Health Business Blog

Happy Thanksgiving! I’m going to be posting little or nothing the rest of the week.

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A Canadian relative of mine went to the hospital for “minor” surgery and ended up in the ICU on a ventilator with severe pneumonia. He was pretty agitated while intubated –not exactly uncommon, I know. A few days later when the tubes were out and he could speak, he said that when he saw so many doctors and American relatives around he was convinced he was in the US, running up a huge bill that he wouldn’t be able to pay.

That’s what was agitating him more than anything else.

Luckily for him he was actually in Canada.

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This is the transcript of my recent podcast interview with David Hom, Chairman of the Center for Health Value Innovation.

David Williams:  This is David Williams, co-founder of MedPharma Partners and author of The Health Business Blog. I’m speaking today with David Hom, Chairman of the Board of the Center for Health Value Innovation. Dave, thanks for speaking with me today.

David Hom:  You’re welcome.

Williams:  Dave, there are some listeners that aren’t familiar with the Center, so could you just start by giving us a quick recap on your mission and activities?

Hom:  Sure. The center is a not-for-profit organization that was established in 2007 for employers, with employers, by employers, to protect a private healthcare system by sharing best practices in healthcare innovation.

Williams:  We got together in May, six months ago, at Consumer Health World out in Las Vegas, and we talked a lot about the activities at the Center. A lot has happened in that time, in terms of the primary election, the general election, the mayhem in the financial markets, and into the recession.

You have a lot of the stakeholders at the table there. What are they saying about how they’re seeing health care today, and how is that affecting your activities?

Hom: I’ve probably met with all key stakeholders repeatedly over the last six plus months. There’s a concern with regards to each of the stakeholders, in terms of their ability to afford to provide access to healthcare.

For example, small employers are concerned with their ability to provide health insurance for their employees and independents that is affordable. Two is health plans have increasing medical loss ratios, and therefore it is difficult to get new customers, i.e., members, therefore they are under what I call margin issues.

So innovation needs to be driven faster by employers through health plans, by having health plans redoing their services that improve what we call patient adherence or compliance for chronic conditions.

Williams:  It sounds like the focus that you have is the same as what it was. Do you see the role of compliance and adherence being fairly central in this whole affordability issue?

Hom:  Yes. In fact, I’ve had several discussions with HHS (Health and Human Services). I think the next generation of healthcare delivery has to really focus in on how to improve the health of the American public with people with chronic conditions, how to give them the tools necessary to manage those conditions, with more targeted information about their disease. How to manage their disease, how to get access to physicians easily, how to get access to labs and diagnostics, preventative screenings, and how to get access to pharmaceuticals that can help them manage their chronic conditions.

So the big issues looming are the shortage of physicians, and the physicians not willing to accept new patients, because of different reimbursement schedules. Therefore access has become even more important. So things like 24/7 telemedicine is what I call a megatrend that can be integrated into what we call the Patient centered-medical home, virtually.

So think about the world of not just physical office visits, but the world of telephonic, video office visits, that people then can access physicians when they need it, at the time at which they need it, and in the vehicle in which they need it.

Williams:  Massachusetts has been a template for what the Obama plan may look like, in terms of bringing more people into coverage. What we’ve seen here is a real difficulty in access among people that now have insurance, because the stock of physicians has not gone up, and the number of hospital beds hasn’t increased, and yet when people have insurance, then they want to use it. So it sounds as though some of the things that you’re describing could help alleviate that issue on a national basis.

Hom:  Oh absolutely, absolutely. For example in Massachusetts, many of the physician practices are closed to new members. Why? Part of that is because the reimbursement level that was set by the state was too low, so there’s no incentive to physicians to take on the patients. Two, patients that they’re taking on tend to have severe multiple chronic conditions, because they’ve been out of healthcare for a number of years. So that requires intensive use of their time and resources.

So can you create a system that has this new virtual world of telemedicine that can provide relief valves of pressure to access physicians? So that way when someone does visit a physician and see them face to face, a lot of what I would call the routine information gathering for diagnosis has already been completed by someone else. That’s where I think the medical home model can really thrive for small physician practices.

Williams:  When we talked last time, we were talking about emerging information technologies in order to enable these sorts of activities and to enable the patient to take a much more active role. I suppose that the need for these things has stepped up, to deal with the pressure on the system that’s coming as more people enter coverage, Are we closer to it today? What is your level of optimism? What are the issues that you’re concerned about in actually using these technologies on a wide scale?

Hom:  A couple of issues; one is the use of technology on a wide scale takes time, and two is there are multiple barriers around that, I think primarily, who pays for it? Does a health plan pay for these new technologies, does the employer pay for it, or does Medicare or the federal government pay for it? That hasn’t been resolved.

In the absence of that, there are a number of initiatives that I think have been turbo charged over the last six months in the area of personal health record highways, I call them, such as the Google’s and Microsoft’s of the world, that really build PHR communication platforms that are of high value to a patient.

So the PHR world for example, will not only have the ability to capture information for an individual, but also will be able to push targeted communications to the patient based on their chronic condition.

Secondarily, there’s the migration of the patient’s personal health record to the cell phone as a communications platform. Think of the world of cell phones that can capture your sugar levels on a daily basis if you are a diabetic, create a scorecard for you, help you manage your diabetes, and when your diabetes is not under control, it sends a message to your physician who then calls you, and you do a video consult or telephone consult.

Williams:  Now you’ve talked about the personal health record highways, and Google and Microsoft in particular. Now what’s interesting about those companies is that they have not come at it necessarily first looking at health plans or employers as customers, but really from a consumer standpoint.

How are employers and health plans actually viewing those organizations? Do they see them as rivals who are going to undercut them or disintermediate them, or do they find ways to  work together?

Hom:  That’s a great question. I think the answer is mixed. I think some of the health plans could progress knowing that the highway is being built, or that allow their information to be sent from the health plan to a Google, or to a Microsoft. The first example of that would be Aetna. I think others will begin to follow suit, and that this is not a threat, but rather it’s an enabler for patients to really manage their own information and data. So I see that as a fairly large trend.

For consumers, I think the issue is their ability to feel comfortable that data is secure. So there are some technology companies that build secure systems that are looking into getting into healthcare, and using their technologies to provide that security for the personal health record platforms.

I think once that begins to happen the people will feel more comfortable that their data is highly secure.

Williams:  Then on the topic of the patient centered medical home, and using that technology to wrap around it, I’m wondering there, how quickly that can happen and whether you can retrofit an existing primary care practice to become a medical home and to be technology enabled, or whether it’s better off to reconfigure practices completely from scratch so that they’re sort of a medical home and information technology rich place from the start?

Particularly I’m wondering with some of these pilots, whether it’s even possible for one payer to do a pilot, because the primary care office may be partly doing the old fee for service, and then partly doing a medical home pilot. How do you think about that actually coming together?

Hom:  It’s another great question. First thing you’ve got to do is to think about how to create a virtual patient medical home for the small physician practices who cannot scale up.
Two is you have to build the technology, so that it works with their current processes. So you can’t go in and reinvent a physician’s practice, because physicians have already spent thousands of dollars in building a practice and their management system, and they’re not going to discard it.

Two is you have to figure ways to overlap on existing legacy systems.

Once you begin doing that, you can begin then to get wider adoption. So the idea then is to begin testing through a series of pilots, different geographic areas, the small virtual patient medical homes over the next 36 months.

So, I’ll give you an example. I’m battling a cold so I apologize.

Williams:  Yes, I can tell. Perhaps the medical home will prevent it next time.

Hom:  I know, thank you David. I’ve been working with a 24/7 telemedicine company and a large technology company to begin building a patient medical home technology that can be utilized by many physicians across the U.S.

The process is that we’re having discussions with a couple of physician groups to test how something could be implemented and operationalized easily within their practice, and then from that we’ll develop a series of hypotheses and methodologies. Then we’ll begin talking to different medical groups across the U.S. One of them is in Boston who would like to consider this for their small practices as a pilot.

So you’ll see a number of pilots that will spring up in 2009, especially in the 2nd or 3rd quarter.

Williams:  When you look at federal policy and what’s likely to happen after the Obama administration takes office, how well aligned are their policies with what you see as being the right thing to do? What do you think needs to change if anything?

Hom:  There are a number of things. One is I that there’s a huge alignment on wellness and preventative screenings, Obama’s plan has that embedded in there.

Two is having employer mandates, getting everyone into the insurance pool; I think it’s great, like we do in Massachusetts. I think they need to figure out the funding arrangements for physicians to accept new patients. I also believe that they need to begin to provide standards that will create the highway systems for an exchange of information.

I think their focus initially will be on children’s health, providing coverage.

I’ll give you just a small thought  –this is just me now– based on this whole bailout concept on this financial crisis.  I think the government should look at bailouts with patients with chronic conditions. So if I’m a patient, I’m a diabetic, I have a cardiovascular condition, I’m hypertensive, I’m on three meds, that cost me 150 bucks a month, that’s unaffordable. So can we provide that patient with some sort of tax rebate, or some sort of couponing, or incentive and the federal government will then say “We’ll fund portions of your medications for chronic conditions, which would include some preventative screenings”? So the bailout then occurs at the patient level vs. at the aggregate level.

Williams:  It’s an interesting concept. Certainly I think one of the things that shifted is the idea of what the government can do and should do. There have been some swipes taken at Obama for supposedly socialist policies, like raising the marginal tax rate, whereas at the same time the government is taking over Goldman Sachs, and AIG, and so on.

Hom:  Right.

Williams:  I think maybe people have a little bit different idea about what socialism is, and what’s acceptable for government intervention now. So it will be interesting to see how that plays out.

Hom:  Yes, I agree with you.

Williams:  Let me also ask you about the role of health information exchange, an also these eHealth collaboratives that are still operating in different states, including Massachusetts. Do they have a role, and are your stakeholders involved in those?

Hom:  Yes, they have a role. Many of them have not worked effectively because there’s not a sustainable business model around it. So they get additional funding from the State, until they get something up and running, but there’s not a lot of sustainability around it and adoption, in using the information with the physicians.

So there hasn’t been a good buy-in process with the medical societies, with the AMA, and with other local regulatory bodies. Until we get to the point where the data that these RHIOs capture is used well, it will be a long road before things get settled down with adoption by States, and by physician groups and hospital systems.

Williams:  I’ve been speaking today with David Hom. He’s chairman of the board of the Center for Health Value Innovation. Dave thanks for your time today.

Hom:  You’re welcome David.

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I first interviewed David Hom, board chairman of the Center for Health Value Innovation six months ago at Consumer Health World in Las Vegas. We spoke then about value based insurance design, health care consumerism, and the importance of adherence for chronically ill patients. A lot has happened in the intervening period –the end of the primary season, the general election, and the collapse of the financial markets– so it was good to catch up today to hear his perspective.

David is still touting information-technology based solutions, and he’s also calling for a bailout of patients with chronic disease who are financially imperiled.

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The Boston Globe’s Spotlight Team is accustomed to having an impact. In the case of the priest sex abuse scandal the impact was a shakeup in the Catholic Church and the resignation of the archbishop of Boston (not to mention a Pulitzer Prize). Now the team has turned its attention to health care, where the issues are just as important but good and evil are a great deal harder to separate.

The Globe’s lead story on Sunday documented the premium reimbursement rates achieved by Partners Healthcare in particular and teaching hospital systems in general. Essentially, leading health plans in Massachusetts agree to pay these entities more than what they pay others. Now a Spotlight Follow-up article describes a movement to have the state government review reimbursement practices. Secretary of Health and Human Services Secretary Dr. JudyAnn Bigby was asked about the role of the market in price setting:

…Bigby… said… that unlike many other industries, market forces will not automatically drive down costs for healthcare.

Asked whether she was concerned about the role of market power in driving payment disparities between hospitals, Bigby said, “I don’t have any basis to suggest that the reasons why you see the differences has to do with market power. . . . I think what it represents is people want to go to the Brigham, they want to go to Mass. General, they want to go to Children’s Hospital, they want to go to the BI.”

There are market forces involved here, but the main troubles are that the end users (patients) are too removed from the suppliers and there is insufficient information in the market for patients to make good decisions. Private employers, who are the main purchasers of commercial health insurance, are too passive.
What’s happened in the Boston area –as elsewhere– is that insurance companies respond to feedback from their employer customers indicating a preference for certain providers. In Boston, that means everyone wants to offer a plan that includes Massachusetts General Hospital and the Brigham and Women’s Hospital. MGH and BWH are pretty savvy, so they got together in the mid-90s to create one entity: Partners Healthcare. The logic for the combination, and for the addition of other facilities and physician organizations to it, has always been more about reimbursement than about clinical integration. That’s not exactly a secret. And from Partners’ perspective, the entity has been an enlightened force. In fact, while primary care physicians in general have been suffering from underpayment, Partners has managed to boost primary care salaries to reasonable levels.

Patients are pretty far removed from this equation. Sure, all else being equal they prefer going to Partners facilities and doctors, but they are almost completely disconnected from the price and quality tradeoffs. Health plans in Massachusetts are typically structured so that there is no difference in the patient’s out-of-pocket cost as long as they stay in-network –and Partners is always in network. Information on quality is hard to find and difficult to use. So naturally people gravitate to organizations with sterling credentials and excellent resources.

Employer leadership is a missing and often overlooked element of the health insurance situation in Massachusetts. Where are the employer customers who are demanding insurance products that offer value as opposed to access? Except for the state’s Group Insurance Commission, I don’t see it.

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Check out the latest Cavalcade of Risk at Managed Care Matters.

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The odds that we’ll see major health care reform in 2009 seem to be increasing. PriceWaterhouseCoopers and the National Association of Children’s Hospitals and Related Institutions surveyed consumers and health care insiders to get their views on health care reform. Among the findings:

• 75 percent of consumers and 79 percent of insiders expect reform during Obama’s first term
• Half of consumers are worried they won’t be able to afford health insurance
• 75 percent of consumers think the proposals made during the Presidential campaign are insufficient to resolve the underlying problems in the system
• 59 percent of consumers said government would do as well or better than private insurers in managing and paying for health care

There are some telling differences between the consumer and insider perspectives:

• Insiders are strongly in favor of coverage mandates, which after all increase the number of paying customers
• Consumers care more about cost control

This survey represents a broader consensus than one typically sees for reform. Of course the devil is in the details, but I think something along the lines of Obama’s health plan is likely to be enacted. In an environment where one company (AIG) can suck down $150 billion from the government with little to show for it –and where fiscal stimulus is considered good– the high cost of the Obama plan may even be an asset. With Ted Kennedy leading the way and a crisis atmosphere, expect to see some movement when the new Congress convenes.

The survey is to be formally released on November 20 at the National Press Club in a national town hall meeting, viewable here at 1 pm EST.

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I don’t subscribe to The New England Journal of Medicine, but luckily for me a good number of the general interest articles are offered online for free. The November 13 issue includes several free perspectives on the future of primary care. There are interesting pieces about payment reform and the medical home but I was most intrigued by a detail in the perspective on Lessons from the U.K. by Martin Roland:

The United Kingdom takes the importance of primary care for granted. The U.K. government is effectively the country’s single payer, and successive administrations have been convinced by mounting evidence that primary care promotes high-quality, cost-effective, and equitable health care. If anything, the U.K. government has become more convinced over the past 15 years that strong primary care needs to be at the heart of the country’s health care system — quite the reverse of the situation in the United States. U.K. primary care physicians now have average earnings of $220,000 (in U.S. dollars), which is more than many specialists earn [emphasis mine]. The payment system is a mixture of risk-adjusted capitation and 25% additional pay for performance.

I’ve known for a while that primary care docs in the UK make as much or more on average than their US equivalents, but it always surprises people when I mention it. People simply assume that socialism necessarily means low wages, when at least in Europe it doesn’t.

I hadn’t realized, though, that primary care docs are making more than specialists. Roland doesn’t cite any evidence for this claim, but there are some interesting implications:

• Would medical students choose specialties with longer training requirements if they knew those specialties paid less?
• Is it just a matter of time before inflation in primary care income (as occurred with the introduction of pay for performance in the UK) translates into demands for higher pay by specialists?
• What would be the implications in the US of shifting power away from the AMA’s Relative Value Scale Update Committee (RUC), which favors proceduralists over primary care? What if the American Academy of Family Physicians were placed in charge of this function and turned things upside down?

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Yesterday’s Boston Globe Ideas section led off with a typically cheery piece. (See Depression 2009: What would it look like?) The subtitle:

Lines at the ER, a television boom, emptying suburbs. A catastrophic economic downturn would feel nothing like the last one.

The article by Globe writer Drake Bennett is fairly insightful overall. Whereas the Great Depression of the 1930s was characterized by bread lines, threadbare clothes, and migrations from the Dust Bowl to California, the new one, he says, will put the strain on health insurance, housing, transportation and child care. I think that’s right, but the characterization of health care is somewhat off base:

The lines wouldn’t be outside soup kitchens but at emergency rooms…

It’s true that a new depression will put great strain on the health care system, but it’s unlikely to lead to lines at the emergency room. Those lines are more a symbol of prosperity and boom times than of a depression –which is why overcrowding of emergency rooms has been a problem for the last several years. While people think it’s the uninsured clogging up the emergency room, actually people with insurance use the emergency room –and other kinds of medical services– more. In a depression, demand for health care services will drop along with demand for everything else –it just won’t drop as much.

At the macro level, some of the impact may actually be positive, and this is  hinted at by the top story on the front page of the same edition of the Globe, which points out that academic medical centers in Boston charge a lot more than community hospitals for the same services, even when quality is the same or lower. (See A healthcare system badly out of balance.) For many years, employers and health plans have gone along with these price differentials, on the assumption that employees won’t accept having their access to downtown teaching hospitals restricted.

My prediction is that this situation is going to change in Boston (which is unusual in its high use of teaching hospitals), and that the same forces are going to drive change elsewhere. In particular, patients will start rationing care themselves. They won’t go for the most expensive or newest procedure or drug, because they realize they can’t afford it and that something cheaper may be just as good or better. Patients will stop blaming the managed care industry for being cheapskates and will actually seek its help keeping costs under control. And people won’t line up at the emergency room for expensive, inconvenient care.

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Yesterday’s New York Times devoted an article to the emergence of medical tourism as a growth industry in South Korea. (See South Korea Joins Lucrative Practice of Inviting Medical Tourists to Its Hospitals)  If you’d like a more in-depth look at the topic, check out the series I wrote on the topic when I visited South Korean hospitals a year ago.

The entries can be accessed as follows:

• Part 1: The trip from Boston
• Part 2: Inha University Hospital
• Part 3: Yeson Voice Examination Center
• Part 4: Wooridul Spine Hospital
• Part 5: Ajou University Hospital
• Part 6: Hanyang University Medical Center and trip to Busan
• Part 7: Good Gang-An Hospital
• Part 8: Parkside Rehabilitation Hospital and return to Seoul
• Part 9: Soon Chun Hyang University Hospital
• Part 10: Return to Boston and summary thoughts

I also did a podcast interview with James Bae of the Council for Korea Medicine Overseas Promotion.

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