Managing Managed Care

Our inequitable, inefficient, oftentimes uncaring health care "system," revealed. -- Jeffrey G. Kaplan, M.D., M.S.

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Cost--the Elephant in the Room

The U.S. Medicare's financial health is in dour straits. Worse, it can no longer keep up with the demand spiral, especially as the population ages and pension benefits skimp on health care coverage. "Some would replace it with vouchers that seniors could use to purchase private coverage. Others suggest upending the current payment system by inverting volume-based incentives, offering instead profits to organizations that limit utilization."  Experience has amply proven that these suggestions are Draconian, but not remedial. OTOH, "Canada's road-tested cost-containment methods offer an alternative.”

Why, for instance, is Canada appreciably more cost-efficient than us with the same of better results?

 Drs. Himmelstein and Woolhandler (Archives of Internal Medicine*) answer:

1) Primary care is emphasized: About 51% of Canada’s physicians are primary care practitioners compared with 32% in the U.S.

2) Single payer: Canada’s government-based, single-payer system has simplified the administration of health care while holding administrative costs to 17% of the overall spending compared with 31% here.

3) Pooled purchasing power: Canada’s provincial plans have used their concentrated purchasing power to bulk purchase while limiting drug and medical device prices.

4) Global budgets: Canadian hospitals receive prospectively determined global operating budgets, which, in and of itself removes incentives to provide unnecessary care. Indeed, in accountable care organizations, capital costs are not folded into the global budgets.  Rather, they are distributed separately after review by a rigorous health-care planning process. "Canadian hospitals cannot use operating surpluses to fund new buildings or equipment but must request separate capital appropriations. Hence, they cannot expand by overproviding lucrative services, gaming the payment system through upcoding, avoiding unprofitable patients, or cost shifting."

For those concerned that Canada’s health system compromises quality as it controls costs, the authors share that in the last three decades, life expectancy there at age 65 is longer and has improved faster than in the U.S.

* Himmelstein DU, Woolhandler S. "Cost Control in a Parallel Universe: Medicare Spending in the United States and Canada."
INTEMED. 2012;():1-2. doi:10.1001/2013.jamainternmed.272. (Pub online, Annals of Internal Medicine; Oct. 2012)

"The current system is a mess because payment in the private sector is related to competition, contracts, etc. One gets paid a different amount by each. A single payer would have lower per episode payment, but would cover all and make billing simpler and more reliable."

Leemore Dafny, PhD Harvard Business School Namita S. Mohta, MD NEJM Catalyst;  "New Marketplace Survey; What's Next for Payment Reform?"  Insights Report September 2017 

Spending More On Healthcare in the U.S. Getting Less

It's old news, importantly repackaged by the Commonwealth Fund —We spend more on health care than 12 comparable, industrialized countries but, we seem to get less for it, i.e., our per capita cost is $8 grand compared with, for example, "Norway and Switzerland, spending a little more than $5 grand.  Our charges* are ridiculous and the variation in charges unexplainable and, comparent with elsewhere, intolerably high.  We, however, provide less doctor consultations; we have less hospital beds, shorter hospital stays, variable quality and our results, are not outstanding, if better at all.  But, we pay dearly for medication and medical services, and our love affair with expensive technology—'Forget about it'—it has no bounds. The prevalence of obesity in our country is ponderous, while our population is clearly more sedentary.

D. A. Squires. "The U.S. Health System in Perspective: A Comparison of Twelve Industrialized Nations," The Commonwealth Fund, July 2011.

R. Zimlich. "U.S. Outspends Other Industrialized Nations on Healthcare With Mixed Results." Medical Economics  May 23, 2012

Health care's unaffordable, worse its cost is incomprehensible.  See the TIME magazine special report (38 pages), Bitter Pill: Why Medical Bills are Killing Us by Steven Brill where he deftly drills down the costs (or rather the "charges") for care.  This report will make your blood boil! Also, his 3:38 min video, there is also well done).  Will the ACA fix these problems?  Well, first know that the US also has "among the highest rates of potentially preventable deaths from asthma and amputations due to diabetes, and rates that are no better than average for in-hospital deaths from heart attack and stroke."                                         Monegain, Healthcare IT News (5/3/2012)

Worldwide, 15 million premature babies are born each year.  In the first country-by-country global comparison of premature births, just released by the World Health Organization and other agencies, the U.S. had the 7th worst performance among countries, a ranking pathetically similar to developing countries, "worse than any western European country, …. Japan or the Scandinavian countries." And, the percentage is up 30% since 1981. Why? It's the result of a combination of factors—"many pregnant teenagers and many women over 35 giving birth …. obesity, diabetes, high blood pressure or smoking habits."              McNeil The New York Times (5/3/2012)

What we spend on health care in the United States "can't be explained by our aging population, our overuse of doctors and hospitals, our wealth, or our rates of smoking." Instead, "the Commonwealth Fund concludes that high health care prices are the major culprit. US patients pay more to doctors, drug companies, and hospitals than patients in other countries. Other possible factors are our high rates of obesity and a possible tendency to overuse a few particularly expensive procedures"

Sanger-katz, the National Journal (Subscription Publication, 5/3/2012

The unrelenting rise in medical expenditures has nearly broken the back of so many consumers, "outstripping any growth in worker's wages" and net buying power. It is this increasing disparity that has made the U.S. less competitive in the world market.

See "Health Insurers Push Premiums Sharply Higher," NY Times, pub. Sept. 27, 2011., esp. the graph,

Why has it been so difficult to improve the value of care?  The short answer is that the incentives are not well aligned in health care to affect quality, cost and access, simultaneously.

Victor Fuchs, the 'Dean of American Health Care Economics' describes the "elephant in the room" as:

“If we solve our health care spending, practically all of our fiscal problems go away....[And if we don’t?] Then almost anything else we do will not solve our fiscal problems.”

Knotty Challenges in Health Care Costs”  NY Times, March 5, 2012


Cost, read: affordability — the sticky widget, the main thing of health care reform, what needs to be addressed even as we tackle the tension of "medical need," "quality," "access" and "cost-efficiency," i.e., affordability. "Accessibility" is a matter of redistribution of practitioners and that includes midlevel practitioners like physician assistants and nurse practitioners.  And, that will occur when primary care gets adequately reimbursed and the incentives are realigned.  Quality is a bit harder to manage, but the short answer here is to reduce unwarranted variation.  Nevertheless, the final arbiter in quality is and will always be outcome measurement and management–who does what right, where and when?

Quality, cost and access--These factors are critically linked in both theory and in reality.  The Value Equation shows how they relate to each other and to you.

For instance, if doctors are paid fee for service, we're paying for piecework and the economic incentive in piecework is to generate pieces.  [Caldwell Esselstyne, MD Clavarak, NY, circa 1960]  If doctors are paid prospectively (e.g., capitation or for a defined episode of care), they may discourage services that, so to speak, they perceive comes out of their pocket.  If patients have to pay out of their pocket and they have limited cash flow, they may make compromises - delay care, get the cheaper drug or not get that drug.  Make patients informed consumers? It doesn't work even for doctors who are patients.  In one's hour of need, are you going to be sifting through comparative statistics in order to decide which test, doctor or emergency room to use?  

In "Study: Pateint-Centered Medical Home quality, costs linked." Modern Medicine June 26, 2012, care was evaluated in six subscales as follows:

  1. access/communication,
  2. care management,
  3. external coordination,
  4. patient tracking,
  5. test/referral tracking, and
  6. quality improvement.

The Point is Not That Health Care Can Be Compartmentalized Or That There Are Six Areas of Interest, But Rather It Is That To Reform It Means Managing the Care Well, Rewarding Well That Which Works and Not Rewarding That Which Does Not.
  • First, the bad news from the field (Click here)
  • How to design and support health care systems that work....

Health care reform depends on having accessible and well-integrated primary care. Captured by the phrase, “medical home,” that is its cornerstone and it must be designed and supported to meet the health care needs of patients across all settings—specialties, labs, imaging, specialty services and hospitals.  I am not suggesting that the primary care physician (PCP) dictate to specialists.  Rather, they should coordinate and follow-through.

Then there’s the matter of payment reform – PCPs are underpaid.  It should be clear that the disparity between their payments and that of specialists is causing supply problems in all but the most urban environments.  In addition, financial incentives must be aligned so that the savings that result from reductions in costs and improvements in quality inure to those practitioners who do a better job and the obverse—those who do a worse job in terms of cost and quality have some level of accountability for that poor performance. 

As stated by Dr. David Blumenthal:“One stakeholder's cost is another's revenue or desired service; to support the reduction of unnecessary or marginally useful services, financial incentives must reward rather than punish such behavior, since it affects all payers, providers, and patients, not just Medicare.”  He is discussing incentive alignment when he adds, "care coordination and cost management depend on having accurate, timely, and actionable information in real time at the point of decision-making. The availability and effective use of health information technology are therefore essential to improving health system performance for high-cost patients.” 

Nevertheless, the translation of data into information is not easy, even with the advent of the computerized patient record (which is still far from universal – about 3/5ths of practitioners are 'on board.').  In brief, information technology requires: sharable, protected, and better quality information – evidence-based observations of care provided in real-world settings, a longitudinal perspective, and episodes of care, acuity or case-mix adjustments (for apple-to-apple comparisons made available as non-prescriptive guidelines at the point of contact with the patient).

David Blumenthal, M.D., M.P.P. “N Engl J Med 2012; 366:1953-1955 The Genius of the Mandate," we are told the individual mandate was a stroke of genius; it is getting us over two obstacles at once: 1) The "power of the interlocking interest groups — insurance companies, physician associations, pharmaceutical companies — that potentially stood to lose money and power in a comprehensive reform." 2) The "price tag of a universal health care entitlement."

He references, for example, reforms conservatives might offer such as Capretta's and Moffit'sproposal in National Affairs — "a tax credit available to people whose employers don’t offer insurance, better-financed high-risk pools and stronger guarantees of continuous coverage for people with pre-existing conditions."

Liberals, he suggests, would focus on "gradually expanding Medicaid and Medicare to cover more of the near-elderly and the near-poor, creating a larger public system alongside the private marketplace."

So, we improve access with either political camp (but with entirely different foci).  How does this translate into systematically improving "value"? It really irks me, but authors like this, conveniently give short shrift to what is already in the ACA. For instance, there's the Patient-Centered Outcomes Research Institute (PCORI).  Established as an independent, nonprofit organization under the Affordable Care Act, it builds on the "current work of AHRQ and NIH to assist patients, clinicians, and policymakers in making informed health decisions.... [It] will identify research projects that provide quality, relevant evidence on how diseases and health conditions can be effectively diagnosed, prevented, treated, and managed... [and it allows for having] consumer input influence all phases of sponsored research, starting with developing the questions researchers will try to answer." 

For more information see the March 2011 Report to Congress, "National Strategy for Quality Improvement in Health Care."  * Co-author, with Reihan Salam, of "Grand New Party: How Republicans Can Win the Working Class and Save the American Dream" (Doubleday, 2008)

Health care reform requires 'measurement and management; it should be predicated on recognizing "value" and then paying for those test, procedures, on-going care and prevention that are "directly linked to the clinical value it provides to an individual patient."*  The obverse must also be true--no one should be annoyed or surprised when the payer decides to pay less when things don't work, are inefficient or, simply, don't contribute the patient's health, benefit or welfare.

*  "The United States can no longer afford to allow its health priorities to be set by the vagaries of a payment system disconnected from clinical value. The health care system must evolve to provide the care that the population needs, supported by a payment system that reinforces this care. A medical market that is focused on physicians and health care organizations and based on providing clinical value to patients can enhance care and potentially reduce cost. This is the way forward."

Laurence F. McMahon Jr and Vineet Chopra in "Health Care Cost and ValueJAMA 2112;307(7):671-672.

How far does the Acoountable Care Act go in keeping with the aforementioned?

A mnemonic that summarizes the key Affordable Care Act issues is:

ASPECT of CARE, Cost Control and Cost Sharing, as follows:

Administrative costs are out of whack, unjustifiable

Surplus of Specialists – Shortages of

Primary Care the economic results are as expected

Extraordinary cost shifting, e.g., referrals (otherwise known as dumping)

Capacity – an MRI on every corner

Tort reform urgently needed; we are, after all, a very litigious society

Caring Function not funded—E.G., social and mental health services

Accessibility: We must be prepared to treat health care as a right, rather than a privilege and not have it tied to employment. 

Reasonable charges, med costs and salaries of practitioners; these need to be in line with other nations

Egalitarian: It is vital to subsidize the poor and the sick, as they may be the least likely to have resources

Cost-Control It begins with having those who ‘measure and manage’ having the obligation to judge, see, feel and promote that which works (and the obverse—discourage that which doesn’t). Cost Sharing: Unfortunately it will be necessary for all to have some skin in the game otherwise the ER becomes the private office and the private office becomes inundated.

Cost Control and Incentives

Can't get there from here?  Think Again!

Per the Commission on a High Performance Health System: "The performance improvement imperative [is to utilize a coordinated, community-based approach to improve care and lower costs for chronically ill patients." New York: The Commonwealth Fund, April 2012

The tools to finally achieve this objective are: 1) improved primary care, 2) payment reform, and 3) better information. "Nothing is more important for improving performance in caring for patients with complex conditions than coordinating care and enhancing access" during both normal office hours with extended availability — "precisely the role that good primary care plays in high-performing health systems. Payment reform is essential to enabling providers, and perhaps patients, to participate in the savings that result from reductions in costs and improvements in quality.

"One stakeholder's cost is another's revenue or desired service; to support the reduction of unnecessary or marginally useful services, financial incentives must reward rather than punish such behavior, since it affects all payers, providers, and patients, not just Medicare. And care coordination and cost management depend on having accurate, timely, and actionable information in real time at the point of decision making. The availability and effective use of health information technology are therefore essential to improving health system performance for high-cost patients."

David Blumenthal, M.D., M.P.P. "Performance Improvement in Health Care — Seizing the Moment." N Eng J Med. April 25, 2012 (10.1056/NEJMp1203427)

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