Consolidation

Austin Frakt, in an interesting and somewhat lengthy post, talks about a medical arms race for hospitals—in the past they used to compete on technology and amenities rather than price; naturally, the price went up. The HMO era helped slow that trend, with insurers beginning to show more market power. Frakt worries: “ As hospitals continue to consolidate and integrate with other providers (e.g., as encouraged by the ACO movement), I wonder if the medical arms race will return.”

It’s not hard to see the arms race escalating; if you’ve been reading recently, you may have noted stories about insurers getting into care and hospitals starting mergers and building. So I’d guess both sides are trying to avoid bringing a knife to a gunfight—though it remains to be seen who has the bigger guns.

Your Insurer Is Caring (Buzzword?)

The news from KHN that insurers are starting to open retail stores made me scratch my head a bit. Here’s the rationale:

Health insurers increasingly want to make shopping for a new health plan as easy and convenient as dropping into a local retailer to buy a TV. In recent years, a number of them have opened stores where consumers can stop by to talk with a customer service representative about buying a plan or resolve questions about their current coverage. Some stores also sponsor health fairs or community seminars on nutrition and exercise. A few have primary-care doctors on-site.

Maybe “retail stores” is a bit of a misnomer and it should more properly be called the “Apple Store” for health care insurance. Interacting with customer service agents—that’s the “Genius Bar”; the health fairs and other stuff is like the various events the Apple Store does to teach you how to get the most out of your gadget, and so on and so forth. There’s a line from a satisfied customer that’s awfully revealing: "It's a great feeling to know the insurance company is standing behind you.”

How many times in the history of human civilization has this sentence been uttered? Not terribly often, about your health insurer, which is why dickering with your insurer is rated up there with the DMV in terms of bad customer experiences. But the effort to project a kinder, gentler face to interact with is an interesting one. There was an interesting article in the Washington Post recently by Brad Plumer postulating “The End of Retail?” which I thought of first when I read the KHN article, with my first incredulous thought being, “But why would I want to go to a store to get my health insurance when I could just get it on the Internet?”

The aim, however, isn’t the “getting” but the caring. A New York Times article suggests this—it’s about insurers trying to target the 1% of patients who account for 25% of the costs among privately insured. Because of regulations from ACA—the fact that insurers must insure everyone and can’t impose a lifetime limit—it appears insurers may have to figure out how to care for them in such a way to reduce health care use for them. The article details the kind of steps insurers are taking—sending social workers to help clear some of the obstacles associated with care; trying to figure out bundled payments so they can make one doctor responsible for a patient’s overall health, and so on and so forth. It’s essentially health insurers trying to move from financing, mostly, to caregiving. The complaint I’ve heard about this idea is that insurers won’t do particularly well since their primary expertise isn’t in that field, but they’re giving it another crack, it seems.

To Hype and Disappoint

I do hate it when authors exaggerate to promote their books. For example here’s an interview about a book about the underground economy and its size and implications. The author says:

Wired: And it’s growing?
Neuwirth: Absolutely. In most developing countries, it’s the only part of the economy that is growing. It has been growing every year for the past two decades while the legal economy has kind of stagnated.

Wired: Why?
Neuwirth: Because it’s based purely on unfettered entrepreneurialism. Law-abiding companies in the developing world often have to work through all sorts of red tape and corruption. The [underground] enterprises avoid all that. It’s also an economy based on providing things that the mass of people can afford—not on high prices and large profit margins. It grows simply because people have to keep consuming—they have to keep eating, they have to keep clothing themselves. And that’s unaffected by global downturns and upturns.

It certainly sounds good—but then you get to thinking. It turns out a great deal of growth in Africa, to take one example, is attributable to commodities growth recently. Then there’s the growth of cell phone use:

In virtually every single African nation, the leading mobile phone company is now the leading taxpayer to the government, the leading local donor to local causes, and one of the leading employers.

At first thought this wouldn’t be mutually exclusive with the picture Neuwirth is giving us, and it turns out it’s not—it turns out Neuwirth is counting the employment of informal workers for these large telecommunications companies. But that introduces a great deal of conceptual ambiguity to what was once a simply stated, bold premise. That’s unfortunate; you’d prefer a bit more nuance up front.

Price Discipline and Health Care

There was an op-ed by Joseph Rago in the WSJ proclaiming health care’s coming price revolution. Like most WSJ editorial pieces it includes the mandatory odd shot at the liberals that can be safely ignored, as there is the seed of a decent observation in here:

The big insurers now publish transparent, meaningful all-in prices for hundreds of services by hospital and doctors, and they are building Web platforms that allow consumers to shop for providers. Tiered-benefit structures that use cost-sharing to steer patients to more efficient providers finally give patients the means and incentive to make reasoned medical decisions outside of an information vacuum.

Rago gives away the game, later, when he mentions that defined-contribution benefits (that is, like the idea of competitive bidding applied for private plans) will align “costs and incentives.” He believes the misaligned incentives in health care occur at the demand side rather than the supply side—and thinks that the action of consumers shopping for providers will do the relevant work.

It’s an idea that’s much beloved of a certain set, that the problem with health care consumers is that they are insufficiently exposed to the costs of their actions and that so exposing them will cause them to seek out more efficient, better providers. This sounds good in theory, but of course the practice is very different—the question is, how good are consumers at seeking out genuinely healthful doctors or providers?

Elsewhere in the WSJ we saw an interesting study summarized:

According to the analysis, there were about 500,000 fewer screening colonoscopies among commercially-insured people aged 50 to 64 than you’d expect during the most recent recession…
…
The analysis also found that when it comes to colonoscopy, cost sharing appears to be a deterrent. No matter the economic climate, people with higher out-of-pocket costs — $300 or more for the procedure — were less likely to be screened than those with lower costs, defined as $50 or less. That gap “widened during the recession,” says Dorn.

I wouldn’t characterize this as the smoking gun, but it is suggestive that patients will forgo necessary preventative care (as colonoscopies are) when exposed to the discipline of the market. The discipline of the market works fine for short-term problems that can be fixed by short-term solutions; long-term problems have not been as well served, generally speaking. I would guess health care isn’t different.

Romney's Health Care Plan, Redux

Remember back when we were discussing Mitt Romney’s health care plan. At the time I was unsure whether the Reason article marked a departure from an aspect of his plan—that is, to raise the eligibility age on Medicare from 65 to 67.

Well, in his big speech at Ford Field, Romney reiterated that part of his original plan.

Leaving aside the political aspects of this story, I’ve always wondered how it’s considered supportive of business (as Romney claims he is) to propose a policy that sloughs off $4.5 billion (estimated) in health care costs to business. It’s also a classic manifestation of solving the health care problem halfway—to solve health care, you can’t just attack costs or quality, you have to figure out the intersection to really get it right. Raising the eligibility age just attacks costs, and only for the government’s balance sheets (only the entity best-positioned to absorb a spare $7.6 billion or so).

So, what's happening here again?

Via Joe Weisenthal, if Europe is in such bad shape, why….

The argument goes like this: Everyone and their cousin believes that the Greek bailout is a joke that doesn't stand a snowball's chance in hell of really working. A lot of people thing Greece will leave the Euro this year. And then that opens Pandora's Box for more trouble in Portugal, and everywhere else. And yet! Peripheral yields are calm, and the Euro is robust.

There's a disconnect between what everyone is saying about Europe and what's happening in markets, which is calm.

Or, for that matter,

Investor perceptions of euro-zone borrowers is improving. The cost of insuring Italy’s sovereign debt against default for five years using credit-default swaps has fallen 84 basis points this year to 400 basis points yesterday, according to CMA, which is owned by CME Group Inc. and compiles prices quoted by dealers in the privately negotiated market. Similar costs for Spain have slid 115 basis from a record-high touched in November to 378 basis points. The contracts pay the buyer face value in exchange for the underlying securities should an issuer fail to adhere to its debt agreements.

Have the numbing details of the talks/bailouts/haircuts cycle just bored investors into not caring or being frightened about Europe? (If it’s boring, can it really be that bad?)

IVF and Consumer Finance Protection Bureau

There’s an interesting article in the WSJ about “fertility finance”—that is, lending out large sums of money on an unsecured basis in order to cover fertility treatments for the infertile. Since the treatment runs quite a bit of money, this represents an opportunity to loan quite a bit of money.

I see three distinct potential problems. First: what happens in the case of failure? IVF treatments are notoriously difficult, often requiring several tries before success. The article mentions that some of these firms offering finance offer refunds and assume the risk; naturally one supposes that means higher interest rates for everyone else.

On the demand side:

"We thought [taking out a loan] was the best option because we trust our doctor," says Karen Coker, a 27-year-old police-station clerk in New Carrolton, Md.

The trouble, on the supply-side, is intertwined and is mostly involved with bad incentives. Apparently many of these finance firms are not regulated as banks and apparently doctors often invest in them. The potential for conflicts of interest looks similar to pharmaceuticals—how often will doctors be shaded towards offering care when they have an equity stake in its happening? And might patients be very interested in the knowledge that their doctors have a business interest in steering them towards a certain means of finance?

It’s unclear why the problems faced by these firms seeking to make these loans are so specialized as to require specific firms to service them—that is, why can’t banks take them on? I suppose there’s some sort of regulatory evasion here, and I would guess it’s a problem the Consumer Finance Protection Bureau might be well-poised to take a look into.

More on hospital growth

Jeffrey Young has a very good article in the Huffington Post about hospitals merging in order to secure market share and act anticompetitively and thereby raise prices. (On the other hand, as Dan Diamond relays, some hospitals think the mergers are necessary to survive. Both can be true simultaneously of course—some markets might see two otherwise healthy hospitals merge for anticompetitive purposes, others might not). There’s a good quote in Diamond’s piece:

In a thorough examination of the FTC-ProMedica dustup, Modern Healthcare's Joe Carlson notes that hospital executives "caught discussing higher prices and bargaining clout before a merger are likely destined for legal trouble later on." For example, FTC cited a pre-merger email from St. Luke’s president that openly discussed ProMedica’s pricing power and "would come to haunt" the organizations, Carlson writes.

This is some of what I was getting at with my post earlier about hospitals building up to secure more market share—it might be bad if we’re looking at a drive to control a market and raise prices.

On the other hand, mergers might be a different beast—the claim is that in order to do accountable care organizations, you need to have a big system able to keep one patient throughout the system. This might be so, but I suspect it differs from organization to organization. Sadly it’s hard to legislate to ensure good faith.

Understaffed and Overstaffed

Apparently:

Lack of staffing resources was cited as the most significant barrier to implementing IT, according to the 2012 HIMSS Leadership Survey, which was released Tuesday morning at HIMSS12.

Nearly two-thirds of the 302 IT executive level respondents expect to add staff in the next year to successfully implement their IT initiatives.

So. IT people are apparently too hard to find at the moment. Nurses—also a shortage, apparently. We’ve been over primary care doctors and their deficit.

It would seem that several portions of the health care labor force are understaffed, and yet health care employment has been the strongest employment sector in the post-recession doldrums we may only just be sailing through. The secret, of course, is probably in specialists and administrative staff, but it gives you a hint as to how the health care sector is misaligned—too much paper work and too little basic doctoring.

Competitive bidding and private insurers' innovation

Austin Frakt makes a very solid point in general about health care here—that we should want our cost curve bending/shifting to come from efficiency improvements and extends this critique to the proposal of competitive bidding discussed earlier. Frakt wonders whether it would bend the curve.

The authors’ claim here is that private insurers would have an incentive to work with caregivers in order to beat their bid on any given senior. That’s the claim as to whether competitive bidding would bend the curve, and it’s hard to assess whether it’s correct.

Insurers are already clearly thinking along these lines, with UnitedHealth announcing an effort to do a cloud-based data platform (with outside developers creating “apps,” no less.) One of the interesting apparent proposals:

Among the initial apps will be one developed with the help of the Cleveland Clinic that helps health providers structure payments for "bundles" of care, meaning for all services tied to a particular procedure or condition, Optum said.

I’m sure that’s purely coincidental. I’m also sure it’s purely coincidental that UnitedHealth happens to be interested in moving to a bundled payment system and getting 70% of its commercial members in it by 2015. It's probably just a short jump until we're discussing insurers purchasing hospitals again, to get that full degree of integration.

At any rate, I’m sure that’s what the AEI people are thinking about, although time will tell whether it’s successful.

Why the hospital building boom?

Via Aaron Renn’s twitter (aka @Urbanophile), I see that the Chicago Tribune is reporting on Chicago’s hospital building boom:

Driven by the need to replace aging facilities, integrate new technology and equipment and, of course, fend off fierce competition, hospital systems spent more than $6.6 billion between April 2009 and April 2011 to build new facilities and update old ones, according to Illinois Hospital Association data scheduled to be released Monday.

This prompted me to do some research, and it turns out there are quite a few regions similarly extending itself in building additions or outright new hospitals—the Pittsburgh Tribune-Review reports that:

From 2008 through Nov. 1 [2011], U.S. hospitals borrowed $144 billion through public bond issues for construction, refinancing, equipment and other expenses, the Tribune-Review found as part of a yearlong investigation into the rising cost of health care.

The questions that occur are: why? and, is this a good thing?

The “why” part appears to be attributable to “gaining market share.” Let’s run through the reasons mentioned in the Chicago Tribune article. Technologically, updating things seems to be a reasonable idea which is hard to assess from this angle. The “age” idea mentioned in the Chicago Tribune can be looked at skeptically, from the facts stated in their own article—the 2007 median age of an Illinois hospital was 10.55 years versus the national median of 9.77. One doubts the road to hospital obsolescence is measured by .8 years (or that somehow that substantial a percentage of the nation’s hospitals should be updated).

There’s an emphasis throughout both articles on providing amenities—the hospitals in Chicago will apparently feature “luxury finishes” i.e. flat-screen TVs and “other hotel-like amenities.” Apparently, also, a hospital in Western Pennsylvania brought in a consultant from the Ritz-Carlton, which should put in context the sort of thing you’re looking at. They probably aren’t alone in this—a recent New York Times article talked about New York area’s hospitals’ efforts to add luxe features to entice rich people (who would then cross-subsidize the hoi polloi’s care)—but it is it worth it? I don’t want to convey the idea that it’s all frivolity—this WSJ article about the challenges of cooking food for the sick or recovering is worth a read—but it’s hard to avoid agreeing with the conclusion of the Tribune article (“Does every patient really need a 40-inch TV in their room?). If it’s not to improve care, what is it? Attracting patients away from other hospitals, presumably, in a way that probably won’t help the bottom line in the long run. (Though this article speculates that gaming patient satisfaction surveys that the government will be using in the future is another possibility; ultimately it’s the same thing, though.)

One of the striking facts in the Pittsburgh Tribune-Review article is that hospital capacity has dropped by 250,000 beds since 1990…but occupancy is holding steady at around 70%. This despite substantial population growth and significant demographic changes. Do hospitals expect additional demand? No argument in either article is made for that, and given the preceding factoid, it’s hard to bank on one either. So it would seem to be a market share play, and with such a large percentage of Chicago-area hospitals spending money at the same time, it looks likely that they’re moving to a lose-lose equilibrium for everyone, at least in that market. (If everyone builds, everyone raises prices and passes on the price increase at the very least.)

A worse case scenario is that the debt loads incurred by capital expansion ends up causing big problems for some of these hospital systems. The worst case scenario, from the perspective of those expanding hospitals, is changes in the health care system. Given all the noise about the subject, it’s not hard to envision cuts in the Medicare system, whether as a result from a penny-pinching Congress or from the hope of doing care better and cheaper. The latter must seem particularly fearful, because a large portion of the health care efforts look specifically aimed at reducing hospital utilization. Reducing infections and hospital readmissions? Obvious. An emphasis on primary care? Again, more care outside the hospital. Do you believe in retail clinics and urgent care clinics? Again, often outside the hospital. A move away from fee-for-service and towards some other payment system? Less health care consumption—which one presumes means a decline for hospital use.

Given the extent of debt, construction, and the size of the hospital footprints in local economies, these hospital leaders are making big bets on something approximating business as usual in health care. One hopes they aren’t successful, though the price of failure looks high also.

Competitively Bidding Problematically

An interesting report from a trio of writers from AEI on competitive bidding is worth thinking about. Competitive bidding is one of those pet ideas of wonks for Medicare—essentially, it works by giving seniors a voucher, and having each insurer bid for the right to cover each senior. The value of the voucher is set to the second-lowest bid—so the senior can go with anything from the cheapest option (and pocket the difference) or anything above it. Many variations of the plan give seniors the option to stick with traditional, fee-for-service Medicare.

One of the striking facets of the report is their arguments for savings—they estimate $339 billion over 10 years, which really isn’t all that much for a program touted as a cost-saving measure. (They have a long list of reasons as to why their estimates are conservative, but all health policy people are convinced their plans save more than the conservative estimates, as anyone who remembers the CBO saga from the health care reform fight.)

The other striking facet that I hadn’t really thought about enough was this:

Under competitive bidding, some beneficiaries will pay higher monthly premiums if their current health plan bids high, but they can avoid that higher payment by changing plans

This is mostly just a thought at this moment, but do we really want people switching health plans vigorously? Ideally it wouldn’t make much of a difference, but currently health care is fragmented and encouraging people to switch between plans frequently might increase fragmentation—if differences in networks are high, or if certain insurers have closer amounts of integration with certain health care providers…and it’s possible to imagine problems with non-interoperable EMRs, and so on and so forth. Maybe I’m just worrying over nothing, but it might be something worth thinking about.

More on the cost problem

Via Jeffrey Sachs, here we have an article in the Wall Street Journal by AEI’s J.D. Kleine arguing that health care inflation isn’t such a big problem:

New data show that health spending over the past several years has been normalizing toward the rate of general inflation, rather than growing higher and higher, as had been the case almost continuously since the 1970s. This moderation in the growth rate of spending predates the national recession. And it puts the lie to the claim that we need government to put the brakes on an "out-of-control" health-care system.

He goes on to explain it’s because of the technology (generics, among other things) and the management (more patient choice, and “other disciplining forces, like the nonprofit National Committee for Quality Assurance, which measures and reports to employers and other buyers of health care on how well insurers' provider networks manage chronic disease and practice preventive medicine.”)

Can we see this in the data? The WSJ provides a chart that shows the health care inflation rate (which had indeed fallen over the aughts), but crucially does not compare it to the general inflation rate. Fortunately for us we have the St. Louis Fed’s FRED service, with which I made this graph (blue is health care; red is CPI, i.e. general inflation):

I would describe it as “unclear” at best that the health care inflation rate has converged with the CPI.

Consequently, many of his specific claims seem to run into some trouble—for lack of data, or for lack of logic. Take quality. It’s hard to agree on what the quality metrics ought to be, but if you look at the data on hospital errors, it’s pretty clear that there’s quite a big problem in terms of mistakes made. Are patients choosing more? Certainly the HSA and/or high-deductible model has been extended more, but people debate whether that’s actually a good thing to this day.

So while optimism is appreciated, who knows whether it’s correct yet. Sachs, in the original article, stated that he is not prepared to mechanically extrapolate the inflation data out to 2085. This seems more than fair. Nevertheless, looking at the data above, we can see that, aside from recessions and their occasionally-sluggish recoveries, the inflation rate in health care has rarely dipped below 4 percent. So it would seem likely that we need to figure something out.

The cost problem

Matt Yglesias has a post arguing that health care is expensive because the prices are so high. (He cites a chart that notes that differences in quantities account for 18% and differences in cost account for 33% from high-cost to low-cost regions in the U.S.) This is, as he notes, somewhat tautological, but he thinks this implies that if the U.S. were really serious about cost containment it would adopt price controls. (This is, indeed, a big fear of doctors—I remember going to a talk with primarily doctors in attendance. The speaker said, “If we don’t figure out the cost problem, we’ll have cost controls.” The audience reacted with facial expressions usually seen on those suffering from gastrointestinal distress.)

I think the simplicity of thought here misses the overarching problems of the health care system. The cost problem isn’t just that prices are too high now, it’s that they’re high and rising. Currently our budget problem is just about sustainable in the long term; if health care costs rise at about previous trend, then there will inevitably be major problems. And it’s a bit too simple to say the solution is price controls. Chart:

Focus on the gray bars that show the inflation rate from 2000-2008. Enthusiastic price controllers U.K. have an even higher health care inflation rate than does the U.S.; Canada’s Socialized Medicine™ has a health care inflation rate equal to ours. Price control apparently isn’t enough to douse the fire. (Meanwhile, it’s not clear demographics play a huge role either—noted old people societies Italy and Japan were chugging along with a very manageable sub-2% inflation rate.)

The other problem, besides the inflation rate, is the low quality the American health care system too often delivers. This is often related to the overconsumption of care, or at least the substitution of more expensive yet less effective care for less expensive, more effective care. Viewed from this perspective the 18% of care related to the variation of consumption of care isn’t a number that is dwarfed by the third of costs related to higher prices, it is a huge opportunity. As Yglesias notes, the biggest chunk of the difference in health care spending is in “differences in health status.” Well, anytime you do an unnecessary procedure, resulting in a complication, resulting in even more care, you have an awfully expensive problem relating to both “differences in health status” and “overconsumption of care.” Hence health care is expensive because the prices are high , because we use too much of it, and because the product isn’t too great. (And 18% of all the variation is a huge amount—it seems silly to write off that entire part because there’s a bigger line item in the budget. Reducing that number substantially would reduce the budget hit substantially. Doing it right would deliver better health too.)

What about the doctors?

One of the possible consequences of expanding nurses’ scope of practice and allowing them to do more, medically, is reduced wages for doctors. That’s the reason for the opposition from doctors and doctors’ lobbies. The Econ 101 reasoning is pretty simple here: if you have increased supply and the same demand, supply-side takes a hit.

Via Aaron Carroll, a descriptive study about what happens when you ease scope of practice rules. (It doesn’t account for the messy confounding variables). It turns out, it’s hard to tell much: differences in wage gains, wages, etc. aren’t statistically significant.

There’s some speculation as to possible answers. One previous study cited within the study proposed the idea that physicians would substitute labor—from the nurses who could practice on their own to workers who couldn’t. (It didn’t look at employment levels or wages of nurses, unfortunately). Perhaps payers weren’t particularly aggressive in trying to substitute paying for nurses as opposed to doctors (one would imagine many patients would not be particularly excited to go to a nurse alone for many ailments and insurers might pick up on that lack of enthusiasm). Perhaps there’s something on the innovation side—if nurses were very innovative, perhaps they induced demand rather than competing for a fixed share of demand; on the other hand, perhaps nurses weren’t particularly innovative and didn’t compete enough? There are lots of questions that occur.

At any rate, the doctors’ lobbies are probably right to worry. To reprise an old chart from the NYT’s Economix blog:

As you can guess, pay for American general practitioners is well ahead of their peers worldwide, and it’s not hard to guess that that feeds into the American cost problem. American doctors would probably argue that it’s only fair—considering the debt and time burden associated with going to med school and then residency, they’re only making up for lost opportunity with their big pay. That may be so, but that doesn’t exactly dissuade you from the idea that several elements here need a rethink.

The Primary Care Shortage, And Why We're Probably All DOOOOOMMMEDD

So Sarah Kliff had a pretty excellent article in the Washington Post about the dire state of our health care labor force, which we can sum up very quickly as: we need roughly 30,000 new primary care physicians, soon, or else all of the new insured will have no one to take care of them. (I’ll add that the state of primary care is already pretty bad—she opens with an anecdote of a physician talking to a young girl. That kind of care can be hard to come by these days—primary care physicians often cram appointments really close together in order to maximize their appointments per day, which for obvious reasons might not lead to the best care.)

She goes into great detail about the mismatched incentives of the problem and the tentative steps the administration is taking to solve it, but it seems pretty clear that it’ll ultimately be inadequate.

Leave it, then, to Matt Yglesias to describe some more radical solutions:

—Build a new medical school and have it only train primary care physicians. Getting into medical school is hard—much harder than it was 40 years ago; if we let more people in we'll have more doctors.

—Change immigration laws to allow for unlimited entry of foreign-born primary care physicians. If we're worried about "brain drain," we can work out a scheme to automatically deduct 2 percent of the doctors' income and send it back to their home country.

—Reduce the Medicare reimbursement rates for specialists, so as to decrease the financial incentive for students to avoid becoming primary care physicians.

He also suggests allowing nurses to do more work. (I’ve written about that before. It’s a good idea!)

Unfortunately, as with most radical solutions beloved of policy wonks (reducing ethanol subsidies! Congestion charges! etc.), it’s hard to see the necessary changes implied by the first two ideas Yglesias proposes coming to fruition.

Medical schools:

Building a new medical school exclusively for primary care physicians is probably a fine direct solution. In order to have a huge effect, however, it’d have to live in the sort of future world so beloved of pundits also shared by such projects as Khan Academy et. al. Four new medical schools accepted their first classes of students in 2010 and the New York Times expects a total of two dozen to come into existence soon. As far as I can tell from their websites, the schools took about five or six years to actually begin admitting students, which means roughly a decade would pass between the intention to create a medical school and the actual graduation of medical students. After graduation, of course, there’s residency, which means anything we do now in terms of training doctors will start having an effect twelve or so years from now. As Kliff’s article makes clear, the trends in med school graduates choosing to become primary care physicians are highly volatile—there was a marked uptick in the nineties and about a 20% increase between 2009 and 2011.

If you want an increase over a shorter time frame, you probably have to start thinking about things involving medical licensure, online teaching, etc. Khan Academy territory, essentially.

Immigration

Admitting tons of foreign doctors is really only a first step. There was a good policy brief cited by Felix Salmon recently that showed the depth of the problem of that first step—for H-1B visas, you had a 17% denial rate in FY2011 and a 26% request for evidence rate in 2011, meaning that any attempt to hire a foreign physician will be delayed extensively if not denied. As I’ve mentioned, this is really only the beginning of the problem. You also have to get a license to practice. That involves an English proficiency test, as well as a medical test. It also involves…a residency. Whether you are a 55-year-old doctor who’s at the top of her field or a nervous guy right out of college, you will have to do a residency if you are interested in employment in the United States. Some are still interested—which leads to entertaining stories, to be sure (my mom apparently did her residency with an older gentleman from Romania), but probably isn’t the most rational way to do policy. At any rate, licenses present a large additional obstacle besides the visa process to importing large numbers of physicians from abroad, however convenient a solution that might appear at first blush.

(Changing Medicare reimbursements would be a fine idea. It might also be a good idea to address the problems with rural payments—under the current scheme there’s really no additional economic incentive to live out in rural areas.)

At any rate, the number of repetitions of the word “residency” really hides an additional large problem: there’s a residency crunch that might get much worse. Medicare supports funding for residency programs; however, its funding has been more-or-less capped since 1997. The President’s budget proposal does away with that policy—it would cut roughly $10 billion from that support. Perhaps hospitals’ taste for low-cost labor it can flog over many hours won’t be soured by the cut support; perhaps, however, they won’t take as many residents. If so, then there won’t be a solution for the primary care physician problem. In that case, it’ll probably be time to think about empowering nurses.

Faire un pont

I thought this was a funny way for Spain to address their vacation problem:

Tatiana Restrepo has a vacation problem. The Spanish government thinks she takes too many of them.

Every year, she, like many Spaniards, strategically deploys paid vacation days as puentes—literally, bridges—to skip town for an extra-long weekend whenever public holidays fall in the middle three days of a week.
…
But now the time-honored tradition is under threat. In one of several measures designed to boost productivity in a sagging economy, Spain's unions and business associations have agreed to suppress three bridges by moving the holidays to Mondays. The two sides, which rarely agree on anything, say the bridges cost the Spanish economy hundreds of millions of euros in lost production, as they result in idle plants and half-empty offices.

I don’t think Spain is the only country to do this—the French font un pont also—but to my knowledge they’re the first to address it. I don’t know if this is the right way though: if they’re keeping the number of holidays constant, and they’re keeping the number of vacation days constant, doesn’t that mean that total time off will be pretty close to status quo ante? If you’re the kind of person who likes to make a bridge between your weekend and your holiday, you’re the kind of person who likes to take holidays, whenever. You’ll probably just take your vacations at other times. In fact, might your vacation time be worse, relatively speaking, for whatever company? At least before your manager—who probably knows you’re a bridge-builder—could predict when you’d be out. Now it seems like you’d be much more unpredictable in your quest to avoid being useful (while being paid).

Your Record Precedes You

Via Ashish Jha, the fascinating story of what happens when Big Data meets electronic medical records meets American health care:

… a growing number of hospitals [are] using their patients' health and financial records to help pitch their most lucrative services, such as cancer, heart and orthopedic care. As part of these direct mail campaigns, they are also buying detailed information about local residents compiled by consumer marketing firms — everything from age, income and marital status to shopping habits and whether they have children or pets at home.

I did a piece a while back on privacy and electronic medical records, but I confess I didn’t think about this particular permutation of privacy breaches. I do feel pretty dumb for not anticipating this particular consequence, because in retrospect it’s obvious.

The first worry I have is about privacy—I’d prefer, however anonymized, that my data not fall in the hands of these tracking companies (who I’m guessing are combining medical data with credit card data and internet tracking data and so on and so forth). The second big worry here is that it may be a way of promoting provider-induced demand, i.e. care that isn’t really needed.

Austin Frakt pointed out that it’s unclear whether providers do induce demand in patients, but there’s a fairly decent story we can tell as to why it might be true—we do generally trust our doctors to recommend the right care for us and therefore it would seem to be possible for our doctors to get us to take care we might not otherwise want or think to get. An intense version of this story might have doctors recommending care that’s known to be unnecessary.

One of the anecdotes in the story might confirm this particular interpretation—one hospital runs a campaign promoting mammograms for women over 40 and finds it to be quite successful. If you recall the recent mammogram controversy, you’ll remember that the guidelines were changed—the new ones suggest that women between 40 and 49 decide for themselves and then recommend mammograms after 50. As you might expect, the evidence on either side of the debate is muddled; consequently, it does seem a bit off to be conducting an advertising campaign aimed at drumming up business.

What I think this goes to show is that electronic medical records are wonderful tools, but they work best within a broader context: a health system concerned primarily with promoting health (rather than providing services for fees) might look askance at such promotions.

Unpacking the Emergency Rooms?

One of the common arguments for insuring the uninsured is that they will get the opportunity to use care at the proper times and thereby reduce reliance on the emergency room, meaning better care (it’s better to get something early, generally speaking) and cheaper care. A study written up in the Huffington Post (via @HEALTH_NOTES) suggests that that’s true. They looked at a case study of patients in Richmond, VA, and this is what they found:

The study -- which focused on uninsured people in Richmond, Virginia who fell 200 percent below the poverty line -- found that over three years, health care costs fell by almost 50 percent per participant, from $8,899 in the first year to $4,569 in the third after they received insurance. Participants who enrolled in health coverage made fewer trips to the emergency room, which are notorious for running up patient bills. Instead, insured participants went for more primary care visits.

Overall, they suggest a decline of .26 visits to the ER per year from year one to year three of tracking.

Mitt Romney made a version of this argument right after Massachusetts passed its version of health care reform, except he suggested that the uninsured were irresponsible rather than unfortunate (“Why pay for something when you can get it for free?” Romney wrote, of the uninsured’s usage of emergency room care.) So it’s probably appropriate to look at Massachusetts’s ER utilization—a New England Journal of Medicine article did just that, and their comparison of the number of ER visits in Massachusetts, Vermont and New Hampshire suggests that, in fact, there’s no difference in trend of ER use at all. (It also has one of the biggest caveats ever: “Our findings underscore the problem with evaluating policies by looking only at single trends and not examining simultaneous countervailing trends or comparable trends that cannot be attributed to the policies in question.” They go on to explain this stuff is hard, which is true. It is hard.) (On the other hand, this paper from University of Illinois-Chicago Ph.D. student Sarah Miller suggests that Massachusetts health care reform substantially reduced ER usage—the paper actually compared things in-state on a per-capita basis, unlike the NEJM paper, which simply compared the number of pre-health reform visits to post-health reform visits.)

Interestingly, there’s a quote from Nancy Turnbull in Boston Globe about this very issue that states: “I don’t think the increase [in emergency room visits] has anything to do with health care reform. It’s much more reflective of [primary care] access problems.” Well, if you wanted to be critical about it: could this be a natural consequence of increasing the number of insured and hence the amount of demand? If the supply of primary care remains constant, then you’re bound to have shortages…

Factoid

Striking little fact from an interesting tale of kickbacks for spinal fusion surgery in the WSJ:

In California, this trend shows up in the workers' compensation system. California employers paid $7.1 billion in insurance premiums to cover their workers' compensation liability in 2010. Spinal-fusion surgery is a growing part of the care these premiums pay for. It accounted for 40% of inpatient hospital charges to the state workers' compensation system in 2010, up from 30% in 2001, a Journal analysis of hospital discharge data shows.

It’s striking that there was such an increase in spinal fusion surgery—a New England Journal of Medicine article noted that the incidence of such surgery went up 77% nationally from 1996 to 2001. Obviously it’s not a perfect match here, but to follow up a five-year period of bumper increases with yet more bumper increases is pretty interesting.

Spinal fusion surgeries are controversial. That same NEJM article I linked to earlier makes a case for restraint; an article whose authors wrote the evidence-based guidelines for lumbar fusion basically throws up its hands and says “Uh, we don’t know” and practices general skepticism towards all other attempts to figure it out. (This review of European studies shows results anywhere from “appallingly expensive” to “somewhat expensive.”)

Countercycling with Medicaid

The state of Washington’s going extreme on solving Medicaid: it’s planning on severely limiting its payments for emergency room visits by specifying certain events they absolutely will not pay for. (In this article, they manage to turn up the rhetoric to about eleven, saying “We will not pay for diaper rash treated in the emergency room” and claiming that ER physicians and hospitals are “abusing their privileges” in charging so much to Medicaid. It’s typical lazy, shiftless poor rhetoric, and they claim it costs the state $21 million. The total deficit is $2 billion.)

Ultimately, emergency rooms will still be forced to take care of the poor who can’t pay for care, so the change amounts to the state taking $21 million from its hospitals, assuming their numbers are correct.

The situation highlights two discrete problems: first, it’s still somewhat odd that Medicaid is administered by the states in the first place. A program that has to care for the poor shouldn’t become stingier when there are more poor—it’s a countercyclical no-no. (You also wonder what happens as the ACA pushes more people into Medicaid.) This probably makes sense in light of Medicaid’s history as a virtual afterthought, but probably should’ve gotten taken care of at some point afterwards. Second, shouldn’t people be thinking about ways to make sure such unnecessary visits to the ER not happen in the first place?

I’ve written a bit on the potential of retail clinics to fill a niche in health care, and this seems like a situation they’d be helpful—I suspect there’s a lot of care out there that’s urgent but not an emergency. Or some of the solutions doctors are pitching make some sense here too:

The doctors have offered what they call a physician-developed plan they say would reduce narcotic-seeking behavior, coordinate ER visits with primary-care access, spearhead a "generics first" effort, develop a statewide preferred-drug list, and institute a case-management system for frequent users.

(The case-management system sounds a lot like Atul Gawande’s “Hot Spotters” New Yorker article, so there you have that.)

Do You Speak English? Or: why can't I understand the government's statistics?

Don Berwick has an interesting interview with a good point:

I have come to think that transparency is one of the most important aspects of policy in the nation. I don’t think we’re where we need to be and I think if we can make more information more transparent, almost everything will get better, cost and price. I have become more and more a fan of transparency. In the Affordable Care Act, there are more and more tools for this. I think transparency, by which I mean the ready availability of data while protecting patient privacy, at low costs helps everyone. It helps providers compare their quality to one another. It helps buyers look at pricing. It helps consumers know more about the care they get or could get. Some of the consumers that want that information will make good use of it, but many will not. They’re too busy with other things. But overall the effect of transparency will be entirely favorable. Do I think patients will open Consumer Reports to decide where to go when they have a heart attack? Of course not.

It’s echoed in the opening post of US News & World Report’s “Second Opinions” blog—the idea that we just don’t have good enough data, particularly for underreported adverse events.

Fortunately we’re starting to get more data—for example, in California (“For the first time, Californians can compare infection rates at their hospitals in reports released this month by the state Department of Public Health.”) to say nothing of CMS’s “Hospital Compare” website (NPR’s Jordan Rau does some good work with infection rates from catheter infections here).

The trouble, as Berwick notes, is “so what?” Having all this data is useless unless it’s actionable—and who’s going to be dealing with the data? Berwick doesn’t think patients will open Consumer Reports to decide where to go when they have a heart attack, which I suppose opens up two related questions: if a hospital is demonstrably bad at treating heart attacks, and the heart attacked doesn’t have time to evaluate hospitals, who’s going to do it for him? (His insurer? Certainly that’s the way to read their move into changing the payment structure) The other question is, shouldn’t patients be comparing the hospitals via this data?

Obviously the first problem there is patient choice—there’s often not a lot of choice in the matter as to where and with whom you’re treated, for patients. The second problem is that a lot of these presentations of data are pretty useless. How many people know of Hospital Compare, or where to find rates of infection in hospitals in California? Low, of course. And then there’s the presentation of data.

Let’s take my local hospital, Strong Memorial. There’s a lot of data here. Unfortunately, there’s a lot of data here. There’s little attempt to contextualize it—how important is this stuff I’m seeing? What’s the most important data? There just tables upon tables—a wonk’s dream, but not a harried consumer’s. That’s when they provide data. In many categories, they don’t. If you want to compare Strong’s rate of deaths among patients serious treatable complications after surgery to the national rate, we’re only informed that it’s worse than the national average of 115.7 per 1,000 discharges. It surely makes a huge difference if it’s 116 versus, say, 400. (It works in both directions—Strong is better than the U.S. benchmark on central line blood stream infections, but we’re not told how much better (or, indeed, what the U.S. benchmark is anyway).

We’ve seen a move from various governmental bodies to translate complex documents into comprehensible forms—Elizabeth Warren; the move to require agencies to offer “plain English” rules; Kathleen Sebelius’s effort to ban fine print in insurance forms—and that effort could probably profitably be done for the government’s own statistics.

When the demand comes back

The story of the early 2012 in the U.S. from a macroeconomic perspective has been its strength—and with the news that consumer credit climbed $19.3 billion in December 2011, it would seem like demand is poised to grow likewise. That’s good news for most of the economy, but more interesting news for health care than anything else.

The inexorable march of inflation in health care costs was slowed by low demand—people didn’t make the appointments they were supposed to, or otherwise repressed demand they might otherwise have. If the economy is indeed stronger, and demand commensurately stronger, it would seem likely that demand for health care will increase and consequently its cost will be back on the old growth curve. That’s good insofar as Americans won’t put off that open-heart surgery they’ve always had their eye on, but bad insofar as everything will cost much more money.

I think this is the right way to read the news from UnitedHealth, that they intend to switch to a suspiciously ACO-like system. They are, of course, frightened about that demand coming back. (How often do you see a stock drop after recording a 21% growth in earnings, beating expectations? When you’re a health insurer who admits demand’s coming back.) What’s worth watching, as always, is the implementation. They apparently have 2% of their membership base enrolled…and expect to get to 70% by 2015.

By comparison, the government is starting up with 32 ACOs, and planning to finish with its pilot program for Medicare by 2015, at which point they will probably reevaluate. I suppose this is an example of what happens when that private sector ingenuity/efficiency/etc. gets a hold of an idea.

At any rate, the demand is coming, and we’ll see whether new ideas have enough strength to beat them back.

Meta Department: Comparative Effectiveness Research

The Washington Post published an interesting article a few days ago asking why cardiologists preferred an invasive treatment regimen over a low tech intervention? This case is more interesting than many of the comparative effectiveness types, as it turns out the treatments they’re comparing—whether, in cases of patients with stable angina (i.e. chest pain in response to stress), to give patients an angioplasty with stenting or to opt for medication with lifestyle changes—are basically equivalent in effectiveness. It turns out the latter treatment is cheaper, which means that, over time, the health care system should opt increasingly for the medication/lifestyle change one-two punch.

As it turns out, that hasn’t really happened—well, as far as we can tell. To me, the real secret of the article isn’t just that it’s difficult to get doctors to switch to treatments better situated on the cost/effectiveness curve, but that we don’t really seem to know what’s being done in the first place. Here’s the evidence from the article:

It may be that fewer people are getting PCI [the more aggressive option] for stable angina now. That was the case in a registry of 26,000 patients in northern New England, where that diagnosis was given in 21 percent of procedures in the year before [the study] was published but in only 16 percent in the years just after it. Whether that reflects a national trend also isn’t known.

One question that naturally occurs is—while the 5% decrease is appreciated, is it the right percentage? Should it be around, say, 10% in the average population? 5%? The other question is to wonder about the paucity of evidence. 26,000 patients would be quite a substantial study in most contexts, limiting it to northern New England is a problem given what we know about geographic differences in Medicare spending. If you use that as a rough proxy for overall medical culture, it suggests that some populations might be more receptive to more evidence-based approaches to medicine.

(And there’s some doubt whether the drop was due to the study, anyway:

The authors noted that the decline in overall PCI volume started before the [study] results were presented, which they attributed to analyses from European registries linking drug-eluting stents with fatal stent thrombosis that were reported in August 2006....That might have contributed to the response clinicians had to the [study] results six months later, they speculated.

)

It’s hard to know how effective your comparative effectiveness research studies are unless you do…comparative effectiveness research on the effects of comparative effectiveness research?

Romney's healthcare juggling

Peter Suderman in Reason has a cute conceit for summarizing Romney’s career as a politician by tying it to his career as a consultant. I’ll disagree with that—private equity and consultancy are very different entities—but I wanted to spotlight one portion of his article that deserved, well, someone shouting “SCOOP!” in a crowded theater. (Or, maybe just “scoop.”)

Romney is pitching a Medicare plan for the 2012 election which I outlined here, in The New Republic. I’ll give a short and shorter summary of my summary. The shorter summary is that at the time no one could figure out what exactly Romney was driving at. (The Reason article makes it no clearer; it also doesn't report on Romney's then-desire to raise the eligibility age.) The short summary is that Romney apparently wanted to introduce a system in which seniors would be given a voucher for their health care needs. Seniors could then spend the voucher on a cornucopia of private insurance plans, or something that looked like Medicare, if they so preferred. As they say the devil’s in the details, and there are many devils centering around the value of the voucher. If you do Medicare the Paul Ryan way, the value of the voucher is capped and the federal government’s fiscal risk is accordingly capped as well. Any additional costs are borne by seniors. If you do Medicare the other wonky way, it becomes competitive bidding: that is, insurance plans bid for the health care vouchers of seniors and the voucher is worth whatever the second-lowest bid is. Then the senior can either take the lowest option (and pocket the cash) or take a more-expensive option, or what-have-you. Competition! Choice! The American Way!

Suderman catches Romney’s advisor in an interesting (paraphrased) comment:

Asked whether Romney’s plan could reasonably be described as ending Medicare as we know it, a Romney policy advisor admits that the structure of the program would be altered in the future. Why the hedge? Despite Romney’s oft-stated belief in the power of competition, he is not confident about it in the case of Medicare. His policy advisor warns that the effects of competition are still unclear, and it would be a mistake to eliminate a fee-driven system that has worked for years.

Romney is apparently not highly confident in the power of competition in Medicare, but wants to introduce it anyway. It’s pretty clear, then, that Romney has little enough confidence in the policy proposal he unveiled in November. It’s probably fair to be uncertain about the effects of this competition—are insurers really that interested in insuring seniors, a difficult group? How will adverse selection play out (will relatively healthier seniors go for private insurance leaving Medicare in a bind)? Might Medicare always have a cost advantage over private insurers, due to its clout at the bargaining table and its low comparative administrative costs? On the other hand, competition is competition and I suppose it’s theoretically possible a business model of integrated insurer-hospitals might emerge…

At any rate, probably the most stimulating part of this paragraph is the advisor saying “it would be a mistake to eliminate a fee-driven system that has worked for years.” I’m not sure if Romney’s advisor has been mischaracterized or is making a massive rhetorical blunder, not unlike a car executive saying it would be a mistake to not add airbags on account of cars’ working so well for years. Fee-for-service, as a generalized system, is a pretty terrible way of doing health care, and it’s hard for me to believe anyone associated with Romney doesn’t agree with that basic view.

But, yes, it would appear Romney has flip-flopped about his own plan within months of introducing it.

Optimism

A survey about doctors’ behavior grabbed the momentary attention of the Twittersphere earlier today, and the reaction focused mostly on the topline result—about 11% of doctors admit to having lied to a patient or patient’s guardian. Shocking!—or perhaps not. I do wonder what comparable results would be for other professions; I suspect that instances of admitted mendacity among lawyers, bankers, etc. are pretty high too.

Aaron Carroll went deeper and found it troubling that roughly a third of doctors in the sample think it’s OK not to admit whatever financial conflicts of interest might be entangled with your care.

That’s certainly troubling, but I found another result worth highlighting: about 55% of doctors admitted to having described the prognosis to a patient in a more favorable manner than warranted. While I would guess there are several consequences to this behavior, the one consequence I fixated on was end-of-life care.

Atul Gawande had an excellent New Yorker article on this subject, of which this small excerpt gets at what I mean:

Sara underwent blood tests and body scans. Dr. Paul Marcoux, an oncologist, met with her and her family to discuss the findings. He explained that she had a non-small cell lung cancer that had started in her left lung. Nothing she had done had brought this on. More than fifteen per cent of lung cancers—more than people realize—occur in non-smokers. Hers was advanced, having metastasized to multiple lymph nodes in her chest and its lining. The cancer was inoperable. But there were chemotherapy options, notably a relatively new drug called Tarceva, which targets a gene mutation commonly found in lung cancers of female non-smokers. Eighty-five per cent respond to this drug, and, Marcoux said, “some of these responses can be long-term.”

Words like “respond” and “long-term” provide a reassuring gloss on a dire reality. There is no cure for lung cancer at this stage. Even with chemotherapy, the median survival is about a year. But it seemed harsh and pointless to confront Sara and Rich with this now. Vivian was in a bassinet by the bed. They were working hard to be optimistic. As Sara and Rich later told the social worker who was sent to see them, they did not want to focus on survival statistics. They wanted to focus on “aggressively managing” this diagnosis.

The doctors exhibit the same behavior the survey does—Gawande quotes a doctor saying, “I’m running a warehouse for the dying.” Has this doctor informed her patients of this opinion? Probably not.

A lot of health care is consumed with optimism and the idea that something can and must be done and has a decent shot of working if it does. That’s an attitude that’s helpful for producing outliers—your Lance Armstrongs—but may not be terribly helpful on the average.

Paper Pusher

I was surprised that this paper by Douglas Staiger et. al. in the New England Journal of Medicine didn’t get much attention when it was first released—it shows a surge in hiring for health care administrative types in Massachusetts after its health care reform act phased in. From 2005 to 2009, there’s about a 18.4% surge in hiring in those positions as opposed to 8% across the country (hiring for physicians essentially stayed stable). There have been anecdotal reports corroborating this kind of result—see this Kaiser Health News report talking about a few hospitals in New England. If you happen to believe the health care labor force needs reorganization and innovation, then this sort of thing bears close watching.

The big, broad concern is that the health care system has too many paper pushers at the moment—too many people interfacing with a clumsy insurance system, too many people collecting bills, too much overhead, and so on. There’s an argument that, in order to keep up with compliance with the Affordable Care Act, hospitals will have to hire more administrative staff for regulations—there’s too many Medicare dollars at stake. I had a conversation with Ashish Jha of Harvard a while back in which he noted, “For the longer run that worries me; what we need is not more administrative staff in health care; I feel like we’ve got plenty of those in general.”

To what extent might such administrative staff improve care? The Kaiser Health News report talks about IT workers getting hired in health care, and if you consider the competing push to get electronic medical records into our hospitals, you need IT people to install them, to maintain the various firewalls between patient data and prying eyes.

Then there are worries about Accountable Care Organizations, the program that hopes to finally change the way health care is paid for in this country—that is, to pay on a population basis for overall health, rather than for each individual incident of health care. Austin Frakt in The Incidental Economist spends some time on a paper about the implications of ACOs—that is, caring for a health care population will require more administrative staff for primary care physicians, to “coordinate and manage health care” and make sure the quality measures are being hit. The paper wonders where the up-front resources will come from, which makes sense—primary care physicians are, after all, the worst-paid doctors in the U.S.

Nevertheless if there are going to be cuts (there will be), the question is where the money will come from. Efficiencies among administrative staff? Less money for primary care physicians? Less money for specialists? It’s clearly unclear, and there are a lot of moving parts. My guess is, if increasing productivity is a priority, you can’t see this kind of growth among administrative staff as Massachusetts has seen.