May 2011

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Hospital VBP gains the attention of the New York Times

May 31, 2011 in Current Events, Hospitals, Medicare, Value-Based Purchasing | No comments

The Healthcare Economist has already commented on the impending Medicare implementation of a hospital value-based purchased (VBP) system.  Now, Medicare’s hospital VBP program has garnered the attention of the popular press.  According to the New York Times:

“The administration plans to establish ‘Medicare spending per beneficiary’ as a new measure of hospital performance…Hospitals could be held accountable not only for the cost of the care they provide, but also for the cost of services performed by doctors and other health care providers in the 90 days after a Medicare patient leaves the hospital…

In calculating Medicare spending per beneficiary, the administration said, it wants to count costs generated during a hospital stay, the three days before it and the 90 days afterward. This, it said, will encourage hospitals to coordinate care “in an efficient manner over an extended time period…

Medicare will begin computing performance scores in July, for monetary rewards and penalties that start in October 2012.“

Do hospitals like the plan? Some do, but many do not.

This plan has drawn fire from hospitals, which say they have little control over services provided after a patient’s discharge — and, in many cases, do not even know about them…Without opposing the change, lawmakers from higher-cost states like Massachusetts and New York say the payment formula needs more work…Kenneth E. Raske, president of the Greater New York Hospital Association, said the formula ‘tends to discriminate against inner-city hospitals with large numbers of immigrant, poor and uninsured patients.’

By contrast, J. Kirk Norris, president of the Iowa Hospital Association, welcomed the new plan. ‘Medicare ought to pay for value,’ he said.

Will Medicare adequately risk adjust provider payments? Can hospitals coordinate post-acute care once their patients leave the hospital? Will additional coordination lead to increased industry consolidation and–in the long-run–increased health care cost? Will hospitals be able to game the system? How will Medicare monitor quality?

I have discussed these issues in series of previous posts on value-based purchasing. Hopefully, Medicare will get it right this time and improve quality while reducing cost. At this point, however, with Medicare Trust Fund set to be exhausted in 2024, reducing cost may be the priority which trumps all others.

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Why are more than 35 percent of elderly Swedes on disability?

May 31, 2011 in Health Care Around the World, International Health Care Systems | 1 comment

“The proportion of men collecting disability benefits at older ages varies greatly across countries — for example, more than 35 percent of 64-year-old men in Sweden and more than 25 percent of those in the Netherlands are on DI, versus 10 percent or less in Belgium, Italy, and Spain. Does this reflect differences in the underlying health status of older individuals in these countries? Or do differences in the provisions of the DI systems explain this variation in DI take-up rates?”

This is the question the Milligan and Wise attempt to answer in their Introduction to Social Security and Retirement around the World.  The Healthcare Economist suspects the answer is the latter.  Most people consider a quadriplegic disabled and those who are fully healthy are not disabled.  Many individuals, however, have partial disability. Many workers, for instance, suffer from back pain.  Measure the severity of the back pain is typically very difficult; some workers can continue working in physically strenuous jobs, others could continue to work in less physically strenuous jobs (e.g., blogging?), and for a minority the back pain is so severe that working at all is not feasible.  Because partial disability is not only common but also difficult to verify, public programs leniency regarding disability program eligibility likely affects the number of beneficiaries more than the underlying health status of the country.

Sure enough, Milligan and Wise come to the same conclusion.  Using “natural experiments” in which a country’s disability insurance reforms were not prompted by changes in health status or by changes in the employment circumstances of older workers, the researchers find that reforms have a large effect on the labor force participation of older workers.

Source:

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El Barça gana el Champions

May 30, 2011 in Current Events | 2 comments

My soccer team, FC Barcelona, won their fourth Champion’s league on Saturday.  Felicidades!

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Why does cost effective care spread so slowly

May 27, 2011 in CER | No comments

According to Fuchs and Millstein, here’s why:

  • Insurers hesitation to standardize coverage.  Standardization of coverage would force insurance companies to compete primarily on the basis of price, which would put pressure on their profits.
  • Employers bear too much of the marginal cost from employees choosing expensive health plans.  Because companies wish to avoid alienating employees, only 20% of large employers require workers who choose more expensive plans to pay the marginal difference in cost.
  • The public does not understand why cost effectiveness is good for them.  The general public does not typically realize that higher health insurance cost are not paid by employers, but by the employees themselves through lower wages in the long run.
  • Legislators need money.  Legislators seek campaign contributions from health industry stakeholders who benefit from the current inefficient arrangements.
  • Hospitals fear cost-effectiveness means lower reimbursements.  Hospital administrators often resist efforts to reduce hospital occupancy for fear that decreases in revenue will jeopardize their ability to cover large fixed costs.
  • Physicians fear pay cuts and loss of professional autonomy.
  • Drug and device manufacturers will lose profits.  Although manufacturer with unique products can sell their goods for a high price, there are alternatives to most medical products.  In these cases, firms attempt to create the perception that their products are unique to justify high prices.  Marketing and lobbying are vital parts of these efforts.

Source: Victor R. Fuchs, Ph.D., and Arnold Milstein, M.D., M.P.H “The $640 Billion Question — Why Does Cost-Effective Care Diffuse So Slowly?” NEJM, May 18, 2011.

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Memorial Day HWR

May 26, 2011 in Carnivals | No comments

The latest edition of the Health Wonk Review is up at the Health Affairs blog.

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Medicare Payment Adequacy

May 26, 2011 in Medicare, Public Policy | 2 comments

How do policymakers  determine if Medicare payment levels are adequate?  The Medicare Payment Advisory Commission (MedPAC) uses the following criteria:

  • Access to care determined by the number of providers and volume of services.
  • Quality of care
  • Provider access to capital
  • Provider margins.

Although these measures do provide valuable information, they are far from perfect.  Access to care basically means whether beneficiaries have the opportunity to use medical services should they need it.  This could be defined as the proximity of the closest provided or the length of time a beneficiary must wait to receive services.  If certain types of people use lots of services whereas others use few, overall volume of services will be an imprecise measure of access.  Further, the number of providers may obscure geographic variation where certain areas contain too many providers whereas others have too few.

Provider margins is also problematic.  Although aiming to set payments to produce moderate margins (i.e., not excessive, but sufficient to ensure continued provider operations) is reasonable, cost information comes directly from the providers.  Acute care hospitals, skilled nursing facilities (SNFs), home health agencies (HHAs), outpatient dialysis facilities, inpatient rehabilitation facilities (IRFs), long-term care hospitals (LTCHs) and hospices all must submit cost reports.  However, these providers may decide to inflate their costs.  Reporting higher costs will decrease their margins and may cause Medicare to increase payment rates.  At the very least, these providers can argue for higher reimbursement because of artificially low margins.  Medicare must be sure to carefully audit these reports if it plans to continue using them for payment purposes.

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Wednesday Links

May 25, 2011 in Current Events | No comments

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Drinking in College is “Largely Positive”?

May 24, 2011 in Public Health | 3 comments

According to Marshall Poe, drinking in college has more positives than negatives.

“Rowdy drinking is not the problem. It is an essential, ineradicable, and largely positive element of American college culture. The problem is students who cannot or will not engage in rowdy drinking safely, for they often harm themselves and others.”

How is drinking a positive?  According to Poe, it fosters community at the University of Iowa and many other American universities.

“For most students and alumni, rowdy drinking is considered essential to becoming a Hawkeye. …It may well constitute some of the glue that holds said package together. At Iowa and in American colleges throughout the nation, getting tight and acting silly with your classmates is a rite of passage. It is self-imposed hazing writ large. Like any initiation ritual, it comes at a price…In the vast majority of cases, however, that price is low: hangovers, poor grades, and fines. If you make it through — and almost everyone does — then you will have become a different person and be welcomed into a vast, eternal community. You will have earned the right to reminisce about your eventful days in Iowa City, to warn your children with a wink not to do the things you did, and to bask in the glory of being a Hawkeye.”

Drinking in college is certainly a risky behavior.  Public health offical should examine their efforts to stop college drinking in two parts: 1) what is the net impact of college drinking, and 2) will public health officials/college administrators be able to stop it.  On the first count, public health officials generally only focus on the cot of drinking and not the benefits (i.e., hedonistic pleasure, comradery).  On the second count, it seems like health efforts will only have a marginal effect on drinking.

Instead of demonizing college drinking, let’s focus on helping those who truly have a drinking problem, and let college kids who drink (relatively) responsibly have their fun.

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MedPAC’s Analysis of Inpatient Rehabilitation Facilities

May 23, 2011 in Medicare, Nursing Homes, Supply of Medical Services | No comments

Inpatient Rehabilitation Facilities (IRF) provide rehabilitation to invidiuals recovering from serious illnesses such as strokes or hip replacements.  Today I review MedPAC’s analysis of Medicare payment policies for IRFs.

In 2002, expenditures on IRF totaled nearly $5.7 billion. This figure grew at an annual rate of 6.7 percent to $6.4 billion in 2004. Between 2005 and 2009, however, fell to about $6.1 billion aggregate FFS expenditures for IRFs fell as more beneficiaries enrolled in Medicare Advantage plans and as facilities adjusted to comply with a “compliance threshold.” The compliance threshold aims to distinguish IRF from regular acute care hospitals. [Enforcement of compliance threshold in place from 1984-2004 was suspended between 2002-2003, but in 2004 CMS revamped the threshold by: 1) by increasing the number of conditions that count toward the threshold to 13; 2)mandating that only a subset of patients with major joint replacement would count toward the compliance threshold; and 3) consistently enforcing IRFs’ compliance with the threshold.]

MedPAC notes that payments per case have grown faster than costs per case since the implementation of PPS in 2002. In 2009, IRF margins were 8.4 percent.

To become an IRF, a facility must:

  • Have a preadmission screening process
  • Ensure patient receives various services (e.g., physical, occupational, rehab therapy; social services; prosthetic services)
  • Use interdisciplinary approach with nurse, social worker and/or therapist
  • Meet compliance threshold: no fewer than 60 percent of all patients admitted to the IRF must have at least 1 of 13 conditions,
  • Initiate therapy within 36 hours after admission

Eighty percent of IRFs are hospital-based and 20 percent are freestanding facilities.

Most IRF cases are for stroke, fracture of a lower extremity (e.g., hip), joint replacement, debility, neurological disorders, or brain, cardiac or spinal cord injuries.

There were approximately 360,000 Medicare fee-for-service (FFS) cases in IRFs in 2009.  Relatively few Medicare beneficiaries use IRF services because IRF patients must be able to tolerate and benefit from intensive rehabilitation therapy, which typically consists of three hours of therapy per day for at least five days per week.

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Can Home Health Care Reduce Cost?

May 20, 2011 in Home Health | 5 comments

At one point, the answer may have been yes.  But today…

“Although the initial impetus for establishing home health care was charitable, the Metropolitan Life Insurance Company (MetLife) discovered that by providing home health care, it could prolong life while collecting premiums and abstaining from death benefit payments. Yet the model experienced a requisite shift in focus in the 1920s stemming from a decrease in contagious diseases coupled with the proliferation of chronic illnesses, such as heart disease, diabetes, and stroke (Buhler-Wilkerson, 2007). MetLife and other insurers found that providing more care did not improve outcomes and sought to limit visits and eliminate the type of personal services offered. Ultimately, MetLife discontinued home nursing services, determining it unprofitable (Buhler-Wilkerson, 2007).

The years following World War II witnessed an increase in chronic conditions that overwhelmed hospitals and institutions, which, in turn, renewed interest in home health as an alternative to institutional care (Benjamin, 1993). Still, the reductions in institutional care assumed to flow from home health care proved elusive to document, and it was difficult to identify the appropriate population requiring home health care.”

The argument in favor of funding home health care for the chronically ill parallels the argument supporters of much more preventive care make.  They both state the home health care/preventive care is an investment that reduces costs in other settings, but both have little evidence to document these savings in most cases.

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