On September 21, 2006, in Policy
The cost of managing longer-lived patients with multiple chronic diseases is likely to rise — an intuitively obvious statement now backed by research. Telehealth monitoring could attenuate the cost, but the US Congress, the Bush Administration, and the Centers for Medicare and Medicaid Services are doing precious little to stimulate telemedicine.

They may be doing slightly (though not much) better with electronic medical records, which are leading:

  • To better, evidence-based, personalized medicine;
  • To trouble for the pharmaceutical industry, which may not like the evidence of the true effectiveness of their products;
  • To better care; and
  • To huge savings.

But paradoxically, they also lead to increased costs, and are therefore “not a substitute for real reform.”

Proposed new US FDA regulation of pharmacogenomic tests could stifle reform by stifling innovation in the field of personalized medicine. No doubt it could also (as intended) inspire more confidence in the validity and reliability of such tests. Let’s hope the FDA finds the middle way, but any slack in innovation in the US will probably be taken up by China, India, and other less regulated but hungry and talented counties.

If innovation is key to healthcare reform, so are the tools that stimulate innovation. One such tool is a Blue Cross-Blue Shield database of de-identifed medical records of more than a quarter of the US population, which is being made available (for a fee) to employers, providers, patients, and researchers. This is a big step toward the expanded kind of evidence-based medicine that goes beyond just the evidence of formal studies. To get value from such massive datasets, sophisticated data mining tools such as Archimedes and Pin Point Quality are becoming available.

Evidently assuming that innovation and reform will continue, a pundit claims that “the future will be a technologically-aided, consumer-demanding, self-helping, market-based, data-sorted, centralized-to-decentralized system with multiple options offered by new practice models.” Unfortunately for the underprivileged, who have no access to any of the above, he may be right.

Does the cost of healthcare innovation and reform matter? There is an economic argument that more spending on healthcare is a good thing because it drives the economy, as the railroads did at the start of the 20th century. The argument seems to suggest that the high proportion of wasteful spending does not matter; that any kind of spending is OK. Maybe so, but it seems to us this implicitly accepts that corruption, mismanagement, and growing access disparities are OK, too.

Other policy-related news:

  • Problems that surface after new drugs and devices have been approved and are on the market in the US will in future be detected automatically by a system to monitor insurer and provider datafor signs of trouble.
  • We wrote in March about losing our ability to do invasive surgery because of the trends toward minimally- and non-invasive procedures. A drastic decline in cardiothoracic surgeons already well under way illustrates the point, but whether we should be concerned at the loss or welcome it as a necessary and natural market correction is not the question people seem to be asking.
  • It seems that hospitals, labs, and drug companies are prospering at the expense of physicians, who have experienced a significant drop in income in recent years.

Medicare Financing & Chronic Disease

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A study recently published in Health Affairs found that virtually all of the growth in Medicare spending from 1987 to 2002 was attributable to the twenty-percentage-point increase in the share of Medicare patients — now more than half — receiving medical treatment for five or more conditions during a year. The factors responsible for these trends include Medicare’s fee-for-service structure, which “complicates” the adoption of chronic care treatment models and hinders efforts to stimulate lifestyle modification and care coordination strategies. Medicare spending may continue to rise, as increases in longevity for people with chronic conditions prolong the period over which they incur high costs year in and year out. “Historically,” the authors write, “this has not been the case, but mortality reductions resulting from improvements in chronic care may improve health (that is, the ‘compression of morbidity’) and increase spending simultaneously.”

Healthcare Spending As Economic Benefit

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Following hip replacement surgery, a Princeton economist tried to work out how much it had cost. He got as far as understanding the hospital room charge (US$10,000 a day), but was stumped by the myriad charges associated with anesthesia, pain management, physical therapy, the surgery itself, and other services. “The price that is paid is the price an insurer negotiates, and that is kept in a vault somewhere,” he told New York Times reporter Gina Kolata.

What is known is that nearly 16 percent (and rising) of US GDP is spent on healthcare, We just don’t know where exactly it goes, nor do we know if it matters that we don’t know, or that healthcare spending may consume as much as 25 percent of GDP by the year 2030. A Chicago economist suggests that it does not matter, because healthcare spending is “the driving force in the economy,” like railroads at the start of the 20th century. Americans can afford it, he says, echoing two other economists who wrote in a journal article: “As we get older and richer, which is more valuable: a third car, yet another television, more clothing or an extra year of life?”

But a Stanford economist begs to differ, noting that buying healthcare is fundamentally different from buying a television or a car. “Most of it involves transfers from the young to the old,” he said. “Down the road, most medical care will be for people over age 65, and most of the payments will be from taxes on younger people.” He calls it the restaurant check problem. “You go out to a restaurant with a bunch of friends and you sort of understand that you will split the check. The waiter comes along and says, ‘The lobster looks very good, and how about a soufflé for dessert?’ The restaurant check balloons, but you are not so careful because you figure everyone is splitting it.” The issue is not how much is being spent but whether spending more buys marked, or indeed any, improvements.

Said the Princeton economist: “It is probably true that if we spent twice as much money on health care we’d be better off. But half the money we spend is wasted.” Still, the wasted money is, in a sense, a separate discussion, he said. The real questions for the future of medical spending are: “Does it make sense in terms of how we value different things? What do people think a life is worth? And what do you get?”

EMRs’ Impact on Healthcare

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Health information technologies will not necessarily drive down the overall cost of healthcare, according to one physician quoted in Steve Lohr’s in-depth article in the New York Times. It could disrupt the pharmaceutical industry by steering patients and doctors away from blockbuster drugs while increasing demand for more tailored drugs. It could lead to more care for more people and thereby increase overall healthcare costs.

The proposed national health information network of millions of patient EMRs will “someday” provide detailed outcomes data on various therapies, drugs, and devices — with computer decision support systems analyzing the data and advising on what works and what doesn’t. This evidentiary data could replace that currently provided by drug and device maker-funded clinical studies. A handful of smaller-scale health information networks now in existence, such as at the Veterans Administration and Kaiser Permanente, are showing what a national network could achieve if it were built. Both organizations have replaced generic lovastatin for many of their patients who require cholesterol-lowering statins, on the basis of evidence from their own records that lovastatin was “just as safe and effective as Zocor or Lipitor for most patients.”

If this model were adopted nationwide, a Kaiser executive said, we’d be “talking billions of dollars in savings.” But those billions would be losses for the makers of Zocor and Lipitor. Does that matter? “The whole blockbuster model relies on prescribing a drug for a whole lot of people who don’t really need it,” said one health policy researcher, adding: “So much of the information doctors get now comes from studies paid for by the companies that are looking for positive outcomes. . . . The more independent information you can generate, analyze and distribute, the more the blockbuster model is in doubt.” A Pfizer executive countered: “The evidence [mainly from Pfizer-funded studies, we presume — Ed.] demonstrates that not all statins are the same.”

In any event, as EMRs accrue more patient information (including, eventually, patient’s genome data) then more prescriptions, more care, and more healthcare spending will result, says Lohr. Genomic data could determine whether and how an individual patient will react to specific drugs and dosages. Research has already identified gene types that appear to determine how an individual metabolizes anti-clotting agent warfarin, for example. But this improved safety (warfarin is dangerous to some gene types) “would also likely mean a lot more prescriptions for warfarin, since studies have concluded that only about half the people who might benefit from the drug are taking it,” writes Lohr.

Even so, he concludes, “The electronic medical record, for all its promise, is no silver bullet for the nation’s health system.” A Harvard doctor told him: “It encourages the belief that we don’t need real reform, all we need is computers.”

Data Mining

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HealthLeaders contributor Richard Reece says that data mining — the search for hidden patterns in a database, that can be used to predict future behavior — is “the most important and sweeping” innovation in healthcare, because “it gives us the tools to restructure and rebuild the existing system based on irrefutable and impersonal data.”

The major data sources are:

  • Medicare data — a treasure trove for data miners wishing to improve quality and outcomes and to pay hospitals and doctors for performance. 


  • Pharmaceutical data — used to provide clinic research services, medical education services, and therapeutic outcomes and epidemiology research data to pharmaceutical companies, biotechnology companies, and medical device manufacturers. 


  • Text data — Google “is turning the medical world upside-down” and “has leveled the information playing field between doctors and patients. . . . A general practitioner might have to keep up with 600 [diseases]. Patients only have to know about one disease — their own.” 


  • Clinical, practice management, and practice pattern data — practical clinical applications that use data universally available in physician’s offices (patient age and gender, physical measurements, labs, etc.) from which diagnostic possibilities and health status based on height, weight, blood pressure, family or personal history of heart attack or stroke, and laboratory findings can be derived and ranked. 

The real potential of data mining, says Reece, lies in two areas:

  • Practice pattern grouping, and 


  • Predictive modeling. 

Practice pattern grouping, also known as episode grouping, clusters costs around a clinical episode, which specifies everything from doctors involved, to diagnoses, to medications, to interventions, to hospitalization, to rehabilitations, to nursing home care, to outcomes, thereby enabling more accurate analysis of outcomes, costs, and physician performance. “It has been found,” he says, “that total episode costs may vary by factors of as much as 20 to one. . . and even with smaller variations, systematic or structural reforms are in order.”

Predictive modeling uses math and artificial intelligence to “move and manipulate vast amounts of data in a way that simulates reality.” An example is David Eddy’s “Archimedes Model,” funded by Kaiser, which “has virtual people who get virtual diseases, go to virtual doctors, get virtual tests, receive virtual treatment, and have virtual outcomes.” Using Kaiser’s eight million-member database, Archimedes played a role in the Vioxx recall, and it is currently being used as a tool to conduct virtual clinical trials by major pharmaceutical companies. Somewhat similar to Archimedes is “Pin Point Quality,” an outcomes measurement application from MedAI, which integrates data in clinical and financial legacy systems to identify specific steps to monitor and improve clinical outcomes while reducing healthcare costs. It gives medical and administrative directors and other members of the organization quality indicators they can use to drive practice changes in their organization.

Blues Plan National Database

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Blue Cross and Blue Shield Plans (BCBS) has launched a massive national database called Blue Health Intelligence (BHI) intended to give employers, providers, and consumers the de-identified records of 79 million members enrolled in 20 BCBS plans in 34 states. Employers can use it to tailor their health benefit plans. For example, it might show employees were making high use of imaging but that was not resulting in better clinical outcomes, therefore the employers might increase co-payment fees for imaging services. Or they might shift physicians who performed high-cost procedures that did not lead to better clinical outcomes into networks tied to higher patient costs.

The database will also provide hospitals and physicians with information about their own care quality based on standard clinical quality benchmarks, such as administering beta blockers to heart attack patients and ensuring that diabetic patients receive timely blood tests.

Eventually, BHI will publish “Consumer Reports” that include information on medical procedures and individual physicians to help patients make data-driven health care decisions. For example, consumers will be able to find information about which primary care physicians consistently refer patients for screening mammograms or which surgeons have the fewest surgical complications.

Finally, researchers can mine the database to discover, for example, which drugs work best — research the pharmaceutical industry tends not to welcome.

Top 10 Innovations

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Pathologist, writer, and consultant Richard L. Reece has compiled a list of the top ten innovations in US healthcare today. The ten were selected by 100 healthcare leaders in the hospital, physician, supply chain, and policy sectors from a list of 35 major innovations he created and provided. Showing an evident bias toward innovation in health IT [perhaps the 35 were themselves biased – Ed.] the ten were:

  • Pay-for-performance programs 


  • Introduction of electronic health records into medical practices 


  • Add-ons to EHRs — instant medical histories, coding devices, prescription-enabling modules, or Web sites that permit registration, virtual visits, prescription refills and open-access scheduling 


  • Software facilitating office dispensing and prescription writing 


  • Software enabling self-care, self-service and self-empowerment of consumers 


  • New practice business models (concierge, cash and retail) 


  • High tech/high touch remote patient monitoring with patient interactive capacity 


  • Personal health records with and without EHRs 


  • Disease management programs 


  • The transparency movement as part of the consumer-driven care movement 

The poll, says Reece, also revealed five “major directions”:

  • Information technology tools for consumers to better manage and pay for care are on everybody’s docket. 


  • Consumer-driven healthcare has staying power. 


  • Chronic care management will be huge. 


  • Public-private partnerships to manage care for Medicare and Medicaid recipients will be a preoccupation. 


  • Customized ambulatory care centers and chains to deliver high quality, cost effective patient services locally, regionally and nationally will flourish. 

“In sum,” he concludes, “healthcare leaders agree the future will be a technologically-aided, consumer-demanding, self-helping, market-based, data-sorted, centralized-to-decentralized system with multiple options offered by new practice models.”

FDA to Regulate Pharmacogenomic Tests

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US Food and Drug Administration plans to regulate pharmacogenomic tests could discourage their development but also ensure that any such tests are accurate and reliable. The agency already regulates, as medical devices, diagnostic test kits sold to labs, hospitals, and doctors, but it does not currently regulate so-called “home-brew” tests developed and performed by a single laboratory.

Specifically, the FDA plans to regulate “multivariate index assays” — tests that measure and analyze multiple genes, proteins, or other pieces of clinical information taken from a patient — such as Genomic Health’s US$3,500 “Oncotype DX,” which analyzes 21 genes in a breast tumor sample and predicts the probablility that a cancer will recur and whether the patient would benefit from chemotherapy.

One reason for the proposed regulation is that the analysis algorithms in the test kits are complex and usually proprietary, making it hard or impossible for doctors to assess the validity and reliability of the test results. Another reason is Congressional pressure on the FDA to clamp down on what some legislators view as “questionable” genetic tests being sold directly to consumers.

FDA Gets Help from MIT In Assessing Drugs, Devices

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The US Food and Drug Administration (FDA) is working with the Massachusetts Institute of Technology (MIT) to develop an automated system to expedite the detection of problems with drugs and medical devices already approved and on the market. The current method — manual assessment of reports voluntarily submitted by manufacturers – results in underreporting of many potential problems.

The new system will automatically mine data collected by insurers, hospitals, and other agencies to compile real-time information on “unusual or emerging patterns that could indicate potential safety concerns” and will build on technology the agency has used to detect infectious disease outbreaks, identify bioterrorist attacks, and track the spread of avian flu. The system will also alert physicians to potential problems.

Physican Shortage — Cardiothoracic Surgeons

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A decade ago, the cardiothoracic surgery specialty attracted more applicants than it had slots. But a sharp decline in cardiothoracic surgeon residency applicants since 1995, coupled with an impending wave of cardiothoracic surgeon retirements, today signifies a “deadly national trend,” according to the Society of Thoracic Surgeons.

The decline is partly the result of reimbursement rules introduced in 1999 that left surgeons or practices to shoulder the costs of anesthesiologists and other support staff, partly the result of reimbursement cuts more severe than those for any other surgical specialty (CABG reimbursement rates, for example, have been cut to 35 percent of 1985 rates adjusted for inflation), and partly because the specialty has traditionally involved 72-hour, six-day workweeks.

US House and Senate members have urged the Centers for Medicare and Medicaid Services (CMS) to reinstate funding for cardiothoracic surgeons’ clinical support staff; and if it declines to do so, advocates will ask hospitals to help offset the cost of specialized staff.

Doctors’ Pay Cut

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Adjusting for inflation, the average US doctor’s income dropped 7.1 percent between 1995 and 2003, while primary care physicians lost 10.2 percent, according to a report released in June by the Center for Studying Health System Change. Yet spending on physician services grew 9 percent in 2004, reports Anne Krishnan in the Raleigh News & Observer.

On average, specialists earned US$235,820 in 2003, while primary care doctors earned $146,405. By comparison, the median US salary in 2003 was $43,527. So it’s not that primary care physicians’ salaries are not high, it’s that “they’re not as high as they used to be,” and there is a huge investment of time and money to become a doctor. Medical students often graduate in debt to the tune of well over $100,000 and may not begin seeing a real return on their investment until they are in their 30s or even 40s.

“So who is getting rich, or at least richer?” asks Krishnan, and answers: Health insurers, hospitals, and drug companies, largely because doctors — as a result of “An unhealthy and aging population and consumer demand for the latest and greatest treatments” plus “fears of malpractice claims — are ordering more tests and writing more prescriptions.

Physician practices are also not immune from the rising health insurance premiums for their employees, rising staff salaries, supply costs, and rent that affect all small businesses. But reimbursements are “stagnant or getting smaller” as Medicare payments were not increased this year and are slated to decrease in 2007. Many health insurers base their payments on Medicare rates. An American Medical Association survey showed that 45 percent of physicians would stop accepting or decrease the number of new Medicare patients they accept if the government cut payments in 2007.

“The medical care system pays more for physicians to do procedures and operations than it does for doctors to listen and think and figure out proper diagnoses and spend time communicating with patients,” a doctor told Krishnan.


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