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Drug Prices – ‘A Riddle Wrapped Inside an Enigma’

Drug Prices – ‘A Riddle Wrapped Inside an Enigma’“I cannot forecast to you the action of Russia. It is a riddle, wrapped in a mystery, inside an enigma, but perhaps there is a key…”

This quote eerily reflects the current events happening in Washington, D.C. these days. But, it was actually a radio broadcast by Winston Churchill in October 1939 regarding Russia’s involvement with Germany, a precursor to World War II.

Another riddle, mystery and enigma is occurring in front of us. Escalating prescription drug costs are increasingly (and deservedly) under public and political scrutiny. The real culprit to this problem? The complex shell game being played designed to hide the insatiable appetite of greed. This complexity is hidden behind optics that appear to be driven by altruism.  Each drug supply chain member claims to be performing ‘selfless’ work for the public’s well-being. But looks can be deceiving.

Greed is not just limited to drug manufacturers and its trade group – the Pharmaceutical Research and Manufacturers of America (PhRMA). It’s also found with other key players involved in the supply and payment of drug products. PhRMA has been beaten up, quite deservedly, by other supply-chain players as the main reason for high drug costs within the U.S. market. But these same players are not without their own accountabilities. The other players? Pharmacy Benefit Managers (PBMs), health plans and others.

When it comes to drug pricing, fingers of blame point to ‘other’ players without acknowledgment of culpability – similar behavior to a circular firing squad. The blame game is relatively easy to play when there is little transparency to provide proof of guilt or innocence. To maintain this charade of social responsibility, profiteering off those who ultimately pay the bills is the mainstay of any lobbying efforts and marketing optics. Interestingly, PhRMA came out with their own report in January, “The Pharmaceutical Supply Chain: Gross Drug Expenditures Realized by Stakeholders.” After being attacked by PBMs and other stakeholders as being the sole villain of rising drug costs, PhRMA shot back with their own tell-all study about what other supply-chain vendors are doing behind closed doors.

Drug pricing, so it seems, continues to be the riddle wrapped up in an enigma.

There are a considerable number of games being played by drug manufacturers, PBMs, and yes, even insurance vendors working on behalf of employers and consumers. What follows are just brief examples of worrisome behaviors found within the prescription drug pricing structure.

Drug Manufacturers

Since 1998, PhRMA has spent nearly $3.6 billion lobbying Congress to ‘educate’ our elected officials. According to the website, Opensecrets.org, PhRMA spent $245 million in 2016 alone – almost $100 million more than the next largest sector – insurance. Despite this enormous financial ‘investment,’ the efforts have obviously paid off over the years. Drug manufacturers have been immune from negotiating with Centers for Medicare and Medicaid Services to manage their prices to a more reasonable level. They also make it difficult for Americans to purchase drugs from other countries that have more favorable pricing with U.S. drug manufacturers.

Drug prices are expected to increase another 12 percent this year. Americans already spend an average of $858 annually on prescription drugs, more than twice the $400 average spent in 19 other industrial nations. To deter competition, drug manufacturers have found ways to delay generic-equivalent drugs from entering the market. A practice known as ‘pay-for-delay’ allows drug manufacturers to pay-off generic drug makers – thereby delaying the introduction of their generic brands into the market. Thankfully, this practice is declining as the Supreme Court and Federal Trade Commission push this behavior to fall under federal antitrust law. Nonetheless, drug companies are finding more ways to be creative (and profitable).

Pharmacy Benefit Manufacturers (PBMs)

PBMs exist to serve the public by aggregating drug purchasing power from payers, such as insurance companies, large and small employers and consumers. PBMs claim to negotiate the lowest price from drug manufacturers and the lowest dispensing fee from pharmacies. In return, PBMs receive their revenue primarily through rebates paid by drug manufacturers, who gladly pay to have their drugs listed as ‘covered’ under PBM’s list of approved drugs.

So, do PBMs actually lower our costs? Not as much as they would like us to believe. The rebate arrangement creates a perverse incentive for PBMs to dispense more expensive drugs. The largest PBMs – such as Express Scripts, CVS Caremark and Optum Rx – are incentivized to inflate drug prices because they receive higher rebates in return. Higher prices equate to higher rebates – and ultimately, higher revenues for PBMs.

Local pharmacies, a trusted health provider to consumers, see their margins squeezed by PBMs, whose profits are considerably higher. Keep in mind that PBMs generally claim 40 to 50 percent of a medicine’s list price using obscure and complex mandatory rebates – money that is not typically passed on to consumers. The value they provide to the payers is increasingly considered questionable to those who understand the entire drug pricing scheme. PBMs make more money, usually at the expense of pharmacies and consumers.

Some years ago, while I was consulting with employers on the prescription benefit programs they offered, we would often require insurance vendors and PBMs to complete bid specifications on the rebates they received and the amount of ‘savings’ they were sharing with payers and consumers. It eventually became a running joke that such a process would actually reveal honest responses, as the PBMs and carriers were under no obligation to disclose rebate practices. Insurance carriers would arrange their own special ‘deal’ with PBMs on rebate cost-sharing, and would not share their PBM contract when we pushed for proof of pass-through savings to consumers. Again, the drug pricing riddle performs famously in secret and is confusing to patients.

Moving Forward

In May 2017, Dr. Scott Gottlieb assumed his new role as commissioner of the Food & Drug Administration (FDA). He hopes to leverage his agency’s power by promoting more price competition for generic drugs. Where there are fewer than three competing generic manufacturers, applications would be pushed to the front of the line. A prime example of this is Turing Pharmaceuticals AG, which was led by Martin Shkreli, who bought the rights to sell a long-used anti-infection drug called Daraprim, raising the price to $750 a pill from $13.50. In another case, Valeant Pharmaceuticals International Inc. purchased two drugs to treat the rare Wilson’s Disease, only to raise the price by 30-fold. The idea by both organizations was to profit from having no competition.

In the final analysis, much work is needed to fix a broken system. Complete transparency and curtailing conflicting interests must be addressed to solve the drug-pricing crisis that continues to haunt our country. When the truth eventually becomes apparent, PhRMA and the middlemen will reluctantly realize they are part of the problem, and subsequently determine if they can become part of a larger solution.

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Patient Experience: Can it Directly Determine Provider Pay?

Patient Experience - Determine Provider PayThe Institute for Healthcare Improvement (IHI), a not-for-profit organization with the mission to “improve health and health care worldwide,” developed the IHI Triple Aim framework to optimize healthcare performance. The three dimensions of Triple Aim are quite intuitive:

  1. Improve the patient experience of care
    (including quality and satisfaction).
  2. Improve the health of populations.
  3. Reduce the per capita cost of healthcare.

 
Americans are (justifiably) concerned about all three components of the Triple Aim. Yet, most of the oxygen in the room, at least in Washington, D.C., is being spent on the insurance component, which seems to ignore each of the three Triple Aim tenets. Just look at the ping-pong match happening in Congress these days regarding the repeal, replace or repair of Obamacare. Make no mistake, having health insurance allows people to seek the care they need when stricken by serious illness or injury. Without insurance, people often live sicker lives and die sooner than those with insurance.

However, the insurance card that each of us (hopefully) carries merely serves as the ticket to gaining access to the movie theatre show we know as the healthcare delivery system. Without this card, it becomes progressively more difficult to navigate through this ‘system’ and receive the best possible care. Even by having this laminated card, we may unknowingly believe that we will receive the best care available at all times – a soberly mistaken myth. The quality of care that is delivered in the U.S. is uneven and, too often, inadequate.

The three primary ‘Ps’ in healthcare relate to:

  • Payers (government, employers and insurance companies)
  • Providers (hospitals, physicians, etc)
  • Patients (you and me)

Currently, the payers and providers work with one another to determine the best way to incentivize quality care, leaving the patient on the sidelines as a confused bystander. Whether the payment approach is fee-for-service, bundled payment, capitation or some hybrid of these, the patient is not directly included in the value proposition of the care provided.

Yet, it is the patient who actually receives the care, but their experiences (Triple Aim #1) are primarily presumed to be taken into account in the payment models currently used. In short, the patient’s voice is mysteriously (or purposely) missing at the reimbursement level. As a result, the deck of cards is currently stacked against the patient when determining ‘appropriate’ and ‘quality’ care. Their specific experience is rarely used, and if it is considered, it’s by aggregating the experiences of all patients for each given provider.

How then, can individual patient experience determine the price a provider is paid? A new approach is to allow each patient to have input on at least a portion of the provider reimbursement. Theory from this suggests the provider will be held more accountable for the care they give to EACH patient, and possibly learn more about how to make the patient experience a more positive encounter. Here’s a simple idea that may possibly hold some water.

Patient-Centered Value Movement

What do patients REALLY want from the healthcare providers they hire? Quality outcomes? Crystal clear communication and instructions? Clean hospital room and/or convenient parking? Delicious hospital food? Excellent bedside manners from nurses and doctors? Providers being considerate of the time it takes for patients to receive care? The short answer is ‘yes’ to all of the above. But each patient, given the circumstances of care they receive, will make their own unique analysis of what constitutes having a positive experience with any given provider.

A recent JAMA Forum article, “Payment Power to the Patients,” by Dr. Ashish K. Jha, a Harvard professor and practicing internist, provides a somewhat compelling case that the time has come for patients to jump into the reimbursement ‘game’ to determine at least a portion of pay for their caregivers. As Dr. Jha points out, assigning financial penalties or bonuses to providers based on a myriad of performance quality measures is difficult to achieve because consensus from providers and payers about how to define ‘high-value care’ is extremely difficult to determine.

His approach is actually quite simple. Thirty or 60 days following hospitalization, “every Medicare patient would be asked to evaluate the care they received and assign a payment to the hospital, which would determine up to 10 percent of the payment.” Jha uses the example of a pneumonia hospitalization that might have a standard CMS payment of $10,000, of which $9,000 would be guaranteed to the hospital, but 10 percent ($1,000) would be determined by the patient. Should a patient receive excellent care, based on his/her own personal experience, the full $1,000 would possibly be assigned to the hospital. Otherwise, if the patient perceived care to be below expectations, maybe only half would be assigned to the hospital.

From this process, hospitals and providers would need to become more astute about what is most important to their clientele – one patient at a time. Hospitals would, as Dr. Jha articulates, become “flexible and truly patient-centered, by meeting the varying needs and values of individual patients.”

Although Dr. Jha discusses this reimbursement program through Medicare, this approach, if successful, might also apply to the private payer markets, such as individual and employer-sponsored plans. Much work would be needed for this new payment incentive system to work, however.

To become more patient-centered, patients must be involved in deciding whether the care was of good quality for them, personally. The value movement must incorporate all three ‘Ps’, not just one or two. Immediate patient-experience feedback should also have direct consequences. From this, good behaviors by providers will be positively reinforced, while substandard behaviors would require modification when being identified soon after the delivery of care.

As with any reimbursement method, unintended consequences could emerge. But it may be worth the effort to at least try this approach.

What are your thoughts?

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Why Health ‘Autonomist?’

Health AutonomistWords do matter.

A recent survey of 500 consumers located in six southwest states were asked about their sentiments regarding healthcare advertising and marketing. One big takeaway? The three most effective words that healthcare organizations should use when marketing their services to the public are:

  1. Knowledgeable
  2. Trustworthy
  3. Cost-Effective

 

Other similar words, such as “expert,” “helpful” and “innovative” ranked considerably lower. Researchers concluded, “Clearly, nuance [in messaging] matters.” Crafting advertising language in any type of business or industry is important for a few key reasons: Inform, promote and, most importantly, sell.

Unfortunately, in healthcare, when it comes to decision-making tools on pricing of procedures and having the best clinical outcomes on specific local providers, the public generally operates in a ‘black box.’ Instead, we are forced to rely on other factors that serve as guardrails when seeking effective and appropriate medical care, such as provider reputation (justified or not), word of mouth, provider participation in insurance networks, trust (again, justified or not), and the aforementioned, advertising.

The general public is bombarded with countless health-related topics and sources. How can Americans decide what ‘position’ to accept as gospel or reject as hogwash? The convergence between truth and fiction can become so difficult to decipher, especially when documented facts are baked in with half-truths. Former New York Senator, Daniel Patrick Moynihan, perhaps put it best when it came to sharing the truth: “Everyone is entitled to his own opinion, but not his own facts.”

Individuals, organizations and industries are entitled to share their views, but when these views are dangerously lauded to be factual, a fine-line is often crossed that is intended to mislead the public. One of the first things I do when reading an article, study or advertisement is to learn about the author (or source). Which organization(s) does he/she/they represent, and how might they be compensated? I know, it seems a bit anal-retentive, but it actually serves as a good, informal reality check to expose the fox guarding the hen house. As we all know, the fox may appear to have the chicken’s best interest in mind, but in reality, he is looking for his next supper – at the chicken’s expense.

Recently, I was asked by a media outlet to participate in a public discussion about healthcare issues facing Iowa and the U.S. Although unable to attend this event, I was reminded that my role was important because “I had no dog in the fight.”  This meant that I had no predisposition to protect a particular industry or take a sacred position on any given issue. Just tell it like it is. I took this to be a high compliment.

Because I write separate blog posts for two websites, David P. Lind Benchmark and Heartland Health Research Institute (HHRI), I have decided to assign a particular name to my HHRI blogpost – “The Health Autonomist.”

Autonomist: The independence to share one’s thoughts and to have the freedom from external control or influence.
Autonomist comes from ‘autonomy,’ a refreshing word having the independence to share one’s thoughts or actions without tilting the windmill. Autonomy is also about having freedom from external control or influence. When I write about various topics on health, healthcare and health insurance, I try very hard to look at different perspectives that may most likely challenge conventional wisdom. Readers need to understand that there are few simple, concrete answers to these complex, mosaic issues.

 

When writing a blog, my intent is to not influence the reader, but rather, provide a different perspective, using factual information based from credible sources. So, should you believe everything I write? Simply put, “No.” In fact, if you have feasible information that refutes my posts, I invite your comments. When it comes to discussing health, healthcare and health insurance, it is critical to have a community dialogue rather a one-person monologue. Please remember, I am merely trying to seek the truth, as it is buried somewhere under mainstream thought and practice.

The word ‘autonomist’ matters to me. I hope it also matters to you!

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Diet Soda – A Correlation to Stroke and Dementia

Diet Soda - Stroke & Dementia CorrelationEvery day we learn of new study results that admonish us to consume more (or avoid) foods and beverages to keep us both safe and healthy. Some reports conflict with one another, causing us to become even more confused about our daily dietary decisions.

For a number of years, sugar-sweetened soda had been associated with obesity, diabetes, poorer memory and small overall brain volumes. Over time, sugary soda was no longer the ‘beverage of choice’ for some. It was substituted for a seemingly more palatable option – diet soda, a sugar-free, calorie-free carbonated water with artificial-sweetened versions.

However, a 2013 National Center for Biotechnology Information (NCBI) study revealed that both sugar-sweetened and artificially sweetened beverages were linked to an increased risk of developing Type 2 Diabetes. Another study, after adjusting for common factors that contribute to weight gain such as dieting, exercising change or diabetes status, showed that those who drank artificially-sweetened drinks have a 47 percent higher increase in Body Mass Index than those who did not.

A study released in the May journal of Stroke concluded that “artificially-sweetened soft drink consumption was associated with a higher risk of stroke and dementia.” It found that those who drank at least one artificially-sweetened drink a day were 2.96 times as likely to have an ischemic stroke and 2.89 times as likely to be diagnosed with dementia due to Alzheimer’s Disease. The research, however, emphasized that it did not show causation to these diseases, only a correlation. This study’s takeaway is this:  Diet sodas may not necessarily be a healthier alternative to sugar-sweetened beverages.

Iowa Healthiest State Initiative

I serve as a committee member on the Iowa Healthiest State Initiative (HSI), a statewide program whose mission is “To improve the physical, social and emotional well-being of Iowans.” As the name suggests, the goal of HSI is to ultimately “become the healthiest state in the nation.” Our workgroup is currently assessing many different healthy measurement metrics  – including dietary behaviors – that will gauge the progress Iowans make when living active and healthy lifestyles. One key dietary measurement objective that we will likely pursue is decreasing the number of Iowans who consume sugar-sweetened beverages on a daily basis. As with all objectives, the idea is not to have prescriptive “Do’s” and “Don’ts” for Iowans. The goal is to gently nudge behaviors that will encourage positive outcomes for the individual’s physical and emotional well-being.

This most recent study provides yet another reason to temper our thirst for sugar- and artificially-sweetened beverages. Other healthier options to these sugar-sweetened beverages? According to The Nutrition Source from the Harvard T.H. Chan School of Public Health, drink more water, tea or coffee (with little or no sugar), limit milk and dairy products (1-2 servings/day) and just one small glass of juice each day. Again, these are merely suggestions.

More about the Healthiest State Initiative, version 2.0, in future blogs!

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Receiving the Right Healthcare Begins with Getting the Right Diagnosis

Right Healthcare DiagnosisHave you ever heard or perhaps experienced first-hand, that a patient was diagnosed with a particular health condition and learned later the diagnosis was inaccurate? Chances are, it’s happening more frequently than you might think or wish to accept.

Misdiagnosis Statistics

The somber statistics about misdiagnosis in the U.S. are both staggering and devastating. According to a 2015 report, “Improving Diagnosis in Health Care,”diagnostic errors account for up to 17 percent of hospital-related adverse effects – a horrifying number when you consider that about 35 million people are admitted to U.S. hospitals annually. For outpatient procedures, approximately 12 million will experience a diagnostic error. In 1999, the National Academies’ study indicated that 10 percent of all medical diagnoses in the U.S. were incorrect, causing 10 percent of all deaths in the U.S. In short, one in 10 patients receive treatment based on the wrong diagnosis, resulting in unnecessary surgeries, ineffective or dangerous medication, inappropriate transfusions, avoidable infections, extended hospital stays and other care deemed unnecessary.

Mayo Clinic’s study, “Extent of diagnostic agreement among medical referrals,” recently found that when patients were referred by primary care practices to Mayo’s General Internal Medicine Division during 2009-2010, that only 12 percent of patients received confirmation of their previous diagnosis. The majority of patients – 66 percent – found their diagnosis were “better defined/refined” after visiting Mayo, while 21 percent had distinct differences between their referral diagnosis and final diagnosis.  This equates to 88 percent of patients receiving a new or refined diagnosis at Mayo.

In order to provide effective and efficient treatment, patients must first receive the right diagnosis. As James Naessens, Sc.D., head of the Mayo research team stated, “Knowing that more than one out of every five referral patients may be completely [and] incorrectly diagnosed is troubling – not only because of the safety risks for these patients prior to correct diagnosis, but also because of the patients we assume are not being referred at all.” Not receiving a second opinion proves to be both expensive and potentially deadly.

Importance to Employers & Payers?

Why should this matter to employers and other payers? In addition to the human cost of being misdiagnosed, the costs can be a major contributor to approximately one-third of the healthcare waste estimated annually – amounting to $1 trillion.

In the final analysis, each and every one of us need to be vigilant about the care we receive. Our lives just may depend on it.

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Malpractice Caps Won’t Protect Harmed Patients

Malpractice Caps Won’t Protect PatientsMedical-malpractice reform bills currently moving forward in both the Iowa House and Senate (SF 465) attempt to place a $250,000 cap on non-economic damages, such as “pain, suffering, inconvenience, physical impairment or mental anguish.” The push to limit non-economic damages comes from the provider community, which includes doctors and hospitals.

Both sides of malpractice reform offer persuasive arguments on the merits of these reforms. Injured individuals and their lawyers argue against malpractice reform, saying patients won’t be protected against negligent providers. Because of errors, healthcare costs are higher.  Botched care requiring fixes often happens without patient knowledge and involves additional patient and insurance payments. The social and economic costs of medical errors are also enormous.

Doctors and hospitals, on the other hand, usually push for reform, saying it will protect patients from having to pay the high costs of malpractice insurance and help curtail defensive medicine practices – presumably through lower health insurance premiums – and perhaps increase accessibility to some healthcare services.

Interestingly, a recent report from personal finance website, WalletHub, indicated that Iowa is the best state for doctors to practice medicine, when comparing 14 different relevant metrics, and Iowa is the fifth least-expensive state for annual malpractice liability insurance.

But here’s the fundamental question that gets lost: Will capping non-economic damages provide the necessary incentives for providers to alter their practices enough to eliminate avoidable medical errors? This should be the most critical question regarding malpractice reform being debated in Iowa and elsewhere. Unfortunately, the Iowa bills fail to address this issue.

Patients expect to be safe when they receive healthcare from the providers they trust. Yet, solid evidence suggests this trust is routinely violated. We’ve made relatively little progress in reducing preventable medical errors since 1999, the year the Institute of Medicine released their book, ‘To Err is Human.’ In the last year, using national estimates on preventable medical errors, my organization extrapolated that a mid-range estimate that 85,000 patients are harmed in Iowa hospitals yearly due to preventable medical errors. This number does not include harm occurring in physician clinics, outpatient surgery centers, nursing homes and other care locations.

I don’t represent trial lawyers nor healthcare providers and I have become rather apostate regarding political parties. In my opinion, tort reform should be about reducing medical errors – the root cause of why we have malpractice issues in the first place. By working toward the elimination of the root cause – medical errors – malpractice and its negative side effects will also disappear. This more logical approach will benefit patients, providers and our overall healthcare system. Adopting safe care practices would substantially reduce the costs of botched-care fixes and defensive medicine – in addition to enhancing the quality of life for patients and their caregivers.

As the Iowa bills demonstrate, we continue to seek ‘quick fixes’ that gnaw at the edges of the problem. But these laws seldom address the core reasons of why many medical errors happen.  Medical errors are, unfortunately, a fact of life.  But many are avoidable. In our healthcare world, we have well-meaning and very capable caregivers. Too often, however, we also have broken organizational cultures that inadequately address patient safety protocols and burned-out physicians and staff who are required to “produce” at unsustainable levels. Any meaningful reform must begin at the healthcare organization level, ensuring we all receive appropriate and safe care. Organizations providing impactful interventions to help promote safe cultures of care can greatly improve safe care practices.

Misguided malpractice reform can actually exacerbate rather than eliminate medical errors. Placing caps on damages, economic or otherwise, insulates the medical community from high monetary awards, yet offers little, if any, incentives for healthcare organizations to establish clear and genuine protocols to ensure a culture of safety. The right incentives matter, especially when it comes to the safe care we trust we’ll receive.

Isn’t it time for provider organizations to adopt a culture of safety, rather than seek malpractice caps that do nothing to protect us as patients?

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Another Estimation on Hospital-Related Deaths Due to Medical Errors

Another Estimation on Hospital-Related Deaths Due to Medical ErrorsJust one year ago (February 2016), Heartland Health Research Institute (HHRI) published a series of white papers, ‘Silently Harmed – Hospital Medical Errors in the Heartland.’ ‘Silently Harmed’ was intended to demonstrate what the national estimated preventable adverse events (PAEs) may mean to Iowa and six states contiguous to Iowa. Using a handful of U.S. studies that evaluated preventable mortalities, HHRI settled on approximately 250,000 patients dying annually in U.S. hospitals due to preventable mistakes.

Just two months after ‘Silently Harmed’ was published, The Leapfrog Group estimated over 206,000 avoidable deaths occur in hospitals annually. A month later in May, a report released by Makary and Daniel estimated preventable deaths in U.S. hospitals to be greater than 250,000, similar to the HHRI estimate. The Makary-Daniel report made national headlines by suggesting “medical errors are the third leading cause of death in the United States.”

Another report has now been released in the March 2017 edition of the Journal of Patient Safety suggesting that “approximately 200,000 preventable hospital-related deaths each year in the United States is not unreasonable.” This report is authored by Kavanagh, Saman, Bartel and Westerman.

Unfortunately, there are no systematic protocols in place within our hospitals that mandate reporting medical errors. To date, all studies that address the mortality in U.S. hospitals due to medical errors are simply projections that are based on small sample sizes of hospitals and patients. The provider community, armed with their own under-reported data on medical errors, can only argue that these estimates are much too high. The fact is that much of the literature suggests that these estimations are conservative and underestimated.

What I found to be most interesting in the recent report by Kavanagh et. al include the following:

  1. Patient Perspective – Any insinuation from the medical community that preventable medical errors should be discounted due to patient age, health or life choices are baseless. If a terminal patient dies prematurely due to a medical error, this is still an unacceptable occurrence. As the article correctly states, “Medicine does not have the moral authority to discount or disregard days, weeks, or months of life.”

 

  1. Voluntary and Non-Audited Reporting – Voluntary and non-audited reporting mechanisms greatly under-report adverse events, preventable harm and fatalities. “The 2010 Office of Inspector General Report found diagnostic codes ‘absent or inaccurate’ in seven of eleven Medicare hospital-acquired conditions, and in 93 percent of the time, incident reports were not submitted.” In fact, “since 2005, an average of less than 1000 sentinel events have been voluntarily reported to The Joint Commission per year from the hospitals that have undergone their accreditation process…Officials at The Joint Commission estimate that less than 0.1% of events have been reported.”

 

  1. Cultural of Safety – Having a ‘culture of safety’ serves as the hospital’s foundation from which to build new internal systems and policies that prevent patients from being harmed. “What ties the occurrence of preventable adverse events and mortality together is the willingness and determination of facilities to adopt a culture of safety and invest in patient safety. The adoption of preventive protocols is further hindered by the United States’ fragmented, nonuniform healthcare systems composed of facilities with differing philosophies and administrative structure.”

 

  1. Put Your Money Where Your Mouth Is – Some in the healthcare industry ignore current studies on medical harm and believe we must wait for more perfect data before it can be shared with the public. “The onus should not be on consumers but on the healthcare industry to generate comprehensive data to demonstrate that their product is safe.”

 

One example on just how grossly under-reported adverse events are in our hospitals, just look at a recent article in the Minneapolis Startribune. The article indicated that Minnesota hospitals reported only 336  ‘adverse events’ during the last year, including operations on the wrong body parts and disabling medication errors. The report included four adverse events that resulted in deaths — three from patient falls and one from a medication error — and 106 that led to severe injuries. This type of reporting runs contrary to national reports on adverse events in U.S. hospitals. In May 2016, the Agency fo Healthcare Research and Quality stated, “According to the most recent data, nearly 4 million adverse events occurred in U.S. hospitals in 2013…we can project that about 170,000 people died in 2014 as a results of an adverse event or medical error.” This estimate is for Medicare-eligible patients only. Based on 585,000 hospitalizations in Minnesota in 2012, HHRI estimated that roughly 146,000 patients are seriously harmed in Minnesota each year, while over 4,200 patients are fatally harmed annually.

Creative reporting of such important metrics continues to be allowable in this country.

Most agree that we need better data to avoid further speculation of this epidemic. Playing horseshoes and hand grenades to determine the number of patients harmed is no longer good enough. After all, if we don’t know the extent of the problem, how can we determine whether the new delivery and payment systems will solve it?

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Healthcare Waste – It’s About Priorities and Opportunity Cost

Healthcare Waste - It's About Priorities and Opportunity CostWe know that healthcare spending continues to grow at an unsustainable rate. Each election cycle, we expect policy makers to find meaningful ways to slow that growth and ultimately reduce spending – while maintaining quality and access.

As mentioned in our previous blog “Time to Move Upstream and ‘Invest’ in our Health” co-authored with Dr. Yogesh Shah, the prudent approach is to simultaneously move upstream and address the social determinants of health. This thinking might sound ‘pie in the sky’ to some, but controlling costs cannot happen without addressing the environment in which we live, learn, work and play.

In addition, there is another culprit that must be eliminated – healthcare waste. If we are successful in eliminating this waste, by most national estimates, we can reduce our costs by 18 – 40 percent. The midpoint of waste is about 30 percent of healthcare costs.  Per the Robert Wood Johnson Foundation, this waste comes in many different categories:

  • Failures in Care Delivery – poor execution or lack of widespread adoption of best practices, including effective preventive care practices or patient safety practices.
  • Failures of Care Coordination – Fragmented and disjointed care of patients when transitioning from one care setting to another.
  • Overtreatment – Care that ignores scientific findings, perhaps due to outmoded habits. Defensive medicine is an example, such as unnecessary tests or diagnostic procedures to guard against malpractice lawsuits. Here is just one example.
  • Administrative Complexity – Having multiple ‘administrators’ with divergent protocols and practices, such as the government, insurance companies or accreditation agencies who create inefficient and overly bureaucratic procedures.
  • Pricing Failures – This waste is baked in to our healthcare ‘system’ because the price of a service exceeds what would be found in a properly-functioning marketplace. In healthcare, we lack appropriate competition at the right levels and have little transparency on cost and outcomes.
  • Fraud and Abuse – This is the cost due to fake medical bills and scams, in addition to the cost of inspections and regulations to thwart any wrongdoing.

Iowa Healthcare Component Costs

Based on the population of 3.033 million Iowans in 2009, the cost per capita in Iowa for healthcare was $6,921, totaling almost $21 billion. The largest portion of this cost comes from hospital care, which consumes about 39 cents of every dollar spent on healthcare ($2,713 per capita). This amount includes the total net revenue (gross charges minus contractual adjustments, bad debts, and charity care). Assuming the midpoint waste average in Iowa is 30 percent, and we have little reason to believe it is measurably different from national norms, the total annual amount considered to be wasted on hospital care would be $814 per Iowan.

Using a similar waste factor of 30 percent for each of the nine health components, the total waste per capita would amount to $2,076 (see graph below). Because many of the components are interconnected with one another, it is extremely difficult to cull out the actual waste factor within each component. Some components may have much lower inherent waste, while others may not. Costs such as insurance program administration, research and construction expenses are not included.

Iowa Healthcare Cost Per Capita

The following graph provides the total healthcare costs (in $) for each of the nine components, in addition to the potential wasted spending. Again, using hospital care as an example, if 30 percent of waste was eliminated in Iowa hospitals, the price tag could have dropped from $8.2 billion to $5.7 billion – resulting in a $2.5 billion ‘savings’ – or unnecessary overpayment.

Healthcare Costs in Iowa - 2009

Healthcare Waste of $6.3 Billion

I share this information for a reason. Much like the individual choices made daily in our lives, there are opportunity costs for the choices we make, or fail to make. The notion of opportunity cost plays a crucial role in attempts to ensure that scarce resources are used efficiently. If the midpoint assumption of 30 percent waste occurs in healthcare delivered in Iowa, then overspending $6.3 billion annually (and growing due to increased costs) is a huge opportunity cost for Iowans. Think about it, what other ‘opportunities’ can we invest in and receive much better ‘returns?’

Most Americans detest waste – especially when it affects our pocketbooks and the potential impact it has on our health and well-being.

Waste is anything that doesn’t add value to the end product. In manufacturing, waste can be rooted out by using different proven programs, such as lean manufacturing. Doing so allows the manufacturer to build higher-quality products at a more competitive cost. The same process can be used in healthcare. Having the right kind of incentives to change the willpower and behavior of those providing (and paying) for this care, is crucial.

Community Needs in Iowa

In Iowa, communities have a myriad of health needs that go unmet, but most often have limited resources to address these problems. According to Mid-Iowa Health Foundation’s website, there are many community needs for our youth that require attention and affect the social determinants of our health and well-being:

  • 20 percent of children in Iowa lack adequate food
  • Roughly 7,000 school age children in Iowa are homeless
  • Over one-third of Iowa fourth graders read at or above the proficient level
  • Over 13 percent of youth in Iowa are exposed to drug use in their home
  • Approximately 12,000 children are victims of abuse and neglect
  • About 10 percent of central Iowa children say they do not live in a happy home
  • Almost 13 percent of Iowa youth had serious thoughts about killing themselves in the last year
  • More than 20,000 children are living below the poverty level in Polk County
  • 80 percent of Iowa children with mental health needs never receive treatment
  • Only 45 percent of youth in the Des Moines community are hopeful for the future

 

This list represents just a small sampling of social determinants that eventually affect the healthcare we pay. By smartly eliminating waste in our healthcare system, and thoughtfully re-directing the ‘savings’ in areas that matter most to our communities, we can further stem our healthcare-cost epidemic. Imagine the sizeable dent we make in our communities by culling out billions of dollars annually from the waste we pay. The discussion of displaced healthcare jobs and the potential ‘economic impact’ requires further exploration in a later post.

Following the election, we will continue to debate the fate of Obamacare – who will pay and how much – but this discussion is being made with greatly inflated dollars. We would be well-served to dedicate equal energy to squeeze the waste from healthcare and redirect resources to benefit our communities.

We know the waste is there. But what about our willingness to eliminate it?

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Time to Move Upstream and ‘Invest’ in our Health

Time to Move Upstream and 'Invest' in our Health

Authors:  David P. Lind and Yogesh Shah, MD, MPH

Employer-sponsored health premiums in Iowa have increased 215 percent since 1999. This growth, however, appears tame when compared to health insurance plans sold in the individual market. We’ve grown so accustomed to rising health costs that it has become the ‘new normal’ with no apparent silver bullet in sight to remedy the core problems. Healthcare costs continue to outpace general inflation, typically by two-to-three fold. We live with constant anxiety about paying more for our healthcare – whether through taxes, premiums, deductibles and/or other out-of-pocket expenditures.

With the advent of a new Trump administration geared to repeal many Obamacare components, all sorts of health insurance “solutions” will be debated. Ideas to make coverage more competitive include selling policies across state lines, pushing for health savings accounts, and relying on other tax incentives to perform magic. However well-intentioned, belief that the insurance component will somehow fix our cost problem is wishful thinking.

The major source of this problem is our unhealthy population. “Upstream” environmental factors greatly impact our “downstream” health. for all of us. Upstream factors are many – primarily poor nutrition, inadequate housing and education, and low incomes – all considered to be social determinants of our health.

To meaningfully address healthcare costs in Iowa and nationally, we must be willing to consider new approaches and develop a mindset that transcends party politics. This may sound counterintuitive, but to reign in ever-increasing healthcare costs and enhance better population health, we should explore new solutions ‘upstream’ to invest in our collective health and well-being. This is not about implementing ‘socialized medicine.’ It’s about using our limited resources more wisely on key determinants of overall health that can ultimately improve health and control healthcare costs.

Healthcare Spending

In 2014, we spent 17.5 percent of our economy on healthcare, reaching $3 trillion annually. By comparison, in 1960, we spent only five percent on healthcare. One disturbing estimate by the Institute of Medicine shows about one-third of our healthcare spending – or $1 trillion – is widely considered wasted spending, money that can be better invested elsewhere.

Should healthcare costs dominate such a large segment of our economy? If so, shouldn’t we be healthier than other nations based on what we spend? On a per capita basis, the U.S. performs poorly on many key health indicators. For example, our country has lower birth weight, higher maternal and infant mortality, as well as higher incidents of injuries, obesity, diabetes, heart disease, chronic lung disease, disability rates, mental illness and, surprisingly, shorter life expectancy. In addition, we have more drug-related deaths than other industrialized countries.

With these in mind, one would think that most comparable countries must be outspending the U.S. on healthcare services. The facts are quite the opposite. In 2009, our country spent 16.3 percent of its gross domestic product (GDP) on healthcare, about six percentage points higher than the average 10.3 percent spent by 10 other industrialized countries. Yet, our growing appetite for more healthcare spending results in poorer health outcomes. This is both puzzling and frustrating – for policymakers, taxpayers, employers and their employees.

Time to Move Upstream and 'Invest' in our Health - Aggregate Health Care Spending by Country

Social Services (Community Health) Spending

Instead of focusing on how to pay for healthcare – a perpetually-growing segment of our economy – we should re-direct our limited resources to impact basic social determinants of health, such as targeting education, housing, nutrition and poverty. Unlike healthcare, U.S. public spending on social services falls far below other developed nations. In 2009, the U.S. spent 9.1 percent of its GDP for aggregate social services versus the average of 15.8 percent spent by all 10 other wealthy countries.

Time to Move Upstream and 'Invest' in our Health - Aggregate Social Service Spending by Country

When combined, U.S. healthcare and social services spending ranks in the middle of the pack of peer countries, with a disproportionately higher amount spent on healthcare than on social services.

Time to Move Upstream and 'Invest' in our Health - Aggregate Health Care and Social Service Spending by Country

The U.S. is the only wealthy country where healthcare spending accounts for a greater share of GDP than social services spending – an “imbalance” our country has embraced. Over decades, we’ve allowed soaring healthcare costs to smother the necessary investments we must make to improve our community health. In other words, our country inefficiently relies on medical care and insurance to address problems that we fail to address upstream, at their source. An insightful reference on this subject comes from a book written by Elizabeth H. Bradley and Lauren A. Taylor – The American Health Care Paradox…Why Spending More is Getting Us Less.

What can we learn from this?

High healthcare spending in the U.S. has far-reaching economic consequences, such as wage stagnation, personal bankruptcy and budget deficits. Extensive evidence suggests that making the right investments in social well-being substantially improves population health outcomes downstream. For example, housing vouchers, home energy assistance and the availability of supermarkets in low-income areas are known to reduce obesity, diabetes and nutritional risk in children. In addition, availability of prenatal and infant nutritional assistance is associated with reduced infant mortality.

Realistically, the American culture has had little appetite for becoming more ‘socialized’ in tackling upstream problems, relying instead on the national ideology that spending more on healthcare will solve our health woes and improve health outcomes. But for meaningful change to occur, balancing healthcare with social determinant strategies must emerge both nationally and locally here in Iowa. The Iowa Healthiest State Initiative, a nonpartisan, nonprofit organization, is just one example of attempting to improve the physical, social and emotional well-being of our Iowa communities. This initiative is a good start, but other bold private and public initiatives need to be undertaken for real positive change to occur in healthcare outcomes.

Investing in our health upstream makes a great deal of sense. Spending for the ‘right’ community measures that impact health will provide better health outcomes for Iowa and our country. Such expenditures will take time to translate into positive health outcomes but we need to start investing now. The result may be cost-shifting from inefficient healthcare spending to re-allocating funds for social determinants that matter most, such as nutrition, adequate housing and education. By doing so, we will make our communities and state both healthier and more productive.

Controlling health costs and improving population health – we cannot have one without the other.