Become informed and defend your freedoms.  This is a website for citizens by an independent citizen.

The best practice in the US is the best in the world

Best Practice, Some Thoughts and Data:

Doctors, hospitals:  America has the best in the world.  So what incentivizes them, and how does this practice not become more widespread?   Looking at the incentives of the major players, as is done in the Trend/History pages, it is easy to see that the major portions of the healthcare industry has been focused more on lobbying than best management practices.   Check out he leading examples of where it does work.  If we applied this level of practice across the nation, there would be no cost problem.  See also other examples of when it works, it does indeed work well.   

Obama has stated that we are lacking  EMP, telemedicine, coordinated care, even much HIT in this country.  In fact that is not true, as Kaiser has such programs and more.

Southwest Conference participants brainstormed the following ideas for energizing the reform effort:

  • Make health care costs transparent to the public.
  • Suspend health benefits for Congress until they fix health care.
  • Use examples of U.S. and international health care models that work to support the message.
  • Identify a champion to “sponsor” this endeavor.
  • Offer benefit plans with real incentives for positive health behaviors and disease management compliance.
  • Inform the public about how much the government is not paying, causing cost-shifting to other payers.
  • Create a national mission to improve health care and patient outcomes (similar to JFK and the Space Race).

Hospitals:  the best practice is one that is taken seriously, and examined well.   Mayo Clinic proposed approach:  Energizing the Country, Individuals and Congress to Transform Health Care

Overview:  the incentives are what appear to prevent the spread of best practice.   In a highly competitive market place best practice spreads rapidly.  This does not seem to be the case in healthcare.

Many insurers are ignoring the transformation of the HC industry.    Change is occurring in how more and more of the cost is passed onto patients.   They also want information as to how to do this well.   Insurers have grown up as wholesale enterprises, with skills, etc. in serving groups, not individuals.  Healthcare is becoming more retail oriented than most payers think or see. 

Historically the strengths of hospitals was the shared capital, shared admin and facilities, close proximity for doctors, etc.    Payers are using IT to collect and examine the data on cost and quality.  Hospitals need to rethink their basic model:  emphasize excellence in a more limited set of services under new business units.  Improve also payment systems.     Hospitals collect from private clients only 50-60% of the balance due.  Should offer low interest loan packages as they walk in the door. 

One model is to compensate doctors on the basis of metrics using quality, cost, and service.  Example is a hospital that used such an incentive system.   Results were outstanding.  It is even a desired place to work by doctors.  However this model is suspect, as a widespread mandate, in increasing the role of the patient in the decision process, a key element of any cost reduction reform.  It seems that management of any organization would do this type of performance based compensation just as a part of a good management approach.

State regulations that mandate specific coverage of various treatments such as alcohol and drug abuse treatment, chiropractic treatment, and invitro fertilization, drive up the cost of health insurance. Clearly as a part of nay spreading of best practice these kinds of mandates have to be removed.

These and many other requirements also drive up the cost of health care by eliminating people’s ability to choose to purchase inexpensive bare bones coverage that would insure only against major accidents and illnesses. In Connecticut, one of the least regulated states, a 35-year-old male can get coverage for as little as $50 a month or $600 per year.

As costs continued to escalate through the 1970s and 1980s, what did government do to rectify the situation?  Did it rescind the tax incentives, laws, restrictions and regulations imposed on the health care market that skew behavior and result in increased demand for medical care with little concern for cost?    The answer to this question is No.

Instead of removing the controls, incentives and restrictions that were distorting the market, the federal government attempted to stifle the outcome of bad policies with a whole host of new controls and regulations. The focus of all the legislation in recent years has been to control medical prices and hold down costs, specifically by applying additional restrictions to physicians, hospitals, and even patients.

There are good examples of innovation rising, despite the lack of incentives.  This video gives some examples:

In short, what are the cost drivers, and what can be done to drive them in the other direction?

PricewaterhouseCoopers for 2007 further delineated the 6.1 percent growth in premiums into the following underlying drivers as follows:

General Inflation: 2.8 percentage points, or about 46 percent, of the increase was driven by the general economy-wide inflation as measured by the Consumer Price Index (CPI).

Health Care Price Increases in Excess of Inflation: Prices for health care services, as measured by the Medical CPI, contributed 1.8 percentage points, or about 30 percent, of the increase to the growth in premiums. The major factors that drive price increases are reduced provider competition (0.8%), cost shifting from Medicaid and the uninsured to private payers(0.5%), and higher-priced technologies(0.5%).

Increased Utilization of Services: The remaining increase of 1.5 percentage points, or 25 percent of the increase in premiums, is attributed to increased utilization of services. This increase is driven by new treatments (0.5%), aging (0.5%), changes in lifestyle (0.3%), and more intensive diagnostic testing/defensive medicine (0.3%).

Per person personal health care spending for the 65 and older population was $14,797 in 2004, which was 5.6 times higher than spending per child ($2,650 in 2004) and 3.3 times spending per working-age person ($4,511 in 2004). The relative gap in per person spending between these three age groups has not changed much since 1987.

Spending for the oldest old, 85 years and older, relative to spending for all other age groups has decreased from 1987 to 2004, mainly due to a slowdown in nursing home spending. This is the result of an increase in care alternative to nursing home care, such as Medicaid’s home and community-based waivers program.

In 2004, children accounted for 26 percent of the population and 13 percent of PHC spending, while the working-age group, including the Per person personal health care spending for the 65 and older population was $14,797 in 2004, which was 5.6 times higher than spending per child ($2,650 in 2004) and 3.3 times spending per working-age person ($4,511 in 2004).

The relative gap in per person spending between these three age groups has not changed much since 1987.  Spending for the oldest old, 85 years and older, relative to spending for all other age groups has decreased from 1987 to 2004, mainly due to a slowdown in nursing home spending. This is the result of an increase in care alternative to nursing home care, such as Medicaid’s home and community-based waivers program.  In 2004, children accounted for 26 percent of the population and 13 percent of PHC spending.

Of the 1% of the population with the highest health care spending in 2002, 24.3% maintained their ranking in the top 1% in 2003. Of the 5% with the highest spending in 2002, 34% maintained that ranking in 2003.  The top 10% consume 70% of the total, and the top 5% consumer 56% of the total.

Supply vs Demand - is it working to the patients advantage?   No:

In many industries, such as consumer electronics, innovation tends to drive down prices. The opposite is true in health care, where lower prices don’t necessarily boost sales and may even create the perception of low quality.  Instead, innovation tends to focus on the development of increasingly more expensive products and techniques.

High-priced technologies, from imaging to surgical equipment, also mean higher reimbursements for providers by third party payers, as the demand cutting-edge products is large.  What emerges is a constant cycle of cost inflation along the entire health care value chain—from manufacturers of health products to equipment manufacturers to physicians to hospitals to payers and, ultimately, to employers and patients. The incentives from the third party system, insurers or government, reward the use of advanced technology, even when it is not clear as to its benefits in all the cases.

At each step, the stakeholders absorb part of the cost increase and attempt to pass an even larger one onto the next stakeholder. Reformers must determine how to address this cost inflation cycle while retaining the beneficial aspects of innovation.

Medicare:  Concentration of spending:  top 5% of spenders are 43% of total cost:  some with chronic conditions, or onetime events, and some in last year of life.

            The 5% who die each year account for 28% of the total, and is roughly constant.

            Future increases about the same as other healthcare:  new technologies and services.

            18% growth of retirees in 2030 over the number in 2009, so the problem becomes worse.

Regulation:  How has the burden of health services regulation changed over time? W. Mark Crain and Thomas D. Hopkins have shown that between 1970 and 2000, federal regulatory agency budgets grew by 203 percent in real (inflation-adjusted) terms, or 3.7 percent annually.   FDA expenditures during this same period grew nearly ten-fold in current dollars, or 3.3 percent annually in real terms.

Drugs: However, national expenditures on pharmaceuticals accounted for only 12.9% of total healthcare costs, compared to an OECD average of 17.7% (2003 figures).  A study of the operational practices of more than 25 global pharmaceutical manufacturers finds that top ones are more than twice as productive as their average counterparts.

The Congressional Budget Office has found that "about half of all growth in health care spending in the past several decades was associated with changes in medical care made possible by advances in technology."  Although there is some question that all that could not be explained was put in the category of technology.

Payment Process contains many disincentives for best practice:

The payment for service is seen as driving a low quality product.  Other payment options have been tried and are being proposed, with most remaining third party.  The one that has had some success that is patient centric is an HSA account coupled with catastrophic illness protection.  

Central control of any payment process has its difficulties.  The pay-for-performance programs also provide disturbing data on the unintended consequences of coercive regulation. Another report in the most recent Health Affairs evaluating some 35,000 physicians caring for 6.2 million patients in California revealed that doctors dropped noncompliant patients, or refused to treat people with complicated illnesses involving many organs, since their outcomes would make their statistics look bad.

And research by the Brigham and Women's Hospital published last month in the Journal of the American College of Cardiology indicates that report cards may be pushing Massachusetts cardiologists to deny lifesaving procedures on very sick heart patients out of fear of receiving a low grade if the outcome is poor. – an WSJ article.  So universal mandate do not spread best practice.   See also Oregon and its lottery system.

Other changes, some good, some not:

Wellness programs have become commonplace; two-thirds of employers are using them, and nearly half say they are somewhat effective at reducing costs.  Some companies have found a means to make this a strong part of their healthcare program and with great results:  Safeway.

Medicare enrollment growth is anticipated to be a stronger influence on future spending (projected to be 1.6 percent growth per year from 2004-2050) than the changing age-mix of the Medicare population (expected to contribute just 0.1 percent per year).