Unbiased Analysis of Today's Healthcare Issues

Quality-Adjusted Cost Of Care

Written By: Jason Shafrin - Apr• 06•15

One of my paper (along with co-authors Darius Lakdawalla, Claudio Lucarelli, Sean Nicholson, Zeba M. Khan and Tomas J. Philipson) was published at Health Affairs.  The title of the study is: Quality-Adjusted Cost Of Care: A Meaningful Way To Measure Growth In Innovation Cost Versus The Value Of Health Gains.  The abstract is below.

Technology drives both health care spending and health improvement. Yet policy makers rarely see measures of cost growth that account for both effects. To fill this gap, we present the quality-adjusted cost of care, which illustrates cost growth net of growth in the value of health improvements, measured as survival gains multiplied by the value of survival. We applied the quality-adjusted cost of care to two cases. For colorectal cancer, drug cost per patient increased by $34,493 between 1998 and 2005 as a result of new drug launches, but value from offsetting health improvements netted a modest $1,377 increase in quality-adjusted cost of care. For multiple myeloma, new therapies increased treatment cost by $72,937 between 2004 and 2009, but offsetting health benefits lowered overall quality-adjusted cost of care by $67,863. However, patients with multiple myeloma on established first-line therapies saw costs rise without corresponding benefits. All three examples document rapid cost growth, but they provide starkly different answers to the question of whether society got what it paid for.


Does your doc want to be in an ACO?

Written By: Jason Shafrin - Apr• 05•15

The answer is likely “It depends.”  To see why this is the case, let us consider the case of some proposed health reforms in Switzerland to force physicians into managed care (MC) networks.  As described in Rischatsch (2015):

In 2012, Switzerland held a referendum…aimed at encouraging the nationwide development of MC networks. Among other changes…the legal text contained that the health care providers organized in physician networks are financially responsible for the medical provision of the network-insured individuals. In other words, the implementation of a budgetary co-responsibility for ambulatory care physicians was intended. The referendum was rejected by a strong majority of voters (76%)…The physician community successfully campaigned against the referendum with the argument that the reform would abolish free physician choice because the reform also intended to impose a higher co-payment for patients that were not treated in a physician network.

Motivated by this referendum, Rischatsch conducts a discrete choice experiment to examine physician preferences.

The discrete choice experiment, completed by 872 physicians in 2011, reveals a strong preference heterogeneity among Swiss ambulatory care physicians. On the one hand, a first group of physicians – mainly general practitioners – is indifferent between working in a network or in independent practice as long as no budgetary responsibility is imposed, but preferences change depending on the design of the reimbursement mechanism. On the other hand, a major share of physicians – mainly specialists with surgical activities – are unwilling to work in a physician network regardless of how the reimbursement scheme is designed.

In summary, there are some physicians who are interested in actively sharing in risk and others–particularly specialists–who have little incentive to do. These are two extremes, but is important to take into account not only patient and payer preferences for managed care (or accountable care organizations), but also the physician preferences as well.


Friday Links

Written By: Jason Shafrin - Apr• 02•15

Transitioning to Alternative Payment Models

Written By: Jason Shafrin - Apr• 01•15

CMS has stated that they want 30% of all fee-for-service payments to be transitioned to alternative payment models–such as pay for performance–in the upcoming years.  A future where all providers are paid capitation or based on some measure of value is not here yet.  And in the interim, providers are dealing with a complex system of reimbursement schemes that are in and of themselves very complex.  A RAND study on how alternative payment policies affect physician practices finds that:

a serious tension could also arise when practices participated in a mix of both fee-for-service (FFS) and risk-based contracts. In those situations, some practices reported facing fundamentally conflicting incentives—to increase volume under the FFS contract while reducing costs under the risk-based contract. This conflict was especially acute for hospital owned physician practices, in which reductions in hospital utilization—which are strongly incentivized under risk-based contracts—could undermine the financial well-being of the parent organization.

Even though provider groups may be incentivized different ways, physician groups generally do shield individual physicians from direct financial incentives from payers.

Despite the fact that many practices are paid via capitation or some form of risk sharing, most physicians are paid a salary or compensated based on productive (i.e., RVUs.)

Do physicians like the new systems? The initial findings seems like the answer is ‘no.’

However, the overall quantity and intensity of physician
work had increased because of growing patient volume expectations and ongoing pressure for
physicians to practice at the “top of license” (e.g., by delegating less intense patient encounters
to allied health professionals), which was described as a potential contributor to burnout
because lower-intensity patients could be an important source of respite for busy physicians…Additional nonclinical work, particularly documentation requirements, created significant discontent


Why doesn’t evidence based medicine spread faster?

Written By: Jason Shafrin - Mar• 31•15

One reason is that physicians may value their own experiences (i.e., learning by doing) over the accumulated experience across many providers.  A paper by Berndt et al. (2015) look at physician prescribing patterns of antipsychotic.  They note that some physicians concentrate in prescribing specific antipsychotics and others concentrate on prescribing other ones.

The authors claim the reason for this is that the physicians learn-by-doing. For instance, it is more difficult for a physician to learn how to adequately titrate the dose of 10 antipsychotics compared to focusing on how best to do this for a single one.  This approach is clearly sensible in many cases, but it limits the spread of evidence-based guidelines.

…advances in the practice of evidence-based medicine are likely to be constrained considerably if physicians limit the evolution of their evidentiary platform to their own learning-by-doing experiences, down-weighting accumulating evidence reported by other prescribers. Concentrated,“one size fits all” prescribing behavior could fail to exploit opportunities to successfully tailor or “personalize” medical treatments to patients’ idiosyncratic genetic, environmental and behavioral characteristics.

The authors found that psychiatrists who prescribe a high-volume of antipsychotics are the ones most likely to deviate from national market shares.

Another explanation for their results is pharmaceutical detailing. Pharmaceutical firms marketing choice could explain physician decisions to specialize in prescribing specific drugs. However, the authors find that:

…the highest volume psychiatrists in the youngest quartile prescribe a larger share of old drugs. This is consistent with our learning-by-doing framework, but is at odds with the detailing hypothesis, because these youngest high-volume psychiatrists are likely to have been heavily detailed on new drugs, but are likely never to have been detailed on the old drugs.


Quotation of the Day

Written By: Jason Shafrin - Mar• 30•15

Logic will get you from A to B. Imagination will take you everywhere.

– Albert Einstein

Fixing the “doc fix”

Written By: Jason Shafrin - Mar• 29•15

The sustainable growth rate (SGR) was implemented by Congress in1998.  The SGR’s aim was to slowly bring down or at least decellerate Medicare compensation for physicians compensation.  However, each year, it gets reversed by Congress. Now, instead of a gradual decline, the implementation of SGR would  result in about at 25%pay cut for Medicare docs.

I have written many previous posts about how at the end of each year, Congress passes a temporary law which reverses the SGR for a single year.  Fixing the SGR for a single year kicks the can down the road, but for lawmakers, they don’t have to deal with the budgetary implications on a bill’s CBO scorecard.

However, the annual write of passage of temporary fixes may be over.  The New York Times reports:

The House overwhelmingly approved sweeping changes to the Medicare system on Thursday, in the most significant bipartisan policy legislation to pass through that chamber since the Republicans regained a majority in 2011.

The measure, which would establish a new formula for paying doctors and end a problem that has bedeviled the nation’s health care system for more than a decade, has already been blessed by President Obama, and awaits a vote in the Senate. The bill would also increase premiums for some higher income beneficiaries and extend a popular health insurance program for children.

The legislation, which passed on a 392-to-37 vote, embodies a rare and significant agreement negotiated by Speaker John A. Boehner and the House Democratic leader, Representative Nancy Pelosi of California, two leaders who are so often at odds with each other.

This bill still needs to pass the Senate, but this is good news for sensible budgeting. There has been some criticism that SGR will bust the federal budget, but the issue was that the decreases in physician compensation would never have really come to pass. Thus, a permanent doc fix will simply make the cost of Medicare more transparent, rather than increasing federal outlays.

Friday Links

Written By: Jason Shafrin - Mar• 26•15

HWR is up

Written By: Jason Shafrin - Mar• 26•15

Jennifer Salopek has posted the latest Health Wonk Review, Spring Break Edition at Wing of Zock.  This week’s topics are diverse and far ranging – Jennifer does a great job dishing them up.

A Neurosurgeon and A Patient

Written By: Jason Shafrin - Mar• 25•15

The moving story of Paul Kalanithi.

That message is simple: When you come to one of the many moments in life when you must give an account of yourself, provide a ledger of what you have been, and done, and meant to the world, do not, I pray, discount that you filled a dying man’s days with a sated joy, a joy unknown to me in all my prior years, a joy that does not hunger for more and more, but rests, satisfied. In this time, right now, that is an enormous thing.

Paul Kalanithi.