There will soon be a period of further global spread of the swine flu virus in the coming months, and most countries may see cases double every three to four days for several months until peak transmission is reached, World Health Organization Western Pacific Director Shin Young-soo recently announced. WHO has declared the swine flu strain a pandemic, and it has killed almost 1,800 people worldwide.
Activists from all over the world have accused the Obama administration of blocking greater access to affordable drugs in a bid to win pharmaceutical companies' support for its healthcare overhaul. Organizations such as Doctors Without Borders said they had hoped President Obama would join them in the fight to make generic drugs available to combat disease in impoverished countries. Obama officials have rejected the criticism, saying that the president remained committed to the international health goals he embraced during his campaign.
As part of the country's health reform efforts, the Chinese government has issued a list of more than 300 commonly used medicines that will be sold at controlled prices beginning in September. Public hospitals and doctors often rely on profits from the sale of drugs and expensive treatments and tests to cover their operating expenses. The facilities have been accused of aggressively prescribing expensive and sometimes unnecessary drugs and treatment, according to the Associated Press.
Bryce Williams, director of prevention and wellness at Blue Cross Blue Shield of Massachusetts in Boston, discusses MyBlueHealth and member activation. [Sponsored by Emdeon]
I spoke recently with Ralph de la Torre, MD, CEO of Boston's Caritas Christi Health Care, New England's second largest hospital chain. We talked briefly about healthcare reform, but we spent more time on the problem with procedure-based reimbursement, which many argue is bankrupting us as a nation. That's why I was so interested in talking to de la Torre about his system's "alternative quality contract" with Blue Cross Blue Shield of Massachusetts, which rewards hospitals not just for the number of procedures it performs on a patient, but also, and most importantly, allows caregivers and the hospital to earn bonuses for meeting quality targets.
As the White House and Congress pursue comprehensive healthcare reform, one fact remains clear: the status quo is unsustainable and the growth of healthcare spending must be slowed.
From the perspective of the hospital supply chain, where many products and commodities are purchased every day, misaligned financial incentives discourage collaboration, efficiency, and improved quality. Gifts and financial incentives can result in marketing trumping sound science. Too often, insufficient evidence about what works best leads to using the latest and most expensive—but perhaps not the most clinically appropriate—new technologies. The result? Healthcare costs continue to soar with no parallel increase in quality.
It doesn't have to be this way. America's healthcare providers buy almost $350 billion in products annually through group purchasing organizations. A recent analysis by our organizations, using the Premier alliance's clinical and financial database, found that national health expenditures can be reduced by $317 billion over the next 10 years by giving GPOs additional tools to help members and other healthcare providers control their supply costs.
In a June 12 letter to President Obama, we proposed that these tools will allow us to eliminate inflationary cost increases for medical supplies and pharmaceuticals by creating a more competitive and transparent purchasing environment.
But what reforms will deliver on this promise? How will they be paid for? And what expenses can be eliminated while still allowing hospitals to deliver high-quality, affordable healthcare?
In virtually every other sector of our economy, supply prices decrease over time as innovative companies enter the market and compete to meet demand. But in many cases the cost of healthcare products has increased year after year—a pattern our nation can no longer afford.
Our analysis identified seven specific savings opportunities that could help strategic purchasing alliances reduce purchase prices and improve efficiency in the supply chain.
Improved alignment between physicians and hospitals
With better collaboration, hospitals and doctors can work together to better standardize practices, uses of medical supplies, and processes that could help hospitals reduce waste, costs, and unsafe behaviors. But today, physicians make the clinical treatment decisions while hospitals bear the costs. If hospitals could share the savings they realize as part of an effort to improve and standardize processes, analysis suggests savings of 2%-4% a year on high-cost cardiovascular, orthopedic, spine, and ophthalmic procedures, which could yield 10-year cumulative savings of up to $128 billion.
Implementation of unique device identification
The creation of a national unique device identification system is a large, critical piece to fully recognizing savings and improving patient safety. It is implausible that in 2009 there is no uniform bar coding system for medical devices, particularly since Congress directed the Food & Drug Administration to implement such a system nearly two years ago. We can track thousands of items, speed recalls, and efficiently manage the supply chain for a grocery store, but we can't do the same for medical devices in a hospital. If the FDA were to issue the regulations needed to automate supply management by developing a standard method to identify devices, we could improve efficiencies and patient safety. These improvements would generate $16 billion in annual savings, according to independent analysis from the Efficient Consumer Response study "Improving the Efficiency of the Healthcare Supply Chain."
Transparency in payments to physicians by manufacturers
Requiring manufacturers of drugs, devices and medical supplies to publicly report financial relationships with physicians would help expose payments that could create conflicts of interest. These conflicts can encourage inappropriate and more costly care, such as the greater use of more expensive branded drugs rather than equally effective generics.
Removal of price confidentiality contracts
Today, many hospitals are prohibited by contract restrictions from sharing the information on the prices they paid for high-cost medical devices with physicians or other hospitals. Removal of gag clauses in contracts for high-cost medical devices would give hospitals the necessary information to engage with physicians in making informed, evidence-based decisions. Further, disclosure of price points would improve hospitals' ability to negotiate with manufacturers to reduce costs. The power of this type of collaboration is evident in the $36 billion in annual savings already achieved through hospitals and clinicians working with GPOs to aggregate supply purchasing and improve systems and processes that maximize efficiency, labor and expenses.
FDA evidence-based oversight of reprocessing
The Food and Drug Administration (FDA) currently provides oversight and regulates the reprocessing of single-use devices (SUDs). Despite FDA regulation, many hospitals do not reprocess SUDs because of the single-use label. FDA could require manufacturers to show evidence that a medical device is unable to be reused, including studies that indicate reuse would render the device unsafe.
Allowing follow-on biologics
Granting manufacturers of biologic products a set number of years of market exclusivity, similar to one that makers of traditional drugs already have, would allow follow-on biologics manufacturers to enter the market and compete to drive down prices. The Congressional Budget Office estimates that follow-on biologics will produce a savings of at least $5.9 billion ($6.6 billion if increased tax revenues are included) over 10 years.
Comparative effectiveness research
Comparative effectiveness will fill a missing evidence gap on what drugs, devices and procedures work best for the average patient with a given clinical condition. Armed with this knowledge, physicians will have more reliable information to guide decision making and purchasers will have better insights as to what new, and old, technologies and drugs to buy. This, too, will stimulate greater evidence-based market competition.
While lawmakers worry that efforts to reign in healthcare spending could be jeopardized by the price tag of expanding health insurance, the hospital community can do its part right now. GPOs, working in conjunction with their member hospitals, have a real opportunity to significantly reduce costs within the healthcare supply chain. Sensible reforms can produce a more transparent, ethical and evidence-based supply chain. The millions of patients we serve every day can't afford to wait any longer.
Lee H. Perlman is chief financial officer and senior vice president, administration, of the Greater New York Hospital Association, and president of GNYHA Ventures, Inc. Susan D. DeVore is president and CEO of the Premier healthcare alliance. They may be reached at Perlman@gynha.org, and susan_devore@premierinc.com, respectively.
This is my opinion column, so I'm going to give you an opinion this week with which many who make a living pillorying the healthcare industry probably won't agree.
Many of you deserve a round of applause. There, I said it.
After years of paying lip service to improving quality and delivering value for healthcare services and supplies, hospitals are starting to get the message that healthcare providers will no longer be issued free passes for low quality and high costs.
Meanwhile, I can't really imagine how that message is even making it to hospital leaders, given the fact that our elected representatives can't seem to agree on much of anything healthcare-related these days.
President Obama still has not appointed a CMS chief, and his healthcare reform effort is going off the rails because of predictable bomb-throwing from the bases of the right and left. One side won't give up its public health insurance option while the other distorts the truth about current legislation and refuses to make much effort to offer any alternative solutions to the problems of high costs and poor quality. At the same time, we all meekly continue to watch our healthcare benefits erode while our salaries remain static or worse—because healthcare cost increases are eating up any gains.
So back to where progress is really being made, in your hospitals.
Not that you haven't been prodded to do something about outcomes and skyrocketing costs. From the Institute of Medicine's 100,000 Lives report to pay for performance from commercial insurers to Medicare's HCAHPS regulations, you've been unloaded on—deservedly—with both barrels in recent years about your inability (as a group) to provide quality outcomes for patients and better value.
I talked to a COO and CFO at two health systems this week. One's in Texas, and the other is in Wisconsin. They're both big believers in Lean, a production practice that grew out of the manufacturing industry in which expenditure of resources for any goal other than the creation of value for the end customer is considered wasteful, and a target for elimination. Toyota's been using it for decades, and indeed, invented it. Other manufacturers adapted Lean to their organizations many years ago, to excellent effect. Now healthcare true believers are doing the same. God knows there's a lot of low-hanging fruit to be picked from the waste tree in healthcare. I'll tell you about some of them in next week's column.
Why are they doing it now? Well regardless of what happens with healthcare reform—and it looks like "nothing" is at least an even bet right now—hospital leaders know their long-term future is tied to efficiency and cost control.
Jacob Hacker, the Yale professor who many consider the intellectual father of the public option, yesterday described aspects in current health reform proposals as "good" and "not-so-good," but said he fears most the growing support for proposals that he called down-right "ugly."
"Americans want reform, but they're scared now," Hacker said in a news briefing yesterday. He said the reason is "pretty simple"—"scaremongering and lies directed at health reform proposals on Capitol Hill."
"We're seeing the Swiftboating of health reform right now and it's not a pretty sight," Hacker said, referring to a smear campaign to damage the 2004 presidential bid of U.S. Senator John Kerry by attacking his military record as swift boat commander in Vietnam, which were charges never substantiated.
At the Campaign for America's Future-sponsored news briefing, Hacker was joined by Rep. Raul Grijalva, D-AZ. and Rep Keith Ellison, D-MN.
The congressmen are among 60 lawmakers who have pledged to oppose any health reform package unless it includes a meaningful public option to give consumers a choice, which Hacker described as an essential pillar of a three-legged stool.
In Hacker's view, the other two essential legs of the stool include a requirement for employers to contribute to the cost of coverage if they don't directly provide insurance coverage for their employees–a so-called pay or play provision–and a requirement that individuals also buy coverage, perhaps with subsidies, if they don't get coverage paid from their employers.
But with some essential political support dissipating for that most critical leg of the stool, the public plan, Hacker said, "Many of us committed to this goal have watched with a mix of anger and despair about the way in which this debate has spun out of control in this last month."
Hacker tried to parse those parts of existing health reform proposals in three categories.
Good provisions, Hacker said, are those that allow the public plan to create a provider network, pay providers using an established system similar to Medicare, is transparent, and operates as an effective competitor with private insurance plans on a level playing field. It would obtain drug price discounts and deliver value to "workers, their families, employers, and the economy overall." The public plan, obviously, is in the good category.
"Not-so-good" parts of the health reform package, which have been gaining traction, would mean having to create a provider network for a public plan from scratch and negotiating rates directly with providers across the nation, rather than building on Medicare's existing network and payment structure, Hacker said.
He characterized the "ugly" as the Senate Finance Committee's cooperative model, supported by its co-chairs, Max Baucus and Charles Grassley. Hacker said a cooperative will be a much less effective and weaker mechanism for the public to obtain health insurance because it fails to perform three essential functions:
It does not provide a benchmark for cost reductions and quality because it would not have the necessary clout to pressure insurers to improve the value they deliver to their members, nor would it have the strength to bargain more aggressively in markets where one or two insurance companies dominate.
It would not provide a backup that offers financial and health security to those without coverage through their employers, or to small employers without access to good group health coverage plans.
It would not be an effective backstop to bring down costs over time through innovations in payments and the delivery of care, innovations that will be available to the private sector.
In a policy brief also released yesterday, Hacker wrote that "federally promoted health cooperatives should be understood as an effort to kill the public plan and, with it, the prospect of an effective competitor to consolidated insurance companies that have too often failed to provide affordable health security."
Cooperatives don't have "the reach, authority, or desire to drive broadly implemented delivery and payment reforms or act as a strong public-spirited competitor that discourages private insurers from engaging in practices that undermine health security," he wrote.
Hacker and Ellison blamed private insurance companies for creating much of the noise and dissension, and deflecting support for the public plan to a cooperative.
Ellison, vice co-chair of the Congressional Progressive Caucus, vowed a fight in what he called a debate with historic importance on a level with the Civil Rights Movement and the Equal Rights Amendment.
"No doubt that the interests on the table are so great, and stakes are so high, there's going to be a fight. It's going to be competitive," Ellison said. "Before we went on break, there was a general sense of a great level of confidence that the public option was going to be law one day.
"Then we left, and all of a sudden the other side, the side that wants the status quo, the side that profits from the status quo and the side that survives based on the status quo, they had their say, and we should not have been surprised."
But he predicted that with voices like Hacker's, and the support of the 60 members of Congress who have pledged to not vote for health reform without a public option, they will "break up these monopolistic and oligopolistic healthcare markets around the country."
Hacker added, "We want reform to work. And that means–above all–making sure that those who got us into this mess, mainly large for-profit private insurers who have gotten larger and larger since the failure of the Clinton health plan in the early 1990s, and which are not facing competition in most parts of the country, don't get to decide what reform is and don't get to keep doing what they're doing today."
Imposing a tax on health benefits, as some in the health reform debate propose, would hurt lower income people much more than it would impose burdens on the wealthy, according to a new study published online this week in the New England Journal of Medicine.
Ending tax subsidies for employer-paid health insurance "would inflict a regressive tax increase, taking a larger share of income from insured near-poor and middle class families than from the wealthy," wrote Steffie Woolhandler and David Himmelstein, family doctors who practice at Cambridge Hospital in Massachusetts. Woolhandler and Himmelstein are also professors at Harvard Medical School and co-founders of Physicians for a National Health Program, an organization of 16,000 doctors and medical professionals who favor single-payer national health insurance.
In fact, it would impose a tax 140 times higher on insured, working-poor families than on Wall Street executives, such as a Goldman Sachs executive insured with his company’s $40,543 health plan, and who receives a subsidy of about $15,367 last year.
In a chart published with their article, they show that federal tax subsidies for employer paid health insurance in 2004 were $953 and $2,116 for families with annual incomes under $10,000 and between $10,000 and $19,999. That represents 18.3% and 13.8% respectively.
However, for those making more than $99,999 (with a mean income of $168,987), the subsidy was $4,498, or only 2.7%.
"Many health economists, ranging from Democratic advisor Jonathan Gruber to the Heritage Foundation, have argued that tax subsidies for employer-paid health insurance encourage over-insurance and are highly regressive, directed mainly to higher income families," they wrote.
"We beg to differ. The subsidies meet the usual definition of progressivity; they taper down (as a percentage of income) as income rises."
They added that the confusion may arise from "the dazzlingly large sums that high-income families gain from these tax subsidies. They report that, according to a 2004 analysis, 26.7% of the $50 billion in federal tax expenditures for health benefits went to 14% of U.S. families with incomes of $100,000 or more. Conversely, the 57.5% of families with incomes below $50,000 received only 28.4% of the subsidies.
"In other words, on average, families whose income was at least $100,000 got $2,780, while those making under $50,000 received $102 to $1,448."
The idea of taxing employer-sponsored health benefits has been a cornerstone of the most controversial provisions in the health reform package. President Obama recently said he is willing to consider the idea, although on the campaign trail he said he opposed it.
Even more recently, however, the idea has lost favor because of the impact it would have on American families who get health coverage through their employers, and would not tolerate what in effect would be a significant reduction in their pay.
Between 2000 and 2009, the cost of a family premium provided by an employer increased 95.2% while median income went up just 17.5%, according to a new report by Families USA, a Washington nonprofit group that advocates for affordable healthcare. To make matters more galling, workers get fewer benefits plus higher deductibles and copays for the extra money. The organization blamed the higher prices on the rising cost and increased use of medical treatments, inadequate oversight of insurance companies, lack of competition among insurers in many markets, and cost-shifting from the growing numbers of uninsured to the insured.
