Health Business Blog

Welcome to the 145th running of the Cavalcade of Risk. This edition’s submissions were overwhelmingly focused on insurance, with just a smattering of health care and miscellaneous posts.

Insurance, insurance, insurance

Begging to Retire learns the hard, crumply way that rental insurance is important –especially when renting a truck.

FreeMoneyFinance identifies ten (10!) types of insurance you should own. And he didn’t even consider rental car insurance.

Life insurance is an under-rated risk management tool. InsureBlog introduces a hilarious State Farm commercial to underline the point.

Long term care insurance can be pricey, but WalletBlog recommends purchasing it as soon as you can afford to.

My Wealth Builder suggests that earthquake insurance is a good deal if you live in a low probability area, where cost of coverage is low but potential payoff is high.

Bad news for those who heed FreeMoneyFinance and buy 10 types of insurance. Insurance Coverage Law in Massachusetts recommends keeping copies of all policies forever. That’s going to take a lot of file space.

The downside of getting rich is that your personal liability policies might not keep up. Risk Management for the 21st Century has some advice on how to cope.

The health care corner

US health plans gave up a lot in negotiations with the White House over the shape of the Patient Protection and Affordable Care Act. But they got something very important in return: the individual mandate. Insurance Claims and Abuses asks what happens if the Supreme Court strikes down the mandate but leaves the rest of the Act intact?

Workers Comp Insider explores the fine distinctions between on-the-job injuries that qualify for workers compensation and those that do not.

Work in progress. Healthcare Economist takes a look at the current state of Accountable Care Organization implementation.

Don Berwick is stepping down from CMS. Just what can we expect from his replacement, Marilyn Tavenner? Disease Management Care Blog has some early thoughts.

The Joint Commission considers it too risky for doctors to text clinical orders. But as Health Business Blog notes, the Commission is overlooking important benefits.

ANZUS alley

Ozrisk takes a tough look at APS 330 Reports in the Australian context and concludes that the reports aren’t used much and have little to no impact even when they are.

Russell Hutchinson of Chatswood Money Blog hosts next time. And if you want to make CavRisk head honcho Hank Stern happy, please volunteer to host the January 25, 2012 edition.

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This is the transcript of my recent podcast interview with Stuart Long, president of North America for Capsule.

David Williams:            This David Williams, co-founder of MedPharma Partners and author of the Health Business Blog.  I’m speaking today with Stuart Long, Capsule’s North American President.  Stuart, thanks for being with me today.

Staurt Long:            Thanks David.  Glad to be here.

Williams:            Stuart, tell me a little bit about what Capsule is and specifically what you mean by the term “medical device connectivity.”

Long:            Capsule is a 15 year old international company. We provide solutions for medical device integration into hospitals and clinics.  We were founded on the understanding that the electronic medical record would ultimately need automation with respect to medical device data.

What we mean by medical device integration –and why it’s important– is the fact that medical devices such as cardiac monitors, IV balloon pumps, and ventilators all produce data that comes directly from a patient, generally at the point of care.  Given the Meaningful Use criteria and a lot of inertia in the environment with respect to the adoption of clinical systems and automation that surrounds all the elements, that information is important.

The data then has to land in a solution; it’s part of the EMR. The typical destination for us today is the charting and documentation system, which can be in the intensive care unit or the medical and surgical environments.

Capsule takes the data that comes from those medical devices and translates that in a particular way using HL7. Then we send that information to the target system.

We can send the information to additional target systems such as third party research engines, alarms and alerts and other IT systems.

Williams:            Who is usually the customer that is initially interested in Capsule? Who is typically the decision-maker?

Long:            Today typically it’s a hospital. We do have customers in the clinics as well, but the groundswell with respect to automation and having unique, enterprise-wide identifiers comes mainly from hospitals.

I’ll give you a little context.  Historically we sold departmental solutions, namely ICUs. The audience that was buying those was typically the biomedical engineering departments; they were putting a black box under the bed,  connecting monitors and putting that information into an ICU charting and documentation system.

That has evolved now. We can address not just the ICU, but also multiple high acuity environments such as PACUs and EDs as well as lower acuity areas such as medical and surgical environments.  By doing that, the buying audience is now completely different.

The audience that’s making decisions with us today is typically the CIO, the CNO and the CMIO.  They are choosing this because it’s an enterprise-wide decision.  They’re look for a single platform for connectivity of medical devices and then the ability for that system to translate and push that to any target system.

Williams:            I imagine 15 years ago when this started, there was a different philosophy towards getting data out of these devices. Probably the nature and quantity of the data have changed, too

Long:            Capsule was founded by a French engineer and a U.S. engineer. Initially they developed a solution for Philips Healthcare to integrate their vital signs monitors into their ICU application.  Of course all that information was definitely very important and there was, at the time, a lot of data.

Ultimately there was the need for more than just ICU monitors connected at the bedside. That progressed next to ventilators and then to IV pumps and balloon pumps –anywhere from three to five to 10 devices at the bedside.

Over time Capsule developed solutions to allow all those devices to be connected.  At the very core of the thinking was that we knew that there would be mountains of data that would be coming from these devices.

Interestingly enough, in the early days when connectivity needs were evolving, any device that would send information to any target system, all of that information could not be assimilated or taken in.  There was a challenge around the rate at which data could be taken in.

Fast forward to today’s world where we have multiple devices. We have to deal with the sheer complexity of devices, networking, subnets and wireless. The complexity and connectivity is significant, but also the sheer amount of data.

Capsule takes all of that information –100% of that information at whatever speed or time interval that the devices are able to send out– collects it, aggregates it, filters it, translates it, and then sends it to a target system, which could be an EMR charting application or alarms and alerts.

We’re seeing a big growth in research systems for data analytics for the measurement of information for doing research on health care data outcomes.

Because of our ability to have the intelligence in the system, we can really tune the system to meet any needs in today’s health care environment, whether it’s a single ICU application, an enterprise-wide deployment of an EMR or any third party system that can receive the data at whatever rate they want us to send it to them.

Williams:            When you have more information available, does it raise medical/legal issues? Before this data might have been used to trigger an alarm, which may or may not have been documented. But in a system like what you’re describing it might be easier for someone to go back and second guess what happened in the hospital because there’s a lot more data on what occurred or at least what the devices were saying was occurring.  Is that an issue that you’ve come up against?

Long:            It’s not an issue from our perspective.  Typically when we’re sending information to an EMR charting system or some third party component, the data that’s being requested has been tuned specifically for their application. Therefore those vendors have worked out the kinds of data that are most appropriate, so that they’re not overburdened.

Williams:            What about security?  Certainly with a lot of other devices that are out there transmitting data, there are concerns about hackers, viruses and the like.  Is that an issue that you face either directly or indirectly?

Long:            Well it’s certainly a topic we face on a day-to-day basis.  I wouldn’t consider it an issue at this point only because of the way that we’ve architected the system.  It’s highly flexible with respect to the security that’s built into the systems.  We can accommodate a small single hospital with a smaller staffed IT department that is really focused on getting systems deployed.  Although security is important, it certainly may differ from a 160 hospital enterprise deployment with very sophisticated networks.

We’ve been able to fit our solution into virtually any environment with respect to security needs and built a tremendous amount of security into the system.

We’re regulated as a FDA Class II medical device, so there is rigor that goes into our testing, validation, and quality. That ultimately points to safety at the point of care.

The combined efforts of our focus around security being scalable and flexible and our FDA compliance tends to alleviate most of the concerns that we come across.

Williams:            Tell about your activities in countries outside of the U.S. and whether there are any key differences or whether the customers and markets are pretty similar.

Long:            We’re in over 30 countries. The bulk of our business is in the U.S., however we’re growing rapidly in international markets.  We do see a fundamental difference with respect to health care in the U.S. versus other global regions. They all require different go-to-market strategies and types of products. The speed at which they might deploy and the environments of how health care is actually provided and managed are quite a bit different as well.

I think it’s a strong proof statement that Capsule is the global leader in medical device connectivity.  We’ve deployed in excess of 200 implementations outside of the U.S. That’s growing rapidly because device connectivity and electronic systems are maturing quite a bit in overseas markets.  I think they are equally sophisticated as the U.S., but I would say that the drivers to require the adoption of electronic systems that would then remove the rate limiting factor for device integration are greater in the U.S. So we’re seeing a faster deployment here in the U.S.

Williams:            Take out your crystal ball for a minute and have a look into the future five years or so.  Are we likely to see continued incremental changes that we’ve witnessed over the last several years or are things like iPads, smartphones, Meaningful Use and changes to the payment system in the U.S. and elsewhere going to cause more fundamental change?

Long:            If we look at a three to five year timeline, connectivity is very quickly moving beyond the basics of device connections to electronic systems.  We still believe that there is a very large percentage of hospitals that need to implement the basic device connectivity.

A lot of our customers are going department by department.  We see that moving into what we call the “enterprise,” meaning they’ll be addressing both the higher and the lower acuities or every bed in their institution.

We still see a fairly large demand for the foreseeable future; within the next three to five years.

Once those are implemented the things that are on the horizon are the sophistication around the devices themselves and how to solve connectivity.  We know that the integration of pumps is going to have to be solved in a very meaningful way because of their ability to integrate into bar code medication administration.

Beyond that there is a lot of desire and discussion about device interoperability and two-way communication between devices and there’s a tremendous amount that needs to be solved with respect to clinic workflows and having devices interoperate.  Those are portions of the criteria that we see in the Meaningful Use rules out in 2015.

We know that once all of these things come together and the basic needs are met, we have the ability to look at larger things within clinical workflows and the management of all the data that is being collected for analytics and outcomes. We have the ability to progress from alarms and alerts to build intelligence and context into that information and to disseminate that information to mobile health care providers. This can be done not just at the point of care but also through iPads, smartphones and potentially other third party vendors that are enabling those markets.

We see “small leap frogs” coming every 24 months or so, which are significant changes with the use of the data that’s being collected and moving well beyond the basics of connectivity.

Williams:            I’ve been speaking today with Stuart Long, Capsule North American President.  We’ve been talking about medical device connectivity.  Stuart, thanks so much for your time.

Long:            Happy to do it.

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Tiered health plans cutting costs, restricting options in today’s Boston Globe raises reasonable questions about new benefit designs from Massachusetts insurers that require members to pay more when they seek services at hospitals that are not on the preferred list. The article profiles Glenn McCarthy, a 48 year old man from Weymouth who faces $4500 in out-of-pocket costs after obtaining services at 2 hospitals that are in the higher cost tier. I empathize with the man and his wife, but overall I’m very much in favor of the availability of tiered plans like his.

To summarize the story:

• McCarthy was told he needed surgery for “an aggressive form of prostate cancer”
• He could have surgery at Faulkner Hospital in “more than a month” where his co-pay would be just $150
• He could have surgery at the Brigham and Women’s in about 2 weeks –with the same surgeon– but he’d have to make a $1000 co-payment because the Brigham is in a higher cost tier for the Blue Cross Blue Shield plan he has
• He opted to go to the Brigham because “his doctor advised against a delay.”
• He had complications after surgery and went to South Shore Hospital in Weymouth, also in the higher cost tier, and racked up another $3500 in out-of-pocket expenses

I don’t know the specifics of the case and am not a clinician, but I’m going to go ahead and make some observations about this situation anyway.

• It’s noteworthy but not surprising that the same surgeon was going to perform the surgery whether at the Faulkner of the Brigham. Have a look at the Faulkner website and you’ll see it’s actually branded as a Brigham and Women’s Hospital. It’s not just some off-price, low tech competitor as the article implies. The home page features a big come-on for the Brigham and Women’s Center for Robotic Surgery at Faulkner Hospital
• I’m skeptical about the scheduling delay. Sure it would be a drag to have to wait more than a month for urgent surgery, but even the two week timeframe for the Brigham isn’t very impressive. Maybe the McCarthy’s don’t know how to navigate the system, but I’m willing to bet that a well-informed consumer and the surgeon could have had the timing pushed up if it was medically necessary
• It’s too bad McCarthy got complications and then went to his local hospital, which is also in the higher tier. (By the way, can you imagine how the story would have read if McCarthy had gone to the Faulkner and ended up with complications. Would the article have blamed that on the lower end hospital?) But his situation is the exception, because very few hospitals in Massachusetts are actually in the higher tier. Two lower tier hospitals –Quincy Medical Center (part of Steward) and Milton Hospital (part of Beth Israel Deaconess)– are within 10 miles of Weymouth

Certainly $4500 is an unwelcome expense, one that the McCarthy’s are struggling to pay off. And yet it’s small change in the context of overall health care costs and even relative to the costs of the McCarthy’s health insurance.

A typical Massachusetts family health insurance premium is in the range of $1500 per month or $18,000 per year. (I don’t know what the McCarthy’s pay.) At that rate, the $4500 represents only 3 months of premium. Meanwhile, tiered plans are priced at least 12 percent below non-tiered plans. That means about $2200 per year on an $18,000 policy. So even if McCarthy wanted to go to higher tier hospitals he’d still break even financially as long as he only had this type of unfortunate episode once every two years.

In the meantime we need to consider tiered networks more broadly than just this case. Consider:

• The introduction of tiered networks has enabled the Massachusetts Health Connector to enroll everyone who qualifies for fully subsidized insurance, despite the state’s difficult fiscal situation
• Tiering is meant to incorporate quality as well as costs. The two should generally trend in tandem, e.g., if costs of complications are included
• The ratings are not static and hospitals can shift between tiers year-to-year. I would expect South Shore Hospital to do everything it can to get onto the lower tier list. Why shouldn’t they be as cost-effective as Quincy and Milton?
• I am sympathetic to the plight of high cost, prestigious hospitals such as the Brigham. But they, too, can make improvements or reconfigure their networks. For example, I would argue that the Faulkner affiliation is a good example of how this can be done
• I note that Dana Farber and Children’s are upset about being listed on the higher tier. I know that I would want those hospitals in my network. Yet this may also provide an opportunity for Blue Cross or its competitors to add benefit designs that have multiple tiers rather than just two, or for these institutions to demonstrate that their higher quality justifies their higher costs
• Hospital systems such as Steward have an opportunity to carve out a major market opportunity as high efficiency, high quality hospital systems –and inject some welcome “value” competition into the provider market

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The Joint Commission has issued a statement indicating that health care professionals should not text patient orders. It reads:

“It is not acceptable for physicians or licensed independent practitioners to text orders for patients to the hospital or other healthcare setting. This method provides no ability to verify the identity of the person sending the text and there is no way to keep the original message as validation of what is entered into the medical record.”

I was alerted to this statement by an iHealthBeat article on the topic, which quotes a couple of experts who note that texting has security, privacy and reliability problems that make it unsuitable for critical issues.

I understand the downsides but I’d be interested to learn more about what’s driving the use of texting for orders — if there is in fact such a trend. My guess is that younger physicians in particular are used to texting in their personal lives, finding it convenient, immediate, reliable, concise and likely to be read, acknowledged and acted on quickly. Add to that the fact that texting can easily be done from personal mobile devices and the appeal becomes pretty clear.

It used to be broadly accepted that doctors didn’t like using information technology, but a more likely explanation is that they have an aversion to clunky systems that slow them down and load them up with administrative work that is more suited to administrative support staff. Doctors are big users of smartphones and tablets in their personal lives and have started to bring their own devices and apps into the workplace. It’s fine for the Joint Commission to guard against the downside of such activities, but health care IT providers and health system leaders would due well on how to harness physician enthusiasm for better ways of working and incorporate that input into innovative products and policies that meet the rigorous needs of the health care workplace.

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Capsule is a leader in medical device connectivity (MDC) –the integration of medical devices with information systems. Hospitalized patients are often hooked to several devices, each of which is generating a large volume of data. At the same time hospitals are increasing adoption of electronic medical record systems and striving to better incorporate –and eventually analyze and act on– clinical data of all kinds.

In this podcast interview, Capsule’s president of North America Stuart Long and I discuss the market for medical device connectivity, how it’s changing with the advent of meaningful use, data security challenges and differences among US and international markets.

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David Williams interviews Capsule's Stuart Long on medical device connectivity [ 14:36 ] Play Now | Play in Popup | Download

You can hear me on American Public Media’s Marketplace commenting on Avastin losing its indication for breast cancer.

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As expected the FDA today removed Avastin’s approval for use as a breast cancer treatment. The drug will remain on the market for other cancer indications, so if a physician wants to prescribe it for breast cancer they can. However, some patients may have a hard time getting reimbursement from their commercial health plan. Not everyone will have this problem, though, because Medicare and some health plans (including United) will continue to reimburse as long as the drug is listed as appropriate for breast cancer by the National Comprehensive Cancer Network (NCCN).

This provides a good opportunity to discuss the benefits of rationing using evidence based guidelines.

In my view, FDA has handled this exactly right. Avastin was approved for breast cancer in 2008 under an accelerated review process designed to allow potentially life-saving treatments on the market on a provisional basis before all the evidence is in. In this case follow-up studies failed to demonstrate efficacy but did show plenty of harsh side effects, including hemorrhage and severe high blood pressure. FDA review panels voted overwhelmingly to remove the breast cancer indication, and after five months of further analysis and deliberation FDA decided to follow that recommendation.

It’s possible that Avastin works well for some breast cancer patients. No matter what there will be people who insist it’s saved them or been worth the risk. But late stage cancer patients tend to undergo all sorts of desperate and costly treatments and I firmly believe this label change will get doctors and patients to think twice or three times about whether Avastin is really the right choice. The advisory panels’ recommendations have already had that effect to some degree.

I’m not familiar enough with the NCCN’s process to know how they will react to the data FDA and its panelists have reviewed. But in addition to the clinical dangers faced by those taking Avastin there is a very real financial cost to Medicare and commercial payers. That $50,000+ treatment cost gets reflected in the cost base for taxpayers and health plan customers.

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Check out the latest Cavalcade of Risk blog carnival at Insurance Writer.

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The Commonwealth Fund just released a sobering analysis (State Trends in Premiums and Deductibles, 2003–2010: The Need for Action to Address Rising Costs) revealing that total premiums for family coverage increased 50 percent over the past seven years, with big increases in every state. It probably won’t surprise you that insurance costs in Massachusetts are among the highest in the nation. If you are an opponent of the Patient Protection and Affordable Care Act (PPACA) you’ll probably also be eager to point to Massachusetts as the evil place where it all started and the harbinger of doom for the rest of the country as PPACA is implemented.

Health insurance costs have always been high in Massachusetts, and while so-called RomneyCare hasn’t fixed the problem, it also hasn’t made Massachusetts worse relative to other states. Meanwhile the cost of health insurance shouldn’t be looked at in a vacuum. Massachusetts is also expensive on other dimensions such as housing and education.

Luckily, thanks largely to the state’s investment in education and infrastructure, and its open minded populace, Massachusetts is also a place with a modern, knowledge based economy that offers high wages. The Commonwealth Fund’s analysis reveals that health insurance in Massachusetts is significantly more affordable relative to income than it is in other states. Not only that, but the situation is improving over time relative to the rest of the country.

In 2003, the average health insurance premium as a percent of median household income for the under-65 population nationwide was 14.9%. In Massachusetts it was 12.6% –or 2.3 percentage points better.

By 2010 the national average had jumped to 20.3% of income. In Massachusetts it moved up, too, but only to 15.9% –now 4.4 percentage points better than average. Only Connecticut (15.5% ) and New Jersey (15.4%) are more affordable. By way of comparison, health insurance in Texas consumes 24.5% of median income, which goes a long way toward explaining why so many people are unemployed there.

Don’t get me wrong, Massachusetts has a big health insurance cost problem and it needs to be tackled. But thanks to health care reform and a high-wage economy we have a better chance than most to deal with it.

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When I was in Seattle on business a couple months ago I met Jonathan Rickert, CEO of an interesting company called Array Health. They are a start-up operation with aspirations to provide health plans with private exchanges that will give small businesses and individuals  access to several health plan and ancillary benefit designs rather than the few they are typically exposed to today. Health plans are interested in opening these exchanges in order to capture a higher share of the new members gaining health insurance as a result of the Patient Protection and Affordable Care Act (PPACA), which is rolling out through 2014. There will also be public exchanges, but the big plans would rather have customers shop within their own stores (think Apple Store v. Best Buy).

This all fits in to an expected long-term shift from defined benefits to defined contribution that’s likely to unfold in a similar fashion to what we saw in the pension market, which has shifted dramatically from defined benefit to the 401(k) model.

The big health plans are still in the mainframe era and are not well placed to serve this emerging need. Of course they’re also nervous about working with newer companies on a business critical process. That’s why I’m so pleased to see Highmark Blue Cross Blue Shield announce its agreement with Array Health:

“We’re bringing a retail experience to the wholesale environment,” said [Steve Nelson of Highmark]. “Highmark’s exchange will give small business employees a chance to truly choose a health plan option that’s right for them.”

With a defined contribution approach, an employer sets a monthly fixed dollar allowance for employees. They use this money to go to an online insurance store to select from a menu of seven Highmark health plan options as well as two dental and vision insurance plan options.

“Our platform seamlessly packages health and ancillary products to look and feel just like a traditional group plan, which is what most employers, employees and brokers are familiar with, but also gives a menu of options,” said Jonathan Rickert, Array Health CEO. “We have extensive experience in exchanges, and we look forward to bringing our expertise to the Pennsylvania marketplace with Highmark.”

In the coming weeks I hope to  have the opportunity to interview Array and Highmark about their new partnership. In the meantime, congratulations.

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