Healthcare Town Hall

Analysis of Medicare cost and utilization data has been extensively documented, most notably by the Dartmouth Atlas, and has revealed significant variation from one region to the next. Similar analysis using commercial insurance data, however, has been lacking. This study, the first to consider commercial populations, examines regional cost variation, providing cost relativities for claims paid by commercial payors for particular hospital referral regions. Among other findings, the study highlights the importance of negotiated provider reimbursement as a factor in the nation’s healthcare cost. While Medicare sets provider reimbursement rates based on formulas and rules, commercial provider reimbursement is set by negotiation between the insurer and the provider. This means, among other things, that regions with low Medicare costs could have high commercial costs. An examination of commercial data alongside Medicare data is crucial for understanding the true nature of healthcare cost variation across the country.

Cost Bruce Pyenson, geographic cost disparity, Michele Berrios, Sara Goldberg

We have talked before about ACOs (more info here and here and here). US Oncology today announced plans to develop a cancer-related physician-payor risk contracting model. Check it out.

UPDATE: Health Finance News picked up on this story on Sept. 2. Here is an excerpt:

The initiative comes at a time when providers across the country are preparing for the new landscape expected under the Affordable Care Act. The Centers for Medicare and Medicaid Services will pursue alternatives to the fee-for-service model through its Medicare Innovation Center, as well as its Medicare Shared Savings Program slated for 2012, whereby Medicare will implement accountable care organizations.

Due to the size of its physician network, which numbers more than 900 oncologists, along with an electronic health record that includes more than 1.6 million patient charts, US Oncology and Milliman officials see this data as the foundation of creating effective risk-based contracts.

“Physician-led organizations are ideally positioned to assess and balance the clinical, quality and cost demands of today’s healthcare environment,” said Bruce Pyenson, principal and consulting actuary of New York-based Milliman. Through Milliman’s work with US Oncology, Pyenson said they can “help oncologists create the healthcare delivery and reimbursement models of the future.”

Accountablity ACOs, Bruce Pyenson, Cancer

The Health Beat blog revisits a study from last year, “Imagining 16 to 12.” Here is an excerpt summarizing the article:

Could we bring our nation’s health care bill down from 17% of GDP to 12%? An intriguing study from Milliman, the independent consulting and actuarial firm, says”yes.” Looking at actuarial data from some of our best and most efficient health care plans, Milliman’s analysts conclude that, in theory, it would be possible to trim our bloated health care system by 25%.

Before you dismiss the idea, consider this: not that long ago, we brought health care inflation down to less than 3% a year for six years running (1994-1999). During that time, the nation’s health care bill remained flat as a percentage of GDP.

And Milliman points out that today, our most efficient , high quality health plans are achieving similar savings by “reducing unnecessary inpatient stays” and “inappropriate imaging.”  The site of service also changes to emphasize lower cost settings—for example, home care instead of nursing-home care, or office-based primary care instead of emergency room care. The authors of the Milliman report acknowledge that 12% is only a “target for what is possible, not a budget.” They are not suggesting that we try to cap health care spending at 12% of GDP.

But the actuarial firm points that that in the not-so-distant past (1991) health cared did consume just 12% of GDP. Now it equals 17% of the economy. Granted, medical technology continues to advance, but have we really made that much progress since the ‘nineties?

Read the full article here.

Cost, Reform 16 to 12, Bruce Pyenson, Kate Fitch, Sara Goldberg

The New York Times considers the long-term implications of hepatitis C and the efforts to treat it with drugs that are now becoming available. Here is an excerpt:

But even if the [hepatitis C] drugs do work, some experts and doctors warn that this virus may be particularly tough to vanquish. Three-quarters of the people who are infected do not know it because they are not tested for the virus and because the infection can be asymptomatic for years while it stealthily attacks the liver.

And because this disease is transmitted by blood, those infected largely are former or current IV-drug users — a population that characteristically has little or no health insurance — who may not be the most able to stick to a lengthy treatment regimen that can cause brutal side effects…

Vertex has commissioned studies projecting a rising toll from hepatitis C. One such study, done by Milliman, a health insurance consulting firm, projected that the number of people with advanced liver disease from hepatitis C would quadruple in 20 years if treatment did not improve.

The Milliman report is available here.

Pharma Bruce Pyenson, Hepatitis C

The House Oversight and Government Reform Committee yesterday considered a bill to improve detection and treatment of hepatitis C. Here is an excerpt from the testimony of Louisiana congressman Bill Cassidy:

While new HCV infections have declined over the past two decades, there are at least 3 million Americans with chronic HCV. According to the 2009 Milliman Report, Consequences of Hepatitis C Virus: Cost of a Baby Boomer Epidemic of Liver Disease, most of our infected population are baby boomers.

Read more…

Chronic care Bruce Pyenson, Hepatitis C, Kate Fitch

We blogged last week about a new cancer report. That report is now available. Here is an excerpt:

Cancer is an important cost issue for commercial benefit programs. Based on our analysis of Medstat 2007, cancer patients make up 0.68% of a commercially insured population, but account for 10% of the overall healthcare costs. Over the course of a year, a cancer patient receiving chemotherapy (approximately 22% of all cancer patients) incurred, on average, allowed costs of approximately $111,000 a year, almost four times the cost of a cancer patient not receiving chemotherapy. This paper quantifies the medical service utilization and costs of cancer patients receiving chemotherapy, and, in particular, identifies unexplained variation in several utilization and cost measures that indicate opportunities for better quality and cost management…The variation in chemotherapy-related inpatient admissions, ER visits and chemotherapy costs suggest opportunities for improvement, and we modeled the impact of a 10% reduction in national average rates for these key quality outcome metrics. The 10% reduction is significantly less than the regional variation we observed for each of these three categories. The cost reduction per chemotherapy patient would be approximately $3,000 or 2.6% of a patient’s total annual costs.

Our analysis focuses on 10 common cancer types where chemotherapy is a key treatment modality. These 10 cancers account for 65% of cancer patients in a commercial population, and 25% of the 10 cancer population receives chemotherapy in a year. The members receiving chemotherapy and having one of the 10 cancers make up about 0.11% of commercial members but account for about 4% of overall healthcare costs… Some payers are increasing efforts to manage chemotherapy utilization. Although treatment guidelines are well established, standards for treatment outcomes are lacking. This means that measuring adherence to guidelines rather than outcomes could be a useful tool for payers. Few payers require that providers demonstrate adherence to guidelines to receive reimbursement. Establishing best practice benchmarks for particular cost, utilization and quality metrics could improve the ability to monitor and set targets for improving the quality of care delivery for cancer patients receiving chemotherapy.

Electronic Health Records Bruce Pyenson, Cancer, Kate Fitch

We blogged previously about a new diabetes study that is now available in its entirety. The study, “Improved Management Can Help Reduce the Economic Burden of Type 2 Diabetes: A 20-year Actuarial Projection,” indicates that a 50% improvement in diabetes management and control will have immediate and longer-term implications, including:

• A reduction in diabetes-associated deaths by 49,000
• A reduction in diabetes-associated complications by 239,000
• Annual cost reductions of $196 billion (in 2031 dollars)

Read the full study here.

Chronic care Bruce Pyenson, Diabetes, Kate Fitch, Kosuke Iwasaki

The Disease Management Care Blog looks at the question of hypertension, blood-pressure treatment, and the medical home model:

Long ago, the Disease Management Care Blog was a co-investigator in a multi-center high blood pressure (hypertension) research program. Everyone was treated with a precisely defined script and, compared to it’s regular patients, the blood pressure of all the DMCB’s research participants dropped. The DMCB concluded that that was thanks to two features of the research trial: 1) free drugs, and 2) a nurse devoted to making sure people took their free drugs.

That nurse helped convince the physician-DMCB that disease management could work.

“Could work,” with the emphasis on could, is also the context of this report by the expert health insurance actuaries over at Milliman, who examine the same potential of the patient centered medical home (PCMH) in the management of hypertension. In this handy and thoroughly researched review (63 references), authors Kathryn Fitch, Kosuke Iwasaki and Bruce Pyenson discuss how the PCMH could improve the treatment of hypertension thanks to its a) ongoing patient monitoring and treatment plans, b) use of telephonic and email outreach, c) concurrent co-morbidity management, d) efficient medication adjustments, e) liberal use of non-physicians for low-risk patients, f) increased patient-provider communication, g) coordination of specialist access and g) an ability to measure population-based outcomes.

All well and good, says the DMCB, but the reason why policymakers and other stakeholders may want to download the report is because it contains some key caveats…

Prevention, Wellness Bruce Pyenson, hypertension, Kate Fitch, Medical home

A new study, “Improved Management Can Help Reduce the Burden of Type 2 Diabetes: A 20-Year Actuarial Projection,” was announced yesterday at the National Conference on Diabetes in Washington, DC. Here is an excerpt from the press release:

“The expected growth of type 2 diabetes in America and the resulting healthcare costs are alarming,” said Kathryn Fitch, a co-author of the study and principal and healthcare management consultant at Milliman.  ”We calculated that even modest improvements in diabetes control measures could reduce health complications, deaths and costs, particularly for the elderly.”

Milliman’s study estimated the impact of improving blood glucose, blood pressure and cholesterol control in type 2 diabetes patients. According to the report, fewer than two-thirds of patients meet the target ranges for any of these three measures (A1C <7%:49%; Systolic blood pressure <130:60%; LDL <100:39%)(1). The study found that reducing by half the number of people who are not meeting targets could, by 2031, reduce annual costs from diabetes-related complications by nearly $200 billion(2), reduce diabetes-related complications by 18 percent and reduce deaths from diabetes-related complications by 9 percent(3).

The study noted that the diabetes epidemic will continue to expand, and improving treatment and management practices are vital to reversing this trend. Over the next 20 years, type 2 diabetes cases outpace the growth of the U.S. population, to eventually affect 32 million patients (8.6 percent of the population)(4). With this jump in type 2 diabetes prevalence – and with people who have the disease expected to account for 15 percent of all national healthcare expenditures by 2031(5) – better patient management practices are urgently needed.

We will post the full study when it is available.

Cost, Economy Bruce Pyenson, Diabetes, Kate Fitch

A new report sheds light on the medical home model by looking at how medical homes can be used to treat hypertension (HTN), which is “the most common primary diagnosis coded on medical claims” and is often paired with another condition. These patients “are challenging for physicians to manage as they have higher prevalence of comorbidities compared to non-HTN patients.”

How, then, should hypertension be treated? The key is to keep blood pressure under control, and a medical home can help do that. A survey conducted by the Commonwealth Fund found that “hypertensive adults with a medical home are substantially more likely to have their blood pressure under control.”

Medical homes for hypertension face challenges in how they are structured, however. This report examines four such challenges:

1. Adjusting payments so that the patients with high demands generate higher medical home payments.

2. Coordinated information and treatment plans across physicians and other providers so the patients with multiple sources of care get treated appropriately without gaps, conflicts, or redundancies.

3. Use of Allied Health Service professionals, remote monitoring, telephonic interactions and email to better manage complex patients and to reduce resource burden for low complexity patients.

4. Prompt use of evidence-based criteria and efficacious therapy to product better outcomes at lower cost.

Read the full report here.

Medical home Bruce Pyenson, hypertension, Kate Fitch, Medical home