The Massachusetts Paradox

It's not much of a puzzle.  Massachusetts has relatively low utilization.  But our overall costs are among the highest in the nation.   What we have is very high cost per unit of care delivered in Massachusetts. 

The Boston Globe published the third part of its series on Partners Health Care yesterday, and fixes the blame on a "gentleman's agreement" between Partners, the parent company of Massachusetts General Hospital and Brigham and Women's Hospital, and Blue Cross Blue Shield of Massachusetts, which has a large share of the Massachusetts insurance market.   The Globe reports that in 2000 the CEOs (since retired) of each organization agreed to a large pay increase, contingent upon Partners obtaining similar arrangements from BCBSMA's competitors.   

This graphic shows relative rate of various surgical procedures in Massachusetts compared to the rest of the United States.  Massachusetts has lower than average utilization for most of these procedures.  This data is from the Dartmouth Atlas, which is based on Medicare utilization by state.  Utilization and cost in the Medicare program is not necessarily equivalent to total utilization and cost for all state residents.  

The Partners response to the Globe article is here
There is not a response posted on the BCBSMA website as of now.

Maryland Hospitals Sue Poor Patients For Payments Despite Rates That Incorporate Payment for Bad Debt

The Baltimore Sun recently ran a three-part series documenting efforts by hospitals in Maryland to collect “bad debt” bills from patients, even when the state rate-setting process pays them for unpaid bills.

Maryland has a unique arrangement where the state sets rates for all payers, including Medicare. The rates are set to incorporate costs of unpaid care for each hospital. Essentially, hospitals can wrap the cost of this year's unpaid care into their future bills. Under this program, Maryland hospital bills have grown at a slower rate than the rest of the country, and Medicare payments to Maryland are inflated by as much as $500 million per year.

The Sun reporters created a database of all civil lawsuits filed to collect for hospital bills, a total of 132,000 lawsuits with over $100 million of judgments. The investigating team discovered that there are no standards for when medical bills are written off as free care, and there are wide disparities from hospital to hospital. Furthermore, some hospitals “double dip” by writing off bills as bad debt (and building this into their rates), and then later suing patients for the charges which had previously been written off.

Johns Hopkins acknowledged sending 20% of its patients to collection, and the Maryland Hospital Association expressed pride that the industry sends only ½% of patients to collection. Hospitals routinely charged higher interests rates than allowed by law, and at times sued patients for payments not made by Medicaid, a violation of provider participation rules for that federal-state program. Many hospitals had substantial surpluses attributed to high rates to make up for uncompensated care.

Hospitals are in substantial financial distress across the country - and bad debt rates are likely to increase in coming months. Hospital are obligated to try to collect legitimate debts; otherwise, the costs for those who do pay will go way too high.  But suing patients with no resources and charging them credit-card-worthy interest rates is unseemly, and suing even after the bad debt has been factored into future bills seems at least immoral, and probably illegal. 

Maryland has in place an attractive process to discourage hospitals from turning away those who cannot afford to pay. However, its regulators have not watched over hospital behavior well enough to guard the public interest.

Thanks to John Petito of our Harvard School of Public Health class for pointing this series out to me.

Congressional Budget Office Throws Down the Gauntlet

The Congressional Budget Office put out a 200-page tome on evaluating competing health care plans. Some critical conclusions from this report:

*  No simple solutions are available to reduce the level or control the growth of health care costs. Steps to restructure the insurance market and to encourage people to purchase less extensive coverage could reduce the use of treatments that provide minimal benefits, but enrollees would face higher cost sharing or tighter management of their care
* Other approaches—such as the wider adoption of health information technology or greater use of
preventive medical care—could improve people’s health but would probably generate either modest reductions in the overall costs of health care or increases in such spending within a 10-year budgetary time frame
* In many cases, the current health care system does notgive doctors, hospitals, and other providers of health care incentives to control costs. Significantly reducing the level or slowing the growth of health care spending require substantial changes in those incentives

This report helps frame the difficulty of the task ahead for Tom Daschle and the Obama administration.  

Health Care in Massachusetts

It's been a busy week in the world of health care costs, and thinking critically about them.

Jon Kingsdale, the Executive director of the Commonwealth Health Insurance Connector Authority, penned an article in Saturday's Boston Globe pointing out some of the keys to success of the Connector, including gaining broad support, the individual mandate, a small levy on employers who don't offer health insurance, a public education campaign, merging the individual and small group markets and generous subsidies.  He concludes 

"Challenges certainly lie ahead in Massachusetts, particularly around cost containment, and the cost of a national bill will be a major factor in the Washington debate"

The Globe Spotlight team had another article about Partners Health Care, and its reach out into the suburbs.  Many community hospitals, with lower reimbursement rates, feel that they cannot compete effectively against Partners.  On the other, many patients are voting with their feet and going to Partners-affiliated facilities.   The electronic version comes with an interactive graphic which shows the increased market penetration of Partners throughout Massachusetts.   The frenzy of building in the suburbs, both by Partners and by competing institutions, seems likely to lead to increased health care costs for some time to come.   

Primary Care Shortage - Diminishing With Economic Woes

Distressing article in today's Los Angeles Times  about a primary care physician who found that in the current economic times her volume decreased dramatically, and her patients stopped paying even bills for copayments.  She recently moved from Los Angeles to suburban Washington DC to join a group practice (at a very low salary).   

Consider this a part of the ongoing series "Health Care is Not Recession-Proof."

Regional Variations in Medicare Coverage

Today's New York Times has a well-reported article on Medicare coverage Cyber-knife treatment of prostate cancer.  This is covered in 33 states and not in 17 (and you can generally tell by whether or not there is an onslaught of radio ads for this technology).  Cyberknife allows more focused radiation therapy, and has been well-demonstrated to be advantageous for brain and spinal tumors.   However, the manufacturer is pushing this therapy for more common cancers, including lung and especially prostate.   There is a substantial patient advantage -- fewer  trips for radiation therapy.   There is also a substantial provider advantage. The machines to deliver this are very expensive ($3-5 million), so being able to use these machines for more common diseases can create a lot of marginal profit.  While the Times reports that Cyberknife is less expensive than some other radiation therapy, that doesn't necessarily mean that coverage will be cost saving, as the smaller number of required treatments might encourage some men to get treatment who would have otherwise opted for watchful waiting.   

The Times reports that there are five year outcome studies for a total of only 80 patients.  

Health Care is NOT Recession-Proof (an ongoing series)

Last Sunday's Boston Globe had a front-page article about how Boston-area hospitals were freezing capital spending plans.  Many hospitals contended that it was hard to justify new expenses in an environment where volumes were declining and philanthropy was down.  This article preceded the Bernard Madoff Ponzi scheme, which has caused huge losses in the philanthropic community.  Paul Levy of Beth Israel Deaconess Hospital has suggested that in Boston, the Madoff scandal might cause more financial distress among Boston nonprofits than the ongoing economic implosion.  

What does this mean for the cost of medical care?    Loss of capital dollars could lead to less building and fewer high technology purchases; this could lower overall medical costs over time.  Some will worry that this will also diminish technologic and other  innovation.

Massachusetts Quality and Cost Council - MyHealthCareChoices Site Unveiled

Massachusetts’ Health Quality and Cost Council has just unveiled its new public transparency web site, MyHealthCareOptions, which is available at   The state has taken claims data from the major commercial health plans, and ascertained cost of care by hospital for a limited number of procedures. It has also assembled related quality data, generally from different sources (since it’s hard to determine quality through claims alone).  This was a big effort, and the web site allows patients to filter by geography and compare up to 4 hospitals. Where possible, there is notation of level of statistical certainty.   (For instance, a low volume hospital might have an apparently high cost, but this would be more likely to be due to chance rather than a real difference).

It’s a good start – but the data available on cost is limited to 1-4 stars (representing top 15% of cost, above average, below average, and bottom 15% of cost.  Actual dollar numbers and relative prices, as displayed in a Globe article a few weeks ago, would be more meaningful than percentiles.  Some additional information  I’d like as a consumer which is not currently displayed includes: 

  • Patient experience by service, rather than hospital-wide
  • Volume for surgical procedures, where more volume often leads to higher proficiency
  • Rate of caesarian section by hospital.  While there is no “right” rate, some women might prefer to go to a hospital with lower C-section rates.

It’s also impressive how often there is no generally accepted quality data.  It’s hard to describe “value” when we only know the cost and don’t have a good way to ascertain the quality of the health care we purchase.

Who will look at this web site?    My own experience is that it will be reviewed largely by providers rather than consumer – and that’s just fine.  The site might make some hospitals feel pressured to implement some safety processes (like computerized physician order entry) and work harder to improve patient experiences.    The site might help pressure some organizations to accept lower rate increases, although it’s also likely to make many single $ institutions push much harder for large rate increases.  

 ADDENDUM: Young Joo, a student in our HSPH class, has worked on staff of the Health Care Quality and Cost Council.   He did some of the statistical work underlying this web site. He points out  that by clicking on "show details" you can get median, 85%ile, and 15%ile of costs where available for each of the listed procedures.   This tool also allows you to see the state median, 85%ile and 15%ile -- so you can see where the $ ratings come from.  

Closing "Bad" Hospitals

The New York Times reports today on how difficult it is in New York State to close a poorly performing hospital. University Hospital in Syracuse, owned by the State University system in New York, has a high rate of infections and complications, and a low rate of compliance with national guidelines. A state commission recommended it be merged into another hospital.

But the hospital's administration has lobbied hard, and its unions are important ally. A year after the Berger Commission recommended that University Hospital be merged (and shrunk), there has been no progress.

Why is it so hard to close an "underperforming" hospital?
1) Jobs - hospitals are the major employers in many communities
2) Convenience - closing hospitals usually means that someone will have to travel further for care
3) Professionals - Physicians are reluctant to move from one facility to another
4) Patient loyalty - I remember the public outcry in Massachusetts when a number of small community facilities closed.

Does closing underperforming hospitals lower the cost of care?

Not necessarily. While closing a hospital means there is less capital deployed and could decrease supply-induced demand, weaker hospitals slated for closure often have lower rates, and patients move to higher cost facilities. This is not the case with University Hospital in Syracuse, where costs are above the state average. Of course, all costs must be risk adjusted for severity of illness. The data cited in the Times regarding University Hospital IS risk adjusted, although it's always possible to argue the risk adjustment is not adequate.

In Massachusetts, the cardiac surgery program at UMass Memorial was closed in 2005 due to higher than expected risk-adjusted mortality. The program was voluntarily shut just before legally mandated state public reporting of mortality statistics. The leadership at UMass has written honestly about the experience, and ultimately recruited a new team of cardiac surgeons and now has reopened with excellent safety metrics. UMass lost its cardiac surgery training program due to this event. (Harvard link) (Non Harvard link)

Health care demand elasticity in a recession -- many warning signs

Both the New York Times and the Wall Street Journal have had heart-wrenching articles in the last few days about how employees and dependents lose their health insurance and access when they lose their jobs. Both newspapers focused on Ashland, Ohio, where Archway Cookies closed abruptly and filed for bankruptcy. The company was self-insured, and didn't have enough reserves to pay for health care already delivered, so some of its employees are facing bills of tens of thousands of dollars. Some patients tried to get their health care needs met before the closure (like early induction of pregnancy, early gallbladder surgery, and rapid purchase of insulin pump); the company's self-insured status probably means even those patients will be out of luck.

I've also talked to a number of senior hospital executives over the last few weeks, and they are reeling from
(1) Slowdown in philanthropy, with some donors not coming through with pledged funds
(2) Increase in accounts receivable, as payers have slowed down payment
(3) Increase in bad debt, as patients lose their insurance
(4) Decrease in revenue, as patients are not coming in for elective procedures, including orthopedic surgery, CT scans and MRI scans. Making this still worse, these elective procedures provide the highest margin for hospitals.

This is one more blow against the notion that health care is "recession-proof."

(Note the WSJ link will work for ~5 days -- after that, use this URL).

Comparative Effectiveness -- Maybe Not a Panacea?

A few weeks ago, the New England Journal of Medicine had an insightful article about the National Institute of Clinical Effectiveness, an independent government funded agency which determines which medications and procedures should be covered by the UK's National Health Service.  (Harvard full text URL)   The agency develops economic models and approves drugs or procedures when they cost less than $34,000 per Quality Adjusted Life Years (QALYs), and has discretion to approve values of up to about $50,000 per QALYs.   The title of the NEJM article was "Saying No Isn't NICE — The Travails of Britain's National Institute for Health and Clinical Excellence."  It turns out that British industry has been lobbying NICE and suing it when that fails.  It's not easy to say no!

This is especially important, because the Obama health care plan, the Daschle health care plan, and many others include an institute of comparative effectiveness to be sure we spend our health care resources wisely.   NICE is usually the model for this.

The New York Times followed up yesterday.  The article is introduced and concluded by a powerful anecdote about a patient sufferering from metastatic renal cell cancer who was hoping that NICE would approve an expensive Pfizer medication, Sutent, which delays progression of this cancer by 6 months for a cost of $54,000.  That's far outside of the allowable amount for  approval. 

Britain has a budget for overall health care, so it's clear that approving a very expensive medicine means that the NHS must make other tradeoffs.  It'seven  tougher in the US, where there is not a unified budget. 

The NYT article notes that the patient with metastatic cancer was losing his voice and having progressive trouble breathing.    It ends with a quote from his wife:

"It’s hard to know that there is something out there that could help but they’re saying you can’t have it because of cost,” said Ms. Hardy... “What price is life?”

In a theoretical world, we can all agree that above some cost threshold certain treatments just aren't valuable enough to be covered.  We feel differently, though, if we're talking about potentially extending the life of our own loved one.