Road To Hellth Dr. Doug Perednia

Feb
14

Emergency Medicine Goes Down the Rabbit Hole in the Evergreen State

Just when American healthcare system seems so dysfunctional that it seems impossible to imagine how it could be screwed up further, a decision is made that restores one’s faith in the creativity of Man. But before you run out of guesses as to which particular decision we’re talking about today, we’ll just blurt it out. We are referring to last week’s decision by Washington State Medicaid to deny payment for emergency room evaluations incurred by its beneficiaries that this public insurance entity decides were, in retrospect, “unnecessary”. No “three strikes you’re out”, no quibbling over the diagnosis list, no excuses – Medicaid has washed its hands of these people.

We’d previous written about this story here and here, when the folks at Washington Medicaid were just getting warmed up at the end of 2011. Little did we know we’d be revisiting the issue so soon. Have the people running the Medicaid program in Washington State gone nuts, or are they just misomedicusists and misohospitaleists?*

Like nearly all public healthcare insurers, Medicaid in the great state of Washington is rapidly going broke. The state is faced with a $1.4 billion budget gap in the FY 2011-2013 biennial state budget, and has begun cutting all sorts of benefits to its Medicaid population. Thus far, these have included elimination of the Basic Health Plan that delivers health care to 35,000 low-income individuals, elimination of routine dental care for persons with developmental disabilities, long-term care clients and pregnant women; increasing the level-of-care requirements for personal care services; elimination of the Adult Day Health program; utilization management for mental health services; and elimination of medical interpreter services and, of course, reductions in payments to clinicians. But these pale in comparison with the innovation the state has devised in terms of saving on its annual Medicaid emergency room bill. It’s a program which, as nearly as we can tell, hasn’t yet been tried elsewhere. Call it “Heads We Win, Tails You Lose”. Here’s the story from The Seattle Times:

“Intent on cutting state budget health-care costs, Medicaid officials say the program will no longer pay for any medically unnecessary emergency-room visits, even when patients or parents have reason to believe they’re having an emergency.

The rules — arguably more drastic than an earlier proposal to limit Medicaid patients to three visits per year for nonemergency conditions — would block payment for ER visits for about 500 different conditions.

They would apply to all adults and children on Medicaid, with no exceptions, such as someone being brought in by ambulance or from a nursing home, or when patients have neurological symptoms or unstable vital signs.”

Of course the need for some sort of action to be taken is pretty straightforward: a certain number of Washington Medicaid patients are clearly abusing the system and costing taxpayers millions in the process.

“Dr. Jeff Thompson, chief medical officer for Washington’s Medicaid program, said the state is committed to paying for medically necessary care. But many times, he said, patients go to ERs when they would get better, and less expensive, care in a primary-care ‘medical home.’

‘The ER cannot be the medical home of the 21st century,’ he said. ‘We will not pay for diaper rash treated in the emergency room.’

Currently, there is ‘tremendous overuse and abuse’ of emergency rooms, Thompson said — amounting to at least $21 million a year.

Some patients show up as many as 120 times a year for costs of $20,000 to $25,000, he said, but until now, most ER doctors and hospitals have done little to deter them because the state paid the bills.

‘The ER physicians and hospitals have been abusing their privileges as providers of ER services for years, having the state pay for non-medically necessary services in the ER,’ Thompson said.

‘They have not stepped up as leaders to actually be better stewards of care and safety and the public resources,’ he said.

Under the new rules, ER services not paid by Medicaid wouldn’t be billed to the patient, leaving the doctor or hospital on the hook.”

While every reasonable person can agree that it defies logic, reason and good medical sense for any individual to rush to the emergency room for non-urgent or even trivial problems, one simply must treasure the rather unique assertion that emergency room physicians and hospitals are at fault for “abusing their privileges” as providers of services to the poor. As a rule, public insurance program payment is so poor hospitals and doctors lose money on virtually every Medicaid patient they’re forced to see. Believe us when we say that any patient showing up in your ER or office every third day is about as welcome as a porcupine in a waterbed warehouse, especially if you’re paying for the privilege of seeing them. One has to wonder if Dr. Thompson had to rehearse his lines in a mirror to master the art of reciting them without laughing.

For those of you who may not be familiar with the ins and outs of emergency rooms, federal law mandates that each and every person walking into one be seen and evaluated regardless of their ability to pay. This is a result of the Emergency Medical Treatment and Active Labor Act (EMTALA), which was passed by Congress in 1986.

Simply put, EMTALA says that every hospital that operates an emergency room and accepts federally funded insurance must by law, see, evaluate and, if necessary, treat each and every homo sapiens that walks, crawls or swims into their ER regardless of race, sex, nationality or ability to pay. If the doctors and hospitals involved lose money in the process that’s just too bad. If you don’t like it, close your emergency room. (Coincidentally, this last idea is one that seems to be catching on around the country as a direct result of the less-than-generous payments that publicly funded insurance is paying these days. A 2009 study showed that nearly one in every three emergency rooms in the United States has closed their doors over the past 20 years.)

So here’s the actual logic underlying this new Washington Medicaid initiative:

ER docs and hospitals are required by federal law to see and evaluate anyone who walks in – at their own expense if necessary.
If a Washington State Medicaid patient walks into the ER with a non-emergency and the doctors and hospitals see them as required by law, Medicaid will refuse to pay on premise that the provider are “abusing the system” and being lousy “stewards of care and safety and the public resources”
Since the doctors and hospitals are abusing the system by simply being there and doing what the federal government has said they must, they should not even be allowed to try to bill the patient directly for the visit.

It may not have occurred to Dr. Thompson and the other folks in charge of this “innovation”, but it seems self-evident that when a person repeatedly goes to an emergency room for problems that are not medically urgent, we are really talking about a social problem rather than a medical one. Heck, other states have recognized this reality. Oregon has launched a very useful and cost-effective program that essentially assigns a social worker to each high-cost Medicaid recipient. A major part of their job is to divert ER-abusing patients away from the emergency room and into keeping their regularly scheduled clinic appointments. As it turns out, sucking up an hour of social worker time is far less costly – and far more effective in changing behavior – than sucking up an hour of hospital and ER time. It makes sense once you bother to think about it. What the new Washington Medicaid program does is simply convert a social problem to an economic one, and then dump it on doctors and hospitals in the private sector. If this is the best government thinkers can do, we are all in some serious trouble. Heads should roll as a result of pulling this sort of stunt. Where’s the Queen of Hearts when you really need her?

However beyond the issue of the people running our healthcare programs are rational, competent, or even looking out for the best interests of taxpayers, there are two other more profound and troubling issues raised by this policy decision. Issues that affect all of us.

First, is there any limit to what the government may require law-abiding citizens to do without compensation? EMTALA requires doctors and hospitals to see patients regardless of their ability to pay, but does it free insurers of their obligation to pay for the care of their beneficiaries? Do all insurers have the right to do this, or just public insurers? How does requiring free people to work without compensation differ from slavery? Where are the limits? Can firemen be required to put out fires regardless of a community’s ability to pay them? Can police or firemen be required to work without pay on the principle that people’s lives may be in danger? Or should they only be paid if there really was some real risk to life and limb?

Second, if people – patients in this case – are behaving irresponsibly by, for example, going to an emergency room for diaper rash, why do they have no obligation to bear any financial responsibility for their actions? If the issue is simply that these patients are poor, why are any financial penalties levied on the poor? Why are the poor required to pay for parking tickets – an abuse of public space – but not clearly unneeded emergency room visits – an abuse of a private space? Is the government in the business of protecting its citizens, or merely itself? Where does the public interest end, and something more akin to abuse of power begin?

We may have already crossed that line.

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*Misomedicusist = Miso (greek) Medicus (latin) = hater of physicians

Misohospitaleist = Miso (greek) Hospitale (latin) = hater of hospitals

2 Categories : Abuse of Power, Business and Law, Clinical Care, Economics, Ethics, Healthcare Policy, Hospitals and Health Systems, Political Hellth, Politics, The Practice of Medicine

Feb
7

America’s Higher Ed System Hits the Road to Hellth

by Dr. Doug Perednia

In recent weeks, President Obama offered to do for higher education what the government has done for healthcare: become more heavily involved in deciding who gets what, and at what price.

“In his Jan. 24 State of the Union address, the president warned colleges and universities that he was putting them ‘on notice,’ adding: ‘If you can’t stop tuition from going up, the funding you get from taxpayers will go down.’

A short time later the White House decided to elaborate:

“’Colleges that can show that they are providing students with good long-term value will be rewarded with additional dollars to help students attend,’ the White House said in a statement. ‘Those that show poor value, or who don’t act responsibly in setting tuition, will receive less federal campus-based aid.’”

Anyone familiar with our posts and the history of government involvement in healthcare will immediately see the parallel between this approach and what the federal government has been doing for some time through Medicare and Medicaid; and will soon begin doing in the private insurance market by virtue of a host of new powers granted to the Department of Health and Human Services by The Affordable Care (“ObamaCare”) Act. The term “good long-term value” implies that the “quality” of an educational experience (however the heck that can be objectively defined) can be readily compared with the cost of the tuition in dollars to create a metric of “value” that state and federal governments can us to determine their level of financial payments. Before long, universities will need to report on various “quality” metrics in order to justify whatever level of federal funding they wish to receive. The reporting will come with its own bureaucracy, checklists and monitoring costs – all of which will gradually overshadow and overwhelm their original educational function.

Lending a sense of déjà vu to this process is the fact that it can be just as hard to measure the “quality” of something like higher education as it is the quality of healthcare. Both fields deliver something whose benefits are highly personal, and in a setting where endpoints are often tough to quantify. How does one objectively decide whether students are receiving a quality education when courses of study range from drama and political science to computer engineering? (Now there’s an interesting field. How the devil did politics ever become a “science”? And how exactly is political science differentiated from political theater?) By how successful students are in passing standardized tests? By passing standardized tests in their field of major study? By the speed with which they find employment? By how happy or well-adjusted they are? Will it be necessary to adjust for how intelligent new students are, just as it’s necessary to adjust for how sick patients are upon admission to the hospital?

Adding a measure of irony to the need for tuition cost controls is the fact that, in education as in healthcare, the federal government is almost certainly responsible for much of the cost inflation that we are seeing. Indeed, what’s astonishing is how much the increase in spending on education resembles the housing bubble caused by federally-mandated easing of loan qualifications. The website Higher Ed describes this rather well:

“The facts, though, are that enrollments are at an all-time high of 20 million students annually, degree attainment rates for all age groups have risen consistently and sometimes very rapidly for more than half a century, and public funding of higher education has increased at an explosive clip over the past decade. Pell Grant spending and tuition tax credits more than tripled in real terms from 2000 to 2010, while federal funding of university-based research and federal student loan costs for interest subsidies and defaults grew by at least 50 percent in constant dollars during the past decade. Even state and local funding of higher education grew by 10 percent in real terms during the 2000s; it’s only when the rapid increase in enrollments over the past decade is factored into the equation that state and local support on a per-student basis shows a significant decline in constant dollars.

Two of the statistics that have been accurately portrayed in recent debates are that college charges have increased at more than twice the rate of inflation over the past several decades and that student loan debt burdens have grown enormously, both in terms of the number of students who borrow and in how much they borrow. These are the troubling statistics that need to be addressed.”

Basically the federal government has been heavily subsidizing education, thereby increasing the demand and the amounts that people are willing to borrow (just like mortgages!) in order to buy themselves the educational equivalent of house that they would normally never be able to afford. At the same time, well-intentioned regulatory requirements have displayed the “unintended consequences” phenomenon of actually demanding that universities actually increase their tuitions so that students still have some skin in the game:

“In his State of the Union Address, President Obama decried skyrocketing college tuition, attempting to take advantage of public anger over the steadily-worsening college tuition bubble. This was ironic, since his own Administration has done much to foster rising college tuitions.

For example, it imposed the 90-10 rule, which forced low-cost educational institutions to raise their tuition to comply with a new federal regulation requiring them to charge enough over federal financial aid so that at least 10 percent of education costs don’t come from financial aid. For example, Corinthian College had diploma programs in health care and other fields that can be completed in a year or less. Until 2011, many of those programs had a total cost of about $15,000, which meant that federal grants and loans could cover nearly 100 percent of their cost. In response to the Education Department’s rule, the college raised tuition to comply with the 90/10 rule. The net result of the Obama Education Department’s rule was to “create a perverse, no-win ‘Catch-22′ that could prevent low-income students from attending college,” by encouraging such colleges to raise tuition to outstrip rising financial aid by more than ten percent. Administration allies like Senator Richard Durbin (D-IL) are now pushing a new rule, the 85-15 rule, that would require low-cost institutions to further raise tuition so that at least 15 percent of education costs aren’t covered by financial aid. (With this kind of mentality, it is no wonder that college graduation rates have actually “fallen somewhat since the 1970s” “among poor and working-class students”).”

And there is one more fascinating data point that is worth sharing – the remarkable relationship between federal spending and tuition increases over the past fifteen years. Consider this chart and text from the website Political Calculations:

“Here we find that for the years from 1976 to 1992, the change in total federal spending has a correlation coefficient of 0.984. Or to describe what that means in simpler terms, the change in total federal spending “explains” some 98.4% of the change in the average cost of tuition at a four-year institution.

We next see a transition period running from 1992 to 1996, after which, changes in total federal spending would appear to “explain” some 99.4% of the recorded changes in the average cost of college tuition, all the way up through the 2008-09 academic school year.

These high and increasing levels of correlation between total federal spending and the average cost of college tuition strongly indicates that the federal government is directly responsible for the escalating cost of attending college for the vast majority of students.”

Although correlation does not necessarily imply causation, one can certainly imagine a scenario in which federal subsidies make it easier for students to borrow, which makes it easier for colleges to increase tuition in the face of high demand, which leads to still more demand for federal aid so people can afford college. Multiply this over a whole collection of fields in which the federal government has decided to insert itself as a major force in the marketplace – healthcare, housing, retirement benefits and now “clean energy” – and it rapidly becomes apparent that social intervention is an expensive business that can slip out of control faster than a pack of Dobermans at a cat show.

Taxpayers simply can’t go around subsidize things and lowering the cost to end-users without creating demand that isn’t based on a rational expectation of returns. It’s not necessarily the case that, just because a student can now borrow the money to get an advanced degree in ancient Mayan culture, that investment will ever generate sufficient value to justify the subsidy. By the same token it’s relatively easy to demand end-of-life care or well-person physicals if the government will pay for them, despite the fact that the return on those investments may be vanishingly small. When you then add in bureaucracy in an effort to control costs, total spending is driven still higher.

The problems we’re seeing with the affordability of healthcare and the affordability of education almost certainly have a great deal in common. Neither area of human endeavor is going to become any more sustainable until we agree to limit the unintended consequences of government subsidies and regulatory interventions.

Categories : Bureaucracy Run Amok, Economics, Healthcare Policy, Political Hellth, Politics

Jan
31

Will Medicare Bother to Learn Anything from Its Own Demonstrations? – Part II

by Dr. Doug Perednia

In our last Road to Hellth post, we looked two of the four ”value-based payment” demonstrations whose results were recently reported by the Congressional Budget Office (CBO).

Key Features and Results of the Demonstrations of Value-Based Payment (Click on image to enlarge table)

These demonstrations are important because they represent the best thinking that Medicare can muster with respect to how to reduce healthcare costs and make things all better on the American healthcare front. In particular, they represent the Affordable Care Act’s only real hope for stemming the more than one-trillion dollar hole on the federal budget that it’s going to create over the next ten years. So much is riding on these results that it would be a crime to simply acknowledge the findings with a headline and blithely launch into yet another series of demonstrations. After all, our national objective should be to find and disseminate what works, and discard what does not work. In our previous post we looked at the Physician Group Practice Demonstration and the Premier Hospital Quality Incentive Demonstration and were frankly disappointed with the results. How did the next two fare?

The Medicare Home Health Pay-for-Performance Demonstration lasted for two years, but the CBO only had the results of the first year available to analyze. As to the design:

“The Medicare Home Health Pay-for-Performance Demonstration was initiated by CMS to test the effects of providing financial incentives to home health agencies (HHAs) to improve quality of care. Under the demonstration, HHAs received their standard payments from Medicare and were eligible to receive additional payments if the participating HHAs in their region achieved Medicare savings and if they met certain criteria regarding the quality of care…

For each of four regions, CMS estimated the Medicare savings attributable to the demonstration and distributed the entire amount of those savings to HHAs in the treatment group whose quality scores were in the top 20 percent among demonstration participants in their state or whose improvement in quality scores was in the top 20 percent.23 Thus, although it was anticipated that the demonstration might lead to improvements in the quality of care that could reduce Medicare expenditures, the demonstration was not intended to yield net savings for the Medicare program. HHAs in regions that did not achieve savings did not receive any additional payments, regardless of their quality scores.”

Once again this study hopes to demonstrate that: (1) “high quality (at least as Medicare measures it) leads to low costs”; and (2) clever payment, leads to high quality. In order to estimate the impact of the payment scheme on its expenditures, Medicare compared the actual expenditures for patients of the HHAs in the treatment group with an estimate of what they would have been without the demonstration. The result:

“During the first year, the demonstration had no overall effect on the seven measures of the quality of care that were used to determine HHAs’ eligibility for bonuses and had little or no effect on the other reportable measures…

An analysis of the effects of the demonstration on Medicare expenditures showed that HHAs in three regions achieved combined savings of about $15 million during the first year; expenditures were about $9 million higher than projected in the fourth region.25 However, the estimated savings were very small as a proportion of projected spending—ranging from 0.4 percent in one region to 1.2 percent in another region—suggesting that those differences between actual and projected expenditures could reflect random variation in Medicare expenditures rather than actual savings. The absence of a notable effect on Medicare expenditures is consistent with the finding that the demonstration had no discernible effect on quality of care—particularly in the number of hospitalizations and in the use of emergency care.”

Here we see some of the same lessons that we should have learned from the Premier Hospital Quality Incentive Demonstration. In this study as in that one, all of the participating organizations were volunteers. Who volunteers for a project that offers to reward home health agencies that meet certain performance criteria? Why, agencies who already know how. So what has Medicare proven by rewarding them for what they already do? Nothing. Absolutely nothing. How much did Medicare save as a result of this innovation? Statistically, nothing. Absolutely nothing.

Who designs these studies?

But there’s no use crying over spilled taxpayer dollars, especially when they’re borrowed from China. Let’s look for some good news from the fourth and last “value-based payment” trial, the Medicare Participating Heart Center Demonstration (MPHCD).

This project was a little different from those that we’ve discussed thus far. Instead of trying to achieve a financial healthcare miracle by rewarding people for hitting “quality” metrics and saving money through more efficient and effective care, the MPHCD represents an effort to save money by “bundling” services. Bundling simply says that, instead of paying for each thing doctors and hospitals do to produce a successful coronary artery bypass operation, Medicare would instead negotiate an up-front one-price-for-everything fee to be paid for each bypass patient treated. If the total cost is higher than the negotiated price, the hospitals and doctors lose money. If it’s lower, they get to make a profit. Simple, eh? Here’s CBO’s description:

“CMS selected the 7 hospitals from 27 applicant institutions.30 CMS’s criteria for selecting participants for the demonstration included the projected Medicare savings implied by their proposed bundled payment rates, the quality of care at the hospital, and the volume of bypass surgeries performed there…

Applicants were required to propose separate rates for two DRGs in which bypass surgery is performed.32 During the demonstration, the bundled rates were updated annually using the payment updates for hospitals and physicians in Medicare’s fee-for service program. According to the government’s estimates before the demonstration, the expected savings at the four original hospitals for services covered under the bundled-payment arrangement varied from about 10 percent to 30 percent, with an average of about 20 percent. For each of the three later-starting hospitals, the expected savings were about 7 percent to 8 percent.

Competitive pressures prompted the hospitals to apply for the demonstration. All of the hospitals that applied anticipated that being named a Medicare Participating Heart Bypass Center could help boost their volume of bypass surgeries. The hospitals also were concerned that Medicare could implement a national policy requiring bundled payments for bypass surgery and contract with a limited number of providers; they expected that their participation in the demonstration might improve their chances of inclusion in such a national program.”

So let’s get this straight. Medicare went to a bunch of hospitals and said directly or indirectly: “Hey, we might give a few hospitals around the country an effective monopoly on Medicare bypass surgeries. If you guys want to have a chance of bein’ one o’ da lucky winners, we want ya to quote us a bundled price for bypass surgery that’s lower than what we’re currently paying ya. If not, well golly gee. It would be too bad if’n ya lost the ability ta do bypass surgery on Medicare patients, especially since da majority of bypass patients are on Medicare. That would kinda wipe out yer heart surgery program, wouldn’t it? But hey, you guys make up your own minds about whether ya wanna take us up on our offer. But don’t wait too long to decide…”

Now here’s the good news. According to the CBO, this strategy worked!

“The evaluation showed that the demonstration reduced Medicare expenditures on services furnished during hospital stays for bypass surgery by about 10 percent. The estimated savings were in the range of about 5 percent to 10 percent for five of the seven hospitals and about 20 percent for the other two hospitals. Those savings reflect the estimated difference between the bundled payments and the amounts that Medicare would have spent for services provided to those bypass patients in the absence of the demonstration…”

Did this bundling reduce the true cost of taking care of those patients? It’s not really clear. It may have in three hospitals, but not a fourth, and there was no direct comparison with comparable cost data in other hospitals. Was there any change in patient outcomes? Nope.

The immediate lesson? If you’re the government and a monopsonist (i.e., pretty much the only buyer of a specific set of goods and services), and you beat up your suppliers by threatening them in a nice way, you can get them to lower their prices. Unfortunately that approach is only going to work for so long. It’s not the financial miracle the Affordable Care Act is going to need in order to keep healthcare from bankrupting the country.

And with that, let’s get back to the original question posed by these posts: will our unelected leaders at Medicare and the Department of Health and Human Services bother to learn anything from the substantial amount of time and money spent on these demonstrations? First let’s review what we believe to be the important take-home lessons of these four “value-based payment” studies:

It’s time to get real with respect to saving American healthcare by use of Accountable Care Organization. Far from proving a boon to the healthcare system in general and Medicare in particular, the results of the PGP demonstration show that this complex, top-heavy strategy has little to offer other than an increase in healthcare infrastructure and administrative expense. Yes, two of the ten PGPs involved secured bonuses in all five years of the demonstration and “saved” money relative to projections. If Medicare specifically wants to study those programs in an effort to understand what made them special, that’s swell. But when the pilot project is a failure, most responsible people would think twice before launching it on a widespread basis as if nothing happened. As they continue to move forward with ACOs, Medicare and the Department of Health and Human Services (HHS) seem strangely indifferent to the results of their own five-year study.

If Medicare wants to prove that paying doctors and hospitals to improve quality measures is a good investment of time and capital, it’s time to design a decent study to prove it. Imagine this scenario. You want to prove that students who are paid to study hard and do their homework will improve their grades and incur fewer education costs than students who aren’t paid. To prove that the payments make a difference, who are you going to recruit into the study: (a) students who already study hard, get top grades and incur few education costs; or (b) students who don’t study as hard, don’t get top grades, and incur substantial education costs?

Yes, we would have picked (b) as well, but this subtlety is apparently lost on America’s best and brightest at HHS. Who are the people who approve these demonstrations, anyway?

Just as students who have already achieved the desired end point in the absence of payment aren’t going to improve much even if we pay them, hospitals and home health agencies that are studly enough to volunteer for Medicare’s pay-for-performance studies aren’t going to change their behavior if they’re already meeting the desired quality criteria. Nor will they prove anything for Medicare by virtue of their participation. Yet this is exactly the approach that Medicare took in both the Premier Hospital Quality Incentive and Home Health Pay-for-Performance (P4P) demonstrations. If you want to show that improvements in quality can be created by a P4P program, common sense dictates that you test your hypothesis on hospitals and home health agencies that have lots of room for improvement, and that you choose the participants on that basis. Not the best, probably not the worst, start out somewhere in the middle. If they show improvements in quality metrics and the level of overall spending after (and only after) you launch the P4P program then you’ve proven something. If not, drop the idea and move on. And if you’re not willing to do the appropriate study,

Proving that you can beat up your suppliers doesn’t mean that you’ve hit upon a beneficial, or even sustainable, strategy for reducing healthcare expenditures. Since the Medicare Participating Heart Bypass Demonstration is the only “value-based payment” demonstration to document savings, it might seem logical to conclude that forcing doctors and hospitals to negotiate bundled Medicare payments that are lower than what they’d normally get from fee-for-service billing is a brilliant idea. However that depends upon who gets stuck with the bill. Medicare and Medicaid have a long history of cost shifting onto patients who self-pay or have private insurance, thus creating yet another hidden tax for them to pay on behalf of the federal government. Not only is this type of cost shifting unsustainable, but it’s exactly the type of approach that is most likely to destroy the entire healthcare system in the long run.

We’ll be the first to admit that these lessons will be hard for anyone at Medicare to accept. They’re grim at best because they say that Medicare’s current cost-saving doctrines are mostly wrong, unproven or unsustainable. But Americans are far better served by facing this reality than continuing to live in a fantasy world where hiring more “quality care” administrators is the best way to reducing the cost of healthcare. The overall message of the CBO to everyone involved in healthcare is pretty clear: it’s time to take a radically different approach to finding economic salvation.

Categories : Business and Law, Clinical Care, Economics, Healthcare Policy, Hospitals and Health Systems, Politics, Quality Questions, The Practice of Medicine, Uncategorized

Jan
24

Will Medicare Bother to Learn Anything from Its Own Demonstrations? – Part I

by Dr. Doug Perednia

This past week, the Congressional Budget Office (CBO) released two reports summarizing the results of 14 major demonstration projects aimed at improving the “quality” and/or reducing the cost of care provided to Medicare patients.

These fell into two broad categories: disease management and care coordination demonstrations, and “value-based payment” projects. Both types of projects are of enormous importance to the future of the Affordable Care (“ObamaCare”) Act and the healthcare policies of the current administration. This is because ObamaCare greatly expanded insurance coverage – and therefore total U.S. healthcare costs – without a proven, sustainable plan for reducing the financial burden of all this new care. Without some cost-saving miracle, the result will be well over a trillion dollars of new healthcare spending by the federal government alone over the next ten years, (and even more if you disallow the bogus “savings” that would have been produced by the now-defunct CLASS program). The innovations behind these Medicare demonstrations were to have provided that miracle.

Unfortunately, things aren’t looking so good on the miracle front Here’s the short version from the CBO:

“The evaluations show that most programs have not reduced Medicare spending. Programs in which care managers had substantial direct interaction with physicians and significant in-person interaction with patients were more likely to reduce Medicare spending than other programs, but on average even those programs did not achieve enough savings to offset their fees. Results from demonstrations of value-based payment systems were mixed. In one of the four demonstrations examined, Medicare made bundled payments that covered all hospital and physician services for heart bypass surgeries; Medicare’s spending for those services was reduced by about 10 percent under the demonstration. Other demonstrations of value-based payment appear to have produced little or no savings for Medicare.”

But we really shouldn’t stop there. The long version is well worth going through in a little detail. So much is riding on these results that it would be a crime to simply acknowledge the findings with a headline and blithely launch into yet another series of demonstrations. After all, our national objective should be to find and disseminate what works, and discard what does not work. So what have we really learned thus far? Let’s look at the “value-based payment” demonstrations first. As shown in the table below, there are four of these.

Value-Based Payment Demos Click to Enlarge

The philosophy behind of all of them is the same: since doctors, hospitals and other healthcare providers are directly responsible for incurring healthcare costs as a result of the care they provide, all we have to do to save money is reward or penalize their incomes based upon how much they spend to take care of their patients. Want to curb spending? Just dangle a carrot or wield a stick in the direction of their bank accounts. Greed will do the rest, wiping out the inefficiency that the doctors themselves have built into the system. The CBO’s Lyle Nelson describes the structure and results of all four of these demonstrations in some detail.

We’ve written about the Physician Group Practice (PGP) demonstration in a previous post. This study is of special significance because it serves as a dress rehearsal for the highly acclaimed Accountable Care Organization (ACO) approach to saving healthcare dollars. ACOs are supposed to combine groups of doctors and hospitals together into a single economic unit for the purposes of taking care of large groups of Medicare patients. The financial incentives and penalties involved are fairly intricate and require that each participating group gathers large amounts of data. Calculating them involves computing the actual money spent on thousands of Medicare beneficiaries, estimates of how much would have been spent in the absence of the ACO, how many “quality-of-care” measures fell into a specific range, whether the calculated savings exceeded a certain threshold, which year of the demonstration it happens to be, and so on. When all is said and done, the PGP’s are supposed to get a cut of the “savings” that were generated by their newly efficient quality practices.

According to the CBO, here’s what happened:

“After accounting for the bonuses paid to the PGPs, the estimated net savings for the Medicare program for the second year of the demonstration was about $1.6 million. That represents a net savings of about $7 per beneficiary across the 10 participating PGPs—a net reduction in Medicare spending of about 0.1 percent. Estimated savings were lower for the first year…”

But the real savings probably weren’t even that large.

“There are two reasons why that estimate might overstate the amount of any net Medicare program savings. First, it appears that some PGPs changed their diagnostic coding practices under the demonstration in a way that increased the risk scores of their patients relative to those of the comparison group… A second factor that might have led to an overestimate of Medicare program savings is that, for the four PGPs that received bonuses in the second year of the demonstration, Medicare expenditures per patient were growing more slowly than were those of the local comparison groups before the demonstration.”

As for quality, the CBO estimates that the proportion of patients receiving recommended tests increased by 1-5% in the demonstration group.

Although the net financial cost to Medicare was negligible, this was hardly the case for the participating PGPs. On average, each of these groups had to install an additional $1.7 million in infrastructure in the first year alone. That was an average of about extra $737 per provider. You can do the math. Just to participate in the project, the PGPs themselves spent ten times the amount of money that Medicare “saved” over the entire five years. But this is almost certainly just the tip of the true-cost iceberg. Any program of this type requires substantial numbers of additional administrators – personnel whose only jobs are to track what’s going on, hold meetings, remind participants of what’s going on and generate reports. Although neither Medicare nor the CBO provide any numbers on what these administrative costs entail, it’s easy to come up with a rough approximation. Let’s assume that each PGP hired just one single additional administrator for this initiative at a fully burdened cost of $50,000 per year. This is almost certainly an underestimate. $50,000 per year x 5 years x 10 PGPs = $2.5 million. This sum alone is over 50% more than the reported savings to Medicare. Adding in the original $17 million investment for all ten PGPs, and we have a total net cost of this demonstration to the U.S. healthcare system of about $18 million over 5 years, in exchange for a minimal increase in the number of “recommended tests” performed. In essence, the physician groups involved and privately insured patients are directly subsidizing Medicare and impoverishing rate-payers in order to achieve a savings of about one-tenth the amount that’s being spent.

It seems pretty clear that while repeating the PGP demonstration a bad business idea, expanding it in the form of ACOs is nothing short of financially and medically irresponsible. Every dollar “saved” by Medicare translates into more than $10 in higher premiums and costs borne by private business and individuals; hardly an approach to “affordable” healthcare. That’s the kind of program you’d pay to do without. Let’s see how the other value-based projects fared.

The Premier Hospital Quality Demonstration was actually an unsolicited proposal to Medicare from Premier, a company owned by 200 non-profit hospitals and health systems. Under this program hospitals reported data on the quality of care provided to patients in five clinical areas: acute myocardial infarction (AMI, or in lay terms, a “heart attack”), congestive heart failure, pneumonia, coronary artery bypass surgery and hip or knee replacements. The information was used to compute a “composite quality score” for each hospital in each clinical area. The top 10% of hospitals in each clinical area were initially paid a bonus by Medicare of 2% of their Medicare payments for those areas. Later in the program, this formula was changed to reward those hospitals whose scores were above the median of the prior two years, or if they had improved markedly compared to their own previous scores.

Why should any of this save money? The inherent assumption is that it’s “quality” as measured by: (1) adherence to various process measures, (such as whether and when to anti-coagulate people); and, to a lesser extent (2) real indicators of morbidity and mortality, that determines how costly it is to hospitalize people. Presumably good quality leads to low costs, while bad quality leads to high costs, longer hospitals stays and frequent re-admissions. Pay people based upon quality and you’ll optimize care and reduce costs at the same time. There is, however, also a second assumption embedded in this study. That is that the quality that people put forth is directly related to how you pay them. Pay them based upon quality measures, and those quality measures will improve.

Simple, eh? How did that turn out? We’ll let the CBO tell the story:

“The composite quality scores for the demonstration hospitals rose from the first quarter of the demonstration to the twelfth quarter for each of the five clinical areas. On average, the increase ranged from 7 percentage points for AMI (the average score rose from 90 percent to 97 percent) to 22 percentage points for CHF (the average score rose from 67 percent to 89 percent). Those increases in composite quality scores were primarily the result of improvements in the process scores. There was little room for improvement in the outcome scores, which were very high at the start of the demonstration.”

So part of our second assumption was right. Pay people to increase their process scores, and they’ll do just that. Or is it?

“Not all of the increases in quality scores for the demonstration hospitals can be attributed to the effects of the demonstration, because quality scores were improving nationwide. The best available evidence indicates that the demonstration was responsible for small increases in quality of care and that most of the increases in quality that occurred at the participating hospitals would have occurred in the absence of the demonstration. The CMS-funded evaluation reported that the effect of the demonstration was to raise quality scores during the three-year period by an average of about 1 to 4 percentage points.”

This suggests that hospitals that are sufficiently motivated to participate in a study like this are already doing just about everything possible to maximize the quality of care as measured by the composite score yardstick. So in a sense, Medicare learned nothing from this wasted six-year effort except perhaps that preaching to the converted is a waste of time. Since the “value-based” payment mechanism didn’t really change anything in terms of the way these hospitals behaved, one would predict that no money was saved as a result. And this is exactly what happened:

“The demonstration did not affect Medicare expenditures for inpatient hospital care… The analysis also showed that the demonstration did not affect the total number of days that patients were hospitalized during the episodes of care or the number of days they were hospitalized for re-admissions.”

So as was the case for the PGP study, if we add in the cost of any extra administrative overhead required to achieve these results, we end up with a net loss of dollars to the overall healthcare system.

Two down and two to go. We’ll look at the remaining two “value-based purchasing” demonstrations, and talk about what this means so far in our next post.

Categories : Business and Law, Clinical Care, Economics, Healthcare Policy, Hospitals and Health Systems, Politics, PPACA, Quality Questions, The Practice of Medicine, Uncategorized

Jan
17

Desperately Seeking Quality

by Dr. Doug Perednia

Earlier this month a physician social networking website asked its subscribers to weigh in on a survey supplied by a “client” who was looking for some help with a perplexing problem. We’re forbidden under the website’s terms of use from publishing the exact post, but it went something like this:

The Affordable Care (“ObamaCare”) Act requires Medicare to expand its “Physician Compare” Directory tool. This is a website that currently allows potential patients to enter an address or zip code and find information about doctors such as their name, address, phone number, medical specialty, sex and whether they accept Medicare and speak more than one language. It also reports on where these doctors obtained their medical training.

As a number of observers have observed, this federal program is not exactly a goldmine of useful information – especially with much better information put out by private sector websites. And even the small amount of information that the federal government has put together with your tax dollars is not exactly reliable. Articles in Forbes and elsewhere have documented that much of it seems to be incorrect, incomplete or a combination of the two.

The survey posting then went on to point out that the law of the land now requires that, by 2013, the Physician Compare website report data about the quality.

Here’s the exact wording from the Affordable Care Act itself:

“SEC. 10331 ø42 U.S.C. 1395w–5 note¿. PUBLIC REPORTING OF PERFORMANCE INFORMATION.

(2) PLAN.—Not later than January 1, 2013, and with respect to reporting periods that begin no earlier than January 1, 2012, the Secretary shall also implement a plan for making publicly available through Physician Compare, consistent with subsection (c), information on physician performance that provides comparable information for the public on quality and patient experience measures with respect to physicians enrolled in the Medicare program under such section 1866(j). To the extent scientifically sound measures that are developed consistent with the requirements of this section are available, such information, to the extent practicable, shall include—

(A) measures collected under the Physician Quality Reporting Initiative;

(B) an assessment of patient health outcomes and the functional status of patients;

(C) an assessment of the continuity and coordination of care and care transitions, including episodes of care and risk-adjusted resource use;

(E) an assessment of patient experience and patient, caregiver, and family engagement;

(F) an assessment of the safety, effectiveness, and timeliness of care; and

(G) other information as determined appropriate by the Secretary.”

The survey post then finally got to the point. The unknown client, who one can only imagine to be a Department of Health and Human Services functionary tasked with implementing this language, mentioned that “we are interested in learning more about” how primary care physicians would measure things like quality, cost and the efficiency of care provided.

In other words, we’re obligated to slap something together pretty soon here if we can only figure out how to realistically measure any of this stuff in literally tens of thousands of private medical facilities all over the country. So we’d thought that we’d ask for your two cents before we officially mandate that you gather immense amounts of detailed new data and hand it over to us.

Too bad many of these doctors and clinics are already struggling just to stay in business.

The survey then went on to suggest a number of different measures one might use such as length of stay (shorter is better), patient satisfaction, how many referrals a doctor got, how many of a doctor’s patients were hospitalized, the volume of preventive care delivered and so on.

We’ve written previously about such dead ends as “pay-for-performance”, but we found this particular survey request interesting for two reasons. The first is that, although the entity posting the survey was asking about “quality”, the sheer volume of information that would have to be gathered in order to comply with the wording of the law is frankly breathtaking. Assessments of the health status and outcomes for a statistically significant fraction of patients in each physician’s practice? These sorts of things are only meaningful if one were to adjust for a host of individual patient-specific factors. How sick was the patient to begin with? How compliant are they with their medical treatment? Do they have any other diseases making them sick? Did their insurer allow their doctor to use the medications and procedures that would have given them the best possible chance at recovery, or were they forced to use whatever happened to be cheapest? How long did they see the doctor in question before the results are measured? What about the impact of the patient seeing other doctors, who might either improve the results or make them worse? Were they allowed to see specialists? The list goes on and on.

There is absolutely no doubt in our minds that this part of the law was written by someone living in the world of academic research. This stuff is the very essence of elaborate clinical studies; work that routinely require dozens of research assistants, years of data collection and validation, statisticians, approval from human subjects committees and the very real risk that the physician in question will retire or pass away before the results are complete. What other profession on God’s green Earth is expected to gather and report information of this scope and detail? It’s roughly equivalent to soldiers in combat being asked to keep track of everything from their accuracy in shooting (“What was the functional status of each enemy soldier after you fired upon them? Please note whether they under cover or out in the open.”), and their popularity with the civilian population (“How satisfied was each family with your search of their home?”), to the “effectiveness” of their operations, despite the fact that government higher-ups are calling the shots (“Did the Taliban return to your areas of operation in the six month period after your departure? If so, please explain.”)

And exactly who is going to be able to collect all of this information? It’s clear that the forcible collection of this type of data is one of the primary reasons that Medicare has implemented plans to punish clinicians who do not choose to “meaningfully use” electronic medical record systems, but much of this information is simply beyond the ability of the average clinician to gather and still have time to care for patients. Given the rapidly developing shortage of physicians it is perhaps the right time to ask which will benefit that average American more: having all of this information (which may or may not be correct and statistically valid), or having the ability to see a doctor at all? It appears that the Affordable Care Act has decided the answer for them.

Given the obvious complexity of obtaining this data for Congress and Medicare, it seems clear that one purpose of the survey is a plea for help from the regulated. If doctors can be induced to recommend the terms of their own bondage it would certainly help to justify whatever standards of data collection and interpretation were ultimately adopted. So it was particularly interesting to see some of the responses. We’ve received permission to print two of them here. A family practice doctor had this to say:

“I agree 100% that in a free market quality is very easy to spot. You know how? Look at successful operations. They will be delivering quality, guaranteed. In a skewed, third party controlled, overregulated, stifled, stressed system, one will have to go through crazy contortions to determine quality. You have to descend on an operation, probe it, measure it, survey it, poll it, compare it, peer into its computers and grade it. And then what have you got but a bunch of bullshit reports as proxy for free market success.”

While an endocrinologist observed:

“All measures of “quality of care” are biased in some way. Payors rate how much a provider costs them. I am frequently chided for prescribing too many glucose test strips, but I take it as a compliment and a measure of quality care that my patients are testing their sugars. Adherence to accepted guidelines? Every patient is different, and care has to be individualized. I get inquiries from payors and PBMs as to why patients aren’t on certain meds, like ACE’s or statins. My clinical judgment, none of their concern, I shred them. Patient satisfaction? As noted in the above posts, you can’t please everyone. Patients have agendas, and sometimes you don’t know what they are. You do what’s right medically and ethically, according to your clinical judgment. Hospitalizations? Depends on your patient population. Mine is filled with sick, elderly diabetics with all the complications. Many will be hospitalized. Some will die. There is no objective way to rate quality of care that can apply to all providers. I personally think that a good indicator of quality of care is peer reputation. But the bureaucrats can’t figure that into their evaluation models. And how do you prove that your model means anything at all? I agree with gdunn [Ed note: the pen name of another doctor], we need to be involved in setting any standards, and we also need less paperwork and more patient time to give patients quality care.”

With just a few short sentences, both of these individuals have shed more light on the issue of measuring “quality” than all of the academic papers on the topic combined. How did they do it? Well for one thing they live in the real world rather than some sort of academic utopia. In the real world, every time you decide that you want something it has an associated opportunity cost. If you want your auto mechanic to document how successful his repairs have been, it means he can spend less time fixing your car. If he spends less time fixing your car he has to charge a higher rate for the work he does manage to do. So you end up paying for that “quality” report quite directly. Either that or he goes out of business. It’s exactly the same in medicine. To pretend that it isn’t is either stupidity or deceit. Take your pick.

As our first commenting doctor observed, the economically efficient way to gauge quality is to rely on the workings of a free marketplace. One important reason that capitalism beats the stuffing out of communism or any sort of command economy is that it’s far cheaper, more efficient and more reliable to gather information about the relative desirability of goods and services from the marketplace than from a bureaucracy. And free-market demand for that market-based information is what allows the folks at Angie’s List make a living without the need for government subsidies.

And as our second doctor observes, one key reason that bureaucratically-generated “quality” measures are so inadequate is precisely because they are inherently biased – especially when the self-interest of your average insurance company is frequently in conflict with the personal and medical self-interest of your average patient. The inherent conflict is even scarier if the government itself is your insurance company. After all, if you don’t like your private sector insurance company, at least you can switch to a different one.

It rather makes one wonder why government itself doesn’t seem to be associated with any “quality” measures. Perhaps Congress could pass a law to make them mandatory and link poor performance to automatic pay cuts for elected representatives?

Categories : Clinical Care, Economics, Ethics, Healthcare Policy, Politics, Quality Questions, The Practice of Medicine

Author Archive for Dr. Doug Perednia

Emergency Medicine Goes Down the Rabbit Hole in the Evergreen State

America’s Higher Ed System Hits the Road to Hellth

Will Medicare Bother to Learn Anything from Its Own Demonstrations? – Part II

Will Medicare Bother to Learn Anything from Its Own Demonstrations? – Part I

Desperately Seeking Quality

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