Policy: A Word About Transparency (Part Two)

I've always felt that comments from bright and thoughtful readers often get trapped in the shadow of many blogs and unfortunately, the ego of the blogger. As it is usually the readers of this blog who have wiser things to say than myself, I thought I'd be sure to highlight an especially thoughtful response I received this weekend. Only known to me as "BC" - the readers comments are found below:

BC said (my own comments are in bold)...

I think it would be enormously helpful if Medicare rates for all DRG codes were readily available on the CMS website. Consumers could at least then use that information as a benchmark for assessing the reasonableness of their own bills.

JD: Here! Here!

I do not think someone without insurance, even if wealthy, should have to pay more than a 15%-20% premium above Medicare rates.

JD: Yes...but CMS is also an imperfect pricing agent and can often grossly underpay on certain procedures.

Even when insurance is paying most of the bill, many policies have a lifetime benefit cap, so pricing does matter, at least for those of us who incur significant medical costs.

JD: Agreed.

For hospitals that believe they are low cost, or at least competitive, in their market and have a robust enough accounting system to determine with reasonable accuracy what their costs are,

JD: Which, unfortunately many do not (on both counts)...

...it could be a competitive advantage for them to provide some leadership on the pricing transparency issue. Especially with respect to outpatient services and inpatient surgeries that are scheduled in advance, pricing transparency should be easy to provide (including package pricing) if hospitals really wanted to move in that direction.

JD: Yes! And these hospitals are certainly the one's most likely to compete on price (rather than convenience or quality of experience). As an "early adopter" they will also likely gain considerable market share for leading the market amongst price discriminators.

Hospitals that perform a teaching function or provide care to an unusually large number of uninsured patients should be compensated for those costs via direct federal or state subsidy.

JD: I suspect similar to the current disproportionate share criteria used today...

If basic costs are uncompetitive, they should downsize or close.

JD: Ahhh, Friedman would be proud!

Thanks BC for such a thoughtful reflection...and to all you readers out there who take the time to leave comments!

Policy: A Word About Transparency

Price transparency has been one of those sleepy issues that has been gaining steam in the courts (around prices charged to the uninsured) and in the recent media regarding the White House's proposal to force providers to publically disclose how much they are being paid by insurance companies. For a quick synopsis of the issue click here.

So who should cares about pricing technicalities in the health care industry?

We should all care.

Granted, pricing transparency increases competition (which is why many providers are against public disclosure) - but, I believe, it is instrumental to helping patients (and their employers) better understand where their moneys (copays and insurance payments) are going (which incidentally, is likely to the insurance company given their huge windfalls this fiscal year).
In short, price transparency will force providers to compete within the broad categories of:

• Price
• Quality
• Convenience

While the government will continue to ensure a basic level of quality in institutions, price transparency will help people decide whether they want to valet park, watch HGTV post surgery, and have a massage prior to discharge. It will help patients decide whether convenience is more important than price, and force providers to compete in all three dimensions (truly forcing health care costs to decrease).

We have it today in the Minute Clinics. Here we pay $60 dollars to get a prescription for the cold I know my child already has. Since they take my insurance, it's the same price as a primary care doc, so they win my business based on convenience. If they don't take my insurance, I assess if $60 dollars worth the convenience. If I don't have insurance, they compete on price (as a primary care doc is $100 plus - I think). As the quality of my treatment is based less on diagnosis and more on treatment...I'm willing to be assessed by the nurse practitioner.

I've used them twice... and both times the nurse sent me a personal thank you note....another dimension of the quality category.

Yet I get distracted...

The real point of transparency in my mind is that it re-builds trust in the industry. Without the patient's trust that s/he is getting appropriate service for what they have paid into the system...people will grow to resent the system itself. Without transparency, patients will feel doctors are seeing them quickly because they want to make a greater margin on their business and they'll believe hospitals want to use the cheaper hip implant to simply save money, or they'll think the insurance company is just pocketing dollars I'll never see for decades.

Without transparency we will lose the public's trust. And that is not a policy dilemma, that is a cultural backslide that will take generations to fix...just as we're all getting older.

Renewal: Focus! Focus! Focus!

So it’s not the easiest read and I can’t say I agree with the authors on every point – but Porter and Olmsted Teisberg make a strong argument for reform in Redefining Health Care: Creating Value-Based Competition on Results

Here is a quick excerpt on how to create value on a patient (as consumer) level. I especially appreciate their attention to the service level of "medical condition." When someone goes to a hospital for a breast exam...they are likely not going to ask about your kidney transplant program:

“Patient value in health care delivery . . . can only be understood at the level of medical conditions. Overwhelmingly, value is determined by how well a provider delivers care in each medical condition, not its overall breadth of services. The value delivered in a medical condition arises from the full set of activities and specialties involved. It is not the individual roles, skills, or functions that matter, but the overall result. Moreover, for each aspect of care, value is determined by how well the needed set of skills and functions come together. In surgery, for example, value depends on not only the surgeon but also the anesthesiologist, the nurses, the radiologist, the skilled technicians, and others, all performing well. Yet no matter how skilled the surgical team, the overall care cycle is crucial. Unless the patient's problem is accurately diagnosed, the patient is properly prepared, and recovery and rehabilitation are managed well, patient results will suffer. Indeed, the impact of the cycle of care is even broader. Value may be enhanced by not performing the surgery at all, and treating the case in a different way. Value may be still greater if preventive care and advice is provided over time so that little or no treatment is needed at all.”

With respect to adding value on a hospital basis, we hear a strong argument for focusing services (synonymously with the argument above). While the thought of not "doing everything" may seem heretical to some...a strong argument is made for focusing on areas we do best:

“In value-based competition, most hospitals and physician groups will retain an array of service lines but will stop trying to offer everything. Most institutions should narrow the range of medical conditions served, or at least the types of cases they seek to address. Some practices may be phased out completely, while others are significantly reorganized. In most businesses, it is common sense to concentrate on products and services that create unique value. For many hospitals and other health care providers, however, doing so will require a significant change in mind-set in a field used to handling any patient who walks in the door. And deciding what not to do is an even more radical idea. In health care, the need for strategic choice of services has been avoided because of the lack of information and the lack of accountability for results.”

While I think they may glaze over the cross-subsidization of services within hospitals...and consequently fail to address who will deliver the least profitable services...it is certainly worth the read (I think).

Still interested? You can buy the book here.

Innovations: Medtronic and the Chronicle ICD

Quietly…Medtronic has begun late stage clinical trials of a truly remarkable device – the Chronicle ICD. As noted on their website and in various articles:

“The investigational device, known as the Chronicle® ICD, features both the traditional ICD’s ability to restore normal heart rhythm following a dangerously fast heartbeat and the first-ever real-time tracking of pressure inside the heart, body temperature, patient activity and heart rate 24 hours a day. Patients implanted with a Chronicle ICD will transmit that information from home, using a standard phone line, to their physicians who view the recorded data from a secure Web site in their office and then potentially make changes to patients’ medications or diet. “

While clearly a modern health care achievement…there is unfortunately…no one willing to pay for it. Medicare has yet to create a separate payment amount for the device – but rather will be using the current payment level for devices far less competitive. And as Medicare goes, so do the commercial payors.

In the end, I suspect it will be the hospitals who pay for the device in order to maintain a positive image in their communities and to provide their practicing physicians with cutting edge technology.

How will the hospitals continue to pay for the technology? Many, unfortunately will have to find ways to cross-subsidize the service with a more profitable one (such as margins from neurosurgery)…which are harder and harder to come by.

Sustainable? Not really…but than do we wonder why our health care costs are increasing?

No…we don’t want to have to think about that…we just want the latest and greatest…but you have to admit…having your physician be able to monitor your heart as he drinks his morning coffee and reads the newspaper…that’s pretty cool.

Hezbolla, Health Care and Social Cohesion

It is hard to ignore the sadness and grief gripping the Middle East. The escalation of war and violence is forcing thousands to flee in search of safer homes, streets, and basic amenities.

And yet, not all are leaving. Some are staying to fight, to rebuild, and retrench - on both sides - but for what reasons?

The answer, no doubt, is complicated and steeped in a context that has lasted hundreds of years. Many, however, have attributed the loyalty, or social cohesive nature of groups engaged in conflict, to the public goods many have been provided over the last few decades (especially those provided to the poor and underserved).

A notable example in the Middle East has been the rise and maintenance of power by Hezbollah in southern Lebanon. In short, Hezbollah has made significant investments in schools and health care since the 1980s. So much so, that the government of Lebanon has made minimal investment in the area because of Hezbolla's significant development efforts.

In this context, it is less surprising to see why people are staying to fight and live in their communities. Idealogues have educated their children and taken care of their ailing families when they, themselves and their government, could not do so.

The question then presents itself - at least in the US - in our search to develop efficient markets (ex. privatization of health care and education) have we eroded the social cohesiveness that makes us stand up and protect one another? While I am by no means arguing that the control of public goods should be used for coersion, but rather that the provision of public goods may be instrumental in creating social norms that inherently force us to support one another.

While we often think of health care policy as a means to improving the health and longevity of individuals, it might also serve us to review our policies through the lens of whether they are pulling us together as a society.

How long until transparency?

The New York Times published today a report on CMS' slow release of complication data related to heart difibrillator devices.

To read the article -click here

The surpirising part was not the actual complication rate (roughly 4% in the study - whereas a recent report in the Journal of the American College of Cardiology showed a 10.8%) but that CMS was still not willing to release the doctors and hospitals with the higher complication rates.

Granted, there are always two sides to the story. Those hospitals and physicians that do "more complicated" procedures may have higher complications - but those same physicians - statistically - often do more procedures - hypothetically making them better at the procedure and achieving a more normal bell curve that represents the population at large

To me, however, the issue is simple. Would I want to know whether or not my mother's physician had done a procedure before...and whether or not the physician had a history of complications when performing the procedure?

Of course...unfortunately we still won't be empowering patients and rewarding those who do a good job any time soon.

Grassley and Baucus Push For Delaying DRG Changes

If you're like me, you always seem to catch policy changes once their rolling down hill and are already determined to drastically change the way your health care business is run.

So here's my small attempt in alerting you to big changes...

In case you aren't aware, CMS is planning to significantly change the inpatient DRG system in fiscal 2007. In short, the new system will be based on a methodology put together by 3M (aren't they the folks who brought us floppy disks?) and largely decided by projected costs rather than projected charges. While there has been little transparency to how costs are computed, and lots of opinions on who it will help and who it will hurt, it does appear to be a more "fair" system and should help hospitals recoup the rising prices of devices, implants and other major supply costs.

And while Grassley and Baucus pushed for the legislation, given the fact that know one can figure out how the policy change will affect them (i.e. hospitals, suppliers, etc.) they've asked for the implementation to be delayed a year. To read their actual letter to CMS - click here.

More importantly - CMS has noted that their final regulations on the new system will be August 1st. So check out your monthly subscription, or if you have more exciting bedtime reading, just check back her for the published ruling and its intended affects.