Archive for the ‘Policy’ Category
Tuesday, March 6th, 2012
During one shift last week, I felt as if I was spending too much time doing computerized charting, computerized order entry, and computerized admit orders [contractually required to write them - don't ask] and not enough time with patients and their families.
This week, I decided to account for every minute of my time during a 12 hour shift in a moderately busy emergency department where I was the only physician working. I had to scrap the first time I tried it because I kept forgetting to write things down. The next shift, I put the notes where I wouldn’t forget – right next to the computer keyboard with portable clock sitting on top of them.
There is a little bit of overlap between categories when I was multitasking. For example, 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 720 minutes in the shift, I calculated that I spent the following amount of time performing the following tasks:
Seeing patients: 247 minutes
Time on computer: 365 minutes including …
–Charting/entering orders and labs to be done: 219 minutes
–Looking up old medical records: 42 minutes
–Entering discharge instructions/prescriptions: 41 minutes
–Entering admit orders/completing transfer forms: 63 minutes
Discussions with other physicians: 69 minutes
Researching medical issues: 13 minutes
Eating lunch: 5 minutes
Personal phone call: 4 minutes
Miscellaneous down time: 12 minutes
Sign out to oncoming physician: 5 minutes
Longest time between patient exams: 47 minutes
Involving: 24 combined minutes charting patient’s condition and entering orders, 13 minutes discussing the patient condition with three physicians, 10 minutes completing transfer documents and giving report to medics
I probably write more than most docs on my patient charts. Even so, more than half of my time was spent making sure that the charts were documented sufficiently to satisfy hospital administrators, to please governmental payors, and to smite plaintiff attorneys.
I’ve had some nurses tell me that I spend too much time with patients. My shift averaged 7-11 minutes per patient, with a few outliers. In total, I spent only one-third of my 12 hour shift with patients and their families. That’s too much?
Kind of disappointing to realize how the practice of medicine has “evolved.”
Thursday, February 23rd, 2012
Want non-emergency care in the emergency department? Pay up first.
After performing a federally-mandated screening exam, many hospitals are now charging an up-front fee of $100 to $150 to be treated for non-urgent complaints. Don’t want to pay? You’ll get a list of other health care resources and can leave.
And it is happening … all … over … the … country.
ACEP is against such a policy, arguing that 2 to 7 percent of patients determined to have “nonemergency” conditions are admitted to a hospital within 24 hours and that a vast majority of patients have conditions requiring urgent treatment.
I don’t think the policy is a bad idea, provided that patients have an alternative source for routine care. Medical care costs money … a lot of money.
The problem is that when the practice becomes commonplace and a public outcry occurs, I can only imagine what new laws that will be created to force hospitals/providers to provide treatment to all emergency department patients.
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.
Monday, January 23rd, 2012
See more medical news from around the web over at the Satellite Edition of this week’s Update at ER Stories.
The story of “Dr. Douchebag” and why morale is declining in many of this country’s emergency departments. Even if you say “thank you, sir” for the abuse, your job may still be threatened because of bad Press Ganey scores.
More than 80% of medical mistakes go unreported by hospitals. Let’s just get this out of the way: Doctors kill every single patient that they treat and plaintiff attorneys should be paid even more money to sue our way to better health care. That should do it.
Indiana woman awarded $1.5 million after surgeon did not operate on abdomen soon enough. Two days after initial presentation, she required emergency surgery for ischemic bowel requiring that a large portion of her intestines be removed.
Sorry, Grandma, I know that your bone cancer is causing you excruciating pain, but you can’t have any more pain medication. As Florida cracks down on doctors who treat chronic pain patients, the patients are having more difficulty getting their medications. Where do the patients end up? In the emergency departments.
When pill abusing patients go to the emergency department and don’t get their medications, some become abusive and violent.
Now some Florida hospitals are implementing a “chronic pain management plan” which requires doctors to “help educate patients about the dangers of abusing prescription drugs and addiction.” Got that, Granny? You have bone cancer and you have six months to live, but abusing oxycontin is dangerous and can kill you.
As part of the “plan,” emergency physicians then will “refer the patient to a primary care physician” – who has already been “cracked down upon” and who won’t prescribe the pain medications, either.
End result? In an attempt to curb abuse by criminalizing the prescription of pain medications, Florida is now affecting the ability of patients who are legitimately in pain to receive necessary treatment. Cancer pain patients in Florida now more likely to get bounced around the system and die in pain.
And people blame the physicians instead of the legislators.
Why let a little thing like a gangrenous appendix get between you and your wedding? Ceremony held in hospital. Both bride and groom wear “gowns.”
New York jury awards 18 year old patient $3 million for delay in c-section at birth that allegedly caused patient’s cerebral palsy.
Patients gone wild in Pennsylvania. Woman gives medical staff hard time in ED, pulls out IV, threatens to infect everyone around her with HIV, kicks a security guard in the cha-chas when trying to escape, then is wheeled out of the hospital by police kicking and screaming in a wheelchair. Initially charged with three felonies, but those charges were dropped by persecutors er, um prosecutors. Of course, if the security guard was an off duty police officer, the patient would be doing 20 to life in Leavenworth.
Patients gone wild then … police gone wild? Patient becomes combative in emergency department. Police called, then allegedly “strike the patient, place him in a headlock, pull and twist his head and forced handcuffs on him with force and violence.” Another officer allegedly “pushed the handcuffed man over a metal chair arm with the force of his weight pressing upon him.” The officers could face jail time and fines if found guilty.
Patients gone wild — Twilight Edition. Toledo woman allegedly tries to steal baby from hospital. When ED nurse approaches her, the woman turns around and bites her. Then she hisses, turns into a bat, and flies away.
The Medical Marijuana Advocates create even more safety policies. Now they’re recommending that health care organizations assess “fatigue risks” and develop a “fatigue management plan” which includes “strategic caffeine consumption.”
My kid kept me up last night. I’m a little fatigued. I want to come to work and sleep, then when I wake up, I want free double mocha lattes. OK, nanny?
The problem is that “fatigue” is determined in a retrospective manner and the Marijuana Advocates don’t tell anyone how to determine fatigue prospectively. Make people afraid of it and tell people who’s to blame for it. That’s how you win elections.
Of course, it didn’t take the plaintiff’s attorneys much time to jump on how providing services while “fatigued” is negligent and will kill people.
While many patients can’t afford health care at all, some hospitals cater to the ultra-rich, charging them between $450 and $4,500 per day in order to have a butler, swank hospital rooms, and an exclusive menu. Meanwhile, other patients wait in the emergency department for days before a hospital bed opens up. Oh, and medical residents aren’t allowed on the units, either — only attending physicians.
Kevin Pho from Kevin, MD wrote an article in USA Today providing some suggestions on how to reduce malpractice lawsuits. Some people commenting on the article demanded that physicians’ hours be cut back so that they aren’t overworked while trying to pay for their “expensive houses, cars, and boats” (see comments section).
I say “be careful what you wish for.”
In other countries, people are demanding that physicians work more hours because patients can’t get the care they need when the doctors work banker’s hours.
Friday, January 20th, 2012
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?
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?
Saturday, December 31st, 2011
If you haven’t read parts 1 and 2 of this manifesto, please do so here and here before reading further.
How will bundled payments affect the incentives for each of the players in the medical market?
For patients, a change to bundled payments will probably have little effect upon monetary issues or fears. Demand for medical care will increase. With millions of additional patients being added to Medicaid roles, and with government “paying” the costs, there will still be little disincentive for patients to seek comprehensive care. In addition, patients who are forced to purchase insurance through health care reform will want to get something for their money.
Bundled services will obviously benefit the insurers. Otherwise there would be no incentive to move to such a model. For insurers, bundled payments will increase profits. Much of the uncertainty involving payments for medical care disappears with bundled payments. If a patient with a heart attack develops a complication requiring prolonged hospitalization, in the current system the insurers bear the costs of treating that complication. Switch to a bundled payment model and the providers bear the risk of medical complications or outlier patients. Whether a patient is in a hospital for six hours or six months, the payment to the hospital for one diagnosis will be the same. The theory is that the threat of paying for complications will “encourage” hospitals to take steps to avoid those complications. In other words, a threat of financial liability will improve the quality of care. Kind of like suing our way to better health care … and we all know how well that has worked. For now, the point is that bundled payments increase profits for insurers by decreasing uncertainty in the payments that must be made to providers. As providers decrease costs, then the insurers will gradually decrease the bundled payments while gradually increasing the premiums that every person in the United States will be required to pay under health care reform. Profits go up.
Demand for insurance will go up under health care reform because there is a mandate that everyone purchase insurance. Insurers will encourage people to buy into their plans. More subscribers plus relatively fixed costs equals more profits.
The financial risk that insurers fear in the current medical payment model is largely erased by a bundled payment model. While insurers may be forced to accept all patients – even those with pre-existing conditions – bundled payments diffuse the risk that the insurer must accept. Even though some patients may be hospitalized more often than others, the insurers know that they will only have to pay a fixed cost for the hospitalization.
There will also be a decrease in the legal risks to insurance companies with a bundled payment model. Insurers will be less liable for refusing care. They pay the providers one fee and the providers are then forced to decide what care is and is not “necessary.” Also look for our government to create additional legal protections for insurers as health care reform becomes implemented over the next few years.
Probably the largest effect of bundled payments will be felt by providers of medical care.
For providers, bundled payments will create an incentive to provide less care. Currently, extremely ill patients create profit through utilization of costly medical services. More services = more payments. When providers are paid one price for a given diagnosis, regardless of the severity of the illness, then the incentive will be to accept a large bundled payment and provide the least expensive medical care possible. This will happen in several ways.
First, providers will want to make patients look sicker so that the bundled payments will be larger. Bundled payments for a patient suffering from pneumonia will be much more than a bundled payment for a patient with a chest cold. Patients in respiratory failure will command an even higher bundled payment. Therefore, the incentive will be for providers to label patients with serious illnesses in order to receive higher bundled payments. Just like payments for catheter-related sepsis caused a significant decrease in the reported incidence of catheter-related sepsis (but an increase in other types of sepsis), increase in bundled payments for more serious illnesses will cause an increase in the reported incidence of serious illnesses. The problem is that those serious illnesses will get reported to the Medical Information Bureau and will follow a patient for the rest of the patient’s life.
Second, there will be less utilization of costly medical services. Look for invasive procedures to decrease. Providers will start pointing to medical studies saying that such procedures are not proven effective. Costly antibiotics and other costly medications will be off limits. Consultations will be less available.
Third, providers will begin avoiding patients who are more likely to suffer adverse consequences. Ideally, bundled payments will provide appropriate reimbursement for an “average” patient. Healthy patients will utilize less resources and therefore increase profitability for a given bundled payment. Young healthy patients who may need a day or two in the hospital for their pneumonia will be readily admitted as there will be a high likelihood of profitability with the ensuing bundled payment. Pneumonia patients with diabetes or with HIV who will likely need long admissions and expensive medications will become hot potatoes. Community hospitals will find reasons to transfer high utilizers to other facilities. Perhaps they need an endocrinology consultation. Perhaps they need an infectious disease specialist. Bundled payments will create an incentive to avoid treating obese patients, cancer patients, and other patients with chronic diseases. Financial solvency will be difficult to maintain with bundled payments and chronically or seriously ill patients.
Demand for services from providers will increase, since some patients will not be receiving the level of care to which they are currently accustomed. Patients may go from provider to provider trying to get the care that they desire.
I’m not sure how the fear issue will play out with medical providers. In the current system, fear is mitigated by providing more services. However, in a bundled payment system, providing more services will quickly erase profits and may lead to financial insolvency. How will medical providers adapt? My guess is that there will be less services and more studies and medical testimony showing why providing fewer services is within the standard of care. There will also be a backlash against hospitals if patients die because they didn’t receive what was retrospectively deemed to be “necessary” care. I also think that at some point there will be a revolt against regulatory agencies that create guidelines which increase expense without improving outcomes.
Bundled payments will also have several other effects:
First, the system will get gamed. Big time. If insurers are going to make a large bundled payment for a given diagnosis, expect more of those diagnoses to be made. Patients who previously were sent home with “walking pneumonia” will be admitted because admissions for “pneumonia” generate more money. The admission may only be “overnight,” but it will still generate that bundled payment. Outpatient diseases will suddenly require inpatient management – if that inpatient management is what generates the bundled payments.
Second, bundled payments will allow insurers to vilify medical providers. In the current system, insurers are the bad guys when they refuse to authorize or to pay for medical care. By bundling payments, insurers will be able to blame medical providers for not providing more services because those services are included in the bundled payment. Patients will then direct their anger toward providers when the patients don’t get the medical services that they want.
Finally, bundling payments will also cause fighting between providers. How do physician consultants get paid when the hospital receives the bundled payment for the patient’s illness? The pie is only so big and anyone that provides services is going to want a piece. Hospitals are already trying to minimize this problem by purchasing physician medical practices. When physicians are employees and paid by the hospitals, the hospitals get to keep the bundled payments. Otherwise, let the fights begin.
What happens if a patient goes to an emergency department with a pneumonia and needs to be transferred? Who gets the bundled payment? What if a patient is hospitalized for a hip fracture and then develops a pneumonia while in the hospital? Who gets the bundled payment? Will the payments be split? If so, how much? I posed these questions to a friend who works at CMS. Her response was that the providers would have to create agreements regarding payments for services. Of course, providing a prospective division of payments for every possible type of care would be impossible, so the providers will be left fighting over who gets what payments and how much. When providers fight with each other, nothing good happens. Divide and conquer.
Bundling payments will protect insurers, increase insurer profits, and decrease the willingness of providers to care for seriously ill patients. When the only variable for payments from insurers is how many times a diagnosis is made, the diagnoses will be made more frequently and will result in an increase in the number of “bundled” payments.
Bundling payments will also cause rifts between medical providers that will ultimately detract from the medical care provided to patients.
Stay tuned for Part 4 where I discuss solutions that will reduce costs.
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.
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.
Wednesday, September 21st, 2011
While scanning the news this morning, I laughed out loud at Pennsylvania’s newest proposal to cut Medicaid costs.
According to this Kaiser Health News report, Pennsylvania plans to pay Medicaid recipients up to $200 to visit “higher quality and lower cost hospitals and doctors.”
Gary D. Alexander, the Pennsylvania secretary of public welfare, compared the idea to a shared cost savings. “If the state saves $1,000 on a medical procedure we may give the beneficiary $100 or $200 as a reward.”
Does anyone see a problem with this approach?
Let me lay it out for Mr. Alexander, just in case someone who reads my column has his e-mail address.
In some of the inner-city emergency departments where I have worked, there used to be a policy that patients would be given subway tokens … or bus fare … or cab vouchers at the conclusion of their ED visit. The theory was that hospitals didn’t want patients loitering in the emergency department waiting rooms after their visits trying to find a ride home. The policy was also viewed as creating good public opinion since the hospitals were making sure that patients had a way home if they came by ambulance and had no other means of transport. Ambulance transport to the hospital is provided at no cost to the patients. Ambulance transport home must be paid with credit card.
Once the general public got wind of the cab voucher policy, guess what happened. Patient volumes increased. Ambulance transports increased. Wait times went up. People waited hours for free medical care so that they could then get their free subway token … or bus fare … or cab vouchers at the end of their visit. The policies were quickly discontinued.
If Pennsylvania begins paying people to go to “better” hospitals, the cab voucher fiasco will occur in Pennsylvania, only on a much grander scale. Once Pennsylvania Medicaid recipients learn that they will be paid to go to a certain hospital for medical care, those hospitals will be deluged with patients. To those receiving public medical assistance, the medical care is free, the medical testing is free, and the medical procedures are free. Now, with a monetary incentive to have a procedure done at a given facility, what do you expect will happen? Patients get $200 if they get a cardiac catheterization at one hospital versus another? Twelve year olds will go to those emergency departments complaining of crushing chest pain. Patients get $50 if they go to one emergency department that provides “higher quality”? There will be lines out the door.
Medicaid will end up footing the bill for an increase in medical care because it has incentivized the patient population to seek out that care.
Brilliant. Just brilliant.
Mr. Alexander even went to a meeting of “300 health insurance executives” in Washington and pitched his plan. I’m sure he got a little round of golf claps for his innovative approach to reducing health care costs.
This is what happens when people who make policies have no practical experience in the industry in which they are making the policies. Mr. Alexander was a political science major in college and has a law degree.
You want to decrease utilization? Pay Medicaid patients that same $200 at the end of a year only if their medical resource utilization (ED visits/prescriptions/whatever other variable you want to control) is below the average utilization for other Medicaid recipients for that year. Kids get $50 per year. Send out letters to those who didn’t get the money telling them why they didn’t get their “incentive payment”.
That policy will pay for itself within the first two years.
But what do I know? I’m just a dumb ER doc without a political science degree.