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Are All Readmissions Bad Readmissions?

September 1, 2010 in Hospitals | 1 comment

Currently, Medicare and private insurers are attempting to put in place incentives to reduce the number of readmissions. Visits to the hospital are costly and reducing the frequency of hospital visits is the best means to reduce medical costs. In particular, if readmissions are the fault of the care the patients receive during the initial admissions, hospitals should be liable for subsequent care.

On the other hand, a recent letter to the New England Journal of Medicine, argues that high readmission rates may in fact indicate high quality care.

“A higher occurrence of readmissions after index admissions for heart failure was associated with lower risk-adjusted 30-day mortality. Our findings suggest that readmissions could be ‘adversely’ affected by a competing risk of death — a patient who dies during the index episode of care can never be readmitted. Hence, if a hospital has a lower mortality rate, then a greater proportion of its discharged patients are eligible for readmission. As such, to some extent, a higher readmission rate may be a consequence of successful care.”

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Sigmoidoscopy: The colonoscopy’s cheaper, equally effective predecessor

August 23, 2010 in Physician Compensation, Prevention, Specialists | No comments

Physicians claims that colonoscopies are the gold standard of preventive medicine.  In 2008 the American Cancer Society deemed the colonoscopy as the preferred test and the health reform law (PPACA) will compel insurance companies to cover colonoscopies.  But does the sigmoidoscopy–the colonoscopy’s predecessor–offer less expensive, less invasive, equally effective preventive care?

“[The sigmoidoscopy] looks at only half the colon. In that test, there’s no sedation, no day off from work, no jug of laxatives the night before and maybe no gastroenterologist. Your primary care doctor could probably do the procedure himself…

Colonoscopy is three to four times more expensive than the simpler sigmoidoscopy test. And the risk of complication is seven times higher. Still the idea caught on. And as it did, it transformed the profession of gastroenterology. We went from too many specialists to a national shortage.”

In fact, the inventor of the colonoscopy, Al Neugut, wrote an editorial in the JAMA this summer stating that he regrets inventing the colonoscopy.  On Marketplace, Neugut said “If today, we were where we were in 1988, I would not institute colonoscopy based on the current evidence.”

The gold standard of preventive medicine may only be golden from the point of view of physician salaries.

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Wage Index Reclassifications

August 16, 2010 in Hospitals, Medicare | No comments

Should Medicare pay hospitals located in New York City more for the same care as hospitals in Montana?  Prima facie, one might believe that New York hospitals should receive higher wages since the costs of operating a hospital are much higher in New York.  Labor (i.e., nurses, doctors, etc.) may prefer to live in an urban environment and thus it is possible that the cost to attract labor in Montana would be higher.

To adjust inpatient prospective payments to hospitals, Medicare created a wage index system.  Each hospital’s wage index value determines whether their payments will be adjusted upwards or downwards depending on the cost of labor in their area.  The cost of labor is currently defined as the average hospital worker wage (adjusted for occupation) in a given metropolitan statistical area (MSA).

This simple methodology, however, is complicated by exceptions.  Today, I review some of those exceptions where hospitals can reclassify to MSAs where they’d receive a higher wage index value.

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Income and Long Term Care

August 10, 2010 in Nursing Homes | No comments

Almost 7 out of every 10 of individuals living to age 65 will require some long-term care (LTC) assistance.  Of these, over one-third will spend some time in a nursing home.  In general, however, the elderly strongly prefer home based LTC if possible.   “Mattimore and colleagues (1997) found that 30% of elderly survey respondents would rather die than enter a nursing home and an additional 26% indicated they were very unwilling to move to an institutional setting.”

A recent paper Goda, Golberstein and Grabowski (GGG hereafter) examines how permanent income shocks affect LTC utilization.

The estimation equation used is the following:

  • Uhi = βIh + δXh + ε

where U refers to a LTC utilization measure (e.g., nursing home, paid home health care, unpaid care), I is annual household Social Security Income, and X is a set of exogenous controls.

Identifying income and LTC choices independently is difficult.  Individuals with a high probability of needing LTC may more years or longer hours per year to accumulate additional assets to fund LTC expenses.  Ideally, identification requires an income shock that is exogenous to the individual’s labor market choices.  For that purpose, GGG rely on natural experiment known as the “Social Security Benefits Notch” to serve as an instrument for the income variable.  The authors define the Notch as follows:

“Prior to 1972, neither lifetime earnings nor post-retirement payments were indexed for inflation, but rather periodically adjusted by the Congress. In 1972, Congress amended the Social Security Act to provide automatic indexation of credited earnings for those workers who had not yet retired, which created an unanticipated windfall for workers from certain birth cohorts because of an error that led the prior earnings of these workers to be doubly indexed for inflation. The high rate of inflation over the following years led to a large increase in benefits for the affected cohorts. In 1977, Congress passed another law to eliminate the double indexation for future cohorts of retirees.  This law change created a large reduction in Social Security payments for those cohorts born in 1917 or later relative to the preceding cohorts. Importantly however, cohorts born prior to 1917 (near retirement in 1977) retained doubly indexed benefits under a grandfather provision. Taken together, these law changes and the high rate of inflation over the mid 1970s created a large and permanent difference in Social Security payments across birth cohorts, which came to be called the Social Security Benefits Notch.”

Econometrically, GGG use a dummy variable for being born in the notch years (i.e., 1915-1917).  To apply their model, the authors use data from the 1993 and 1995 waves of the Assets and Health Dynamics Among the Oldest Old (AHEAD).  The authors find that this instrument is weak for richer households who have at least a high school education, but much stronger for households whose heads have at least a high school diploma.  Due to this result, GGG limit the sample only households without a high school education.  Using this specification,  the authors find the following results:

“…positive income shocks had a negative effect on nursing home entry, but a positive effect on the use of paid home care. Specifically, a $1,000 (or 10.2 percent) increase in annual Social Security income for those in this low-education group would decrease the likelihood of any nursing home use by 22%-30% (relative to mean) and increase the likelihood of receiving any paid home care use by 24%-34%. Social Security income was not systematically related to the receipt of any informal (unpaid) care across the different specifications.”

At first glance, one might perceive that increased income leads to less nursing home care due to substitution for home health care.  Alternatively, higher income could improve health directly and thus lessen the need for institutionalized care.

One obvious mechanism by which increased income would decrease nursing home use is through disqualification of Medicaid eligibility.  The authors claim that assets rather than income are the key driver of Medicaid eligibility for nursing home care, but do not investigate how asset accumulation and the Social Security notch are related.

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Three Tiers of Accountable Care Organizations

August 4, 2010 in Health Reform, Supply of Medical Services | 1 comment

The Healthcare Economist has previously reviewed different forms of Accountable Care Organizations (ACOs).  Implementing ACOs in practice, however, may prove more difficult.  How could the government or private insurers incentivize providers to provide integrated care?  How can they incentivize providers do perform fewer services and, thus, make less money?

An article by Shortell and Casalino (2010) takes a tiered approach.  ACOs would be classified into one of 3 tiers.

  • Level  I: ACOs bear no financial risk, but simply receive a share of savings and bonuses for hitting quality targets.  This payment structure is similar to the Medicare Group Practice Demonstration.  The organizations would have to establish a legal practice entity that would be able to provide performance measures.  A minimum number of PCPs would also be required.
  • Level II: ACOs in this level would be eligible for a larger share of savings gains, but would also be liable to penalties if costs rise above predetermined targets.  Level II ACO’s would also be required to meet a wider scope of performance metrics.  Further, these ACOs would receive more bundled payments and episode of care payments as well.
  • Level III: The most “advanced” ACOs could be paid through full or partial capitation.  These ACOs would also be required to have public reporting of a comprehensive set of performance measures and electronic health records.

The Level I and Level II ACOs likely will only have a marginal impact on physician behavior.  For instance, assume that the cost per patient is $100 per year and ACOs in level II must pay 25% of any additional costs above $100.  If an ACO has $200 of charges per patient, even after the $25 penalty, they will still make $175, which is greater than what they would have made by reducing volume.  [This example does not take into account that performing more services also increases the cost for the physician.]

There is little doubt that paying physicians in Level III ACOs via capitation will decrease cost.  Physicians will not have an incentive to provide excessive services since they will not receive additional revenue.  The question is will quality remain the same?  Policymakers may claim that it will because of all the necessary quality metrics.  Nevertheless, most healthcare outcomes are difficult to measure and measuring some outcomes may cause physicians to transfer their efforts from improving more important, unmeasured outcomes to less important but measured outcomes.

Currently, Medicare is a fee-for-service system with the exception of the Medicare Advantage system.  Instituting a capitation-based system may meet much resistance from physician and hospital organizations such as the AMA and AHA.  It might be easier to simply transfer all Medicare beneficiaries to managed care rather than create ACOs.  Regardless, implementing ACOs in the U.S. will not be as easy as it seems.

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No Wrong Door

August 2, 2010 in Medicaid, Nursing Homes | No comments

In Virginia, there are over one million people age 60 and older and over 90,000 Virginians age 85 and older. These figures will only grow in the upcoming decades.  Thus will put increasing strain on public programs and will require service providers to reorient medical care toward providing continued, high-quality long term care services.  Long term care is of growing importance to health care sector.  Although the aged and disabled populations make up 30% of Virginia’s Medicaid population, these individuals account for 70% of the state’s $4 billion Medicaid budget.

Yet providing long term care to those in need is a confusing a bureaucratic process.  For instance, in Virgina, there are 6 agencies that provide long term care services:

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Atul Gawande’s Latest Article

July 30, 2010 in Nursing Homes, Supply of Medical Services | 1 comment

Atul Gawande has written yet another excellent article in the New Yorker.  This one about end of life care.  In the debate surrounding health reform, many politicians hijacked the serious discussion of end-of-life decisions and decisions to use non-invasive medical treatment were termed death panels.  But end-of-life decisions merit further investigation.  Not only can giving patients end-of-life treatment options lower cost, but it can also improve the patient remaining quality of life.  For instance:

“Coping with Cancer project published a study showing that terminally ill cancer patients who were put on a mechanical ventilator, given electrical defibrillation or chest compressions, or admitted, near death, to intensive care had a substantially worse quality of life in their last week than those who received no such interventions. And, six months after their death, their caregivers were three times as likely to suffer major depression.”

One reason that palliative care has not been adopted by more patients is that most hospice facilities compel patients to agree to forego more intensive services.  One innovative program convinced more terminal patients to use hospice facilities by allowing access to more intensive treatment while in hospice care.

“In late 2004, executives at Aetna, the insurance company, started an experiment. They knew that only a small percentage of the terminally ill ever halted efforts at curative treatment and enrolled in hospice, and that, when they did, it was usually not until the very end. So Aetna decided to let a group of policyholders with a life expectancy of less than a year receive hospice serviceswithout forgoing other treatments…A two-year study of this “concurrent care” program found that enrolled patients were much more likely to use hospice: the figure leaped from twenty-six per cent to seventy per cent. That was no surprise, since they weren’t forced to give up anything. The surprising result was that they did give up things. They visited the emergency room almost half as often as the control patients did. Their use of hospitals and I.C.U.s dropped by more than two-thirds. Over-all costs fell by almost a quarter.”

NPR’s Fresh Air also has an interview with Dr. Gawande.

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Hospital Quality

July 27, 2010 in Hospitals, Quality | 1 comment

The HCAHPS (Hospital Consumer Assessment of Healthcare Providers and Systems) is a standardized survey instrument and data collection methodology for measuring patients’ perceptions of their hospital experience.  HCAPHS is the first national standard for collecting and reporting hospitals quality data.

The survey asks discharged patients 27 questions about their recent hospital stay.  The survey is administered to a random sample of adult patients across medical conditions between 48 hours and six weeks following discharge.

Although CMS publicly reports the results of the HCAPHS survey, the sample is not restricted to Medicare beneficiaries.  However, hospitals are allowed to collect their own data which begs the question of whether they manipulate the data.  For instance, they may prefer worse satisfaction scores to have a low baseline or prefer high satisfaction scores to attract more patients.  Although I do not know if this occurs, one could envision a patient conveniently being dropped from the survey if they give the hospital a bad review.

The number of hospitals that publicly report HCAHPS results has increased from 2,521 in March 2008, to 3,711 in March 2009.

Timeline:

  • 2002.  CMS partnered with the Agency for Healthcare Research and Quality (AHRQ), another agency in the federal Department of Health and Human Services, to develop and test the HCAHPS survey.
  • May 2005.  National Qualify Forum endorses HCAHPS
  • December 2005.  Office of Management and Budget (OMB) approves HCAHPS
  • October 2006.  CMS implements HCAHPS survey
  • July 2007.  The Deficit Reduction Act of 2005 requires IPPS hospitals to submit HCAPHS data to receive full IPPS annual payment update.  Non-IPPS hospitals, such as Critical Access Hospitals, may voluntarily participate in HCAHPS.
  • March 2008. CMS publicly reports HCAHPS survey results on Hospital Compare.

Source: HCAHPS Fact Sheet, March 2009.

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Midwifery

July 2, 2010 in Nonphysician Clinicians | 11 comments

I recently watched a video advocating for increased use of midwives during births.  There is little doubt that using a midwife reduces costs.  In addition, many studies have shown that home births with midwives have comparable health outcomes to those in the hospital setting.  In fact, even births using non-nurse midwives have  health outcomes similar or better to when a doctor is involved.

What was surprising about the video was the following observation: 33.7% of Massachusetts births in 2007 were caesarean sections.

Why are there many caesareans?  Dr. Gene Declerq claims the reason is the cascade of intervention.  Dr. Declerq defines this term using the following scenario: “…they come in and they’re relative low risk, but to be cautious, they put a fetal monitor on them…because things do not appear to be going as quickly as they would like, they induce them or stimulate the labor.  And then because the contractions–as a result of the induction–become very strong, they have to do an epidural to try to relieve the pain from those now stronger  than natural contractions…that may slow labor a little further and then they have to keep adding intervention upon intervention to the point where at the end, somebody says ‘we’re going to do a Caesarean.  Thank god we’re able to do the Caesarean’ whereas if they hadn’t start that series of interventions in the first place, we may have never gotten to that point.”

An economist would simply claim that physicians do Caesareans because they are revenue enhancers.

Why aren’t midwives more popular?  Couldn’t midwives be the first option and only if there are problems would the patient be transferred to the hospital?  One reason is that obstetricians want to protect their turf.  Having midwives perform more births will not only take a large chunk of the birth market share, it may also drive down price.

Economists may to often run to the conclusion that financial incentives are the sole driving factor motivating human behavior.  In this case, however, one cannot help but arrive at the conclusion that hospitals and physicians have made giving birth a high-cost, high utilization process to increase their revenue.

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Medical Conservatism and End-of-life Decisions

June 20, 2010 in Medicare, Supply of Medical Services | 3 comments

The New York Times Magazine discusses two pressing issues: 1) what type of treatment to the elderly really wish to receive at the end of their life and 2) how does economic incentives affect how physicians advise these patients.  Much of my own research has dealt with (2) [see here].  The following two excerpts are revealing.

“According to an analysis by the Dartmouth Atlas medical-research group, patients are far more likely than their doctors to reject aggressive treatments when fully informed of pros, cons and alternatives — information, one study suggests, that nearly half of patients say they don’t get. And although many doctors assume that people want to extend their lives, many do not. In a 1997 study in The Journal of the American Geriatrics Society, 30 percent of seriously ill people surveyed in a hospital said they would ‘rather die’ than live permanently in a nursing home. In a 2008 study in The Journal of the American College of Cardiology, 28 percent of patients with advanced heart failure said they would trade one day of excellent health for another two years in their current state.”

“It was a case study in what primary-care doctors have long bemoaned: that Medicare rewards doctors far better for doing procedures than for assessing whether they should be done at all. The incentives for overtreatment continue, said Dr. Ted Epperly, the board chairman of the American Academy of Family Physicians, because those who profit from them — specialists, hospitals, drug companies and the medical-device manufacturers — spend money lobbying Congress and the public to keep it that way.“

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