Unbiased Analysis of Today's Healthcare Issues

Weekend Reading

Written By: Jason Shafrin - Oct• 04•14

Funding for Digital Medicine on the rise

Written By: Jason Shafrin - Oct• 02•14

What is digital health?  Although a single definition is hard to fine, digital health uses data collected from patients to improve care.  Mobile health, the use of electronic medical records, the “quantified self” movement and various forms of health information technology all count as digital health.

Is digital health just a fad or will it revolutionize health care?   If you look where the money is going, a good bet is on the latter. WonkBlog reports:

Companies in the Big Data and analytics space are the biggest fundraisers this year, with 77 deals totaling $1.17 billion, according to StartUp Health. That’s followed by companies that help navigate the health-care system (40 deals, $794 million) and practice management (26 deals, $598 million).

This isn’t just a San Francisco phenomenon either, though that city leads the country in digital health funding this year (62 deals, raising $948 million). It’s followed by New York ($584 million, 33 deals) and the D.C./Maryland area ($536 million, 14 deals).

The question seems now whether or not digital health will be the wave of the future, but rather exactly how it will affect the care provided to patients in the US and around the world.


Visit your doctor whenever you like

Written By: Jason Shafrin - Oct• 01•14

Typical hours when illness strikes is 24 hours a day, 7 days per week.  In the US, typical physician hours are 9-5, Monday through Friday.

Although this is changing (CVS Minute Clinics have Saturday and Sunday hours), it is still difficult for individuals who are work and are ill to see a doctor without taking time off for work.

In England, however, this may no longer be an issue. The UK’s National Health Service is planning a pilot program where patients will have access to primary care physicians 7 days per week.  Pharmafile reports:

Cameron says: “People need to be able to see their GP at a time that suits them and their family. That’s why we will ensure everyone can see a GP seven days a week by 2020. We will also support thousands more GP practices to stay open longer – giving millions of patient’s better access to their doctor.”

The plans are part of a new GP contract to be announced later today. In April the government launched a £50m pilot scheme where practices in nine key areas of England were able to bid for money in order to open from 8am to 8pm seven days a week, in addition to offering Skype consultations.

Despite these plans, fewer physicians in the UK are going into primary care. Thus, will the UK have the staff to fulfill these promises? Will it have the budget since these doctors likely would require salary increases to work nights and weekends?


CoR #218

Written By: Jason Shafrin - Oct• 01•14

David Williams of the Health Business Blog hosts this week’s abbreviated – but meaty – Cavalcade of Risk. From child-proofing your vacay to unique weorker’s comp risk calculations, you’re sure to find something interesting

What share of society’s “raise” should go to healthcare?

Written By: Jason Shafrin - Sep• 30•14

Politico.com has an interesting series of articles titled Obamacare 2.0, which examines different perspectives on how to improve the Affordable Care Act.   One common theme in about half the articles is that the ACA does not do enough to cut healthcare spending.

The rise in healthcare spending over the past few decades has been significant.  In 1995, 13.6% of the economy went to healthcare.  By 2012, this figure had climbed to 17.9%.  The CBO projects that federal spending on Medicare, Medicaid, CHIP and health insurance exchange subsidies will rise by 85% between 2014 and 2024.  Further, 22% of the federal budget goes to Medicare, Medicaid and CHIP, and this figure will only rise as the baby boomers retire.

Those who focus on cost control have a valid point which cannot be discounted, especially as it relates to the fiscal solvency of the federal government.

On the other hand, consider where else you would want to spend your money besides healthcare.  In 1995, per capita GDP in the US was $28,782.  By 2012, this figure had risen to $51,755.  In other words, each person saw an increase of $22,973 in income on average.  Of this increased income, $5,353 went to healthcare and $17,620 went to non-healthcare items.

Ignoring issues of the unequal distribution of income, one might think that by 1995 the US had sufficient income to cover the basic needs (e.g., clothing, food, housing) for all its citizens.  If this is the case, then how would you rather spend your money?  Nicer cars?  Bigger houses?  Better education?  Certainly.  However,  many believe that healthcare is a luxury good and that as society’s income increases, society and individuals become more willing to pay a larger share of their income towards healthcare.  Life is short and one cannot enjoy and of the aforementioned luxuries if you are not alive and healthy.

To put the increase in health spending another way, in essence, society got a 3.5% raise every year between 1995 and 2012 and we decided to spend 23 cents of every dollar of that raise on health care and 77 percent of the raise on everything else.

That doesn’t sound like too crazy a breakdown to me.

Reimbursement Rates and Quality

Written By: Jason Shafrin - Sep• 29•14

How do reimbursement rates affect quality?  One school of thought holds that decreased reimbursement decreases quality in the short-run and decreases innovation in the long-run.  Another school of thought believes that there is so  much inefficiency in the health care system, that reducing reimbursement rates will have no affect  on quality.  Which answer is correct?

A study by Wu and Shen (2014) aims to answer this question by examining the long-run impact on quality of the reimbursement rate reductions from the Balanced Budget Act of 1997 (BBA).  Why is the BBA so important?

With the exception of the Prospective Payment System (PPS), the BBA is the only legislation that reduced Medicare inpatient payments in nominal terms, rather than just slowing down the growth rate.  Second, BBA payment cuts could have a long-lasting effect on hospitals because the legislation not only reduced diagnosis-related group (DRG) payment levels between 1998 and 2002 but also permanently altered the formula for special add-on payments [i.e., DSH and IME payments]…Third, Medicare BBA reductions occurred after a sustained period of declining inpatient admissions and lengths of stay, as well as aggressive payment negotiations from managed care plans (Wu 2009) that limited hospital ability to cost shift to private payers.

Using MedPAR data between 1995 and 2005, the author uses a DDD design.  They compare “…the relative change in mortality trends between large- and small-cut hospitals before and after the BBA.”  They find that:

…the BBA generated long-term financial pressure to hospitals that extended beyond the BBA implementation period. While there is a general declining trend in AMI mortality rate, Medicare patients treated at hospitals facing a large degree of such fi nancial pressure experienced smaller improvement in mortality outcomes relative to patients treated in small-cut hospital, not in the short run, but in the longer run post-BBA period. The elasticity  of the effect, while small ( 0.2), is constant and consistently observed from 7-day to 1-year post hospitalization…hospitals responded to BBA cuts by reducing operating costs per bed immediately after the BBA took effect, and such effort involved a reduction in staffing, particularly among registered nurses.


Rankings and Kendall’s W

Written By: Jason Shafrin - Sep• 28•14

How can you compare how similar two rankings are.  For instance, US News and Consumer Reports may both rate hospitals.  If they have identical ratings, then they are obviously the same.  However, what if the rankings differ for 2 hospitals?  For 4 hospitals?  How can one quantify the similar of rankings?

One method for doing so is Kendall’s W (or Kendall’s coefficient of concordance).  Kendall’s W is a not parametric measure of how similar two or more rankings are.  Whereas the Spearman rank correlation measures the similarity of  any two sets of rankings, Kendall’s W can be used to measure similarity for more than two raters.

A common heuristic for judging Kendall’s W is the following:

  • ≤0: poor agreement
  • >0 to ≤0.2: slight agreement
  • >0.2 to ≤0.4: fair agreement
  • >0.4 to ≤0.6: moderate agreement
  • >0.6 to ≤0.8: substantial agreement
  • >0.8 to ≤1.0: almost perfect agreement.

Do demonstrate how to use Kendall’s W, I look at last year’s college basketball rankings.  I choose the top 5 teams according to the AP poll and see how other polls (RPI and Ken Pomeroy’s rating) would rank these same teams.  You can see the calculations of Kendall’s W for this example HERE.

End of week links

Written By: Jason Shafrin - Sep• 25•14

HWR and Recess

Written By: Jason Shafrin - Sep• 25•14

Billy Wynne has posted the  Thank God It’s Recess” edition of Health Wonk Review at Healthcare Lighthouse.  Check it out.


Stimulating Health Care Innovation

Written By: Jason Shafrin - Sep• 24•14

How do policymakers increase the speed of healthcare innovation in the US? A 2014 report by RAND gives five proposals which I list below with my own commentary.

  1. Enable more creativity in funding basic science. Increasing funding for basic science is a clear way to spur innovation. The opportunity cost of additional funding for science is other government programs that often have better short-term returns. However, few societal investments pay off in the long term like investments in science. RAND also proposes adopting the a funding model “used by the Howard Hughes Medical Institute, which funds scientists rather than
    projects…” This proposal would decrease the administrative burden on applicants and could target more funds to the most promising scientists. On the other hand, this policy would likely move research funds even more towards senior researchers, decrease the probability that junior researchers receive funding, and increase the cost of allocating funds incorrectly. Thus, the marginal payoff of this change is likely low.
  2. Offer prizes for inventions. Prizes for innovation is a good idea but of limited applicability. In cases where it is clear that innovation is needed, prizes can be highly useful. For instance, there is a clear need for an effective treatment for Ebola. Prizes could be useful here to spur innovation while lowering the marginal cost of the products near zero. On the other hand, much innovation occurs in unexpected medicine. No one has a clear idea of what the best ideas in digital health will be in 10 or 20 years. Thus, prizes for fast changing areas may reward innovations that quickly become obsolete.
  3. Buy out patents. In theory, buying out patents could create value to society. Pharmaceutical firms will charge a price not less than the estimated profits they would make over the lifetime of the patient. Society will benefit because the marginal cost of the innovation will fall to 0 and thus use of the product will increase above what would occur under monopoly prices. However, the true value of a patent is likely uncertain and pharmaceutical firms likely have more information about the true value of a product than the government. Thus, this policy will likely lead to the government systematically overpaying to buy out patents.
  4. Establish a public-interest investment fund. “The market rewards for inventing products that reduce spending are often too low to be attractive to private investors. A public-interest investment fund (PIIF) could finance such inventive efforts.” This approach could be beneficials but–RAND correctly worries–that this relies on government or quasi-government public-private partnerships to pick winners. Further, the government may have incentive to pick suboptimal treatments funded by the investment fund in order to receive a return on their investment even if superior products are available in the market.
  5. Expedite FDA reviews and approvals. Faster FDA reviews would certainly increase innovation. Lowering the cost to bring a product to market will improve innovation. This is especially important for digital medicine devices and smartphone diagnostic apps that the FDA is regulating.

Healthcare Economists’ Take

In summary, I believe the RAND propositions will have a small effect on innovation. Reducing barriers to entry by speeding up FDA review and increasing basic science fund would clearly improve innovation. Creating prizes, buying out patients, or creating a government investment fund would likely work in selected cases, but they will not have a major impact on innovation.