Health Business Blog

Medical malpractice reform is one of the few health care policy issues where there is a real possibility of agreement between the White House and Congress. A common refrain is that the fear of lawsuits leads physicians to practice defensive medicine, ordering too many tests just to cover their behinds in case of a lawsuit. It drives up costs without creating benefits. There’s some truth to this argument, but it’s much overblown. First, the malpractice system isn’t going to go away entirely so I’m not sure the motivation will change that much. Second, unnecessary tests may continue but the explanation may shift, e.g., to patient preference or best practice. A much bigger impact on unnecessary tests will be had by shifting the payment system toward capitation.

Another issue –and to my mind it’s a bigger one– is that despite the risk of malpractice lawsuits the health system does a heck of a lot to create or at least tolerate situations that are dangerous for patients. An op-ed piece in today’s Boston Globe (A deadly information gap; Many doctors lack the motivation to communicate with each other) tells the story of a doctor and her lawyer sister who did their utmost to help their elderly mother navigate the health system and still found her near death due to lack of coordination. Their story is simultaneously extreme and typical. You probably have your own version:

In the hospital, after her heart attack, my mother’s diabetes doctors weren’t allowed to prescribe her medications or diet because she was on a cardiology unit. Despite good intentions, the hospital almost killed her by giving her 32 ounces of apple juice one day, causing her blood sugar to rise to a dangerous level. To compensate, they had to give her a lot of extra insulin, which caused her blood sugar to drop precipitously. At one point they had to resuscitate her because her blood sugar went so low. This happened because the diabetes doctors had almost no real-time way to communicate with the cardiology doctors. They needed a navigator — a knowledgeable intermediary — to make sense of the overall picture and connect the doctors to each other…

When my mother became stable enough to leave the ICU, she was transferred to a step-down unit only two doors away, but with a whole new medical team — doctors, nurses, aides, case managers. And every new clinician had to read the paper chart, or if unable to decipher it, “interview’’ my mother again. “She’s not able to tell me her history. . .’’ over and over again. Exasperated, my sister introduced us with, “Hi, this is my sister, she’s a doctor. And I’m a lawyer.’’

Patients should not need a doctor and a lawyer in the family in order to get appropriate medical care. My mother survived her near fatal illness because she had knowledgeable, relentless insiders to advocate and communicate for her.

The author is convinced that the health reform law with its introduction of Accountable Care Organizations will make everything right. I’m less sanguine. I say: go ahead and let malpractice reform happen, if only to take some of the focus off of extreme cases and get doctors to relax a bit. But let’s divert some or all of the savings to education and re-engineering of care processes to improve patient safety in order to prevent the emergence of situations that the malpractice system is meant to address.

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A couple of related pieces caught my attention today: @HealthPlan: How insurers use social media and Insurers are scouring social media for evidence of fraud. Slowly but surely health plans and other insurers are stepping into the world of social media and it’s interesting to see how they are doing it.

Health plans seem to be following along the lines of other big, bureaucratic organizations that cause customers a lot of frustration through poor customer service. Here’s an example of a Twitter exchange between Humana and a customer:

Sept. 23, 2010
@MrAndrewDykstra: Dear Humana, you’ve ruined my day. Worse, my wife’s day. Way to CYA. I’m paying you to cover mine. #NotHappy

Sept. 24, 2010
@HumanaHelp: @MrAndrewDykstra I’m sorry to hear about your frustration, is there anything I can do to help out?

@MrAndrewDykstra: @HumanaHelp You were kind and didn’t give my wife the run around, I appreciate that. 3/3.

Sept. 27, 2010
@HumanaHelp: @MrAndrewDykstra Thank you, let me know if you need any customer care.

This is pretty typical of what I’ve experienced from companies like Comcast and Honda. In contrast to what feels like impersonal help through traditional customer service channels (e.g., phone) with Twitter you get the feeling there’s a real live human taking an interest. I’ve had the Twitter folks check in with customer service on my behalf and on occasion get things unstuck. Even when they can’t do much it provides some relief because it feels like they’re trying. That response is out there for all of the customer’s Twitter followers to see, too.

It’s not all that exciting, however, and health plans aren’t going to dramatically change the customer experience with these sorts of efforts. There are a few other things they’re doing such as providing health tips, political messages, and promoting microsites for specific projects. Perhaps in the future they’ll move on to actively soliciting feedback and testing ideas, not just responding to gripes.

The insurance fraud article is a little more exciting. At least based on the article (which may not be representative) insurers are being a little less conservative in this realm than on the health plan customer service side. Not surprisingly, insurers are checking out the social media pages of people who’ve made disability claims. See someone out with a bad back bragging about running a marathon? Probably a reasonable trigger for a fraud investigation. But things get a little less straightforward from there. For example:

Mike Fitzgerald, a Celent senior analyst, said life insurance companies could find social media especially valuable for comparing what people will admit about lifestyle choices and medical histories in applications, and what they reveal online.

That could range from “liking” a cancer support group online to signs of high-risk behavior. “If someone claims they don’t go sky diving often, but it clearly indicates on their online profile that they do it every weekend they can get away,” Fitzgerald said, “that would raise a red flag for insurers.”

“The situation is coming up more and more in court where lawyers for insurance companies lay traps for the insured based on pictures or postings on Facebook or Twitter,” said Vedica Puri, a partner at Pillsbury & Levinson, a San Francisco law firm that specializes in insurance.

“Photos can be years old. People joke or write things in jest, but insurance companies use everything. Even if it’s not true, it can be very damning,” she said.

Lawyers and industry experts said that one of the dangers for consumers is people’s desire to present themselves in the best light, even if it hurts an insurance claim.

Or as Lavin puts it: “No one puts pictures of themselves crying in a dark room, even if that’s what they’re doing 18 hours a day.”

“The whole thing is just symptomatic of technology running ahead of the people who are using it,” he said. “It’s kind of like the early years of flight when planes are crashing all over the place. Society has not come to terms with how to manage social networking.”

The last point is a good one. I’ve read about –and noticed– that people tend to present the sunny side of life on their Facebook and LinkedIn pages and sometimes their blogs. That probably shouldn’t be used against them.

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Dan Pollard, founder and CEO of myDrugCosts, Inc. is working on a solution that fits perfectly into the transparency and mobile health trends I discussed in my 2011 predictions post. myDrugCosts.com (now in public beta) allows patients to engage about drug costs, either at the point of care or before or after a doctor’s visit. It goes well beyond the usual advice to switch to generics  by offering information about alternative products within the class and different dosage forms. It also goes beyond the health plan’s drug formulary information by including information on discounted retail purchase options that are sometimes cheaper than the plan’s copay and even includes details about co-pay coupons offered by brand name companies.

myDrugCosts can be used on a smartphone or a computer. In this demo, I walk through three examples from the perspective of someone on the North Carolina State Health Plan.

1. For lisinopril I highlight the discount retail options
2. For Imitrex I review the plan’s restrictions and available generics
3. For Lipitor I display information about a manufacturer’s co-pay coupons

What I like about the application is it’s developed to provide the key information upfront, which would make it possible to use it in real-time during a physician visit. It’s easy to dive into more detail when needed, for example to learn how to submit a prescription to a PBM for mail order.

I look forward to seeing how this offering develops.

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I can only shake my head on days like today when I read about the state of biogenerics policy in the United States. The Wall Street Journal reports (Firms Push for Biotech Generics) that biotech companies are lined up against health plans and PBMs over the interpretation of the waiting period for biogenerics embedded in the Patient Protection and Affordable Care Act (PPACA). The dispute is over the meaning of the 12 year “exclusivity” period specified in the Act. Biotech companies want generic companies to wait 12 years before starting development (that’s “data exclusivity”), while PBMs that distribute drugs and health plans that reimburse for them want companies to wait 12 years before the drugs are sold (“market exclusivity”). The PBM/health plan position is somewhat better for consumers, because it would get the drugs on the market a year or more earlier, but this really shouldn’t be the debate we’re having.

First, some background. Generic versions of traditional, small molecule pharmaceuticals (like statins) have been a great success story over the past couple decades, since passage of the Hatch-Waxman Act. After the patent term expires on a branded drug, a highly competitive market for generic products typically emerges. Prices often fall by 80 percent or more. Thanks to Wal-Mart, many of these products are available for $4 or so a month compared with hundreds of dollars or more during the patent period. These small molecule products are typically relatively easy to make. Generics are exact copies that don’t require much clinical testing. Pharmacists can –and generally must– substitute a generic product unless the doctor or patient specifically requests the branded version. Incentives for innovation are preserved because drug companies have ample time to make back their R&D investment during the five or 10 years the patented product is on the market without generic competitors.

Biotech drugs are different. These large molecule products are difficult to produce, and it’s almost impossible for another company to make an exact “generic” copy like with small molecules. (This is even true for the original maker of the product, who may have product variation from one manufacturing facility to another or even batch to batch. But I digress.) Until PPACA there really wasn’t a regulatory path to introducing generic versions of biotech drugs. Now legislators seem to expect that the biotech market will follow the path trailblazed by the small molecule products.

Those expectations, however, are badly misplaced. Here’s why:

• The cost of development and manufacturing scale-up for the generic company will be much higher for these products than for small molecules. That means fewer competitors, less competition, and relatively high prices
• Biotech manufacturing is notoriously difficult. Companies like Genzyme can’t seem to keep their factories from being contaminated. FDA has its hands full as it is and is really not in a position to inspect and oversee a bunch more facilities. That will slow approvals and/or allow dangerous products on the market
• Even with all this effort and expense, the products are not likely to be directly substitutable by pharmacists the way small molecule generics are. That is a further reason prices won’t drop much. In fact, the market is likely to resemble the 1990s small molecule market with lots of “me-too” products in a given class. Take statins for example. Lipitor wasn’t the first statin but it used subtle differences to gain share and in some cases charge a premium price. You can bet companies will try something similar with generic biologics, aka “biosimilars.” I think it’s possible that prices could even rise as generic companies deploy salesforces and look to exploit clinical findings. PBMs don’t really mind, because they can make a lot of money by shifting market share among high priced, similar products, just like they did with the me-too small molecule market.

All of this matters a lot. Why? Because in the future biologic drugs will comprise a larger and larger share of overall drug spending. Small molecule companies don’t seem to be bringing new drugs to market, so that segment of the industry will continue shifting to generics. Meanwhile, more and more companies are trying to launch biotech drugs, which are much more expensive (often tens of thousands of dollars per patient per year or more).

I have no doubt that eventually Congress and the President will figure this out. But it will probably take 10 years or so. Here’s my suggestion (which I’ve been making for some time):

• Allow biotech drugs to be approved and marketed as they are now, without price regulation
• After patent expiration or after a certain number of years on the market, regulate price. The price could be based on cost of goods, a percent of the previous selling price, or some other mechanism

This would avoid the costs and risks of biogeneric development and regulatory approval while delivering the benefits of lower costs to payers. The original maker of the product should be happy too. Although their price will be lower than it is today, they won’t have to share the market with generic players or spend money blocking the entry of new players. They will still enjoy a substantial period of high margin sales as they do today. It just won’t go on forever.

When, at some point in the future, science improves to the point where truly identical biogenerics can be developed, these rules could be revisited.

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The latest edition of the Cavalcade of Risk blog carnival is posted at The Notwithstanding Blog. It’s well worth a look.

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This is the transcript of my recent podcast interview with MEDecision’s VP of medical home initiatives, Matt Adamson.

David E. Williams:            This is David Williams, cofounder of MedPharma Partners and author of the Health Business Blog.  I’m speaking today with Matt Adamson, vice president of medical home initiatives for MEDecision.  Matt, thanks for being with me today.

Matt Adamson:            Thank you, David.  I appreciate the opportunity.

Williams:            A number of new care models are moving forward.  Which are most significant?

Adamson:            It all starts with the medical home, with the advocacy from the Patient-Centered Primary Care Collaborative and a number of pilots that have been successfully run and reported.  The medical home is the most important component because that’s where the care coordination piece sits.

In a medical home model, through additional reimbursement, you’re giving the primary care physician a team of people to manage the care of the patient. The biggest difference between the way you do things in a fee for service world and in a medical home world is the addition of a care coordinator. This really provides a great opportunity for MEDecision because the care coordinator role is largely underserved given its newness to the health care system.

Tools that exist in physician practices today including EMRs and practice management systems really aren’t designed to help care coordinators manage their workflow and optimize care of their patients. However, it does equate very closely to the care manager role that MEDecision has been supporting in health plans for 22 years.

Williams:            As medical homes have begun to catch on others are speaking of “neighborhoods.” What is that about?

Adamson:            The neighborhood concept is great because it puts a name to something that is required to be successful if you’re implementing a medical home program. It provides an easy way to describe something complex.  The idea is that even though the care coordination component sits at a primary care practice, you need other stakeholders including hospitals, nursing homes, specialists and pharmacists that patients rely on to perform care on their behalf.

It’s a description of what needs to occur and the coordination that has to happen among various entities that impact the care.  We advocate that the medical home neighborhood needs to include the health plan, too, because the health plan does have the ability to provide a lot of value to the medical home neighborhood and optimize it further.

Williams:            Does the medical home neighborhood bump up against Accountable Care Organizations or are they just two separate universes?

Adamson:            I see it all rolling together starting with medical home.  You have care coordination there.  You are working within a neighborhood of specialists and subspecialists that have all agreed to work together and help each other.  Clinical integrations formalizes that a little bit more.  Maybe there are some more formalized agreements on referrals, and you also generally include a lot more technical integration with clinical integration.

As a next step we see the accountable care model, which puts formal business relationships and payments and reimbursement contracts. The ACO manages first how to win contracts and bring patients into the organization, but then also how that money is distributed amongst all the stakeholders, the neighborhood so to speak.

The danger of course is if an ACO isn’t properly set up or managed, you have a bucket of money coming in and doctors fighting over it.  One of the things we would advocate that could help alleviate the fight is to include the health plan in that process either as a manager of the ACO or an important partner so that you could take advantage of the experience and the tools that already live in the health plan world to mitigate those risks.

Williams:            Some of these care models are emerging because providers want to escape from health plan control, but you’re talking about giving the health plans a broader role. Can you help me reconcile the two perspectives?

Adamson:            That makes sense. I definitely understand where that question comes from. Through the medical home, the primary care docs can start becoming more important again, which I think we’re finding is where the largest degree of responsibility should lie.  They’re the ones that look at a patient more holistically.

They’re looking at everything, so by increasing their reimbursement and providing a capability for them to bring on the staff required to manage in a patient centered way, it puts more control in that realm.

The health plan went through a period of time where they probably did have too much control, particularly in the days of HMOs where you had to ask permission to perform care, particularly outside of a primary care setting.

In this model, we’re not putting more control in the hands of the health plan. We’re saying let’s utilize the resources that the health plan has to mitigate risk and improve the clinical coordination.

It’s a largely unknown fact that health plans have care managers who are outreaching to their members, particularly members with chronic conditions and acute case management issues.  They’re reaching out to those members and impacting in a positive way the quality of care every day. But that work is very splintered and not integrated with the rest of the health care system.

Docs usually aren’t even aware, for the most part, that such work is taking place.  So we’re saying let’s use the data that’s available –the longitudinal record that the claims process can provide– and that care management capability and the analytics tool that health plans have invested in so much over the years and get that information in the hands of those docs and those care coordinators where the care can be impacted to an even greater degree.

So let’s not push them aside.  Let’s take the good that comes from that and utilize it even better than we do today.

Williams:            Say more about what MEDecision does and in particular how your role working with the health plans and providers changes in a world of patient centered medical homes and neighborhoods, accountable care organizations, and clinical integration.

Adamson:            We have a product suite today that’s been working in the health plan environment for 22 years supporting a care manager role. The care coordinator in a medical home could utilize a lot of those tools if re-imagined a little bit in a different setting to impact care to an even greater degree.

Our vision and strategy has been to do just that. We look at three components.  One is to take an analyzed view of the health plan data, meaning for members or patients attributed to a particular primary care doc to make a view of those patients available to those docs so that you can slice and dice. We provide a look of that information to determine any treatment opportunities or gaps in care that might exist for any of their patients and provide a more population based view of their patient panel. We do that in a multi payer way, collecting data from multiple payers to give that doc a complete view of their panel, depending on availability of data.

Second, we bring care management closer to the patient with care management tools that lets the care coordinator work more closely with any care management activities going on at the health plan. We help them look at all those evidence based protocols that need to be met for patients with specific conditions or acute events and make sure all those things get done. We also provide tools to automate wellness initiatives and get a little bit deeper into the panel so you’re not just focusing on the people who are really sick.  You’re also able to take a look at people who might get sick in the future if you don’t keep them on track.

The third component involves medication therapy management. This involves getting analytics and data connectivity into the hands of the care coordinators. They can see the complete medication list and have the ability to see very quickly where any potential adverse drug interactions might be, whether multiple drugs have been prescribed for the same thing, or whether the patient is taking drug for which there is no longer a diagnosis.

Getting this information into the hands of a care coordinator enables them to collaborate with the pharmacy and back to the physician to adjust medication lists when appropriate.

Williams:            There’s a lot of posturing and fighting in Washington over health reform even after passage of the Affordable Care Act.  On the other hand, providers are making decisions and moving forward.  Would anything significant change with these care models if Republicans overturn health reform?

Adamson:            I don’t anticipate any changes even if health care reform is repealed.  No matter what is done legislatively, we need implement systems that impact the quality and cost of care.

We pay too much for health care.  The health care reform bill was a great attempt at trying to change that but if nothing else it put a lot of attention on the fact that we can’t continue to go on the way we are now and be successful as a nation.  We cannot spend as much on health care as we are now and still be successful.

Even without health care reform you’re going to have accountable care organizations, patient centered medical homes and the need for clinical and health information exchange to help drive down the cost of that care.

Williams:            I’ve been speaking today with Matt Adamson.  He’s vice president of medical home initiatives for MEDecision.  Matt, thanks so much.

Adamson:            You’re welcome.  Thanks again for giving me the opportunity to speak with you today.

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I subscribe to the Boston Globe but usually skip the health monday pages in the “g” section. However, I read today’s edition and was really impressed by the way Deborah Kotz compiled the lead story on statins. The article (Are statins overprescribed for low-risk patients?) includes a number of praiseworthy elements in its 11 short paragraphs. The lead is clear and compelling, the issues are well-defined, and reputable sources with contrasting perspectives are highlighted.

But I was really impressed with the treatment of the statistical findings toward the end of the article:

The Lancet study found that high-risk and low-risk patients who take statins to lower their cholesterol can reduce their risk of having a heart attack, stroke, or heart procedure by 25 percent.

In absolute risk terms, statin users who don’t have heart disease would lower their yearly risk of having heart complications from 1.8 percent to 1.4 percent. Those who have already been diagnosed with heart disease would lower their yearly risk from 5.6 percent to 4.5 percent — and those with type 2 diabetes from about 5 percent to about 4 percent.

The lower your heart disease risk, the smaller the benefits you’ll receive from statins. That means the risk of side effects will play a greater role in determining whether you should take the drug.

The last two sentences, in particular, are very informative and I’m reasonably confident that the average reader will be able to understand the implications. Yet it’s rare to find such plain results presented in a mass circulation paper.

I’ll have to start reading this section more often.

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By Don Fornes, founder and CEO of Software Advice

Electronic health record (EHR) software vendors aren’t churning out profits like you might expect. You’d think that the Federal subsidies for EHR implementation would create a rising tide that lifted all boats in the EHR software industry. In reality, some vendors are about to capsize.

Based on data points I’ve observed in the market over the past few months, I think some vendors are facing a cash flow crunch. They’re thrilled to have the wind at their backs for once, but the pace is proving hard to maintain as market evolution has accelerated under the unnatural effect of government subsidies.

Here’s the problem.

EHR Vendors Are Spending Money Like Crazy
Most software markets evolve over a twenty or thirty-year period. Consider the enterprise resource planning (ERP) market: the first ERP vendors were founded in the early 1970s, but rapid growth and innovation continued until about the year 2000. The EHR market, however, will mature in the next five years. This is because healthcare providers are buying EHR systems sooner than they otherwise would, to make the most of massive federal subsidies and avoid penalties. Consequently, EHR vendors are in a mad rush to gain market share.

Those that win will own a massive customer base paying recurring support fees. Those that lose will become irrelevant from a market share standpoint and will be ingested into a larger vendor (if they’re lucky; some will just go broke). As a result, EHR vendors are increasing their R&D budgets to develop new features and meet meaningful use criteria. Their marketing colleagues are spending heavily on demand generation and brand building. These vendors have no choice but to win today’s market share battle.

But Providers Are Gun Shy
Almost a year and a half passed between when the American Recovery & Reinvestment Act (ARRA) was signed in 2009, and the final definitions of “Meaningful Use” and “Certified EHR” were issued in July 2010. Certainly that process was no small task, but during that time, most providers took a wait-and-see approach to EHR adoption. There have been tens, maybe hundreds, of thousands of practices out kicking tires, but fewer than expected are writing checks to buy an EHR system. Furthermore, a disproportionate share of these deals – I’m estimating >60% – are going to the top ten market leaders, which is typical of enterprise software markets.

With meaningful use criteria now defined, I believe demand trends have improved. Providers now have the clarity necessary to make purchase decisions with confidence. That can’t happen soon enough, however. EHR spending has to catch up with the investments these vendors have been making over the past two years.

And Subscription Pricing Constrains Cash Flow
To complicate matters further, the software industry as a whole is shifting to cloud computing. Providers have not yet embraced the Cloud en masse, but they have embraced the subscription pricing model popularized by Cloud vendors. Why make a large, up-front investment in a perpetual license when you can just pay monthly for what you consume? Subscriptions are even more logical in light of a five-year subsidy payout.

To meet physician demands, the major EHR players are now offering low monthly pricing and publishing it right on their home pages. EHR vendors love this recurring subscription revenue, but their cash flow is spread out into the future as a result. It takes a healthy balance sheet to withstand this transition.

So what do we have so far?

• EHR vendors are investing lots of money;
• providers are writing fewer checks than expected; and,
• checks that are written are smaller and spread out.

The result is a very difficult cash flow scenario for many, but not all, EHR vendors. Lately, I’ve seen some EHR vendors stretching their payables out 90 or even 120 days. Meanwhile, I’ve been surprised to hear that some leading vendors are operating between breakeven and just a few points of profit margin. Both practices represent good financial discipline considering the pace of market evolution. In reality, however, some vendors are struggling – “taking on water,” to stick with our nautical imagery.

Buyers Beware
The EHR and practice management markets have always been highly fragmented into hundreds of software vendors, largely as a result of the need to service small and demanding local practices. As a result, providers have seen plenty of vendors fail to reach critical mass, then close up shop or sell out. Anecdotally, I also know that some of the leading EHR vendors grew their top line 30% to 60% last year, while laggards foundered. Gaps between winners and losers are expanding quickly, so expect to see more consolidation.

Vendor size is important, but isn’t the deciding factor for success and viability. In this intense market, success will result from execution. The winners and losers will be determined by the competency and discipline of their management. EHR vendors must spend with discipline and generate a strong return on their investments. It wouldn’t hurt to raise capital, either, but not all vendors will need to take this step.

It’s tough for providers to assess the financial viability of private EHR vendors. Software Advice offers our Guide to Assessing Medical Software Vendor Viability, but the industry really needs a trusted third-party to evaluate the 400 plus vendors. Organizations like CCHIT, InfoGard and ICSA Labs are all certifying EHRs against functional criteria. However, buyers also need the equivalent of an A.M. Best or Moody’s to rate the financial health of EHR vendors. Okay, maybe without the negligence and bias the later demonstrated during the mortgage bubble.

In Conclusion
There will be some big EHR winners within the next five years and consolidation will be a net positive for the industry. However, buyers must be careful not to become collateral damage as the fierce battle for market share plays out. It’s important to determine which vendors are closing business, growing their revenue and building a sustainable, profitable business. Providers should keep in mind that their success is tied to the success of the software vendor that will enhance and support their EHR system in years to come.

This article originally appeared on the Software Advice Medical Blog.

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In this podcast interview, MEDecision’s vice president of medical home initiatives Matt Adamson lays out his vision of patient centered medical homes and neighborhoods and Accountable Care Organizations. He argues that these new clinical care models are best served when health plans are closely involved. In his view, the new entities can benefit from the care coordination data and tools available from health plans through MEDecision. Adamson is convinced that medical homes and ACOs have important roles to play in bending the health care cost curve, and thus are unlikely to be threatened by the ongoing political wrangling in Washington, DC.

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David Williams interviews MEDecision's Matt Adamson [ 13:35 ] Play Now | Play in Popup | Download

Joe Paduda hosts a solid roundup of health care policy posts in the latest edition of the Health Wonk Review at Managed Care Matters.

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