In 2010 Maryland replaced fee-for-service payment for some rural hospitals with “global budgets” for hospital-provided services called Total Patient Revenue (TPR).
A principal goal was to incentivize hospitals to manage resources efficiently. Using a difference-in-differences design, we compared eight TPR hospitals to seven similar non-TPR Maryland hospitals to estimate how TPR affected hospital-provided services. We also compared health care use by “treated” patients in TPR counties to that of patients in counties containing control hospitals.
Inpatient admissions and outpatient services fell sharply at TPR hospitals, increasingly so over the period that TPR was in effect.
Emergency department (ED) admission rates declined 12 percent, direct (non-ED) admissions fell 23 percent, ambulatory surgery center visits fell 45 percent, and outpatient clinic visits and services fell 40 percent.
However, for residents of TPR counties, visits to all Maryland hospitals fell by lesser amounts and Medicare spending increased, which suggests that some care moved outside of the global budget.
Nonetheless, we could not assess the efficiency of these shifts with our data, and some care could have moved to more efficient locations. Our evidence suggests that capitation models require strong oversight to ensure that hospitals do not respond by shifting costs to other providers.
“The health care system has become horribly perverted,” says Alex Gibney, director of The Inventor: Out for Blood in Silicon Valley.
Nobody likes having a needle stuck in their arm. And nobody likes having money sucked out of their wallet, either. So when smart young entrepreneur Elizabeth Holmes emerged from Silicon Valley claiming to have a cure for a broken health care system, politicians and journalists and investors couldn’t wait to shower her with praise and money.
But the story of Holmes’ company comes with a sting. Her black outfits helped create an image of a new Steve Jobs-esque voice in Silicon Valley, but after faking demos and lying about patient treatment Holmes and her partners are now awaiting trial on charges of fraud.
I asked the film’s Oscar-winning director, Alex Gibney, if we fetishize the idea of a genius inventor. “We do,” he told me by phone from San Francisco, “and it’s bullshit.” Having tackled corruption and deceit in films about Enron, the Church of Scientology and the White House, Gibney describes Holmes as “a variation on a theme” of the type of people he’s seen before. “Elizabeth was afflicted with the notion that the end justifies the means,” Gibney says. “She thought she was entitled to make mistakes because her intention was pure and worthy and socially vital. But the mind plays tricks with you when you start down that path, as you rationalize your behavior in ways that can become quite dangerous and delusional.”
Big-name investors from both inside and outside Silicon Valley fell for Holmes’ delusion, including Rupert Murdoch, who invested $125 million into Theranos. But the question remains whether the profit-driven private sector is even suited to solving health care problems. “Reports show the health care system in the US has become horribly perverted,” says Gibney, “through this patchwork system of insurance and private enterprise and then also government legislative initiatives. Medicare is not allowed to negotiate directly with drug companies, how crazy is that?”
Everyone can agree that fixing problems in health care is a noble cause, but relying on Silicon Valley and the private sector also lined up with other political agendas for the politicians who backed her. “This notion of the entrepreneur lets government off the hook,” Gibney says.
The director does credit Holmes with highlighting problems in the laboratory testing industry. “They’re incredibly opaque with their pricing,” he points out. Patients don’t pay directly for blood tests, so depending on the circumstances, the illness or even the state, lab companies can charge outrageous prices to insurance companies to complete the test.
The health care system “is designed to enrich companies rather than to serve the health of patients,” says Gibney. “It’s full of all sorts of bad incentives.”
While things clearly need to be improved, the Silicon Valley style of disruptive innovations may not be what we as patients need. Taking control of your own health is a “a very cool-sounding libertarian notion,” but Gibney cautions that “we’re not doctors.” He’s concerned about the idea of treating patients as customers, seducing us with promises of competitive prices and greater choice. “That’s good for sneakers,” he says, “but I’m not sure a consumer/producer relationship is necessarily good for health care. You want a patient/doctor relationship, and blood testing is part of it.”
Silicon Valley has adapted the credo of “move fast and break things,” which means iterating and making mistakes until you find the right path. But you can’t make mistakes when people’s lives are at stake. And real people were put at risk when Theranos pushed ahead with a contract with Walgreens to carry out blood tests for ordinary people.
“That was a line Elizabeth crossed,” says Gibney. “If she had just wasted a lot of investors’ money on a machine that didn’t work, there wouldn’t really be a story here. It was when she put people at risk, that was the problem.”
Gibney is concerned that Holmes will be portrayed as a one-off, “one rotten apple in an otherwise pristine barrel.” But he thinks the Theranos fraud shows cracks across Silicon Valley, the health care industry and capitalism as a whole. “I tried to indicate there are bigger problems in Silicon Valley in terms of lying, in terms of becoming disruptors in ways that may make people a lot of money but may not always be a good thing.”
Within Theranos, a culture of silence and paranoia couldn’t suppress the lies forever. And so Theranos employees blew the whistle on the deceit.
“I think all of us should be aware that there are certain cultural, and also legal, impediments to hearing the bad news,” says Gibney, who highlights the use of nondisclosure agreements to gag employees. These legal contracts are supposed to protect trade secrets, but they can also be used to prevent insiders from calling out corruption. “Look at Harvey Weinstein,” Gibney says. “NDAs are rapaciously used by people to cover up misdeeds.”
Yet for some reason, we have a strange relationship with those insiders who do come forward. “It’s sort of like they’re showing us up,” says Gibney. He recalls being asked the same two questions over and over after making The Smartest Guys in the Room, his film about the corruption within Enron: “One was about this guy who got away with it, sailed off with $200 million and married a stripper. But the other question was about Sharon Watkins, the whistleblower, and it was always, ‘Who does she think she is? How come she’s so holier-than-thou?’ Of all the lessons to take away from Enron, she’s not really the malefactor, but it seemed to really get under people’s skin.”
Gibney has made a career out of exposing corruption from the business sector to the CIA to the White House. “Part of us is secretly thrilled by people who are conning the game,” he says. “But we always at the end want to see them punished, so it’s kinda like a double pleasure. You wanna see ’em sneak around — and then you wanna see the hammer come down.”
“I’ve been spending a lot of time on problems,” Gibney says as we wrap up the interview. “I’m starting to think about doing films about people who are coming up with solutions.”
A paper out this week from Rice University healthcare economist Vivian Ho is the latest analysis to posit that vertical integration of doctors and hospitals does little to improve care quality. Researchers evaluated 29 primarily hospital-focused quality and patient satisfaction measures and found that higher levels of vertical integration were associated with improved performance on just a small number of metrics—and increased market concentration was associated with lower scores on all patient satisfaction measures.
Before concluding that vertical integration generates little improvement in quality, it’s worth looking a little deeper at the methodology of this study, as well as the larger drivers of hospital-physician integration. Researchers used a blunt measure of vertical integration, combining health systems’ self-reported physician alignment model with a standard index of hospital market concentration (on the theory that lower hospital-to-hospital competition indicates greater vertical integration). The performance measures examined are hospital-focused, ignoring outpatient care quality, as well as the nuance of whether the “integrated” physicians in any market are responsible for the outcomes measured (employing primary care doctors and orthopedic surgeons would have little impact on measures of hospital treatment of heart attacks).
In a press release, the author notes: “If patient welfare doesn’t improve after integration, there may be other reasons why physicians and hospitals are forming closer relationships—perhaps to raise profits.” That’s right: there are many motives for vertical integration. Surely profitability has been a driver, as well as the rising complexity and deteriorating economics of running an independent practice. In the real world, physician alignment strategies are rarely driven by the primary goal of improved quality. However, many health systems have begun to recognize that closer financial alignment is a necessary (but far from sufficient) requirement to enable real progress on quality improvement. Regardless of alignment approach, though, quality improvement results from the hard work of care process redesign and cultural change, not as the inevitable result of vertical integration. Success stories are still too few and far between, but we believe there is value in leveraging vertical integration to make this work easier. Condemning vertical integration seems a harsh verdict; a more appropriate criticism would be that much of the heavy lifting of care redesign is yet to begin.
More Medicare fee-for-service and Medicare Advantage beneficiaries are dying at home or in community settings than in acute care hospitals, according to new findings published in JAMA.
The study showed proportions of fee-for-service beneficiary deaths occurring in an acute care hospital decreased from 32.6% in 2000 to 19.8% in 2015. Proportions of deaths occurring in the home or in a community setting (foster care home, assisted living facilities) increased from 30.7% to 40.1% in the same time span.
Medicare Advantage beneficiaries were less likely to be hospitalized overall than those in traditional fee-for-service plans and, in the last 30 days of life, the difference in the hospitalization rates was 9.3% — a difference study author Joan Teno called “huge.”
Although most Americans over 65 say that they’d prefer to die at home, in 2009 only 24% of them actually did. Yet, in recent years, more and more Americans are choosing to live out their last days in their home or community instead of being admitted to a hospital.
The JAMA study reveals a potential patient response to the current inadequacy of end-of-life care as, for some older Americans, ending up in a hospital can mean high-cost and aggressive treatment in their final days.
Such treatment does not always equal better care. When it comes to their elderly patients, incumbent healthcare systems increasingly specialize in expensive, often unnecessary services as opposed to a value-based approach.
The findings come on the tide of the so-called “silver tsunami” as the American population skews ever older. The number of Americans aged 65 or older is projected to more than double by 2060, when they will eventually account for 24% of the total population.
New startups have emerged looking to address the institutional inadequacy of end-of-life care, viewing the aging population as a business opportunity. The growing companies zero in on technology-driven solutions in home health, chronic illness and end-of-life care as they look to scale to combat industry issues.
Such startups are a potential wake-up call for traditional healthcare organizations.
“Innovation comes from the private sector,” Teno, a professor of medicine at the University of Washington, told Healthcare Dive.
“I think the implication of this is that hospitals are going to have to change how they’re practicing. They’re going to have to come into new population-based business models that don’t have their entire survival based on their number of admissions,” she said.
On the hospital side, Teno called for multifaceted interventions that address the issue of care overuse and fragmentation in hospitals, such as care bundling and coordination, surveys measuring patient satisfaction and public reporting of readmission rates.
Despite the challenges, Teno was optimistic about study’s implications.
“We’re on the right path,” she said. “We need to wean ourselves off of this fee-for-service world of paying for a procedure and paying for volume, to paying for value.”
“The fee-for-service world provides perverse incentives,” Teno stressed, also noting that it tends to lead to hospital disorganization and miscommunication.
Teno cited the growth of Medicare Advantage as a program (it accounts for a third of Medicare enrollees and spending), and the 9.3% difference in hospitalization rates between MA and fee-for-service as a good sign for the future of healthcare.
It’s one of the intractable financial boondoggles of the U.S. health care system: Lots and lots of patients get lots and lots of tests and procedures that they don’t need.
Women still get annual cervical cancer testing even when it’s recommended every three to five years for most women. Healthy patients are subjected to slates of unnecessary lab work before elective procedures. Doctors routinely order annual electrocardiograms and other heart tests for people who don’t need them.
That all adds up to substantial expense that drives up the cost of care for all of us. Just how much, though, is seldom tallied. So, the Washington Health Alliance, a nonprofit dedicated to making care safer and more affordable, decided to find out.
Have you worked in the health insurance industry? You have expertise that could help ProPublica’s reporting. Please share your insights with Marshall Allen to help him learn about the industry.
The group scoured the insurance claims from 1.3 million patients in Washington state who received one of 47 tests or services that medical experts have flagged as overused or unnecessary.
What the group found should cause both doctors, and their patients, to rethink that next referral. In a single year:
More than 600,000 patients underwent a treatment they didn’t need, treatments that collectively cost an estimated $282 million.
More than a third of the money spent on the 47 tests or services went to unnecessary care.
3 in 4 annual cervical cancer screenings were performed on women who had adequate prior screenings – at a cost of $19 million.
About 85 percent of the lab tests to prep healthy patients for low-risk surgery were unnecessary — squandering about $86 million.
Needless annual heart tests on low-risk patients consumed $40 million.
Susie Dade, deputy director of the alliance and primary author of the report released Thursday, said almost half the care examined was wasteful. Much of it comprised the sort of low-cost, ubiquitous tests and treatments that don’t garner a second look. But “little things add up,” she said. “It’s easy for a single doctor and patient to say, ‘Why not do this test? What difference does it make?'”
ProPublica has spent the past year examining how the American health care system squanders money, often in ways that are overlooked by providers and patients alike. The waste is widespread – estimated at $765 billion a year by the National Academy of Medicine, about a fourth of all the money spent each year on health care.
The waste contributes to health care costs that have outpaced inflation for decades, making patients and employers desperate for relief. This week Amazon, Berkshire Hathaway and JPMorgan Chase rattled the industry by pledging to create their own venture to lower their health care costs.
Dr. H. Gilbert Welch, a professor at The Dartmouth Institute who writes books about overuse, said the findings come back to “Economics 101.” The medical system is still dominated by a payment system that pays providers for doing tests and procedures. “Incentives matter,” Welch said. “As long as people are paid more to do more they will tend to do too much.”
Dade said the medical community’s pledge to “do no harm” should also cover saddling patients with medical bills they can’t pay. “Doing things that are unnecessary and then sending patients big bills is financial harm,” she said.
Officials from Washington’s hospital and medical associations didn’t quibble with the alliance’s findings, calling them an important step in reducing the money wasted by the medical system. But they said patients bear some responsibility for wasteful treatment. Patients often insist that a medical provider “do something,” like write a prescription or perform a test. That mindset has contributed to problems like the overuse of antibiotics — one of the items examined in the study.
The report may help change assumptions made by providers and patients that lead to unnecessary care, said Jennifer Graves, vice president for patient safety at the Washington State Hospital Association. Often a prescription or technology isn’t going to provide a simple cure, Graves said. “Watching and waiting” might be a better approach, she said.
To identify waste, the alliance study ran commercial insurance claims through a software tool called the Milliman MedInsight Health Waste Calculator. The services were provided during a one-year period starting in mid-2015. The claims were for tests and treatments identified as frequently overused by the U.S. Preventive Services Task Force and the American Board of Internal Medicine Foundation’s Choosing Wisely campaign. The tool categorized the services one of three ways: necessary, likely wasteful or wasteful.
The report’s “call to action” said overuse must become a focus of “honest discussions” about the value of health care. It also said the system needs to transition from paying for the volume of services to paying for the value of what’s provided.
Whenever I talk to physicians about outcomes that are worse than you’d expect, they are quick to point out that noncompliance — when a patient does not follow a course of treatment — is a major problem.
Sometimes prescriptions aren’t filled. Other times they are, but patients don’t take the drugs as prescribed. All of this can lead to more than 100,000 deaths a year.
A thorough review published in The New England Journal of Medicine about a decade ago estimated that up to two-thirds of medication-related hospital admissions in the United States were because of noncompliance, at a cost of about $100 billion a year. These included treatments for H.I.V., high blood pressure, mental health and childhood illnesses (it can be difficult to get children to take their medicine, too).
To address the issue, researchers have been trying various strategies, including those rooted in behavioral economics. So far, there hasn’t been much progress. A systematic review published five years ago in Annals of Internal Medicine looked at all kinds of trials that tried to improve patient compliance. It found some limited successes in improving patient compliance in different disorders, but most of the trials were small and not easily generalized outside the research setting.
A more recent Cochrane review concluded that “current methods of improving medication adherence for chronic health problems are mostly complex and not very effective.”
At first glance, behavioral economics — the basis of Richard Thaler’s recent Nobel Prize in Economics — seems like a rich field of potential solutions. People tend to do things, like donate organs, when it’s the default option as opposed to something they need to request. They tend to be less likely to miss appointments if you tell them how many other patients show up for theirs. They tend to be more likely to engage in preventive behaviors like using sunscreen if you focus on the benefits, not the harms. Many are turning to ideas like these to improve medication adherence.
But those excited about the potential of behavioral economics should keep in mind the results of a recent study. It pulled out all the stops in trying to get patients who had a heart attack to be more compliant in taking their medication. (Patients’ adherence at such a time is surprisingly low, even though it makes a big difference in outcomes, so this is a major problem.)
Researchers randomly assigned more than 1,500 people to one of two groups. All had recently had heart attacks. One group received the usual care. The other received special electronic pill bottles that monitored patients’ use of medication. Those patients who took their drugs were entered into a lottery in which they had a 20 percent chance to receive $5 and a 1 percent chance to win $50 every day for a year.
That’s not all. The lottery group members could also sign up to have a friend or family member automatically be notified if they didn’t take their pills so that they could receive social support. They were given access to special social work resources. There was even a staff engagement adviser whose specific duty was providing close monitoring and feedback, and who would remind patients about the importance of adherence.
This was a kitchen-sink approach. It involved direct financial incentives, social support nudges, health care system resources and significant clinical management. It failed.
The time to first hospitalization for a cardiovascular problem or death was the same between the two groups. The time to any hospitalization and the total number of hospitalizations were the same. So were the medical costs. Even medication adherence — the process measure that might influence these outcomes — was no different between the two groups.
The researchers in this trial deserve praise for their frank assessment of their results, as well as for trying to brainstorm ways in which they might achieve success in the future. Getting patients to change their behavior is very hard. In the past, we’ve tried making drugs free to patients to get them to adhere to their medications and improve outcomes. That failed. We’ve tried lotteries (as in the study above) to nudge people to achieve better compliance. That failed.
Maybe financial incentives, and behavioral economics in general, work better in public health than in more direct health care. There have been successes, after all, with respect to weight loss — although these seemed to disappear over time. We’ve also seen promise with respect to smoking cessation, although these come with caveats as well.
Experts caution that the interventions that achieve success are often very intensive. They demand a great deal of attention, and can be quite expensive. Moreover, they are very focused, usually on a single issue or condition.
The problem is that health has so many moving parts. The health care system has even more. Trying to improve any one aspect can make others worse. Behavioral economics may offer us some fascinating theories to test in controlled trials, but we have a long way to go before we can assume it’s a cure for what ails Americans.