Connected Care Cuts Costs; But Can It Overcome Inertia?
(Part two of a two-part series. A version of this Health Alert was published by Forbes.)
The first article in this series suggested that there is a great opportunity for “connected care” to reduce costs by keeping patients out of hospitals and nursing homes. “Connected care” refers to a large and growing portfolio of digital tools, from video consultations with psychiatrists to in-home sensors passively detecting when a senior falls to devices that measure diabetics’ blood glucose and send messages to their families’ or doctors’ smartphones when intervention might be needed.
It does not take a lot of imagination to see that these technologies should be able to cut huge costs out of the health system. Yet, uptake so far has been limited. To the degree that there has been widespread adoption, it is in the use of Electronic Health Records (EHRs). Nine in ten hospitals offer patients the ability to at least view their records online, and a significant share allow patients to download and transmit their records. However, this is not actually leading to better care, because the EHRs were implemented as a consequence of government subsidy rather than patient demand.
Beyond EHRs, uptake of connected health is very low. The Office of the National Coordinator of Health Information Technology, which quarterbacks the federal government efforts in connected care, estimates that over half of physicians exchange secure messages with patients and almost half of physicians exchange patient information with other providers. However, this appears to contradict an independent survey commissioned by the Council of Accountable Physician Practices and the Bipartisan Policy Center, released in November. According to this sobering report:
- Less than half (45 percent) of patients receive even the traditional telephone appointment reminders.
- Only one in five (21 percent) have access to online appointment scheduling with their doctors.
- Fifteen percent use email to communicate with their provider.
- Just 14 percent have 24/7 access to medical advice.
- Fewer than one in ten (9 percent) receive reminders by text.
- Only a small percentage (3 percent) are able to send a photo of a medical condition over email.
- Just 2 percent have access to video visits.
Even more discouraging are physicians’ attitudes: Fewer than half believe telemedicine (delivering care over the phone or video) is an important evolution in the practice of medicine, while almost one third belief it is “not worth the hype.” These physicians are going to have to change their attitudes. By 2019, Medicare will have fundamentally changed the way they get paid, due to the so-called “doc fix” legislation passed last April.
The “doc fix” has a lot of problems, and will likely have to be renegotiated before 2019. Nonetheless, it demonstrates bipartisan consensus that Medicare should pay doctors for value, instead of volume, and explicitly includes “use of remote monitoring or telehealth” as adding value.
Emerging evidence supports this position, and examples of success are growing. For example, remotely monitoring patients with sensors has a huge impact. It allowed the Hackensack Alliance in New Jersey to reduce readmission rates for congestive heart failure patients from 28 percent to 5 percent. Even re-admitted patients get treated at lower cost: Christus Health, a large Catholic system in the South and Southwest, reduced the average cost for congestive heart failure readmissions from $12,937 to $1,231 per re-admission after implementing remote patient monitoring.
One obstacle to increased use of these technologies is devices’ inability to communicate with each other. Thought leaders like the Center for Medical Interoperability refer to the need for “plug and play” interoperability between devices made by different manufacturers, all feeding into information systems available to patients’ families and caregivers. Continua, a non-profit alliance of over one hundred firms (including Intel, Qualcomm, and IBM) develops design guidelines for “end-to-end, plug-and-play” interoperability. Further, it certifies devices that meet Continua’s standard of interoperability.
Yet, interoperability has been hard to achieve. One problem is the hub is the EHR, for which the federal government implemented perverse incentives that encouraged hospitals to install EHRs that block data. The large EHR vendors, such as Cerner and Epic, insist that they are working hard at interoperability. However, insiders note that actual interoperability seems to occur when two hospital systems with competing EHRs merge and neither vendor wants its EHR ripped out. They agree to a “cold peace” and stitch their competing systems together.
And that is just interoperability between installed EHRs! With respect to apps or devices, insiders suggest it is also hard to collaborate with the large EHR vendors until the developer already has a deal with a large customer – hospital system – of the EHR vendor.
Despite these problems, the amount of entrepreneurial energy unleashed by companies of all sizes to overcome the obstacles to interoperability is remarkable. Patients should hope that this energy manages to overcome the health system’s longstanding resistance to change.
Just out of curiosity John, do you call everyone who has an appointment with you to remind them? How about people you schedule appointments with? Do they call you, or do they rely on the fact that you’re a grownup?
I don’t see why it’s my responsibility to remind adults to keep their appointments as a crucial service. Who dresses these people in the morning? Who reminds them to go to work? We do appointment reminders but it’s because people have an unfortunate tendency to not show up. Some practices overbook like airlines but we don’t. A no-show is lost opportunity for me and for the patient who could have used that slot. BTW you’d be amazed at how many times you call and get “mailbox full”.
As for the rest of the communication items, I have this quaint antiquated habit of seeing my patients, talking to them and even touching them. A huge amount of information is lost with an email. How do I do a neurological exam with a video call?
Adoption would probably improve if you could get paid for these services. Look up the Medicare criteria for getting paid for telemedicine. I thought I’d give it a try but unless my patients lived in igloos it would be pretty hard to collect.
If telemedicine was a game changer you wouldn’t have to nag, wheedle, threaten or cajole doctors into using it. They would want it. I have yet to see a worthwhile medical innovation that wasn’t voluntarily embraced. No legislation was required to force us to order an MRI, monitor oxygen levels in the OR with pulse oximetry, or give a flu shot.
Interoperability is an interesting issue. The latest Meaningful Use criteria require that you demonstrate that your EHR is interoperable which is laughable, if not due to the total chaos you’ve already noted then for the simple fact that this feature is beyond the doctor’s control.
Paying doctors for value? That’s not going to happen. There will be a system that purports to do that but it will be shallow and worthless and medical care will “teach to the test”. There will be no value metric for compassion, explaining things well, picking up a diagnosis everyone else missed, fighting with insurance to get a test done, etc.
Instead they’ll use things that can be measured but that are often beyond the physician’s control such as how many diabetics have good control as measured by HgA1c. Never mind that whether a diabetic has good control depends to a large extent on patient compliance. What’s important is that you can measure HgA1c.
Hopefully by the time they turn their attention to my specialty I’ll be retired because there’s no test for pain and I can only guess what kind of stupidity will reign.
Even restaurants now call with reminders!
How do you do a neurological exam with a video call? See A.J. Larner, “Teleneurology: An Overview,” Practic Neurol, 2011;11(5):283-288.
You are not considering the cost to the patient of travelling to your office.
Restaurants don’t do it as a service, they do it for the same reason I do. But do YOU call all your appointments with reminders or is it just doctors and restaurants that have to?
Did you actually read that article you cited?
I do consider the cost of traveling to my office but I also consider the cost of misdiagnosis due an inadequate examination.
I don’t have any appointments except for presentations with humongous speaking fees attached (facetious). I spend the rest of my time scribbling.
“It is a great art in life to know how to sell wind.” — Baltasar Gracian, The Art Of Wordly Wisdom 1647
My doctor(s) and my dentist offices always call with a reminder. Have for at least the past three years, maybe longer I don’t really remember and I don’t care.
They are robo-calls so I imagine that they are scheduled automatically by their office systems at the time my next appointment is logged in. Thus they take virtually zero time for the office staff. They serve the dual purpose of reminding me, and prompting me to give the office timely notice if my schedule has changed and I cannot make my appointment.
“They serve the dual purpose of reminding me, and prompting me to give the office timely notice if my schedule has changed and I cannot make my appointment.”
Exactly. This is something the practice does to prevent no-shows (just like restaurants), but suddenly reminder calls turn up in a “sobering report” about service deficiencies. When did your physician become your personal assistant?
Placing a robo-call does not imply that anyone has become anyone else’s personal assistant.
It’s simply a patient service – of less importance, but of the same kind as establishing an unhackable electronic personal health record that my physicians can all access. (Unfortunately, an unhackable electronic record does not exist).
I have argued for years that we suffer from too little constructive physician leadership in health policy. As a result, business and government types filled the vacuum and we got what we have. Nevertheless, I never had in mind that physicians with something to contribute would spend their time picking fights over the utilization of reminder calls by other physicians.
“I never had in mind that physicians with something to contribute would spend their time picking fights over the utilization of reminder calls by other physicians.”
If you’re referring to me this is a completely inaccurate portrayal of my position that detracts from the discussion. Please re-read what I have posted.
“please re-read what I have posted”.
The first two paragraphs of your very first comment above, and all of your second, third, and fourth comments, suggest that you feel patient appointment reminders is important enough to comment on repeatedly.
Seems to me this is a narrow issue, not a leadership issue. So yeah, I was referring to you in my prior post. If I misunderstand the importance of those calls, then my bad.
Still, I’d much rather know your thoughts on broader issues about your practice, or read comments you care to make on more general medical oare matters. For example, what follows the first two paragraphs of your first comment above.
Over the years we have had more and more free services heaped on our plates. Managed care has been a huge burden.
You see your doctor and she recommends an MRI. Here’s what can happen:
1. The doctor puts in a preauthorization request on your behalf, gratis.
2. If the MRI is denied your doctor appeals it on your behalf, gratis.
3. If it’s still denied your doctor requests a peer to peer review, gratis.
4. Your doctor argues on the phone with the insurance doctor, gratis.
This can easily take more time than the visit where the decision was made.
If you have a gatekeeper model and it’s a specialist who orders the MRI, some hapless PCP has to approve it. More uncompensated paperwork.
Another way we have been pushed into free service is bundling. Medicare does this a lot. Suddenly one year a service gets bundled with another service. The fee remains the same. Postop care is now bundled into the surgical fee. It doesn’t matter how easy or complicated it was, it’s bundled. We used to get paid for using fluoroscopy to guide our spinal injections. Now it’s bundled. That was a significant part of the fee. If you were getting $75 for the injection and $25 for the fluoro but now you’re just getting $75, that’s a helluva pay cut.
CMS has turned us into free data entry operators at the cost of our productivity.
This frog is tired of being slowly boiled. That is why I had a disproportionate reaction to the notion that reminder calls are now a service.
“I had a disproportionate reaction”
Well, then let’s bury it.
I get the frustrations you listed. My grandfather, his three brothers, and an uncle never had to deal with those frustrating as country docs between 1910 and 1950. They still had their frustrations, a cousin who was a neurosurgeon did experience a lot of what you mention, but not as much as physicians today.
My relatives’ stories were all different but one thing stood out. They were jealous of their time and wanted to spend as much as possible of their time actually caring for patients. I read the same in your list, too.
Seems to me that, more than ever, we need more physicians more involved in Heath policy leadership.
If you aren’t aware of the Docs 4 Patient Care Foundation give them a look. It’s a goofy name but they are probably the best group you’ll find in terms of a blend of patient-centric and free market policies.
https://d4pcfoundation.org/about-us/the-physicians-prescription-for-health-care-reform/
I’ve heard primary care doctors suggest that as many as 50%-75% of their in-office patient encounters could have been effectively handled by e-mail, phone or video chat (Skype, etc.). I get that doctors need to be paid for their time and they can’t get paid for phone calls or e-mails in the current fee for service environment, presumably because there is no billing code for them. Practices that work on a capitated basis or under a shared risk / shared savings approach have more flexibility to employ those alternative communication techniques when they make sense.
As a patient, I would find it burdensome and unreasonable to force me to schedule an office visit just to get prescriptions for my maintenance drugs renewed but I’m told that many doctors require an office visit to do that so they can get paid. After a recent procedure in a NYC hospital, I was able to get several questions answered by e-mailing one of the NP’s in the practice. She got back to me quickly and told me what I needed to know or do. It was very helpful. Several times over the years, I’ve used my insurer’s nurse hotline including once when I was on vacation in Utah 2,500 miles from home. It saved me a trip to the ER.
Obviously, some problems can only be effectively dealt with by an in-office visit. That’s fine. However, for simple things that can be resolved by phone or e-mail, it’s much more convenient for the patient to handle them that way. Our time has value too.
One potential problem with creating insurance billing codes for phone and e-mail communication under a fee for service system is the potential for abuse is enormous. Will automated calls to remind patients to schedule an appointment for a checkup or to show up for their appointment tomorrow generate a bill for each call? How about blast e-mails to all the diabetics on the panel to schedule a quarterly visit to get their HgA1C checked? In Kaiser’s system, they handle 15-20 million phone calls each year for their 9 million members. Someone has to read and respond to all those but they seem to be able to make it work.
It depends on your practice. I prescribe a lot of narcotics and that requires a certain amount of surveillance. Initially they come in monthly and as I learn to trust them with the medication the interval is extended, but I still see them quarterly.
If someone is seen today and needs a refill next week I won’t make them come in for another visit just for that. The purpose of medication visits is to periodically have a face to face encounter and perhaps do a urine tox screen, and today’s visit will suffice for that purpose.
I handle a lot of patient calls without a visit at no charge but any new problem, worsening of a problem or a request to change chronic medications requires a visit.
Let me give you an example of how things can go wrong. Simon Says “hands on hips”. Where are your hands? Chances are they are not over you hip joints. Most people confuse their iliac crest with their hip. It’s not uncommon for a patient with sacroiliac joint pain to describe it as hip pain. On more than one occasion I have seen a patient referred for hip pain show up with hip xrays ordered by their PCP, and upon asking them to point to their pain they point to the iliac area, not their hip joint. Then I realize that this is a patient who wasn’t examined at all. A waste of time and money and a needless exposure to ionizing radiation.
There is no shortage of doctors who want to spend as little time as possible listening to and examining patients. Give them an opportunity to bill for it and you’ll have no problem whatsoever being managed by remote control.
This is the same ol’ story. There is new technology that could work wonders in health care. But it is not utilized to its capacity because providers are not competing on price and convenience for patients’ business. They are seeking to maximize revenue against rigid reimbursement formulas. For their part, insurers are bureaucratic and will not pay for a service until it’s been proven.
Remote monitoring is something every hospital would use if it were competing to hold costs down, especially if their competitors were doing the same. But, a hospital offering to monitor patients at home instead of in the hospital would have to convince Medicare/insurers that the service was truly worth paying for.
Imagine if you’re a patient, and your doctor tells you… “you can stay in the hospital for $1,000 per day, or I can wire you up and you can convalesce at home for $100 per day. Which would you prefer?”
We all know the answer.
It was the same way with outpatient surgery.
The first ASC was started in 1968 by Drs. Wallace Reed and John Ford.
The AMA endorsed the concept in 1971. In 1973 the American Society of Anesthesiologists established guidelines for outpatient anesthesia.
Unfortunately, Medicare didn’t approve payments to ASCs until 1982.
Where was the bottleneck?
I don’t think most people understand how revolutionary of a concept this was. When I was 26 I had minor abdominal surgery. I was admitted to the hospital the night before and stayed 3 days after. My preop workup was a battery of blood tests, a chest xray and an EKG – for a healthy 26 year old.
That was 1979. By the mid-80s ambulatory surgery was established and people showed up for heart surgery on the day of the procedure. If I had the same surgery then I would have been in and out the same day with zero preop testing.
Doctors were behind this quantum leap that has saved untold amounts of money, but when we say something isn’t ready for prime time suddenly we’re Luddites who are unreasonably standing in the way of progress.
And the nerve of us wanting to be paid for services rendered!
I’ll bet the hospital lobby did everything it could to thwart the formation of ASC’s and stop Medicare from paying them for as long as possible. To prevent more ASC’s from coming on the scene, the hospitals probably pushed for CON laws as well.
How much less does Medicare pay an ASC than it would pay for the same procedure in a nearby community or teaching hospital?
Medicare rates for lumbar epidural steroid injection CPT code 62311, a common treatment for sciatica:
Office $133
ASC $368
HOPD $672
The physician fee is $92 regardless of location.
Why should the HOPD get 500% as much as the office? Same doctor, same patient, same procedure.
I would also add that the time it takes a patient to get through the system – from the time they walk through the door to the time they leave – is inverse to the facility fees. I can have you in and out in the time it takes the hospital to get you registered.
I’ve heard people say it’s because the hospital has higher overhead. It has to be open 24/7 and handle all sorts of complicated cases, etc. So their justification is . . . cost-shifting? Medicare wants sciatica patients to subsidize the ER?
I have never seen an explanation for this differential. My guess is that it’s related to the lobbying power of the parties involved.
I have also never received a single response when I have written to insurance companies pointing out the savings they could reap if they encouraged patients to have their procedures in the office. Not one. Why would an insurance company want their patient to go to a more expensive place of service?
Very interesting comment. I don’t understand why insurers wouldn’t be interested in saving money either. You might try writing to the CEO of one or more of the big publicly traded insurers — UNH, CI, AET, HUM, ANTM. On the non-profit side, try Healthcare Services Corp. One of the CEO’s staffers will probably route it to the right place in the organization and you should get a response. At least that’s been my experience.
I have spoken with people as high as VP. They always tell me that I need to speak with someone else, tell me they’ll have that person call,and then nada.
Once I was talking to a medical director about this issue and she treated me like I was trying to run a scam.
I think there should be a single price for this service and if a hospital can’t do it at that price then too bad. If there is a very sick patient and you can justify the use of a more complex level of care then there should be a special code for that with a higher rate so the patient can be done safely and the hospital can make a profit.
It sounds like the procedure you cited in your earlier comment would lend itself well to reference pricing at a rate well below what hospitals get paid now and maybe even somewhat less than the ASC’s currently get from Medicare. The only thing I wonder about is if it’s done in an office or an ASC and there are complications, is there time to get the patient to a hospital for treatment that only a hospital can provide? Or, is it similar to the maternity centers in Paris where when things go south, it happens very quickly and there may not be time to transfer to the hospital even if it’s close by.
I think you should take a shot at writing to the CEO of at least one or two insurers, preferably the one or two with which you do the most business. I’ve done this numerous times on other issues, and it’s worked quite well. Tell them your suggestions and how it will save money for both patients and the insurer without compromising quality or safety and offer to speak with appropriate people within their organization about the issue. You don’t have much to lose beyond a modest investment of time. It’s probably worth a try.
A “Joan Rivers” incident is extremely rare and gathering enough data for statistical power would be very hard.
Personally, I don’t have any qualms about undergoing procedures in the office or an ASC.
Suppose the mortality rate in the office is 1:500,000 and at a hospital it’s 1:750,000. Should we spend the extra money and have everyone done at the hospital at 5X the cost? That’s a societal question, not a medical one.
The Big 5 Health Insurers (soon to be 3) administer plans to satisfy their largest customers. Most of these customers are self insured; that is, they, not the insurance company bear the cost of the health care delivered to their employees and their families.
These customers, in turn, rely on consultants to design plans that meet the employers needs for cost control, employee satisfaction and ease of administration.
You might get more traction for innovative ideas by appealing to employer groups (Leapfrog, et al.) or the national consulting firms (Towers Watson, et al.).
Unfortunately, the history and the culture of Medicare is oriented toward reimbursing providers for their costs, assuming they are efficiently run. So, if hospitals have inherently higher costs than ASC’s and offices, they get paid more. If Medicare really cared about saving money, it would embrace both reference pricing and providing incentives for both patients and doctors to ensure that care is provided in the most cost-effective, safe and appropriate high quality setting.
Imagine a car salesman arguing that you should pay more at his dealership because his overhead is higher.
Interestingly, prior to the late 1950’s, I think, there was no such thing as the Manufacturer’s Suggested Retail Price sticker on a car. It came into being when Congress passed legislation requiring it. Until then, people paid very different prices for the same vehicle depending on their negotiating skill but the dealer had all the information about the cost of the car and the customer had none. Now information about the dealer cost of each vehicle is widely available on the Internet.
Question:
I have been told that these self-insured plans use TPAs and that TPAs get a “PPO repricing fee”.
If they get the hospital down from the Chargemaster fee of $5,000 to $500 for a procedure that’s more lucrative than getting Gorback down from $500 to $300.
True?
The Big 5 administer ASO contracts as do TPAs. Part of the buying decision on the part of any large self insured employer is the attractiveness of the contracts with providers. Insurers maintain their own networks, the same ones that underlie their insured products (HMO, PPO, MA, etc.). ASO customers pay a fee to access these networks as you indicated.
Except for the fledgling ACOs being set up market by market, the ASO business is pretty much still FFS. Therefore insurers compete on the medical cost side of the total expense (administrative fees plus reinsurance being the other) by “controlling” unit cost and utilization. No one pays anything like chargemaster rates for hospitals, so at the margins you become a more attractive target (with all your brethren) than you might think. Plus, as you may have heard, the most expensive piece of medical equipment in the world is a pen in a Docs hand.
Michael –
I covered the publicly traded health insurance companies for the last five years of my career as an analyst for a large corporate pension fund. I have never heard of a repricing fee charged to self-funded employers in talking with health insurance executives and have never seen any mention of such a fee in detailed Wall Street research reports. Self-funded employers may or may not purchase stop loss insurance (reinsurance) to cap aggregate or specific individual claims or both. Carriers charge employers an administrative fee per member per month (PMPM) for claims processing, provision of a network and perhaps some other optional services. Five years ago, my employer’s ASO fee was about $20 PMPM for active workers and about double that for retirees since they have significantly more claims that need to be processed and adjudicated.
The linked to article provides a detailed discussion of employer health insurance options – full risk insurance, using a TPA firm, or contracting for administrative services with an insurance carrier. See page four for a breakdown of the components of an employer’s health insurance costs.
http://www.hcc.com/portals/0/subsites/hcclife/downloads/HealthCareSuccessPublicationl.pdf
By contrast, drug insurance contracts with pharmacy benefit managers (PBM’s) do indeed include a repricing fee. In fact, there are four ways that PBM’s make money which are (1) administrative fees, (2) rebates from drug companies for moving market share, (3) the spread between what the PBM pays for the drug and what it bills the employer and (4) profit from filling generic drug prescriptions by mail through its mail order pharmacy. Some employers want to capture the drug company rebates while others want to minimize administrative fees. The PBM’s just want to make a certain amount of money from a given account and it doesn’t care which of the four buckets the profits come from.
Michael, Barry:
I interpreted Michaels “repricing” as a reference to a Network Access Fee, the charge made to cover maintaining a provider network that would be buried in a fully insured premium.
As Barry states, ASO fees can be set up several ways. Carriers prefer to unbundle some fees and bundle others. E.g.; charging per EOB removes the volume risk in claim handling. Employers often prefer a flat fee per employee (PEPM) or per member (PMPM); the later requires knowing the exact count of employees and all family members, which in turn requires more data to the administrator up front.
I worked for one of the Big 5 for 30+ years over half of which was pricing employer plans.
Those groups have been trying for years to cut costs. The record speaks for itself.
My first job in health care was as an accountant for an ASC in 1986. I was oblivious to the politics of ASCs at the time, but the medical director explained that many doctors (including some who were investors in that ASC) would not set food in an ASC. Their reasoning: why on Earth would you want to walk a couple blocks away from the hospital to operate in a small surgery center?
I agree. It doesn’t really make sense. But, in the convoluted politics of medicine, the ASC was a way to get away from high hospital prices.
Given the WSJ’s article on readmissions versus observational admissions, i view all improvement data with suspicion.
Dr Gorback is on the front lines, so to speak, so I hope we keep hearing from him.
Two quick observations:
a. If doctors are paid these relatively piddling amounts for procedures by Medicare, why has the total spending in Part B climbed to about $300 billion a year? It certainly is not from $92 doctor fees, seniors would have to be in the clinic every day of the year.
b. Self funded plans can indeed hire TPA’s to drive down the bloated chargemaster pricing for procedures done in hospitals.
Likewise, individual patients can hire bill negotiators as well. (I have done this job on a freelance basis.)
Forgive me for subversive thoughts, but this seems to me to cry out for a national fee schedule, or what is called all-payer regulation.
The current American system is maddening. Medicare and Medicaid have price controls and strict limits on balance billing. So do most HMO’s.
So providers have license in almost all states to bill anything they want to individually insured and uninsured patients. The patients have to hire someone to protect them.
Seems to me that the government should protect them with a national fee schedule.
Of course the next question is who has the political muscle to install a national fee schedule. It would take a Bernie Sanders who won the election, but did not care if he never got another campaign contribution.
Bob –
I don’t think a national fee schedule could work in the U.S. for a couple of reasons. First the differences in medical input costs from one region to another are significant. Second, rural hospitals have higher than average costs for a different reason – persistently low average occupancy rates. That’s why they’re dubbed “critical access hospitals” and paid more to keep them in business though quite a few have closed anyway in recent years. The same thing is done in Canada by the way. Maryland has an all payer system for hospital based care but even it pays academic medical centers more for the same work than it pays community hospitals and I think it pays hospitals in the high cost Baltimore to Washington corridor more than it pays hospitals in lower cost Western MD.
I’ve asked commercial insurers in the past what their medical claims consist of. I was told that they generally break down into three main buckets. About 40% of claims are for hospital based care, both inpatient and outpatient with ER visits and inpatient stays under observation status also counting as outpatient care in this context. Another 40% is for physician and clinical services including non-hospital owned labs and imaging centers along with physical therapy, durable medical equipment, alcohol and substance abuse rehab and the like. The final 20% is for prescription drugs. Administrative costs and profit would be over and above medical claims, of course.
The bigger challenge, I think, is to develop incentives that will steer patients toward getting their care from the most cost-effective high quality providers in the most cost-effective setting. If patients want to go to a teaching hospital for routine care, they should pay enough more out-of-pocket to get their attention. If they want to go to a community hospital for care that could be safely and effectively delivered in an ASC or even a physician’s office, they should pay more out-of-pocket for that choice as well.
(a) is a very good question. I figure it must be the aging population and increased volume.
The fees have not only failed to pace inflation, they have been cut dramatically over the years, yet MA plans always seem to get increases every year.
Since the reply boxes are getting microscopic I’m opening a new comment thread on my PPO repricing question to clarify what I’m asking.
Here is a statement by Dr Keith Smith, who has become a poster boy for transparency in pricing (even though I think his own facility’s pricing us transparently high):
“many PPO’s are actually incentivized to seek out the highest priced facilities. What?! Oh yeah! Nobody talks about this one: PPO repricing. You see, some PPO’s (actually all of them I think) charge PPO repricing fees. This means that if the PPO pays $10,000 to a facility for a surgery or hospitalization that the facility charged $20,000 for, the PPO, by virtue of having “repriced” this procedure or hospital stay, gets a percentage of the money they” saved” whoever was paying the bill…usually no more than 25%.”
http://surgerycenterofoklahoma.tumblr.com/post/17555104043/ppo-repricing
This is as close to an explanation I’ve ever seen regarding the apparent indifference to POS fee differentials.
In my 30 years of experience with a Big 5, I know of no instance of this happening. I would guess that none of the other national carriers engage in this either. Even if they wanted to the consulting community would not allow it. Either the costs show up as medical expense or as fees. Either way makes you uncompetitive.
While some TPA networks may do things differently, I don’t believe they could hide these expenses either.
Another twist on the issue of discounts.
Several years go Blues plans in some states were caught out playing serious games when re-pricing claims for self-funded employer groups. This only occurred in states where the Blues enrollment was so dominant that they were able to negotiate deeper discounts vs their competitors. I don’t suggest this happened in many states. I know of three where it did.
The first play in the game was to hide the actual overall discounts the Blue plan had negotiated with their networks service providers. Why? Suppose a Blues discount of 25% and the nearest competitor’s discount of 20%. The Blue plan could reimburse its contracted service providers using the negotiated 25% discount, but re-price claims charged to the self-funded employer group using 23%. This would “raise” the Blues claim charges a little, but they would still be less than their nearest competitor. That leaves 2% of claims for the Blue plan to play with. That amount could be pocketed or, if need be, used to reduce the employer group admin fees. Keep in mind 2% of claims is a large fraction of an employer group’s admin fee which typically equate to less than 10% of claims. In summary, hiding the discounts gave Blue plans in some states an enormous competitive advantage on admin fees, even while maintaining a competitive advantage on the net cost of re-priced claims
Inevitably other insurers acting as TPAs discovered the game. Then came lawsuits and court orders and new Blue Cross Association requirements. I assume all Blue plan employer contracts now disclose specifically how all discounts are applied.
As Underwriterguy suggests, PPO repricing defies common sense, I think, for several reasons. First, profit margins in the health insurance business just aren’t all that high. It’s a very competitive market. Pretax profit margins are about 3% on Medicaid business and 5% on Medicare Advantage business. They’re close to 20% on ASO business but the revenue opportunity is far lower. Second, if PPO’s actually tried to reprice in the self-funded employer market like Dr. Keith claims, employers would quickly discover that it would be cheaper to buy full risk insurance coverage instead. Third, in the old days, negotiations between insurers and hospitals used to be down from the chargemaster rate. In more recent times, they’re up from the Medicare rate which means chargemaster rates are increasingly irrelevant except to the extent that they figure into the formula for calculating Medicare outlier payments. Fourth, since self-funded plans own their own claims data, they can see clearly any differences in actual payment rates among hospitals and other providers for the same service, test or procedure. That tends to create an incentive to move toward tiered networks that attempt to steer patients toward the most cost-effective high quality providers by varying coinsurance exposure depending on where the patient seeks care within the network. Finally, the insurers themselves will tell you that the profit opportunity per covered life is 5-6 times higher for fully insured business as compared to ASO business. The only revenue from fully insured business is the insurance premium. Insurers would like to have more fully insured business and less ASO business but the trend has been moving strongly in the opposite direction for years because it’s more cost-effective for employers including smaller employers who never considered at least partial self-funding in the past.
Dr Smith posted on his blog recently about “shared savings” and in it he’s still banging the repricing gong, claiming that shared savings is variation on the same theme. Wouldn’t someone have refuted his thesis by now?
http://surgerycenterok.com/blog/how-big-insurance-carriers-are-making-big-bucks/
I have heard about PPO repricing fees from a Texas legislator and from my own office manager, who used to be a midlevel manager at a TPA.
Other than those few sources the response I get to my queries is along the lines of what I’m reading here. Most people haven’t heard of it. Or maybe some of then pretend not to. I can’t imagine a hospital CEO admitting to a scam like this.
I guess I need to contact Dr Smith and ask for evidence.
Btw, compare Dr Smith’s transparent price for a cervical epidural steroid injection with mine.
Dangit, hit the wrong button. I wanted to post the charges.
SCO price: $1,100
http://surgerycenterok.com/
My cash price is $266.
directpaypain.com
Dr Smith points to the ChargeMaster fee and says “Look how cheap we are”.
Michael –
Shares savings contracts, with or without shared risk, have nothing to do with repricing. Their goal is to keep medical claims costs per covered life below some agreed upon benchmark such as prior year spending plus a growth factor for medical inflation. Ways to achieve that include reducing unnecessary and inappropriate care, ensuring that patients receive necessary care in the most cost-effective setting and from a cost-effective high quality provider, minimizing preventable hospital readmissions and hospital acquired infections, and keeping sick patients, especially those with CHF, COPD and mental illness out of the hospital to the extent possible among other strategies. If costs are kept below the agreed upon benchmark and quality targets including patient satisfaction scores are met, providers are paid an agreed upon share of the savings as a bonus on top of their fee which may be bundled or capitated in certain cases such as for surgical procedures that lend themselves to bundled payments or capitated for the management of chronic disease.
Here’s what Dr Smith says;
VShared savings, basically, is where a $100,000 bill is discounted to $20,000 and the employer, not having spent that $80,000 is very happy and they share part of that savings with whoever is administering their health plan. It basically works the same way.
These opportunities are not available to those administering health plans when they deal with entities like the Surgery Center of Oklahoma. Here, we say a knee arthroscopy is $3,740. That creates no opportunity for whoever is administering the health plan to share any savings because the price is what it is. There aren’t any discounts; that’s just the price. That’s one of the reasons why the big carriers don’t like to deal with us. They lose out on this opportunity to share in false savings. This activity represents a huge part of their revenue and I thought that this shared savings concept would help everyone understand the repricing of claims concept even better.”
I tried to find contact info for him but apparently he’s only interested in media contacts. You can’t comment on his blog and no email address is given.
Barry,
While I can’t argue with your suggestions for reducing cost, the implementation is formidable difficult.
You can talk about quality and necessity but how do you measure it? Does it mean the same to everyone?
When I try to define quality medical care I run into St Augustine’s conundrum with the concept of time:
`If nobody asks me, I know what time is, but if I am asked then I am at a loss what to say.’
Cost-effectiveness can be better quantified but you still run into problems – the PSA debate being a prime example.
Suppose there’s a therapy that will extend the life of women with breast cancer by one year. Is $100 cost-effective? I’d say so, but what about $500,000? Certainly the patient and family would think so but others might balk. How about $10,000,000? At what point is it not cost-effective?
These are often not medical but societal and philosophical issues.
If want to see this in action try suggesting to someone that they could afford their proposed surgery if they switched to basic cable for 1 months, 6 months or a year. I tried it a few times and you should see the looks of horror.
Michael –
I agree that cost-effectiveness is, in the end, a societal debate. How much are we as a society willing to spend to keep one person alive? How much of our GDP should we devote to healthcare without crowding out other important and necessary priorities both public and private? Personally, I like the idea of QALY metrics as a mechanism to help payers, including Medicare and Medicaid, decide what they will and won’t pay for. Setting the threshold beyond which taxpayer funded programs won’t pay would be a political decision.
For private insurers, they could offer multiple thresholds at different premiums that customers could choose from. In the end, though, there would have to be a willingness among payers to just say no to coverage if the cost is beyond some specified threshold. Developers of new drugs, devices, or other innovative treatments could be invited to lower the price to less than the threshold. Otherwise, the only potential customers would likely be wealthy people willing to self-pay
Defining quality in healthcare is indeed a challenge. I’ve heard experts like Uwe Reinhardt suggest that there are four components to quality in hospital based care which are: (1) process – following evidence based guidelines and protocols, (2) outcomes, preferably risk adjusted in some way, (3) safety – minimizing hospital acquired infections and preventable readmissions, and (4) patient satisfaction. All four would have to be appropriately weighted to develop a composite score.
I think the litigation system in our country drives physician practice patterns in the direction of too much care rather than too little. Sensible tort reform could potentially change that.
Reinhardt’s recommendations are based on what? Quality studies showing that those are the four crucial pillars of health care delivery? No. They just sound good.
Its very hard to get the “E” in EBM and it’s even harder to get consensus. Once again, look at the PSA debate. Lots of evidence, no consensus.
How do you define patient satisfaction?
Outcomes are often contingent upon patient behavior and not under the doctor’s control. I can prescribe medication to prevent a stroke but I can’t make the recipient take it.
Risk adjustment using what tool?
All four criteria would be “appropriately” weighted? Does Prof Reihardt cite the proper weightings or is that left as an exercise for the reader?
This is just academic fog that burns off the minute you shine light on it. Once again, we’re back to St Augustine. Everyone knows what to do until you ask for details.
Michael,
Are you suggesting that there is really no answer to this issue of quality and that we will just have to make our choices based on general perceived reputation and asking our primary care doctor, friends and associates for advice and recommendations?
To be fair, there aren’t any systematic scientific ways to choose a lawyer or account either. Should we stop wasting our time and effort in trying to measure quality and outcomes in healthcare, especially for surgical procedures?
Barry I know I sound nihilistic, but IMHO the only thing worse than being unable to measure quality is to measure it incorrectly and act on the results.
Several years ago one of the large uinsurers tried to determine who was cost-effective. I was deemed to not be cost-effective and this was indicated on their provider listings.
I demanded to see the data and then cross-referenced it to my charts. Of 20 charts reviewed, 19 had the wrong diagnosis. I wrote them a very nasty letter accusing them of libel. I imagine they had similar blowback because they abandoned the program.
There is also evidence that “patient satisfaction” correlates negatively with outcome, including mortality. The Atlantic did a nice article on this. http://www.theatlantic.com/health/archive/2015/04/the-problem-with-satisfied-patients/390684/
Maybe Dr Reinhardt needs to revise his list. It sure sounded like a good idea though, didn’t it?
Michael,
I don’t understand how the insurer could screw up your case so badly. What data were they looking at?
Also, what exactly is the goal of post-utilization review? Is it to ensure that the standard of care was met or exceeded or to assess whether there was inappropriate or unnecessary care provided or something else?
Barry, I have no idea how the insurer could get things so wrong. That takes a real effort.
All I can say is that they considered an intra-thecal pump refill a “wellness visit” and that they said I spent $30,000 to treat ankle arthritis that was actually RSD and required a spinal cord stimulator implant. Those babies are expensive.
Check out my Medicare database. http://graphics.wsj.com/medicare-billing/#/1730188087
Per CMS the #1 thing I do is Synvisc injections. So many, in fact, that if you do the math I have little time for anything else (over 9,000 in 2013).
According to CMS I received $9.73 per procedure and I was paid over $88,000.
Except that’s all incorrect. That’s because a single injection of Synvisc One is 96 units. Medicare pays by the unit for the drug, but lists each unit as a separate service. If you divide by 96 you get the real number of injections I did. The actual number of patients treated was 125. $88,000 is what they paid for Synvisc, which I buy from the manufacturer and then submit for reimbursement by Medicare. I didn’t make $88,000 injecting knees and I certainly wouldn’t do it for $9.73.
My second highest “payment” was “Noc drugs, other than inhalation drugs, administered through dme”. I had a hard time figuring this one out. That’s what CMS paid for drugs that I used to refill intrathecal pumps. Once again, I buy the drugs and then submit bills for reimbursement.
So the top two payments in my data were for medications that, if I’m lucky, I can mark up a tad. Medication reimbursements were 42% of my reported 2013 Medicare “payments”.
5.8% of my payments, or about $16,000 were for “radiation oncology”. WTF?! Still trying to figure that one out.
Can you see why I’m a bit leery about quality measures and value-based payments?
What do you mean by post-utilization review? Do you mean post-payment utilization review, where they decide that the service they preauthorized wasn’t necessary after all and they want their money back after you did the work in good faith?
Michael,
That’s fascinating stuff to a non-medical person like me.
I’m not sure what I’m asking for about post-utilization review. Perhaps you could comment on what the recovery audit contractors (RAC’s) do and what they’re looking for. I understand that they get to keep a percentage of any money they recover for Medicare.
Here is another ‘from the bleachers’ observation.
The large insurers do work hard to get discounts and achieve lower hospital costs.
However, the premiums that they charge to employers are not going down.
I assume that this is because of what Barry outlined. If an insurer drives down hospital costs by 5%, maybe their drug costs and outpatient costs go up by 5%, or even more.
I am kind of like Stephen Brill in his notable Time magazine article about hospital bills. I am so outraged at the chargemaster practices and how they harm the uninsured, that I may be over-rating their importance in our insurance costs.
I should note that I am still unhappy with a system where a person under 65 has to pay good money to an insurance company (or a freelance bargainer) to get a fair deal on hospital costs. A cynic might say that this practice in effect creates two extra jobs (one in the hospital for cost accounting and billing, and one at the insurance company or TPA to contest the bill)……..but if so, it is a pathetic way to create jobs.
“However, the premiums that they charge to employers are not going down”
The answer is pretty simple Bob. Medical delivery costs go up every year. But insurers / TPAs cannot increase their discounts by an equivalent amount every year. As much as they try, it’s not possible. And so premiums continue to rise.
Sellers of any product or service – including hospitals and medical professionals – can discount off their margins, but cannot afford to give away their entire margin. If they did, they’d go out of business. So as sellers’ own costs rise, they must increase their prices to keep up. They cannot be expected to give away their price increases thru larger discounts. In other words, as medical delivery costs continue to rise, so will prices charged for medical services – and so will medical insurance premiums.
btw, this gets back to the reason I’ve said all along that ACA fails: because it’s an insurance mechanism that does not reduce medical delivery cost to hospitals or professionals. Instead, it increases their costs. As medical delivery costs rise, so also do medical insurance premiums – and premium subsidies. ACA has not, and cannot result in more “affordable” insurance.
John, why would delivery costs rise every year?
I realize that hospital cost allocations are very complex, but if the issue is boiled down to the cost of a knee surgery, let’s say, what is going up each year?
a. number of nurses
b. number of attending physicians
c. salary scales
d. cost of drugs
e. ‘rent’ of an operating room
Do these really go up in cost, or do some parties just raise their prices?
Well Bob, if all medical procedures performed in the US consisted of “knee surgery” – and if all such surgery was within the same CPT – then perhaps I could understand your question. But they aren’t, and I don’t.
I suggest you ask any physician if their practice costs tend to go up from year to year and, if so, why. Ask them if their practice is exactly the same as it was several years ago; if not, ask them what has changed. If you know anyone who is a hospital administrator or financial officer, ask them the same questions. And ask them if their case mix has changed in the last several years.
If you really do believe that the cost of medical delivery is rising, then that helps me better understand a large number of your comments here and elsewhere over the years.
My costs go up every year. There’s inflation, taxes, insurance, rent, supplies, salaries and so on just like every other small business. The cost of converting ICD-10 this year wasn’t cheap either.
However, I can’t pass increased costs along to payers because it’s not a free market. There’s no haggling with Medicare or with any of the large insurers. Its a Hobson’s Choice. The only things I’ve been able to negotiate at all are supplies because that does happen to be a free market.
Maybe HCA can negotiate higher prices but most medical practices have zero leverage.
The growing cost of complying with state and federal regulation must figure in there, too. And physician insurance costs include malpractice – other small businesses don’t face that expense.
It’s my understanding most managed care companies’ reimbursement agreements contain an escalator clause. This was common industry practice at one time, I’m assuming It still is.
The continuing overall rise In frequency and intensity of professional services is well-documented. Rising costs for delivering a fixed set of services is certainly part of the reason overall costs are increasing. Yet that’s not so simple as it can be made to seem. Bob Hertz looks at “knee surgery”. OK, what kind of knee surgery? Arthroscopic knee surgery and total knee replacement did not exist some years ago; as these new procedures (and others) came into use, and as their use grows, costs grow accordingly. New and more advanced treatments are intended to improve patient outcomes and thus justify the added cost. But there is still added cost.
The cost impact of new stuff clearly adds to rising costs of existing stuff. A lot of the new stuff is technology-driven, e.g., computer tomography, or magnetic resonance imaging, or even ultrasound. All of these had an impact on overall cost when they were first introduced, and as their usage expanded, and as their unit operating costs grew.
It would be interesting to read a comparison of services and equipment in a typical urban hospital facility today, with a counterpart in say, 1980. I think such a comparison would reveal a significant increase in service capability and also a significant increase in the cost of the facility’s operations.
I would also note that the trend rate for Medicare costs has been generally less than private insurance, but is still a positive number. CBO or the Medicare Actuary – I forget which – recently forecast annual Medicare cost growth of almost 6% for the next several years.
Finally Bob, I don’t mean to excuse you from finding answers to your own questions about rising medical costs. Talk with your physicians and with hospital financial people if you know any. See for yourself whether their answers to the questions I’ve previously suggested differ markedly from the ones i or Dr. Gorback have suggested.
Some of the regulation isn’t too burdensome after your startup. There are the initial burdens of workers’ comp, OSHA, etc. The OSHA safety data sheets are a PITA.
The killers have been mostly federal. HIPAA and ICD-10 were brutal. Things like that can soak up up your staff’s time to the point that the billing and collections aren’t being done. We spent a lot of time and effort cross-walking our billing codes to the more specific ICD-10 codes and then CMS didn’t even use those codes. They use generalized “Other” codes. We had to re-do half of the codes.
Malpractice doesn’t always go up. I pay less now than I did years ago. Texas malpractice reform reduced everyone’s rates. Part of my own rate decrease is due to using TMLT, which is owned by the policy holders. Every once in a while I even get a refund.
The vast majority of contracts are now pegged to Medicare. Over the years this has steadily diminished from say 150% of Medicare to 120%, and now pretty much Medicare rates. This is very convenient for the insurer since CMS does the fee cutting for them.
When dealing with some of the big companies you’re lucky to even get Medicare rates.
I’m not sure what I’m going to do going into 2016. Some of my patients will be losing their PPO coverage (individual PPOs are unavailable now in my county). If I contract with the HMOs (right now I have almost no HMO contracts) I will simultaneously take a fee cut and the added burden of the HMO paperwork.
One small example of new technology that came on the scene over the last few decades is great improvements in imaging which, among other things, basically eliminated the need for expensive and risky exploratory surgery to determine a diagnosis in many cases. ER docs now order huge numbers of CT and ultrasound studies but not nearly so many MRI studies. If CT and ultrasound, which are both non-invasive and not painful, didn’t exist, there wouldn’t be nearly as many exploratory surgeries ordered instead. So, the bottom line is more services, better and faster diagnoses, but at a higher cost. Also, new but very expensive specialty drugs to treat cancer, MS, RA, Parkinson’s and certain rare diseases like cystic fibrosis and Gaucher’s, extend the lives of patients who would have otherwise died sooner. When they die, their healthcare costs cease. As they continue to live, they incur more costs. Finally, huge improvements in the treatment of heart disease allow many of us to live long enough to be diagnosed with Alzheimer’s or dementia which kill very slowly but at high cost as the patient can do less and less for himself or herself. General inflation across the economy, including all the things that Dr. Gorback mentioned impacting his practice would drive up costs every year even without improvements in medical technology or any new federal or state regulation that needed to be complied with at additional cost.
While costs push relentlessly upward, there are numerous strategies to mitigate costs for the system overall. Among them are creating incentives to help steer patients toward more cost-effective providers and, especially, away from hospitals. To the extent we are successful in doing that, more hospitals will have to downsize or close at a significant cost savings some of which will come from fewer jobs and associated salaries and benefits in the hospital sector. Sensible tort reform could also help to reduce defensive medicine and better and more intensive use of data analytics could reduce fraud in the Medicare and Medicaid programs.
Barry, once again we have hit the box limit so I have to start a new comment thread. All I can say about RAC audits is what I would say about any bounty hunter.
I had a RAC audit a while back. They said I owed about $200. It was nitpicky stuff like not documenting that the patient was alert and oriented on the Neuro exam.
Its like a visit from Vinny and Guido. You pay up and go about your business and hope they leave you alone.
Sorry about the stereotype. If there are any Italians out there who had to go to their safe space: Mi displace moltissimo. Guardi un video di cuccioli che giocano.
Extending the lives of patients is expensive twice —
once, when you intervene with surgery and hospital care, and then, over many years in some cases, when you pay for expensive maintenance drugs and/or other illnesses.
We are caught to some extent in the defect of our virtues.
It is a decent and generous impulse to want to save lives, regardless of whether the patient is an innocent child or an adult who had had years of destructive health habits.
We also have what I will loosely call a “self-image” that saving lives means protecting plague victims and famine victims and war victims from utterly unnecessary and tragic deaths. We understandably transfer this ‘self-image’ to extending the lives of people who have already enjoyed 70 prosperous years.
Economically this puts us in a crunch. Saving a child’s life creates a person who will hopefully work and pay taxes for another 40 years. Saving an old person’s life creates someone who may draw Medicare and Social Security for 20 more years.
We are a wealthy nation and we can probably do this for a long time. But the process is not without strain, and since it is very hard to speak of this even in private, the strain is rarely analyzed in public debate.
Oops.
“The price of wearable craze: Personal health data hacks”
http://www.cnbc.com/2015/12/12/price-of-wearable-craze-your-health-data-hacked.html
According to this story they disabled Cheney’s pacemaker telemetry due to concerns about hackers trying to kill him.