Original Story: NYTimes.com
NORWALK, Conn. — Start in Room 4, just beyond the reception area: A man is having blood drained from a bruised finger. Over in Room 1, a woman is being treated for eye trouble. Next door, in Room 2, a boy is having his throat swabbed.
For more than eight hours a day, seven days a week, 52 weeks a year, an assortment of ailments is on display at the tidy medical clinic on Main Avenue here. But all of the patients have one thing in common: No one is being treated at a traditional doctor’s office or emergency room.
Instead, they have turned to one of the fastest-growing segments of American health care: urgent care, a common category of walk-in clinics with uncommon interest from Wall Street. Once derided as “Doc in a Box” medicine, urgent care has mushroomed into an estimated $14.5 billion business, as investors try to profit from the shifting landscape in health care.
The office here is part of PhysicianOne Urgent Care. Bankrolled by two private investment companies, PhysicianOne has grown into an eight-clinic operation, the largest of its kind in Connecticut, with plans for even greater expansion.
But what is happening here is also playing out across the nation, as private equity investment firms, sensing opportunity, invest billions in urgent care and related businesses. Since 2008, these investors have sunk $2.3 billion into urgent care clinics. Commercial insurance companies, regional health systems and local hospitals are also looking to buy urgent care practices or form business relationships with them.
The business model is simple: Treat many patients as quickly as possible. Urgent care is a low-margin, high-volume proposition. At PhysicianOne here, most people are in and out in about 30 minutes. The national average charge runs about $155 per patient visit. Do 30 or 35 exams a day, and the money starts to add up.
Urgent care clinics also have a crucial business advantage over traditional hospital emergency rooms in that they can cherry-pick patients. Most of these centers do not accept Medicaid and turn away the uninsured unless they pay upfront. Hospital E.R.s, by contrast, are legally obligated to treat everyone.
But as urgent care centers expand their reach, regulators in some states are scrutinizing their activities. While some states require the clinics to be licensed, most do not. It is unclear whether such urgent care centers offer better or worse care than other providers. But some family physicians — who stand to lose business to the newcomers — wonder if patients are trading quality for convenience.
“The relationship I have with my patients and the comprehensiveness of care I provide to them is important,” said Dr. Robert L. Wergin, a family physician in Milford, Neb., and the president-elect of the American Academy of Family Physicians. “While there is a role for these centers, if I were sick I’d rather see my regular doctor, and I hope my patients feel that way.”
Already, the race is on to build large chains with powerful, national brands — a McDonald’s or a Gap of health care. Wall Street money is driving the growth, but so are other forces. Millions of newly insured Americans are seeking care. Others are frustrated by long waits at E.R.s, or by having to conform to regular doctor’s hours.
Many experts say a cultural shift is also underway.
“We expect to do our banking 24 hours a day, seven days a week, and to shop 24/7,” said Dr. Ateev Mehrotra, an associate professor in the Department of Health Care Policy at Harvard Medical School and an adjunct policy analyst at the RAND Corporation. “So now we want our health care to be 24/7.”
While convenience is one factor, so is cost. The average charge to treat acute bronchitis at an urgent care center in 2012 was $122, compared with $814 at an emergency room, according to data on the website of CareFirst Blue Cross Blue Shield, which operates in Maryland, Northern Virginia and the District of Columbia. The price of treating a middle-ear infection was $100 versus nearly $500 in an E.R. Such cost differences matter not only to commercial insurers, but also to consumers with high-deductible health plans.
Still, just how quickly urgent care is proliferating is difficult to measure. The Urgent Care Association of America, which represents more than 2,600 clinics, estimates there are more than 9,000 clinics in the United States. But Thomas Charland, who runs Merchant Medicine, a research and consulting firm in Minnesota, puts the number at 5,000 to 6,000.
One reason for the discrepancy, Mr. Charland explained, is that the industry is dominated by physician-owned practices with one or two facilities that nobody tracks. But a bigger issue, he said, is that the industry lacks clear criteria about what exactly urgent care means.
“Just because a physician’s office extended its hours doesn’t make it urgent care,” Mr. Charland said. “To me, urgent care means you can do X-rays, that you can do sutures, maybe you’re open one weekend day, plus one or two evenings.”
Regulators in some states are struggling with that question and others as well. In Illinois, for instance, the authorities restrict the use of the word urgent, so clinics there are called “immediate care” facilities. Other states have weighed proposals on whether urgent care facilities should be required to accept Medicaid or uninsured patients.
Despite concerns of possible increased regulations, companies are lining up to buy urgent care groups.
The insurance giant Humana paid nearly $800 million in 2010 to buy Concentra, the nation’s largest group of urgent care centers, with about 300 currently. Two years later, Dignity Health, a San Francisco-based health system, acquired U.S. HealthWorks, a group that today has 176 centers.
Even hospitals are embracing the trend. Florida Hospital in Orlando, for example, has opened 24 Centra Care urgent care clinics.
“We have a number of urgent care centers that have opened up around where I practice, and almost every day, we have patients transferred to us from one of them,” said Dr. Robert E. O’Connor, the chairman of emergency medicine at the University of Virginia in Charlottesville and vice president of the American College of Emergency Physicians.
But some of the most aggressive buyers have been private equity firms, according to data from a research firm, PitchBook.
In 2010, General Atlantic, a private equity firm, and Sequoia Capital, a giant in venture capital, acquired a stake in MedExpress Urgent Care, which operated 47 clinics in four states. Today, MedExpress has 130 clinics in 10 states.
Last fall, when Dr. R. Robert Rohatsch and his partners decided they needed additional capital to expand their practice, Urgent Care of Connecticut, they received bids from about a dozen private equity firms. Dr. Rohatsch and his partners chose PineBridge Investments and Pulse Equity Partners, which specializes in health and wellness investments.
“We’ve focused on how health care is going to be delivered to consumers in the new world order and how do consumers want their health care to be delivered,” said Douglas W. Lehrman, the founder and chief executive of Pulse Equity.
For now, at least, many patients seem satisfied. At a PhysicianOne clinic, Roberta Giordano got an X-ray recently after she dropped a kitchen knife on her foot, severing a tendon. Peter Andino arrived at the Norwalk clinic on a recent Thursday evening after smashing his finger in a car door. The doctor quickly punctured his nail to relieve the pressure and wrapped up the finger. Mr. Andino was in and out in 45 minutes.
“Dealing with the E.R. is a hassle,” Mr. Andino said. “This place is clean, it’s quick, and it’s about five minutes away from my house. What more could you want?”
Showing posts with label Care Costs. Show all posts
Showing posts with label Care Costs. Show all posts
04 October 2011
Incentives to Lower Health Care Costs
Story first appeared in USA TODAY.
Sarah Gardner wants her company's employees to be savvy medical shoppers.
So this year, she rolled out a plan that sets limits on how much the company will pay toward a range of tests and procedures, from MRIs to hysterectomies. Workers at Buffalo-based Prodigy Health now know to call their employee insurance plan to find a list of local doctors and facilities that meet the price. Or they can choose to go to a higher-price center elsewhere in the insurer's network and pay the difference themselves.
Before the new program, workers' incentive to shop around was limited because they had no idea — or any easy way to find out — that prices for many types of medical treatments varied widely. A test at one center might be $3,700, while right down the street they could get it for $900. Prodigy provides benefit management for self-insured employers.
Other employers and insurers are pursuing the same strategy, experimenting with ways to slow rapidly rising spending on medical care. Some, like Prodigy, are going beyond simply offering high-deductible insurance to being more directive, using financial incentives to promote doctors, hospitals or medications they've deemed more cost efficient.
Safeway employees in the San Francisco Bay Area, for example, face higher payments if they choose centers that cost more than $1,500 for a routine colonoscopy. And in January, the giant California Public Employees' Retirement System (Calpers) said it would not pay more than $30,000 toward knee or hip replacement. Workers who choose a hospital that costs more pay the difference. Next year, the program will be expanded to outpatient colon cancer tests, as well as some surgeries, including cataract repair for the 345,000 people enrolled in Calpers' preferred provider plans.
Employers say they hope the efforts, often called reference pricing, will get patients to act more like consumers — and drive down the cost of some procedures.
This sends a signal to (medical) providers about what is considered a reasonable and acceptable price. These providers should also seek Hipaa Training.
Still, patient advocates fear the trend may leave workers not only footing more of the cost of health care, but also choosing among providers mainly with information on price, not quality.
Kathleen Stoll at the advocacy group Families USA worries that some employers may be simply picking an arbitrary number for the price they're willing to pay and not considering accessibility (of the centers) or quality.
Medicare, some private insurers and a few states track a few quality measures, such as mortality rates at hospitals, but there is generally little information on the outcomes of specific procedures, especially at facilities that are not part of a hospital, says Elliott Fisher, a Dartmouth Medical School professor well known for his research into quality and cost variation in medical care.
A lack of data on quality is a concern, as it is even with high-deductible plans, which can require workers to spend thousands of their own dollars before coverage begins.
The criticism has been that it's not fair to give people cost responsibility without the ability to make quality decisions. Maybe the $500 colonoscopy is done in a terrible factorylike environment, and the $1,200 one is better, but we don't know.
Gardner says her workers, many of whom are nurses, did raise the issue.
When she broached it last November their main concern was, “Are you going to send me to some low-quality provider just to save money?”
She countered by pointing out that the providers who met reference prices were ones employees were already using. Pretty much the places they suggest they go are the big places, the well-known places.
Checking medical claims
Before officially rolling out the program in March, Prodigy hired an outside firm called Healthcare Blue Book to comb through Prodigy's medical claims spending, looking particularly for tests and procedures for which there was high demand and wide price variation.
Working with the Blue Book information, Prodigy eventually settled on nine broad categories of tests or procedures that would fall under the new program. Included are imaging services, such as computed tomography (CT scans), sleep apnea tests and some non-emergency surgeries, including arthroscopic knee procedures. What Prodigy pays for each service varies based on local costs in the cities where its 1,200 covered employees live, including Buffalo; Minneapolis; Columbus, Ohio; Evansville, Ind.; and Okemos, Mich.
The rate is set at about the median (half were higher and half were lower) that Prodigy had paid in the past for the services. About 90% so far have chosen to go to medical providers who meet the price limits, she says. The rest go to higher-price centers and pay the difference themselves.
In the program's first two months, Prodigy saved an estimated $17,000. But Gardner says her main goal is not so much saving money as arming workers with information and getting them to pay attention and ask questions.
Facing challenges
The idea of having employees pay the difference for higher-cost services is not new. About 39% of large employers surveyed in an August National Business Group on Health report said they use the technique in their prescription-drug programs, often by requiring workers who want a brand-name drug when a generic is available to pay the difference. Some employers encourage workers to use high-performance networks of doctors or hospitals by lowering their co-payments if they seek care there.
But only about 1% of employers in the August survey use reference pricing like Prodigy, for lab tests, radiology exams or other medical services.
The approach faces challenges. For one thing, it can be hard to explain to employees. Prodigy, for example, hired someone solely to help workers select a facility that meets the price limits.
Also, patients may be hesitant to question their doctor about costs or reluctant to switch to a different physician or hospital.
Focus groups show that people generally don't like shopping around for health care.
It's one thing to go from store to store to see how much toilet paper costs, but with doctors, you don't have an easy way to find out. It feels unnatural and uncomfortable to ask a doctor how much they would charge.
Still, the trend is further fueling efforts by employers and other groups to push for more quality data, Lansky says. He recalls a recent conversation with members of the American Gastroenterological Association who are developing a registry that will eventually track the quality of colonoscopy providers. They don't want to see a market where (only) the cheapest places do well. They want to reward physicians who are doing high-quality care and put in place a system that makes that visible.
Checking on doctors
Consumers can't yet check the registry to find out if their doctor does a better job than one across town. But it is under development.
Anthem, the insurer running the new hip and knee program for Calpers, says it will track the outcomes to make sure they are at least as good as what was seen before the change. About 90% of the hospitals in Anthem's California network met the reference price for hip or knee replacement, including Cedars-Sinai, UCLA and other well-known medical centers.
Anthem provides transportation costs for patients who live too far from one of the centers. About 77% of the covered workers having the procedure since launch have gone to a reference-price hospital.
The 46 hospitals were chosen after Calpers analyzed what it was paying for hip and knee replacements under its previous arrangement and found it ranged from as little as $15,000 to more than $100,000.
The $30,000 limit for hips and knees is not a median but was selected after looking at the range in costs and taking off the really high and really low numbers. The program should save Calpers about 20% of the cost of the procedures.
This is the future for select procedures where people can shop.
Sarah Gardner wants her company's employees to be savvy medical shoppers.
So this year, she rolled out a plan that sets limits on how much the company will pay toward a range of tests and procedures, from MRIs to hysterectomies. Workers at Buffalo-based Prodigy Health now know to call their employee insurance plan to find a list of local doctors and facilities that meet the price. Or they can choose to go to a higher-price center elsewhere in the insurer's network and pay the difference themselves.
Before the new program, workers' incentive to shop around was limited because they had no idea — or any easy way to find out — that prices for many types of medical treatments varied widely. A test at one center might be $3,700, while right down the street they could get it for $900. Prodigy provides benefit management for self-insured employers.
Other employers and insurers are pursuing the same strategy, experimenting with ways to slow rapidly rising spending on medical care. Some, like Prodigy, are going beyond simply offering high-deductible insurance to being more directive, using financial incentives to promote doctors, hospitals or medications they've deemed more cost efficient.
Safeway employees in the San Francisco Bay Area, for example, face higher payments if they choose centers that cost more than $1,500 for a routine colonoscopy. And in January, the giant California Public Employees' Retirement System (Calpers) said it would not pay more than $30,000 toward knee or hip replacement. Workers who choose a hospital that costs more pay the difference. Next year, the program will be expanded to outpatient colon cancer tests, as well as some surgeries, including cataract repair for the 345,000 people enrolled in Calpers' preferred provider plans.
Employers say they hope the efforts, often called reference pricing, will get patients to act more like consumers — and drive down the cost of some procedures.
This sends a signal to (medical) providers about what is considered a reasonable and acceptable price. These providers should also seek Hipaa Training.
Still, patient advocates fear the trend may leave workers not only footing more of the cost of health care, but also choosing among providers mainly with information on price, not quality.
Kathleen Stoll at the advocacy group Families USA worries that some employers may be simply picking an arbitrary number for the price they're willing to pay and not considering accessibility (of the centers) or quality.
Medicare, some private insurers and a few states track a few quality measures, such as mortality rates at hospitals, but there is generally little information on the outcomes of specific procedures, especially at facilities that are not part of a hospital, says Elliott Fisher, a Dartmouth Medical School professor well known for his research into quality and cost variation in medical care.
A lack of data on quality is a concern, as it is even with high-deductible plans, which can require workers to spend thousands of their own dollars before coverage begins.
The criticism has been that it's not fair to give people cost responsibility without the ability to make quality decisions. Maybe the $500 colonoscopy is done in a terrible factorylike environment, and the $1,200 one is better, but we don't know.
Gardner says her workers, many of whom are nurses, did raise the issue.
When she broached it last November their main concern was, “Are you going to send me to some low-quality provider just to save money?”
She countered by pointing out that the providers who met reference prices were ones employees were already using. Pretty much the places they suggest they go are the big places, the well-known places.
Checking medical claims
Before officially rolling out the program in March, Prodigy hired an outside firm called Healthcare Blue Book to comb through Prodigy's medical claims spending, looking particularly for tests and procedures for which there was high demand and wide price variation.
Working with the Blue Book information, Prodigy eventually settled on nine broad categories of tests or procedures that would fall under the new program. Included are imaging services, such as computed tomography (CT scans), sleep apnea tests and some non-emergency surgeries, including arthroscopic knee procedures. What Prodigy pays for each service varies based on local costs in the cities where its 1,200 covered employees live, including Buffalo; Minneapolis; Columbus, Ohio; Evansville, Ind.; and Okemos, Mich.
The rate is set at about the median (half were higher and half were lower) that Prodigy had paid in the past for the services. About 90% so far have chosen to go to medical providers who meet the price limits, she says. The rest go to higher-price centers and pay the difference themselves.
In the program's first two months, Prodigy saved an estimated $17,000. But Gardner says her main goal is not so much saving money as arming workers with information and getting them to pay attention and ask questions.
Facing challenges
The idea of having employees pay the difference for higher-cost services is not new. About 39% of large employers surveyed in an August National Business Group on Health report said they use the technique in their prescription-drug programs, often by requiring workers who want a brand-name drug when a generic is available to pay the difference. Some employers encourage workers to use high-performance networks of doctors or hospitals by lowering their co-payments if they seek care there.
But only about 1% of employers in the August survey use reference pricing like Prodigy, for lab tests, radiology exams or other medical services.
The approach faces challenges. For one thing, it can be hard to explain to employees. Prodigy, for example, hired someone solely to help workers select a facility that meets the price limits.
Also, patients may be hesitant to question their doctor about costs or reluctant to switch to a different physician or hospital.
Focus groups show that people generally don't like shopping around for health care.
It's one thing to go from store to store to see how much toilet paper costs, but with doctors, you don't have an easy way to find out. It feels unnatural and uncomfortable to ask a doctor how much they would charge.
Still, the trend is further fueling efforts by employers and other groups to push for more quality data, Lansky says. He recalls a recent conversation with members of the American Gastroenterological Association who are developing a registry that will eventually track the quality of colonoscopy providers. They don't want to see a market where (only) the cheapest places do well. They want to reward physicians who are doing high-quality care and put in place a system that makes that visible.
Checking on doctors
Consumers can't yet check the registry to find out if their doctor does a better job than one across town. But it is under development.
Anthem, the insurer running the new hip and knee program for Calpers, says it will track the outcomes to make sure they are at least as good as what was seen before the change. About 90% of the hospitals in Anthem's California network met the reference price for hip or knee replacement, including Cedars-Sinai, UCLA and other well-known medical centers.
Anthem provides transportation costs for patients who live too far from one of the centers. About 77% of the covered workers having the procedure since launch have gone to a reference-price hospital.
The 46 hospitals were chosen after Calpers analyzed what it was paying for hip and knee replacements under its previous arrangement and found it ranged from as little as $15,000 to more than $100,000.
The $30,000 limit for hips and knees is not a median but was selected after looking at the range in costs and taking off the really high and really low numbers. The program should save Calpers about 20% of the cost of the procedures.
This is the future for select procedures where people can shop.
25 April 2010
Military's Health Care Costs Booming
USA Today
WASHINGTON — Military health care spending is rising twice as fast as the nation's overall health care costs, consuming a larger chunk of the defense budget as the Pentagon struggles to pay for two wars, military budget figures show.
The surging costs are prompting the Pentagon and Congress to consider the first hike in out-of-pocket fees for military retirees and some active-duty families in 15 years, said Rear Adm. Christine Hunter, deputy director of TRICARE, the military health care program.
Pentagon spending on health care has increased from $19 billion in 2001 to a projected $50.7 billion in 2011, a 167% increase.
The rapid rise has been driven by a surge in mental health and physical problems for troops who have deployed to war multiple times and by a flood of career military retirees fleeing less-generous civilian health programs, Hunter said.
Total U.S. spending on health care has climbed from nearly $1.5 trillion in 2001 to an estimated $2.7 trillion next year, an 84% increase.
As a share of overall defense spending, health care costs have risen from 6% to 9% and will keep growing, said Navy Lt. Cmdr. Kathleen Kesler, a Pentagon spokeswoman.
That upward trend is "beginning to eat us alive," Defense Secretary Robert Gates told Congress in February.
In addition to mental issues, multiple combat tours have created more strains on joints, backs and legs, Pentagon statistics show. Medical visits for such problems rose from 2.8 million in 2005 to 3.7 million in 2009.
Behavioral-health counseling sessions for troops and family members rose 65% since 2004. The Pentagon paid for 7.3 million visits last year — treatment of 140,000 patients each week, according to TRICARE numbers.
Other factors driving up costs:
• Many new patients are children suffering anxiety or depression because of a parent away at war. Children had 42% more counseling sessions last year than in 2005, TRICARE numbers show.
• The number of TRICARE beneficiaries has grown by 370,000 in the past two years to 9.6 million troops, family members and military retirees.
• Nearly 200,000 prescriptions were filled each day at civilian pharmacies last year.
Active-duty troops and their families receive free health care except for out-of-pocket co-payments of $3 or $9 per prescription at civilian pharmacies.
Retirees receive the same benefits by paying $230 a person or $460 a family each year, along with small co-payments for various types of care. The fees have not gone up since 1995. By contrast, private insurance plans try to limit expenses with frequent increases in premiums and copayments
"I want to be generous and fair to all those who serve, but there's a cost-containment problem," Sen. Lindsey Graham, R-S.C., said at a recent hearing. "I don't see how we can sustain this forever, where TRICARE is never subject to adjustment in terms of the premiums to be paid."
Hunter said higher out-of-pocket expenses are being explored by the Pentagon, too.
"The difference this year is that we see members of Congress saying we need to have a thoughtful discussion," Hunter said. "Where's the balance here? We want to be grateful for people's service, absolutely. But the costs are up. What's fair?"
The surging costs are prompting the Pentagon and Congress to consider the first hike in out-of-pocket fees for military retirees and some active-duty families in 15 years, said Rear Adm. Christine Hunter, deputy director of TRICARE, the military health care program.
Pentagon spending on health care has increased from $19 billion in 2001 to a projected $50.7 billion in 2011, a 167% increase.
The rapid rise has been driven by a surge in mental health and physical problems for troops who have deployed to war multiple times and by a flood of career military retirees fleeing less-generous civilian health programs, Hunter said.
Total U.S. spending on health care has climbed from nearly $1.5 trillion in 2001 to an estimated $2.7 trillion next year, an 84% increase.
As a share of overall defense spending, health care costs have risen from 6% to 9% and will keep growing, said Navy Lt. Cmdr. Kathleen Kesler, a Pentagon spokeswoman.
That upward trend is "beginning to eat us alive," Defense Secretary Robert Gates told Congress in February.
In addition to mental issues, multiple combat tours have created more strains on joints, backs and legs, Pentagon statistics show. Medical visits for such problems rose from 2.8 million in 2005 to 3.7 million in 2009.
Behavioral-health counseling sessions for troops and family members rose 65% since 2004. The Pentagon paid for 7.3 million visits last year — treatment of 140,000 patients each week, according to TRICARE numbers.
Other factors driving up costs:
• Many new patients are children suffering anxiety or depression because of a parent away at war. Children had 42% more counseling sessions last year than in 2005, TRICARE numbers show.
• The number of TRICARE beneficiaries has grown by 370,000 in the past two years to 9.6 million troops, family members and military retirees.
• Nearly 200,000 prescriptions were filled each day at civilian pharmacies last year.
Active-duty troops and their families receive free health care except for out-of-pocket co-payments of $3 or $9 per prescription at civilian pharmacies.
Retirees receive the same benefits by paying $230 a person or $460 a family each year, along with small co-payments for various types of care. The fees have not gone up since 1995. By contrast, private insurance plans try to limit expenses with frequent increases in premiums and copayments
"I want to be generous and fair to all those who serve, but there's a cost-containment problem," Sen. Lindsey Graham, R-S.C., said at a recent hearing. "I don't see how we can sustain this forever, where TRICARE is never subject to adjustment in terms of the premiums to be paid."
Hunter said higher out-of-pocket expenses are being explored by the Pentagon, too.
"The difference this year is that we see members of Congress saying we need to have a thoughtful discussion," Hunter said. "Where's the balance here? We want to be grateful for people's service, absolutely. But the costs are up. What's fair?"
07 October 2009
Hospitals Learning: Better Care Is Cheaper Care
Story from the Wall Street Journal
Be it cereal or cars, buyers usually have an idea of how good the products are and how much they cost before they buy them.
That's not how U.S. health care works. Patients rarely know which hospitals offer top-quality lung or aortic surgery, and which are more likely to harm them. Hospitals don't compete on price and rarely publish measurements of their quality, if they measure it at all.
Except in Pennsylvania. For two decades, a state agency has published "medical outcomes" -- death and complication rates -- from more than 50 types of treatments and surgery at hospitals. The state has found that publishing results can prompt hospitals to improve, and that good medical treatment is often less expensive than bad care.
One reason is that high-quality treatment usually results in shorter hospital stays and fewer readmissions. The state has had less success in publishing hospital prices and has drawn criticism from hospitals that disagree with its reporting methods. But companies or unions in Pennsylvania that have agreed to work only with the best-performing hospitals say they have been able to drive down medical costs.
"High-quality care costs less -- always," says David B. Nash, a medical-quality expert and dean at Thomas Jefferson University's School of Population Health in Philadelphia. "If the federal government could behave like a savvy shopper, that would change the health-cost game overnight. But the government is a bill payer, not a savvy shopper."
Walter McClure, who helped spark Pennsylvania's efforts, was an early advocate of publicizing medical outcomes and fostering competition among hospitals.
The Senate Finance Committee could vote late this week on its sweeping health bill, seen as the backbone for any final legislation. That bill would make available $75 million annually for the U.S. Department of Health and Human Services to develop methods of improving quality, including potentially publishing outcomes.
Although at times premium care can be exorbitant, there's evidence some in Pennsylvania saved money using top-rated hospitals. Hershey Co. offered workers medical coverage based on the state agency's reported outcomes, and cut the company's expenses by 50% over several years. The Philadelphia police union's benefits-management company says it uses the state reports to steer officers to the best hospitals; as a result, it say its costs fall about 17% below those of comparable plans.
Tom Lamb, administrator of Philadelphia police health benefits, says he frequently explains to members why they should go to hospitals with better outcomes. "If an officer's 7-year-old daughter has to go in for surgery," he says, "I'll sit down with the father and say, 'Are you just going to shake your head yes when your pediatrician wants to send her to his golfing buddy?' "
Quality Ratings
The Delaware Valley Health Care Coalition, a group of union and municipal health funds covering 1.3 million people, is beginning the process of picking about 20 hospitals based on the state's quality ratings. Capital BlueCross in Harrisburg has designed a plan that selects hospitals based on the reports. Mark Dever, benefits manager at Duquesne Light in Pittsburgh, says his company recently got an offer from a hospital chain to treat the company's workers. But after reviewing state quality data and comparing prices, he rejected it.
An August 2008 study in the American Journal of Medical Quality reported that Pennsylvania in-hospital odds of death were 21% to 41% lower than those in other states. The research focused on heart attacks, congestive heart failure, brain hemorrhage, stroke, pneumonia and septic infections.
The Obama administration is allotting $1 billion for research to compare effectiveness of medical treatments. Some hope comparing hospital outcomes will be part of that. "As a patient," says Michael Pine, who runs a medical quality-measuring business in Chicago, "I would generally be more interested in whether Hospital A or Hospital B gets better results, more than whether drug A is more effective than surgery."
The theory underlying the Pennsylvania program is that, to create a truly competitive health-care market, consumers need hard information showing which hospitals perform better.
Curbing Infections
For example, Pennsylvania three years ago published its first report on hospitals' infection rates that arise largely from intravenous catheters and tubes left in too long. Infection numbers the following year fell 7.8%, as hospitals responded with steps designed to lower infections.
The average payment in 2006 for hospitalization where a patient acquired an infection was $53,915; with no infection, the average payment was $8,311, according to state reports.
By simply getting rid of preventable infections, Pennsylvania estimates its hospitals could lower expenses by nearly $1 billion.
The White House is looking at publishing information possibly including medical outcomes as part of overhaul efforts, officials say. Quality data could also be used in existing programs. "There is a clear understanding from the Obama administration that both Medicare and Medicaid need to move in the direction of what's happening in Pennsylvania," says Jonathan Blum, director of the government's Center for Medicare Management.
The Philadelphia police health fund benefit-management company, covering 26,000 people, adopted a plan pegged to the state's hospital-quality results seven years ago. Mr. Lamb says the police fund has saved as much as $5 million a year using the information.
Sent Home
One retired Philadelphia police officer benefited from the state reports in an unusual way -- by learning he didn't need the coronary angioplasty he had been prescribed. Ed Gillespie, of Cape May, N.J., says he was told by his doctor six years ago that he needed angioplasty to clear out heart arteries. After consulting with Mr. Lamb, he learned state reports showed good results at Jefferson Medical College in Philadelphia. He decided to go there.
While he was on the gurney awaiting angioplasty, his cardiologist asked colleagues to study the films more carefully -- and concluded he could go home without treatment, Mr. Gillespie recalls. "I get checked every year, and I've been OK," he says.
Pennsylvania's agency -- called the Pennsylvania Health Care Cost Containment Council, or PHC4 -- has its critics. Hospitals have complained its data are imprecise or unnecessary.
P.J. Brennan, chief medical officer of the University of Pennsylvania Health System, says that PHC4 reports -- even though they are adjusted for certain risk factors -- still aren't comprehensive enough to take into account the very sickest patients, the sort treated at academic medical centers. "These reports are very important for transparency, but I don't think you can look at a PHC4 report and conclude you should not go to that hospital," he says.
In the state's most recent report, the Hospital of the University of Pennsylvania performed well in many categories but had worse-than-expected death rates in treating septicemia, or blood infections.
State legislators have tentatively cut the PHC4's budget to $2.8 million this year from $5.4 million in 2008, largely because of a state deficit.
The program got its start in the 1980s. Alarmed by health-cost inflation, business and labor leaders sought out Walter McClure, a Minnesotan who had pioneered a medical-quality program. Dr. McClure, who has a Ph.D. in physics, made a presentation to the Pennsylvania Business Roundtable in 1985.
Dr. McClure called on the executives to foment competition among hospitals. "We used to say to a patient, 'Go anywhere, regardless of cost, and we will pay the bill,' " he said in his speech. "Quality was assumed. That was dumb."
In 1986, Pennsylvania legislators created the PHC4. Three years later, the agency published its first report comparing death rates at about 180 hospitals.
Hahnemann University Hospital in Philadelphia fared poorly at first on several quality measures. Its ratings were significantly "worse than expected" on eight of 55 procedures in the first PHC4 "Hospital Effectiveness Report." The report included data for July 1, 1989, to June 30, 1990.
John Russell, then president of the Hospital Association of Pennsylvania, says Hahnemann and others complained, but "within about six weeks, they cleaned up their act." In the second Hospital Effectiveness Report, Hahnemann improved its ratings on seven of the eight procedures. The hospital declined to comment.
PHC4's first report on infections in 2006 showed Hamot Medical Center in Erie with a relatively high infection rate, in part because the hospital was early to use computers to track such rates. Emily McCracken, the hospital's epidemiologist, says the report "put a spotlight on something that needed a spotlight."
The hospital has since lowered the infection rate by about 20% by cleaning IV catheters more often and removing them earlier.
Care Disparities
Over the years, PHC4 sought a wider variety of data and started producing reports on infection rates, readmissions and lengths of stay due to complications. The reports revealed startling disparities among hospitals and even individual doctors.
The hospital-performance reports use data compiled from medical records. Results are "risk adjusted," meaning the agency collects laboratory and medical-chart information about the age and overall health of patients so hospitals taking on difficult cases won't be unduly penalized.
The agency estimates the cost to the state's 172 acute-care hospitals of collecting the data annually is $7 million. The state's hospital association says it is $10 million or more.
The state agency hasn't been as successful in obtaining the prices that insurers pay to hospitals, information that would be important because it would allow patients and payers to factor in prices when choosing hospitals. The agency has legal power to get that information from insurers and publish it, but it has done so only for heart surgery. An agency spokesman says insurers didn't refuse, and that lack of manpower at the agency explains this omission. One person familiar with the events says many insurers wouldn't divulge prices.
Hershey came to rely on the state's hospital reports. In the early 1990s, medical costs for its 15,000 workers and dependents were soaring. "I told the human-resources department we needed to do something," says then-Chief Executive Richard Zimmerman.
Richard C. Dreyfuss, compensation and benefits manager, and his boss, William Lehr Jr., scrutinized the state's data for 23 hospitals. Mr. Dreyfuss ranked hospitals based 70% on medical outcomes and 30% on hospital prices, which the company obtained from insurers on its own. He focused on 21 costly procedures such as heart bypass and diabetes care.
Cost Correlation
Results shocked him. "The correlation between cost and quality was zero," he says. "You go in thinking that all hospitals are pretty much equal, but this was eye-opening. Generally, higher-cost hospitals had poorer outcomes."
Mr. Dreyfuss devised a plan called Health Styles in which only 10 hospitals would be included -- and 13 left out. Employees had other plans to choose from, but Health Styles was cheaper than the relatively inexpensive health maintenance organizations Hershey offered, Mr. Dreyfuss says.
The 13 excluded hospitals weren't happy -- especially the highly regarded Penn State University's Milton S. Hershey Medical Center, founded by the family that created the chocolate company.
C. McCollister Evarts, dean of the hospital's medical school, told Messrs. Dreyfuss and Lehr that the state agency's information was wrong and "you don't understand what an academic medical center does," Messrs. Dreyfuss and Lehr recall.
Dr. Evarts confirms his remark and says he believes such measurements have become far more precise over the years. In recent years, Hershey Medical was reinstated under the company's plans. The hospital declined to comment.
The Health Styles plan took effect in 1994. About 40% of employees in central Pennsylvania signed up. The company, which was self-insured, was able to hold its medical-care cost increases annually to 4%, about half the national rate, saving about $10 million in the first five years. "This thing was a real winner," says Mr. Dreyfuss. He and other former Hershey executives say the company cut its annual medical expense by 50% for several years.
Dennis Bomberger, business manager of Chocolate Workers Local 464, says Hershey's Health Styles "was an excellent plan" that "employees liked the best."
The plan was discarded two years ago, however, when a new Hershey management team changed health coverage, Mr. Bomberger says. A Hershey spokesman declined to comment.
Former Hershey vice president Mr. Lehr is now chairman and chief executive of Capital BlueCross, where he has installed a plan for customers that would use PHC4 data to select hospitals. He would like to see hospital-quality information available across the country. "I would ask officials in Washington to push for mandatory compiling of medical data."
Be it cereal or cars, buyers usually have an idea of how good the products are and how much they cost before they buy them.
That's not how U.S. health care works. Patients rarely know which hospitals offer top-quality lung or aortic surgery, and which are more likely to harm them. Hospitals don't compete on price and rarely publish measurements of their quality, if they measure it at all.
Except in Pennsylvania. For two decades, a state agency has published "medical outcomes" -- death and complication rates -- from more than 50 types of treatments and surgery at hospitals. The state has found that publishing results can prompt hospitals to improve, and that good medical treatment is often less expensive than bad care.
One reason is that high-quality treatment usually results in shorter hospital stays and fewer readmissions. The state has had less success in publishing hospital prices and has drawn criticism from hospitals that disagree with its reporting methods. But companies or unions in Pennsylvania that have agreed to work only with the best-performing hospitals say they have been able to drive down medical costs.
"High-quality care costs less -- always," says David B. Nash, a medical-quality expert and dean at Thomas Jefferson University's School of Population Health in Philadelphia. "If the federal government could behave like a savvy shopper, that would change the health-cost game overnight. But the government is a bill payer, not a savvy shopper."
Walter McClure, who helped spark Pennsylvania's efforts, was an early advocate of publicizing medical outcomes and fostering competition among hospitals.The Senate Finance Committee could vote late this week on its sweeping health bill, seen as the backbone for any final legislation. That bill would make available $75 million annually for the U.S. Department of Health and Human Services to develop methods of improving quality, including potentially publishing outcomes.
Although at times premium care can be exorbitant, there's evidence some in Pennsylvania saved money using top-rated hospitals. Hershey Co. offered workers medical coverage based on the state agency's reported outcomes, and cut the company's expenses by 50% over several years. The Philadelphia police union's benefits-management company says it uses the state reports to steer officers to the best hospitals; as a result, it say its costs fall about 17% below those of comparable plans.
Tom Lamb, administrator of Philadelphia police health benefits, says he frequently explains to members why they should go to hospitals with better outcomes. "If an officer's 7-year-old daughter has to go in for surgery," he says, "I'll sit down with the father and say, 'Are you just going to shake your head yes when your pediatrician wants to send her to his golfing buddy?' "
Quality Ratings
The Delaware Valley Health Care Coalition, a group of union and municipal health funds covering 1.3 million people, is beginning the process of picking about 20 hospitals based on the state's quality ratings. Capital BlueCross in Harrisburg has designed a plan that selects hospitals based on the reports. Mark Dever, benefits manager at Duquesne Light in Pittsburgh, says his company recently got an offer from a hospital chain to treat the company's workers. But after reviewing state quality data and comparing prices, he rejected it.
An August 2008 study in the American Journal of Medical Quality reported that Pennsylvania in-hospital odds of death were 21% to 41% lower than those in other states. The research focused on heart attacks, congestive heart failure, brain hemorrhage, stroke, pneumonia and septic infections.
The Obama administration is allotting $1 billion for research to compare effectiveness of medical treatments. Some hope comparing hospital outcomes will be part of that. "As a patient," says Michael Pine, who runs a medical quality-measuring business in Chicago, "I would generally be more interested in whether Hospital A or Hospital B gets better results, more than whether drug A is more effective than surgery."
The theory underlying the Pennsylvania program is that, to create a truly competitive health-care market, consumers need hard information showing which hospitals perform better.
Curbing Infections
For example, Pennsylvania three years ago published its first report on hospitals' infection rates that arise largely from intravenous catheters and tubes left in too long. Infection numbers the following year fell 7.8%, as hospitals responded with steps designed to lower infections.
The average payment in 2006 for hospitalization where a patient acquired an infection was $53,915; with no infection, the average payment was $8,311, according to state reports.
By simply getting rid of preventable infections, Pennsylvania estimates its hospitals could lower expenses by nearly $1 billion.
Where are the insurance companies? They are the major payers. They should be driving this data collection and management of the system.
The White House is looking at publishing information possibly including medical outcomes as part of overhaul efforts, officials say. Quality data could also be used in existing programs. "There is a clear understanding from the Obama administration that both Medicare and Medicaid need to move in the direction of what's happening in Pennsylvania," says Jonathan Blum, director of the government's Center for Medicare Management.
The Philadelphia police health fund benefit-management company, covering 26,000 people, adopted a plan pegged to the state's hospital-quality results seven years ago. Mr. Lamb says the police fund has saved as much as $5 million a year using the information.
Sent Home
One retired Philadelphia police officer benefited from the state reports in an unusual way -- by learning he didn't need the coronary angioplasty he had been prescribed. Ed Gillespie, of Cape May, N.J., says he was told by his doctor six years ago that he needed angioplasty to clear out heart arteries. After consulting with Mr. Lamb, he learned state reports showed good results at Jefferson Medical College in Philadelphia. He decided to go there.
While he was on the gurney awaiting angioplasty, his cardiologist asked colleagues to study the films more carefully -- and concluded he could go home without treatment, Mr. Gillespie recalls. "I get checked every year, and I've been OK," he says.
Pennsylvania's agency -- called the Pennsylvania Health Care Cost Containment Council, or PHC4 -- has its critics. Hospitals have complained its data are imprecise or unnecessary.
P.J. Brennan, chief medical officer of the University of Pennsylvania Health System, says that PHC4 reports -- even though they are adjusted for certain risk factors -- still aren't comprehensive enough to take into account the very sickest patients, the sort treated at academic medical centers. "These reports are very important for transparency, but I don't think you can look at a PHC4 report and conclude you should not go to that hospital," he says.
In the state's most recent report, the Hospital of the University of Pennsylvania performed well in many categories but had worse-than-expected death rates in treating septicemia, or blood infections.
State legislators have tentatively cut the PHC4's budget to $2.8 million this year from $5.4 million in 2008, largely because of a state deficit.
The program got its start in the 1980s. Alarmed by health-cost inflation, business and labor leaders sought out Walter McClure, a Minnesotan who had pioneered a medical-quality program. Dr. McClure, who has a Ph.D. in physics, made a presentation to the Pennsylvania Business Roundtable in 1985.
Dr. McClure called on the executives to foment competition among hospitals. "We used to say to a patient, 'Go anywhere, regardless of cost, and we will pay the bill,' " he said in his speech. "Quality was assumed. That was dumb."
In 1986, Pennsylvania legislators created the PHC4. Three years later, the agency published its first report comparing death rates at about 180 hospitals.
Hahnemann University Hospital in Philadelphia fared poorly at first on several quality measures. Its ratings were significantly "worse than expected" on eight of 55 procedures in the first PHC4 "Hospital Effectiveness Report." The report included data for July 1, 1989, to June 30, 1990.
John Russell, then president of the Hospital Association of Pennsylvania, says Hahnemann and others complained, but "within about six weeks, they cleaned up their act." In the second Hospital Effectiveness Report, Hahnemann improved its ratings on seven of the eight procedures. The hospital declined to comment.
PHC4's first report on infections in 2006 showed Hamot Medical Center in Erie with a relatively high infection rate, in part because the hospital was early to use computers to track such rates. Emily McCracken, the hospital's epidemiologist, says the report "put a spotlight on something that needed a spotlight."The hospital has since lowered the infection rate by about 20% by cleaning IV catheters more often and removing them earlier.
Care Disparities
Over the years, PHC4 sought a wider variety of data and started producing reports on infection rates, readmissions and lengths of stay due to complications. The reports revealed startling disparities among hospitals and even individual doctors.
The hospital-performance reports use data compiled from medical records. Results are "risk adjusted," meaning the agency collects laboratory and medical-chart information about the age and overall health of patients so hospitals taking on difficult cases won't be unduly penalized.
The agency estimates the cost to the state's 172 acute-care hospitals of collecting the data annually is $7 million. The state's hospital association says it is $10 million or more.
The state agency hasn't been as successful in obtaining the prices that insurers pay to hospitals, information that would be important because it would allow patients and payers to factor in prices when choosing hospitals. The agency has legal power to get that information from insurers and publish it, but it has done so only for heart surgery. An agency spokesman says insurers didn't refuse, and that lack of manpower at the agency explains this omission. One person familiar with the events says many insurers wouldn't divulge prices.
Hershey came to rely on the state's hospital reports. In the early 1990s, medical costs for its 15,000 workers and dependents were soaring. "I told the human-resources department we needed to do something," says then-Chief Executive Richard Zimmerman.
Richard C. Dreyfuss, compensation and benefits manager, and his boss, William Lehr Jr., scrutinized the state's data for 23 hospitals. Mr. Dreyfuss ranked hospitals based 70% on medical outcomes and 30% on hospital prices, which the company obtained from insurers on its own. He focused on 21 costly procedures such as heart bypass and diabetes care.
Cost Correlation
Results shocked him. "The correlation between cost and quality was zero," he says. "You go in thinking that all hospitals are pretty much equal, but this was eye-opening. Generally, higher-cost hospitals had poorer outcomes."
Mr. Dreyfuss devised a plan called Health Styles in which only 10 hospitals would be included -- and 13 left out. Employees had other plans to choose from, but Health Styles was cheaper than the relatively inexpensive health maintenance organizations Hershey offered, Mr. Dreyfuss says.
The 13 excluded hospitals weren't happy -- especially the highly regarded Penn State University's Milton S. Hershey Medical Center, founded by the family that created the chocolate company.
C. McCollister Evarts, dean of the hospital's medical school, told Messrs. Dreyfuss and Lehr that the state agency's information was wrong and "you don't understand what an academic medical center does," Messrs. Dreyfuss and Lehr recall.
Dr. Evarts confirms his remark and says he believes such measurements have become far more precise over the years. In recent years, Hershey Medical was reinstated under the company's plans. The hospital declined to comment.
The Health Styles plan took effect in 1994. About 40% of employees in central Pennsylvania signed up. The company, which was self-insured, was able to hold its medical-care cost increases annually to 4%, about half the national rate, saving about $10 million in the first five years. "This thing was a real winner," says Mr. Dreyfuss. He and other former Hershey executives say the company cut its annual medical expense by 50% for several years.
Dennis Bomberger, business manager of Chocolate Workers Local 464, says Hershey's Health Styles "was an excellent plan" that "employees liked the best."
The plan was discarded two years ago, however, when a new Hershey management team changed health coverage, Mr. Bomberger says. A Hershey spokesman declined to comment.
Former Hershey vice president Mr. Lehr is now chairman and chief executive of Capital BlueCross, where he has installed a plan for customers that would use PHC4 data to select hospitals. He would like to see hospital-quality information available across the country. "I would ask officials in Washington to push for mandatory compiling of medical data."
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