Healthcare Economist

Today is “Match Day.”  The Match Day proceedings will determine not only where graduating students will work after medical school, but also what kind of doctors they will become.  What will work life be like for these students?

If they were to enter a residency 20 years ago, they may have worked 120 hours per week.  Now, however, the Accreditation Council for Graduate Medical Education has placed residents on a strict 80 hour work week.  In fact, the Council is even considering dropping the limit to 60 hours per week.

The Washington Post reports that although most residents appreciated the reduced work hours, physicians fear that resident training may suffer.  “John W. Larsen, 67, GWU’s OB-GYN department chairman, said he worries that reduced hours have diminished new doctors’ training. Residents who stay with one patient from their arrival at the hospital all the way through to delivery have the advantage of detecting and recalling tiny but important clues that might not be written down when a case is handed to the doctor on the next shift.”

Although most residents prefer shorter work hours, in some cases they would actually like to work more.  One first year resident said that “…she usually works 70 to 75 hours a week but sometimes stays beyond her shift to take part in procedures involving fetal abnormalities.”

In the entire article, however, there is no mention of what is best for patients.  Having residents work 120 hours per week instead of 80 hours may (or may not) improve physician training.  However, would you like to be treated by a doctor in the 39th hour of a forty hour shift?  I thought not.   Dr. Larsen also worries that handoffs between one resident and another may not be smooth and shorter hours will increase the number of these transitions.  Why then shouldn’t practicing physician also work longer hours to improve patient care?  Experienced doctors may also want residents to work long hours for another reason: they’re cheap labor.

In the debate between the number of hours residents should work, policymakers should focus on what is in the best interest of the patient rather than subjecting residents to what is, in essence, an elaborate hazing ritual.

The latest edition of the Health Wonk Review has a NCAA basketball theme and is posted at the Reform Galaxy Blog.

Over the course of the past decade, there has been a trend to move more and  more treatment of chronically ill individuals outside the hospital and into ambulatory care.  There is good reason for this. Ambulatory care is much less expensive than hospital care.  In fact, the goal of treating patients more regularly in the ambulatory care setting is to reduce the probability that they need care in the inpatient setting.

However, Siu et al. (2009) claim that hospital do form an important link in the chronic care chain of treatment.  Their most compelling argument is that even under the best ambulatory care, some patients with chronic diseases will inevitably need to visit a hospital.  Thus, providing the highest quality care and integrating acute care with preceeding and following non-acute care is imperative.

However, is there a business case for hospitals to treat these chronically ill patients?  Siu and co-authors argue that the answer is yes.  How hospitals could improve chronic care treatment and improve their bottom line include the examples from the following three settings:

• Pre-hospital: In the hospital at home program, the goal is to provide more intensive medical services at home to prevent hospitalization.  Providing care in this setting can reduce complications and iatrogenic injuries and also eliminate/improve transitions to the hospital.  The hospital can make money by reducing low- or negative-margin Medicare admissions and increase the bed capacity available for high margin admissions.  Also, the hospital can make money on the billable services provided at home.
• Hospital: In examples such as the Hospital Elder Life Program (HELP), the goal is to move patients through the acute hospital admissions process safely and efficiently.  This hospital can increase profits through reducing the length-of-stay needed and the cost per day as well as reduce ED crowding.
• Post-hospital: Transition programs can help patients smoothly move out of inpatient care.  This should reduce the need for readmissions. If Medicare stops paying for unnecessary re-admissions, than smoothly moving people out of inpatient care and decreasing readmission rate will improve the hospital’s bottom line.

The article recommendations in essence seek more integrated care between the acute and non-acute treatment settings.  In the three examples above, the hospital is expanding its reach to include more ambulatory care.  Some of the business case made above depends on reforming Medicare’s payment methods however, (e.g., reduced or no reimbursement for hospital readmissions).  Even if these changes are made, however, Siu and co-authors recognize that implementing these changes will not be easy.  For instance, even if these hospital programs reduce readmission rates, decrease the number of iatrogenic injuries, and decrease overall medical costs, “these savings, however, may accrue to other cost centers (for example, if length-of-stay or intensive care unit use is reduced) or to a separate entity (such as an insurer) rather than to the entity paying for the model…Even for programs that operate entirely within the hospital, crossing departmental and cost-center lines makes funding difficult, given the silo-based budgets and norms for recognizing revenue.  Further, Medicare Part B does a poor job of proving funding for care based on interdisciplinary teams.”

This article does provide some areas for further integration and improved care for patients in the chronic care setting.  However, an integrated hospital system would seem to be able to overcome many of these issues.  For instance, an organization like Kaiser Permanente could more easily allocate chronic medical care across the inpatient and outpatient settings in the most efficient manner, worrying less about which setting the cost accrues.  A more integrated health insurance model would still have to worry about these issues, but further vertical integration seems like a more sustainable business model in the long-run than the business policies laid out by Siu and co-authors.

• Siu AL, Spragens LH, Inouye SK, Morrison RS, Leff B (2009) “The Ironic Business Case For Chronic Care In The Acute Care Setting” Health Affairs, v28(1):113-125.

• Health tourism in Germany & hospital privatization in Poland.
• Private insurer’s enrollee turnover makes preventive care a poor investment.
• Don’t blame the insurance companies.
• Tyler Cowen on Managed Care.
• The ‘12 cent problem.’
• No change in the share of Medicare costs for end-of-life care.
• The medicalization of life.

In America, your health care expenses are taken care of when you get older…right?  We have Medicare after all…shouldn’t that pay for all my healthcare expenses?

Not according to a recent article from Yahoo! Finance.  Here are some of the health care costs retirees face:

• Part B Premiums: For most people retiring in 2010, the Medicare Part B monthly premium is $110.50 per month.  Retirees who earn more than $85,000 annually ($170,000 for couples) pay higher premiums of up to $353.60 monthly.
• Part D Premiums: These average about $30 per month.
• Cost Sharing: Medicare enrollees pay a 20% coinsurance rate for physician and outpatient services.  Plus, there is no out of pocket maximum.  Hospital stays have a $1,100 deductible.  If the hospital stay is more than two months, beneficiaries must pay an additional $275 per day for days 61 through 90, $550 for days 91 to 150, and all costs after that.
• Uncovered Expenses: These include items such as dental care, eyeglasses, and hearing aids.
• Long Term Care: Medicare pays for a maximum of 100 days of nursing home care before retirees absorb the entire cost themselves. When nursing-home costs are included, the amount needed for a typical couple’s medical bills increases from $197,000 to $260,000 with a 5 percent risk of exceeding $570,000, according to Boston College estimates.  Only those dual-eligibles also covered by Medicaid will have their long-term care services covered for the most part.
• Healthcare Inflation: Median out-of-pocket costs for the typical senior are expected to rise from about $2,600 in 2010 to $6,200 in 2040 in constant 2008 dollars, according to a recent Urban Institute report.

The morale of the story is either be rich (and have lots of money stashed away) or be poor (and have Medicaid take care of your long-term care expenses).

The Economist has a debate between Van Jones and Andrew P. Morriss on the value of subsidizing green jobs.  Mr. Jones is the author of the book, “The Green-Collar Economy”and Mr. Morriss is a professor of law at the University of Illinois.  Some highlights:

Mr. Jones:

The markets for new energy sources are being strangled by government support for old energy sources…Governments spend billions of dollars subsidising Big Oil companies and other polluters. And power grids were designed to service huge, centralised power plants, not to link multiple points of distributed, intermittent renewable sources of energy.  We need deft government action to address these challenges and create the conditions for a multibillion-dollar clean-tech energy boom.

Mr. Morriss

Public choice theory identified a key insight about government in the 1960s and subsequent work has repeatedly demonstrated its truth. Concentrated, organised interest groups (oil companies, solar power companies, etc get benefits from governments at the expense of diverse, dispersed groups (the general public)…

We can spur innovation and investment without the problems Mr Jones’s special-interest approach creates. Professor Jonathan Adler argues in Eyes on a Climate Prize (working paper) that if Congress provided prizes modelled on the Ansari X Prize for spaceflight, it would avoid many problems of political manipulation because prizes impose costs only when they produce results…Prizes “allow the government to establish a goal without being prescriptive as to how that goal should be met or who is in the best position to meet it.”

Read the rest of this entry »

From a paper by Weinstein and Skinner (NEJM 2010):

“Moreover, there is considerable variation in health care expenditures and a weak or even negative association between spending and outcomes, such as mortality at the regional level and quality measures at the state level. This evidence has been interpreted to mean that cutting back on these putatively useless or harmful services would simultaneously reduce cost and improve health. In contrast, several cross-sectional studies that have shown positive associations between spending and outcomes have been interpreted to show that more spending leads to better outcomes.”

“A recent study using chart-review data from the 1994–1995 Cooperative Cardiovascular Project categorized “…hospitals as either high-adopting facilities or low-adopting facilities, according to their rates of use of aspirin, beta-blockers, and coronary reperfusion in the treatment of acute myocardial infarction. The researchers found that the high-adopting hospitals had consistently better rates of risk-adjusted survival, at no additional cost to Medicare. But after stratification according to the hospitals’ adoption rates, there was a positive but diminishing effect of spending on the health outcome (12-month survival)…The cost-effectiveness ratios at the margin were $95,000 per life-year or more but with slightly better returns for the hospitals that were slower to adopt cost-effective practices…”

“Another study showed that regions that had high rates of revascularization for patients with acute myocardial infarction received good health value for the expenditure on the intervention.  Despite this, there was essentially a zero association between spending and outcomes across regions. The explanation is that the high-revascularization areas were also less likely to use beta-blockers and aspirin for their patients.”

• Weinstein MC, Skinner JA (2010) “Comparative Effectiveness and Health Care Spending — Implications for Reform,” NEJM, ePub, January 6, 2010 (10.1056/NEJMsb0911104).

Comparative Effectiveness has been a hot topic in health services research. According to a recent article in the New England Journal of Medicine, “the American Recovery and Reinvestment Act of 2009 authorizes the expenditure of $1.1 billion to conduct research comparing ‘clinical outcomes, effectiveness, and appropriateness of items, services, and procedures that are used to prevent, diagnose, or treat diseases, disorders, and other health conditions.’”

Comparative effectiveness compares how effective various medical treatments improve health outcomes.  This sounds like the course we want to take.  Most policymakers laud the health benefits of comparative effectiveness research, but some people claim that comparative effectiveness research can also save cost.

This is most easily seen in the case where a treatment is completely ineffective.  If research can prove a treatment is ineffective, then insurers could save a lot of money by not covering this type of treatment.  This is especially true if the treatment is expensive.

However, comparative effectiveness treatment could also increase cost.  Assume that there are two treatment currently in use: Treatment A and Treatment B.  Let us say that treatment A costs $1,000 and has a 90% cure rate and Treatment B costs $10,000 and has a 95% cure rate.  According to comparative effectiveness research, we should always use Treatment B.  Yet this would significantly increase costs.

Most health economists argue that cost effectiveness research is provides a better way to improve health and decrease cost.  In the example above, should we cover Treatment B?  The answer is likely yes if this is a very serious disease (e.g., cancer) but likely not if the disease is less serious (e.g., the common cold).  Some readers may believe insurers should always cover Treatment B no matter what.  However, would you be willing to pay increased premiums that would occur if treatment B were covered?  Would you feel the same way if Treatment B cost $100,000?  or $10 million?  What if the cure rate was only 90.1%?

At some point, there must be a trade-off between cost and benefit.  Admittedly, these are very difficult decisions in practice, but because there are limited healthcare resources, we must ration care.  Yes, I said it, we must ration care.  I’ve said this before.  This rationing can take many forms: the scope of what your insurance company (or Medicare) will cover, waiting lines, or increased prices you must pay out of pocket for medical services.  The government wants to avoid making these tough choices because it is politically unpopular.  Politicians don’t want to be labelled  the sentator who “killed Grandma” or “instituted a death panel.”  But to truly decrease cost and improve quality, cost effectiveness rather than comparative effectiveness is the prescription we need.

Russell Hutchinson presents the 100th edition of the Cavalcade of Risk.

Here are some other links of interest

• German Ministry of Health considers a 20-30% cut in hospital beds.
• Best and worst health reform ideas according to a libertarian.
• The median salary change for faculty members in 2009-10 was 0 percent.
• Should nurses be able to facebook at work?
• Pharma advertising or public service announcement?
• Catchy title, but an irrelevant research question.
• Lessons of a $618,616 Death.

From the N.Y. Times:

The national Caesarean rate, 31.8 percent, has been rising steadily for the last 11 years and is fed by repeat patients. Critics say that doctors are performing too many Caesareans, needlessly exposing women and infants to surgical risks and running up several billion dollars a year in excess bills, precisely the kind of overuse that a health care overhaul is supposed to address.

In fact, the rate of vaginal birth after Caesarean (VBAC) is now below 10%.  Some doctors claim that VBACs risk tearing the mother’s scar tissue on her uterus, but others–including the profiled women on a Navajo reservation–successfully undergo multiple VBACs.  Why are the rates VBAC rates so low?

• Fears of malpractice
• Physicians make more money Caesarean rather than a vaginal birth
• Caesarean’s use fewer physician hours than vaginal births
• Fewer expected number of pregnancies
• Patient demand

Why are Caesarean rates so much lower on the Navajo reservation?  On the reservation, physicians are federally insured against malpractice, are paid a salary, and the use of midwives is much more common.  Additionally, Navajo “couples often want more than two children, but repeated Caesareans increase the risk of each pregnancy, so doctors and patients are motivated to avoid the surgery.”

To see further evidence of how different physician compensation methods can alter surgery rates, see my own study in Health Economics.