Unbiased Analysis of Today's Healthcare Issues

CoR #216: The End of Summer Edition

Written By: Jason Shafrin - Sep• 03•14

Tim Dodge of iiabny makes a fine CavRisk debut with an impressive and eclectic collection of risky posts – everything from stolen kayaks to legalized marijuana. You can find the posts here: 

Do we need to go back to PHRs?

Written By: Jason Shafrin - Sep• 01•14

There has been lots of public outcry for integrated, interoperable electronic health records (EHR).  Having EHRs silos makes it difficult for physicians, hospitals and other providers to share information with one another and with patients.  However, there is one benefit of these silos; any data breach will be somewhat contained.

Are data breaches of EMRs a problem.  A recent hacker attack on a hospital system clearly shows the answer is yes.

Community Health Systems Inc, one of the biggest U.S. hospital groups, said on Monday it was the victim of a cyber attack from China, resulting in the theft of Social Security numbers and other personal data belonging to 4.5 million patients.

That would make the attack the largest of its type involving patient information since a U.S. Department of Health and Human Services website started tracking such breaches in 2009.

It almost (I said almost) makes you yearn for the days of PHRs (paper health records).

Health Benefits of a Vacation

Written By: Jason Shafrin - Aug• 28•14

The Healthcare Economist will be off through Labor Day, taking a vacation to San Diego.  Inspired by this trip, below is a study that finds that people who take vacations are healthier.  Although not a randomized trial, this evidence is suggestive.  The Huffington Post paraphrases:


In a study of 13,000 middle-aged men at risk for heart disease, those who skipped vacations for five consecutive years were found to be 30 percent more likely to suffer heart attacks than those who took at least one week off each year. Even missing one year’s vacation was associated with a higher risk of heart disease.

This result applie for both men and women according to this study.  Again, Huffington Post paraphrases:

A study conducted among 1,500 women in rural Wisconsin found that those who take vacations twice a year or more were less likely to become tense, depressed or tired than those who took vacations once every two years. In addition, the odds of marital satisfaction decreased as the frequency of vacations decreased.

Have a Happy Labor Day Holiday.

Mid-week links

Written By: Jason Shafrin - Aug• 26•14


Why don’t payers adopt my technology?

Written By: Jason Shafrin - Aug• 25•14

Why don’t payers adopt innovative approaches to treat mental illness? For instance, crisis intervention programs, recovery-focused consumer education programs, telehealth programs, and on-line treatment programs have sometimes have had problems receiving reimbursement from payers. Monica Oss of OpenMinds takes the payers’ perspective:

Often, the organization proposing the new program comes to the table with an expectation that the payer will reimburse for the service on a traditional volume-based, fee-for-service (FFS) basis. For most payers (whether Medicaid, Medicare, health plans, or employer health plans), the prospect of adding a new program that is reimbursed on a volume basis is problematic. There is no “guarantee” of cost savings – and a very real possibility of increased cost.

How do you gain payer approval? One option is to bring data of significant health improvements and/or large cost offsets. For instance, effective drugs may improve health and also decrease hospitalization rates. Another option is to put yourself at financial risk using a pay-for-performance approach or cost sharing financial agreement.

A great example of this principal in action is the recent decision by the Centers for Medicare & Medicaid Services (CMS) to waive the Medicare rules requiring a three-day hospital stay for covered skilled nursing facility (SNF) care – but only for provider organizations in the Bundled Payments for Care Improvement initiative, accepting bundled payments (referred to as Model 2). In the Model 2 arrangement, each participating provider (as of March 2014, there are 169) chooses their own “custom” bundled services from a group of 48 different episodes (for the full list, see BPCI Initiative Episodes: Details on the Participating Health Care Facilities).

Under this program, Medicare continues FFS payments to the participating providers, but the total payment for a beneficiary’s episode will then be compared against a CMS estimate of what the bundled services ‘should’ cost. If the provider delivers care under the estimate, they share in the savings. If the cost of services goes over the estimate, the provider makes up the difference…

This is an example…where payers are willing to give flexibility to provider organizations – in programming, in care authorization, in service eligibility requirements, etc. – but only when the provider organization has a shared financial incentive.

Providers and manufacturers generally may dislike risk sharing; insurers are the ones who manage risk, providers and manufacturers treat patients. However, as the US continues to move towards considering cost-effectiveness in reimbursement, demonstrating that your product creates value for patients and payers will become increasingly important for providers, pharmaceutical firms and devicemakers.

A biologic by any other name would smell as sweet?

Written By: Jason Shafrin - Aug• 24•14

How important is a name?  In the case of biologics and biosimilars, billions of dollars depends on whether biosimilars can share the same name as branded biologics.  WonkBlog explains the biologic vs. biosimilar debate:

Biologics, which treat serious diseases like cancer and multiple sclerosis, are usually more expensive than conventional drugs, and they’re also harder to make. Unlike traditional drugs made from chemicals, biologics are made from the proteins of living organisms. So that also makes it impossible to exactly duplicate biologics, but copy cat “biosimilars” are near-replicas of these drugs and have been selling at about 20 percent to 30 percent lower than the biologic price in foreign markets.

Biosimilars are still waiting to break into the United States, though. By one estimate, the U.S. market for these drugs will grow from virtually nothing to $36 billion by the end of the decade…

The question comes down to this: Should biosimilars be allowed to share the same as the biologics they’re substituting, similar to the way generic drugs share an identification with the brand-name product. The answer to this question will likely help determine how widely biosimilars will be used when they’re approved in the United States.

…last week, 10 groups representing specialty physicians urged the FDA to require unique names for biosimilars, citing the difficulty of trying to copy the original biologics among other reasons. “Distinct nonproprietary names will help to alert physicians that each product, while safe and effective, may differ slightly.”

The results of this ruling will have large implicaitons for patients, payers, policymakers and physicians throughout the U.S.

Friday Links

Written By: Jason Shafrin - Aug• 22•14

Medicare Advantage Plans: Thumbs Up or Down?

Written By: Jason Shafrin - Aug• 20•14

Austin Frakt says although Medicare Advantage plans used to be considered high cost, low-quality options, in recent years, these Medicare Advantage plans have vastly increased quality of care and have become less focused on cream-skimming healthier patients.


Medicare Advantage plans — private plans that serve as alternatives to the traditional, public program for those that qualify for it — underperform traditional Medicare in one respect: They cost 6 percent more.

But they outperform traditional Medicare in another way: They offer higher quality. That’s according to research summarized recently by the Harvard health economists Joseph Newhouse and Thomas McGuire, and it raises a difficult question: Is the extra quality worth the extra cost?

It used to be easier to assess the value of Medicare Advantage. In the early 2000s,Medicare Advantage plans also cost taxpayers more than traditional Medicare. It also seemed that they provided poorer quality, making the case against Medicare Advantage easy. It was a bad deal…

…in contrast to studies in the 1990s, more recent work finds that Medicare Advantage is superior to traditional Medicare on a variety of quality measures. For example, according to a paper in Health Affairs by John Ayanian and colleagues, women enrolled in a Medicare Advantage H.M.O. are more likely to receive mammography screenings; those with diabetes are more likely to receive blood sugar testing and retinal exams; and those with diabetes or cardiovascular disease are more likely to receive cholesterol testing.

This may be why almost 1 in 3 Medicare beneficiaries choose a Medicare Advantage plan over traditional Medicare fee-for-service.

CoR #215 is up

Written By: Jason Shafrin - Aug• 19•14

Paul Dzielinski of The DEC page makes his CavRisk debut with an excellent round-up of interesting posts, and his own helpful insights on each one. 

How much are you willing to pay to live an extra year?

Written By: Jason Shafrin - Aug• 18•14

Health Economists often use the cost per quality-adjusted life year (QALY) metric to answer this question.  QALYs are used to measure not only the additional years of life from a treatment, but also the quality of life.  For instance, you may prefer to live 1 year in perfect health to two years in a coma.  A QALY of 0.5 can indicate that the patient lived for 6 months in perfect health or for 1 year at a 50% health level.

Two popular methods to evaluate the value of a statistical life are stated preference and the value of a statistical life methods.

A first and direct approach is to ask respondents about their WTP for small health increases/QALYs using stated preference (SP) techniques such as discrete choice experiments or contingent valuation. The WTP estimates can subsequently be used to estimate the WTP for a gain in a full QALY. A second approach is to use the monetary value of preventing fatalities (the value of a statistical life), on which there is a substantial empirical literature, in order to implicitly derive the WTP-Q assuming a certain life expectancy (LE) and discount rate for the sample on which the value of life is derived.

Payers often used the cost per additional QALY to determine if a product is cost effective.  Countries often only approve reimbursement for a therapy if the cost per QALY falls below a certain threshold.  Ryen and Svensson (2014) write:

Threshold values often referred to in the literature and policy debates include the US value of US$50,000 to US$100,000 (approximately €37,500 to €75,000), which dates back to 1982 (Kaplan and Bush, 1982), and a UK threshold value around £20,000 to £30,000 (approximately €24,000 to €36,000) (NICE, 2004). In Sweden, relevant government authorities have suggested a threshold of 500,000 SEK (approximately €57,000) (Socialstyrelsen, 2007).1

The authors look at the literature on the value of a QALY and find significant variation across studies.


Overall, the average willingness to pay for a QUALY is 118,839 EUR 2010, which is equivalent to $179,000 USD in today’s dollars. The median WTP however, is only 24,226 EUR (or $36,000 in 2014 USD). Additionally, there is variation across method for valuing a life year. WTP measures using the stated preference measure are likely to be much smaller than those using the value of a statistical life (VSL) measure. Disregarding the 2.5% highest and lowest estimates, respectively, the resulting trimmed mean amounts to €74,159, or ($114,545 in 2014 USD)
WTP QALY Summary

Some additional conclusions from the authors:

We find that individuals have a higher WTP if the QALY is based on length of life improvements compared with QoL improvements. Further, the evidence indicates that there is a problem with scale bias, that is, WTP is not linearly proportional to the QALY change respondents are asked to value, which implies that WTP-Q is lower if respondents are asked to value higher changes in QALY.