Saturday, August 30, 2014

Who Should Be the Buyer?

If market forces are to be used to control the cost and quality of health care, there will be a need to decide whether patients or insurance companies should play the role of buyer.
The pros and cons of selecting insurance companies are currently being played out in Nebraska where Nebraska Blue Cross Blue Shield is locked in a contract dispute with CHI Health, formerly called Alegent Creighton Health/Catholic Health Initiatives Nebraska.    As discussed in an earlier posting, CHI has managed over the years to get payment rates from Blue Cross that, according to Blue Cross, are ten to thirty per cent higher than it is paying anybody else for the same services.   CHI admits to receiving somewhat higher rates, which it justifies by claiming that its high quality services save money by reducing complications, readmissions, etc.   As indicated in my earlier posting on this subject, attempts by others to confirm that claim have not been successful.
Based on what one can tell from the newspapers, the two sides to this dispute appear to be about evenly matched.  The absence of a contract will undoubtedly cause CHI to lose some patients and cause Blue Cross to lose some subscribers and each seems to think that the other will be hurt more.
The current contract between Nebraska Blue Cross and CHI expires at the end of August and according to reporting by the Omaha World Herald it does not appear that an agreement will be reached by that time.  The result will be that Blue Cross subscribers obtaining care from CHI will have to pay out-of-network levels of copays, which will be much higher than they have been paying up to now. 
It seems clear that Blue Cross is able to put more pressure on CHI than any individual patient or group of patients could.  On the other hand, the absence of a contract will result in some inconvenience and added cost to individuals, to which at least some of them will object and put the blame on Blue Cross.
My own leaning is to assign the buyer role to well-regulated insurance companies.  But there is certainly ample room for others to come down in favor of assigning it to patients.

Wednesday, August 06, 2014

Don Berwick for Governor
Don Berwick is running for governor in Massachusetts.
Healthcare people will recognize Don as the founding and long-time executive head of the Institute for Healthcare Improvement (IHI), the organization that more than any other was responsible for igniting the quality movement in health care.  He is a pediatrician who previously had been the chief quality officer for the Harvard Community Health Plan.
Don left IHI to become head of the federal Centers for Medicare and Medicaid during the planning period of Obamacare.  Republicans in the Senate were not about to approve the appointment of a liberal like him and so his tenure there was limited to the 17 months allowed for a temporary appointment.
After leaving his federal duties, Don decided to run for governor in his home state and has been actively engaged in that effort.
I’ve known Don since the early 1990’s when he played a role in getting the quality effort under way at Henry Ford Health System in Detroit, where I was working at the time.  Being a longtime admirer of him, I’ve been somewhat active in his current political effort.  The next step in his campaign is the Democratic primary which takes place early next month.  He is running against two established politicians who have the advantage of established political organizations and better name recognition.  However, Don has been able to match and exceed them in fund raising.
Readers who don’t vote in Massachusetts will note this as a matter of passing interest.  For Massachusetts voters, I recommend voting for Don in the upcoming primary.
Those interested in donating to Don’s campaign or learning more about it can go to www.berwickforgovernor.com.



Saturday, August 02, 2014

Healthcare.gov Debacle

The federal Government Accountability Office, a nonpartisan investigative agency of Congress, reports that the Healthcare.gov debacle was caused by management failures.
Just as I suspected.
The GAO finding was reported in an AP article that appeared in the July 31 issue of The Boston Globe. 
GAO was quoted as stating that the managers responsible for the project lacked “effective planning or oversight practices” for the development of the web page.  It found that “the administration kept changing the contractors’ marching orders….creating widespread confusion” and that “changes were ordered in seemingly arbitrary fashion, including 40 times when government officials did not have the initial authority to incur additional costs.”
Failure of large information technology projects is common in both the public and private sectors.  The main reason, in my opinion, is that managers have the mistaken notion that computer projects can only be understood by computer experts.  They therefore neglect to decide and declare in specific terms what the project is intended to do and how it is to operate.  Then as the project proceeds and they learn how the final product will function, they order changes that disrupt and confuse the planning process – decisions that should have been made before planning started.
Project management remains a large blind spot in the field of administration.  Let us hope that the Healthcare.gov debacle becomes a learning experience.

Wednesday, July 30, 2014

Doctors and Insurance Companies

Should insurance companies have the right to overrule doctors?
That question is currently being debated indirectly in the Massachusetts legislature.
Massachusetts has recently experienced a spate of deaths related to recreational drugs and the families of addicts are pressing the legislature to require health insurance companies to cover inpatient treatment.  The insurance companies, with the support of a number of organizations and individuals in the treatment field, claim that inpatient treatment of drug addicts has been demonstrated to be outmoded and usually unnecessary. 
The issue was the subject of a lengthy article in the July 29 issue of The Boston Globe discussing two bills dealing with it, one in each house of the legislature.  Reading through it, I was struck by the following sentence appearing in all innocence about a third of the way through:
“Especially worrisome to insurers, both bills limit insurers’ ability to override treating physicians’ decisions.”
In my day, the very idea of insurers overriding medical decisions would have been rank heresy, but apparently no more.  Now it seems as though it is well enough accepted that insurers can openly claim the right to do it.
I think it is something to worry about.  But the medical profession has brought it on itself.  By failing to require its members to adhere to best practices, it has created the need to which insurers are responding.
I hope the day is not too far off when capitation will be the dominant form of payment and decisions about effective treatments are made by providers.  I would much rather those decisions be in the hands of my local hospital and its medical staff than in the hands of insurance companies trying to maximize value for investors.

Saturday, July 19, 2014

 Healthcare Economics
There is something of a flap going on in Massachusetts over the desire of Partners Health Care System (formed by the merger of Massachusetts General Hospital and Brigham and Women’s Hospital) to acquire three more hospitals in the Boston area, two in the north shore and one south.
Partners has for some time dominated health care delivery in eastern Massachusetts.  Its reputation is such that it would be nearly impossible to sell a health insurance policy in the area that didn’t cover its services.  Taking advantage of that, Partners has been able to leverage health insurance companies into paying it considerably higher rates than are paid to other providers.  That has caused some grousing, but up until now not enough to spur much in the way of action.
Partners’ proposed acquisitions require regulatory approval and a few weeks ago Martha Coakley, the state’s Attorney General, announced that she had reached agreement with Partners on conditions that would allow them to proceed, subject to approval by the Suffolk County Superior Court.  That has produced a small storm of protest.  Competing hospitals have filed objections.  Two gubernatorial candidates have come out against it.  Now the state’s Health Policy Commission, an advisory group, has expressed reservations.  The story has received coverage in the local press.
In my mind, the Partners merger should never have been allowed.  Its almost sole purpose of gaining negotiating power with payers was clear at the time to anyone who understood health care institutions and has been confirmed by its actions ever since.  But people have not wanted to believe that.   We have been very slow to accept that health care providers are not simply organizations engaged in the healing ministry, but also entities that engage in economic behavior.  When they find themselves with economic power, they exercise it. 
Maybe we are becoming more realistic about the matter.


Saturday, July 12, 2014

Buying Care

I have always been skeptical about the popular idea that healthcare would be better if consumers (i.e., patients) had an incentive to pick providers based on cost and quality.
One reason for my skepticism is that the psychology prevailing at times of illness or injury doesn’t seem to me to be conducive to cool judgments about where to get care. 
Another was illustrated by a front page story in the July 6 issue of the Omaha World Herald headlined Best bang for buck at hospitals is no easy call.  It seems that Blue Cross Blue Shield of Nebraska is asking Alegent Creighton Health hospital and physicians to lower their rates which, it claims, are some 10 to 30 per cent higher than those of comparable systems.  Alegent claims the difference is justified by higher quality which reduces things like complications and re-admissions.
The World Herald tested the claim by comparing ten systems in the area, using 20 Medicare price and quality measures.  Based on the evidence, as shown in 12 lists and 12 bar charts, the World Herald decided that the insurance company’s claim was justified, but took a full page of text to explain its conclusion.
Even so, the article conceded that there was evidence on both sides of the issue.  For example, each of the ten hospitals ranked first in one category.  Seven ranked last in one.  Imagine, then, a patient faced with a medical need trying to go through a similar process.  Creighton, the hospital that gave rise to the issue, ranked first in four categories and last in five.
If we want to employ market forces in an attempt to make health services both better and more efficient, I think there is no avoiding dependence on insurance companies to develop packages that they claim offer the best value and then convince consumers that they are right.



Saturday, June 21, 2014


The article on page 8 of the May 5 issue of Modern Healthcare was titled Spending jump puzzles providers.  The article on facing page 9 was titled Insurers brace for high-cost Sovaldi.  Sovaldi is the medicine that treats Hepatitis C at a cost of $84,000 per patient.
While we are understandably concerned about the high and rising cost of care, we pay no attention to how we got into this situation.
For most of recorded history, healthcare was paid for by the sick and injured.  Patients paid for care when they received it.
Then in the 1930’s, somebody in Dallas invented what became Blue Cross.  For a modest monthly payment, school teachers who subscribed were guaranteed that when they needed hospital care it would be paid for, within defined limits.  So now hospital care was being paid for by well people rather than by the sick and injured. 
During World War II, the federal government, responding to pressures to raise wages, decided that employers could provide health insurance to employees without its value being considered taxable income to the employee.  Under that arrangement, health care would be paid for by employers.
During all this time, health care for those unable to pay – the so-called medically indigent – was largely the responsibility of local governments and private charity.  The cost of care gradually grew beyond the capacity of these sources and in 1960, the federal congress enacted the Kerr-Mills bill, which provided matching grants to the states to be used to pay for health care for the medically indigent aged.  This added federal and state treasuries to the sources of money that supported health care.
Kerr-Mills never worked very well and Medicare and Medicaid were adopted in 1965.  Medicaid was a more workable federal and state program of funding health care for the medically indigent.  Medicare was for seniors, and was financed by a national payroll tax – causing health care for retired seniors to be paid for by the employed population.
Medicare as originally adopted did not cover prescription drugs.  That omission was rectified in 2003 with the enactment of Part D – which included a healthy federal subsidy.
Despite all these initiatives, a sizeable portion of the population remained uninsured, an issue addressed directly by the Patient Protection and Affordable Care Act (aka Obamacare) which was passed in 2010.  It made health insurance mandatory, so that much of the care for which providers had previously not been compensated would now be paid for.  The program also greatly expanded the number of people eligible for Medicaid and provided federally financed subsidies for those considered unable to pay the full cost of health insurance.
And during all this time we have been encouraged by the tax laws to donate money in support of health care.
So although we have long claimed to be worried about the high cost of care, what we have done over the years is to tap every available source of money to support it, with each measure increasing the amount of money funneled to providers.
And we wonder why health care costs so much.

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