Managing Healthcare Costs: Children’s Hospital

Today’s Managing Health Care Costs Indicator is $1.46

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Today’s Boston Globe front page rings out with a “top of the fold” headline “Children’s Hospital Reports Asthma Progress.”

Hospitalizations for asthma have been dramatically cut by a program that helps families reduce the conditions that trigger attacks, saving $1.46 in hospital care for every $1 spent on prevention, according to a Children’s Hospital Boston study being released today.

The actual article was e-published by Pediatrics today. The link to the article is here. Harvard Link

The truth, as always, is murkier than the headline.

First of all – this study is laudable for many reasons. It aimed to lower the asthma morbidity in underprivileged communities – which is where asthma has the most devastating impact. Asthma hospitalization rates are five times higher among Blacks and Hispanics compared to whites – and the study group was largely Black and Hispanic. The researchers sifted through the literature about what works, and developed a multidisciplinary intervention based on this literature. They measured carefully. They counted only “hard” savings like decreased hospitalizations and ED visits, and did not attribute monetary value to

Researchers made notable efforts to be culturally sensitive, and offered home community health worker and nursing visits, supplies to help decrease allergens, and even special vacuum cleaners to decrease airborne particulate matter. When necessary, the program did extermination to help prevent exposure to allergens that could trigger asthma attacks.

Now, the concerns.

This is a study with 283 patients, who were handpicked by researchers because they appeared to be at highest risk for recurrent emergency department visit or hospitalization based on their recent history. The study was offered to 562 families; so the take-up rate was about 50%. The cost savings are comparing these study patients with patients from different zip codes – who were not subject to the same selection process.

Note that the study was designed in 2003 and carried out from 2005-2008. This gives you the sense of how complicated these studies are to complete.

Here are two reasons why this study likely overstates the benefit from this intervention

Regression to the mean. Those asthmatics who are chosen because they appear very ill today will as a group always have far fewer hospitalizations and ED visits going forward than they had in the recent past. Here’s a link to a 2004 study where the control group (no intervention) had more than a 30% decrease in cost. Here’s a link to my letter to the editor, where I pointed out that even this understated the true amount of regression to the mean.
Selection bias. The families that were willing to participate and were able to persist in the intervention likely had more means than those who refused, were unable to be reached, or dropped out during the course of the trial. The stated control group did not have such selection.

To the Globe’s credit, the last two paragraphs quote a researcher who points out that this was not a randomized controlled trial.

It’s heartening that it appears that there was some decrease in asthma morbidity that coincided with this intervention. I would be very cautious about the cost-saving claims from this article.

Two major public health interventions to lower asthma morbidity – decreasing air pollution and decreasing parental and teenage smoking rates, are not mentioned in the article. We tend to overemphasize interventions in the medical model while we underinvest in effective public health interventions.

Today’s Managing Health Care Costs Indicator is 1.5x

Monday’s Boston Globe had an article on page one (“top of the fold”) on tiered health plans. The title was “Tiered health plans cutting costs, restricting options.” The authors tried to be even-handed – but stories with narrative force are more compelling than some dry statistics. It’s hard to come away from the article with a positive feeling about health plan network options that charge patients more for care at hospitals and providers with higher prices.

The focus of the article is Glenn McCarthy, 48, who was found to have prostate cancer. Faced with a potential month-long wait to have surgery done at a community hospital ($150 cost share), he chose to have the surgery at an academic medical center ($1000 cost share). His total out-of-pocket liability ended up not being a thousand dollars, but $4500 because he had a series of complications that led to additional cost sharing. He and his wife are now struggling to pay this off, and their insurer has denied their appeals.

Enrollment in narrow network or tiered plans has increased sharply in the last few years. The Massachusetts Group Insurance Commission, which purchases health insurance on behalf of state and governmental employees and retirees, offered a three month employee “premium holiday” to encourage state workers to choose narrow network plans this year, and 10,000 made the move.

Employers have found that when overall cost of care has increased but they feel cannot afford to raise the employer contribution to this, they can

Raise employee contributions
Lower the benefit level (raising member cost sharing across the board)
Raise cost sharing for providers who have very high prices.

The last option is attractive because it could encourage some patients to move to more cost-effective providers, as well as encourage providers with high allowed prices to lower these prices. That’s happened in California when CalPERS, which covers state and other governmental employees and retirees started using ‘reference pricing’ for knee and hip replacements. Some hospitals with allowable fees in excess of the reference price renegotiated their rates to avoid losing patients.

Tiered networks that are based on price alone could actually destroy value by directing patients to hospitals or providers of lower quality. Most of the available tiered plans use some form of quality ranking to be sure that high quality providers are available within the lower cost tier.

Clearly, tiered networks have the attention of the more expensive providers:

“[Tiered Networks] present one of the greatest threats to access that there is in the Commonwealth right now,’’ said Dr. James Mandell, chief executive of Children’s Hospital Boston.

Many would say that the greatest threat to access is high cost – not health plans that offer lower premiums and a choice of paying higher cost share to get care at Children’s, which is very expensive compared to comparable hospitals. How expensive? The Attorney General reported that risk adjusted total medical expense at Children’s was among the three highest in Massachusetts for all three major health plans – over 1.5x the least expensive provider in BCBSMA and Tufts, and over 1.9x in Harvard Pilgrim.

As I’ve noted before, increase in unit cost is a major problem in Massachusetts, and is the major factor making health care in the US more expensive than in other developed countries.

Clearly, with huge disparities in cost and without clear correlations with quality, efforts will continue in Massachusetts to rein in higher allowed prices. Tiered networks are a market lever to try to reduce the price at the highest cost facility.

There are alternatives. Former Massachusetts governor Mike Dukakis spoke earlier this week at Harvard School of Public Health and said

If we paid a little attention, it might be a good idea, to the experience of other countries around the world who are doing this and who, for some reason, seem to be able to provide rather good health care to their people at half the cost we do -- whatever the siltstone, whether it’s Australian medicare or a multi-payer system in Germany or an essentially privatized system in Switzerland -- every one of them regulates cost, without exception…Now don’t get me wrong. Nobody loves having to regulate. We had something called the rate-setting commission when I was governor... We treated hospitals as public utilities. They couldn’t raise their rates a nickel unless they went to the rate-setting commission. We certainly didn’t have these huge disparities between what Partners gets and what the BI gets. Wouldn’t allow it. So, we’ve got to get on with the business of regulating costs.

I’m guessing that we’re likely to continue preferring market approaches to price disparities, so tiered networks will continue to expand. Efforts to reintroduce price regulation continue to heat up as well.