Ten Ideas That Could Fix Healthcare

I’ve written a fair amount over the years about what is wrong with the American Health Care System from ethics to pricing, structure, incentives etc.  So, what needs to be done to fix it? In the end, is there a better way? Listed below are some of the ideas that I think would have a profound impact on lowering costs and improving quality.  None are new, but taken together they could be very powerful:

  1. Get rid of Fee For Service (FFS) medicine. Yes, its cliche but it needs to be gotten rid of and the best solutions are to move the risk to the providers, through global capitation or other bundled payments. Providers will need to put in the resources and expertise to manage this and work to drive the 30% of waste out of the system, thereby potentially making more profit than before.  This is one of the reasons why it is so important to continue the various bundled and capitated payment programs now being implemented by CMS and others.  Providers need to learn, and learn fast, no more sticking one’s toe in the water, take the dive. Another example of how bundled prices or capitation can save money.  If a hospital has a fixed bundled price for knee replacement, how hard is it to bill that?  You don’t need a bunch of billing clerks and others to be sure every item is on the bill the hospital submits, and on the payer side, they don’t need a bunch of people reviewing the hospital bill to re-price the $75 aspirin or remove the extra band aids that were not provided. Who cares whether the hospital used an additional band aid at that point if the service was appropriate and high quality.
  1. Revise the 80/85% Medical Loss Ratio (MLR) requirement.Let’s say you manufacture cars and sell each one for $10,000. Per the MLR rule, you would have to spend $8,500 (85% of your sale price) per car on all the parts and labor, excluding marketing and management. Your cost for marketing and management would come out of the remaining 15% and then whatever is left over is your profit. In this example assume marketing and administration are $1,000 (10%) leaving your profit at $500 (5%) per car. You as the manufacturer now negotiate lower prices on your supplies and it now costs you $8,000 to make the same car. According to the MLR rule, you can no longer charge $10,000 for your car, but can only charge $9,411.76 because the costs of parts and labor must make up 85% of your total charge; and unless your marketing and management fees were reduced, you now would only legally make $411.76 per car.

So why would you get more efficient?  In healthcare, the question is, why as a health plan would you want to improve the health of your members and seek to prevent illness, thereby reducing the 85% you paid for their medical care; ultimately reducing the 15% for other expenses and profit?  Current health plans want to get 15% of an ever-growing number, they want 15% of $10,500 the next year and on and on. This was a fundamental flaw in the ACA. I understand it was to ensure that health plans do not make money by denying services, but there is an upper and lower range to most quality measures not a fixed point and the same goes for healthcare services. Health Plans or those accepting the risk should have a range that their MLR must fall in and/or some way to benefit when they can show that their efforts improved the health of their members and thereby reduced costs.

  1. Target Medication Pricing and the Supply Chain.  We pay way too much and there are so many people in the middle of this that there are multiple opportunities. Here are two.  The first is to allow importation or other means to get access to cheaper medications.  Want to see prices drop fast, that’ll, do it.  We’ll reach a happy medium somewhere below what we pay now and what we allow developing countries to pay for the same medicines. At the same time, we need a new system of medication purchasing and distribution, an Amazon type system that gets rid of the many middlemen adding a piece of cost/profit at each touch point. Think also beyond the pharmacy:  Imagine a system where you go online and take the order direct from the manufacturer through Amazon with a drone delivering the medications to your door. In healthcare medications are one of the best “onion” examples, it just keeps adding layers to the service and each layer adds costs.  Just the fact that companies often hire consultants to review their PBMs who are supposedly getting them the best rate is all you need to know.  In fact, one major corporate chief medical officer told me verbatim “I’m sick of getting ripped off by my PBM.”
  1. Watch out for Aggregation to increase prices versus lower costs. Hospitals are rapidly embracing this philosophy, driven by the ACA, as they are buying up practices, opening free-standing ERs and the like.  It’s amazing to watch as these efforts more often than not increase admissions and costs.  I was at an American College of Healthcare Executives meeting where the panel topic was how hospitals would survive the move from inpatient to outpatient services. In a stunning show of honesty, two of the three senior hospital executives said they were not going to move to a more outpatient based approach and were in fact doing everything they could to increase admissions. They both claimed to have been so successful at pushing people into their hospitals that their inpatient census continued to rise and were at record levels.

Well at least they were honest (in front of a friendly audience). Going back to number one, if they have a fixed price (capitation) for the person or population, they’ll figure out once and for all that the hospital is a cost center and reducing beds, not building more, while allowing services to occur through the lowest cost point in their network is the key to profitability. And yes, maybe constructing less gorgeous and elaborate facilities might lower costs as well. Here’s another classic hospital aggregation approach to increase costs, acquire the oncology doctors and then stop providing infusion services in the clinic. Why?  Because hospitals can charge 2-4 times as much when the infusion is completed in a hospital outpatient or inpatient facility versus the doctor’s office.

  1. Sell healthcare services on eBay or Amazon.I spoke with eBay years ago about this concept, but they were not interested.  Why they wouldn’t want a piece of the $3.2 trillion healthcare market is beyond me, but hey perhaps Amazon? My dream is to go online and schedule my MRI at 3 am for $150 or $200 because the radiologist has an open slot and I am paying out-of-pocket. Sure, I know, what about quality? Well vet the places, provide real outcomes and quality data and publish it.
  1. Narrow the networks based on quality and price.  Most people say they hate narrow networks, and of course when done based solely on price, I hate them too.  But I experienced a narrow network in action long before they came into the lexicon.  As a child, I was a frequent visitor to the ER, I broke a lot of bones and had a few other stitches and scrapes. My father was a Professor of Medicine.  I can’t tell you how many times he narrowed my network and told the physician who was walking in to see me that they would not be treating me. He knew all the doctors, the good and the bad.  I healed up well, thanks to him.  I also experienced issues with poor quality during his later years with Lewy Body Dementia and other ailments. There were more than a few times I wish I could have thrown the doctors out who were suddenly assigned to treat him because he was now covered by a Hospitalist and some specialist he had never seen. They nearly killed him a few times.  As in any field quality varies.
  1. Allow Medicare and Medicaid the flexibility to send patients outside of the United States.  As an add-on to number 2, why not save billions by flying surgical patients or those with Hepatitis C out of the country to get much cheaper services or drugs?  I’m sure after a few flights, the providers and manufacturers will come running back with lower rates. And while we’re at it, how about the prisons, there are a lot of Hepatitis C patients now incarcerated who should be getting treated.

We need to look at issues like Hep C from the patient side. Because of the high costs of the drugs in the United States, there are hundreds of thousands of people who are not getting access to the treatment. Is that good?

  1. Don’t let Congress be bought. Not sure how to do this except through an election, or changing the rules of lobbying while remaining within constitutional bounds, which is well out of my wheelhouse. The healthcare industry uses Congress to protect their interests at the expense of average Americans who are now burdened with excessive costs and poor outcomes compared to other developed countries.
  1. Send Crooks to JailHealthcare has a fair amount of fraud, and you know what, its perpetrated by people, people who hide behind corporations.  Typically, the corporation settles, without admitting guilt of course, pays a fine and moves on.  But what about the people who directed the corporation to do this stuff? If we sent more people to jail, we’d reduce the fraud. Recently, there have been more announcements by the DOJ holding  individuals personally accountable; so it seems this is moving in the right direction.
  1. Invest in our communities and social services. These phrases have become mantras now:
    1. healthcare only accounts for 20% of your health;
    2. your zip code is one of the best indicators of your health status;
    3. how you live determines how you die,

We must invest more in the areas that impact health like community, safety, schools, parks, access to housing and food, but, and it’s an important but, we have to hold the organizations that we fund accountable, too many of them exist to exist and offer limited value. Much of this funding could come from savings in healthcare costs. Together can create healthy communities for all our community members.

These ten ideas are but a start and I am certain that there are many other good and viable ideas for fixing our healthcare system. It’s time we got serious and began implementing more of them.

What are your thoughts and ideas?

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Saving on Employee Health Benefits: Would you Hire this Consultant?

Over the years as an HMO executive and later founding a disease management and Healthcare IT company, I have analyzed a lot of medical claims and quality data. One of the largest was an analysis of a State Medicaid program with about 675,000 beneficiary lives with two years of inpatient, outpatient and pharmacy claims. The pharmacy file alone contained about 15 million prescription fills.

More recently I became certified as a Professional by the Care Innovations Validation Institute and sit on their Advisory Board. This certification tested my ability to look at data and decide whether the outcomes reported were likely to be valid or not.  As you look for vendors or consultants I would suggest you start with the Validation Institute. The following example is a good reason why.

Cruising around the web looking at various healthcare consulting firms and company websites I came across  a company that is targeting employers and claims they  have vetted and can bring in vendors to lower the costs for a company’s self funded health plan. Their website says they can identify, evaluate, oversee, manage and report on the vendors they propose.

On their home page is a chart used to show the savings an employer can expect to see by implementing their various cost saving approaches.  Can you spot the flaw(s)?

 

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Let’s start with the first and most glaring error and its on the first line. According to this consulting firm, Primary Care represents 100% of Total Healthcare spend.   If Primary Care represents 100% of Total Health Care Spend, then there are no other areas attributable to healthcare spend, so I’m not really sure why the other categories are included in this chart. They should have stopped right there.

Again, this group claims they can evaluate, oversee, manage and report on these vendors, know their numbers and can save you money.

We all know that Primary Care does not represent 100% of Total Healthcare spend. So, let’s try this line again using data representing ALL Physician costs (not just PCP’s) and see how close we can get. Turns out that All physician costs represents about 8.6% of Total Healthcare costs. So if one achieved a 15% savings on all 8.6% of physician costs, it would only be 1.29% or less than 1/10th of the total shown above.

This one error invalidates the entire chart. If we corrected this error, and assuming no other errors, the still overstated savings associated with this line are at most $148.14, not $1,723 and the Total Across Offerings savings, assuming they were cumulative, would be $3,528, substantially less than the $5,103.

But wait there is more to this chart.

Lets go to the bottom of the chart.  Here they state “Savings may interact and not be cumulative.”  Really?  Then why do you sum them? So even the $3,528 as more correctly calculated is probably not correct and that leads us to the next issue.

There are three areas they propose that are pharmacy related, the last three lines on this chart. This includes two offerings related to pricing and formulary and one related to specialty drugs.  First, I guess that they are assuming that the first two areas do not interact with each other, nor do they interact with the Specialty pharmacy costs which are a subset of the total 15.4%. Might a change in pricing or formulary selection affect the other? Well they say yes at the bottom, but their actions say no.

Furthermore if this is the case, then the two RX related companies are really creating the 15% of total spend savings not from 15.4% of Total Per Employee Per Year costs but from the 8.8% of RX only related spend (removing the Specialty Rx Management costs). For these vendors  to achieve savings of $265 PEPY from this lower number would require them to drop costs in this area by 24% per service not 15%. And if the two are cumulative, as they show in the chart, that means they will cut RX spend not including specialty drugs by a mind altering 48%! They must have access to some drugs not in my formulary.

And let me add another point to the pharmacy issue completely separate from pricing strategies.  We all know that medication adherence is problematic, in fact many people do not fill prescriptions, stop filling prescriptions and miss doses.   If one has selected a good and honest disease management vendor, depending upon the disease, they will tell the employer to expect to see their pharmacy costs increase as these poor adherence issues are corrected. So as Al Lewis has pointed out on many occasions, not all costs can go down. Might disease management, medication adherence and quality improvement programs have an impact?

And this then leads to the specialty pharmacy costs, are they all cumulative,? Again, they say no, but show yes.

My advice, look at all claims of savings from your consultants and vendors critically.  There are many ways to play with the numbers including some ways to just get them wrong. This is perhaps a simple example, one that everyone would have spotted given the gross first error about Primary Care Savings.

If you have an interest in looking at your data and finding opportunities or selecting vendors to help with your self funded plan, contact me or reach out to a Validation Institute certified professional or  company.

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Alternative Payment Models: Yeah or Nay?

So where do we go with our healthcare system under the new administration? Will we move to Alternative Payment bundled-paymentsModels or will FFS continue? A recent study showed that bundled payments for orthopedic joint replacement appeared to be working at lowering costs while maintaining quality.

At the same time, it seems that Dr. Tom Price, the nominee for Secretary of HHS is not a fan of bundled payment.

Along with Gregg Masters and Doug Goldstein, we’ll be exploring some of these and many other issues about the next phase of healthcare reform during the coming months on PopHealth Week.

Let us know what you think.

 

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PopHealth Week is a Production of Health Innovation Media and Accountable Health, LLC.

 

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Humana Bold Goal Launched in Jacksonville, Florida – a Call to Action

This is the longer original piece with all the links and images that  was the genesis for the Florida Times Union commentary.

This past month I had the opportunity to participate during Humana’s  half-day Bold Goal launch conference in Jacksonville, Florida (the county seat is Jacksonville and there has been a consolidated government of Duval County since 1968, so some refer to the broader county).  The conference had excellent presentations and I was honored to be included with a distinguished group of panelists from the Health Department, hospitals, providers of care and the Duval County Medical Society. It was nice to be involved in an event and try to play a role in improving the health in the community in which I live.

There are other efforts ongoing to improve community health in Jacksonville, including the Clinton Health Matters Initiative, which has focused on solving the hunger issues and a number of hospitals have launched their own efforts as part of the Community Health Assessment and Improvement Plan. While these programs and others in the community may have made some progress, Jacksonville still faces major health issues and our quality measures are poor:

Some of the major barriers we face include:

  • we tend to say we need more data or another study,
  • we have not been very innovative, and
  • we have little accountability.

As far as data goes, there are plenty of studies available in addition to those cited above. Here are just a few more interesting ones:

For data on Health Literacy, the University of North Carolina has a fantastic website. The map itself can be accessed here. The screen shot below shows Duval County with areas of poor health literacy in red and orange. The locations highlighted with below average health literacy will come as no surprise to those who understand the community, poverty, Social Determinants of Health and their relationship to health status.

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MLA: National Health Literacy Mapping to Inform Health Care Policy. Health Literacy Data Map. University of North Carolina at Chapel Hill, 2014. 2 Dec, 2016

 

As a community we clearly can find and/or know what the issues are,  where the issues are and have a multitude of organizations and funds apparently working on them; yet we continue to see our community’s outcomes in many key areas remain the same or get worse.  It’s long overdue for Jacksonville to do something about our communities poor health status and the inequities that cause it.

If we are to make a difference we need to begin by having the will to:

  • make a difference,
  • recognize what the problems are,
  • speak of them openly,
  • collaborate,
  • do something, and
  • hold ourselves and those working on these issues accountable for results.

The following are some basic principles I think should be incorporated into our efforts:

  1. Recognition that most of what we have been doing has not worked.  We need new ideas, new programs, new approaches. I recently moderated a webinar on Health Literacy during which Cynthia Baur, Director of Health Literacy for the CDC said “We’ve known for 30 years that handing out pamphlets and reading materials does not improve health literacy, yet we continue to do it.”  We need to identify similar inadequate approaches and discontinue them.
  2. Look beyond the healthcare system for our solutions.  Many of our issues are not “care” related.  Jacksonville, like other communities, is experiencing the impact of Social Determinants of Health.  Solving these problems requires looking to expertise, services and solutions outside the “care” system.
  3. Saying “no” to calls to do another study so that we can measure some aspect of the community’s health status before we start doing something. We know what the opportunities are from a multitude of local and national studies.   Instead we should take the money we intend to spend on studies and apply it elsewhere, like perhaps trying some innovative pilot programs.
  4. Collaborating for the benefit of the community, not the benefit of the organization.  There is mission here that is  larger than any one person or any one organization.  Each should leave their agenda at the door and recognize that for the community to benefit, different services may be required than those an organization offers.
  5. Holding each organization working on aspects of this accountable by requiring them to report outcome measures. Too many organizations seek to justify their existence by reporting process measures or anecdotes. If an organization cannot measure their outcomes and show significant results, those funds should be spent elsewhere. Just as we are moving towards value-based purchasing of health care services, we should move to value-based purchasing of community services.
  6. Asking our healthcare system to focus internally. If the providers of our healthcare which ranked 11th of 67 counties really care’s about the community’s health, they should work on getting the 30% of waste discussed by the Institute of Medicine out of the system. Imagine what we could do with those funds. Heres another interesting data set from Eliminating Waste in Healthcare, Berwick, D. M. et al, JAMA April 11, 2012.estimates-of-annual-healthcare-waste-by-category
  7. Looking to new approaches. Tray Cockerell of Humana pointed out that these problems are complex and complex problems can’t be solved using traditional approaches.
  8. Ensuring that any solutions tried are scalable. We have a large and geographically distributed community, funded programs must be able to provide a solution for a large number and/or geographically dispersed population.

Jacksonville, like other major cities, struggles with a lot of issues that affect the health of members of our community ; but with the will, an agreement on basic principles, and some new thinking we can create a thriving, healthy community for all of us.

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Guest Column in Local Paper: A call to action to improve community’s health

The Florida Times Union published a Guest Commentary I wrote on Improving the Health in our community

Guest column: A call to action to improve community’s health

Humana recently launched its local Bold Goal initiative with a conference at UNF. There were excellent presentations and I was honored to participate with a distinguished group of panelists from the Duval County Health Department, hospitals, providers of care and the Duval County Medical Society. It was nice to be involved in the event and try to play a small part in improving the health in the community in which I live.

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I’ll be posting a longer version with all the citations here.

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