Next Things First


Lost in D.C. with The Dartmouth Atlas (reprint)
June 27, 2010, 7:36 pm
Filed under: health policy, value-based purchasing

Amazing what does not change in a year’s time… this post, originally posted to the Health Value Blog a year ago, is still as relevant as it was then. Perhaps even more important now – since the Dartmouth Atlas (and its use by Atul Gawande in his now famous New Yorker piece) influenced much of the health reform debate.

The HVBlog pulled this post – and I am very pleased that the authors have given us permission to reprint it here…

Lost in D.C. with The Dartmouth Atlas

by Hal Andrews & John Morrow

We know some of the people involved in the Dartmouth Atlas Project, and we think their analysis is important. Even so, using 2005 Medicare data to inform comprehensive payment reform is inadequate.

As such, we are surprised and dismayed at how policymakers are using the findings as the map for healthcare reform in Washington, D.C. We are also frankly appalled at how The New Yorker article by Dr. Atul Gawande has seemingly become the guidepost of reform for policymakers. The reason is that the conclusions that The White House and much of Congress have drawn from The New Yorker article are, at best, suspect and, at worst, completely wrong. Reengineering 20% of the economy is a large task, in our view, and getting the facts straight is important.

So, what have we done? Instead of using an “Atlas” to analyze McAllen and El Paso, we suggest using a “GPS” to triangulate the position that hospitals played in overall excess cost and utilization. Doing so provides some critical facts that The New Yorker failed to report.

At first blush, McAllen and El Paso are quite similar:

  • 2008 populations are within 1% (752,020 for McAllen vs. 759,868 for El Paso).
  • Median age of the population is similar, at 28.2 years for McAllen compared to 30.6 years for El Paso.
  • Per capita income for each market is depressingly low, with $12,276 for McAllen and $16,838 for El Paso (making El Paso 37% wealthier, as suggested by the physicians in McAllen).
  • Medicare hospital utilization rates are similar, with 28% Medicare utilization in McAllen and 30% Medicare utilization in El Paso.
  • Total hospital utilization (i.e., all-payer data) when compared to the population were similar in calendar year 2007 (the most current year that all payer data is available), with 12% hospital utilization in McAllen versus 10% hospital utilization in El Paso.
  • Each market has 2% workers’ compensation hospital utilization.
  • Per capita hospital utilization is similar, with a rate of .48 patient days per capita in El Paso compared to .53 patient days per capita for McAllen.
  • McAllen cost per case is 5.4% lower than El Paso, and McAllen’s average length of stay is 9.6% lower than El Paso.

Based on these similarities, McAllen is in many ways a more desirable option for hospital care.

So, what about the real differences between McAllen and El Paso?

Overall, and not just for the Medicare and Medicaid population data (which were central to the Atlas and The New Yorker perspective), McAllen’s average cost per case is $315.00 less than in El Paso, representing in total $23.6 million in incremental costs that could be saved if all of the El Paso cases had been treated in McAllen hospitals. For policymakers who are concerned about the price paid by the uninsured, the average charge per case is $7,841 more in El Paso than in McAllen.

Importantly, the “excessive” costs attributed to McAllen do not occur in McAllen, or even in Hidalgo County. A full 6% of McAllen residents left McAllen for care to other markets such as Brownsville, Houston, San Antonio, Corpus Christi and Dallas! A total of $283 million in charges migrated away from McAllen, yet those costs are attributed to the population and demographics of the beneficiaries living there. As a result, the Dartmouth Atlas analysis overestimates the costs attributed to McAllen. As a comparison, $63 million of charges out-migrated from El Paso to other Texas hospitals during the same period (the all-payer analysis does not reveal out-migration to any other states; El Paso is closer to Phoenix than Dallas).

What about the important things, like quality? The March 2009 release of the Hospital Value Index™ reports McAllen’s average index score at 42.76 with El Paso’s being 43.83, just over one basis point difference. This indicates that the markets are nominally different on quality, core process measures, mortality, patient safety and patient satisfaction and experience. Shorter lengths of stay, lower costs, and lower mark-ups for charges on patient bills make for a more desirable profile of McAllen hospitals than El Paso.

In summary, the most current all-payer data (2007) simply does not support The New Yorker piece, which was partially based on 2005 Medicare data from The Dartmouth Atlas. For both McAllen and El Paso, the cost per beneficiary would decrease if the beneficiaries did not leave the market.

These markets have a great deal in common, but critical differences not discussed in The New Yorker. We are reminded how important it is to “follow the money”, yet without the anecdotes about what is going on in McAllen, the empirical data report that the hospitals in McAllen aren’t the problem.

We think that there are several important questions that arise:

  • Could an entire industry be led astray by the miscalculations of Medicare spending delivered by a half dozen hospitals in McAllen and El Paso?
  • Should policymakers draft legislation to reform the provision and coverage of healthcare based solely on (old) Medicare data?
  • Is the nation going to allow a handful of well-meaning, but uninformed, policy-makers to reform healthcare based on the view of an article in The New Yorker?

Heaven help us if we do…



What a Difference a Year Makes…
June 27, 2010, 7:23 pm
Filed under: Uncategorized

There is no way to hide it, Next Things First took a nap that lasted a little too long. While we were dozing, the world as we knew it changed – wasn’t health reform dead in the water this time last year?

We will try to pick things up as if nothing ever happened…. except for the health plans running for the hills, the providers all scrambling to become ACOs and HCA going public (again). At least some things never change.



Reform: Finally, Some Discussion of the Real Issues

In light of all the distraction recently generated by discussions of health care IT (and even, cue the smoke machines, Health 2.0), I was very pleased to find Senator Tom Coburn, MD, and Regina Herzlinger’s piece in the Huffington Post.

In a week that for many of us has been dominated by reading the “wouldn’t-it-be-cool-ifs” of messenger bag-carrying technology evangelists, it was refreshing to see a call for a much needed national debate around the *real issues* facing the health care system.

With little fanfare, Congressional leaders may be near to agreeing on the most sweeping expansion of government in a generation – the de-facto takeover of the health insurance market by the government. Congressional Democrats are already icing the champagne. When the President’s “Medicare for all” plan is coupled with the budget, which contains a “down payment” of $634 billion over the next decade for health care, government-run health care may be inevitable.

All sides in this debate acknowledge that the U.S. has long needed easier access to health insurance. This need has gained urgency for the many Americans who are fearful of losing their employer-sponsored insurance in the midst of a recession. Unfortunately, the President’s plan will not only endanger the U.S. economy, but millions of patients as well.

They make clear that the issue here is cost containment. Or, perhaps better, that solving the “access” issue without controlling costs may be politically expedient but is a recipe for disaster.

The fundamental problem is that the President and congressional leaders lack realistic plans to control the health care costs that are already crippling U.S. global competitiveness. As a percentage of GDP, our businesses spend roughly 70 percent more on health care than competitors in other developed nations, yet we hardly receive 70 percent more in real value.

We talk a lot about cost containment – and in the world of health care venture capital, some of the most exciting investment opportunities address just this set of issues. But translating these decidedly market-focused ideas into terms that are politically palatable is difficult. Denying reimbursement for treatments, no matter their relative value or efficacy, has interest groups rushing to mount the barricades. However, as Coburn and Herzlinger point out, there is a risk of even greater hazard if we don’t engage the cost containment challenge now:

In the end, the Democrats’ health care reform will require drastic rationing… Consider Canadian patients, who may wait a year or longer to get radiation therapy. Or ask one of the nearly 1.8 million Britons who are waiting to get into a hospital or have an outpatient procedure. Or talk to the German breast cancer patients who are 52 percent more likely to die from the disease than Americans.

Concerns about rationing and patient outcomes are not demagoguery. How else can a government control costs in the real world? Many experts, including the Congressional Budget Office, dismiss as wishful thinking the Democrats’ claims of achieving efficiencies through bureaucrats’ dazzling implementation of information technology and other technocratic tools.

And this is where the real world collides with the health care technology bandwagon. It goes without saying that health care lags behind in the implementation of back office and administrative information technology. And certainly this is due in some part to all the factors that are debated regularly in the blogosphere. However, it is also due to the basic fact that there has been little ROI for physicians implementing these technologies.

I worry that we are just further confusing the issue. As my colleague Alan Buffington points out:

Isn’t it interesting that no matter how many times they are corrected, politicians and media folk refuse to distinguish between health care and health insurance.  Failing to make this distinction is what causes the problems discussed in the article.

If you watch the blogs, Twitter or CNN, you will have proof that the problem Alan points out is deep and widespread. The problem with health care is that it is “hard” – complex, path dependent, interlocking, huge, with substantial ethical and moral considerations. For most people (especially politicians),  this is way too much.

Posted by RobC

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Rubbernecking: Watching the Critique of Health 2.0 Get Personal
April 28, 2009, 4:33 pm
Filed under: health 2.0 | Tags:

So, while it has taken all of our collective restraint to remain silent about the growing fury and froth in the Health 2.0 “space,” we have to point our readers to John Chilmark’s spot-on critique of the Health 2.0 Conference and the fast-bubbling brouhaha in Chilmark’s comments section. Click here to watch as a reasonable debate takes a turn for the nasty.

Full disclosure: We didn’t attend the Health 2.0 conference – but thanks to Twitter I feel like I lived through it five times over. Of course, by all accounts, there were some very interesting things to come out of the event. But for those outside the echo chamber, it is difficult to identify the value amidst the hype. Hence, I appreciated Chilmark’s comments and believe that the challenge is to bake the features and functions of Health 2.0 into the reality of the practice of medicine and the health care delivery system.

Posted by RobC

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innovateHealth Agenda has been Posted
April 28, 2009, 4:03 pm
Filed under: innovateHealth, seattle market | Tags: ,

Just a quick FYI that the agenda for the innovateHealth Capital Meets Innovation Summit (May 12 in Seattle) has just been posted. You can find it here…

From what we can tell, the turnout looks incredible – we have health care industry types, entrepreneurs and investors coming from all over the country (and some – it seems – from Europe) to join the conversation and see what’s cooking in the Pacific Northwest’s health care cluster.

You can click through to register for the event on innovateHealth’s blog.

Posted by RobC

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News about InnovateHealth; Call for Entrepreneur-Presenters
April 24, 2009, 8:32 am
Filed under: innovateHealth | Tags:

ih_logoWe are off and running with innovateHealth’s first Capital Meets Innovation Summit here in Seattle on May 12. All the details are on the innovateHealth blog – but we have copied some of the important information below. Hope we can see many of you there next month.

Also, the organizers have issued a call for entrepreneur-presenterssee the details here. Any story about raising capital, not raising capital, or adjusting to the new venture capital world order would be welcomed and encouraged. Stories of survival and success. …

Capital Meets Innovation Summit

Tuesday, May 12, 2009
8:00 a.m. – 12:00 p.m.
Davis Wright Tremaine
1201 Third Avenue, Suite 2200
Seattle, WA 98101
(206) 622-3150

Davis Wright Tremaine, iMedExchange, Clarity Health and Faultline Ventures invite you to attend the innovateHealth inaugural Summit. This program will highlight successful strategies being used by health care entrepreneurs from the Pacific Northwest to access capital and build their businesses during “droughts” in the traditional funding markets. In addition, the Summit will feature an opportunity to introduce investors from across the country to the next generation of technology-enabled health care services companies clustered here.

To view the full agenda and register, please CLICK HERE.

Posted by RobC

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Remembering Rick Carlson – In His Own Words
April 23, 2009, 11:30 pm
Filed under: health policy | Tags: ,

Today in Seattle, the memory of health care thought leader and industry veteran Rick Carlson was celebrated by a room full of friends, family and colleagues. Around the room, Rick’s family had posted quotes from his articles and books – which served as both a testament to Rick’s talent as a thinker and writer and as a virtual history of health care reform efforts.

I appreciate Rick’s son Josh allowing us to share these excerpts. They are important now as we remember Rick – and perhaps even more so as we prepare for a yet another vigorous  health care debate.

“Well over half of those who seek physicians’ services do not have medical disorders. Rather they are afflicted by disorders of the spirit bred by the suffering and anguish that accompany life.….. [M]edicine has fostered a profoundly dependent public which searches for cures that do not exist.” The End of Medicine. Pg 26-27.

”Should all (technological) improvements be considered health care and thus covered by existing (insurance) plans – full speed ahead and damn the premiums?” The Terrible Gift. Pg 235. 2003.

“If someday we want to think seriously about subjugating medicine to the needs of society, there are basically three roads we can take. First, we can decide not to… Alternatively, we can ask government to level the playing field a la Scandinavia. … There is a third possible road: we can — and most likely we will — jury-rig a hybrid combining some of the pros and cons of each of the first two models.” The Terrible Gift. Pgs 231-233. 2003.

“The emergence of molecular control technologies raises a truly Darwinian question of survival for much of the human race. Perhaps Americans can plan safe and worthy use of biotech medicine only after we confront our true place in the world and learn to see ourselves as others see us. Until then, trusting our secret agencies with the keys to life could be the worst policy decision since Montezuma showed Cortez the Gold Room.” The Terrible Gift. Pg 223. 2003.

“Genomics will force us to decide what we are willing to pay for health care, in costs both financial and social. Because of its size and power, our health care system might be compared to a mighty river. As therapeutic medicine expands and an entirely new currents of upgrade medicine improve human endowments and performance, that stream could overflow its banks and inundate all other aspects of life.” The Terrible Gift. Pg xii. 2003.

“To a degree, the rise of personal genomics markets, generally, is an outgrowth of rising consumer activism in health care under the rubric of ‘consumer-directed health care.’ The policy objective is to increase the consumer’s investment of time, commitment to health living, and most of all money, into the health care system…. The long term expectation (hope?) is that an educated, motivated consumer with ‘skin-in-the-game’ will be more parsimonious in the use of scarce health care resources.” Personal Genomics: public policy at the frontier of consumer markets in health care. Pg 1. 2009.

“The personal genomics market leaders deny that they are just selling ‘curiosity’ to the affluent and worried well, arguing that individuals fortified with personalized data will be motivated to address and minimize controllable risk factors and hence prevent or at least slow the onset or progression of chronic disease. This is a provocative and promising premise, and may be right, but to date we have very little evidence to support it, acknowledging at the same time that we haven’t had enough experience with highly personalized risk information to know the likely answer.” Personal Genomics: public policy at the frontier of consumer markets in health care. Pg 2. 2009.

“..genetic discrimination can be practiced by communities, and social systems, not just by employers and insurance companies, though its forms are different….And, finally, it is now being appreciated that much of our accumulating genetic information could lead us down one of the slipperiest of slopes if it becomes the fodder for engineering human perfection.” Personal Genomics: public policy at the frontier of consumer markets in health care. Pg 5. 2009.

“In my view, the choice to develop a system to delivery medical care through nearly exclusive allocation of resources for that purpose, was made for political, social and economic reasons rather than for therapeutic ones.” Western Journal of Medicine. Pg 466. 1979.

“Holistic thinking, as an epistemological notion, requires that human beings be perceived as whole persons made up of physiological, emotional, intellectual and spiritual dimensions that dynamically interact, and that any approach to improving the health of human beings, either individually or in groups, requires placing them in a larger and richer context than does traditional medicine.” Western Journal of Medicine. Pg 468. 1979.

“In health care, genomics technologies are disruptive yet potentially cost-effective because they enable primary prevention, the antidote to runaway costs and declining productivity. The challenges to integration are great, however, and many bioethical and social-policy implications are alarming. …we must debate genomics vigorously if we are to act wisely. Public policy must lead.” Journal of Health Politics, Policy and Law. Pg 39. 2008.

“ [genomics] is aikido, not Special Forces. Genomics taps the body’s wisdom by immersing itself in the ebb and flow of the body’s information system – the genome – rather than by looking only to extirpate the results of molecules gone bad by providing a patch and then leaving us ignorant of the proximate cause…. We are not born healthy and made sick; rather we are born predisposed to certain conditions, characteristics, strengths, and limitations.” Journal of Health Politics, Policy and Law. Pg 42. 2008.

“As genomics metastasizes, every business model for every health care sector will be affected, some profoundly.” Journal of Health Politics, Policy and Law. Pg 43. 2008.

“[HMOs’] initial cost-cutting success – achieved with an axe, not a scalpel – led the way to the hedgerows of the vilified managed care cost-control systems that followed.” Journal of Health Politics, Policy and Law. Pg 46. 2008.

“Lots of money will always be made in health care – we just need to give those who make markets reasons to make the ones that would improve our public’s health.” Journal of Health Politics, Policy and Law. Pg 48. 2008.

“In the 1950’s, when the Salk vaccine displaced the crude technology of the Iron Lung, science writers and the popular press loudly proclaimed the arrival of a golden age of modern medicine, a medicine that would systematically eradicate the lengthy and gory list of human maladies. That age proved to be more tin than gold. ..This must necessarily chasten any prediction about the future of medicine.” Public Health Genomics. Pg 180. 2009.

“Our private health insurance model is a hybrid of economic ruthlessness and utilitarian social policy…. through which we are made to take care of each other though abstractly, because the benefits we don’t need go to meet the needs of others we don’t know.” Public Health Genomics. Pg 182. 2009.

“There is a real peril that lowbrow theories wrapped in tendentious and oily slogans will get the public’s ear and gain even footing with scientific proof as worthy of belief.” Health Affairs. Pg W-5-467. 2005.

“Real reform is not on the agenda. There is no money for real reform because we spend it all on medicine.” Healthcare Forum Journal. Pg 18. 1993.

“Policy initiatives are being tossed around like obscenities at a hockey game…” Healthcare Forum Journal. Pg 18. 1993.

“Perversely, since job creation is the central goal of this new administration, reforming the medical care system by cutting costs may just be the worst thing to do…. No tooling up is required. Just let the tides loose. Medical care can and will encroach like the worst weeds in your prized front lawn.” Healthcare Forum Journal. Pg 21. 1993.

“Here are my suggestions for initiating real reform:

  1. Explode the physicians’ worm’s-eye view

  2. Dismantle the replicating engine

  3. Discipline the spoiled child

  4. Turn the reward system upside down

  5. Honor the consumer

  6. Admit that we can’t afford it anymore

  7. Get rid of the insurance industry

  8. Force medicine to be a science

  9. Advocate health aging”

Healthcare Forum Journal. Pgs. 18-26. 1993.

Posted by RobC

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