BLOG Medicine

August a Flurry of Activity

I have to apologize for the abrupt shortage of articles in August, but the month was an absolute flurry of activity, behind the scenes.

In addition to maintaining BLOG Medicine, we operate a parent company (Maynard & Company) that provides healthcare consulting and management services.  Thanks to the steady increase in clients throughout New England, the services provided through Maynard & Company have transitioned to a new entity called Origin Health Group, recently taking on clients in the additional regions of the Mid-Atlantic and Deep South.  The stretch goal for 2008 is for Origin Health Group to have a presence coast-to-coast.

Also, after 11 months of brainstorming and hard work, we've created MedBay, the on-line auction community for healthcare equipment and services.  MedBay is wrapping up testing and is targeted for general release October 1.  Given the heightened awareness about health insurance and reform, MedBay will provide the ideal community mix for patient, provider, and purchaser.  I think MedBay will offer an exciting and attractive alternative to the current more restrictive and cost-prohibitive approach to paying for healthcare.  We'll be providing more information over the next few weeks as we approach our "go-live" date.

Finally, BLOG Medicine is evolving.  Over the next few months, BLOG Medicine will integrate into a larger blog platform that will include a mix of topics written by contributors from throughout the blogosphere.  Although my dedication hasn't changed, due to the other time commitments, my BLOG Medicine entries will now be biweekly on Mondays and Thursdays.  Bloggers interested in contributing to BLOG Medicine and/or the larger platform (including suggesting a name for it) are welcome to comment/contact me here.

Exciting times, indeed.  Expect BLOG Medicine to be back on schedule (and topic) with today's submission and watch for appropriate updates regarding MedBay over the coming weeks and [Insert New Blog Platform Name Here] over the coming months.  As always, I'd like to thank the readers of BLOG Medicine and especially those who have taken the time to comment -- we're nothing without you.■

Health Insurance Benefit Costs by Region

According to March 2007 data released by the U.S. Bureau of Labor and Statistics, among the four regions of the United States, the average cost per hour to employers for health insurance benefits ranges from $1.59 to $2.04.

The Compensation Cost Trends program reports that the proportion of total compensation represented by health benefits was 6.7 percent in the West, 6.9 percent in the South and Northeast, and 7.8 percent in the Midwest.

Nationwide, the average cost for health benefits was $1.83 per hour worked, accounting for 7.1 percent of total compensation.■

Health Care Top Campaign Issue

Robin Toner's article in today's New York Times reiterates the importance of the health care issue in the 2008 Presidential Election.

In case anyone had forgotten, according to the Kaiser Family Foundation, premiums for family coverage have increased some 87 percent since 2000 and the number of Americans without health insurance has grown from 37 million when the Clinton Administration first confronted health care costs to 45 million, according to recent Census Bureau estimates.

Unfortunately it does appear that the issue is being treated to partisan politics with Democrats tending to side along the lines of government-mandated care and Republicans shooting for free-market solutions, but at least both parties seem to agree that this issue won't tolerate being ignored.■

Regional Differences in Costs and Care

The Dartmouth Atlas of Health Care, a project run by the Center for the Evaluative Clinical Services at Dartmouth Medical School, works to accurately describe how medical resources are distributed and used in the United States.  The variation in quality and cost of health care is a result of many complicating factors, but it's geography that determines your chances of undergoing certain surgical procedures, how often you visit the doctor, and whether you die in a hospital or at home.

For example, Medicare patients living in New York undergo knee replacements at a rate of 5 in 1,000 people.  In Ohio, the number rises to to 8 in 1,000 while the national average is 7 in 1,000.  Female Medicare enrollees who receive a diagnosis of breast cancer have three times the chancing of having a mastectomy in Rhode Island, where the rate is .9 in 1,000, as they do in Vermont, where the rate is .3 in 1,000.  Per year health care for the average Medicare patient costs $5,581 in Maine, $7,804 in Massachusetts and $7,225 in Florida.

In a recent New York Times article, Stephanie Saul states that such differences cannot be explained by rates of illness or cost-of-living deviations.  While some variation depends on personal preference and the advice that doctors give about risks versus rewards, much of the deviation, according to Saul, appears to be caused by "supply sensitive care," where the number of doctor visits and hospitalizations expand to the system's capacity.

In the article, Dr. Elliott S. Fisher, who studies healthcare economics and is a member of the Dartmouth research group identifies the way doctors and hospitals were paid as part of the problem.  However, patients in high-cost areas are not necessarily getting better care, but Fisher did find higher mortality rates in higher-spending regions.  Higher risk of infection, increased system complexity and resultant medical errors appear to be the cause.

An interesting solution offered by Saul involves an increase in primary-care doctors, citing research that indicates that costs go up and quality declines with increased physician specialization.  In fact, policy makers are noted as seeking ways to increase financial incentives for becoming a family doctor, internist or pediatrician, possibly by raising the payments doctors receive for patient evaluation & management (E&M) or creating a new reimbursement category for coordinating care.■

Health Costs Push Companies to Set Targets for Workers

In a recent New York Times article, Tim Race warns us that the nation's employers are aiming to get their money's worth from ever more expensive medical insurance by playing a bigger role in managing and monitoring their workers' health.

Race focuses on four such employers: Intuit, BB&T Corporation, Textron, and Carlson Companies.  The employer's programs vary from voluntary medical questionnaires, to blood draws and fitness tests.  Monitoring is frequent and often detailed, and while rewards for participation focus on cash and merchandise incentives, premium discounts, and health coaches, medical monitoring by employers has raised privacy concerns.

The employer-based health programs are meant to comply with federal privacy and nondiscrimination provisions such as the Health Insurance Portability and Accountability Act (HIPAA) and Americans with Disabilities Act (ADA), and, so far, such protections have been adequate for keeping ethical bosses from using medical data when deciding which employees deserve raises or promotions and which should be put on probation or fired.■

Who Pays for Efficiency?

Steve Lohr wrote in the 11 June 2007 New York Times that the price for lowering the costs of care is more spending with every cost-saving product or service requiring an upfront investment -- and none of it's going to be cheap.

With a $2.1 trillion annual health care bill, health care spending is the equivalent of $7,000 for every man, woman, and child in the United States and, with our fragmented healthcare economy, the path to savings often has contradictory incentives.  Lohr's article focuses on four such cost-saving efforts: computerized health records, specialty hospitals, new technology, and preventive care.

The dollars and cents pay off for computerized health records, it seems, benefits insurers more than doctors.  Lohr writes that about one-fourth of primary care doctors use electronic health records, but only 5 percent of them are in offices with five doctors or fewer (about half of all doctors' practices).  According to a study by the Center for Information Technology Leadership, physicians get only about 11 percent of the savings from electronic health records, making computerized health records a big cost with no clear payoff.

The value found in the use of specialty hospitals, specifically specialty cardiac hospitals, has also become suspect with a recent study (subscription required) published in a March issue of The Journal of the American Medical Association reporting that in regions where cardiac hospitals had opened, the overall rates of angioplasty and open-heart surgery more than doubled after four years, compared to regions without specialty hospitals.

In new technology, Lohr focuses on stents, mesh-like tubes used to keep arteries open after blockages have been cleared, and an expensive new pump for the heart-lung machine used during open-heart surgery.  While the number of open-heart, coronary-bypass surgeries each year has dropped by more than 100,000 since stents became popular in the mid-1990s, more than a million stent procedures are now performed each year.  The result of the stent-first approach has been, Lohr writes, that patients who later require bypass surgery are often older and less healthy than the typical open-heart patient years ago.  Post-surgery kidney failure has consequently increased sharply.  One answer to the kidney problem is a new pump for the heart-lung machine that costs $2,000, about 10 times more than conventional pumps, but potentially can save up to $2 billion in hospitalization and treatment costs.

Dr. Dean Ornish, a clinical professor of medicine at the University of California, San Francisco, and founder of the Preventive Medicine Research Institute, supports preventive medicine as the best way to improve health care and contain costs.  Because preventive care programs cost money upfront, few insurers pay for it, but preventive care programs can cut overall treatment costs to insurers by 30 percent or more, according to Ornish.  In 2006, Medicare agreed to cover a dietary program designed by Dr. Ornish.

Despite healthcare reformers saying that treatments are justified when there is evidence of sound science and financial logic, according to studies done by researchers at Dartmouth College, that threshold doesn't seem to be the standard.  Jonathan S. Skinner, an economist at Dartmouth, is quoted as saying, "you need to move toward well-defined clinical guidelines based on medical evidence and better information throughout the health care system."  While the attempt to build consensus on healthcare reform seems to be a minefield of difficult choices, the cost of the alternative has simply grown too great.■

Is Europe's Health Care Better?

In the 13 June 2007 issue of BusinessWeek, Kenny Capell has written an article that has declared U.S. health care a disaster, Britain's subsidized NHS little better, and France's hybrid system working, but facing rising costs.

The key to France's success, Capell writes, is that it relies on a mixture of public and private funding, but, unlike Americans, every French citizen has access to basic healthcare coverage through national insurance funds, contributed to by both employers and employees.  Some 90% of the French population also buys supplementary insurance to provide benefits that aren't covered, with the government paying for the unemployed unable to gain coverage through a family member.  As a result, France's 62 million citizens are healthier than the U.S. population, but per capita spending on health care is roughly half as much.

A combination of higher taxes and price controls, contribute to the success of the French system.  Government and the majority of private insurers reimburse according to a national fee schedule, prompting more than one-third of French doctors to charge extra, but, on average, French doctors earn approximately one-third the salary of their U.S. counterparts.

The French system, however, is facing financial challenges with rising costs and an aging population.  France, already facing a $5.2 billion deficit, warned that this year's healthcare inflation is running higher than projected.  Britain's forecast is worse.

Having provided universal coverage for nearly 60 years with generous drug benefits and despite the government having poured some $81 billion into the National Health Service (NHS) over the last six years, in 2005, 41% of British patients waited 4 months or longer for elective surgery, annual physicals are not insured, screening programs are less generous than in the U.S., access to life-extending new cancer drugs is constrained (Britain now has one of the lowest five-year survival rates for cancer, overall), and access to advanced, gene-based medicine is not much better.

The startling conclusion, according to Capell, is that neither the French nor the British system can overcome the stark math of cost-benefit analysis, and that money buys good health -- on both sides of the Atlantic.■

Healthcare Cost, BIDMC and Strategy

A recent posting by Paul Levy, CEO, Beth Israel Deaconess Medical Center (BIDMC), Boston, on his blog asked some questions about strategic planning that I, and an enthusiastic number of others, responded to.  (Note to self: remember to better identify yourself, BLOG Medicine, or Maynard & Company, Inc., as appropriate, when commenting in blogs.)

What had prompted Paul's question was a recent post by Charlie Baker, President and CEO, Harvard Pilgrim Healthcare on his blog that would seem to reinforce the idea that payors reimburse based on market power rather than quality clinical outcomes.  A number of respondents, in their own way, mirror or support my own response, including, interestingly, that of Andrew Dreyfus, Blue Cross Blue Shield of Massachusetts.

Regardless of what payors may say, market power currently drives reimbursement and hospitals should plan accordingly.  Evolution of reimbursement methodologies that incorporates quality initiatives and healthcare transparency can be seen, but this change is slow and seemingly made only grudgingly.  Strategic plans, however, are a dynamic document and BIDMC can effectively incorporate none, some, or all of the suggested responses to increasing healthcare costs, decreasing revenue, and questionable clinical outcome reporting knowing that the plan will change again a year from now.■