Month: October 2014

Hospitals As Stakeholders

The desire for health care reform in the U.S. must lead us to examine the role that the various stakeholders play in the high costs and dysfunction of our system(s). Abuse, waste, and profiteering have been well documented in the pharmaceutical, medical appliance, and insurance industries. Fraud and mal-aligned payment incentives by and for physicians is, at least, being discussed. The hospital industry has been receiving a lot of attention because of the notoriety of the obscene charges and opaque charge-master protocol. But, so far the general public has had little instruction as to the destructive changes that have been occurring in the hospital industry over the last 20 years. With over half of U.S. hospitals being a part of a Health System we are now talking about much bigger and more powerful entities.

1   Hospital wars
The fight for survival and supremacy has affected profit and not-for-profit hospitals alike. Developing profit-making but duplicative services has contributed to the rising cost of medical care over the last two to three decades. CT scanners and MRI machines around every corner creates excess capacity that is met with increased prices, advertising and non-indicated use (often supported by conflicts of interest promoted by referring physicians).

Hospitals follow the latest high cost medical fads in order to capture a higher portion of the medical dollar. In the previous two decades this included first, the popular coronary bypass (CABG) programs. These include 301 new CABG programs within a 20 mile radius of an existing program and 80% of the new ones were within 5 miles of the old ones. These were built to capture the dollar, not to fill a medical need. And contrary to free-market dogma, the prices went up instead of down (the invisible hand?).

Fewer CABGsDuplicatice CABG

Following this was the expensive cardiac lab for inserting stents in coronary arteries. This procedure is now on the watch list for its overuse in patients who have never had a coronary related episode. Again, every hospital wants to have one-so they have to be used. This not only drives costs but it creates unnecessary surgical complications.

See:
Inappropriate Heart Procedures
Controversy in the Cath Lab
Duplication of New PCI Programs
Competition, Not Need, Drives Hospital Cardiac Care Investment

One of the latest fads is robotic surgery, pushed by Intuitive Surgical, Inc. These instruments are extremely expensive and very costly to maintain. The company’s claims of reducing surgical times and reducing complications have not been proven. In fact many complications have occurred from their use. It will take a number of years to sort out the appropriate use of these complex and sophisticated machines.  In the meantime hospitals are jumping on the bandwagon. As reported in the Seattle Times in 2012, “Washington hospitals now have at least 37 surgical robots, and robotic surgeries — most to remove a uterus or prostate — have skyrocketed in recent years. Swedish Medical Center has seven robots, Sacred Heart in Spokane has three. Even tiny Pullman Regional Hospital, with 25 beds, bought one. It cost twice as much as the hospital netted in 2010.”

Use of surgical robots booming despite hefty cost
Robotic Surgery Complications Underreported

2.  Advertising & Lobbying
As with insurance companies, the hospital industry spends $1.5 billion dollars annually to sell their product. This often includes endorsements by medical people who have a financial interest. It is the patient who ultimately pays for these efforts to produce sales and income beyond what the hospitals can acquire by just doing their job. As one example, at St. Francis Medical Center in Missouri the ad budget amounts to nearly $46,000 per licensed hospital bed a year, or $130 a day per bed

3.  Marked increase in payroll costs for non-clinical salaries

     Generic managers & Executive Salaries
Kaiser Health News created a chart of executive compensation in the hospital industry for the year 2011. The highest compensation was at Kaiser Permanente ($7,936,510). It should be noted that many of the executives are what have been called “generic” managers.  Generic managers, that is leaders trained only to manage, but not experienced in what constitutes personal health care.  Managers and bureaucrats are increasingly numerous in health care, the former somewhat and the latter greatly out-numbering physicians.

A similar, but more surprising chart had been developed by KUOW an NPR radio station. This was for the Puget Sound area in Washington State in 2008. 21 of the top 62 administrators received $1 million or more (two over $5 million).

         Growth of non-clinical workforce
As Robert Kocher says in The Downside of Health Care Job Growth, “Over half of the $2.6 trillion spent on health care in the United States in 2010 was wages for health care workers.”   and, “today, for every doctor, only 6 of the 16 non-doctor workers have clinical roles, including registered nurses, allied health professionals, aides, care coordinators, and medical assistants. Surprisingly, 10 of the 16 non-doctor workers are purely administrative and management staff, receptionists and information clerks, and office clerks.”  Kocher points out that this non-clinical workforce has little to do with delivering better patient outcomes or lowering costs. So much of this is created by the multiple payer insurance system with hundreds (thousands) of payers and many thousands of billing codes, policies, rules, etc.

A good example of this bloat of medical bureaucracy comes from the 2008 testimony of Uwe Reinhardt, the economist, before the Senate Committee on Finance when he stated that at Duke Health Systems, where he served on the Board they had 900 clerks on the payroll for a 900 bed hospital.

Physicians vs Adm

4.  Acquisitions and Mergers
In 2012, 94 mergers or acquisitions took place in the hospital industry worth a total of $1.88 billion. See Mergers in 2012. In the first 6 months of 2013 there were 46 M&A’s and 98 for the year. In the first 6 months of 2014 there were 43. Additionally we are seeing various “affiliations”, “quality alliances”, “strategic alliances”, partnerships, and “Clinically Integrated Networks”, etc. Some of these acquisitions occurred because one of the participants was in financial difficulty but the large number of them is designed to increase market leverage and create increased reimbursements. The increased leverage in a geographical area also allows the new entity to dominate any kind of negotiation during physician hiring.

Large scale mergers almost always lead to higher prices and there is no evidence that they improve quality of care. “Hospitals that face less competition charge substantially higher prices,” said Martin S. Gaynor, director of the F.T.C.’s bureau of economics price increases could be “as high as 40 percent to 50 percent.”

When Massachusetts General Hospital and Brigham and Women’s Hospital merged into Partners Health Care it drove up health care costs with no improvement in quality of care. Attempts to minimize the monopoly effect have been unsuccessful. As the New York Times stated in an editorial, “The experience in Massachusetts offers a cautionary tale to other states about the risks of big hospital mergers and the limits of antitrust law as a tool to break up a powerful market-dominating system once it is entrenched.”

5.  ACO’s
As hospitals try to position themselves in the world of Accountable Care Organizations the mergers and acquisitions noted above become part of the game plan. Kaiser Health News discusses this as a “Humongous Monopoly.” This leads into the latest trend of hospitals hiring physicians. So far there is no good evidence that these organizations can lower costs and no evidence that they can improve quality. In fact, hospitals dominate the governance of most of the existing ACO’s and any money saved is simply a shift of dollars from Medicare to the ACO’s, not the patients. Additionally, the hiring of primary care physicians reduces the number of physicians available to provide care in rural and distant suburban areas. When hospitals purchase medical practices and clinics the price goes up for everything from the office visit charge to electrocardiograms and other basic office procedures as well as the major procedures such as joint replacements and cardiac stents.

 6.  Religious influence
Dr. John Geyman has explained well the ill effects of the expansion of Catholic hospitals across the country.  This growth of religious influence on the quality and universality of medical care especially affects reproductive and end-of-life services. Ten of the biggest twenty-five health systems in the United States are Catholic. Merger Watch and the ACLU have teamed up to publish a definitive review of this phenomenon in “Miscarriage of Medicine: The Growth of Catholic Hospitals and the Threat to Reproductive Health Care.” In this report they state, ”Catholic hospitals have organized into large systems that behave like businesses – aggressively expanding to capture greater market share – but rely on public funding and use religious doctrine to compromise women’s health care.” In the process they are gobbling up both non-profit and for-profit entities. The only difference left between these categories is that the non-profits don’t pay taxes and they can solicit tax-free donations. Former quality differences have all but disappeared and the exceptional charity care has been swallowed up by the business model. More alarming is the threat posed to women’s reproductive health care and patient driven end-of-life care.

7.  Costs-Bitter Pill
In March, 2013, Time Magazine published the landmark article by Steven Brill, Bitter Pill: Why Medical Bills are Killing Us. The bizarre and obscene hospital charges that have become an all too familiar story are exposed as well as the rapacious “charge-master” billing system. These unbelievable bills will only get worse until hospitals are forced to live on a system of global payments for operations and tight certificates of need for capital improvements. This can not be accomplished with Obamacare or the free market.

8.  Fraud, Abuse, Fines
Up-Coding
Hospital systems may increase their incomes by up-coding (raising diagnostic codes to a more severe level of illness) and thereby making their reimbursements higher and magnifying their risk-adjustment scores.         

Gaming the System
There are numerous other abuses such as (1)keeping patients in observation units for days instead of admitting them to the hospital is legal and profitable for the hospitals but inherently unethical, (2)charging huge mark-ups on cancer drugs, and (3)Aggressively pursuing collections at point-of-care from patients with medical emergencies.

Kickbacks
The National Health Care Anti-Fraud Association figures that fraud annually accounts for tens of billions of loss. This would include fraud by other providers and medical services as well as hospitals. Hospitals are prevented by federal law from providing financial or in-kind compensation to physicians for less than fair market value. Nevertheless these practices continue. The Office of Inspector General has published a list of 34 settlements for violations by hospitals over the last 5½ years. These were all self-disclosed and just hint at the real numbers involved in these practices. For instance, in 2012 Freeman Hospital System paid $9.3 million for paying physicians for referrals. Of course this was a pittance compared to the $731.4 million penalty paid by HCA in the year 2000. That didn’t stop them however, and in 2007 they paid another claim at $16.5 million. The list goes on and on, e.g., Health Management Associates, Parkland Memorial, Adventist Health, etc. Since January, 2009 the Department of Justice has recovered over $7.4 billion in health care fraud prosecutions.  Not all of these were from hospitals but here is a list of representative fines:

St. Barnabas Hospitals —$265,000,000
First American Health Care of Georgia — $225,000,000
Staten Island University Hospital —$76,500,000
University of Washington —$35,000,000
University of Pennsylvania —$30,000,000
University of California Davis, San Francisco, Los Angeles, Irving andSan Diego — $22,500,000
Montefiore Hospital and Medical Center — $12,000,000
Catholic Healthcare West —$10,750,000
The Cleveland Clinic — $9,050,000
The Mayo Foundation —$6,500,000
San Diego Hospital Association —$6,200,000
Northwestern University —$5,500,000
Yale University School of Medicine— $5,500,000
New York Presbyterian Hospital —$4,880,000
Johns Hopkins University School of Medicine — $3,400,000
Harvard University and Beth Israel Hospitals — $2,400,000
University of Illinois College of Medicine and University of Chicago Hospitals $2,000,000
St. Louis University (a Tenet hospital) $1,800,000

Almost all of the problems discussed here relate to the nature of our fragmented, profit-motivated medical system. They are caused by the system and can not be solved by the system. And we haven’t even discussed the huge problems of quality, affordability and access. Only a revolutionary change can have the muscle to change the basis of our medical care from profit-motive to a service ethic. Creating and moving to an Improved Medicare For All is such a change.

Please “like” me if you do.  Help me spread the word. You follow me and I’ll follow you.  Let’s talk about revolutionizing our medical care. If you want, I will come to your community organization and present a run-down on the arguments for single payer medicine.

Gilead thrives on Sovaldi

Gilead’s profits were up 246% in Q3.

As Becker’s Hospital CFO states, “The increased revenues were due to substantial product sales growth. Gilead’s product sales for the third quarter increased to $5.97 billion compared to $2.71 billion for the third quarter of last year.”

At this rate it won’t take long for Gilead to pay off the $11 Billion purchase price for Pharmasset and the hundreds of millions of dollars for clinical trials of Sovaldi, the $84,000 anti-hepatitis C drug.

http://www.beckershospitalreview.com/finance/driven-by-sovaldi-sales-gilead-s-profits-up-246-in-q3.html

Welcome to the free market.

Don’t Fight the Health Insurance Companies

The recent poll by the AP concerning health insurance deductibles with private policies only confirms what we knew was going to happen.  People cannot afford health care even when they are insured. The trend for policies to have higher deductibles is just making the matter worse. Most of the policies being sold in the insurance exchanges are high deductible. Supposedly the consumer is at fault for picking premium price instead of level of coverage. The insurance companies are happy.

If the deductible prevents people from seeking medical care for illness and injuries or following treatment recommendations then those people are underinsured.  As Obamacare increases the number of insured by 10-15 million people it is increasing the number of underinsured by many millions more. This problem will get noticeably worse year-by-year as the people who are use to good health develop an increasing number of medical problems that require them to pay $3,000 to $6,000 even before their insurance kicks in. And, of course, if the problem lasts into the next year then the out of pocket deductible starts all over again. And, God forbid, what if two people in the family get sick. For comments by Dr. McCanne see http://www.pnhp.org/news/2014/october/private-health-plans-no-longer-assure-adequate-protection.

For my Blog: Insurance Exchanges: The Fast Food of Health Care

And  We Are All Underinsured

There is no use complaining and talking about which insurance policy to buy, etc. Don’t fight the health insurance companies. It’s only going to get worse. The solution is single payer medicine, Improved Medicare for All.

Accountable Care Failure

Accountable Care Failure

Recent releases from CMS verify that 13 of the original 32 Pioneer ACO’s have quit even though year 3 isn’t even over yet.  Keep in mind that all 32 of these organizations are sophisticated EHR driven medical care systems. The reason for quitting is that they could not qualify for earned shared savings and many reported losses. Interestingly enough there are still no reports of what the start-up costs were for all these entities and, of course, we have no estimates of what the national start-up costs would be if ACO’s dominated Medicare reimbursement across the country. Many facilities lack sufficient EHR systems and staffing to comply with all of the regulations in the Pioneer ACO experiment. And what is it costing CMS to administer the program? Even worse, none of this applies to private and exchange insurance policies.

All of this nonsense could be stopped with the creation of a single payer system.

http://www.beckershospitalreview.com/accountable-care-organizations/pioneer-financial-results-show-why-some-acos-are-leaving-the-program.html

http://innovation.cms.gov/Files/x/PioneerACO-Fncl-PY1PY2.pdf

http://www.healthcaredive.com/news/cms-releases-highly-anticipated-pioneer-aco-data/318834/

Can Physician Performance Be Measured?

In response to Comments in Becker Hospital Review I received these questions:

“Dr. Dave – I’d be interested in what outcomes you’d measure that really matter in the care of patients. And, what you’d suggest for a delivery and payment model(s).”

I submit the following answer:

I don’t know what background you are coming from. I’m a retired family doc with 27 years in private practice, 10 years working in and running a (salaried) rural health clinic and 7 years (salaried) doing urgent care in a >200 docs physician owned medical clinic and 6 years part-time in a low income clinic.

When talking about “measuring outcomes” remember the old saying (falsely attributed to Einstein) “Not everything that counts can be counted, and not everything that can be counted counts.”  What are outcomes;  mortality rate, days of pain free existence, avoidance of bankruptcy, peace of mind, years of life lost due to premature mortality (YLLs), years lived with disability (YLDs), healthy life expectancy (HALE) ?  And to whom do we attribute increase and decrease; the patient, which doctor, an institution, the system, society?  And, again, can numbers represent compassionate, concerned, competent care?  So what does it mean to “measure”?

There are numerous problems with current pay for performance problems. One of the biggest problems is thinking that any sense can made of the current Rube Goldberg system of Obamacare plus >2000 insurance carriers. Any real solutions need to benefit every single person in our country. Pretending to measure performance in medical care is a political diversion of both CMS and the insurance companies.

As far as I’m concerned putting all physicians on salary with reasonable negotiations is the only way to help gain control of medical costs and create the leverage for improving quality by eliminating incentives for cursory encounters and unnecessary medical procedures.

Pay-for-Performance is a poisonous concept whose unintended consequences are far greater that any conceivable benefits. System improvement and re-development of the culture of a medical “calling” and ethos of peer responsibility are essential. So-called P4P and quality improvement efforts cannot begin to deal with the multitude of problems that face us.

We can’t (and shouldn’t) go back to a Dr. Welby picture but we don’t have to keep going in the wrong direction.

I’m in favor of a single payer system (improved Medicare for All). I’m also in favor of starting that improvement now.  And I’m in favor of medical care reform in many areas (physician, hospitals, pharmaceuticals, medical appliances, costs, integrity, transparency, etc.)  A single-payer system would require a tremendous amount of work to create the needed reforms  but it’s the only system that can have the muscle to overcome the self-interest of the powerful stakeholders and ensure compassionate, competent, and cost-effective care for  everybody.

I invite you to visit my blog site (HC-Reform) and “Like” what you like. For our present discussion I would start with Pay-For-Performance (http://wp.me/p4MwV3-m).

Dr. Dave