Archive for the ‘Medicare’ Category

More Joys of Electronic Medical Records

Tuesday, January 22nd, 2013

HistoryGo up to your favorite emergency department staff member and ask them what they think of “twofers.”

Depending on that person’s mood, chances are that you’ll get anything from a scowl to a punch in the gut in response. Two patients from the same family both needing emergent medical care at the exact same time? It still happens … car accidents, fires, maybe a stomach bug. But it can be frustrating. There’s a saying in emergency medicine that the likelihood of a true emergency is inversely proportional to the number of patients in the family registering to be seen.

That being said, a “fivefer” will raise the hairs on the back of the neck of pretty much any emergency department personnel. When the complaint is that everyone in the family has a cough, three of the five family members smoke, and none of them got their flu shots … well … you get the picture.

One of the frustrations with scenarios like this is the charting involved. The nurse and the doctor are literally stuck at the computer for 30 minutes each, both entering useless information about different patients over and over again – instead of taking care of other patients. The medical records won’t let you proceed without entering the information.
Is there a fall risk?
Is there a risk for tuberculosis?
Does the patient smoke? Nurses have to enter this information even on infants to satisfy government regulations.
Is there a risk of danger in the home?
Is there evidence of abuse?
When entering an order for IV fluid, if the patient has a sulfa allergy, doctors have to acknowledge that there is some potential interaction between saline and the patient’s allergy and describe why we would dare to give salt water to a patient with an allergy to sulfa.
And on and on and on.

So I tried something that sounded easy when I thought of it, but was technically quite difficult when I tried to actually do it. I tried to log the number of times I clicked on different check boxes and the number of different screens I had to navigate in order to document on and discharge/admit a patient.
This is easier said than done.

I never realized how quickly I am able to navigate a byzantine array of computer screens. After clicking on one button to order a medication, I found myself subconsciously moving the mouse to the area of the screen where the next “OK” button would pop up. I had to literally slow myself down to count the clicks and the screens. I’m sure I missed a few in the process.
The number of data points in each aspect of a patient’s history is quite large. There are 144 data potential points to click on just for a patient’s physical exam. The screen to the right is what must be navigated for each and every patient’s history. Each line in the white fields is a data point that must potentially be either right- or left-clicked depending on whether it is positive or negative. I didn’t even bother counting up how many potential data points could be clicked upon, but it numbers in the several hundreds – depending on the presenting complaint.

So I set out to log the clicks and screens. The first few times I tried, I wasn’t able to do it. Finally, when it wasn’t so busy, I made a conscious effort to stop on every screen and mark down clicks and screens. I use some basic templates, so the amount of clicking that I do is actually less than someone who doesn’t use templates.


Do Electronic Medical Records Affect Productivity – Part 2

Tuesday, October 30th, 2012

In case you didn’t catch the earlier version of this experiment that I posted, you can find that one here.

I work at several hospitals and each uses a different electronic medical record system. When I switch from hospital one to another, I obviously have my favorite EMR systems and my not so favorite EMR systems. In the previous post, I was using the EMPOWER charting system, which I liked for its simplicity, but disliked because of the layouts of the charting interface and some of the macros it contained.

After becoming rather frustrated with the function of another EMR system, I decided to repeat the experiment at a different hospital. This hospital uses the Meditech system. I also did the same thing at a third hospital using yet another EMR. Those times will be published in a future post.

I had to do the experiment at this hospital a few times because several times I wasn’t consistently busy throughout the shifts as I am at other places. In the shift that I used, I only tracked 7 hours in an 8 hour shift because the first hour had a lot of down time that wouldn’t have fairly represented the effects of the EMR on my productivity. In general, the whole shift had rather low acuity with only a couple of admits. In theory, low acuity should increase efficiency because of less charting time. It didn’t. In fact, the percentage of time that I spent with patients during this low acuity shift was just slightly more than the percentage of time I spent with patients during a much higher acuity shift which required more documentation of several more admits and a transfer.

As with the previous experiment, when there was overlap, I would generally count the time toward the task with which I was focusing most — if I was speaking to a doctor on the phone while charting, I counted the time as only speaking to the doctor.

Out of a total of 420 minutes, I calculated that I spent the following amount of time performing the following tasks:

Seeing patients: 156 minutes
Time on computer: 237 minutes including …
–Charting/entering orders and labs to be done/entering discharge documentation: 191 minutes
–Looking up old medical records: 20 minutes
–Entering admit orders/completing transfer forms: 13 minutes
–Meditech program issues: 13 minutes
Discussions with other physicians: 20 minutes
Miscellaneous down time (bathroom, food, non-work related issues): 7 minutes

Despite a lower acuity shift, more than half of my time was spent on Meditech entering data. I should take that back. Thirteen minutes were wasted due to Meditech program freezes and due to watching the little hourglass turn over and over on the computer screen while Meditech’s pages loaded. The rest of the time was spent entering data.
I lumped patient evaluations and re-evaluations into one category, so I wasn’t able to calculate the total time I spent with each patient. However, based on the numbers, it appears that time with patients averaged between 6 and 10 minutes (with a couple of outliers)

Out of a seven hour shift, I spent just over 2.5 hours with my patients and their families and I spent just under 4 hours with the computer program.


Microbial Armageddon

Wednesday, May 9th, 2012

Any patient who demands a ZeePack for a runny nose, who wants amoxicillin for sinus congestion, or who wants Levaquin to “keep this bronchitis from developing into pneumonia” needs to read this Bloomberg article.

We are heading toward a situation where people die from infections that no antibiotics can treat. The article discussed one infant in a pediatric ICU that died because the infection that the child developed was resistant to all antibiotics used for treatment. Six similar incidents occurred during the course of 16 months. Estimates are that 100 million people in India have been colonized with organisms carrying the genetic mutation. Medical tourism in India is decreasing as a result.

Even the director of the CDC cites the situation an example of why we have to limit antibiotic prescriptions: “We are looking at the specter of untreatable illness.”

Oh, and remember how the Centers for Medicare and Medicaid Services assert that if hospitals don’t give antibiotics to every single pneumonia patient within 6 hours of arrival – even though a large proportion of pneumonias are viral in nature – that the hospitals are falling outside of “quality” guidelines? Our government’s own “quality” guidelines may be contributing to the looming microbial Armageddon in this country.

Dr. Google, meet Pharmacist Bing

Tuesday, May 8th, 2012

FDA decides whether to allow patients to purchase prescription medications over the counter for many common ailments.

This idea is controversial.

On one hand, deregulation would remove one of the largest barriers to receiving treatment for some conditions – the doctor’s visit. If no doctor’s visit is necessary to receive necessary blood pressure medications or diabetes medications, then patients don’t have to wait for an appointment and the patient/government doesn’t have to pay for the doctor’s visit. The move would also purportedly cost patients more money for their prescriptions because insurance companies (including Medicaid) don’t pay for over the counter medications. Therefore the costs for medications that go over the counter would be shifted to the patients who purchase the medications.

But on the other side, I’m sure that patients will “Bing” what medications they think they need, and the proposed plan would require patients to answer questions online or at a kiosk and then get input from a pharmacist before the prescriptions could be purchased. So there really isn’t unfettered access to the selected prescription medications.

According to the article, the American Pharmacists Association is embracing the concept while many doctors’ groups are opposing the idea. Pharmacists believe that their increasing role in a patient’s medical care will be a good thing while physicians see many of their “bread and butter” patients skipping appointments and instead going to the pharmacy kiosk.

Some of the conjectures about such a policy should be addressed.

Will prescription costs for patients go up? If patients have to pay out-of-pocket, then perhaps they would be paying more money for prescriptions, but I doubt that the amount of money would be much more than the copay they were previously paying. I imagine that most of the medications considered for over the counter use would be generic medications from the notorious “$4 list,” so the financial burden on a vast majority of patients would not be great.
However, there are certain medications that have no alternatives. Consider colchicine, vancomycin, and Plavix. Medications similar to these would continue to command a higher price. If patients need such medications or desire name brand medications, then they will keep going to the doctor in order to get their designer medications for a $20 copay.
However, medications that do have a generic or over the counter equivalent will see downward pressure on their pricing. Who in their right mind would buy a $300/month name brand medication when the $4 generics (or a combination of $4 generics) work just as well? So pharmaceutical manufacturers would have to justify the price of their expensive medications or would have to lower the price until patients felt that the price justified the benefits over generic medications. That’s free market at work.

Will the public be in imminent danger if they are allowed to self-prescribe? I doubt it. The Angry Pharmacist has a different take on the matter (read the post from behind a blast shield because it is rife with f-bombs). He believes that patients who take some medications need to be medically monitored for adverse effects from the medications. For example, patients who take ACE inhibitors may have deterioration in their kidney function from the medication and may even develop renal failure. If patients are worried about the effects on their kidneys, they can see their doctors for such testing. There are also some online labs that will provide direct-to-patient testing. But if we consider the renal function example, we can also look at Mexico where patients can purchase many medications over the counter. The rates of chronic kidney disease are no higher in Mexico where people can purchase ACE inhibitors over the counter than they are in the US where people cannot purchase ACE inhibitors over the counter. Maybe the adverse effects of medications are balanced by fewer people developing hypertension-related kidney disease because they are controlling their blood pressure. Lots of potential explanations, but we won’t know the real cause and effect without specifically studying the issues. Perhaps this isn’t the most accurate indicator of adverse effects from medications, but comparing health issues in the two countries may show that some of the health concerns raised against this policy are overblown.

Will pharmacists be happy with this policy? Decidedly not. If patients are allowed to purchase prescription medications over the counter, pharmacists all over the country are going to have another very significant and time-consuming task added to their laundry list of things to do while simultaneously being expected by their employers to fill prescriptions at the rate of no less than two per minute. Consider the intent of this policy. What the government is trying to do is shift patients from a paid physician service to an unpaid pharmacist service. Pharmacists are going to be doing a lot of extra work for which they will receive no extra compensation. And … if the patient does develop a serious side effect from over the counter medications provided at a pharmacist’s advice, then the patient (or the family of the dead patient) will have only the pharmacist or the pharmacy to blame because no physician was involved in prescribing the medication. Pharmacy malpractice insurance premiums are about to go up. The Angry Pharmacist notes that there is no one to sue in Mexico if there is a bad reaction to a drug. Do pharmacists really want the target painted on their backs?
This is a case in which I think pharmacists should be careful about what they ask for.

So what’s the right answer?

Deregulation. We shouldn’t stop with medications, either. We also need to deregulate radiologic testing, lab testing, and many medical devices as well.

Under this proposed policy, there shouldn’t be any input required from medical providers before patients purchase a medication, either. If patients want to ask about a medication before purchasing it, that’s fine. Patients don’t need pharmacist input to purchase vitamins, ibuprofen, Tylenol, Prilosec, or Claritin, so why should patients require pharmacist input before they purchase blood pressure medications? Just as with current over the counter medications, the onus should be on patients to research the side effects and interactions of medications before taking them. For that matter, why should patients need a doctor’s permission to get a CBC, have their cholesterol checked, or get an x-ray of an injured ankle? All that the regulations are doing is causing a barrier to access. Very few people are refused x-rays if they go to a doctor and really want them.

There should be some limits on what can be purchased over the counter, though. Controlled substances and antibiotics are a couple of examples of things that should still be off limits to the general public. In fact, so many physicians inappropriately prescribe antibiotics that I think antibiotics should be a controlled substance and that physicians should lose their ability to prescribe antibiotics if they demonstrate a disregard for proper prescribing practices. Coughs, runny noses, and simple toothaches do not require antibiotics, doc. We need to practice 21st century medicine.

So let patients purchase most medications over the counter. Yes, medical providers will still have to be Vicodin police and ZeePack police. For the rest of the medications, have at it. There will inevitably be some adverse outcomes and even deaths from wrong doses and from medication reactions. When these adverse outcomes occur, patients will gradually begin to see the value in the services that pharmacists and physicians provide.

We’re there to try to watch out for your interests, we’re not there to keep you from getting care and treatment that you truly need.

If you don’t believe me, you should be able to go and purchase medications yourself, knowing that you alone are responsible for any adverse outcomes that come from using the medications you purchase.

I think that is a fair trade-off.

UPDATE 05-14-2012:
Cross-posted at Kevin MD here with additional commenters.


Drug Shortages

Wednesday, March 28th, 2012

Just got word that several additional medications have been added to the national list of “drug shortages”. Doctors better start learning more about wilderness medicine at this rate.

I can see the management of our next unstable patient now …

[Call comes in on telemetry line]
“We’re coming to you with a 44 year old male hypotensive and unresponsive. Short transport time.”
[15 minutes later, the crew arrives]
“Sorry it took so long, our ambulance ran out of gas because we couldn’t afford to fill the tank due to the high gas prices and low Medicare/Medicaid reimbursements. We had to call for assist with transport from the Amish Ambulance Service with its horse and buggy. By the way, do you know where I can get a broom and a very large shovel?”

[Patient is hooked up to the monitor. Wide complex bradycardia. Pressure 60/40. Dialysis graft is noticed in his arm.]
“Dialysis patient. He may be acidotic and hyperkalemic. Give him an amp of bicarb STAT.”
“Sorry doc, we’re out. There’s a national shortage.”
“Keep that fluid bolus going. Let’s start some Levophed on him to raise his blood pressure.”
“Sorry, doc. We don’t have any of that either. National shortage.”
“Well let’s at least give him some Vancomycin in case he’s septic.”
“I’d like to, but I can’t. That’s on national shortage, too.”
“Well, he’s not responding very well. At least let’s get him intubated. Can someone push some Rocuronium?”
“Don’t have that, either. National shortage.”
“Nope. That’s out, too.”
“Nope. National shortage.”

[patient now loses his pulse]
“He’s CODING! Start CPR. Give him an amp of epinephrine, STAT.”
“Sorry, doc. National shortage. Don’t have any.”
“OoooKayyy. Give him an amp of atropine, then.”
“Don’t you know that atropine isn’t part of ACLS protocol any more? Besides, we don’t have any and there’s a national shortage of atropine, too.”
[patient is unable to be resuscitated and dies]

Six weeks later, the doctor receives a letter from the Arizona State Nursing Board [for those who don't regularly follow this blog, this is parody -- background here] informing him that he is being investigated for failure to properly manage the patient and failure to properly look out for the patient’s best interests, too. He must submit to a psychiatric evaluation, must submit to a genetic test to assess his future intellectual capacity, and must submit to a hearing in front of the whole nursing board to explain himself or else his name will be posted somewhere on the Arizona State Nursing Board’s web site and he will never be allowed to be a nurse in Arizona.

“I think I’m going to be sick.”
“Hope not. We’re out of Zofran, too. National shortage.”

[fade to black]

Good thing I had extra coffee and some old jumper cables laying around to jolt my heart back into a normal rhythm after seeing the Instalanche! Thanks, Glenn!

Legislative Fixes

Friday, February 17th, 2012

Washington State drops its plans to limit Medicaid patients to three emergency department visits per year. Instead, Washington plans to institute a policy of refusing to pay for any emergency department visits by Medicaid patients that are deemed “unnecessary.”

What effect will this policy have?

Medicaid patients can’t/won’t be charged for the “unnecessary” visits.
Washington state will no longer pay for the “unnecessary” visits.
Therefore, hospitals and medical providers take a financial hit if the state makes a retrospective determination that a visit is “unnecessary.”

In order to make the determination whether a visit is “necessary” or not, Washington State officials must rely upon what is written in the patient’s chart to determine a patient’s complaints, diagnosis, and workups. Who controls what complaints are emphasized on the charts and how the complaints are worked up? The same providers that will be financially liable if the visits are deemed “unnecessary.”

If this policy survives the legal challenges that are being mounted against it, look for a sharp increase in the number of patients diagnoses that Washington State does not deem “unnecessary.”

The funny thing is that when you pay for a result, you often get the result. Remember when Medicare started docking hospitals that had central line related bloodstream infections? When hospitals don’t get paid for patients with central line related bloodstream infections, the incidence of such infections plummets. But the incidence of bloodstream infections in general goes up. It’s all in how you define the issue.
With emergency patients, the demographics won’t change. The patient complaints won’t change. The diagnoses will change a lot – especially if patients know that they might be triaged out of the emergency department without receiving care and sent to a medical clinic if they have certain “unnecessary” complaints. If I was running a hospital, I would even put a sign up in the waiting room stating which complaints/conditions that Washington State would pay for and telling patients that after they receive their federally mandated triage exam, they may be sent to a clinic for their care if they do not have one of those conditions.

Because reimbursable diagnoses are usually paid at a higher level, I think it’s a safe bet that Washington State will end up paying out more money for emergency department visits by Medicaid patients. Your baby needs to be seen for a cough? Coughing is an “unnecessary” complaint. But, that cough could represent RSV pneumonitis or pneumonia. Those aren’t “unnecessary” diagnoses. Instead of giving you some cough medication and discharging you, we should probably do some blood work, a chest x-ray, and get a nebulizer treatment going just to make sure that there’s no pneumonia or RSV present.

When legislators try to fix a system that they know nothing about, they often just make the system worse.
And then they need to create more regulations to try to fix the problems they created with the initial regulations.

We’re from the government. We’re here to help.

Too Many CT Scans … or Not Enough?

Friday, January 20th, 2012

Scary findings.

Patients using Coumadin who have any head injury need repeat CT scans.

The study looked at 116 patients who were taking Coumadin and who had any head injury with a GCS of 14 or 15 – regardless of loss of consciousness (patients with lower GCS were presumably at higher risk of intracranial bleeding). CT scans were performed on all patients. Of those initial 116, nineteen patients (16%) had bleeding on their initial exam. Of the remaining 97 patients with normal initial CT scans, ten refused to be in the study. Repeat CT scans were performed on the remaining 87 patients 24 hours after the first normal CT scan and showed 5 cases of new hemorrhage. Three of those patients required hospitalization and one delayed bleeding patient required brain surgery.
Even after a normal CT scan 24 hours later … two additional patients still developed symptomatic subdural hematomas — one patient 2 days later, one patient 8 days later. Both of those patients had INRs greater than 3.0. The study recommends admitting patients overnight and repeating CT scans in 24 hours. Original study here (.pdf).

While admission and repeat CT scan for minor head trauma hasn’t become the standard of care in the United States, this study raises questions about the optimal care of minor head injuries in patients taking blood thinners.

Also at issue is the Medicare policy not to pay for “normal” CT scans of the head in atraumatic headaches. Will this policy spill over to deny elderly nursing home patients from receiving CT scans when they can’t remember whether they have hit their heads?

Certificates of Medical Necessity

Wednesday, January 18th, 2012


Not too long ago I got a letter labeled “URGENT” in my mailbox at work.

The letter was from Walgreens regarding a patient I had seen several weeks earlier. I cut and pasted parts of the letter to make it fit on one page above.

As the prescribing physician, in order for our government to pay for the prescription I wrote for the patient … several weeks ago … I had to sign a statement stating the following:

“I, the undersigned, certify that the above prescribed supplies/equipment are medically necessary for this patient’s well being. In my opinion, the supplies are both reasonable and necessary to the accepted standards of medical practice in the treatment of this patient’s condition and are not prescribed as convenience supplies. By signing this form, I am confirming that the above information is accurate.”

Seriously? To get reimbursement for a medication on the $4 list, the government is forcing health care providers to take the following steps:

A pharmacist has to receive the denial from Medicare, look at the medication, enter all the information into the CMN and generate a letter to me. The pharmacy must then spend 44 cents to mail the letter to me
Once I receive the letter, I don’t remember the patient, so I am then forced to waste time looking up the patient’s chart, reading through it so I could find the diagnosis and make sure that the flipping $4 albuterol prescription wasn’t for the patient’s “convenience.”
The pharmacy then spends another 44 cents for the self addressed postage paid envelope.
Once the pharmacist receives the certificate saying that the patient really does need his albuterol solution, he then has to spend more time going back on the computer, matching the signed statement with the visit and then forwarding the claim onto the government for medication that has already been dispensed.
Then the pharmacy waits months and hopes that it gets back $3 in reimbursement for a $4 medication.

In essence, health care providers waste 50 times as much value in time getting paid for something after the fact than the item is worth. And the government knows it. It is just hoping that one of the providers won’t do all the paperwork so that someone else gets stuck paying for the medication – other than the government. No paperwork, no payment.

Is this what medicine has come to? Harassing providers so much with pre-authorizations and post-authorizations because they don’t have enough to do? What other ways can we concoct to steal services and supplies from medical providers?

Then I thought that since the government uses these authorizations so much, that they must be a good idea.

Before I send in my next tax payment, I’m thinking about sending in a similar authorization to the IRS.

“I, the undersigned, certify that the above tax payments are necessary for this country’s well being. In my opinion, the government purchases made with this money are reasonable and necessary to the accepted standards of accounting practices and are not spent on wasteful or potentially wasteful projects or items. By signing this form, I am confirming that the above information is accurate.”

Any accountants out there? Would this work?

Why Bundling Payments Won’t Reduce Costs – Part 2

Friday, December 16th, 2011

If you haven’t read Part 1 of this post, please do so. In that part, I try to explain the main drivers of cost in our health care system.

Now that everyone has a basic grasp of the drivers of cost in our health care system, I want to try to show how the proposed changes to the system will have little effect on lowering cost in the system.

Through the Affordable Care Act, government is now moving towards “bundled payments” as a means to reduce health care costs. In the current system, providers receive separate reimbursements for each of the multiple services a person may receive during a specific illness or injury. For example, a patient with chest pain may have an EKG. The hospital gets paid for doing the EKG. The cardiologist gets paid for interpreting the EKG. The emergency physician gets paid for acting on the results of the EKG. If the patient is later admitted, the hospital gets paid for the use of the hospital bed and gets paid separately for the medications the patient receives or for the machines that the patient uses. Doctors get paid separately for visiting the patient in the hospital.
Bundling would add up all the payments for a given medical event and lump them into one. Instead of the government making separate payments to the hospitals, physicians, and other providers, the government pays the hospital one fee for everything and lets the hospital divide payments.

Bundled payments are touted as a means to improve quality and reduce mistakes.

CMS considers Bundled Payments for Care Improvement.

Ezekiel Emanuel in the New York Times “Opinionator” blog says that, as a means to “save real money and improve care,” we should embrace bundling and eliminate fee-for-service.

A New York Times editorial also noted how “most [unnamed] experts agree” that the solution to spiraling fee-for-service costs is to pay providers “fixed sums” to manage a patient’s care and then decide which services are truly necessary.

Mayo Clinic President Denis Cortese was quoted as saying that bundled payment plans prompt hospitals to deliver the best possible care:

“Once you have a bundled payment, the delivery system can really do anything they want because the money’s on the table,” Cortese said. “But the incentive is to get it right the first time. If there’s a failure, you have to redo it on your nickel.”

A 2009 USA Today article noted that not only is the government advocating bundling of services, but it is also paying patients to go to hospitals that accept bundled payments. One 79 year old patient on a fixed income said that the government bribe, er, um “incentive payment” helped to “seal the deal” for her because the $271 check she received from the government for going to the hospital would come in handy for “helping get my car fixed.” I think that it is good that the federal government acknowledges it is appropriate to provide “incentive payments” to encourage patients to go to certain hospitals. Wait. Isn’t that illegal? Oh well. You call it a bribe, they call it a tax refund. Have to look at that in another post some day.

Before getting into medical payment models, I want people to think about how bundling would affect us in the real world if we implemented it outside of health care.

Imagine that you were going to receive a bundled payment of $100 for ten pieces of winter clothing. What would you do? I know that I would go to my closet and find the 10 cheapest pieces of clothing there. Some of the gloves with holes in them, a ratty old scarf, maybe an unmatched boot. I wouldn’t even think about giving up a wool coat or a leather coat. If  I could find 10 pieces of clothing that cost less than $100, I’d complete the deal. If you only had high-quality or expensive clothing in the closet, you’d probably pass because you’d lose money.
Point #1 is that sellers of bundled goods or services have an incentive to cut costs in order to make a profit. Those cuts must be either to the quantity of services or to the quality of services. There’s no other variable to change.

Next example. Imagine going into a supermarket to purchase a bundle of 3 pounds of bananas for $1. If you are a purchaser of bundled services, you want the best product that your money can buy. Wouldn’t you pull off all the bruised bananas and toss them back onto the table? After all, why should you pay good money for something you aren’t going to be able to eat? No one wants damaged bananas. When enough damaged bananas have accumulated on the table, then the grocer collects them all and dumps them in the garbage.
Point #2 is that consumers of a bundled services want the best quality for their money.

We’re already seeing a conflict arise from bundled payments. But I’m not done yet.

Another example. Suppose that a group of five people was going to receive a payment totaling $100 for 10 items of their winter clothing. How would that affect the goods being supplied and the payment being made? No one would want to contribute expensive items, so it is likely that every person would contribute the lowest quality clothing that they had available. After ten items had been contributed, then the five people would begin to argue about payments. The arguments would center around the relative value of the items they contributed because each person wants the maximum “cut” of that $100. Gloves should only count as one item – that person should get half as much. Wool gloves are worth more than a yarn hat – that person should get less. No one really uses scarves any more – that person should get less.
Point #3 is that there is no simple way to bundle payments to multiple entities for the same services. Doing so will always create arguments over how that payment is divided.

One last example. Suppose that you were purchasing three pounds of bananas, but those bananas were in a black bag and you could neither see the bananas nor could you remove the bruised bananas. You had to accept the bundle sight unseen. Would you still make the purchase? Maybe some shoppers would try it. If they had a good experience, they might purchase more. Other shoppers would be upset because they lost money on a bag of bananas that were in really bad shape. But, at most, they would be out a buck.
Now imagine that the grocery store wanted you to accept bundling of all your produce in a dark bag, sight unseen, in one payment of $100 for the whole year. Would you do it? Some people might. Many people probably wouldn’t. Then the grocery store would entice people into the program. We’ll only charge you $50 per year. Isn’t that a great deal?
Once enough people accepted that model, then the grocery store might go to an exclusive bundling model where they didn’t sell produce any other way. Then the grocery store might expand that model to grains and then to beverages and then to dairy products.
Once the grocery store had achieved a relative monopoly, it could then make significant modifications to the consumers of the bundled products. This year, they’re increasing the price to $150 for bundled produce.
Some people might go other places to buy produce.
If not enough people paid the higher prices for produce, then the grocery store could create a law, er um rule, making produce purchase mandatory as a condition of purchasing other groceries. For example, if consumers don’t purchase bundled produce, they can’t purchase bundled meat or bundled dairy products, either.
The idea here is to get a large market share to adopt a payment model and then once that model has reached a “critical mass”, then turn around and use the widespread acceptance of that model to the disadvantage of the market.
A similar analogy might be a corporation’s abuse of a salaried employee. A company might agree to pay an employee a set salary for performing a set of specifically delineated services. After the relationship is established, the company wants to save money, so the company makes cuts to the staffing. The remaining workers now have to perform the services the fired employees were performing, but have to perform those tasks for the same salary. Then the company fires more employees and widens the scope of the services that are required in order to keep the same salary. Finally, in order to cut even more costs, the company decreases the salary, but increases the scope of services that are needed to earn that salary. By this time, there are so few employers left that the company is able to impose an economic hammer on the workers. Either you accept our policies or chances are that you won’t have any employment at all.
Oh, and if you don’t perform your services flawlessly, you might be sued for millions of dollars.
Although I have honed in specifically on how bundling can be misused, Point #4 is that widespread policies in either a monopoly or a monopsony tend to benefit only the monopoly or the monopsony. Those policies tend not to benefit the people who provide services on behalf of the monopoly/monopsony, or those who use the services provided.

Well, I had hoped to finish this topic with two posts, but it looks like there will have to be a third focusing on how bundling will affect medical costs.

Again, comments are encouraged. If I’m missing something or have misrepresented something, let me know.

Why Bundling Payments Won’t Reduce Costs – Part 1

Thursday, December 8th, 2011

Probably one of the largest pending changes in health care is payment reform.

Right now, payment for medical services is essentially a fee for service model. Patients (or their insurers) are generally charged for the services utilized. If a patient goes to hospital for chest pain, and a physician evaluates the patient, either the patient or the patient’s insurer pays the physician for those services. If the physician orders an EKG and lab tests, either the patient or the patient’s insurer pays the hospital for the EKG and lab tests. If the patient is admitted to the hospital, the hospital gets paid a given fee for the admission. It goes on and on.

The feds want to reduce costs by changing the payment model for medical care to a “bundled” approach. I don’t think it’s going to work. Bundling won’t change the behaviors necessary to save money. This will be a two part post on why. This part will discuss incentives and how they drive utilization of health care. Next part will apply those concepts to bundled health care.

Why is our current system going bankrupt? It is all about incentives. There are three main concepts driving health care costs: profit, demand for services, and fear. Before we can see the effects of a policy change on health care costs, we need to understand how these concepts drive the actions of the major players in the health care market.

For Providers, the incentive is currently to provide more services.

  • Demand for services is created by illness. When ill, patients often demand as many medical services as the providers are willing to provide. Patients may seek alternative providers if their demands are not met. There is little incentive to provide less care with increased demand.
  • Profit is created by providing services. In a fee for service environment, the more services that are provided, the more that the providers are paid. If patients want the testing or services, more often than not, they get the testing or services. Unhappy patients tend not to come back. No patients = no income.
  • The most pervasive fear for providers is fear of liability – either legal or professional. This fear is often mitigated by providing more services. Increased testing decreases the fear of liability because if there is a bad patient outcome, the provider can point to all the testing and argue that they should not be liable because “we did everything we could.” It is uncommon for a provider to suffer adverse consequences for performing too much testing. Fear of liability may lead to extremely expensive and questionably beneficial medical care.
    Hospitals also fear regulatory sanctions. It is comical to watch hospital administrators scurry about when there is a JCAHO survey. Poor performance on a JCAHO survey threatens a hospital’s Medicare reimbursement.

For Insurers, there is an incentive to increase customers who pay into the system, but who do not take money out of the system.

  • Demand for services is still created by illness, but as demand for services goes up, insurer profits go down (or, in the case of government insurance, debts increase).
  • Insurers profit by having healthy and wealthy subscribers. Healthy subscribers pay into the system, but don’t take as much out of the system. Insurers can increase profits by raising insurance premiums, but must be careful when setting prices. If premiums are raised too high, healthy insurers may drop their coverage because they perceive too much of a disconnect between the premiums that they are  paying and the services that they are utilizing. In that case, the profits from increased premiums may be diminished because the insurer has fewer subscribers and proportionately more “unhealthy” insureds who utilize more services that the insurer must pay for. Insurers increase their subscribers by contracting with employers to provide services to employees. If an employer chooses a specific insurance company, it would be a huge financial burden for an employee to try to go with another company not offered by the employer. There are even tax disincentives from purchasing your own insurance instead of using your employer’s insurance.
    Insurer profits also increase when insurers deny care. Insurers have an incentive to deny claims to subscribers or to create roadblocks to providing care (also known as “pre-authorization”) in order to discourage people from taking money out of the system. A patient’s MRI doesn’t meet medical necessity — the insurer refuses to pay for it. Expensive cancer treatment is “experimental” — the insurer refuses to pay for it. Patients need an expensive medication? The physician has to call and pre-authorize the medication — which is uncompensated time spent away from caring for patients. However, too many inappropriate refusals may cause the insurance company to get a bad reputation with its insureds and may cause further attrition – or may cause a corporation to drop its affiliation with the insurer. Underwriters make a determination whether the risks of denying care are worth the potential financial benefit
    Finally, insurers increase profits by paying less to providers. Providers need patients in order to make money. If insurers have control over a large proportion of a market’s patient population, then providers may be financially forced to contract with the insurer on the insurer’s terms so that the provider has access to the insurer’s patient base. Sometimes the providers have unconscionable contract terms to which providers will not agree. For example, Medicaid pays such little money that many providers will not accept patients who have Medicaid. The government gets around this conundrum by creating laws that force certain providers to provide care to Medicaid patients and by giving states funding to provide care to Medicaid patients.
    Some private insurers also create unconscionable terms in their contracts in order to increase profits. In our area several companies have a reputation for low reimbursements and long reimbursement delays. Therefore, many providers simply refuse to contract with those companies. Think about it. Would you work for an employer who paid less than minimum wage and who didn’t give you your paycheck for 120 days? But insurers that cut corners then market lower cost products to employers who purchase their product to save money. Then the employees get “insurance,” but that “insurance” has less options and less physicians than other insurance plans.
    For the most part, providers can still care for patients under private insurance plans, but patients must pay proportionately more for “out-of-network” physician services. In other words, if an insurer is only willing to pay a physician $20 for an office visit costing $150, the patient may being billed for the $130 balance. This is so-called “balance billing.” When patients pay a substantial amount of money in insurance premiums, they become upset by having to pay more than a small co-pay for provider services. Private insurers then blame “greedy” providers for charging too much and have successfully lobbied many state legislatures into making balance billing illegal and forcing some providers to accept whatever amount of money the insurance company chooses to pay. In other words, states such as California make it so that if an insurance company wants to compensate a physician 10 cents for providing medical care to a patient, the physician has to take the 10 cents and cannot bill the patients for the difference.
    Medicare has also outlawed balance billing. Providers either agree to what Medicare pays for services or they don’t accept Medicare patients. Because of Medicare’s large patient base, it has considerable influence over medical providers. All patients over age 65 are eligible for Medicare. Because these patients typically are high utilizers of medical care, a hospital’s refusal to accept Medicare could threaten the hospital’s financial viability. Medicare knows this and it creates arcane rules that enable it to refuse payment or diminish payment to providers if the rules are not followed. For example, failing to note that a patient is a smoker may cause a provider’s payment to be diminished by up to 40% per patient. Hospitals have “chart police” who are hired solely to make sure that providers properly document everything that Medicare wants us to document.
  • Insurers fear financial risk. If a patient has a history of a potentially costly medical problem, an insurer will not contract with that unhealthy patients. Try getting a private insurance policy if you have a history of diabetes or cancer. Fear therefore diminishes the availability of care to patients who need it most.
    Insurers also fear legal liability. In many cases an insurer can be successfully sued for refusing to pay for medically necessary services. To mitigate this risk, a law called ERISA was created that minimizes insurer liability for refusing payment for services when those payments are for an employee-sponsored health plan. ERISA doesn’t apply to private insurance plans, so insurers have less fear of employed patients than they do of private patients.

For Patients, there are mixed incentives, depending on their insurance status and ability to pay for care.

Well-insured patients or patients on government insurance have an incentive to demand comprehensive medical care. If they are paying large insurance premiums, if they can afford to pay out of pocket, or if someone else is paying for the cost, why shouldn’t everyone have the latest and greatest testing, medications, and treatments?
In addition, patients with government insurance have no disincentive to seek medical care for trivial complaints or for secondary gain (such as narcotic prescriptions or work notes). With no financial risk involved in seeking medical care, the only disincentive for those with government insurance is time spent obtaining the medical care. The only time a monetary disincentive comes into play is when government insured patients seek care from a provider who does not take their insurance or when a government insured patient is prescribed a medication that is not on the government’s formulary.
Monetary issues aren’t a much of a concern for well-insured patients. If there is no out of pocket cost, very few patients even question how useful a test is or how much the test costs.
Patient fears drive increased utilization. Perhaps a relative just had a stroke or died from cancer. If an insurance company is picking up the tab, fear may cause the patient to demand that those same diseases be ruled out or that low-yield testing be performed, or that a family member be inappropriately admitted to the hospital.
Patients who pay out of pocket or who have high insurance deductibles have an incentive to obtain the minimum necessary care. Medical care is extremely costly and medical costs are behind a large proportion of bankruptcies in this country. Those who pay face value for their medical services avoid any services that aren’t essential – sometimes to the point of letting a treatable disease become worse or even become untreatable. To illustrate, consider a patient with good private insurance who has a $3000 deductible. Before the deductible is met, testing is kept to a minimum. Providers may have some difficulty obtaining co-pays or other payments. Toward the end of the year, when deductibles are met, there is a rush to have testing and procedures performed before the end of the year and the onset of a new deductible. Another example might be a patient who requests a questionably necessary service or test. If a patient or family member is given an Advance Beneficiary Notice to sign, acknowledging that they may personally be responsible for payment if the government does not pay, a large proportion of patients decide to forego the service or test.
Monetary concerns are a large disincentive to patients who pay out of pocket. Medication prescriptions may not be filled if they are too expensive. If pre-authorization for testing is needed, patients often forego the testing if pre-authorization cannot be obtained. Often patients become angry at physicians because they are not able to obtain pre-authorization so that the patient does not have to pay for the test.
Fears of monetary outlay serve as a disincentive to care for patients who pay out of pocket.

That’s it. I think that these are the main market forces at work in determining the cost of medical care. The examples certainly aren’t exhaustive. I’m interested in seeing comments on what other forces people think may contribute to medical costs.

The second part of this post will use the above concepts to show how the current proposed payment reforms will have little effect on controlling costs.

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