Arnold Relman: Doctors Can Fix Health Care

Today’s Managing Health Care Cost Indicator is $152 billion

Arnold Relman, a former editor of the New England Journal of Medicine, has a long piece on health care in this week’s New York Review of Books.  I especially liked the title:  “How Doctors Can Rescue Health Care.”   I was hoping that he would emphasize that even in our system riddled with administrative waste and resource-consuming middle men, most health care dollars are spent in the delivery system, and physicians determine how much health care is going to be delivered in many or even most instances.

Relman diagnoses three main problems with current efforts at health care reform

·         The Affordable Care Act increases our reliance on private health plans. He states the overhead and profits of private health plans add $152 billion to our annual health care bill.

·        The Affordable Care Act doesn’t change fee for service, which encourages higher utilization

·        The Affordable Care Act does not decrease the fragmentation of health care, and he is skeptical that the Accountable Care Organizations will take off based on provider pushback.

He also notes that the prospect of the Independent Patient Advisory Board helping to bring more evidence to health care decision-making is dim, concluding that the constraints on the IPAB will lead it to suggest price cuts and benefit reductions rather than ways to actually improve care.

Relman doesn’t spare opponents of the Affordable Care Act, either, stating that “Republicans in Congress have pretty much limited their health policy to an unyielding opposition to “Obamacare,” to calls for reform of malpractice litigation, and to their traditional reliance on “market forces.”  He notes that Paul Ryan’s Medicare plan would substantially increase patient cost sharing.

Relman finds hope in the consolidation of provider systems with physicians increasingly salaried employees.  He notes that surveys from the American Medical Group Association and the American Hospital Association suggest that as many as a quarter of American physicians are now employed in multispecialty groups.  However, he states that the current payment system limits how many costs will be saved even in these systems without intrinsic incentives to overutilize care.

He suggests, with more than a whiff of magical thinking, that as more people see the value of these integrated systems, we’ll start having a real discussion about payment reform, and he states

…    It might become easier to pass legislation that created a system based on a tax-supported single-payer system, with prepaid comprehensive care for all. Obviously, there is no guarantee this would happen. Indeed, the odds would still be against it. But if most physicians were to be employed in multispecialty groups, the growing number of practitioners now supporting major reform would probably become a strong majority. This could well change the climate of opinion enough to influence legislation.

I’m not convinced.   I like multispecialty groups because I think they can deliver tightly integrated care, use teams that include robust roles for nonphysicians, and think about an entire population, rather than just the patients in that day’s schedule.   But tightly-integrated multispecialty groups require large capital investment, and there are few markets (San Francisco, Minneapolis) where such groups are dominant.   Kaiser and the clinics in the upper Midwest and the Pacific Northwest have cultures that have been built over many decades, and current physicians who highly value autonomy are not going to coalesce into Kaiser-like groups across the country in just a few years.    Further, there is good evidence that provider consolidation is actually raising costs.

Relman deeply dislikes health plans, especially for-profit health plans.  However, even Medicare is largely administered by private (for-profit) claims administration companies.  Further, health plans are big businesses. The top five have market capitalization of almost $120 billion and United Health Care alone says it employs over 70,000. They are not going away any time soon!

Source: finance.google.com 

I think Arnold Relman got the headline right, though.  Physician bills represent less than 20% of all medical costs – but physicians play a pretty substantial role in determining how much we’ll spend on everything else. We spend too much on

·        Drugs (we use too many brand name drugs when generics would do just as well)

·        Hospitalizations (we have too many readmissions among the elderly, and use expensive academic medical centers when community hospitals would be just fine)

·        Medical devices (don’t get me started on the overuse of implantable defibrillators)

·        Dialysis (with worse results than the rest of the developed world)

Physicians can rescue health care – and many around the country are working hard to implement Toyota or Lean techniques – others are doing process reengineering to eliminate unnecessary steps, and some are learning from Disney and other great retail and consumer products companies about how to better meet the needs of the customer, aka patient.

But I don’t think physicians being more discrete in their use of medical resources will lead to the collapse of the current health care finance system, as dysfunctional as it is. 

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Physician Office Insurance Hassles Quantified

The new May Health Affairs is out on the web, although the hard copy hasn't yet reached my house. This issue is all about primary care reform -and it looks great. There are articles on the lower costs and higher quality of large multispecialty groups, success of one medical home, the roles of NPs and PAs,  and much more.  I'm just hopeful to have it in my hands before my next plane ride!

In the meantime, a colleague sent me an article from a year ago this week reviewing the cost of interacting with insurance companies for physician offices.  In this survey-based study, Casalino et al showed that physicians in smaller practices spent more time dealing with insurers, and in large practices staff spent more time.

Physicians reported that they spent 43 minutes per day (3 weeks of time per year) spent interacting with health plans- for a potential extrapolated cost of $31 billion.   As the authors point out, not all of these minutes were wasted; there are time the health plans added real value.  The mean was much higher than the median -- so there were some physicians with very high reported health plan interaction time that pulled up the average.

This is not a time and motion study, and physicians angry at the dysfunctional and fragmented system in which  they practice might have been blowing off some steam.

My colleague at Mass General Hospital published a study last month of their experience - creating a hypothetical model eliminating the fragmented multipayer system and assuming that there were a single set of transparent and reasonable rules across all health plans. The results were a bit lower estimate of the total cost of health plan interactions, but a higher number of lost physician hours. One way or another, there is a lot of time and effort spent in shuffling of papers and bytes of data back and forth. 

We should limit physician-health plan interactions to those that really increase value, either by lowering total cost (including provider and patient resource costs) or improving quality (such as detecting and remedying 'gaps in care.')

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CMS: 2008 Medical Inflation Much Lower

The Centers for Medicare and Medicaid studies released its report on health care spending in 2008 – published in Health Affairs on Monday and covered extensively in the press.   The good news is that health care inflation overall was lower than it’s been for years (4.4%).  The bad news is that health care inflation continued to outpace growth in the economy – so health care moved from 15.9% to 16.2% of GDP. 

Some of the conclusions that have been widely reported 

- Health care is not immune to the effects of severe recessions

- Hospital inflation decreased to 4.5% - and hospital prices only went up 3%

- Physician services increased by 5% - the slowest rate since 1996.  Medicare physician spending, however, increased by 7.8%

- Prescription drug spending increased only 3.2% - continuing a trend of relatively low pharmaceutical inflation with the onset of many new generics and without big blockbusters coming out of the pipeline. Still, most of this increase was price (2.5%) as opposed to utilization.

-Medicare spending was up 8.6% - and growth in Medicare Advantage plans played a role.  Big cuts in Medicare Advantage reimbursement in health care reform could now have an impact on more constituents.

- Medicaid spending increased.

One observation that has not been covered extensively.  The government pays much lower rates (especially Medicaid). Therefore, a shift of a patient from commercial health insurance plans to Medicaid could  easily mean a decline of 50% in reimbursement to many hospitals.  If providers shift these costs by charging private insurers more, then there are no “real” savings.  On the other hand, if providers see decreases in revenue and reengineer their processes to allow for sustainability at lower reimbursement, then the increased government role should lower unit prices.

I’ve often blogged about the problem we have with unit price in the United States.  The CMS article has a great graphic (below) showing the role that price inflation (compared to utilization inflation) has played over the last 30 years.

 (click the image to enlarge it)

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