Next Things First

Lost in D.C. with The Dartmouth Atlas (reprint) by Rob Coppedge
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…


More on the Value of Care (Hint: It Varies Widely) by charlottegee

“Value is the watchword in today’s economy, and health care cannot be the exception.” – Hal Andrews, CEO of Data Advantage

Back in December, we featured a guest post by Hal, where he wrote:

VBP [value-based purchasing], in some form, is headed to a hospital near you. Hospitals have always ultimately adapted to changes in the financing of healthcare, but usually reluctantly and slowly. Value can, and will, be defined for healthcare, and CMS is leading the charge. History suggests that private payers will not be far behind. If you don’t know your value proposition today in comparison to your peers, time is not on your side. If you don’t join the discussion of how value should be defined, others will fill that void.

That post continues to see quite a bit of traffic. … Google searches for “value-based purchasing” remain high. And the information available on value of care also continues to build: According to the latest edition of the Hospital Value Index™, a study that looks at quality, affordability and efficiency, and patient satisfaction at more than 3,000 hospitals, the value of care offered to hospital patients can vary by as much as 40 percent across the United States. (Data Advantage developed the Hospital Value Index™.)

Just a couple of the study findings:

  • The median Hospital Value Index™ score declined more than 8.5 percent since June 2008.
  • Hospitals in the Northeast (also known as CMS Region I) have hospital value scores some 40 percent better than those in the Southwest (CMS Region IX). The sharp contrast between Regions highlights the complexity of measuring value. For example, some hospitals provide similar quality at a lower cost, while others provide higher quality at a similar cost.

More here (PDF).

In the announcement, Hal noted: “We found that the delivery of high value care is widely divergent across the country, among regions, and even among markets. Measuring value in healthcare is more complex than measuring solely quality or cost and represents a significant challenge for every stakeholder who wants to improve healthcare.” We talked with Hal to get a little more perspective on what all this means. hcvalue

1) Explain to someone who doesn’t know anything about how health care works (say, someone who just goes to the doctor when he gets sick) why your findings are important?

In some ways, consumers and employers have operated under the assumption that “priceless quality” in health care was OK. As consumers increasingly become responsible for shouldering more of the cost of healthcare, we believe that value will become as important in health care as it is in other buying decisions.

Obviously, for matters of life and death, a value analysis will place more emphasis on quality than price; at the same time, for basic health care, like blood tests or X-rays, we believe that understanding the relationship between quality, price (what is charged), cost (what is paid) and patient satisfaction will become more important.

2) I’m a little confused. The data shows that quality scores “significantly” declined since June 2008, but “patient safety, patient satisfaction, and affordability and efficiency scores showed improvement across virtually all hospitals.” How does that work?

The Index is a composite number that moves depending on the number and weight of variables. The most recent Index included information about mortality that was not available in the first Index, and including mortality in our calculation of quality offset gains in other elements of quality.

3) How can hospitals, and health care in general, take this data and use it to spur innovation in care? Given the news that came out recently about 50 percent of hospitals being unprofitable in 3Q 2008, there’s little cash on hand to pay for staff or facility improvements or IT or anything. Give one example of what a hospital CEO might do to improve her hospital’s value rating, now that she’s seen this variation in value.

Any unprofitable business should perform an internal and external analysis of its performance. Benchmarking is the starting point in this analysis – a hospital should analyze what service lines are unprofitable (internal) and then compare that to its peer group (external) to understand where the opportunities for improvement are. In anticipation of CMS’s proposed Value-Based Purchasing, every hospital should have a clear understanding of how it compares to the benchmarks that CMS will use.

4) How does all this fit in with the current political landscape, with the idea of larger health care reform in general?

CMS first proposed Value-Based Purchasing in the fall of 2007, at the peak of the stock market. Even then, it was clear that “priceless quality” was not sustainable. In the current economic environment in which value is the watchword, healthcare can no longer be the exception.

5) Will having this kind of information at their fingertips drive people to, well, drive to other areas of the country to get care?

We have found wide variance in value across the country, within regions, and within individual markets. Value is different to everyone, and we would hope that people would use the information to make decisions that fit their own personal needs.

Posted by CharlotteGee

Value-Based Purchasing: Coming to a Hospital Near You (From Hal Andrews) by charlottegee
December 2, 2008, 11:15 am
Filed under: health policy, quality, value-based purchasing | Tags: , ,

Remember the halcyon days of 2007, when the stock markets reached their peak? In the midst of the (seeming) boom, Congress instructed CMS to submit recommendations for an initiative called Value-Based Purchasing (VBP). In November 2007, CMS submitted its outline of a VBP initiative to Congress. The lynchpin of VBP is “to transform Medicare from a passive payer of claims to an active purchaser of care”.

Since that day, CMS, particularly Thomas Valuck, MD, MHSA, JD, the Medical Officer and Senior Advisor to CMS, has spoken widely about its plans to implement VBP.

In a nutshell, VBP proposes to link payments to results, including quality, efficiency, patient satisfaction, and other measures. CMS’s November 2007 proposal suggests that hospitals should be rewarded for sustained excellence and improvements from a baseline. On November 26, 2008 CMS issued a release regarding the development of VBP for physicians.

Back to the fall of 2007 – if Congress was contemplating VBP when times were good, then today’s economic woes seem likely to accelerate the concept. Senator Baucus’ plan advocates the implementation of VBP, though a bit more slowly than CMS has proposed. The Baucus plan, which incorporates many of the tenets of President-elect Obama’s plans and received the initial blessing of Senator Kennedy, is a possible launchpad for reform in the Obama administration.

If you ask a hospital executive what VBP is, you get various answers, and occasionally a blank stare. If you ask the Federation of American Hospitals, you get a lecture on how CMS adopts regulations (sort of like the old Saturday morning “Schoolhouse Rock” episode on how a bill becomes a law).

On the other hand, every hospital executive knows about POA and RAC and P4P and HCAHPS and Never Events and Core Measures. Many hospital executives have approached these initiatives as discrete (and unrelated) initiatives. Connecting the dots of these seemingly unrelated initiatives reveals the outline of VBP.

Ask a hospital CFO to estimate the amount of revenue at risk under POA and RAC and Never Events and P4P – most of them can get to 5-10% of revenue pretty quickly. Couple that with declining investment income, and hospitals should have a new urgency to understand where they are in a VBP environment.

VBP, in some form, is headed to a hospital near you. Hospitals have always ultimately adapted to changes in the financing of healthcare, but usually reluctantly and slowly.

Value can, and will, be defined for healthcare, and CMS is leading the charge. History suggests that private payers will not be far behind. If you don’t know your value proposition today in comparison to your peers, time is not on your side. If you don’t join the discussion of how value should be defined, others will fill that void.

Submitted by Hal Andrews