Hospital Improves Maternity Care and Lowers Cost

Today’s Managing Health Care Costs Indicator is $3.5 billion

Maternity care really matters.  Earlier prenatal care, prenatal vitamins, and cigarette, alcohol and drug cessation help us have healthier children – and prevent excess health care costs. Still, maternity represents 20% or more of hospital admissions for many employers, and sick newborns often represent a quarter of all catastrophic care cases. 

Caesarian section delivery is shockingly common in the US – about 1/3 of all deliveries at this point.  The World Health Organization has recommended an optimal rate of 15%.  C-sections increase the likelihood of complications of subsequent deliveries –and they decrease the new mom’s ability to immediately bond with the newborn.  Once a woman has an initial c-section, it’s unlikely she’ll have a future vaginal delivery, as VBAC deliveries are increasingly rare.

Induction (intravenous drugs to start the labor process) is also quite common in the US– and can start the cascade toward C-sections – since if induction is begun before the cervix has started to dilate, it’s likely to lead to prolonged labor that is ended by Caesarian section.

The variation in elective induction is dramatic across different institutions – here’s a link to the Leapfrog Group’s website , where you can see elective induction rates by hospital. 

Health Affairs just published an article from Intermountain Health describing its focus on system variation (not merely variation of individual clinicians).   Intermountain’s efforts began over a decade ago – and cover a range of medical care.  I’ll focus here on the results of their maternity process improvement.

Intermountain recognized that 28% of their elective inductions in 2001 did not meet medical criteria –and imposed the following rule. 

When an expectant mother arrived at the hospital for an elective induction, nurses completed an electronic check sheet that summarized appropriateness criteria. If the patient met the criteria, the induction proceeded; if not, the nurses informed the attending obstetrician that they could not proceed without approval from the chair of the obstetrics department or from a perinatalogist—a specialist in high-risk pregnancies.

With the initiation of this rule, the percent of elective inductions which did not meet clinical criteria dwindled to 2%!  Intermountain’s c-section rate is 21% now – over a third lower than the national average.

The authors state that $50 million in annual medical costs have been averted through this simple program, and extrapolate that a national effort like this could save $3.5 billion per year.

This is a great example of making care better for moms and babies and saving money at the same time.  I often talk about how we have to make difficult choices to improve value in health care.  The only tradeoff necessary to lower inappropriate elective inductions, and thereby lower c-section rates and premature deliveries is a small decrease in physician autonomy.    Seems like a very good tradeoff indeed!

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Remarks for a corporate executive upon joining a hospital or health system Board

Today’s Managing Health Care Costs Indicator is 10

Top corporate executives sit on the boards of directors or trustees of nonprofit hospitals and health care delivery systems in many communities.  It’s natural that health care providers want the best minds in business to participate in their governance.  It’s also natural that executives want to ‘give back’ to the community, and it’s an honor to serve on a hospital or health system board.

However, it’s a tough position to be in.  The rise in health care costs is a major headache for the corporate executive, but hospitals seek to increase their revenue.  A hospital that has not increased its revenue is likely to have trouble borrowing money to make capital investments that will keep it successful.

I’ve been talking to a few colleagues about this, and I offer theoretical maiden remarks for a corporate CFO who has just joined the board of a health care delivery system.

Thanks for the opportunity to serve on this board.   This health care delivery system is a pillar of our community.  It delivers health care to many of my company’s employees, and my family has benefited from the excellent quality of health care within this system.

I know I’m joining this board at a time of great change.  Health care costs have skyrocketed over the last decade, and insurance premiums are increasingly unaffordable to companies and to our employees.  My own company has only been able to continue to offer health care coverage and maintain our bottom line through converting our employees to high deductible health plans – so I’m well aware of the impact of rising health care costs.  At the same time, we’ve learned more about the mistakes patients suffer within the health care system, and we know that the system is rarely designed with patients in mind.

Health care reform promises to increase the portion of Americans with health insurance; however, many will have Medicaid, which I know has low payment rates.  It won’t be possible for providers to simply shift extra costs to employer-sponsored health insurance to make up for poor Medicaid payment rates.  

I intend to use my expertise to push this health care system retool itself to succeed in this new world. I hope my fellow Board members will join me.   I don’t underestimate the challenge, and I know that many of this health care system’s constituents would rather things remain as they were.  The current state, though, is not sustainable. We can meet our community mission through delivering higher value in health care, and we cannot meet our community mission if our costs continue to escalate unchecked.

I know that some good transformation work is already underway here, and I’ll be listening to our executives and our staff because I know many of the best ideas will come from those practicing within this system.   As I start my term, I’d like to suggest ten steps this health care delivery system should start working on tomorrow morning to start down the road toward being more accountable, and to deliver better quality, more affordable health care to this community.

1.      Be fully transparent

I’d like to see us make public all of the data we collect on quality, patient service, and patient satisfaction.    That especially means reporting on our performance where we don’t look as good as our reputation and our self-image.  I know our clinicians are intensely committed to being the best – and I suspect that we’ll make things better more quickly when everyone knows that our quality scores will be readily available to anyone through our web site.

2.      Put together bundled prices for various service lines

We need our entire medical staff to function as a team – and we need to have the right incentives to take steps out of our processes that will allow us to deliver the best treatment for a lower price.   As long as we are paid more for delivering more units of service, it will be hard for us to figure out how to make our patients better with fewer units of service.

3.      Fully disclose any medical error or bad outcome, apologize, and offer restitution when we make errors

Harvard Medical School hospitals adopted this policy a few years ago, and the Veterans Administration and the University of Michigan have showed that this can lower the overall cost of health care.  It’s also the right thing to do, and the way all of us would want ourselves and our families treated when we get care within this system.

4.      Consider the community’s real medical needs, rather than revenue potential, when we make capital decisions.

Many hospitals purchase new fancy technology which adds little to patient benefit, but allows for much larger bills and revenue.  Some hospital CEOs have complained about this, but haven’t had the fortitude to obey their own rhetoric.  We want technology that will be the best for our patients and allow us to deliver the highest quality care that is cost-effective. We don’t just want the latest gizmo.

5.      Get rid of sample closets for pharmaceuticals in practices owned by the health care system, and prohibit pharmaceutical representatives from our campuses

Our physicians are making purchasing decisions on behalf of their patients.  Let’s give them access to nonbiased sources of information, and let’s not entice them to prescribe the latest brand name medicine for which there are plenty of generic equivalents at a fraction of the price.

6.      Drive a hard bargain with suppliers

Medical devices are expensive – and often drive up the cost of medical care unnecessarily.  Limit the number of different implantable devices available, and get the best price on behalf of our patients.  The same goes for all supplies.  First, be sure we need the supply.  If we need it, get the supply at the most advantageous price – as if it were our money we were spending.  We will be spending our own money on supplies in a future world of bundled payments.

7.      Improve the health habits of our own employees

Our employees serve as an example to the entire community, and preventable chronic diseases take up too much of our medical resources.  Let’s fully cover counseling and medications to help them quit smoking, and offer healthy food alternatives in our cafeterias.  Let’s make it easy for our employees to walk or cycle to work where that’s safe, and let’s set up employee competitions for exercise to drive the social network here to promote healthy lifestyles.

8.      Give our patients better tools to help them make better decisions

Patients often don’t have the best available information to help them make difficult choices, especially where there is no single “right” medical answer.  Examples include back surgery, hysterectomies, heart surgery, and mastectomy and prostatectomy for cancer.  Patients given access to objective information on treatment alternatives often choose less invasive therapy and have lower costs.  Hospitals have not been enthusiastic about this in the past, as more invasive therapy is often more profitable.  I’d like us to focus on helping our patients make the best decisions for themselves and their families, not merely focus on promoting decisions that might be better for our bottom line

9.      Support efforts to improve the health of the entire community

Our mission is to improve the health of the community – not just those who see us as patients.  I know in the past we’ve done cancer screenings which can increase our own volume. I’d like to see us do much more.  I’d like to see this health care system as at the hub of ‘information therapy’ in the community, and I’d like to see us helping more members of our community avoid chronic disease, and avert preventable emergency department visits and preventable hospital admissions.  We should publish an annual stewardship report showing what we have done to improve the health of the entire community.

10.   Reach out to community employers to see what their real needs are, and to get feedback on how we’re doing. 

Employers purchase health care for their employees because it’s genuinely important. Employees value their health insurance, and the certainty of this insurance means that they can focus on their jobs.  Better health also leads to increased worker productivity.  I’d like to see us regularly interview executives from other companies in our community to assess their needs and how we’re meeting those needs.   When I talk to my colleagues I hear that they would like more primary care access to prevent avoidable emergency department visits and better musculoskeletal care to help patients with back injuries return to work more quickly. I’m sure we’ll learn a lot from talking to other employers, and we’ll help improve our own processes here.

None of what I’m suggesting here is easy, and much of it will be very disruptive. I’ve already talked to the CEO about this, and she’s supportive, but aware that she’ll face opposition from some clinicians and others within the organization.  To succeed, we will need this transformation to be the focus of this Board over the coming months and years.   

I think as a Board we’ll be up to this challenge, and I’m glad to have to opportunity to join you.

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Provider Payment Reform is Key to Encourage Disruptive Innovation in Health Care

There is a lot of great innovation in health care – but not nearly as much disruptive innovation as we’d expect in an industry that represents a sixth of the American economy.  Disruptive innovation can bring huge social benefit – in terms of better good or services at lower prices available to more and more people.  However, disruptive innovation can be terrible for incumbents – and it’s only nurtured in environments where those making purchasing decisions are intensely price conscious. 

So – if we want more disruptive innovation, we need more price-consciousness in health care.

And we’re getting it, too.  As Drew Altman notes in his most recent Kaiser Family Foundation column, high deductible health plans are growing rapidly in the US – and it’s been almost under the radar.  Those with high deductible health plans use far less resources – sometimes skipping valuable care as well as discretionary care. 

Higher patient exposure to health care costs is likely to lead to more fertile territory for disruptive innovation.  For instance, if all office visits cost a $15 copayment at the point of service, patients would not flock to retail clinics, with their limited menu of services.  When patients are paying the first $2,000 or more for their care, and then 20% for care beyond the deductible, they’re much more likely to “shop” for better bargains – which is great for disruptive innovation.  Hospital emergency departments offer many services that most people with earaches don’t need, and higher member cost-share discourages overuse of expensive sites of care.

But patient cost share only works to encourage more prudent purchasing behavior if

-        The health care service is elective, where the patient has a choice. 

o       It’s pretty hard to convince an ambulance driver to take you to the most cost-effective hospital if you feel an elephant sitting on your chest, are out of breath, and are drenched with sweat!

-        The patient has some idea of the cost. 

o       Most physicians have no idea what various health care services cost, and even  health plans often aren’t sure of the actual cost of a service.  This is even worse because services are not bundled in ways patients find intuitive.  Even if I knew that my physician would charge $150 for a level 4 office visit, I’m not sure that she would bill that level of office visit, and she might order laboratory tests that would increase the cost dramatically

-        There is some signal available about quality

o       No one would recommend going for the cheapest angioplasty if the cardiologist had a history of bad outcomes.

-        There is choice

o       In many rural areas, there is a single hospital and often a single group in each specialty.

The biggest problem is that a small portion of patients represent the vast majority of health care costs (10% of patients represent about 60% of all costs). I recently saw data where those in the top 50% represented 93% of total costs (averaging over $3000 per person).  These patients will almost always exceed the annual deductible, so all this extra “skin in the game” might dishearten those with severe illness, but it’s not so likely to change their behavior.  If the extra member cost-share decreased utilization among this half of the population by a factor of half, it would only lower overall health care costs by 3.5% - less than the inflation rate for a single year! Much of the care received by the low cost half of the population is preventive, so we really don’t want to decrease that anyway!

In many instances, the purchaser of health care services is frankly not the patient – but is the health care provider. For example, patients are not generally shopping for the highest value hip prosthesis.  They “shop” for an orthopedist, and the orthopedist recommends what artificial hip should be implanted.  

That’s why I believe that bundled payments and provider risk are the real keys to increasing disruptive innovation in health care. 

Bundled payments have been very effective at increasing disruptive innovation in the provider community in the past.  For instance, when Medicare switched to the diagnosis related group (DRG) payment methodology, hospital stays got dramatically shorter, and total days in the hospital plummeted.  Essentially, the physicians who demanded longer hospital stays under a “cost plus” payment system figured out how to cut hospital stays when they were asked to be prudent purchasers of hospital services.  Independent practice associations and other provider organizations taking “risk” or capitation have put in place innovative programs to diminish hospital admissions and readmissions, and dramatically increase use of generic medications. 

Disruptive innovation is nourished by value-based purchasing, and government can do two things to increase value-based purchasing.

The first is to help us know what really works, and what doesn’t.  That’s why it’s critical to increase our investment in comparative effectiveness research – whatever we want to call it. We’re not talking about rationing or death panels – we’re talking about collecting the data we need to know what’s worth paying for.   

The second thing is, can we please allow the FDA to make determinations about approvals based on value rather than just effectiveness?  As long as we approve a new medication or medical device that is ten times as expensive as existing medicines, and is merely “noninferior,” pharmaceutical and medical device companies will focus their research efforts on innovations that will increase the cost of care, rather than those that could substantially increase value, and sometimes even lower costs.  

The Managing Health Care Costs Indicator will return next week

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