice.

Health IT after Daschle: Phil Bredesen

by jingemi

This week I have decided to discuss what we cold expect from potential replacements for former Senator Daschle. On my blog, www.healthitpolitics.com, I talk about the Governor of Kansas. Here I discuss Phil Bredesen, Governor of Tennessee.

Healthcare is a signature issue for Gov. Bredesen. He focused mostly on Medicaid reform and covering the uninsured. His first attempt at reform of Medicaid, (TennCare) included full enrollment but limits on benefits. His alternate reform included full coverate for children but some reductions for some adults. He also has focused on stamping out fraud, having managed care organizations assume more risk, removing legal constraints on reform and he has pushed for the use of Health It for disease management and cost-reduction.

He also created CoverTN to provide converage to the uninsured. This program includes some prescription drug benefits, programs for small businessess and a high-risk pool for sick individuals.

So what can we expect from “Secretary” Bredesen. I think he will agree with President Obama’s idea of coverage for everyone. However, I think Gov. Bredesen also believes that everyone cannot get everything in terms of coverage and there will need to be limits. So the President Obama’s idea of citizens having access to Congress’s health plan may not come to fruition. There also in another irony: the high-risk pool for sick individuals was actually part of John McCain’s Healthcare proposal! Based on his experiene with legal constraints, I also think that Gov. Bredesen may advocate tort reform.

In terms of Health IT, Gov. Bredesen seems to view Health IT as a tool, a means to end, rather than an end in and of itself. Since Tennessee took part in the NHIN, we can expect authorization and funding of the NHIN. However, I think all Health IT funding will have to be justified with results.

As I said in my other blog, the idea of a Governor in charge of HHS is reassuring. The experience of a governor provides insight into delivering healthcare results while balancing budgets.

CIGNA Uses Social Networks to Teach Health and Supply Clean Drinking Water.

by Martin Trussell

drinking-waterI recently had the chance to catch up with Karen Kocher, Chief Learning Officer at CIGNA, and asked her about how the large health plan was using social networking websites like Facebook and Twitter to engage their members to become healthier.

“CIGNA has been doing quite a bit,” Kocher said, “to educate people to manage their own health.” She noted that CIGNA has made use of social networking websites like Facebook, Twitter, and Myspace to help get people to be more aware of their own health and to convey a CIGNA brand image that is more consumer-focused and personal.

“CIGNA has evolved into a health service company, and an important part of our service mission is to help people better understand and manage their health,” Kocher said.

To help accomplish this overall communications strategy, Kocher said, that CIGNA has used several social networking sites to draw visitors to a web-based game that allows winners to provide a full-day’s supply of clean drinking water to a child in a developing country. To win, one only needs to answer correctly three questions related to health and/or health insurance terminology.

When I played the game, I found that I could answer most of the questions easily enough on the first try, though I did miss a few. But, what’s more interesting, is that I felt myself compelled to keep playing the game a racking up more and more days of clean water for the children.

It seems that others have felt the same way. Kocher said that the program began in September 2008, and has exceeded expectations by over 400%. To date, 56,756 days of water have been donated meaning that people have answered correctly over 150,000 questions. Also significant is that 85% of the traffic came from Facebook and other online referrals.

“Phase I of our program, Kocher said,” was intended to engage people in a fun and meaningful activity that allowed them to learn more about health. Phase II, which will launch in 2009, will be designed to build on that knowledge and bring in the wealth component.”

By the “wealth component,” Kocher is referring to an effort to help educate people about the cost of healthcare and to begin to engage them in learning to make better decisions about how they spend their health care dollars.

In the meantime, I am headed back to the Water Challenge game to see if I might be able to add a few days more to the supply of clean drinking water. Who knows, I might even learn something while I am there. Join me at: www.itstimetofeelbetter.com.

Launching the World Health Care Congress’ First-Ever Military Health Summit

by jgruen

First, I’d like to thank to the World Health Care Congress for the opportunity to participate in their blog community.

This year the World Health Care Congress is introducing the first-ever Military Health Summit. It will bring together leadership from across the Military Health System to examine two key questions: Firstly, what can the Military Health System (MHS) learn from the best practices and leading organizations in the commercial sector? And second, what can the commercial sector learn from the advances, including research advances and extraordinary technologies in the combat theatre, which have been developed in the military sector?

To kick off what I hope will be an ongoing blog conversation (and to hint at the type of conversation to expect from the Military Health Summit), I’d like to bring to your attention two interesting facts. The following is the well-known graphic of national health expenditures as a percentage of U.S. GDP:

National healthcare expenditures are doubling every 5-7 years and are projected to be around $4 trillion by 2015. The situation is no different for the MHS. MHS budget doubled from 2001-2007 from around $19 billion to $38 billion. MHS total budget is projected to be $65+ billion by 2015. At this rate, national health expenditures could be greater than 50 % of GDP within our lifetimes – clearly unsustainable. The interesting question is: when do traditional measures of a system’s sustainability indicate that the tipping point has been reached?

The following graphic shows the net income for the U.S. banking industry for the years 2004-2008:


Note that net income measures were stable until the first quarter of 2007 and then precipitously drop off. This is an example of an unsustainable system whose key performance measures remained relatively stable until very close to the collapse of the system.

In the spirit of legitimate inquiry into the degree of urgency needed for both individual players in the system and for policy makers, let me raise the following question: Are current “healthcare reform” efforts sufficiently addressing the long-term unsustainability of the system? If not, what measures of the system’s performance would most likely provide the earliest warning signs of significant impending disruption?

The good news is that we are observing an extraordinary milieu of innovation in healthcare services and technology, which combined hold the promise for “changing the game” in the industry and potentially averting these and other trends. In future blogs I’ll explore the implications, including how providers, payers and others in both the commercial and Military Health sector can best respond to upcoming challenges. In the meantime, I’m looking forward to your comments and dialog.


Lessons Learned from DOD-VA Initiative

by jingemi

On my blog, Health IT Politics (www.healthitpolitics.com), I talk about the perils of trying to do too much too fast in terms of the stimulus package and health IT. I think a GAO report on DOD and VA’s initiative to share health information electronically demonstrates the need for careful planning. It also provides some lessons for those of us planning Health IT projects.

The thesis for the report is that DOD and VA needs to develop a plan with performance-based objectives for information sharing. Milestones should be “results-driven”, that is, measurable and quantifiable. Special emphasis must be placed on interoperability, the linchpin of health information sharing.

So what are lessons learned? Basically, prior to implementation the Health IT plan should include the following:
-Medical Focus: what is the medical domain(s) of the information exchange? Examples include prescriptions, allergies, lab records, etc.
-Interoperability: What standards and subsequent technology and certifications are needed to exchange information?
-Architecture: What IT architecture is required?
-Performance measures: How do we determine success at given phases of implementation and operation?