Health Care Savings from the “Coalition of the Willing”

The heath care “coalition of the willing,” AdvaMed (medical device manufacturers), AHIP (insurance plans), AHA (hospitals) AMA (physicians) PhRMA (brand name pharmaceutical manufacturers) and SEIU (service workers union) presented details of its plans to achieve the promised $2 billion in savings over the next decade In the last post, I reviewed a report from United Health Care suggesting means to save a half trillion in Medicare expenses over the next ten years. In this post, I’ll address the proposals encompassed in the six separate letters submitted by this coalition.

First off – the fact that this was six separate letters gives you a sense of the fractures in the coalition. Since this set of proposals was released, the AMA joined AHIP in opposing a public health plan option, which SEIU has strongly endorses, so the coalition. So, David Nexon (once Ted Kennedy’s health care chief, and now the CEO of AdvaMed, will have his hands full keeping these six groups together.


Advamed supports health promotion and asserts that its products lower the cost of health care by early diagnosis and efficient treatment, but provides no proof or examples of this. The organization quotes a study from the Milken Institute[free registration required] claiming that better care of chronic disease could save $1 trillion annually (remember, total health care cost now is $2 trillion annually), which seemed a bit ambitious. When I reviewed the 2007 Milken Institute report’s executive summary, I think the authors are talking about a combination of productivity loss and medical costs. The research report suggests that $218 billion of $277 billion in medical costs costs could be saved annually.

1) Cooperate with the AMA’s Physician Consortium for Performance Improvement to develop quality metrics for device use. Good idea, but there are no estimated savings attached.

2) Decrease medical errors. This is motherhood and apple pie. Again, no estimated savings attached.


1) Administrative simplification: Overhaul claims submission, eligibility, claims status queries, payment and remittance. Automation and standardization will take dollars out of the bloated administrative system without question. This will take an initial investment on the part of insurers and also on the part of providers submitting bills. It’s not clear that AHIP has provider buy-in for this. No estimated savings attached.

2) Common web portals: Single web site to transact business with multiple health plans. Good idea that could reduce administrative complexity. No estimated savings attached.

3) Common approach to measuring provider performance: Measurement sometimes seems like the utterly unregulated wild west- so this is a good idea. Again, no estimated savings attached

4) Improve health literacy. AHIP states that health care system costs for low literacy could be as much as $238 billion annually. Health plans are good at marketing –so they could play a positive role. No estimated savings attached.

5) Personal Health Records. Insurers want that space – but there are plenty of other efforts to make PHRs available to patients. No estimated savings, and not clear that health plans are in a better position to do this than Microsoft and Google. (The AMA announced a collaboration with Microsoft yesterday)

American Hospital Association

1) Reduce hospital acquired infections (including surgical infections, central line infections, ventilator associated pneumonias, catheter infections, and resistant hospital bacteria). These are all good ideas, and there are good models to substantially reduce these infections. The AHA has not estimated cost savings

2) Improve discharge coordination. There is good evidence that this can help, especially in the Medicare population where 20% of patients are readmitted within 3 months.

3) Implement health information technology. This can improve quality and might help with reducing hospital infections. Most observers believe that HIT adoption increases quality but the verdict is out on whether it actually reduces cost.

4) Improve end of life care

5) Prevent hospital falls

6) Decrease neonatal complications

7) Reduce supply costs (from toilet paper to physician services). This is a potential big deal – there are too few details to tell what it really means.

All of these proposals are in the sweet spot of improving care while also possibly lowering costs. None of them are new or innovative, and the absence of detail makes me skeptical that this represents a real step forward.


1) Reduce hospital readmissions by improving discharge planning. More details here than in the AHA summary – and the AMA’s Physician Consortium for Performance Improvement has done a good job in the areas where it has ventured.

2) Reduce overutilization in targeted areas, including invasive cardiac procedures, caesarian sections, antibiotic use and various imaging modalities. These areas are well chosen and there are specific dollar amounts of opportunity cited.

3) Medicine reconciliation –coordinating prescriptions by multiple physicians. AMA cites New England Health Institute study suggesting $3 billion annual savings potential.


PrRMA notes decreasing drug cost trends over recent years, and loss of 130,000 jobs in its industry globally over the last 2 years.

Specific Initiatives:

1) Support for public reporting of performance measures: This would increase the patient adherence to prescriptions so that more patients hit performance targets (such as blood pressure control, and HbAIC control in diabetes). It’s a good idea, and can deliver many years of quality adjusted life to Americans. However, most of these drugs are cost-effective, not cost-saving, so increased adherence will raise medical costs.

2) Expanded use of pharmacists to monitor patients on multiple drugs to prevent complications. PhRMA cites studies showing cost savings in pharmacist-managed diabetes care.

3) Regulatory support for follow-on biologics. This is a big deal - right now, there is no method for the FDA to approve generic biologic medications. With treatments for multiple sclerosis and rheumatoid arthritis often costing $75,000 per year, more competition in this space is an excellent idea.

4) Comparative effectiveness research, including using Medicare Part D data. The Congressional Budget Office does not think comparative effectiveness research will save much money. It’s still a good idea, and PhRMA support would be welcome

5) Development of new drugs (including some regulatory reform). I suspect that new innovative agents would be priced to be cost-effective rather than cost-saving. It’s hard to argue with innovative drug development to improve our lives, but hard to take savings from this to the bank

6) Adoption of personalized medicine: PhRMA brings out the already discredited $1.1 billion in savings from a genetic test for warfarin.

7) More access to drug coverage. See my comments above about cost-effective drugs vs. cost-saving drugs. Few interventions of any type within the medical system actually improve health AND save money. Most improve health at a cost that we find societally reasonable. I support full access to drug coverage – insurance without drug coverage is deeply flawed in a system where the pharmaceutical industry is responsible for enormous improvements in health. But I can’t figure out how to say we can do this and spend less rather than more.


SEIU cites its (reluctant) support for closing of excess hospitals in New York, its post-strike collaboration with Kaiser Permanente, and its support for health IT initiatives.

Specific Proposals:

1) More support for home based long term care. Home-based care is better for most patients compared to institutionalization. SEIU suggests diversion of 3% of nursing home patients could save $43 billion over 10 years

2) Chronic disease prevention using community health teams. SEIU suggests care plans for everyone – an aspirational goal. I’m skeptical that this will net decrease costs 4-8%

3) Nursing home payment reform: SEIU suggests that this can decrease nursing home spending by $6 billion, mostly be reducing rehospitalizations.

There are a lot of words in these 28 pages – and a lot of good ideas to make our health system better. AdvaMed has done a public service by getting these six organizations together. There’s not nearly enough specificity, and there is a lot of wishful thinking in the few instances where there is an estimate of impact. It would be real progress if these six groups can agree on a single prioritized document with clear next steps and accountabilities.