The Cost of Convenience

By Bill Rusteberg

The cost of convenience is high in health care. This is evidenced through managed care plans offered by most employers today. Preferred Provider Organization (PPO) plans dominate the market, providing consumers with easy, stressless access to most health care givers within their respective communities.

There is a price to be paid for this convenience. The financial transaction to facilitate the premium to be charged is memorialized contractually between the managed care organization (PPO) and medical care givers. This collaborative effort benefits both parties in the form of higher reimbursement rates and fees to be earned off each health care episode.

Continue reading “The Cost of Convenience”

Key Mechanisms That Define Health City Cayman Islands’ Value Innovation

Based on everything I saw in the Cayman Islands, the operational approaches in Dr. Shetty’s hospital are about 10 years ahead of those used in the typical U.S. hospital.

Robert Pearl, MD, CEO, Permanente Medical Group

Forbes, Offshoring American Health Care: Higher Quality at Lower Costs? 3/27/14

Health City Cayman Islands (HCCI), less than three years old and located in the Caribbean just an hour’s flight south from Miami, is a 104-bed hospital outpost of Bangalore, India-headquartered Narayana Health (NH). HCCI has caught the attention of US health care professionals not just as a nearshore health care destination, but for having extremely high quality despite pricing that is a fraction of that in the US, as well as careful attention to the patient’s experience. HCCI is not only a competitor to traditional US health systems, it is potentially a radical disruptor. It’s model is so different that it could significantly change the standards by which health systems are judged.

HCCI’s performance is the culmination of a deep commitment to access, efficiency and excellence. NH’s Founder, Dr. Devi Shetty, began with a mission-driven awareness that health care is an essential need and must be affordable to be accessible. He then spearheaded an enterprise-wide focus on process optimization to deliver the best care possible at the lowest possible price. The results have been remarkable. Fifteen years ago, NH’s bundled costs for open heart surgery in India averaged about $2,000. Now they are about $1,400, or about 1% of average US cost. Interestingly, Dr. Shetty believes that better results are within reach and has set a five year target of $800 for those services.

Continue reading “Key Mechanisms That Define Health City Cayman Islands’ Value Innovation”

Engaging High Performance Healthcare Solutions

Brian Klepper and Richard Sutton

Posted 12/28/16 in Employee Benefit News

Benefits managers who rely on their health plans to keep costs down are bound to be disappointed. Despite health plans’ protests to the contrary, realizing a percentage of total expenditures is an incentive to make healthcare cost more, not less. The largest insurance companies have been among the market’s most profitable performers, with almost 500% average health plan stock price growth since 2009. Until health plans are at financial risk for better health outcomes at lower cost, reducing total spend will continue to translate to reductions in net earnings, a result clearly at odds with their business interests.

[Image credit: Bloomberg]

[Image credit: Bloomberg]

So for now, benefits managers interested in driving greater efficiencies are on their own. Their most promising opportunities are programs that deliver strong returns in health outcomes, productivity and savings. They can use their core plan for the basics. But then they can go around many of its programs, directly engaging instead with proven high-performance solutions compared to conventional health plan management.

Continue reading “Engaging High Performance Healthcare Solutions”

How To Control American Drug Costs

Posted 11/08/16 on The CollabRx Blog

November 8, 2016
Brian KlepperQ: Many newer (as well as many older) drugs are of great value in treating many diseases. But the prices charged seem very high and rising, causing serious concern for many. Is there anything the United States can do to control these costs?

A: We can do a lot to control drug costs, but success will take the cooperation of Congress and the legislatures, which are fundamentally in the drug industry’s pocket. The industry lavishes money on Congress to buy that favor. Open Secrets data show that the pharmaceutical/health products sector, the most politically influential industry, gave Congress $3.3 billion in campaign contributions between 1997-2015. That largess averages out to $183 million annually over that 18-year period, or a stunning $343,000 per legislator per year. Within these dynamics, every relevant law and rule is spun to favor the interests of the drug industry over those of the American people. Continue reading “How To Control American Drug Costs”

The Ethical Stain on U.S. Medical Care

Brian Klepper

Posted 11/02/16 on The Doctor Weighs In

Image result for william bestermann md
Dr. Bestermann

Bill Bestermann, MD, Medical Director at QualityImpact (COSEHC) Practice Transformation Network in Greenville, South Carolina, has spent the past few years training other physicians to optimize the care of patients with cardiometabolic disease. In a project sponsored by Louisiana Blue Cross, Dr. Bestermann worked with 700 primary care physicians to improve care and outcomes for patients with multiple risk factors. In 3.5 years, the percentage of hypertensive patients who achieved their goals rose from 47% to 67%, a 42.5% increase. Even more noteworthy, diabetics reaching their goals rose from 14% to 30%, a 114% improvement.

These results are clearly strong, no question. But most striking is that the treatments Dr. Bestermann advocates for are based on solidly established science. They have been disregarded, not because most physicians don’t believe in science, but because healthcare’s scientific foundation has been trumped by financial incentives.  Continue reading “The Ethical Stain on U.S. Medical Care”

Proceeding With Caution With Worksite Clinics

Brian Klepper

Published 9/20/16 in Employee Benefits News

Image result for lipstick on a pigA telling revelation from a September 2015 Mercer survey of 134 worksite clinic sponsors was that “only 41% were able to provide ROI data.” Like vendors in other healthcare sectors, clinic vendors as a group can have wildly different and sometimes questionable ways of calculating health and financial impacts. As someone involved with this sector for some time, my guess is that an even smaller percentage of clinics actually deliver returns on investment.

Obviously it is in clinic vendors’ interests to claim that they save money. It is also in benefits managers’ interests to show that the clinic vendor they were guided to and chose performs. But if, on rigorous analysis, a clinic does not return more than it costs and/or can’t demonstrate enhanced health outcomes, what’s the point? You can claim — and many do — that better access provides worthwhile value, but that’s akin to putting lipstick on a pig.

Continue reading “Proceeding With Caution With Worksite Clinics”

Why U.S. Prescription Drugs Prices are the Highest in the World

By Patricia Salber MD, MBA

August 24, 2016
Originally Posted on The Doctor Weighs In on 8/24/16

Patricia Salber MD, MBA (@docweighsin)It was hard to contain my outrage as I made my way through a special communication in the August 22/23, 2016 JAMA written by Aaron Kesselheim, Jerry Avorn, and Ameet Sarpatwari. The article is titled “The High Cost of Prescription Drugs in the United States: Origins and Prospects for Reform.” In this comprehensive review of the issue, the authors provide examples of drug pricing that will make you grind your teeth. The abuses go far beyond the most well-known example of egregious drug pricing—the infamous Turing Pharmaceutical company that raised the price of a 63-year old treatment for toxoplasmosis from $13.50 a pill to $750 a pill just because they could. Or the recent headliner, the 400% increase in the life-saving allergy treatment, the EpiPen.

  • Between 2008 and 2015, prices for the most commonly used brand-name drugs increased 164%—much more than the 12% increase in the consumer price index.
  • A treatment for a rare condition, Gaucher disease, was $150,000 per year when the drug was first released in 1991. Now, it is $300,000. Why?
  • Generic drugs that were dirt cheap, when I was in practice, have seen price increases, such as a 5000% increase for colchicine, a drug that has been used to treat gout for centuries. Other examples are the inexplicable increases for very old cardiac drugs, such as a 2500% increase for isoproterenol, 1700% for nitroprusside, and 637% for digoxin. Even insulin has increased 300% between 2002 to 2013.
  • In 2013, the per-person spending on drugs in the U.S. is more than double that of 19 other advanced industrialized nations (i.e., $858 vs. $400). It is more than quadruple if you compare the U.S. to Poland, the country with the lowest per capita spending listed in the study.

Continue reading “Why U.S. Prescription Drugs Prices are the Highest in the World”

Employers, Unions Look to Direct Contracting

Brian Klepper and Fred Goldstein

Published 8/17/16 in Employee Benefit News

Industry denials notwithstanding, reducing healthcare costs is fundamentally against nearly every healthcare organization’s perceived economic interests. That’s why it’s been such a struggle for purchasers to find healthcare organizations that deliver truly better health outcomes at lower cost. U.S. healthcare is built on a culture of excess: egregious unit pricing and over-treatment. Many organizations promise value but few deliver.

As Florida’s Gov. Rick Scott, former CEO of Hospital Corporation of America, pointed out at a venture capital conference a few years ago, “What business wants to make half this year what they did last year? That’s why the healthcare industry won’t fix the healthcare industry.” Continue reading “Employers, Unions Look to Direct Contracting”

The Gold Standard for Current Cancer Treatment

Published Online 6/27/2016 in JAMA Internal Medicine.

EandBA couple of months before Elaine died from peritoneal cancer, we hired Anila, a cheerful, hearty Albanian house cleaner. On her first visit, Anila saw that Elaine was bedridden. “Kerosene can save her,” she said. “There is science. Look it up on the Internet.” Later, Elaine and I had a good laugh over it. She said, “Maybe that’s all they have available in Albania.” But in retrospect I’ve thought, “Could it be any worse than the treatment she got here?”

Elaine was a bright light to those who knew her, one of those rare people whose inherent grace put others at ease and made them feel special. A trained pianist, she was also a gifted and productive artist who in her last year painted and gave away more than a dozen original pieces to friends and family. Continue reading “The Gold Standard for Current Cancer Treatment”

Patients and Physicians Should Share Decisions in Oncology

Posted 8/2/16 on the CollabRx Blog

Brian Klepper

Q: Many of us have been touched by the publication of your sensitive but serious criticism of your wife’s care once her ultimately lethal peritoneal cancer had spread. How do you propose that oncologists, patients and their families should best practice “shared decision making”?

A: Sad but true, most cancer patients today unknowingly enter highly conflicted treatment environments where, as a practical matter, the ideal of shared decision making may run counter to the provider organization’s interests. Cancer care is such lucrative business that more than one in four health systems is now building a cancer center. Physicians or the health systems they work for typically profit from the drugs they prescribe, which often lack evidence of efficacy. These vectors often result in care decisions that accrue more to the health system’s than the patient’s benefit.

Patients should assume that their physicians have their best interests at heart but, in complicated, unfamiliar territory, insist on asking hard questions. Doctors are increasingly aware that their role includes making patients aware of their options, but they, like all of us, may also have inherent biases that manifest in what treatments they urge for their patients.

Physicians can be optimistic about outcomes and patients may be unreasonably hopeful, so an honest evidence-based assessment of current realities is critical. What benefits will the treatment realistically buy the patient and how much of an ordeal will it induce? What are the odds of success and what, exactly, is the definition of success in each case. The goal is to arrive at care decisions based not just on abstract notions of what works better, but on results that will be meaningful to the patient’s and family’s lives.

Treatments that buy a few extra days or months may not be worth it if adverse effects make that additional life miserable. And palliative care data over the past few years has shown that stopping after failed 1st or 2nd line chemotherapy often lengthens life by 2-3 months and improves quality of life over conventional therapy.

It would be particularly useful to know whether the vast majority of cancer patients who have gone through aggressive therapy and are about to die believe in hindsight that it was worth it. That voice of experience would be critical new information for patients, and validate or counter many physicians’ arguments that they prescribe all-but-hopeless treatments because many patients demand any chance. Of course, studies are less fundable when they aspire to less treatment and are not in the care community’s financial interests.

In Being Mortal, Atul Gawande MD’s profound and wonderful book, he presents 5 questions for patients at the end of life, developed by Susan Block, a palliative care physician at the Dana Farber Cancer Institute in Boston.

  1. What is your understanding of where you are and of your illness?
  2. What are your fears about what is to come?
  3. What are your goals as time runs out?
  4. What tradeoffs are you willing to make?
  5. What would a good day look like?

The beauty of these questions is their deep humanity. They clarify the patients’ understanding, worries and priorities for the patient and family, and help clinicians know what matters most to them. My wife Elaine referred to them as “perfect questions.”

In British Medical Journal, Richard Lehman MD sums up the shared decision making problem this way. “We urgently need every paper about a new oncology drug trial to incorporate a comparative infographic, compiled by an independent author from the individual patient data. This could probably be done for the same cost as a single course of the treatment.”

When Its More Profitable To Raise Rates Than Manage Care

Brian Klepper & Fred Goldstein

Posted 5/24/16 on The Doctor Weighs In

A recent Associated Press story reported that two health plans with deep managed Medicaid experience, Molina and Centene, have been successful with their commercial exchange offerings. The experience has been sufficiently positive that Molina is considering expanding into two more states next year.

Contrast this with the mainstream of commercial plans that have tended to be considerably pricier than the plans with managed Medicaid roots. A recent McKinsey & Company report noted that in 41 states, insurers in the individual markets, including exchanges, lost money. Several have said that they’ll reduce their participation in the exchanges.

UnitedHealth Group has been the most visible of the malcontents, announcing last month that they expect to lose about $650 million on exchange health plans in 2016. And that in 2017, they will withdraw from most of the 34 exchange markets where they currently have offerings. Stephen Hemsley, United’s CEO, cited the smaller markets and higher per patient costs in the exchanges relative to United’s larger book of business of employer groups.

Humana also announced that it would adjust exchange plan offerings and exit certain markets in 2017 to become more profitable. Its first-quarter earnings fell by 46%, in part due to a 21% drop in individual policies, including those on the exchanges.

Why Molina and Centene Outperform Other Commercial Exchange Plans

In Forbes, analyst and former health plan executive Bob Laszewski delved into why Molina and Centene outperformed the commercial plans. Both built their commercial exchange offerings on established Medicaid market presences, networks, and brand recognition, recruiting the 75% of low-income eligibles necessary for a sustainable risk pool balance of healthy and unhealthy participants. The populations they sought on the exchanges are familiar with their brands, and accept narrower networks in exchange for more reasonable premium contributions. More traditional plans sought higher income enrollees, who were more demanding and in shorter supply on the exchanges.

But there is another explanation as well. Plans like Molina and Centene, grounded in long managed Medicaid experience, have of necessity learned to manage risk more effectively than commercial plans. Medicaid plans receive a monthly rate for each enrollee, and then manage within that set budget. To accomplish this, they have become adept at understanding their populations’ clinical and financial risks, and putting medical management approaches into place that can mitigate those risks. In other words, when a plan with Medicaid experience moves into a fully insured (at-risk) commercial plan space, it is more likely to succeed.

The commercial plans, not so much. Most commercial plans have not been required to adhere to rigorous risk management disciplines and, if anything, their incentives are different. They can go light on large case management, for instance, allowing the costs of high-intensity patients to balloon, knowing that when costs exceed premium, they can recoup those costs through subsequent premium increases. Because of their ability to “play the increases forward,” their incentive has been to increase rather than manage cost. Employers and unions, assuming that costs can’t be controlled, simply pay more. And more. Unendingly.

Misaligned incentives

Molina’s and Centene’s success on the exchanges betrays the lie that healthcare costs can’t be managed, and that their competitors’ 30% higher premiums are necessary to remain in the exchanges. It is possible for the mainstream health plans to manage the risk but, over decades, they have not needed to exercise this expertise. Said another way, the important truth is that, under current rules, managing risk is not necessarily in their interest.

Letting plans that have lost money raise rates to their liking is the wrong answer. Instead, participation in the exchanges should require risk management within certain limits, based in part on evidence that others have been successful within those same constraints.

Brian Klepper is a health care analyst. Fred Goldstein is a former Medicaid HMO general manager. Both are Principals of Health Value Direct, which connects health care purchasers to high performing, high impact health care services.



The Emergence of High Performance Health Care

The health care mainstream is investing in a variety of mechanisms to beat back America’s health care cost and quality crisis –  ACOs, medical homes, data analytics, practice transformation, technology and app integration, patient engagement and decision support – but few have borne fruit. Hidden in our system, though, are companies with unique and successful approaches. For example:

There are companies that, by collaboratively working on different parts of drug spend, consistently reduce pharmacy cost by 30-50 percent. This can result in savings of 6-12 percent of an organizational purchaser’s total health care spend, a huge amount!

Continue reading “The Emergence of High Performance Health Care”

13 Questions To Ask Onsite Clinic Vendors

Brian Klepper

Published 2/24/10 in Workforce Magazine

Thinking about opening a primary care clinic at your business site? Many organizations are.

Work-site medical clinics are catching on as employers discover they can save significant dollars and improve the care for their employees and families. Clinic vendors’ medical management and business models vary dramatically, however, and, as a result, so do their impacts on cost and quality.

Though on-site clinics have been around for more than 25 years, the designs have evolved. Some older clinic vendors offer elaborately expensive facilities with conventional doctor office arrangements, which makes it difficult to deliver savings. By contrast, contemporary vendors are more likely to heavily invest in tools and programs, creating comprehensive medical management platforms.

Continue reading “13 Questions To Ask Onsite Clinic Vendors”

Why High Performance Health Care Remains Elusive

By Brian Klepper

Published 3/31/16 in Employee Benefits Advisor

Do you know about a high-value healthcare program that wildly exceeded your expectations by delivering provably better health outcomes at dramatically lower cost? If so, I want to know about it.

High performance healthcare services are available in virtually every costly healthcare clinical and financial niche: e.g., musculo-skeletal care, cardio-metabolic care, cancer, surgery, hospital bills, out-of-network claims, dialysis, large case management, imaging. Generally, these programs have deconstructed problems that consume large percentages of the healthcare dollar, and then developed solutions that are unconventional but more effective. They win, not by exploiting conventional healthcare’s perverse incentives as the mainstream does, but by exploiting market vacuums, like crazy pricing for mediocre health outcomes.

If benefit plan sponsors and unions go outside their health plans to favor these better services, their patients typically will fare better and they will achieve significant savings. But they’ll also disrupt the current excessive-care-and-cost-is-fine paradigm, and help bring things back to rights.

Advocates may gush about a particular program’s performance but, in my experience, high performance is rare. Few programs can provide hard data or credible testimonials showing that they solidly improve health outcomes or cost. Few can show that they can scale from performance at one location to another, or that their impact is enduring. Most telling, many vendors are unwilling to put part of their fees at financial risk against the bet that they’ll hit performance targets. More often, they want you to go at risk for their performance instead. So caveat emptor.

High performance healthcare is one answer to America’s healthcare cost and quality crisis. Are you in or do you know a high performance healthcare organization? Can you/they demonstrate it with data and testimonials? If so, let me know. As a working definition, we are searching for vendors that consistently achieve >20% improvement in either key health outcomes or cost. Thirty percent is better. The greater the impact, the more likely that purchasers will be willing to disrupt conventional processes.

Meaningful change won’t happen in healthcare until purchasers, including plan sponsors, work together to favor organizations that deliver better value and, equally important, start withholding favor from those that don’t.

Congress’ Drug Addiction

Posted 2/26/16 on Employee Benefit News.

The Congressional committee that recently demanded Martin Shkreli’s appearance must have hoped to spotlight a smug jerk responsible for the outrageous prescription drug pricing that we’re all up against. Of course there are lots of Shkrelis running drug companies, but most are shrewder and less brash, and might not make for such good theater.

Rep. Elijah Cummings (D-MD), one of the Committee’s questioners, seemed to think that his witness could move healthcare forward by disclosing the machinery of the drug sector’s excesses. “The way I see it, you could go down in history as the poster boy for greedy drug company executives or you could change the system. Yeah, you.” Continue reading “Congress’ Drug Addiction”