Health Care Is an Investment, and the U.S. Should Start Treating It Like One


We invest billions of dollars each year in medicines, new technologies, doctors, and hospitals — all with the goal of improving health, arguably our most prized commodity. Yet, investments in the U.S. health care system woefully underperform relative to those made in health care in other countries. For instance, the U.S. spends nearly 7–10% more of its national income on health care than other similar countries and yet life expectancy at birth remains, on average, two to three years lower.

To be sure, many factors influence health outcomes and the investments the health care system makes are only one input. But a large reason why investments in health care underperform is because we invest so much in services that are clearly low-value — i.e., offer little or no clinical benefit relative to the cost — and likely many more where the returns are gray. Investing limited health care dollars into low-value services crowds out our ability to spend on high-value services. So if we want to see better outcomes, we need to start to think like investors.

Examples of significant investments in low-value care services abound in the U.S. health care system, ranging from expensive imaging for benign medical conditions to routine pre-operative testing before low-risk surgeries like cataract surgery. Some research estimates that 42% of Medicare beneficiaries receive some form of low-value care.

Many factors contribute to our failure to disinvest from low-value services and invest more heavily in high-value services. For one thing, physicians, insurers, and patients often have limited data on the relative value of different health care services. There is an abundance of high-quality comparative effectiveness data for pharmaceuticals, largely because of the drug approval process, but there’s less data on the value of other expensive investments into health, such as doctor visits and hospitalizations. Put differently, there is no equivalent of the Food and Drug Administration for a large chunk of the health care sector, which means evidence on value in these sectors takes long to produce, in part because nobody requires that evidence to be generated. Furthermore, even when we have good evidence that a treatment or service is highly valuable, we frequently underuse it. Many medications for chronic conditions such as heart disease, e.g., statins, are routinely underused.

Physicians and businesses also generate income from performing low-value services. They may even be able to order these services themselves, effectively generating their own business. (For example, a cardiologist who performs and reads nuclear stress tests, which are frequently low value, has the ability to order these studies for his or her patient.) So reducing investments in low-value care services means spending less on doctors, hospitals, and other health care technologies. But, like pharmaceuticals, each of these entities is represented by powerful lobbyists (such as physician and hospital organizations), who will strongly oppose any steps to reduce payments.

Patients also frequently lack the information and ability to evaluate whether or not low value studies should be performed, and to hold their physicians accountable for choosing to provide low-value care. This issue is further complicated by the fact that labeling care as low-value is context dependent — advancing imaging for back pain is often not useful but sometimes it is. And moreover, some physicians may order unnecessary low-value testing because of the perceived threat of liability. Despite significant efforts to make physicians and patients aware of low-value services, we’ve observed little improvement in reigning in use.

Overinvesting in low-value services by physicians, payers, and patients leads to the underinvestment in high-value services. But affordability and timing is another critical issue that stymies investment in high-value care. Many high-value treatments take several years to yield significant health benefits. Because patients regularly change insurers, any individual insurer has less incentive to commit to investing in an expensive, high-value treatment if the return on investment could end up accruing to a competitor. Short-term budget constraints among both public and private insurers, and the fact that re-allocating resources away from low value services takes time, further limit investments in high-value services.

Consider, for example, the debate around the pricing of new Hepatitis C Virus (HCV) therapies. HCV is a chronic infectious disease that affects 3 million or more Americans. If untreated, HCV can cause liver dysfunction, liver failure, cirrhosis, and ultimately death. Until recently, the only available treatments for HCV were complex, multi-drug regimens with severe side effects and only modest efficacy. In the last half decade, however, several new HCV treatments have been developed with cure rates exceeding 90%. These new treatments typically cost $40,000-$50,000 per treatment course, but they have been shown to be cost effective over the long-term, as they can help patients avoid terminal liver disease, which is extremely expensive to treat, and reduce morbidity and mortality due to progressive liver disease.

Many physicians, experts in public health, and, of course, representatives of the pharmaceutical companies which produce these new treatments contend that these drugs should be made available to all patients with HCV who could benefit from them. But both private and public payers have raised objections over the price of these therapies, in large part because the population of patients who require treatment is so large. Payers contendthat they simply cannot afford to cover the cost of these drugs for all patients who are eligible for them and still provide coverage for other health care services that patients use. And state Medicaid agencies and small insurers frequently assert that short-term budget constraints prevent them from paying for costly, high value therapies like those for HCV.

In cases like this, it may be instructive to think about the circumstances through the lens of a portfolio manager who is choosing how to allocate investments. When given the opportunity to invest in an expensive asset, with high potential for significant future returns on investment, an investment manager would not pass it over due to lack of funds, because this capital could likely be acquired at a cost below the asset’s expected return. The manager would reduce holdings in investments with lower expected returns and re-allocate these funds into more promising investments. If the investment were valuable enough, the manager might even find ways to raise additional capital to invest in this asset.

In health care, this means at least two things: (1) wrestling with the factors that continue to promote use of low-value services (like lack of information and financial incentives for patients, and inappropriately structured financial incentives for physicians) and (2) recognizing that high-value investments often require large financial outlays today that ultimately reap future benefits.

Aside from reducing the use of low-value services, one potential solution is to identify and develop sources of long-term financing for high-value services. Mortgages exist to spread the costs of a home or a car out over a longer period of time, thereby allowing people to buy a product that they otherwise could not afford. Similar approaches could be used to help finance high-value health care investments that otherwise would be unaffordable.

For both public and private insurers, a long-term view should be feasible. State governments already rely heavily on capital markets to finance infrastructure investments and it’s quite possible that the returns on these investments fall below high-value health care investments like HCV drugs. Private insurers could also access private capital markets and design contracts with other insurers that allow them to partake in some of the long-term benefit of early high-value care when individuals switch between plans. For instance, an insurer that covers HCV therapy for an individual could, in theory, be compensated by future insurers, even Medicare, that treat that patient and benefit from that patient already being cured of HCV.

Ultimately, reducing investments in low-value care will require coordinated action from many actors. Patients and providers need more robust and up-to-date information on the value of different services. Insurers must look hard at the services they cover and discourage utilization of low-value services and encourage use of high-value services, even those that are high cost. Innovators developing new drugs, devices, and procedures should look beyond profits alone and incorporate the need to add value into their investments. And policymakers must create incentives for all of the above to consider value when making decisions about how to invest their health care dollars.

These actions are important because not only does underinvesting in high-value services make them less accessible, it may also make them less available in the future. Many expensive high-value treatments — like HCV therapies, new cancer treatments, and gene therapies — are the product of extensive research and development, which are undertaken because the expected returns are thought to exceed the known costs. A failure to reduce investments in low-value care and reinvest these resources in high-value therapies will reduce incentives to develop future therapies that can deliver significant value to patients.




Would Americans Accept Putting Health Care on a Budget?

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If you wanted to get control of your household spending, you’d set a budget and spend no more than it allowed. You might wonder why we don’t just do the same for spending on American health care.

Though government budgets are different from household budgets, the idea of putting a firm limit on health care spending is far from unknown. Many countries, including Canada, Switzerland and Britain, pay hospitals entirely or partly this way.

Under such a capped system, called global budgeting, a hospital has an incentive to deliver less care — including reducing hospital admissions — and to increase the efficiency of the care it does deliver.

Capping hospital spending raises concerns about harming quality and access. On these grounds, hospital executives and patient advocates might strongly resist spending constraints in the United States.

And yet some American hospitals and health systems already operate this way, including Kaiser Permanente and the Veterans Health Administration. To address concerns about access and quality, these programs are usually paired with quality monitoring and improvement initiatives.

That brings us to Maryland’s experience with a capped system. The evidence from the state is far from conclusive, but this is a weighty and much-watched experiment for health researchers, so it’s worth diving into the details of the latest studies.

Starting in 2010 with eight rural hospitals, and expanding its plan in 2014 to the state’s other hospitals, Maryland set global budgets for hospital inpatient and outpatient services, as well as emergency department care. Each hospital’s budget is based on its past revenue and encompasses all payers for care, including Medicare, Medicaid and commercial market insurance. Budgets for hospitals are updated every year to ensure that their spending grows more slowly than the state’s economy.

Because physician services are not part of the budgets, there is an incentive to provide more physician office visits, including primary care. According to some reports, Maryland hospitals are responding to this incentive by providing additional support outside their walls to patients who have chronic illnesses or who have recently been discharged from a hospital. Greater use of primary care by such patients, for example, could reduce the need for future hospital admissions.

In 2013, early results found, rural hospital admissions and readmissions were both down from their levels before the system was introduced.

In the first three years of the expanded program, revenue growth for Maryland’s hospitals stayed below the state-set cap of 3.58 percent, saving Medicare $586 million. Spending was lower on hospital outpatient services, including visits to the emergency department that do not lead to hospital admissions. In addition, preventable health conditions and mortality fell.

According to a new report from RTI, a nonprofit research organization, Maryland’s program did not reap savings for the privately insured population (even though inpatient admissions fell for that group). However, the study corroborated the impressive Medicare savings, driven by a drop in hospital admissions. In reaching these findings, the study compared Maryland’s hospitals with analogous ones in other states, which served as stand-ins for what would have happened to Maryland hospitals had global budgeting not been introduced.

But a recent study, published in JAMA Internal Medicine, was decidedly less encouraging.

Led by Eric Roberts, a health economist with the University of Pittsburgh, the study examined how Maryland achieved its Medicare savings, using data from 2009-2015. Like RTI’s report, it also compared Maryland hospitals’ experience with that of comparable hospitals elsewhere.

However, unlike the RTI report, Mr. Roberts’s study did not find consistent evidence that changes in hospital use in Maryland could be attributed to global budgeting. His study also examined primary care use. Here, too, it did not find consistent evidence that Maryland differed from elsewhere. Because of the challenges of matching Maryland hospitals to others outside of the state for comparison, the authors took several statistical approaches in reaching their findings. With some approaches, the changes observed in Maryland were comparable to those in other states, raising uncertainty about their cause.

A separate study by the same authors published in Health Affairs analyzed the earlier global budget program for Maryland’s rural hospitals. They were able to use other Maryland hospitals as controls. Still, after three years, they did not find an impact of the program on hospital use or spending.

Changes brought about by the Affordable Care Act, which also passed in 2010, coincide with Maryland’s hospital payment reforms. The A.C.A. included many provisions aimed at reducing spending, and those changes could have led to hospital use and spending in other states on par with those seen in Maryland.

A limitation of Maryland’s approach is that payments to physicians are not included in its global budgets. “Maryland didn’t put the state’s health system on a budget — it only put hospitals on a budget,” said Ateev Mehrotra, the study’s senior author and an associate professor of health care policy and medicine at Harvard Medical School. “Slowing health care spending and fostering better coordination requires including physicians who make the day-to-day decisions about how care is delivered.”

broader global budget program for Maryland is in the works. The U.S. Centers for Medicare and Medicaid Services is reviewing a state application that commits to global budgets for Medicare physician and hospital spending. An editorial that accompanied the JAMA Internal Medicine study noted that a few years may be insufficient time to detect changes. It suggests that five to 10 years may be more appropriate.

“Maryland hospitals are only beginning to capitalize on the model’s incentives to transform care in their communities,” said Joshua Sharfstein, a co-author of the editorial and a professor at the Johns Hopkins Bloomberg School of Public Health. “This means that as Maryland moves forward with new stages of innovation, there is a great deal more potential upside.” As former secretary of health and mental hygiene in Maryland, he helped institute the Maryland hospital payment approach.

Global budgets are unusual in the United States, but their intuitive appeal is growing. A California bill is calling for a commission that would set a global budget for the state. And soon Maryland won’t be the only state using such a system. Pennsylvania is planning a similar program for its rural hospitals.

Can this system work across America?

How much spending control is ceded to the government is the major battle line in health care politics. An approach like Maryland’s doesn’t just poke a toe over that line, it leaps miles beyond it.

But the United States has been trying to get a handle on health care costs for decades, spending far more than other advanced nations without necessarily getting better outcomes. A successful Maryland experiment could open an avenue to cut costs through the states, perhaps one state at a time, bypassing the steep political hurdle of selling a national plan.


Experienced Bedside Nurses: An Endangered Species?

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“The trend toward our hospitals being primarily populated with nurses with less than two years’ experience is worrisome.”

At least three colleagues who’ve recently been patients in hospitals or had family members who were have remarked on the youthful nurses they encountered—and on their lack of experience. In two of the conversations, my colleagues cited instances in which this lack of experience was detrimental to care, one of them dangerous. That “sixth sense,” that level of awareness that comes with lived experience and becomes part of expert clinical knowledge, is important for safe, quality patient care.

In the February editorial, I report on the answers I received when I queried our editorial board members about new nurses’ inclination to work in acute care for only two years to gain experience and then leave to pursue NP careers. Many of the board members have seen a similar trend, one reflected by research on nurse retention, some of it published in AJN (most recently, see Christine Kovner’s February 2014 study on the work patterns of newly licensed RNs, free until February 6).

As one board member noted:

“The narrative must be shifted to embrace the full range of roles and contributions of all nurses. Our health care system depends upon a well-trained, experienced workforce. The trend toward our hospitals being primarily populated with nurses with less than two years’ experience is worrisome.”

It’s a complex issue, and no one is faulting new RNs for the career paths they pursue. But as this trend accelerates, what can be done to ensure that there are enough experienced nurses at the bedside to protect patient safety? Let us know your thoughts.


Hospitals are germy, noisy places. Some acutely ill patients are getting treated at home instead.

Phyllis Petruzzelli spent the week before Christmas struggling to breathe. When she went to the emergency department on Dec. 26, the doctor at Brigham and Women’s Faulkner Hospital near her home in Boston said she had pneumonia and needed hospitalization. Then the doctor proposed something that made Petruzzelli nervous. Instead of being admitted to the hospital, she could go back home and let the hospital come to her.

As a “hospital-at-home” patient, Petruzzelli learned, doctors and nurses would come to her home twice a day and perform any needed tests or bloodwork.

A wireless patch would be affixed to her skin to track her vital signs and send a steady stream of data to the hospital. If she had any questions, she could talk via video chat anytime with a nurse or doctor.

Hospitals are germy and noisy places, putting acutely ill, frail patients at risk for infection, sleeplessness and delirium, among other problems. “Your resistance is low,” Petruzzelli said the doctor told her. “If you come to the hospital, you don’t know what might happen. You’re a perfect candidate for this.”

So Petruzzelli, who is now 71, agreed. That afternoon, she arrived home in a hospital vehicle. A doctor and nurse were waiting at the front door. She settled on the couch in the living room, with her husband, Augie, and dog, Max, nearby. The doctor and nurse checked her IV, attached the monitoring patch to her chest, and left.

When David Levine, the doctor, arrived the next morning, he asked Petruzzelli why she had been walking around during the night. Far from feeling uncomfortable that her nocturnal trips to the bathroom were being monitored, “I felt very safe and secure,” Petruzzelli said. “What if I fell while my husband was out getting me food? They’d know.”

After three uneventful days, she was “discharged” from her hospital-at-home stay. “I’d do it again in a heartbeat,” Petruzzelli said.

Brigham Health is one of a slowly growing number of health systems that encourage selected acutely ill emergency department patients to opt for hospital-level care at home.

In the couple of years since Brigham Health started testing this type of care, hospital staff who were initially skeptical have generally embraced it, Levine said. “They very quickly realize that this is really what patients want, and it’s really good care.”

This approach is quite common in Australia, Britain and Canada, but it has faced an uphill battle in the United States.

A key obstacle, clinicians and policy analysts agree, is getting health insurers to pay for it. At Brigham Health, the hospital can charge an insurer for a physician house call, but the remainder of the hospital-at-home services are covered by grants and other funding, Levine said.

Insurers don’t have a position on hospital-at-home programs, said Cathryn Donaldson, a spokeswoman for America’s Health Insurance Plans, an industry trade group.

“Overall, health insurance providers are committed to ensuring patients have access to care they need, and there are Medicare Advantage plans that do cover this type of at-home care,” Donaldson said in a statement.

Levine, a clinician-investigator at Brigham and Women’s Hospital and an instructor at Harvard Medical School, was the lead author of a recently published study comparing patients who received either hospital-level care at home or in the hospital in 2016.

The 20 patients analyzed in the trial had one of several conditions, including infection, heart failure, chronic obstructive pulmonary disease and asthma. The trial found that while there were no adverse events in the home-care patients, their treatment costs were significantly lower — about half that of patients treated in the hospital.

Why? For starters, labor costs for at-home patients are lower than for patients in a hospital, where staff must be on hand around the clock. Home-care patients also had fewer lab tests and visits from specialists.

The study found that both groups of patients were about equally satisfied with their care, but the home-care group was more physically active.

Brigham Health is conducting further randomized controlled trials to test the at-home model for a broader range of diagnoses.

Bruce Leff began exploring the hospital-at-home concept more than 20 years ago, conducting studies that found fewer complications, better outcomes and lower costs in home-care patients.

Hospitals, accustomed to the traditional business model that emphasizes filling hospital beds in a bricks-and-mortar facility, have been slow to embrace the idea, however.

There are practical hurdles, too.

“It’s still easier to get Chinese food delivered in New York City than to get oxygen delivered at home,” said Leff, a professor of medicine and director of Johns Hopkins Medical School’s Center for Transformative Geriatric Research.

Since the seven-hospital Mount Sinai system in New York launched its hospital-at-home program, more than 700 patients have chosen it. And they have fared well on a number of measures.

The average length of stay for acute care was 5.3 days in the hospital vs. 3.1 days for home-care patients, while 30-day readmission rates for home-based patients were about half of those who had been hospitalized: 7.8 percent vs. 16.3 percent.

Begun with a $9.6 million federal grant in 2014, Mount Sinai’s program initially focused on Medicare patients with six conditions, including congestive heart failure, pneumonia and diabetes. Since then, the program has expanded to include dozens of conditions, including asthma, high blood pressure and serious infections such as cellulitis, and is now available to some privately insured and Medicaid patients.

Mount Sinai has also partnered with Contessa Health, a company with expertise in home care, to negotiate contracts with insurers to pay for hospital-at-home services.

Among other things, insurers are worried about the slippery slope of what it means to be hospitalized, said Linda DeCherrie, clinical director of the mobile acute care team at Mount Sinai.

Insurers “don’t want to be paying for an admission if this patient really wouldn’t have been hospitalized in the first place,” DeCherrie said.


AIMING HIGHER: Results from the Commonwealth Fund Scorecard on State Health System Performance

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The 2017 edition of the Commonwealth Fund Scorecard on State Health System Performance finds that nearly all state health systems improved on a broad array of health indicators between 2013 and 2015. During this period, which coincides with implementation of the Affordable Care Act’s major coverage expansions, uninsured rates dropped and more people were able to access needed care, particularly those in states that expanded their Medicaid programs. On a less positive note, between 2011–12 and 2013–14, premature death rates rose slightly following a long decline. The Scorecard points to a constant give-and-take in efforts to improve health and health care, reminding us that there is still more to be done.

Vermont was the top-ranked state overall in this year’s Scorecard, followed by Minnesota, Hawaii, Rhode Island, and Massachusetts (Exhibit 1). California, Colorado, Kentucky, New York, and Washington made the biggest jumps in ranking, with New York moving into the top-performing group for the first time. Kentucky also stood out for having improved on more measures than any other state.

Exhibit 1Exhibit 1: Overall State Health System Performance: Scorecard Ranking, 2017

Using the most recent data available, the Scorecard ranks states on more than 40 measures of health system performance in five broad areas: health care access, quality, avoidable hospital use and costs, health outcomes, and health care equity. In reviewing the data, four key themes emerged:

  • There was more improvement than decline in states’ health system performance.
  • States that expanded Medicaid saw greater gains in access to care.
  • Premature death rates crept up in almost two-thirds of states.
  • Across all measures, there was a threefold variation in performance, on average, between top- and bottom-performing states, signifying opportunities for improvement.

By 2015, fewer people in every state lacked health insurance. Across the country, more patients benefited from better quality of care in doctors’ offices and hospitals, and Medicare beneficiaries were less frequently readmitted to the hospital. The most pervasive improvements in health system performance occurred where policymakers and health system leaders created programs, incentives, or collaborations to ensure access to care and improve the quality and efficiency of care. For example, the decline in hospital readmissions accelerated after the federal government began levying financial penalties on hospitals that had high rates of readmissions and created hospital improvement innovation networks to help spread best practices. (notes)

Still, wide performance variation across states, as well as persistent disparities by race and economic status within states, are clear signals that our nation is a long way from offering everyone an equal opportunity for a long, healthy, and productive life. Looking forward, it is likely that states will be challenged to provide leadership on health policy as the federal government considers a new relationship with states in public financing of health care. To improve the health of their residents, states must find creative ways of addressing the causes of rising mortality rates while also working to strengthen primary and preventive care.




18k Kaiser nurses vote for option to strike at California facilities

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Tens of thousands unionized registered nurses at facilities owned by Oakland, Calif.-based Kaiser Permanente voted for the option to call a strike if an agreement is not reached on issues such as staffing and patient care, according to a California Nurses Association news release.

The CNA — which represents 18,000 RNs who work at more than 20 Kaiser Permanente medical centers and dozens of medical clinics and office buildings in California — said nurses are calling on the healthcare giant to improve patient care standards.

“With this vote nurses are making it absolutely clear: We are ready to strike to make sure our patients get safe care,” said Zenei Cortez, a South San Francisco Kaiser Permanente RN and co-president of CNA.

Union officials said nurses specifically are calling on Kaiser Permanente to support their proposals regarding staffing and patient care standards. These include bringing in a charge nurse on each unit, as well as resource nurses to assist other nurses so they are able to take breaks. The union said nurses also propose “interventions with pharmacy to expedite patients receiving correct medications,” and “increased staffing when needed due to emergent conditions and heightened patient volume.”

Additionally, the CNA said nurses are opposed to Kaiser Permanente’s proposal to move from the existing GRASP patient classification system to Epic Acuity, which nurses contend is less transparent. Nurses are also opposed to what they said are Kaiser Permanente’s plans to cut pay for new hires by 10 percent in the Sacramento region, and 20 percent in Fresno and the Central Valley.

Regarding the union’s claims about staffing, Debora Catsavas, senior vice president of human resources for Kaiser Permanente Northern California, said in a statement: “Our nurse staffing meets, and often exceeds, state-mandated staffing as necessary for patients, based on the complexity of their medical conditions. We employ more than 18,000 nurses, and have hired more than 2,000 nurses in multiple key specialty areas over the last three years, and continue to hire more as needed.”

As far as the move to Epic Acuity, Ms. Catsavas said the move addresses various issues nurses have raised about the existing GRASP patient classification system.

“GRASP is a system from the 1980s based on studies of nursing work flows conducted nearly 50 years ago. Epic Acuity is an up-to-date, comprehensive system that directly reflects the care provided and allows nurses to spend more time at the bedside,” her statement reads. “Epic Acuity uses clinical information directly inputted by the nurses into our electronic medical record.”

She said Kaiser Permanente also offered nurse representatives paid time to talk about and review Epic Acuity’s implementation.

Furthermore, Ms. Catsavas said there are no proposed wage cuts or wage reductions for current nurses. However, she said Kaiser Permanente last October proposed a new wage scale for new nurses hired in the Sacramento, Central Valley and Fresno areas on or after Jan. 1, 2019, “to more closely align with the lower cost of living in these markets.”

She noted Kaiser Permanente nurses in Sacramento, the Central Valley and Fresno earn 24 percent, 37 percent and 45 percent more than non-Kaiser Permanente nurses, respectively.

While the Kaiser Permanente nurses have authorized a potential strike, no strike date is set. For a strike to occur, nurses would have to provide at least 10 days notice.

Ms. Catsavas said Kaiser Permanente anticipated a strike authorization might occur but believes an agreement is within reach.