Health Business Blog

Seeking Alpha highlights what leading hedge funds are doing with Pfizer. Some are selling, but some savvy (i.e., very rich) investors like David Einhorn –who also holds a lot of Microsoft shares– are buying. It’s an interesting move.

Personally I find it hard to be bullish on Pfizer. Sure, they scored a victory against Teva and will be able to keep generic Viagra off the market for a few more years, but where is the replacement for Lipitor, the big seller that’s about to expire. Despite massive spending on R&D Pfizer really doesn’t seem to have what it takes to discover and develop new molecules. Most of the creative effort in the company seems devoted to planning out the next reorganization and downsizing, and this has been the case for some time.

Of course that doesn’t mean investors can’t make money on the stock in the near term. I just wouldn’t be a long term holder.

Anyone see things differently?

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California Healthline has a good roundup of the implications of the recent court ruling on the Patient Protection and Affordable Care Act, including a look back on what could have been done differently and a look forward to the Supreme Court. The article’s author, Daniel Diamond includes a link to my prediction that we could be headed toward single payer if the individual mandate is struck down but the rest of the law stands.

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Radiology practices don’t like having angry patients, according to AuntMinnie:

Patient dissatisfaction is a recurring problem for radiology administrators and imaging providers, and one that can cause disruption, thus wasting a practice’s precious time.

Indeed!

But luckily a speaker at a recent conference is prepared with a diagnosis and solution. According to FrogDog’s Leslie Farnsworth, the reasons patients get angry are (in order of prevalence):

• Confusion (50% of respondents)
• Wait time (21%)
• Billing mistakes
• How they are treated by staff
• Cost of a procedure

I found it funny that these conclusions on patient anger were drawn from a survey of physician practices rather than from patients. Must have been easier and cheaper than going to the source. A more interesting approach would have been to compare the perceptions of patients with those of practices. Nevertheless, the solutions Farnsworth offers to address patient confusion and improve communications are sensible, if a bit paternalistic:

1. Explain to the patient in simple turns what to expect
2. Disarm the patient –tell them directly they’re going to have to wait a long time or have a lousy experience
3. “Co-build the solution” by asking patients to express their desires
4. “Postsell” the solution by confirming the plan with the patient

Speaking of confusing, the address was delivered at the AHRA conference. I looked up AHRA to find out what it stood for and found the Association for Medical Imaging Management. Hmm. I looked back on their history and found that their original name was the American Hospital Radiology Administrators, Inc., which at some point became American Healthcare Radiology Administrators. Funny that they changed the name but not the acronym.

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Ever since the Patient Protection and Affordable Care Act (PPACA) was passed, opponents have looked for ways to overturn it in the court of law and the court of public opinion. They’ve had reasonable success in both arenas, using opposition to the individual mandate to buy health insurance as Exhibit A. Ironically, President Obama wasn’t a big fan of the individual mandate at the outset. In the primary election, Hillary Clinton favored an individual mandate while Obama opposed it. But somehow the mandate –at its core a Republican concept of personal responsibility– has become synonymous with so-called Obamacare.

With the recent court decision, it seems reasonably likely we will end up in a situation where the individual mandate is overturned but the rest of the law is upheld. Observers have some thoughts on what would happen:

• Insurance companies will be unhappy. PPACA puts many restrictions on health plans, e.g., minimum medical loss ratio, no exclusions for pre-existing conditions but the upside is the mandate: lots of new customers, and a reduction in adverse selection, because everyone has to buy insurance and you can’t wait till your sick
• Many fewer people will be enrolled in insurance.  Jonathan Gruber’s objectivity may be suspect, but he persuasively argues that repeal of the mandate would lead to many fewer people in coverage and higher premiums due to adverse selection. And the cost of the law wouldn’t drop by much despite the lower impact
• Some opponents think/hope that eliminating the mandate will cause the whole law to collapse. I really doubt it.

If the mandate is indeed repealed but the rest of PPACA stays on the books, here’s my expectation:

• Fewer and fewer people will have insurance as prices continue to rise inexorably. The health care system –hospitals especially– will be overwhelmed by the cost of caring for the uninsured
• Some states will follow the policy Massachusetts had in place prior to its health care reform: an uncompensated care pool paid out to providers who take care of the uninsured. But few states are as wealthy or universally insured as Massachusetts was even before health reform, so the impact will be partial at best
• The lower middle class will rise up, and rather than sending the Tea Party to Washington, will send representatives demanding more access to health care. The rest of the middle class will go along, as they see their wages being cut to pay for employer-sponsored health insurance or find themselves priced out of the individual market. Corporations will join them, as they seek to do whatever they can to restore US competitiveness in the face of unaffordable premiums partly resulting from cost-shifting of the uninsured onto costs paid by the better off
• Eventually, we really do get a “government takeover” of the health insurance industry at a minimum, and possibly of major parts of the delivery system

Could it be that a Republican president ends up signing national health insurance into law around 2020? I wouldn’t be shocked

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From all I’ve seen and heard, text messaging and Facebook are a lot more effective ways to communicate with today’s teenagers compared to calling landlines and cellphones. So I was skeptical when I read in HealthCareIT News that Telephone beats social media for teen research participation.

In the age of social media and text messaging, one would guess teenagers would prefer those methods of contact over something more antiquated like the telephone. But the opposite is true, according to research from Georgia Health Sciences University.

The research showed that of teen participants in a asthma management study, 54 percent preferred phone contact with a recorded message, 24 percent wanted a personal call from a research assistant, 15 percent preferred text messaging and 8 percent preferred Facebook.

There are multiple reasons to be skeptical of generalizing from these results:

• The participants are all in rural Georgia
• All the participants have asthma
• The sample of 188 is relatively small

When working with teenagers it seems it’s worth considering telephone as a communications medium, but I wouldn’t take more away from the study than that.

If I want to contact a teen I’ll still place my bet on texting.

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Yesterday I posted about a Wall Street Journal opinion piece by John Goodman of the National Center for Policy Analysis and today he’s responded to my post (see Pushback on My Medicare Proposals). John is blindingly optimistic about the prospects for free market policies in health care, and some of the commenters on the blog seem even more so. (One commenter seems to be referring to me as “the forces of darkness.” This would be a new low if I hadn’t previously been called a “commie”, “incompetent” and “parasite” when I pointed out we had waiting lists for health care in the US.)

I’m sympathetic to Goodman’s perspective. I really am. But based on my own experience working with and studying companies that make their living by boosting volumes for services paid by Medicare and private insurers, it’s clear to me that implementing Goodman’s proposals would only drive up Medicare costs further. The nature of supply and demand for health care services and the reality of third-party payment make Goodman’s simple solutions, elegant and attractive as they may seem, unlikely to succeed in their stated goal.

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In today’s Wall Street Journal, John Goodman, National Center for Policy Analysis CEO suggests, Three Simple Ways Medicare Can Save Money. I only wish. His overarching plan is to “allow medical fees to be determined the way prices are determined everywhere else in our economy –in the marketplace.” His three specific starting points are:

• “Free-standing emergency care clinics that post prices and usually deliver high-quality care”
• TelaDoc –telephonic conversations with doctors
• Concierge physician practices

His argument is that these services are typically delivered outside of the health insurance system and so have their prices set by the market, rather than Medicare. He proposes having Medicare allow patients to use these services and suggests having Medicare pay the posted prices.

Not to be negative but these proposals wouldn’t work at all:

• When Medicare adds services, it tends to increase costs, not reduce them. Case in point: it’s cheaper for Medicare to pay for home care than to pay for someone to be in the hospital who can’t go home and take care of himself. But add a home care benefit to Medicare and suddenly everybody opens a home care operation and finds ways to bill Medicare. Do the hospitals get less crowded? No.
• Free standing emergency rooms are huge drains on payers, so much so that purchasers and health plans in some parts of the country (like the Northwest) have gone to great lengths to try to keep these facilities from opening up. Goodman probably means urgent care clinics or in-store clinics, which struggle to make a living and rely on insurance payments
• Concierge services are pricey, and encouraging doctors to go into these practices dramatically reduces the availability of primary care for regular patients

In sum, Goodman’s idea would all add to the cost of Medicare. They wouldn’t do anything to reduce costs. And they certainly offer no solution to the misaligned incentives of third-party payment and overutilization.

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After reading the July edition of Health Affairs, I’m concerned about the impact of Accountable Care Organizations (ACOs) on cost trends in the US health care system.

In The Accountable Care Organization: Whatever Its Growing Pains, The Concept Is Too Vitally Important To Fail, Francis Crosson of the Kaiser Permanente Institute for Health Policy plays down the various criticisms of ACOs (that they may stifle innovation, unleash a torrent of regulation, and rely too heavily on fee for service payment methodologies) and argues that we need to help them succeed because there are no good alternatives. If not,

both public and private payers will probably be forced into across-the-board reductions in payment rates to providers, because the state of the economy will require cost reductions, and there will be no other obvious course to pursue. Reductions in quality and access may follow…

But the emergence of ACOs is driving hospitals to consolidate, buying other hospitals and physicians practices. This may help them coordinate care as required by an ACO but also increases consolidation in local markets. James Robinson (Hospitals Respond To Medicare Payment Shortfalls By Both Shifting Costs And Cutting Them, Based On Market Concentration) demonstrates that more market power leads to hospitals raising costs and boosting prices to commercial payers:

It generally is more desirable, from a hospital management perspective, to increase revenues than to reduce costs, because the former merely alienates insurers, but the latter alienates employees, physicians, and potential patients. The cost-shift perspective highlights the revenue-enhancement hospital response to Medicare payment shortfalls.

The hospital’s ability to pursue revenue enhancement over cost reduction will depend, however, on the degree of competition in the local market. Hospitals in competitive markets will be less able than those in concentrated markets to raise prices and hence must either reduce costs or suffer erosion in their profitability.

In other words, as Medicare reduces reimbursement levels, hospitals in competitive markets respond by cutting costs, while hospitals in concentrated markets –for example where ACO development is strong– raise prices. This doesn’t bode well.

I really hope Crosson is wrong about the lack of alternative to ACOs. To me ACOs are very much a top down, scale-based approach that gives too much credence to the cost-saving potential of organizational integration and ignores the anti-competitive tendencies of large organizations and the potential for smaller, nimbler competitors to make markets more efficient and drive down costs. I’d like to see the emergence of virtual ACOs, tied together more by information flow than ownership and top-down management, but I’m not hugely optimistic.

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Healthcare Economist hosts the latest edition of the Cavalcade of Risk blog carnival, entitled Risk Grabs the Headlines.

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What do you think when you hear the term “safety net provider?” It doesn’t make a very positive brand impression, does it? Trapeze artists are glad that there’s a safety net underneath them, but they sure as heck don’t want to fall into it. If they screwed up and landed there they wouldn’t go around telling all their friends how great it was. And there’s absolutely no chance they’d rather perform in the net than up above.

I thought about this as I read Safety-Net Providers After Health Care Reform in the Archives of Internal Medicine. Here’s the bottom line: uninsured patients in Massachusetts who use community health centers tend to keep using them even after becoming insured. Why? Because the centers are convenient, affordable, and offer services beyond medical care. As the nation as a whole follows Massachusetts’ example and the number of uninsured falls dramatically, I suggest it’s time to stop thinking of and labeling these facilities as mere “safety nets” and start treating them as the prototypical patient centered medical homes that they are. Not only should we encourage newly insured patients to continue using community health centers, we should encourage traditional primary care practices to evolve toward the health center model.

My own primary care office in downtown Boston is a traditional one: cramped, unattractive, filled with paper records, limited in its hours, indifferent in its customer service and focused entirely on medical issues. The only ways you’d know it serves an upper middle class clientele is by its address and by viewing the people in the waiting room. Visit a typical community health center in Boston and you’ll see something much more dynamic, friendly, modern. and efficient. They have electronic medical records, friendlier administrative staff, and offer dental, vision and mental health care along with a variety of community oriented outreach services.

Community health centers have been “patient centered” since well that phrase became trendy. They attached themselves to the community and focus on serving the needs of the population. I spoke with a physician leader at a large health system that has both private practices and community health centers under its umbrella. She told me that there’s a major difference in how the physicians look at their work. When there’s a surplus within a private practice the physicians want to pay out bonuses. When a community health center has extra money, the staff look for opportunities to bolster the infrastructure and expand services. As a patient, which  attitude would you prefer?

I’m all for keeping a “safety net” in place, and community health centers should be proud to have that as part of their mission. But it’s time to shuck the “safety net” label and position health centers in the vanguard of primary care where they belong.

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