I was in the pharmacy recently and saw that Colgate has added a Total Gum Defense line extension to its already large set of Total products. But this product makes exactly the same set of claims as the regular Total –”Helps prevent: Cavities, Gingivitis, Plaque. Fights Tartar, Freshens Breath, Whitens” –and lists the same active and inactive ingredients. Then yesterday I was at the dentist’s office, where there was a big basket of Total Gum Defense samples. I asked a periodontist there if there was any difference and she said, “Not as far as I know.”

I poked around the Colgate website and couldn’t find any differences mentioned there. (Could be hiding somewhere but it wasn’t apparent.) I did find it instructive that the site lacks the ability to compare the various Total products head-to-head, probably because the main differences are how they’re positioned to the market rather than anything substantive.

Finally I called Colgate customer service to ask my question. Judging from how quickly they came up with an answer, this is clearly a question they’ve been receiving a lot. The rep pointed to two differences:

• The formulation is milder –using a different type of hydrated silica
• The flavor is less minty –presumably making it more tolerable for those with sensitive gums

I guess it’s enough of a difference to be plausible, and maybe labeling regulations prevent them from being more explicit. But my guess is that Colgate Total Gum Defense is just a typical consumer product line extension, designed to grab a little more shelf space, appeal to a few more consumers, maintain price premiums, and keep generics at bay.

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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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Williams:            This is David E. Williams, co-founder of MedPharma Partners and author of the Health Business blog.  I’m speaking today with Dr. Harvey Kaufman.  He’s a Medical Director from Quest Diagnostics and he’s also co-author of a recent article about the value of laboratory tests and employer sponsored health risk assessments that was published in the journal PLoS ONE.  Dr. Kaufman, thanks for being with me today.

Kaufman:            Thank you.

Williams:            What was the motivation for conducting this study in the first place?

Kaufman:            Quest Diagnostics is a leading provider of workplace wellness programs to employers across the country. Employers are struggling to manage population health as a business imperative. We were asked repeatedly about the documented value of employer sponsored laboratory based wellness programs, and there’s no existing literature evaluating this benefit, especially across employers. We had the unique opportunity to close this gap and provide key observations that answer this question.

Williams:            There were three conditions chosen. Why those three in particular?

Kaufman:            We focused on the three common chronic conditions for which there is clear evidence that early detection and medical management can change their course by flowing or halting the disease progression. High cholesterol dyslipodemia is present in more than 1 and 3 adults, diabetes affects more than 26 million Americans, and there are an additional 79 million Americans with pre-diabetes.

The widespread recognition of chronic kidney disease is just emerging, but that too affects 26 million Americans. The most important risk factors for chronic kidney disease are diabetes, hypertension, obesity and cardiovascular disease. Health risk questionnaires can’t detect these common medical conditions. Only laboratory tests can. Also key is that the three medical conditions are silent conditions at the early stages, when intervention is most likely to change the course of the disease.

Williams:            What kind of results did you see, and was there anything that surprised you?

Kaufman:            The study evaluated 52,270 employees, spouses and domestic partners of working ages: 20 to 64, for first-time participants in their employer’s laboratory based wellness program. The resulting data showed that one in three participants, or 36% had one or more newly identified risk for these diseases. Fifty-nine percent of those with high cholesterol were newly identified, 28% of those with diabetes were newly identified, and 89% of those with chronic kidney disease were newly identified. Surprisingly, nearly 1 in 4 participants, even in the youngest age group (20-29), had a newly identified health risk. Participants’ level of education didn’t have any impact on the results and there was no significant difference between the disease risk between male and female participants. The majority of these participants had health insurance. This shows that health care access alone doesn’t guarantee detection of risk factors of these common health conditions, since many adults don’t seek preventative care in the absence of symptoms.

Williams:            I want to ask about use of the term, “health risk.” Are you referring to condition identified through a laboratory test, that’s subject to a confirmed diagnosis? When you say “health risk” I think you mean a pretty strong likelihood that somebody has one of these conditions, not just that they’re sort of “at risk” in a general sense. Is that correct?

Kaufman:            Right. The diagnosis of high cholesterol, diabetes and chronic kidney disease depends on laboratory tests, but also depends on an evaluation by a doctor to rule out other causes. The typical follow-up is a medical assessment and repeating the initial lab tests.

Williams:            It’s interesting that you mention that these are people with to access to insurance. You’re doing this with employers, who presumably not only offer reasonable health insurance, but who are also investing in wellness programs. So as you say, it’s not a question of access to insurance. Is it surprising that folks who have insurance don’t have a better sense of where they stand with risk factors or with diagnosis? Or is that a function of how people access the health care system, or what physicians do when those patients visit?

Kaufman:            Yes, I did expect people with health insurance to take advantage of the generous benefits that are largely supported by their employers. Our study really underscores that the issue isn’t access or quality of care, it’s that people aren’t going to see their physicians until they have serious problems. Employer sponsored laboratory based wellness programs fill this gap. They identify people who should be more engaged with their medical care. These programs complement physician care by driving awareness and driving people to seek medical professionals who can help them get on the right track.

Williams:            One of the things that struck me in reading the article was that you’re testing people that are younger than some of the usual thresholds for when people are tested for cholesterol or kidney disease or diabetes. Yet a fair number of problems were being identified in that younger cohort. This probably goes beyond what the article was addressing, but is it reasonable to explore whether some of those thresholds should be lowered, and is that one of the factors that’s at play here?

Kaufman:            Yes, unfortunately Americans as a group have become increasingly unhealthy.  That’s because we’re eating unhealthy foods, we’re eating too much of those foods, and we’re getting less physical activity and exercise than we should. Combine all that together, and you end up with a large percentage of people including those in their 20’s who are now at risk for heart disease, diabetes and chronic kidney disease. I think it was in November that the National Institutes of Health came out with recommendations supported by the American Academy of Pediatrics, to test children as young as 8 for high cholesterol. So we’re seeing what used to be a disease in older people is now in younger people and unfortunately now in adolescents and children.

Williams:            I know with some testing, maybe more on the screening side, there is a controversy about whether to do the testing and how much to do it. There are concerns about false positives, for example, leading to more invasive tests, or to treatments that could themselves be harmful. For these three conditions that you are testing for, are there concerns like that?

Kaufman:            Yes, we’re always concerned about wanting to identify the right people, and not identify the wrong people.  Employee sponsored laboratory based health risk assessments involve common laboratory tests that are relatively inexpensive and the conditions fall on to the right side, here. People who have these risks that are newly identified should see their physician, take that history, perform the physical exam and typically repeat the same test to confirm the initial result before they make a diagnosis. The tests are common, they’re relatively inexpensive, but by themselves; don’t lead to more expensive tests. The tests themselves are designed to minimize false positives for people who may think that they’re healthy and think that they’re invincible.

These diseases are hidden inside people, you can’t see them. If they’re not identified early, and identified late, possibly it’s sudden death, a significant illness and cost, so it’s important to identify them early even when the finding is not confirmed.  The individual may be heading in the wrong direction, such as having pre-diabetes. Through changes in lifestyle, by losing some weight, and becoming more physically active they can delay or avert the development of diabetes. In the end, knowledge is power when people have access to their lab results and understand them; they’re more likely to ask the right questions and make better decisions and receive better care. I don’t think there’s any downside there.

Williams:            What reaction have you already had, or would you expect to these findings from providers like physicians or commercial health plans or employers or others?

Kaufman:            Every entity you mention has a stake in improved population health, because we all must reduce the projected costs to both the public and private health plans. Our findings suggest that employer sponsored laboratory based wellness programs can be important keys in the early detection of these silent, common medical conditions. Doctors love it. They love the one page summary of the laboratory results that participants bring to them. Doctors love that they’re practicing medicine and making a difference in the lives of these patients. Participants keep telling us how this program has saved them, their spouse, and their domestic partners in terms of early identifications of cancers, hypertension and the three conditions that are the subject of the study.

For employers, it’s all about establishing a culture of health that can lead to healthier and more productive employees and lower their health care costs.

Williams:            I appreciate that you’ve published this article in PLoS ONE, which is a prestigious peer reviewed journal. It’s also an open access journal, which means rather than my having to have a subscription, or pay $25.00 or so for the article, I can actually read it. I’ll be able to link to it from this blog post, and everybody can see the details. I’m wondering, was it a conscious decision to seek out that particular publication, or an open access journal in general?

Kaufman:            Absolutely. PLoS ONE is now recognized as one of the most respected peer reviewed journals. We were looking for the widest audience given how our message crossed across from human resource directors to physicians. In addition, PLoS ONE has quick turnaround time, so it let us get the message out more quickly compared to other leading journals. Open access journals like blogs, have become more important in terms of how we communicate. When we seek to share information, they serve to document current conversations without many of the constraints of traditional journalism, yet with the same rigor of peer review.

They provide wide access to current research and thinking, and I think that’s the upside for exchanging current ideas and learning.

Williams:            I’ve been speaking today with Dr. Harvey Kaufman, Medical Director from Quest Diagnostics about the findings from a new study about the value of laboratory tests in employer sponsored health risk assessments for identifying health conditions. Dr. Kaufman, thank you very much for your time today.

Kaufman:            Thank you, David.

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Neumann focuses on a statement from the new edition of the American College of Physicians’ Ethics Manual:

Physicians have a responsibility to practice effective and efficient health care and to use health care resources responsibly. Parsimonious care that utilizes the most efficient means to effectively diagnose a condition and treat a patient respects the need to use resources wisely and to help ensure that resources are equitably available.

The term “parsimonious” has generated a lot of pushback. That’s not unexpected, because policymakers, the health care industry and consumers continue to studiously avoid serious discussions of cost. Neumann is on the side of the ACP, and makes the following key points:

• The embrace of “more efficient, more effective, and safer care” and reducing waste is sensible and productive, but won’t really address cost growth
• Society has to face the fact that unlimited access and unlimited patient choice are unrealistic
• The Affordable Care Act’s restrictions on using comparative-effectiveness research for coverage decisions and its ban on the use of cost-effectiveness thresholds will limit the law’s impact
• It’s nice to have a “patient-centered” approach to outcomes research embodied in the Patient-Centered Outcomes Research Institute, but it hinders the cost debate by de-emphasizing “considerations of societal resources”
• Accountable Care Organizations (ACOs) are actually well placed to employ “parsimonious” care, but no one speaks in those terms
• The ACP is performing a real service by bringing up a topic that isn’t being discussed honestly

I’m fully on board with Peter, and would add a couple observations from recent news:

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In this podcast interview, Dr. Kaufman sheds light on the findings and implications.

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Meanwhile, the Tea Party’s influence scared off the more reasonable, electable GOP Presidential candidates and we’re left with an odd bunch. Santorum is a pretty extreme social conservative and nowhere near qualified to be president, Gingrich is a narcissist and probably more of a socialist than Obama, Paul appears to be a modern day John Bircher, and who knows where Romney really stands? In any case, the group has taken the primary so far to the right that it’s opened up a huge centrist gap for Obama to fill.

The recent flap over birth control is pretty interesting in that regard. I doubt Obama planned it this way, but it seems likely that things will work out at least neutrally for Obama and possibly very positively. The original Obama proposal, requiring religious institutions to offer birth control coverage — was quite reasonable. It was in line with the policy that’s in place in most states in the US –one that doesn’t generate a lot of debate. When things blew up, Obama back tracked a little bit, forcing insurers to pay for the benefit. His move was enough to at least partially mollify the sincere critics (e.g., Catholic hospitals). But of course nothing Obama proposes will be seen as adequate by his ideological opponents, who are striving to present Obama as trampling on religious freedom.

But opponents are at a serious risk of overplaying their hand. In particular, they may accurately be perceived as against birth control. And that’s not something that the average person in this country is going to be comfortable with.

Birth control is not like the abortion issue. Although “pro-life” campaigners like to portray the “pro-choice” side as “pro-abortion,” it’s just not true. Even those who favor abortion on demand would like to see the number of abortions be as low as possible. That truth is lost on some of the anti-contraception zealots.

As a result of Obama’s partial backtracking, the opposition is split and a bit confused. The real anti-contraception people are coming out of the woodwork, and that’s going to scare the heck out of a lot of undecided and Republican leaning centrist voters. If the Republicans get painted as anti-birth control I don’t see how that’s going to be a winning message for the party. It could even trump bad economic news for some voters.

And although the financial impact hasn’t attracted much coverage, birth control benefits are very cost effective. The benefit reduces unplanned births and the associated medical expenses.

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Williams:            This is David Williams, co-founder of MedPharma Partners and author of the Health Business Blog.  I’m speaking today with Dr. Evian Gordon, executive chairman of the Brain Resource Company.  Evian, thanks for being with me today.

Gordon:            It’s a pleasure.

Williams:            We’re going to talk about personalized medicine for the brain. So first off, how is personalized medicine for the brain different than other kinds of personalized medicine?

Gordon:            Well it’s no different at all.  The goal essentially is to find biological markers that can accurately predict treatment response.  The difference is one of more pragmatic reality. Most of the findings in personalized medicine that are well learned have come out of the area of cancers and HIV/AIDS.

The most common examples cited are Herceptin for breast cancer, Selzentry for HIV/AIDS, Gleevec for leukemia, Iressa for lung cancer and Erbitux in colon cancer.

Even though there are a small number of findings, there are a growing number and it is rather surprising that they have been confined to the cancer area in the main.  So that’s been the biggest difference, but that I think is one of simply where the focus has been and where the investments have gone into. It’s cancer.

Williams:            Now speaking of investments, I know that you are involved in the iSPOT study, which I understand is a large study that is related to the brain and personalized medicine.  Can you tell us a little bit about that?

Gordon:       Sure.  This is a study from a European biotech. It’s a $20 million study. The goal is essentially to look at psychiatric disorders starting with depression and ADHD. The principle is to look beyond just the molecular findings –all the findings so far in cancer and HIV have been molecular.  The current word, as you probably know, is “panomics,” meaning everything from genomics to gene expression to metabolomics; everything that moves at the molecular scale.

And while that’s absolutely noteworthy and important, in the brain where most genes seem to be involved or 80% of our genes possibly involved in psychiatric illnesses, it seems unlikely that genes alone or any form of panomics are going to be sufficient to sensitively and specifically predict treatment response.  So what we’ve done is set up the first global standard to measure both molecular, but also everything else about the brain; the brain structure, functional MRI, electrical brain function, cognition and real world outcomes in addition to standardized clinical workups to see if by combining genes and brain markers we have a better chance of revealing some of these underlying biological disturbances that can predict treatment response.

The little catch is that it requires significant numbers.  By significant numbers I mean thousands.  This study is studying 2,000 patients.  We’re just looking at the first 1,000 at the moment and in the process also of very efficiently bringing integrated analysis facilities to really mine for the best biomarkers that predict treatment response.

It’s a fascinating phase and the principles are no different to any other aspects of biology. We have standardization.  There are 20 sites, ten in the United States and ten in Europe and Australia where the patients have been drawn from.  We have the power of standardization of all measures; hardware, software, ways of analyzing, but also the integration of all these methodologies and then the power of numbers.

Williams:            Why is it so hard to predict treatment response with psychiatric conditions?

Gordon:            Well I’m not sure that it actually.  It’s just that the current model is pretty much the opposite of looking at really standardizing the diagnosis of using signs and symptoms.  It was a wonderful effort when it occurred in DSM.  The treating was a shift forward from psychotherapy type analysis and trying to find a standardized way for diagnosis.

It turned out that signs and symptoms, if you take depression for example, asking questions like, “Did you sleep poorly?”  “Have you lost your appetite?”  “Have you lost your ability to experience pleasure?”  These have not turned out to be the sorts of subjective questions that have done well in predicting who will respond to which antidepressant and that’s why the results, the data from anti-depressants have been so poor.

It would seem in the whole of biology and the whole of medicine that we are essentially redefining medicine based on biology and essentially psychiatry is now entering that phase, that paradigm shift of seeking to find the biological underpinnings, which can hopefully be more accurate and objective in predicting treatment response than have been signs and symptoms.  While they have a value in diagnosis, they have shown to have a much less value in predicting treatment response especially at the individual level.

Williams:            You mentioned standardization as an important component of this iSPOT study and the overall approach.  Talk a little bit more about why standardization is important here.

Gordon:            That’s a good question David.  We’re an international consortium of medical scientists who are looking to study the whole brain as a system and find these biomarkers.  I suppose the context is that very little happens without standardization.  Very little of scale happens without standardization and that’s not just about biology.  If you look at all the major projects across history that have shown really big insights, they’ve required scale and they’ve required standardization.

One can only presume that when you’re dealing with a complex system, that’s just so that you can really compare apples with apples and not continually having small numbers of subjects with small effect sizes and the huge number of confounds so that you simply can’t compare one study with another very easily.

Standardization gets rid of that problem and allows you to benefit from the power of numbers. And if there is an effect size, you really know that it’s real and reproducible and you’re not distracted all the time by thinking that it could be because a paradigm was a little bit different or the analysis was slightly different.

So if you move the confound in that regard, it’s not the panacea of all aspects of finding biomarkers and certainly not the panacea for finding mechanism.  Sometimes these things are found serendipitously by having a great diversity. But if you can standardize on a global scale and get the power of numbers, it’s one way in which major inroads have been made in other areas where this has been attempted and that’s the reason why broad databases are of course coming back into fashion in science and systems are coming back into fashion in science which had become so fragmented and siloed and specialized.  It’s really an attempt to bring the whole back into tying up all the wonderfully important thousands of details and specializations.  Standardization is the glue that essentially does that.

Williams:            Now this iSPOT study as you mentioned is quite expensive; $20 million, a large-scale effort funded by a biotech company.  I’m sure it will produce a lot of interesting findings, but when you come right down to it, do you believe that there will be a business case for the use of some of the results of the study in pharmaceutical development or elsewhere?

Gordon:            I think that given that there are no current claims with the FDA on the brain and so many, relatively speaking on cancer, I think that it could potentially open the floodgates. We’re using three drugs by the way that constitute about 40% of the anti-depressants used in the United States.  A $6 billion per annum spend and if we can find any biomarker that either predicts if you respond at all or if you respond to one of them preferentially, can you predict that?  Or can you predict side effects and who shouldn’t go on that drug?  Or can you predict who gets better but then recurs?  There are a lot of predictions that can be made that are very valuable and have massive clinical validity in a sense if they work.

Once that proof of concept has been derived and registered and the claim lodged with the FDA where we can publish and replicate it, that would potentially open the flood gates to biomarkers being exploited more widely as has been the case after Herceptin with cancer.  So I think it’s a pretty pivotal time to see whether Brain Resource or iSPOT or somebody else can achieve the first landmark and biomarker. Follow-on effects are considerable and they expand the current model of DSM very dramatically.  DSM themselves are trying to incorporate biological markers, but if you look at the draft of DSM-V it doesn’t have a lot of them.

Certainly NIMH have done something very bold in my view.  They have put out a document called RDoC, which is the beginnings now of having domains that are not DSM based that can start moving towards a biological frame of reference. FDA of course is shifting very dramatically toward personalized medicine.  So that confluence of activity I think is a pointer it’s just a matter of time and solidness of the biomarkers that are found.

Williams:            Explain a little bit about the Brain Resource Company itself.  What do you do?  Who are your customers?  What are you trying to achieve?

Gordon:            In terms of biomarkers, by having this platform, this standardized platform and having attracted this study and numerous others, what we’re trying to achieve is setting up one of the landmark ways of finding these biomarkers, companion diagnostics with the key drugs used in psychiatry and then partnering with either pharmaceutical companies or licensing out the biomarkers to payers where clearly there are huge cost savings for people to actually get drugs who are going to benefit from them.  So essentially that model, the monetizing model of the business would be either through pharma or through payers. We’re already in discussions with both in that regard.

The third possibility in this is to use this platform for drug discovery.  So instead of looking at drug discovery from a molecular level only in the microscopic scale to additionally look at the whole brain as a system and look at the kind of circuits that seem to drive the brain; circuits associated with fear and safety like the amygdala fight or flight system that is so critical to the way the brain processes everything in terms of first and foremost minimizing danger.  So looking at circuits like that in the amygdala, medial pre-frontal cortex or how specific chemicals like serotonin work.  So really teasing out those circuits within the brain associated with specific neurochemistry and explicit molecular variance and using that broader insight to also help develop and discover new drugs.  That would be the third tier of the way we see Brain Resource operate.

We also draw from the same insights about the brain to empower people with insights about their brain and how to train themselves on the web in the aggregation product called mybrainsolutions.com. The principle is the same.  It’s about aggregating information to either –on the medical side, find biomarkers that can improve treatment and on the self-empowerment side for people to use those brain insights to train their own brains to be more effective.

Williams:            Well it sounds really fascinating and that a lot of progress is being made already. But also it sounds like we’re really still in the infancy of brain science.  Ten or 20 years from now where will we be in terms of insight about the brain and how it will be used?

Gordon:            Our hope is that in the next 12 months we’ll be peppering the FDA with claims about biomarkers from iSPOT both for depression and for ADHD. We have a number of reasons to feel confident that we will have the biomarkers even from the 1,000 patients and 150 ADD patients.

Things are done incredibly slowly in medicine but this has been a 30-year germination phase from inception to now for us in setting up this standardized platform and database.

I’d say in the next year we would expect some tipping point in terms of biomarkers, potentially.  Realistically though things always take three times longer than one expects as a rule of thumb.  Hopefully within the next three years there will be some brain based biomarkers that will have been replicated and be accepted as clinically meaningful.

After that point I think that there’s going to be an inexorable –probably slow– shift of how to reconcile this biological tipping point of how the brain and biology is impacting psychiatry with the current signs and symptoms and more of a pragmatic clinical diagnostic focus and consumers getting empowered and reconciling them into this equation.

I think it’s going to take five to 10 years to find the right mix. And certainly when it’s all about who pays for what being such a critical variable, that’s going to be another factor as are many of the privacy and other issues.  I’ll say a year to three years for a tipping point and three years to 10 years to really shift the balance of our understanding and our clinical usefulness of this biological information about the brain.

Williams:            I’ve been speaking today with Evian Gordon.  He’s executive chairman of The Brain Resource Company.  Evian, thanks so much for your time.

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Mark Colwell, Marketing Manager of GoHealthInsurance.com answered my questions on the topic in an email interview.

Why have some companies started offering insurance to domestic partners? Do they face any complications in doing so?

There are now six states, almost seven if you include Washington, that will give marriage licenses to same-sex couples, compared to only one state in 2004. The tides are obviously turning and many companies started offering same-sex benefits in the 1990s. Right now private companies are ahead of the federal government by acknowledging the need of affordable health insurance for same-sex couples.

A company first has to decide whether they will provide domestic partnership benefits to same-sex and opposite-sex partners. Also some companies have started reimbursing couples for the amount they are taxed for the same-sex benefits. Right now, same-sex benefits are viewed as taxable income by the IRS (whereas married couples’ health benefits are not viewed as taxable income) which is a disadvantage of offering the benefits.

In states where gay marriage is legal, how does that affect beneficiaries of federally funded programs such as Medicare and VA benefits? What about Medicaid?

State laws regarding same-sex marriages do not affect federal guidelines.

Same-sex couples are not entitled to the same benefits under COBRA as married couples, which is a huge disadvantage if a partner is fired or let go from a company. Also as noted before, the IRS taxes same-sex benefits which is another big disadvantage to opposite-sex couples.

When it comes to Medicaid coverage, it will be greatly expanded over the next few years due to health care reform. The expansion will allow low-income individuals without children will be able to get Medicaid coverage – this will help many same-sex couples who do not have access to coverage or cannot afford it.

If a gay spouse travels out of state and needs treatment, are they still covered in a state that does not recognize gay marriage?

This situation would be more dependent on the type of coverage the couple currently has through work or privately. If the plan covers out-of-network health care costs, then they will be covered in another state. Unfortunately, Health Maintenance Organizations (HMOs) do not cover out-of-network costs leaving the couple susceptible to pay for the health care services.

Are any insurance companies offering products tailored to gay or lesbian couples? Do you expect that they will?

There are plans that are tailored to add a domestic partnership or another same-sex individual. Not all plans offer this coverage and it depends on the health insurance company, but it’s great to know that there are plans that offer this type of individual coverage. In the future, more plans will probably change to include the coverage to stay competitive.

What resources are available for a person in a domestic partnership seeking health insurance?

If a person wants to try to get their company to offer the benefits they should check out the Human Rights Campaign. HRC has provided a lot of literature on how to advocate for LGBT equality in the workplace.

Otherwise, a person could apply for individual coverage if group benefits are not an option.

Are there opportunities for people to lobby their employers or state politicians for insurance equality?

There are opportunities for individuals to lobby and learn more about the guidelines set in their state. Again the HRC has a lot of resources online to help answer these questions and holds events regularly.

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GoHealthInsurance.com is a health insurance technology platform used by millions of health insurance shoppers each year.

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Williams:            This is David E. Williams, co-founder of MedPharma Partners and author of the Health Business Blog.  I’m speaking today with Colin Barry,  CEO of MEDfx.  Colin, thanks for being with me today.

Barry:            Thank you David.

Williams:            Tell me a little bit about what problem your company is trying to solve.

Barry:            Every other sector of our economy has leveraged technology to drive massive improvements in efficiency, quality and service delivery.  Our health care delivery system is a key target for this kind of improvement.  The potential of health information is largely untapped because it still remains in a form such as paper that is not efficiently communicated or aggregated.

MEDfx is focused on solving this very problem by making electronic health information available and fluid.  Our solution allows physicians to quickly access information that’s pertinent to a patient’s care.

Williams:            It seems as though your focus is care for military veterans and soldiers on active duty.  Is that in fact a focus and if so what is the use case?

Barry:            Our role is helping to bridge the connection between the VA and the DOD and the private sector to bring all this information together.

Nearly 60 percent of military personnel receive their health care through non-military providers.  A typical scenario is that a veteran receives care at a private health care facility and using our technology, the treating clinician is able to view a universally accessible health record containing information from the VA, DOD and other private health care facilities.  This might include the patient’s allergies, their medications and diagnostic test results that would otherwise require phone calls, faxes or redoing unnecessary diagnostic testing.

Williams:            Are there key difference between veterans or the active duty population and civilians in terms of their needs?  I’m just curious about why you’re focused on this particular issue.

Barry:            There are some key differences.  Veterans, through the VA and the DOD, are served by some of the most widely deployed electronic medical records systems.  They’re very advanced in maintaining the health information within their individual organizations.  Veterans and active duty service members benefit from this centralized medical records system, which provides a level of continuity when receiving care at veteran and military service facilities.  These are very large organizations.

The rest of the population, in most cases, receives care from smaller organizations that lack the available health information, which is a challenge.  This speaks to the problem itself and our focus on making health information available across organizational boundaries.  In our case, the information follows the patient wherever they might seek care.

Williams:            I noticed that you’ve got a product called Virtual Lifetime Electronic Records.  Does that tie in closely with what you’re describing?

Barry:            It’s similar.  We don’t have product for Virtual Lifetime Electronic Records.  It’s actually a government funded initiative that was launched in 2009 by the President as a directive to the Department of Defense and Department of Veterans Affairs to create a Unified Lifetime Electronic Health Record for members of our Armed Services.  ULER contains both administrative and medical information for service members and veterans, providing access to information from day one of the service member’s military career through transition all the way through veteran status and beyond.  Think of it as a universally accessible health record for active and non-active service members and their families.

The goal here is to provide more efficient processing of benefits, better informed clinicians, services and care providers, improved continuity and timeliness of care and enhanced awareness among all involved parties and elimination of gaps in records.

Williams:            And who is funding this?

Barry:            This is government funded.  Our technology supports this initiative on the private sector side so that we can support the exchange of health information from the private sector to the VA and the DOD when they might be treating a patient and need information at the point of care.

Williams:            When a person on active duty or a veteran goes to a private facility or a non-governmental facility, does that facility have to be connected in with you or can the patient just bring some sort of key or link that allows access to the records?

Barry:            There have been pilot programs where people have health information stored on some small device or flash memory stick, but the real push right now is based on the Nationwide Health Information Network. And that underpins a large part of the Virtual Lifetime Electronic Record initiative.

These create the secure standards to be able to transport this information through the networks securely over the internet so that people don’t need to carry around a physical device or something similar, which is difficult to update with additional health information or easy to lose.  We add much more fluidity to the information when it’s available real time, on demand.

Williams:            I’ve heard of the Nationwide Health Information Network and I know there have been various pilots.  What’s the status of that initiative?  Is it something that’s up and running that you can actually use or is that just a future plan of what you’d like to be able to do?

Barry:            That’s a great question.  Actually it is in use.  In 2009, we were the first to bring it into production use, starting with the Social Security Administration, the VA and DOD. After that we added CMS to the network for a community in Virginia.

As of the end of last year, there are over 20 organizations connected to the Nationwide Health Information Network; a vast array and variety of sizes of organizations from federal agencies to large IDNs. Health information exchange organizations are all collaborating and using this today.

Williams:            One partnership that I’ve seen mentioned in connection with your company is MedVirginia, but I’m not familiar with MedVirginia or the nature of your partnership.  What’s that all about?

Barry:            MedVirginia is a super regional health information organization.  They aggregate data for their stakeholders in Central Virginia and were very much and still are a leader in connected health solutions with a particular focus on the Nationwide Health Information Network.

It was with them in collaboration that we did the work to be able to connect up entities like the Social Security Administration and do the VLER work to connect the hospitals and facilities for both public and private.  They’re real leaders in this space. Our focus is on the technology and we’re able to accommodate the standards and guidelines that are being published through the  Office of the National Coordinator of Health IT, which is really describing the plumbing of how this works in a safe and secure way to be able to move this information from stakeholder to stakeholder.

Williams:            Going back to what you said at the beginning about the problems that you’re trying to solve, it seems like there is actually a pretty clear set of issues that you’re addressing, but things are still in the relatively early stages. Can you give me a sense of what kind of milestones you expect along the way and what kind of timeline to expect before this technology is widely implemented ?

Barry:            There are several initiatives. VLER is a very important one, which supports moving health information from the government organizations and the very large systems –the top down approach.

At the same time, we have states that are receiving funds through the stimulus act to create Virtual Lifetime Electronic Records at a state level.  We have the national level, we have the state level, and there are also initiatives that leverage standards to do it at the community level.  There are three things working simultaneously to sandwich in this problem.  It’s not all just top down –how long will it take everyone to get on the nationwide health information network. We’re seeing a lot of activity at all three tiers.

For all the good reasons we talked about, I think this consensus at making electronic health information available will make a tremendous impact on health care delivery in this country. You can think of it like this; the “plumbing” is in place in a handful of geographical locations to support Virtual Lifetime Electronic Records. We’re starting to do smart things and leverage this data, but are only at the beginning of tapping the potential of the information itself.  We’ll see more “plumbing” and see new innovative ways to harness this data for the benefits of patients and care providers.

Williams:            I’ve been speaking today with Colin Barry, CEO of MEDfx.  We’ve been talking about the Virtual Lifetime Electronic Record or VLER program.  Colin, thanks so much for your time.

Barry:            Thank you very much David.

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The section of his website is entitled “Repeal and Replace ObamaCare with PATIENT-CENTERED HEALTHCARE” and has two tenets:

• “Every American should have access to high-quality, affordable health care, with health care decisions made by patients and their physicians, NOT government bureaucrats”
• “America needs targeted, market-driven, patient-centered solutions to address the costs and underlying causes of being uninsured rather than a one-size fits-all, government-run health care system”

It’s interesting that he’s calling for universal, affordable access. Sounds a lot like the Patient Protection and Affordable Care Act (PPACA). The only difference is this piece about “government bureaucrats.” I wonder what specific elements of PPACA he means by this –because I don’t see a lot of interference in “health care decisions” in the Act relative to the pre-PPACA days.

It’s hard to argue with the idea of “targeted” and “patient-centered” solutions. And actually, that’s the path taken by PPACA. Didn’t opponents criticize the length of the bill? A lot of that is because there are many different targeted approaches taken: some for individuals, others for small business, others for medium sized organizations, still others for large entities. Other targeted interventions are in place for high-risk patients, and there is an innovation center to support the efforts of those who want to try new approaches. I will argue with Santorum’s appeal for “market-driven” solutions –which is going to mean many people are not insurable and that their premiums will rise and policies will be canceled when they get sick. And PPACA is simply not a government-run health care system as I have explained.

Santorum lays out his plan in “THE SANTORUM HEALTH CARE SOLUTION.”

“Priority number 1 = repeal ObamaCare,” which he describes as “job-destroying,” “heavy handed,” “cruel.” Nice rhetoric, but no facts to back it up.

He then ticks off a set of unoriginal antidotes, that pretty much echo the uninspiring “replace” long-promised by the Congressional GOP:

• Increase Health Savings Accounts and high deductible insurance plans
• Reduce costs through competition. Ironically Santorum wants to see this done through “increased transparency, electronic records, and health care literacy” –all of which are significant initiatives of the Obama Administration
• Allow the purchase of health insurance across state lines. This is one of the most hypocritical GOP positions, because it really means attacking states’ rights to establish their own rules. And there’s no serious evidence that this would have any meaningful impact on costs
• Letting individuals purchase health coverage with pre-tax dollars. First, this only benefits those paying significant taxes –i.e., those who don’t need the help. Second, it encourages inflation of health insurance costs. Finally, it erodes the tax base and worsens the deficit
• Medical liability reform. Again, another favorite of the GOP, that will do next to nothing to control costs and certainly isn’t “patient-centered”
• Block grants for Medicaid. Just another way to squeeze the poor

And that’s it.

Let’s face it, these proposals will not lead to “every American” having “access to high-quality, affordable health care.” In fact they really won’t lead anywhere productive.

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• The nature of the problem his company is striving to solve
• The typical use case for a veteran
• Differences between the needs of the military and those of civilians
• MEDfx’s role in the National Nealth Information Network
• How the VLER project is likely to evolve over the coming years

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The article is a little vague on exactly what aspects of the hospital’s own databases are being tapped. It appears that some elements of financial and medical records (such as insurance status) are being used, but others (such as whether someone is a smoker) are not. Outside consumer marketing agencies can match the hospital’s data up with all sort of other potentially useful information, such as income, household composition and credit worthiness.

Hospitals defend their use of these targeting tools by claiming that bringing more high-reimbursement patients in allows them to devote more resources to free or low-reimbursement care. But it’s difficult to determine whether that’s really occurring, or just a nice thing to say. At least theses marketing efforts do not appear to be focused on reducing access for those with weaker insurance or less profitable conditions.

Hospitals (especially not-for-profit ones) feel compelled to say they’re using these services to help everybody. But as a whole private practice physicians are less concerned about giving altruistic reasons for improving their case mix. Online doctor finder and booking services like ZocDoc and TopDoc ask patients for their insurance information, not just to help patients find in-network doctors, but also to help doctors finds the patients they prefer to work with.

It remains to be seen whether payment reform including Accountable Care Organizations and bundled payments will change the incentives for providers and result in the curtailment of the current cherry picking strategy.

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I’m pretty savvy about Medicare but did miss two questions (share of low-income Medicare beneficiaries and share of beneficiaries with multiple chronic conditions). At least I got all the policy questions right.

One nice thing about the quiz is that the answers provide direct links to Kaiser resources where you can learn more.

Well done Kaiser! I’d like to see someone organize a whole set of these quizzes on different topics (not just health care) for the 2012 elections.

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Some disappointing examples are noted:

• FDA recommended diabetes monitoring for patients taking atypical antipsychotics, but testing did not increase
• Warnings of drug/drug interaction weren’t heeded –at least for 18 months
• When FDA warned about prescribing drugs in certain populations (e.g., atypical antipsychotics for dementia) there was an across the board reduction in prescribing

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PPACA presents a fat target for opponents of an active federal role. It’s complex and ambitious, and even though at heart it is a very moderate (or even conservative) law, there are lots of hot button provisions to demonize. Health care is such an important emotional, personal and financial issue that people are justifiably nervous whenever something happens, and ready to listen to all kinds of claims.

Criticizing PPACA –whether over death panels, individual mandates, government takeovers, rationing or whatever– is fun and easy. It also obscures the fact that the health care system is drowning the country and really does need to be reformed one way or another. And that it’s very hard to do. As soon as PPACA opponents start listing out their “replace” ideas with any specificity they are going to be very vulnerable.

The Republican leadership knows this, and that’s why they haven’t issued any serious “replace” ideas. Now we hear from House Energy and Commerce Committee Chairman Joe Pitts (R-PA) that the replace ideas will come after the Supreme Court decision on PPACA’s constitutionality in June.

According to Pitts, here’s a taste of what’s in store: “giving the tax break for health insurance to the employee instead of the employer, medical liability reform, creating high-risk medical ‘pools’ and allowing insurers to sell their products across state lines.”

To which I reply, “That’s it? Those are tiny, insignificant tweaks.” Just to pick on these specific examples:

• Tax breaks don’t help people with low incomes –who are the ones who need help paying for health insurance
• Medical liability reform is a feel good measure that will have no appreciative impact on overall costs
• High-risk medical pools sound good but generally just stick government(!) with the bill for expensive patients
• Selling insurance products across state lines is just a way to trample on states’ rights to impose mandates

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PPACA was crafted to encourage smaller companies to provide insurance for employees by regulating the insurance market, establishing health insurance exchanges, providing tax credits for the smallest employers, providing grants for wellness programs and imposing penalties on some who don’t comply. We’ll see where all this leads as the Supreme Court considers PPACA’s constitutionality and Democrats and Republicans contest the 2012 elections, but small businesses would be wise to start planning for the full implementation of PPACA, which is less than two years away.

Kaiser Family Foundation has a good fact sheet on the topic. Key takeaways are:

• PPACA allows businesses to “grandfather” health plans in place as of March 2010. That was to address concerns that people would have to give up health plans they’re happy with now. Companies may wish to use grandfathered plans because such plans are subject to fewer requirements than the “Essential Health Benefits” that will be specified under PPACA. Most small businesses have at least one grandfathered plan. Theoretically these plans could be cheaper, but in practice I expect that most such plans will be abandoned over the next five years as market conditions change
• Health plans will have to guarantee that coverage is available and can be renewed. They’ll also have to offer coverage to dependents up to the age of 26. Importantly, plans won’t be able to base premiums on health status of a company’s employees. Instead they can rely only on age, smoking status, individual/family and location. They can provide substantial discounts for those engaged in wellness programs
• Essential Health Benefits (referred to above) will be decided on a state level, with federal input
• Health plans will be subject to minimum medical loss ratio (MLR) rules and will have to rebate overcharges if medical and quality improvement spending fails to reach 80 percent of premiums
• Plans will be assigned simplified ratings (bronze, silver, gold, platinum) to reflect their level of coverage relative to expected total costs
• Small businesses will be able to participate in state run or federally run health insurance exchanges
• There will be penalties for businesses with more than 51 employees if they don’t provide affordable coverage. Note that businesses with fewer than 50 employees are exempt from the penalties
• Substantial tax credits will  be available to low-wage businesses with fewer than 25 employees
• Businesses with fewer than 100 employees will be eligible for grants to launch wellness programs if they did not already have them in place

In short, PPACA has a lot of implications for small and mid-sized businesses. But employers with fewer than 50 workers won’t actually be compelled to do much. Their employees are likely to obtain insurance coverage through the individual market and Medicaid. In contrast, under state health reform in Massachusetts the mandate kicks in when employers have 10 employees, which is a big difference.

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• The similarities and differences between personalized medicine for the brain and overall
• The iSPOT study that focuses on biomarkers for depression and ADHD
• The importance of a standardized platform
• The business case for personalized medicine for the brain in pharmaceutical discovery and development
• How the next few years will unfold from a brain research standpoint

If you want to hear more from Evian, you can check out a video of his recent conference presentation at Stanford.

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So I was struck by an article today that mentioned a glut of nurses, even in places like California that mandate minimum nurse staffing ratios. The situation is blamed on the recession, which depresses demand as hospitals and other nurse employers seek to control budgets, and also increases supply as nurses delay retirement, seek more hours, or return to work when a spouse is laid off. I’m sure there’a lot of truth to this, but if there is really such a big shortage it shouldn’t turn into a glut so quickly.

I don’t think employers of nurses are quaking in their boots due to the prospect of a gaping shortage of nurses. Although they might not say so openly (since everyone loves nurses) the forward thinking hospitals are planning for the day when nurses comprise a substantially smaller portion of their costs than they do now. They’ll do it with better decision support systems, workflow tools and robots that will take over many routine and high-skill nursing functions. Hospitals may seem capital intensive now, but I really believe there will be even more substitution of capital for labor in the future.

So if you’re betting on a giant nursing shortage in the year 2025 my guess is you’re going to lose.

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The Leapfrog Group. March of Dimes and American College of Obstetricians and Gynecologists has taken the initiative to try to address this issue by getting the word out and having hospitals set performance. They’ve decided there’s no reason for hospitals to have more than 5 percent of births in the early delivery/no medical reason category, and have asked hospitals to report their results.

The good news is that it seems to be working. The rate dropped from 17 percent to 14 percent from 2010 to 2011, according to newly published figures.  More than 700 hundred hospitals voluntarily reported their rates to Leapfrog. It’s fascinating to scroll through and see the variability. A good number of hospitals are at or below the 5 percent target while some others are way up in the 20 to 30+ percent range. That can’t be random variation.

So why are these medically unnecessary early births occurring? Childbirth Connection has a good summary:

• Women’s lack of knowledge about the risks, benefits, and appropriate use of labor induction
• Lack of shared decision making
• A perception among women, caregivers and hospital administrators that induction is convenient and cost-effective
• Frequent use of screening tests at the end of pregnancy, despite lack of evidence of improved outcomes
• A belief that the best way to manage risks in pregnancy is to deliver the baby

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As I write this I’m well aware of the problems such a policy can cause including deterring people from needed care, increasing anxiety at a time of heightened stress, delaying clinical triage, and getting the amounts owed wrong. The biggest issue is the first one –for example even an insured patient may not have the $1000 or $2000 co-payment or deductible on hand. But that also shouldn’t necessarily be the hospital’s problem. Rather that’s an issue for the plan sponsor (often an employer), state or federal policy.

I do worry about big institutions such as hospitals acting inappropriately aggressively toward patients, but this problem already exists with post-treatment payments. If anything, taking care of the bill up front may reduce the interest and fees that can pile up, especially when a collection agency gets involved.

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Gingrich said he supported the measure because it didn’t make sense to pay for kidney dialysis and open heart surgery but refuse to pay for insulin or heart medicine. That’s logical enough.

But Medicare Part D was and still is a fiscally reckless program. Unlike Medicare Part A (hospital insurance) which is 84% funded by a dedicated payroll tax, Medicare Part D has absolutely no dedicated revenue source at all, beyond the very modest premiums paid by beneficiaries! And when the prescription drug benefit was put in place there were no attempt to offset the added costs by cutting elsewhere.

In other words, the government’s Medicare Part D costs of about $50 billion per year go straight to expanding the federal deficit.

Worse yet, Medicare Part D is available to any Medicare eligible person regardless of income. That means many seniors who don’t need another handout from the government are getting one.

You can’t be a conservative and be in favor of Medicare Part D. So, which is it, Newt?

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But one –Should physicians use email to communicate with patients?– should have been settled more than 10 years ago. It’s almost a joke that it’s still being asked, and at first I thought the question was about whether doctors and patients should still be using email as opposed to whether they should be trying it for the first time. Dr. Joseph Kvedar of the Center for Connected Health trots out all the well-rehearsed arguments that have been used over the past 15 years to encourage patients to use electronic messaging with their patients. And I agree with it all:

• Privacy concerns are overblown and not unique to electronic media
• Not every interaction needs to be in-person
• Doctors won’t be inundated with messages, despite their fears
• Patients feel more connected to their physicians when they can reach them online
• Electronic communications promotes efficiency
• Liability issues are mino

Dr. Sam Bierstock, founder of a health care-IT consulting firm, takes the con side of the argument. He’s probably an intelligent guy and knowledgeable about health IT. I’m guessing he jumped at the chance to write a piece for the Journal (and even have his picture published) –even if it meant taking a silly, losing position. Kind of like the Washington Generals, who used to play against the Harlem Globetrotters.

Bierstock concedes that “email can be useful for certain very basic patient-doctor communications” but then lays out a bunch of arguments that aren’t terribly persuasive:

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• Neglect of dental issues due to lack of coverage causes higher medical expenses, for example as dental infections spread to other parts of the body
• Hospital emergency rooms are seeing many dental cases (representing as much as 2.7% of ER volume) and are not well equipped to treat the problems, according to USA Today. In any case the expense is high
• Even well-off people with medical coverage often don’t qualify for dental insurance –e.g., because they aren’t part of a group–  and end up paying high fee for service rates to providers rather than benefitting from a plan’s purchasing power and network
• To the extent that we are moving toward a more integrated approach to care and payment (e.g., medical home, accountable care organization) it makes sense to bring the whole body under one roof

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The government does play a major role in the health care system. It’s a big customer, financier and regulator. The feds own and operate VA and DoD hospitals, and there are various county, city and state facilities, but this is a small share of the total.

Kaiser Family Foundation has an informative piece today (Betting on Private Insurers) that  looks at health care based on who’s managing the benefits. The conclusion: at least 73 percent of those covered are in private insurance arrangements, whether through employer coverage, individual policies, Medicare Advantage or Medicaid managed care. The rest are mainly in fee for service Medicare and Medicaid. And many fee for service Medicare patients have private Medigap and Part D drug plans. If anything, the Affordable Care Act is likely to boost the percentage managed by private entities. More individuals are slated to purchase commercial insurance on their own or through exchanges, and much of the growth in Medicaid will be in managed care.

Providers of health care are overwhelming private and likely to remain so. The government isn’t nationalizing hospitals nor forcing physicians out of private practice.

Sure, it’s arguable that many hospitals are so dependent on Medicare that the government influences them heavily without owning them. But I haven’t heard anyone say the government has taken over the defense industry even though many weapons makers can only sell to the feds.

I think it would be healthy to have a debate about the extent to which government should get more involved in health care delivery and benefit management. Maybe the VA model should be replicated and a public insurance plan be introduced to compete with the private health insurers. But none of this is part of the Affordable Care Act and therefore it’s laughable to frame “ObamaCare” as any kind of government takeover.

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The print ads and video make the following claims:

• PBMs reduce pharmacy costs for employers, unions, and consumers
• PBMs play a key role in the Medicare Part D success story
• PBM mail-service pharmacy improves safety, savings and convenience

Of the six print ads, four focus on how PBMs restrain costs: two are Medicare Part D related and there are one each for employers and employees. Two others focus on mail order: one emphasizing its safety (reduction in medication errors) and another its convenience. The text is quite spare –probably the less said the better, and the ads are dominated by photos of one or two people each. In keeping with PBMs’ end users, the people in the ads are generally on the older side.

The almost three minute long video covers many of the same topics in a little more detail. After a gentle introduction there’s a confusing and meaningless graphic at the 30 second mark showing that “the number of prescription drugs has skyrocketed in recent years.” There’s a bar graph with 1985, 1995, 2001 and 2011 on it. The y-axis is labeled “amount.” I assume this is the total number of SKUs out there including generic medications, but it is curious why it’s thrown in there. Maybe they didn’t want to demonstrate how drug utilization has risen and decided to put out a feel-good innovation message instead.

The video describes how PBMs negotiate discounts with drug manufacturers and retail pharmacies, employees thousands of pharmacists to counsel patients by phone in the privacy of their own homes 24 hours per day, provides home delivery, and uses e-prescribing technology to avoid drug errors. It boasts of PBMs’ role in keeping Medicare Part D costs under control and notes that the states generally don’t use PBMs for Medicaid, even as costs are “spinning out of control.”

On the whole the campaign is accurate. And it probably is a good thing that consumers and policymakers develop an understanding of PBMs. But there are certain omissions and misleading statements. For example:

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Surprisingly (to me anyway) there are numerous veterans who end up on Medicaid instead of turning to the VA system, which offers richer benefits. For example, some veterans qualify for the VA’s Aid and Attendance Pension, which helps low-income veterans and widows receive long-term care in their home or an institution. Medicaid may attempt to recover costs by going after an enrollee’s estate, while the VA doesn’t. And the VA may also provide a pension for elderly and disabled veterans and their survivors, and a death benefit.

The state of Washington considers its efforts a “win-win” that offers enhanced benefits to veterans while achieving $30 million of cost avoidance for the state (which pays a share of Medicaid benefits but not VA benefits). As the number of people eligible for Medicaid expands under the Affordable Care Act, I’m sure Washington and other states will find ways to achieve even greater savings by diverting potential Medicaid enrollees into VA programs.

I’m completely in favor of this program and believe that veterans should receive all the benefits they have earned. However, as a society we should do more to recognize the full cost of our military policy. Cost accounting for the Iraq and Afghanistan wars should include the long-term VA and other costs of returning veterans, and the state of Washington should also at least acknowledge what the increased impact is on the federal budget. If every state followed Washington’s example, taxpayers would pay more money not less, as any reduction in state spending is more than made up for by increases on the federal side. I’d also like to see unclaimed benefits estimated and publicized.

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The scenario she introduces is as follows:

[W]hat about a patient who can no longer speak for himself—and family members who either seem unrealistic about the effectiveness of medical treatment or actually refuse to honor his wishes? What about a doctor’s duty to relieve suffering and not provide treatment the patient wouldn’t want ow that does him no good?

To summarize, here are the tactics Fitzgibbons recommends:

• Be sure all the doctors seeing the patient are saying the same thing –so that a doc who doesn’t like to give bad news doesn’t inadvertently give the family the idea that a cure is possible
• Get records from prior physicians –since families may transfer patients from hospital to hospital until they hear what they want
• Present facts and show them CTs. “Make it clear that the patient’s doctors know what is wrong and are not just speculating”
• Bring in a neurologist you trust so “the family can’t claim that he’s unqualified to talk about the prognosis”
• Find a chaplain who will be on your side
• Seek help from legal staff so you can ignore the family’s wishes and use the patient’s advance directive
• Persuade the patient that their “advisor” is less qualified than yours and that their stories of relatives who recovered are irrelevant
• If you think they are acting against the patient’s interests for their own gain, e.g., “they have been paying their own rent with his disability check” –then let the know you’re aware of it
• Stick to your principles since you know you’re doing the right thing for your patient

I don’t know the author and have no reason at all to distrust her motives. But I do get nervous about her level of certainty. In particular:

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Things have changed. In particular, strong opioids such as oxycontin are now widely prescribed. Teens may find some extras lying around in their parents’ medicine cabinets or even receive some themselves after an injury or medical procedure. Oxycontin has the veneer of respectability and the illusion of safety. After all it’s a commercially manufactured, legal product prescribed by a physician.

But it’s pretty easy to get addicted and that’s when the real troubles begin. Oxycontin is widely available on the street, but it costs about $1 per milligram in Boston, or $20 for a single 20 mg tablet. After breaking their piggybanks and using up their allowances, teens make a surprising discovery: heroin is much cheaper than oxycontin and produces the same effect. And that’s how good suburban kids become heroin addicts, even though they themselves and their parents would never have predicted it.

There’s a growing realization that this problem needs to be addressed. That’s a good thing for public health and also represents an opportunity for companies that can find a way to support these efforts.

New York State just released a report showing that narcotic prescriptions in the state increased 36 percent from 2007 to 2010. For Oxycontin the increase was a staggering 82 percent. Pharmacists are already required to report on sales of controlled substances every 45 days, but new rules would require them to scrutinize patients’ prescription records before filling and to report each filled prescription

Pharmacists would face significant fines for not checking prescriptions. Predictably the state pharmacist association is up in arms, calling such measures “ridiculous” and asserting that regulators don’t understand what the workflow is like behind the counter.

The New York proposal may not be optimal. Nonetheless public officials are justified in taking tough measures. The  proposed requirements do seem somewhat onerous. But that creates a business opportunity for those software and workflow companies that can develop effective and efficient data collection, analysis and reporting tools to aid pharmacists, physicians and public and private payers in addressing this problem without losing productivity.

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I sent the following email to SuperValu, whose name was on the Shaw’s brand product, on December 18:

“In the past I have purchased McCormick Pure Vanilla Extract. This time I purchased Shaw’s Pure Vanilla Extract. When I compared the labels I was disappointed to see that while both products contain vanilla bean extractives in water and alcohol, the Shaw’s product also contains corn syrup.

How much corn syrup is in there and why?

It seems to me that it is misleading to refer to the product as pure and then include corn syrup. What do you think?”

I received a response within two hours. SuperValu didn’t know the answer but promised to check with the supplier to find out the answer within about five days. I was just starting to think they’d forgotten about me when I received the following email today:

“Dear Mr. Williams:

Thank you for taking the time to contact us. We welcome the opportunity to address your disappointing experience with our Shaw’s Pure Vanilla Extract.

Pure Vanilla has a standard of identity provided by the Federal Government. This means the formula must contain certain ingredients which are standard to that particular product.

The word pure indicates the vanilla flavor comes only from the extractives of the vanilla bean. The amber colored liquid known as pure vanilla must also contain, at least, 35% ethyl alcohol and is the extractives of 13.35 ounces of vanilla beans. Other optional  ingredients that may be added to pure vanilla are sugar or corn syrup which enhances the delicate vanilla flavor.

If you wish to respond to this note by e-mail, please include your name and e-mail address.

We hope to have the continued pleasure of serving you.

Sincerely,

[Name of  Person]
Consumer Affairs Specialist”

Interestingly, the email was from McCormick Consumer Affairs, which I assume means McCormick makes both the branded and store brand versions on sale at Shaw’s. That’s a different story from what I see on store brand OTC medicines, which often contain explicit labels indicating they are not made by the branded producer.

This Yahoo Answers page indicates that corn syrup is used to mask inferior beans, which sounds like a logical explanation. Even if the beans are the same quality it’s probably cheaper to include some corn syrup.

In any case, it’s back to the pricier brand name version for me next time. And I still think it’s misleading to call this product “pure” even if the government allows it.

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If the Patient Protection and Affordable Care survives the Supreme Court and the Republican Party, millions of uninsured, non-elderly, low-income adults will be newly eligible for Medicaid in 2014. The authors of the article compared diabetics on Medicaid to those who lacked insurance and found:

• Much higher health care spending for those on Medicaid: $14,229 v. $3,498
• Much higher out-of-pocket expenses for the uninsured: $1,446 v. $415
• Better access to medical services by those on Medicaid
• Better access to prescription drugs by those on Medicaid

Compared to their uninsured counterparts, diabetics on Medicaid go to the doctor more, use more prescription drugs, get admitted to the hospital more and go to the emergency room more.

The authors would dearly love to say that outcomes for diabetics on Medicaid are better, but alas the evidence is lacking. A couple of process measures (HbA1c measurement and retinal exam) were significantly better for Medicaid patients but others –foot check, blood cholesterol measurement, flu vaccination– weren’t. (The authors cite poor sample size –but unfortunately the appendix, which is supposed to include more detail on these analyses is mysteriously absent from the Health Affairs website.)

There’s no attempt in the article to document real outcomes measures such as reduction in complications or even improved glycemic control.

I found this section of the discussion particularly discouraging:

“Taken together, the findings for spending, use, and access in our analysis indicate that Medicaid facilitates financial protection and access for enrollees with diabetes and complex health needs. The findings also indicate that currently uninsured adults with diabetes will probably experience increased utilization and improved access upon gaining Medicaid coverage.

Additional research is needed to understand Medicaid’s role in facilitating access to recommended diabetes care, because the literature on this topic has mixed conclusions.”

In other words, being in Medicaid definitely saves a diabetic enrollee money (how could it not?) and “probably” –but may not– improve access. (And there’s silence on outcomes.)

In the absence of more compelling evidence, there’s a pretty good argument to be made that the main impact of enrolling a diabetic in Medicaid provides doctors, hospitals, pharmaceutical companies et al. access to a paying customer to the tune of about $10,000 above what an uninsured diabetic yields. This is not the kind of access the authors want to talk about, but that’s what I read from the data.

From a purely financial standpoint maybe it would make more sense for the government to hand each uninsured diabetic $1000 per year (the difference in out-of-pocket costs between the Medicaid enrollee and the uninsured) and save the other $13,000 that’s captured by the health care system.

I’m not actually advocating such a policy, for three reasons:

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The creators have big ambitions:

BioDigital plans to develop the virtual cadaver further on its new medical education Web site, biodigitalhuman.com, with the aim of providing a searchable, customizable map of the human body… In the coming months, the company plans to offer its code to… health Web sites that want to embed images of the respiratory system, or to doctors who want to show animations of prostate cancer surgery to patients.

“We wanted to use our data visualization to improve knowledge of complex health topics,” [designer John] Qualter said. His firm hopes to position the virtual body as the health education equivalent of Google Maps — available as a free, easy-to-use public Web site and in an upgraded, fee-based professional version.

“We want to become a scalable model,” Mr. Qualter said, “a Google Earth for the human body.”

They or a competitor have a good shot at it and I’m sure they’ll be plenty of interest among the general public.

The Times concluded the article in a predictable way, with assertions that are likely to be proved wrong over the next 10 or 20 years:

“I don’t think this will ever replace cadavers,” said [first year student Susanna] Jeurling, 24. “There’s something about being able to hold [an organ] and turn it in your hand.”

Administrators at the medical school say they have no plans to phase out dissection, an educational method that dates back to the Ptolemaic era. The 3-D digital human body is merely a complementary teaching method, said Dr. Marc M. Triola, associate dean for educational informatics.

Are these folks really so short-sighted that they can’t envision a time in the not-so-distant future that an artificial cadaver will feel exactly like the real thing?

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Massachusetts has achieved near-universal coverage thanks to its health reform law. Although health insurance costs are among the highest in the nation, Massachusetts can afford to have everyone in coverage. That’s because Massachusetts has a modern, knowledge based economy with high wages, thanks largely to the state’s investment in education and infrastructure, and its open minded populace.

Still, high and rising costs are a burden and universal coverage places a strain on the state’s finances. In 2009 the state legislature shaved $130 million from the budget by going after an easy target: subsidies to legal immigrants.

This was a bad idea for three reasons. First, it undermined one of the tenets of health reform: getting everyone into coverage. It’s important to have everyone in the system so that providers don’t have to deal with uncompensated care and residents don’t miss out on services that could help them and make them more productive.

Second, the system’s costs should be addressed by improving value, performance and efficiency, not by kicking people out or weakening benefits. It’s best for us to face up to the cost challenge and do something about its root causes, rather than foisting pain on vulnerable segments of the population.

Third, it’s vitally important that the state continue to be attractive to immigrants, who are crucial to the dynamism of the economy and the culture. Take a look around the state and the country as a whole and you’ll find that immigrants are strong engines of economic growth. If I had to place a bet, I’d put my money on immigrants rather than the “top 1%” as the best job creators.

So I’m glad to see Massachusetts doing the right thing, and the Supreme Judicial Court playing a constructive role in the process.

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NPR covers the topic under the misleading headline In Tight Times, Medical Schools Market Themselves, describing initiatives by Mayo Clinic, Mount Sinai, New York Presbyterian and Vanderbilt. Many of the advertisers are a bit cagey or even misleading about why they’re investing in advertising. The funniest quote is from Vanderbilt’s chief marketing officer who declares:

“We think of it almost as a service to the public, to get the word out.”

Almost, but not quite. As marketer John English puts it,

“There are ancillary benefits to an effective national or regional campaign. That said, during a time in health care where dollars are precious, I don’t believe those would be the key reasons for a national campaign. I think the key reason is to attract more patients.”

I really have nothing against academic medical centers promoting themselves. I’ll be really excited when they start to compete not just on reputation and high-tech wizardy but on outcomes and value as well.

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• Allow advanced practice nurses to work independently (without physician supervision) as some states have done
• Adopt payment policies that increase primary care practitioner productivity by encouraging teamwork

Both of these proposals are ok as far as they go. In many cases nurse practitioners are doing a fine job providing primary care; in other cases patients would benefit from the added training and experience of physicians. A medical home or team based model is also a good idea, although it may not automatically lead to an expansion of primary care capacity. As the analysis indicates, some medical homes begin by reducing panel size.

There’s no single solution that will be adequate. Therefore let me propose a couple more ideas:

• Encourage increased immigration of primary care physicians. Foreign-born doctors are already a major component of the primary care workforce, but in recent years the US has become less welcoming of immigrants and foreign doctors have enjoyed better opportunities in their home countries. We might as well take advantage of a willing, well-trained labor pool –and the expansion can happen quickly
• The analysis is silent on the fact that female primary care physicians tend to work fewer hours than their male counterparts and retire earlier –often when they take time off to have children. There should be a greater focus on retaining female physicians in the workforce and encouraging them to work more hours. One area to address: re-entry into clinical practice after time away

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As a result, Romney hasn’t been pushed to lay out his real views on health care. He’s been able to get away with just throwing darts at the Patient Protection and Affordable Care Act. Let’s face it, the Obama/Clinton face-off in the 2008 Democratic primaries was much more substantive –simultaneously wonkish and aspirational in fact.

Although Huntsman’s website doesn’t even list health care among the list of issues, his Jobs & Economy section includes serious health care proposals and he has a strong track record of reform as Governor of Utah. As Avik Roy points out in Forbes, Huntsman’s plan would eliminate the wasteful, foolish and highly popular $300 billion per year tax exemption for employer sponsored health care.

A July 2011 blog post by Matt Connelly lays out a stark contrast between health care reform in Utah compared to Massachusetts. There are major differences on:

• Individual and employer mandates
• Role of government in facilitating the market
• Order of rollout (private reforms first in Utah, government reforms first in MA)

I’m not saying the Huntsman approach is right or even that the comparison listed above is presented fairly, but at least it seems Huntsman has a real contrasting approach to bring to the discussion.

Although I doubt we’ll see much attention to Huntsman in Iowa tonight perhaps New Hampshire will be a different story in a few days’ time. I sure hope so.

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I’m quoted in an Associated Press article on the subject (see it here on the CBS News site) and it was also written about on the Daily Kos. In general I’m pretty negative on the concept, though I don’t fault patients or providers for giving it a shot.

For a more in depth look, see my October 2010 Groupon and health care: a few thoughts and a separate interview with Groupon.

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The four themes were as follows, each with specific predictions outlined in the blog post.

1. Transparency will change from buzzword to reality
2. Information technology progress will be uneven, with the biggest breakthroughs in mobile
3. A culture of patient safety will begin to take root
4. Health reform implementation will advance despite some ugly battles

Number 2 and number 4 were right on the money, while number 1 was a bit of overstated and number 3 was worded cautiously enough that it would be fairly surprising if it didn’t come true.

The most prescient prediction came from AOL founder Steve Case (@SteveCase) under #2 who said, “Mobile health will be a game changer in health and wellness.” At the time I thought this was an exaggeration but 2011 really has been the year of mobile health. In particular I note the phenomenon of physicians bringing their personal iPads and iPhones to work to use in the clinical workflow, a development CIOs and CMIOs still don’t have their arms around.

Under #4 I single out Dr. Bruce Siegel (@siegelmd), CEO of the National Association of Public Hospitals and Health Systems for taking a strong stand and being mostly right. He wrote, “Always an optimist, I think 2011 is the year that economic recovery takes hold. This changes the national health care debate dramatically as the Administration’s leverage is bolstered. There are some very ugly battles ahead, especially in the state houses, but overall it’s a year of consolidation. Also, the Redskins won’t go to the Superbowl!”

Bruce’s predictions look durable enough to hold up for both 2011 and 2012. The US economy –even with its troubles– has been outperforming expectations lately and if it holds up will put Obama in strong shape for the 2012 campaign. The “ugly battles” prediction came true and so did the “year of consolidation” point as Affordable Care Act rules were written and implementation proceeded apace. The Redskins didn’t make the Superbowl in 2011 and don’t look likely to do so for 2012 either.

Under #1, Giovanni Colella, CEO of health care transparency company Castlight Health (@CastlightHealth) made a somewhat self-serving prediction that, “Consumers will increase their demands for personalized information about health care cost, quality and convenience and will turn to innovative applications to address these needs.” He was right at least to some extent. Beyond consumers, a lot of the transparency action this year came from initiatives by health plans, employers, and regional health improvement collaboratives.

I’ll give myself some credit for my not-so-risky assessment of the Affordable Care Act: “I expect Republicans to make moderate progress chipping away at the law, even though repeal is not in the offing. The recent one-year Sustainable Growth Rate (SGR) fix, which halted the automatic cut to Medicare reimbursement rates, was financed by snatching a little bit from PPACA insurance subsidies. Expect more gambits like that, along with objections to proposed rules, attempts to defund or delay specific provisions, and continued court challenges to the law itself.”

I hope to publish a list of predictions for 2013 (or maybe I’ll shoot for a longer time frame) just after the Presidential election.

You can expect little to no blogging from me for the rest of 2011, though I’ll probably keep the Twitter feed (@HealthBizBlog) going.

Wishing you a health, happy, peaceful and prosperous 2012 from MedPharma Partners and the Health Business Blog!

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Williams:         This is David E. Williams, co-founder of MedPharma Partners and author of the Health Business Blog.  I’m speaking today with Bonnie Washington.  She’s Senior Vice President at Avalere Health.  Bonnie, thanks for being with me today.

Washington:    Thanks for inviting me.

Williams:         Bonnie, the Affordable Care Act has rules about minimum medical loss ratios. There’s a lot of interest on the specifics of the rules and regulations coming down on that topic. Maybe we can start with the definition of the medical loss ratio.  What is a medical loss ratio anyway?

Washington:    The medical loss ratio is a mathematical calculation, defined in the Affordable Care Act as the ratio of a health insurer’s premiums that are spent on medical claims and quality improvement activities divided by the total amount of premiums that the plan collects.  So it’s basically the medical and quality improvement costs divided by the plan’s total premium revenues excluding most state and federal taxes.

Williams:         What are the rules within the Affordable Care Act about the medical loss ratio (or MLR) and why is it something that matters?

Washington:    The Affordable Care Act instituted for the first time national medical loss ratio requirements in order to try to get plans’ premium costs under control and as a way to cap plans’ administrative costs and profits.

The Affordable Care Act does three things.  First it requires all health insurance plans to report the medical loss ratio that we just talked about to the public and to the Department of Health and Human Services.

Second, it requires that plans meet specific percentages for the medical loss ratio depending on the size of the plan.  Third, beginning this year plans have to issue rebates to their enrollees if they find themselves falling below the minimum medical loss ratios for the category that they’re in.

Williams:         The rates are different for different size plans or customers.  Why are those rates different?

Washington:    That’s right, they are different.  There is an 80% medical loss ratio for small group insurance and non-group or individual insurance. HHS has defined small group as fewer than 100 people. There is a higher medical loss ratio for the large group market, which is over 100 people, and that’s at 85%.

The reason why they are different is because when plans insure individuals or smaller groups they incur higher administrative costs.  It costs more per person to enroll people in your health insurance plan.  It costs more to process the claims.  It costs more to advertise to people.  It’s assumed that large employers have a lot more efficiency because you’re basically performing the same tasks for a larger group of people. Plans can afford to have a higher medical loss ratio because the “administrative load” (the words used in the insurance industry) is lower.

Williams:         When you described the medical loss ratio calculation it sounded pretty straightforward, but I noticed you talked about medical costs plus quality improvement activities.  If I had to take a wild guess my sense would be that there will be some arguing about what a quality improvement activity is.  What are the issues, how are they being resolved, and what issues remain open?

Washington:    You’re absolutely right. I gave you a very simplified version of the definition of the medical loss ratio.  In each of those words that I used, there are lots of details.   Some states have had medical loss ratios prior to the Affordable Care Act, but this is the first time that this concept has been in place across the country. It has spawned a whole new industry in terms of accounting for the medical loss ratio.

Over the past couple of years since the Affordable Care Act was passed, there have been a lot of different efforts from different organizations to try to define what all these terms mean.

One of the big issues was, as you said, what is a quality improvement activity versus an administrative cost? Because if you’re a plan, you want as many of your costs to operate your plan as possible to be in that numerator, to be in the definition of quality improvement and medical costs.

The National Association of Insurance Commissioners recommended a series of definitions to HHS and HHS has been putting out regulations to further define this.

Quite a few things are included in the definition of quality improvement activities.  These include case management, care coordination, expenses that improve patient safety, wellness and health promotion activities, information technology expenses related to quality improvements, and health care professional hotlines.

Recently HHS changed the rules and allowed plans to include costs associated with implementing ICD10, which is the new coding system, in quality improvement activities.

There are a fair amount of a plan’s administrative costs that can be considered quality improvement activities, but there are still some really important and big ticket items that are left as administrative costs.

Williams:         Some states have sought waivers from the MLR rules.  Why are they doing that? Also, why some of those waivers have been approved and others denied?

Washington:    Great question.  The law allows states to seek waivers from the Secretary if the state believes that requiring plans to meet these new minimum medical loss ratios would destabilize their insurance market.

Destabilization means that if insurers were required to meet those minimum medical loss ratios that the market would be destabilized if a number of the insurance carriers would leave the market or stop selling health insurance products, particularly to individuals, because they can’t meet the new rules.

Several states have applied for waivers. As of this week, the Secretary of HHS has approved waivers for six states and the Secretary has rejected waivers for about three states. There are also a handful of states whose waivers are still pending.  Some of the differences between the states that got waivers and the states didn’t have to do with the makeup of the insurance market in their state.

I think Maine was the first state to receive a waiver from HHS.  Maine has one dominant insurance carrier, which is the Blue Cross plan in that state. They had a historical medical loss ratio that was much lower than the requirements in the ACA.  Maine gave a bunch of information to HHS and showed that if the insurers in Maine were required to meet these medical loss ratios beginning this year that they would have a really hard time doing so and may leave the market. That would leave people in Maine without any insurance options.

Other states like Florida have gotten rejected.  HHS has rejected their waivers because there are a lot more insurers in Florida and the insurers’ historical medical loss ratios were a lot closer to the minimums than the situation that you have in Maine.

Williams:         It sounds like in places like Maine there may be objective, structural reasons why one could argue about destabilization.  For some of the other states that have applied for waivers and perhaps have been rejected, is it more of a political expression?  I don’t think of Florida as an uncompetitive insurance market.  Was it clear on the face of it that that would be rejected or was there some solid economic rationale for it?

Washington:   I think it was probably a little bit of both.  What we’ve heard and seen from insurers throughout this process is that, particularly in the individual markets in a lot of these states, plans were not meeting the minimum medical loss ratios that were in the law.

But particularly from the big insurance companies we’ve seen them make statements in their investor relations activities and others saying that they are restructuring their business, they’re making decisions and they’re taking steps to meet the minimums.

So there may be, in a state like Florida, some local plans that can’t meet the minimums and have to issue rebates and struggle, but overall particularly in a state like Florida where there’s lots of competition by the big national plans, they’re going to meet it.

Recently the Government Accountability Office (GAO) looked at the states’ early experiences in implementing the medical loss ratio. The GAO found that most insurers will be able to meet the medical loss ratio requirements in the Affordable Care Act.

One thing that’s going on in states that are requesting waivers is the issue of insurance brokers, which is very important.  The Affordable Care Act and the HHS rules consider the commissions that brokers make from insurance companies to sell their products as administrative costs.  This is a big portion of the administrative cost line and one that is coming under a lot of pressure as plans are trying to get those costs down.

The brokers are very well connected and, at this point, well organized. They have made a big push to try to reopen the definition so that brokers’ commissions are excluded from the calculation altogether.  So far, the National Association of Insurance Commissioners has agreed with the brokers that they should remove the fees.  There is legislation pending in Congress to remove broker commissions from the MLR calculation, but HHS has chosen not to act.

I think in a lot of these states that are asking for waivers, some of it may very well be driven by the brokers who are really feeling the pinch of the medical loss ratio requirements as plans are cutting their commissions or saying to brokers we are not going to pay your commissions directly.  You’re going to have to get paid either by the employer or the individual if you want to continue your role.

Williams:         From the health plan perspective I would imagine that these MLR limits could be somewhat threatening.  A lot of these are profit-making entities that have to report to their shareholders.  I suppose on the one hand the tradeoff is that they should get a lot more customers if the mandates on individual purchases in particular are upheld within the Affordable Care Act.  But on the other hand, the MLR rules are essentially a profit cap for them.  How do they respond?  Do they have an incentive to raise the premiums or to move into businesses where their profits are not regulated?

Washington:    What you see is a little bit of everything.  If you think about the medical loss ratio in and of itself, it could lead to higher premiums because one way in this calculation for plans to have more money for administrative costs and profits is to raise the overall amount of premiums that it has to charge. But there are a lot of other provisions in the Affordable Care Act that try to prevent that.  So you’ve got an incentive to raise premiums because of the medical loss ratio, but you also have premium rate review and a lot of other things going on in the Affordable Care Act that are further pressing down on premiums and putting pressure on plans.

What we see is plans looking market by market, business segment by business segment to try to figure out where they might want to discontinue operations or where they want to continue and restructure what they’re doing to be able to meet the minimum medical loss ratio.

To your point, there are also a few other things going on where plans are trying to diversify their business lines so it’s not quite as tightly regulated.  One area is growing the business for self-funded employers.  These are large employers that hold the insurance risk for their population themselves and just hire an insurance company to administer the benefits.  That’s one area.  Another area that plans are looking at, like you said, is different pieces of health insurance such as health information technology, clinical decision support, providing claims processing and other services for newly formed accountable care organizations.  You see a lot of the plans trying to diversify their business from fully insured to self-insured to some of these other administrative and clinical services in order to balance out the risk.

Williams:         I can understand the populist appeal of a minimum medical loss ratio approach, but if I think about it from the standpoint of the member or the purchaser of insurance, I wonder whether it really holds up.  If I think about other kinds of insurance that I have like life insurance and car insurance and home insurance, I’m happy when the equivalent of the medical loss ratio is zero on my account because that means I didn’t die or crash my car and my house didn’t burn down.  With health insurance, couldn’t you argue there’s something similar? In a year that I’m perfectly healthy, presumably, I’m highly profitable to the insurance company but I’m also pretty happy that I’m not sick. If they’re taking steps to keep me from being sick and to keep medical costs down, why are they being penalized for that?

Washington:    I think that’s a great question. There are some inherent differences between health insurance and other types of insurance that have evolved over time.  Most health insurance these days isn’t simply catastrophic coverage. There’s a big focus on prevention and wellness, so there’s a lot of things that people who are perfectly healthy or who are relatively healthy and managing various chronic conditions should be doing and the plan should be paying for those things.  Health insurance covers those maintenance costs whereas your auto insurance doesn’t cover the maintenance costs that you have at your dealership, such as rotating your tires and having the oil changed.

But I do think that the medical loss ratio was a provision that has populist appeal.  We’re capping insurers’ profits. But it’s really only one thing.  There are a lot of other things that need to happen in the insurance market overall in order to make coverage affordable for people and accessible to everyone. This is really a small piece that has populist appeal that happens to go into effect really quickly.

Williams:         The Affordable Care Act has a lot of different provisions that are rolling out over a few years.  The medical loss ratio in the current rules, would you say that’s the last word on this topic or will we see an evolution in the approach of medical loss ratio regulation?  I understand your point that there are a lot of other pieces of the puzzle here in terms of cost containment, both on the health plan side and maybe in the delivery system as well, but as far as MLR rules themselves, do you expect some evolution?

Washington:    With rules as complicated as this, there will definitely be some unintended consequences.  We’ve already seen HHS put out a modification of the rules that made some important changes and tried to reduce the administrative burden on plans of the MLR rules.  I think that the big issues have been decided, but I do think that HHS will continue to make tweaks around the edges to make it work better and be less burdensome for plans.  As we go through the process this year of figuring out who met the minimums and how the rebate process works, there will be some more changes.

The biggest issue still hanging out there is this issue of the future of insurance brokers.  This is a very big group of people who are very vocal and this is really their livelihood. So I think that they will continue to try to gain support to have their commissions outside of this calculation altogether.  I don’t think that that will go away.

Williams:         I’ve been speaking today with Bonnie Washington.  She’s Senior Vice President at Avalere Health.  We have been talking about the Affordable Care Act and in particular, the rules about the medical loss ratio.  Bonnie, thanks so much for your time today.

Washington:    Oh, thanks for having me.

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David E. Williams:      This is David Williams, co-founder of MedPharma Partners and author of the Health Business Blog.  I’m speaking today with Rick Valencia, Vice President and General Manager and Anthony Shimkin, Senior Director of Marketing at Qualcomm Life.  Rick, Anthony, thanks for being with me today.

Now I understand you were at the mHealth Summit earlier this month where Qualcomm announced a new subsidiary called Qualcomm Life.  Can you tell me about that and what the thinking is behind the new venture?

Rick Valencia:          You bet David.  Qualcomm Life is a business that’s been in the making for nearly a decade now.  For about eight or nine years, Don Jones and a team here from Qualcomm have been evangelizing the concept of bringing wireless technology into the health care arena and specifically into medical devices.

Then in the last year or so we developed a business plan.  After having listened to a lot of customers over that eight or night year period and getting their specifications and requirements and understanding what the real challenge was, we developed a business around those specific needs.

The launch announcement was focused on three specific areas.  First and foremost was that we are now open for business as Qualcomm Life,  bringing about 40 partners with us, all at different stages of integration into the platform.  Second we launched the 2net Platform, the 2net Hub and three other gateways of getting information off the medical device.

Third, we announced a $100 million Qualcomm Life Fund where we’ll invest in early stage businesses in wireless health: devices, services and applications.  We’ve already made five investments in wireless health companies and we will continue to invest and help stimulate this market.

Williams:         There was a fairly long gestation period for the business. Why?

Valencia:          In the first eight or nine years there really was no specific business plan.  The objective was to promote the concept of embedding wireless technology in the medical device and start to build the ecosystem that’s required to support a business and an industry.  We went about doing that including building standards organizations and trade groups.  We were one of the instrumental partners in launching the mHealth Summit.

There’s even an education opportunity now within wireless health where right at Qualcomm’s campus in partnership with Case Western University, you can get a masters in wireless health.

Williams:         Great.  Rick, despite the fact that I’m sure you’re using a lot of high quality Qualcomm gear in your phone, the network is prohibiting us from have a completely clear connection, but I think I got most of what you had to say there!

The concept of remote patient monitoring and at-home monitoring has been around for quite awhile and there have been a lot of different devices and business models in the market going back even before the eight or nine year gestation period that you described for this effort. Everyone sees the appeal yet the uptake and success have been pretty limited so far.  Do you see a sharp break from the past or should we just expect slow, incremental progress?

Valencia:          There are two general areas are going to have a fairly major impact.  I’m going to focus on the first, which is the technical issue and then I’m going to let Anthony jump in about health reform.

Technically speaking what’s happened is a lot of these devices have been put in the home to send data back to a caregiver or disease management company, but they just don’t work or they’re siloed.  In other words, three or four devices that are used, all of which send data in their own stream. You’d have to view the data in its own native format or get a fax with the information handwritten.

The promise of the 2net platform is to take multiple streams of data off of multiple devices, get it all into one platform, standardize that data so that it can be viewed all at once in a simple to understand, easy to use view.

One big issue is that device companies assumed people had Wi-Fi and could connect their devices to it. In a lot of cases that’s not true, so the device never sends a single message.

By sending home the medical device or devices with a 2net Hub, it is in essence paired in the factory with this gateway device. You plug it in the wall and it just starts going.

So from a technical standpoint we think that this will really be a game changer for the device manufacturers.

A. Shimkin:     This effort has been around for years, why isn’t it picking up?  Offering several different gateways to get the biometric data off the devices is one of the advantages that Qualcomm Life brings to the table.  It can serve as a catalyst to accelerate some of these initiatives.

There has been some recent legislative trade news, as I’m sure you’re probably aware.  One is that hospitals will not continue to get paid on readmissions.  The cost and the issue in the United States with that problem is pretty significant.  We’ve seen a lot of interest early on from care delivery organizations.  These would be systems like the VA, which I know has a significant effort around remote monitoring to track those patients upon discharge so that they’re not coming back into the hospital for a series of disease states whether it’s diabetes, congestive heart failure, or COPD.

Now you’re starting to see several large scale Integrated Delivery Networks  taking a significant interest in what these remote monitoring efforts have to offer.

We’re seeing a groundswell of interest, not only from customers, but from physicians.  A recent survey reported that up to 88% of physicians were interested in tracking and monitoring their patients’ health at home.  The top three areas were weight, blood sugar and vital signs.

When you look at the three or four different pillars, we’ve seen a significant acceleration over the last six to twelve months trying to push the whole remote monitoring offering across the continuum of care and especially in the home.

Williams:         What’s the implication of rapid physician uptake of smartphones and tablets? Is that having an impact on remote monitoring that is perhaps greater than some of these longstanding devices, which are often just a glorified bathroom scale at the end of a wire?

Valencia:          There’s no question about it.  Something like 80% of doctors are now using some form of tablet or smart device in their practice, whether that’s just doing web searches for information or actually using the devices connected to their electronic medical records.  They’re starting to use wireless technology in a way that’s having an impact on their practice and their ability to care for their patients, keep track of their patients and also communicate.

One of the key value propositions that the 2net platform and hub offers is that we actually create a two-way communication between the patient and the doctor. So it’s not just a matter of getting the data off of the medical device back to a caregiver or doctor or wherever it’s intended to go, it’s also the ability for that doctor or caregiver to communicate back with the patient and maintain that two-way connection.

The tablet or smartphone also provides an opportunity to present the data in a way that is more meaningful to a physician and patient.

Shimkin:          Over 50% of patients would be interested in using a smartphone or PDA to monitor health.  You’re seeing the acceleration of technology.  As the apps become easier to use for different generations, easier to integrate, (which we’re really seeing across the spectrum in terms of interoperability), I think it’s a matter of time before you start to see some of these pick up more.

If you look at the proliferation of technology, one of the things that we cite here at Qualcomm is the number of people out there with access to a cell phone. It’s more than people worldwide with running water, electricity or the use of a toothbrush.  So it’s going to be a standard that’s hard to ignore not just in the US but worldwide.

Valencia:          Ease of use is going to be the key, taking those streams of data and delivering them in a way that’s meaningful for a doctor and patient.

The 2net platform is an open ecosystem so we are connecting any medical device and allowing any service provider or application developer to develop new solutions that we can’t even think of today, new applications and ways to present the data back to a physician or patient where it’s actionable.

Think about leveraging streams of data off of multiple devices; you can imagine a disease management scenario with a diabetic where you have a glucometer, an insulin pump, a weight scale and activity monitor.  Imagine having those four different streams of data being encapsulated in an application that presents the information in a very meaningful way on how you’re progressing or not progressing towards your goals. Instead of a doctor having to watch a ticker of your blood glucose levels throughout the day to figure out when he ought to intervene, he can view data in a way he’s comfortable using it without altering his day in a way that’s unmanageable.

Williams:         We’re talking about ease of use here as a key aspect in two-way communication.  Are you seeing any impact from the Patient Centered Medical Home, which could provide some reimbursement beyond the physician visit to actively monitor some of these feeds? Or is it just an abstract notion at this point?

Shimkin:          No, I think a lot of that also comes from payer interest.  Some of the evidence that I’ve seen has come out of the VA.  When you’re talking about putting an aging parent in a long-term care situation that costs $75,000 a year and up, the VA has really been at the forefront of some of these initiatives for remote monitoring patients to get those costs down into the low single digits thousands of dollars.

When you just look at the impact of forward thinking care delivery organizations, you’re starting to see a lot of interest in terms of clinical outcomes. It’s very difficult to ignore the body of evidence around the impact. You’re starting to see a significant pickup in payer interest.

Last but not least, we can talk a bit more about the consumer.  There’s a lot around consumer preference.  You have the aging grandparent who is in the home who really doesn’t want to leave the home.  They want more of their care in the home. You’re seeing very strong preferences from some patients with one or several chronic conditions wanting more care available in the home rather than being put in some other situation.

William:           Rick, you mentioned a $100 million Qualcomm Life Fund that has made five investments already.  Can you talk a little bit about one or two current investments and also how you’re thinking about making investment decisions in the future?

Valencia:          You bet David.  One example would be Telcare.  Telcare is a company that has the first FDA approved glucometer with cellular technology embedded in the device. They’re providing the opportunity for diabetics to have their tests go immediately to the cloud and back to where it’s intended to go.  In some cases it might be to a parent with a child who has diabetes who is at school so they can be keeping track of their readings on a regular basis throughout the day.

In addition, we recently invested in a company by the name of AliveCor.  They’re commonly known as the iPhone ECG device.  It’s a device that is a case for an iPhone in which you just put your fingers on the two sensors on either side and it generates your ECG. In an emergency situation to have a device like that where you can quickly apply it to a person and get that ECG and have that sent to a doctor somewhere immediately to determine exactly what you’re dealing with is obviously an important and valuable use of wireless technology in health care.

What we’re looking for are early stage companies.  Typically Qualcomm is not a lead investor.  We typically invest alongside more traditional venture investment firms and we like to invest within companies that need our support strategically, whether it’s the technology, the platform, or our relationships that we can support them with.  We believe that our involvement can further a company’s efforts just by being a partner with them.  That’s where we would typically be most interested in investing.

Williams:         I’ve been speaking today with Rick Valencia, Vice President and General Manager and Anthony Shimkin, Senior Director of Marketing at Qualcomm Life.  Rick, Anthony, thank you very much for your time today.

Valencia:          Thank you, David.

Shimkin:          Thanks for having us, David.

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The company’s aggressive strategy may offer lessons for drug makers facing similar losses of patent protection for other blockbuster drugs over the next few years, and may chart a new path for shifts between the big pharmaceutical companies and generic rivals…

With Pfizer’s plans to try to maintain brand loyalty for the next six months becoming public, industry analysts have raised the company’s earnings outlook by 2 to 4 percent, and now estimate that it could retain 40 percent of the market through next year.

Instead it looks like Lipitor is behaving just about like any other drug going generic. From the Washington Post:

Sales of cholesterol blockbuster Lipitor plunged by half barely a week after the world’s top-selling drug got its first U.S. generic competition, new data show.

That’s despite a very aggressive effort by Lipitor maker Pfizer Inc. to keep patients on its pill, which generated peak sales of $13 billion a year, through patient subsidies and big rebates to insurers.

Big pharma can only win long term by develop innovative new compounds that generate clinical and economic value. They can absolutely forget about making money in the face of generic competition.

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I asked them to arrange an interview for me with Lyndon Johnson –but received no solid promise.

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We cover a variety of areas including:

• What the definition of a Medical Loss Ratio is, and where the controversy lies in the definition
• What PPACA specifies about MLR for various size plans
• Why some states have applied for waivers from the MLR rules and whether their applications were justified
• How health plans and brokers are reacting
• Whether MLR rules are sound public policy

There was a problem with the original audio file. It’s been repaired now.

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In this podcast interview, Qualcomm Life executives Rick Valencia and Anthony Shimkin share the details behind the launch of the new venture. We discuss:

• Whether remote patient monitoring is ready yet for prime time (it’s been a long time coming)
• Existing and planned venture investments
• Qualcomm Life’s 40 existing partners
• The role of the Affordable Care Act and Patient Centered Medical Homes in advancing the wireless health world

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It’s not just that I disagree with the details, which I do. The underlying principles themselves are also problematic.

To quickly summarize the plan, it is a modification of the earlier Ryan plan that would have switched Medicare over to a voucher system to be used to pay for private plans. The Wyden/Ryan version keeps the voucher element but also leaves fee for service Medicare intact.

Here are the main problems:

• The plan would keep everything the same for people 55 and older. According to the first principle, “Seniors should not be forced to reorganize their lives because of the government’s mistakes”
• The program’s provisions don’t kick in until 2022
• The plan relies on competition among health plans to bring down costs
• The plan places caps on spending and introduces rules on minimum benefit levels
• The plan includes a defined contribution option for private employers with under 100 employees

So what’s wrong with all those ideas? Quite a lot, actually.

The Medicare fiscal crisis is here today, it’s not something that can be put off till the next generation. The Medicare tax only pays about half of Medicare’s costs now. And people 55 and over are at least as culpable as those below that age for getting us into this mess. The line about seniors not having to reorganize their lives due to the government’s mistakes is nonsense. Maybe it’s not politically palatable to threaten existing beneficiaries or even anyone who’s remotely close to retirement, but the economics don’t work. As for the 2022 start for the program, that’s about three presidential cycles away. Are we really going to wait that long?

Ryan and Wyden seem to have a mystical belief that bringing private health plans into Medicare is going to control costs. Where is the evidence for this assertion? Private health plans have done a poor job of controlling costs in the private sector and Medicare Advantage plans cost the taxpayer more money than Medicare fee for service. Not to mention the fact that the white paper places all kinds of requirements on the health plans and “will also require the Centers for Medicare and Medicaid Services (CMS) to actively review marketing practices and benefit adequacy… CMS will… weed out junk plans and unqualified insurers.” Sounds nice, but that means we’ll be stuck with mandated benefits and excessive administrative hoops that will thwart innovation. There is a plan to hold down cost growth to just over GDP growth, and somehow (I’ll be curious to see the mechanism) overruns will be dealt with through “reduced support for the sectors most responsible for cost growth, including providers, drug companies, and means-tested premiums.”

The private employer provisions are a little weird and don’t belong in a Medicare plan. They encourage portability (which is fine) but go to great lengths to preserve tax deductibility for employers and employees.

Wyden and Ryan will get a lot of undeserved credit for pushing this plan. Today’s Wall Street Journal editorial refers to it as a “breakthrough.” It’s pretty clear the reason they support it is they think it will weaken Democrats’ argument that Republicans won’t do anything productive on Medicare and will lead to the defeat of President Obama.

Here’s what I would prefer:

• A recognition that Medicare reform has to start with current beneficiaries who are driving expenses today. There’s no excuse to wait 10 plus years, which will just make the problem worse and absolve a huge percentage of the population from responsibility. To me establishing this principle is more important than the details of the cost containment plan
• A focus on reforming the delivery system and payment methodologies, not just tinkering with the financing
• An end to tax deductibility of health insurance in the commercial market, which could be phased in over a five year period. That would reduce the incentive for overspending and help shrink the federal deficit. It would do a lot more than the Ryan/Wyden scheme to make the system more cost sensitive

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Experience from Oregon suggests that even modest, sliding scale premiums result in huge drops in coverage. A report from the Health Policy Institute at Georgetown University suggests 82 percent of those who leave coverage would be children, of whom 98 percent would be below the poverty level.

There are clear examples of emergency room overuse, but what’s crystal clear in retrospect is not always evident up front. In any case, hospitals can do their part with effective triage that sends patients to lower acuity settings or back home when patients who shouldn’t be there show up.

Florida Governor (and former hospital exec) Rick Scott, said, “If we do nothing, this program will bankrupt the state.” But one of the authors of the study, Joan Alker of the Winter Park Health Foundation attributes the growth to rising enrollment and notes that state Medicaid has done a lot better job of cost control than the private sector.

It would be great if Florida and other states could control Medicaid costs just by taking a hard line on beneficiaries. That seems to be the mood the country –or at least the Republican Party– is in. But policymakers will find such an approach won’t actually save much in the way of costs and will have a detrimental impact on public health, overall costs and beneficiaries themselves.

A less instantly satisfying –but more sustainable– approach would be to face up to the reality of the need for delivery system and payment reform, and to invest more rather than less in children.

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But setting all that aside, $10,000 is actually a very relevant figure for a discussion of health care policy, and it’s a figure the electorate should get used to discussing. Consider what $10,000 (plus or minus) represents in the US health care environment:

Health insurance

• The average annual employer contribution to one worker’s health insurance
• What my business pays for six months of family health insurance coverage
• The amount my business’s annual health insurance premium for family coverage has risen over the past decade

Medicare

• The average amount Medicare spends per beneficiary per year
• What a wage earner making $350,000 per year pays in Medicare tax  (employer + employee contribution)

Clinician salaries

• One month’s salary for a new pediatrician
• One month’s salary for an experienced nurse

Drug costs

• Six years of Lipitor for high cholesterol
• Six months of Humira for rheumatoid arthritis
• Two months of Avastin for lung cancer
• Two or three weeks of Cerezyme for Gaucher Disease

Treatment costs

• The average cost of a hospital stay (in Maryland)
• 1/2 of an angioplasty (in Massachusetts)
• 1 appendectomy (in Massachusetts)
• Comprehensive orthodontic treatment for 2 kids (in Massachusetts)

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I spoke to a group of academic physicians recently.  Afterward I was and asked, “Shouldn’t my hospital be responsible for my digital footprint?  I don’t have time to look after that sort of thing.  And wouldn’t it make sense for them to promote my research?”

His four reactions are pretty good:

1. Individuals should be responsible, not their institutions –since no one will look after you like you do
2. Physicians should invest in relationships — to “dig your well before you’re thirsty” because you never know when you’ll need help
3. Physicians should look for good stories to share with hospital PR/marketing –since this may result in high visibility for modest effort
4. Institutions should think about their own digital footprints –including encouraging medical staff to record introductory YouTube videos and placing professional profiles on LinkedIn and Doximity

I agree with Vartabedian that academic physicians generally do a pretty poor job of establishing and maintaining a digital presence, and that they could do better with a modicum of effort. But many don’t see it as a high priority and they may well be right. After all their salaries are covered by their institution, they receive recognition among peers for research and publications, and they’ll have plenty of patients as long as their institution maintains a strong brand and flow of patients.

Hospitals perhaps have the most to gain from Vartabedian’s advice. In particular, they can strengthen the overall positioning of their institutions by encouraging their physicians to have a more active profile outside of the hospital’s own website. Too often when I type in the name of an academic physician to Google the results are dominated by a bunch of fairly useless profiles and ratings by HealthGrades, UCompareHealthCare, EveryDay Health, RateMDs and the like.  Usually there is a bunch of stock information I could get from the white pages along with 2 or 3 ratings from patients. Maybe there’s also a short profile from the academic institution in there somewhere.

How hard would it be for physicians –with encouragement or active assistance from their institution– to build profiles with more interesting and useful information that would climb to the top of Google listings? Not very. Done right, these profiles would include links to colleagues and the institution. Come on fellas, the bar is pretty low!

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An example of a difficult program to implement is the UK National Health Services’ agreement with makers of beta interferons for multiple sclerosis. The NHS was skeptical of the products’ long-term efficacy, so the program calls for price adjustments if the results are 20 percent better or worse than expected over a 10-year period. The long lifecycle, difficult administration and low adherence to the medications makes this one a real nightmare and I can’t imagine it’s worth the trouble.

Meanwhile, a more successful program is an agreement between the NHS and Novartis to limit the number of Lucentis doses that the NHS must pay for to 14. If the patient still needs more injections –based on a measure of visual acuity– Novartis picks up the tab.

As consumers in the US take on an increasing share of medical costs, I expect that drug companies will try various risk sharing arrangements directly with patients, probably administered through PBMs or health plans. The Lucentis example is a good one. Patients will probably be willing to pay a fixed amount to receive all the Lucentis they need –it may be more or less than 14 doses. Certain other drugs, like fertility medications, could also be offered on a risk share basis –although this may require someone to bundle a variety or products to make it work.

I can also see the value of long-term contracts for maintenance medications for chronic conditions, e.g., for high cholesterol or high blood pressure. It could actually help patients adhere to their regimens if they had –for example– a three-year Lipitor contract. They might feel badly enough about not taking a drug they’d already paid for that it would guilt them into keeping up their therapy.

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The official reasoning is that the data submitted did not prove it would be used appropriately by young girls. But in fact this is a highly cynical decision that has everything to do with the upcoming presidential election.

Consider:

• The decision of the HHS Secretary to overrule an FDA decision appears to be unprecedented
• The drug isn’t dangerous even when it isn’t taken properly
• The FDA made the applicant (Teva) jump through a lot of hoops for this submission, then reviewed the data thoroughly
• Scientific panels have been in favor of OTC use since 2003, but political pressure (at that time from the Bush Administration) kept access restricted. In 2005, assistant FDA commissioner Susan Wood resigned over political interference in Plan B

Obama came to office vowing to change course from the Bush administration by respecting science and supporting reproductive freedom. His supporters will be very disappointed in this decision. And yet it is the right thing to do from the standpoint of supporting Obama’s re-election and the move is unlikely to cost Obama votes. Political discourse has moved so far to the right over the past few years that the Obama Administration could have gone considerably further than it did (like pulling Plan B from the market entirely) and still be well to the left of the Republican candidates.

With Republicans treating Planned Parenthood (which historically had bipartisan support) like the Devil, calling Obama a socialist, Bernanke treasonous and treating talk of any new taxes as completely off the table, one really has to wonder where things are headed. An Obama supporter enraged by the Plan B decision would really have to think seriously before jumping over to support a Republican Party whose commitment to things long taken for granted –such as the right to abortion in the case of rape or incest and the legality of contraception — is unclear.

You can bet a decision to widen access to Plan B would have given Republican candidates plenty of fodder to go after Obama as pro-abortion and in favor of 11 year old girls having sex. He did the right thing politically.

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Hudspeth identified the Medicare Modernization Act of 2003 as the main reason for drug shortages, as it shifted the reimbursement rate from a percentage of average wholesale pricing to the average selling price, including all discounts and rebates.

She said, “Generic prices are driven down by market competition, and the current model under the MMA makes it difficult for companies to raise prices more than 6% per year.” Hudspeth added, “Product margins have fallen significantly for many generic drugs, leaving companies with little incentive to continue manufacturing the drug or to increase production” (Modern Healthcare, 11/30)

Problems in manufacturing plants are also playing a role, as sterile drugs for injection/infusion are notoriously hard to produce.

Now Senator Charles Schumer of New York is proposing a headline-grabbing but wrong headed idea: to make it illegal for drug distributors to engage in “price gouging” when they sell medications. The law would be backed up with penalties of up to $500 million per case. Said Schumer:

“Forcing hospitals to buy life-saving medications at outrageously inflated prices is unquestionably unethical, and with this legislation it would be illegal, too.”

Schumer should really be focusing on the root causes of the problem instead of blaming a seller for engaging in a market clearing transaction. The seller isn’t “forcing” a hospital to buy any more than the hospital is “forcing” the seller to sell. If anything, Schumer’s law would make things worse by eliminating the incentive for distributors to hunt down pockets of excess supply and scaring buyers and sellers away from pursuing transactions to avoid getting tangled up in a legal case.

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Community hospitals in Massachusetts have long complained about the power of these big systems, and have gotten worked up as Partners HealthCare in particular has expanded into the suburbs. Employers and health plans have generally been sympathetic to community hospitals –because Partners’ expansion means higher costs for them.

Community hospitals have a strong story to tell, especially in an era of cost-consciousness and transparency. Their clinical quality is typically comparable to the teaching hospitals’, locations are more convenient, level of personalized service is relatively strong, and costs are lower.  Community hospitals could also do more to learn from one another’s experience by sharing information with one another more freely than is done now.

But in general community hospitals in Massachusetts have not taken the initiative to exploit their competitive advantage. That’s why I’m grateful that private equity backed Steward Health Care System has seized the opportunity to create a cost-effective, high quality, high service offering that can thrive in the marketplace. Not surprisingly Steward is now taking heat from other community hospitals, who are whining to the Attorney General (failed Senate candidate Martha Coakley)  about “apparent predatory practices against community hospitals” –in this case related to Steward’s move to ally with a group of physicians, Whittier IPA.

As is often the case with groups running to the government or media to seek special protection, community hospitals are trying to argue that Steward is harming the public –when the real concern is that Steward is eating their lunch through competition. I’m glad to see a profit-maximizing entity such as Steward come in and take on the market opportunity aggressively. And I agree with the sentiment expressed by Steward in the Globe:

“This letter seems to be saying a system of 10 community hospitals is damaging community health care, which is our own business,’’ [Steward] said. “Without us buying these hospitals, most, if not all of them, would have failed or closed. We’re out there as a business saving community hospitals and keeping patients in the community.’’

Don’t be fooled by community hospitals ranting against big bad capitalists. The important objective for the public interest is not the comfort of traditional community hospitals but the ability to finally bring the costs of health care under control in this state.

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That’s why it’s so ironic to read about the plight of the small business owner NFIB chose to represent its Supreme Court case opposing the law and its mandate to purchase insurance. The Wall Street Journal (Hurdle for Health-Law Suit) reports that plaintiff Mary Brown, owner of an auto repair shop,  argued that “she would have had to divert funds from her business to comply with the law’s requirement that… most American obtain coverage or pay a penalty.”

But she closed the business in September and she and her husband filed for personal bankruptcy, citing debts of $63,000, mostly business expenses. As the Journal reports:

Without owning a business, it could be harder for Ms. Brown to argue she is harmed by the legislation. Meanwhile, her recent financial woes suggest the possibility she would be exempt from penalties for noncompliance with the individual mandate. That raises questions about whether the suit can be based on her experience.

Not only will she not be harmed by PPACA, she might even be helped. That’s because the law provides fairly generous subsidies to lower income people –a group that now presumably includes Brown– to buy health insurance. She may also qualify for Medicaid.

What would be really funny is if Mary Brown comes to her senses and becomes an advocate for ObamaCare.

Meanwhile, I’ve been thinking about another way to close the deficit. Just as Grover Norquist has gotten so many GOP reps in Congress to take the no tax pledge, why not have opponents of “ObamaCare” vow not to accept subsidies to buy insurance or to go on Medicaid? That would be a principled stand.

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The author, John Commins, notes that per capita costs in the commercial market grew more than 8 percent over the past year, while Medicare growth was just under 2 percent.

Robert Zirkelbach, spokesman for America’s Health Insurance Plans, agrees… that the different rates of growth for commercial plans and Medicare can be attributed to cost-shifting.

“Medicare simply dictates the prices they will pay for services, and often those prices are well below the cost of providing those services,” Zirkelbach told HealthLeaders Media. “So, what happens is doctors and hospitals charge more to people with private insurance to cover the costs of those services.”

A couple of other federal policies may further exacerbate the situation:

• With the minimum Medical Loss Ratio requirements of the Affordable Care Act, health plans may not care that much about higher medical prices. After all, their administrative costs (including profits) are capped as a percentage of premiums. All else being equal, higher premiums equals higher profits in dollar terms
• Providers are preparing for federally-authorized Accountable Care Organizations (ACOs) by consolidating. In the near-term that provides them with greater market power in negotiating with commercial payers. As Zirkelbach says:
• “Our members are getting rate increase requests from providers by as much as 60% and 70% in some markets across the country,” he says. “There is a growing body of evidence and research showing that as hospitals consolidate, that leads to higher prices for services. In some markets there is only one ‘must-have’ hospital in a region that is able to charge significantly more for services, often 200%, 300%, 400% of what Medicare pays for the same services, and that is having a direct impact on the cost of care.”

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“The FDA’s real goal was to send a warning to the rest of the drug industry about who is in charge of drug development.”

Oh, please.

As I wrote in Yanking Avastin’s breast cancer indication: the right thing to do

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.

Also as I pointed out the drug remains on the market for other conditions –giving doctors the right to prescribe it for whatever they want– while Medicare and many insurers will continue to pay for Avastin for breast cancer.

Luckily the Journal is still confident enough to print dissenting letters, including one from the president of the National Breast Cancer Coalition, who presumably has more insight on the topic than the Journal editorial staff. She writes:

Breast cancer advocates had high hopes that Avastin would save lives. Unfortunately, the evidence before the FDA was clear that Avastin does not increase survival and that it sometimes has severe side effects that are far from manageable, and even lead to death. The FDA’s mandate is to apply scientific evidence to promote and protect the health of the public, not simply to get drugs on the market regardless of their effectiveness or harm. The FDA made the right decision on Avastin.

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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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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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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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“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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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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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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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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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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Despite the waived co-pays and study leadership by big machers from Aetna, Harvard, CVS Caremark and the Brigham, medication adherence was still under 50 percent, an improvement of just 4 to 6 percentage points over patients who were faced with co-pays. The researchers’ conclusions are as follows:

Despite the improvements in adherence that we observed, overall adherence remained low… Therefore, interventions to address other contributors to nonadherence (e.g., knowledge, attitudes, the complexity of prescribed regimens, and difficulties that patients have in accessing their medications) will be necessary to adequately address this problem.

I see things a little differently.

Perhaps the trouble is that rewards for nonadherence under value based insurance design are too low and punishment is entirely absent.  Consider the following alternative study design:

• Pay those who are fully adherent $5000. If that sounds high, keep in mind that these patients incurred about $70,000 in costs on average during the follow-up period
• For those who aren’t adherent, provide counseling and warnings, and a reassessment of whether their therapy is optimal. If they still aren’t adherent, then cancel their insurance

Of course the second bullet point sounds terrible. But if we’re serious about controlling costs shouldn’t we at least contemplate punitive measures?

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Medicare is financed in a regressive manner. Everyone pays a fixed percentage of wages toward Medicare. That includes many working poor who can’t afford health insurance themselves, yet subsidize health coverage for Medicare recipients of various income levels. High income people pay the same percentage of their wages into the system as low earners –so this is essentially a flat tax. However, Medicare tax is not collected on capital gains, which comprise a significant portion of the incomes of high income people. In practice this means low income earners pay a higher percentage of their incomes into Medicare than those who make the most.

Why is it that people seem willing to raise revenue from high-income Medicare beneficiaries when there is a reluctance to impose higher taxes on high-income people in general? Here are a few thoughts:

• Although raising Medicare premiums is essentially a tax increase, it can be presented as a reduction in subsidies, which is more palatable
• The working age population is very familiar with the concept of rising employee financial responsibility for health care at all income levels, so it seems natural to extend that concept to retirees
• There is (finally!) an understanding that Medicare is bankrupting the country and that we need to do something to keep costs down
• The Ryan plan, which calls for providing subsidies to Medicare beneficiaries to purchase insurance, has given people a sense that this kind of change is coming
• While people may generally buy into the vague (and in my view, false) notion that taxing high earners will reduce entrepreneurship and investment, they don’t think it applies to retired people

The Kaiser Health News article includes a couple of disingenuous arguments from the National Committee to Preserve Social Security and Medicare:

• “When you’re talking about seniors, the definition of wealthy seems to be a whole lot lower than when you’re talking about younger people”
• ‘Unlike Social Security, there is no cap on the annual income that is subject to the Medicare portion of payroll taxes paid by working Americans’

The problems with those arguments are as follows:

• The proposals are based on income levels, not wealth, which makes sense because it’s much easier for the government to measure individuals’ incomes. A retired person with an income of $150,000 is likely to have much higher wealth than someone who’s 40 years old making the same amount. I have no problem asking such folks to dip into their savings to contribute to Medicare
• It’s true there’s no cap on annual income subject to the Medicare tax. But that’s only been true since 1994. Most Medicare beneficiaries spent the bulk of their working lives under an annual Medicare wage cap

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—

I’m experimenting with a new transcription service, which should be great but has been causing me some headaches so far. For now you can listen to the podcast and see the transcript. Depending on your browser and OS the recording may also be synchronized with the transcript –you’ll see a cursor in the text keeping pace with the audio. You may even be able to search the transcript and jump to the relevant portion of the audio.

Thanks for your patience.

DAVID WILLIAMS: This is David Williams, Co-founder of MedPharma Partners, and author of the Health Business Blog.

I’m at the 2011 Connected Health Symposium today. I’m speaking with Dr. David Blumenthal. He’s Samuel O. Thier Professor of Medicine, Professor of Health Care Policy at Massachusetts General Hospital/ Partners Health Care System, and Harvard Medical School. He was also the National Coordinator of Health Information Technology until earlier this year. Dr. Blumenthal, thanks for being with me today.

DR. DAVID BLUMENTHAL: Thank you for having me.

WILLIAMS: I’d like to ask you a few questions about the unfolding impact of your work from ONC. Maybe the first question is about the patient’s role in Meaningful Use. I think there’s been a lot of emphasis, especially in the early stages, on physician and hospitals, but I know the patient is in there somewhere. I would love to get your views on where that comes in.

BLUMENTHAL: Well the law focused on the provider, and it was a logical place to focus. If you wanted to get the health care system digitized, most information is in the hands of providers at this point. That’s also the group that can be influenced directly by public programs that pay for care.

When we have a substantial amount of information digitized, then I think the sharing of that information with patients becomes much more practical. The companies that are creating personal health records will actually have information that’s ready to be deposited, and then it will be more meaningful to have patient engagement in a much more proactive way. In the transitional period, the Meaningful Use standard did require an unprecedented level of electronic sharing of information. And I suspect that the next version of Meaningful Use will move further along that trajectory.

So I think we are working toward patient engagement. That’s one of the main aims of the meaningful use framework as it was initially proposed during the first phase of meaningful use. So I’m confident that it’s well integrated into thinking about meaningful use. The Office of the National Coordinator has a consumer eHealth office, and is planning to give it a lot more emphasis going forward, as I think is appropriate.

WILLIAMS: Now, interoperability has always been a priority for you, but also an area where I know there are some challenges. I wonder if you could offer a perspective on where we are on interoperability today, and what the future looks like over whatever timeframe you think is reasonable.

BLUMENTHAL: Well, interoperability is an order of magnitude more difficult as a challenge than accomplishing the adoption of electronic health records. I think we are well on the way toward the adoption. We are at the beginning, I think, of the sigmoid acceleration of adoption that is classic for new technologies. I think it’s already taken off for primary care. I think it’s going to soon take off for hospitals.

I’m reasonably confident that we’ve turned a corner on the adoption. On exchange, the challenges are fundamentally more difficult. It is because it is a collaborative activity. It’s not a individual activity. You have to have partners, and you have to work with partners, and you have to be willing to put the effort in to maintain those collaborations. That means there need to be incentives to do it, and rewards for doing it, and sustaining structures for doing it. Those social supports are much harder to develop than the technological supports.

So the Office of the National Coordinator’s working really hard to increase the number and usefulness of standards. They will be promulgated and adopted, and they will be incorporated into electronic health records. I would say that over the next three to four years, I’m hoping, that the full suite of standards that we need to create an interoperable health system will be in place.

There will need to be, as a result, upgrading of current records and current technologies to accommodate those standards. Then the question will be will the provider community use them? That is, will they implement the capabilities to exchange information, and work with their partners, their collaborators, to overcome the inevitable kinks in the system. I think that will depend as much on the social and economic forces at work as it will on the technological progress we make.

WILLIAMS: Now certainly in the early years after the stimulus law was passed, there was a lot of focus on people chasing the incentives before they expire. But there’s a penalty phase that comes in and I think does not expire. I’m wondering if you have a view on to what extent those penalties will actually motivate adoption, or the kind of behavioral change in that period that’s upcoming only a few years from now.

BLUMENTHAL: The penalties will be very motivating for hospitals because there are substantial amounts of money. For individual physicians, I don’t think they will be decisive. I think the individual physician will adopt ultimately because they view it as a requirement for modern practice. The money’s nice, the penalty is something to be avoided. But it’s really as much a signaling device as it is a real incentive.

The signal has now gone out loud and clear that the 21st century is the electronic age, and medicine can’t isolate itself from the electronic age. Especially for young physicians, that needs no explanation or justification. For older physicians, that’s where I think the money is a sweetener that will move them a little bit further than otherwise they would have gone.

WILLIAMS: With all be acrimony in Washington, it’s pretty hard to find something that Democrats and Republicans agree on, and I think in health care in particular. Maybe one area might be some version of malpractice reform, although that has different flavors depending on where you’re coming from. As far as I can tell, health IT is one of those areas where if there’s not consensus, at least there’s not so much rancor Democrat versus Republican. Do you have a sense of whether that is actually the case, and if so, why that might be?

BLUMENTHAL: I personally believe there’s a great deal of bipartisan consensus in this area. There was danger of it being interrupted by the rancor around health reform in general. But my guess is that it will survive that test. My guess is that it will be one of the initiatives that the Congress will continue to support, maybe not as generously as it has in the past, but it will continue to support it.

People who really want to save money in health care are kind of forced into looking at information technology as a solution, and it’s just so logical, so elementary, so clear and intuitive that it’s needed. That almost anyone who’s serious about deficit reduction, constraining the size of government, improving the function of a health care system, eventually comes around to saying IT is not enough, but it’s really important.

WILLIAMS: I know you’ve closely watched the UK’s progress on health information technology. I’m wondering if you can give me a sense of what they’ve accomplished there, and where they’re heading in the UK.

BLUMENTHAL: Well the UK project is widely disparaged, and I think was not, perhaps, managed as well as it could have been. But we shouldn’t forget that 100% of general practitioners in the UK have electronic health records. We shouldn’t forget that they’ve used those records to dramatically improve compliance with quality metrics throughout their general practitioner sector. And that they have a very, very strong alliance between general practice and the EMR vendors in the UK such that, really, they are using their technology to advance health care goals and developing technology that can advance health care goals.

Where they fell short was in this effort to incorporate the hospitals into the electronic system. And they fell short, I think, because they treated it as a procurement project, rather than as a social change and behavior change project. That’s a very common and damaging mistake to make.

The spine they’ve created, the separate communication technology that they put in place, may turn out to be a great gift to their system. I think the verdict is still out on that. And they have made progress. So I wouldn’t discount the fact that they will be moving forward rapidly. But they made some tactical errors in implementing the system as it was conceived.

WILLIAMS: Well, we’re at the Connected Health Symposium here in Boston, and I know that you participated today on a futurist panel. I’m wondering if there are any key take-aways that came out of that session.

BLUMENTHAL: I thought the panel we had showed a wide range of views and concerns. Maybe the major message was that IT is in the eye of the beholder. There are so many specific technologies and specific uses of those technologies that are encompassed under the term health information technology that it’s easy for people to sit next to each other on a podium and talk about rather different phenomena, and rather different technical needs, and very different care needs, and rather different policies.

So on the one hand you had a company like Verizon, which is trying to think about the use of wireless and cloud-based technologies for enhancing the sharing of information, and runs this huge communication network worldwide. A great resource, a very important company to be involved. On the other hand, you had a geneticist and computer scientist who is thinking about using networking theory to build more complete views of genetic, and physical, and population explanations of diseases. And I was talking about how the 2012 election is going to affect our efforts to create a health information network.

So I think it was indicative of the widespread ferment, and creative ferment, in this field. It’s a very hopeful time. A very dynamic time. It’s almost like the clam shell has opened in health care, and suddenly we are beginning to experience the world that has existed around us for several decades, and it’s going to shake things up and stir things around. And that’s all to the good. It’s just going to be a lot for the average doctor to digest.

WILLIAMS: I’ve been speaking today with Dr. David Blumenthal, formerly National Coordinator of Health Information Technology. Very interested to hear what you’re going to be up to next. I’m looking forward to when you can make that announcement. Meanwhile, thanks for your time today.

BLUMENTHAL: Thank you. Good luck to you.

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Walmart is probably planning to build a network of in-store clinics that are a lot like MinuteClinics. Walmart’s already had a couple false starts in this arena and there’s no great reason to be confident that it will be successful this time around. Most people seem to think Walmart mainly wants to boost retail traffic.

As the article points out, primary care is not where the costs are. Rather, the big money is in specialty physicians and hospitals. I’d like to see Walmart de-emphasize its me-too store clinic strategy and do something bold and potentially impactful.

Open a hospital for instance. Maybe partner with Toyota or Apple to do so.

Ok, I know it’s a completely impractical suggestion, but I would really like to see someone apply Walmart’s supply chain and retail expertise, Toyota’s process engineering and Apple’s design philosophy toward health care. Rather than start with the presumption that everything is going to be expensive, complex and opaque, go for a lean, mean, yet elegant structure.

It’s probably impossible to build such a facility in the US. But maybe the first one can be set up just across the border in Mexico, drawing traffic from north and south of the border –probably self-pay and high deductible patients to start. Staffing will clearly be a challenge, but with the right setup it could become an attractive place to work.

The Walmart $4 generic issue was a bold move. Copying MinuteClinics is not. Why not go for something more worthwhile?

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Romney’s plan won’t save much if any money, and he must realize it. To do that would require changes to the payment and delivery system that I’m sure Romney doesn’t have any appetite for.

I think Romney, Huntsman and Gingrich could have a serious and informative debate about Medicare policy if they wanted to. The optimist in me thinks maybe Cain, Perry, Bachmann and Paul will get out of the way to allow that to happen. Stay tuned.

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David E. Williams:            This is David Williams, co-founder of MedPharma Partners and author of the Health Business Blog.  I’m speaking today with Dr. Bob Darrow.  He’s an OB/Gyn in Dallas, Texas.  He’s at Presbyterian Hospital and is on staff at the University of Texas Southwest Medical School.  Dr. Darrow, thanks for being with me today.

Dr. Robert Darrow:             Thank you David.

Williams:            I understand that about 80 percent of the 600,000 or so hysterectomies that are performed in the U.S. every year are done with open surgery but that something like 95 percent of those could be done with minimally invasive approaches.  Is that the case and if so, why are there so many open surgeries?

Darrow:            That does seem to be the case these days.  I think the reason for so many open surgeries is lack of training.  Most people in their training as a resident only learned the open way or they learned how to do a vaginal hysterectomy. The vaginal hysterectomy becomes difficult for a lot of people who don’t do them often, especially if they have to retrieve or evaluate the ovaries on each side.  The abdominal approach seems to be the easiest approach for most surgeons to learn and to execute.

Williams:            So it’s more about what the surgeons are comfortable with and what’s easiest for them as opposed to an overall assessment of what’s best for the patient or most effective economically?

Darrow:            In my opinion that’s probably the case.

Williams:            From a patient’s standpoint, what’s the difference?  Does it matter if they have an open surgery versus a different approach?

Darrow:            An open surgery is often done when there a lot of difficult pathology is anticipated, meaning a lot of scarring inside or things are stuck together.  A vaginal approach is usually reserved for women who have had multiple births where their pelvic support system is not as adequate, so things are going to be more relaxed and fall out.

The laparoscopic approach seems to be more successful and could be done even with these larger cases that I just described.  I think the doctors simply aren’t as familiar with them.

Williams:            Is it better for the patient in terms of their recovery or their prognosis?

Darrow:            In my opinion, the laparoscopic approach is usually the best because there’s less pain and a faster recovery.  With the vaginal procedure, there’s tugging and pulling on the vaginal support system which, in my opinion and that of others, creates a little bit more pain, but the recovery is almost as swift as the laparoscope.

The abdominal or open approach is the most extensive as far as recovery, sometimes taking six to eight weeks. It requires a longer hospitalization, which makes it more expensive and also more painful.

So in my opinion, the laparoscopic or the vaginal approach are much more comfortable for the patient. If the surgeon is skilled enough to do one of those, it’s preferable from the patient point of view in terms of getting back to work faster, saving money and having an easier recovery.

Williams:            Are there multiple laparoscopic approaches or is it just one specific approach or technique?

Darrow:            There are basically three laparoscopic approaches right now.  The first approach that became the popular earliest was a laparoscopic assisted vaginal hysterectomy in which they started dissecting the tissues down to the laparoscope, then ended up pulling everything out through the vagina –kind of like a modified vaginal hysterectomy.

With time, going into the 1990s, the instruments were better and we started doing laparoscopic hysterectomies where we had basically three ports –three separate incisions– one at the umbilicus and one in each lower quadrant. The right lower quadrant and left lower quadrant went through muscles, but were used for exposure and manipulation –like extended arms of the surgeon– and the umbilicus had the eyes of the surgeon or the laparoscope.  This became more popular and the recovery was much less.

We’ve now developed a single puncture hysterectomy where we can put all three arms or ports in through the umbilicus or belly button. Since we don’t have to go through the muscle, this is a lot less painful in my opinion. The recovery is faster and these patients are going home in two hours whereas a lot of people with the three puncture laparoscopy were staying overnight.

The newest approach besides the single puncture is the robot, which is also through the laparoscope. But the robot has four or five puncture sites.

Williams:            Is there any downside to this single puncture approach?

Darrow:            The main downside right now is the inability to see the entire area that you need to see if the uterus is difficult.  In the really difficult cases it may not be the best approach.  When I say “difficult” I mean extensive pathology.  I always tell my patients that we start out with one puncture through the umbilicus and if we have to add one or two more we can do so.

The single puncture hysterectomy seems to work best in uteruses that are not quite as big and not as stuck or scarred.

Williams:            I imagine if you’ve got a surgery that takes less time to recover from, that’s probably less costly economically and the woman can get back to work sooner. But are there also any losers from an economic standpoint that might stand in the way of allowing this approach to go forward and become more prevalent?

Darrow:            You would like to think that it would become more prevalent as more and more people know about it.  Everybody seems to like the idea of having surgery with less pain and a faster recovery. As the learning curve of the physicians improves with the new technology, I would like to think that more and more physicians would embrace this technology that comes with less pain, less cost, an less time away from work. It seems like a win-win-win situation.

Williams:            My understanding is that various OB/Gyns such as you have come together from competing practices in Dallas to work on this issue of less invasive hysterectomy.  Can you tell me about what’s going on there and what the motivation is for that?

Darrow:            In the three-prong laparoscopic approach you’re absolutely correct.  There’s a group of us from Dallas Presbyterian Hospital who have applied for and received a certificate of excellence through AIMIS, The American Institute of Minimally Invasive Surgery. AIMIS recognizes us as a leader in laparoscopic hysterectomies.  Of this group, I am the only one that does a single puncture and as far as I know, the only one in North Texas that is doing it since this is frankly new technology. But there are many of us that are skilled laparoscopists with the three-prong approach. And yes, we do talk among ourselves and try to share secrets. A friendly rivalry makes all of us better.

Williams:            If someone were told they need a hysterectomy, what advice would you give them?  Let’s say they’re not in your neck of the woods.  What should somebody in another city be thinking about?  What questions should they be asking and what should they be looking for?  It sounds like not everyone is getting it in the most optimal fashion and different surgeons are trained different ways.

Darrow:            Anytime a patient has to make a difficult decision they need to know what the options are from their physician. They need to know the risks and benefits of each option including: pain, potential complications of the surgery, recovery, healing, back to work.  The bottom line is some physicians just don’t have the skill sets that other physicians do. But if they have the trust of the patient, that may be more important to the patient.

Williams:            I understand you’re working with a new technology.  Is there a body of research –either established or emerging– that supports some of the experience that you’re having?

Darrow:            Absolutely.  There’s a body of research otherwise I wouldn’t have started this way without the research to help support me.  Understand that the hysterectomy is a long and proven operation.  All we are doing with our technology is developing newer instruments that make our job easier, whether this has been from day one with the improvement of surgical instruments for open abdominal hysterectomies all the way through vaginal hysterectomies and laparoscopic hysterectomies.  We physicians are always made better by the research that we do and the observations of our complication rates versus success rates.  Certainly you don’t want to have a procedure that has a high complication rate.  Fortunately so far none of these did.

Williams:            Are there other topics that we should cover today?

Darrow:            I think we’ve done a good job of covering it.  I think patients have to always know what the risks are of surgery.  Also always try to resort to non-surgical remedies first in my opinion.  Surgery should be a last resort and you have to weigh the factors that affect your life.  Patients need to be aware of all the options available to them and why their physician chose one over the other.

Williams:            I’ve been speaking today with Dr. Bob Darrow, an OB/Gyn in Dallas, Texas.  We’ve been talking about minimally invasive approaches to hysterectomy.  Dr. Darrow, thanks for your time.

Darrow:            Thank you very much David.

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Drugs undergo clinical trials for specific indications, such as Avastin for colorectal cancer. The label received from the FDA upon approval allows the manufacturer to promote the drug to physicians for those specific indications only. But a drug that works for one disease may work for a related disorder (e.g., another form of cancer) or something that seems totally different, like macular degeneration. Often the drug company will follow its initial clinical trials with trials for other indications in order to broaden the label and expand sales, but salespeople can’t bring up these uses until they’re officially on-label.

Drug companies get in trouble all the time for off-label promotion. According to the Wall Street Journal (The Free Speech Pill), 15 off-label cases were settled between 1996 and 2010 for a total of $8.7B.

There is a rationale for restricting off-label promotion. After all, off-label use can be dangerous or useless. At a minimum the evidence is likely to be less complete. Lifting restrictions on off-label use would almost certainly drive up health care costs significantly. And yet there’s something unbalanced and unhealthy in the current setup, which relies on regulation of the drug industry to ensure proper use of products. In my view, physicians and to a lesser extent patients and health plans need to be more accountable for considering the evidence base for use of a particular drug –not just for off-label use but for on-label, too. Pharma reps should have to disclose when they are discussing an off-label use, but since physicians are already allowed to prescribe for whatever purpose, I don’t see why the reps need to be restrained so dramatically.

I don’t want my own physicians to be overly influenced by drug reps. I’d rather they obtain their information from more objective sources including UpToDate and Cochrane Reviews. If drug reps are unmuzzled on off-label promotion I do think it will lead to problems, but we should address those problems at the level of the physician, patient and health plan, not just the pharma company.

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• Why open hysterectomies remain so common
• Impact on patient experience and outcomes
• Economic consequences for patients, employers and health plans
• The variety of laparoscopic techniques, including single port
• The role of the American Institute for Minimally Invasive Surgery
• How various surgeons in Dallas are working together on this topic

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Now Pfizer is left with the tough task of defending Lipitor against cheaper, but theoretically identical, products. According to the Wall Street Journal (Forget Generics, Pfizer Has Plenty of ‘Lipitor for You’) the company is confident that it can succeed, at least to a reasonable degree.

Pfizer said Tuesday it is striking deals with drug-benefit plans and providing discounts to patients to encourage continued use of branded Lipitor, and to preserve a big chunk of its nearly $11 billion in annual sales.

If Pfizer succeeds, it will only be because of the strange and somewhat dysfunctional structure of the health insurance market.

In general, health insurers seek to pay less rather than more for a drug. They do this with formularies, which discourage the use of pricey drugs through higher co-pays and prior authorization requirements. When a generic is available, there should always be a significant financial incentive for the patient to choose it rather than the branded product. However, Pfizer is likely to undermine this in a couple of ways:

• By providing coupons or co-pay cards to patients, which cancel out the differential between the co-pay for Lipitor and the generic equivalent and effectively block health plans’ attempts to give patients “skin in the game”
• Making rebate or market share incentive deals with pharmacy benefit managers (PBMs) to enable those companies to make significantly more margin from Lipitor than from the generic

These deals cut into Pfizer’s margins but preserve sales revenue, cost the patient nothing, and put money in the pockets of PBMs.

So who loses?

The main losers are whoever is paying health insurance premiums, i.e., employers and individuals. Everyone’s premium is higher than it could be to the extent that Pfizer is successful in its strategy. That’s because ultimately health plans end up paying more when Lipitor is used rather than a generic.

It’s worth noting that Massachusetts is the only state in the country that forbids the use of co-pay coupons by drug makers. I support that policy because it helps contain costs.

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The Blog That Ate Manhattan kicks us off with the Meaningful Use Song, surely the most antic entry I’ve ever hosted. Can’t beat the zippy refrain “I am the model user of an EMR that’s meaningful.”

CMS issued the final rule on Accountable Care Organizations last month, and several bloggers issued their own posts in response. What struck me was their diversity of views on what this all means:

• On one end of the spectrum HealthBlawg compares ACO regs to the camel with its nose under the tent: “the disruptive innovation that is intended to set the rest of the system off-kilter until it reaches a new status quo on the other side of the Triple Aim”
• At the other end, ACP Hospitalist reports that the MGMA’s expert on ACOs opines that the new rule “Doesn’t look like it’s going to affect us right now.”
• Somewhere in the middle come Highlight Health, “If patients show they like this new system, we could see a fundamental change in the American healthcare system” and InsureBlog, “As a medical practice manager, my main concern is still “How do I get paid?”"

GlassHospital’s answer to InsureBlog’s question on how to run an efficient practice and make money in a capitated environment: act like an orthodontist. “I was overwhelmed by the efficiency of it all, the professional nature of the encounter(s), and my daughter entering a rite of passage (and how brave she was!) in no particular order.”

This being Grand Rounds (as opposed to the Health Wonk Review) we have some submissions on the practice of medicine and doctor/patient interactions:

• ACP Internist reports that “Providing information on death to cancer patients… is associated with improved care and to increase the likelihood of fulfilling the principles of a good death.” At least in Sweden.
• Scepticemia (cool blog name by the way) ticks off some pet peeves about what doctors do, including: antibiotics for sore throat, needlessly prescribing pricey drugs, pumping saline into ER patients and doing knee surgery.
• Medaholic asks whether better use of the physical exam could save the system money. The blogger seems to think the answer is yes.

There were more than the usual number of posts related in one way or another to thinking:

• Will Meek, PhD celebrates the arrival of a new book by Daniel Kahneman with insights on two information processing systems: intuition and reasoning.
• Behaviorism and Mental Health explains two ways of looking at human activity: behaviorism and sin. “My primary objection to the notion of sin, however, is that it undermines human dignity and value.”
• Laika’s MedLibLog reviews research on evidence based point of care summaries.

On the patient empowerment front we have:

• Medical Lessons, who’s none too pleased with recent anti-mammogram rhetoric. “Mam­mog­raphy may be the best way for middle-​​aged women to avoid the debil­i­tating and lethal effects of late-​​stage disease.”
• DiabetesMine reminds us that November is National Diabetes Awareness Month and November 14 is World Diabetes Day
• DrPullen.com asks “What vitamins should I take?” and answers, “Most people who have a reasonably healthy diet are best taking no vitamins at all.”

And finally, Supporting Safer Healthcare offers perspectives from the stone age of medical blogging. “Medical blogging in the early days was a heady experience.  The number of medical bloggers was small, and we often found ourselves connecting through shared interests and through Grand Rounds, a weekly collection of medical posts started that same year by Nick Genes, MD, of Blogborygmi.com.”

The Health Business Blog began around that time and first hosted Grand Rounds on June 27, 2005.

That’s it for now! Better Health hosts next week.

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• Numbers That May Make You Sick explores the amount of money –typically in the hundreds of thousands– that people approaching retirement need to have set aside to pay for health care costs such as co-pays, deductibles and uncovered services such as remote patient monitoring for diabetes. To compound the challenge, these costs are likely to rise faster than general inflation, which means that CPI assumptions need to be broken out for this component. It’s something few people do.
• The same article discusses long term care insurance, which is apparently a hard sell for most people. The exception is those people who’ve experienced the trauma of long term care costs with their parents.
• A Nip and a Tuck discusses the phenomenon of older people getting cosmetic surgery, whether because they feel they need it to stay in the workforce or for social reasons. These procedures aren’t covered, which most people realize, but neither are operative-related complications. Although the article points out some of the dangers of cosmetic surgery for older people, the examples it gives are of people who had a lot of success and would recommend such procedures to others. (Reads a bit too much like an infomercial considering its in the WSJ)

It’s Halloween, and if you’re not as scared about long term health care costs as you are of your local ghosts and goblins, their might be something wrong with you.

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The US fiscal situation isn’t as pressing as Southern Europe’s. Still if present trends continue, we’ll get there. In fact, uncontrolled health care spending –mainly Medicare– is the culprit. So what can we expect in a 10 year time frame, assuming the US’s finances aren’t straightened out by then?

• Hospitals and physicians are likely to get hit harder in the US than Europe. That’s partly because physicians get paid more here than Europe and also because Medicare sets rates and pays providers directly
• Pharmaceutical companies won’t escape the axe, but they’re a bit less vulnerable politically in the US because they are a major source of R&D spending, are seen as innovative and a more attuned to the political system
• The Affordable Care Act is intended to bring more people into coverage, but the effects may be partially offset by states tightening Medicaid eligibility and Medicare restricting entry by raising the eligibility age or increasing patient financial responsibility
• Although it sometimes seems spending can’t go any higher, there still may be cost shifting from public programs to the private market, where premiums may grow even more rapidly than they would otherwise

I’m hoping the Super Committee or subsequent efforts place us on a more sustainable policy footing and that PPACA, state-level and private initiatives succeed in decelerating health care spending. Otherwise things are going to get ugly.

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• As the article mentioned, the Massachusetts health reform law Romney signed was about getting people into coverage, not reducing costs
• Although Massachusetts health insurance costs are high relative to other states, that’s not due to the health reform law and doesn’t take into account affordability compared to income

One reason health reform wasn’t passed until 2006 was that opponents argued we had to get costs under control first, and only then take on universal coverage. After a couple decades of that thinking the state decided to try to do things the other way around, an approach I think is more likely to succeed. Universal coverage improved the environment for long-term cost control by getting everyone into the system and making it clear that cost containment would be needed to sustain the gains of reform. Although it would be great to have achieved cost containment in the five years since the law went into effect, it takes longer than that to change health care. Efforts by private health plans to control costs with innovative approaches such as Blue Cross’s Alternative Quality Contract are showing promise. Meanwhile the state is moving forward –albeit slowly– on payment reform and cost control.

Massachusetts insurance costs were high before reform and remain high. Key drivers are our overuse of academic medical centers for primary care, extensive benefits mandates, and guaranteed issue/community rating requirements, which mean that people with pre-existing conditions can purchase insurance –even though it drives up costs for everyone. Overall Massachusetts is a high cost state and health insurance is no exception. But incomes are high, too. Only Connecticut had a higher per capita personal income in 2010.

Statewide health care reform isn’t sufficient, since states can’t control Medicare policies and have only partial control of Medicaid. That’s why federal reform is necessary for Massachusetts and other states to succeed in cost containment, quality improvement and universal coverage.

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• What would a cash paying patient be asked to pay?
• How is the $225 in “charges” derived? Is it determined by Medicare?
• Does the provider lose money on the Blue Cross contracted rate?

I’m not a billing expert so I sent an email to Sports & PT to ask them to respond directly. I was impressed with their informative and thorough response, which I am posting here with their permission.

Mr. Williams,

We would be happy to provide you with some insight into how insurance claims are processed.  Please find your questions with the corresponding answers below.

When a patient first comes to our clinics, we provide them our Policy Disclosure document.  I think you will find it valuable in understanding the relationship between patient and provider, patient and insurance carrier, and lastly, provider and insurance carrier.  Here is the first paragraph:

“Sports and Physical Therapy Associates (SPTA) is pleased to participate in your health care and we look forward to establishing a lasting relationship as your physical therapy provider. As part of this relationship, we wish to establish our expectations of your financial responsibility as outlined in our Financial Policy. Letting you know in advance of our Financial Policy allows for a good flow of communication and enables us to better satisfy you. Your medical insurance is a contract between you and your insurance company; we are not a party to that contract. We can often help with providing information about your benefits, but you are primarily responsible for knowing what type of coverage you have and for any charges that you have incurred as a patient with us. Please review and sign the following Financial Policy prior to your first visit.”

Questions:

1. What I would have been charged if I didn’t have insurance? Do you offer discounts to cash paying customers? If so, what do they have to do to get a discount? How much are the discounts?

For patients with no health insurance we offer a “Self-pay” rate. Our self-pay rate is $100 for evaluations and $75 per visit for follow-up appointments. The rate is based on the average reimbursement we receive from our insurance carriers.

For the most part patients utilize their insurance to cover their episode of therapy but may “run out” or exhaust their benefit prior to the doctor, patient, or therapist’s desired end result. We offer this self-pay rate to all patients who must pay out-of-pocket for their services. In addition, if a patient’s insurance reimburses at a lower-than-average rate we charge them the lower amount. For example, BCBS reimburses around $75-80 per visit but Tufts pays us $68 per visit. A Tufts patient whose insurance cuts him or her off could pay out-of-pocket for continued services and would not be charged more than his or her insurance was paying us ($68/visit). For those patients that are having financial challenges, we will set up a payment plan.

2. How do you come up with the $225 in charges? Is that your price or is it do to with Medicare rules?

Medicare sets the standard when it comes to reimbursement rates as well as billing/documentation guidelines; however, Medicare does not have anything to do with how much we charge for each procedure. The charged amounts are comparable to what other outpatient physical therapy practices are billing (for each procedure) in our region.

Though we may bill $225 we do not receive $225 from our patients or their insurance carriers.  Each insurance has a different allowed amount. We never receive more than your allowed amount. Who we receive the allowed amount from is dependent on the patient’s benefit (if you have a deductible you would be responsible for paying us what your insurance allows for the visit, if you don’t have a deductible your insurance would pay, if you have a copayment they would pay everything except for the co-pay).

Example from your EOB – Note: the actual procedure codes/descriptions are missing from your EOB causing you some confusion (I agree, this is frustrating).

They allowed $81.31 (you pay $25 they pay $56.31 = $81.31), and we adjust off the remaining amount according to our contract with BCBS. For more information on the procedures and descriptions you’ll have to consult with your therapist.

3. Do you lose money on the Blue Cross reimbursement? Do you consider your contract with them a loss leader?

We don’t lose money because we never expected to receive more than the contracted allowed amount. However, if we didn’t contract with BCBS (the largest health insurance carrier in the state) we would lose a lot of money. Why then charge more than we expect to receive? We bill over 200 insurance carriers and they all reimburse at different rates so it’s easier to have a set charged amount for each procedure then make the contractual adjustment at the end.

Please let me know if you have further questions.

All the best,

[Billing Manager]

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I thought it would be a good time to rerun my post from earlier this year about conflict of interest problems with Xigris:

An Archives of Internal Medicine article (Conflicts of Interest in Cardiovascular Clinical Practice Guidelines) is getting a lot of notice today. In essence, many of the physicians who develop guidelines that influence practice patterns and payment decisions have conflicts. The authors recommend only allowing those without conflicts to write the guidelines.

This isn’t a new issue. In 2006 I wrote a piece (Another dirty little secret is out in the open) and am reposting it below because it’s timely:

A year ago in Time to deal with medicine’s dirty little secrets?, I wrote about a variety of practices that are relatively well-known in the health care field but would be shocking to outsiders. Industry often takes the blame for “aggressive marketing tactics,” and no doubt some of that is deserved. But physicians are also culpable.

The open secrets include the ghostwriting of journal articles by industry sponsors, physicians and academic medical centers holding ownership stakes in companies whose products they are researching, the clinical role sometimes played by orthopedic sales reps, and perhaps the most egregious example: physicians who set guidelines having financial relationships with the companies that benefit from how those guidelines are set.

Now we have a new example, which is even more serious than usual. A recent New England Journal of Medicine article blames Eli Lilly for overzealous promotion of Xigris. According to the Boston Globe:

Eli Lilly and Co. funded medical guidelines created for the treatment of [sepsis] in an effort to boost sales of a drug with questionable benefits. The allegation was made by senior scientists at the National Institutes of Health. [They] said Lilly tried to shape the guidelines for use of the drug Xigris by sponsoring a three-pronged marketing campaign

The first two phases are by now almost standard practice in the industry:

1. Lilly paid a task force to spread the word that hospitals were rationing Xigris because of its cost, which forced docs “to decide who would live and who would die”
2. Lilly “orchestrated” the development of practice guidelines to treat sepsis that called for early use of Xigris (an example of the phenomenon I have described before)

But then Lilly allegedly took a third step, which was a little shocking even to me:

Now, Lilly is sponsoring lobbying efforts to turn the guidelines into quality standards. Hospitals that follow such quality measures receive higher payment from insurers.

What’s happening here? Basically, an influential group of doctors is being lazy and greedy, and Lilly is enabling their behavior. The doctors put their fingers in the cookie jar and Lilly keeps restocking it. The public is paying for the cookies –in the form of higher product sales and sub-optimal health care– and should get fed up!

I have no problem with companies using legal means to promote their products, even if their tactics are “aggressive.” They owe it to their shareholders to maximize return on investment. But it isn’t in their long-term interest to push things as far as the medical profession often lets them.

Industry leans on the reputations of individual physicians (aka “key opinion leaders”), medical societies (aka guideline writers), and journals to legitimize their marketing messages. It’s up to the medical profession to scrutinize industry claims and issue independent guidelines and quality standards. Sometimes these claims hold up and deserve to be propagated. Sometimes they don’t. If the docs and journals don’t do their jobs they deserve to lose credibility.

It’s hard to know the extent to which medical guidelines are already corrupted. The situation is a bit like the incident when the Chinese President’s plane was refitted. In the process of fixing up the plane someone inserted a bunch of listening devices (presumably at no extra charge). When the Chinese checked out the plane and realized it was bugged they had to rip the whole thing up. That’s something like what is going on within the major payers. They’ve stopped treating journal articles and guidelines as objective and have started doing their own analyses. But do we really want to leave health care decisions just to them?

Here’s some free advice to the different players in health care:

• Industry: Feel free to market your products and services aggressively, but don’t take things too far. If you do you’ll end up killing the goose that lays the golden eggs. No one will trust doctors, guidelines or journals anymore
• Physicians: Remember that pharma and device companies are not stupid. If they spend money supporting your research or sending you to conferences or sponsoring continuing medical education it’s because they expect to get a return on their investment. It’s awfully hard to remain objective in such instances. Your job is to adopt the best medical practices and put the patient first –sometimes that requires expensive new treatments and sometimes old, cheap standbys are better
• Payers: Go ahead and challenge the objectivity of journal articles and guidelines. On the other hand, don’t pretend that low cost is always synonymous with best treatment. Expect physicians to keep you in line on that.
• Patients: You need to look out for yourself. Find a good, honest physician. Take a look at who’s sponsoring the educational materials you receive. Ask your physician about alternative treatments and do some research yourself

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The part I remember the best was their observation that the research was making an impact. But that impact was that well educated, wealthy people (such as their Harvard Business School alumni audience) were applying the findings to their own kids, and actually widening the gap between themselves and everyone else!

A couple things I saw today reminded me of this:

• A letter to the editor of the Boston Globe by former Stride Rite CEO/chairman Arnold Hiatt making the return on investment argument and noting that state funding of early education and care has been dropping in Massachusetts
• A policy statement from the American Academy of Pediatrics about limiting or eliminating “screen time”for kids under 2, which also notes that kids from lower socioeconomic strata watch more TV from an earlier age

I think it would be productive if the presidential campaign included a serious discussion about shifting funding away from old people –e.g., Medicare and Social Security– and towards the youngest in society. I know what side of the debate I’d be on.

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• Mobile continuing medical education (CME)
• Evolution of CME in light of changes in regulation, technology, funding, and user preferences
• The dominance of Apple and its implications for app development and distribution
• His favorite moments from the Connected Health Symposium
• Highlights from the Facebooking Health panel he participated in here

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David Williams: This is David E. Williams, co-founder of MedPharma Partners and author of the Health Business Blog.  I’m speaking today with Donato Tramuto.  He’s founder, CEO and vice chairman of Physicians Interactive. He’s also co-founder of Health eVillages.  Donato, thanks for being with me today.

Donato Tramuto: It’s a pleasure to be here.

Williams: I’d really like to hear about this Health eVillages program.  What is it?

Tramuto: Let me explain how we got here.  I’m going to start with two very important boards that I serve on; one is Regis College, a college that is focused towards nursing. I have also been appointed to the Robert F. Kennedy Center for Justice and Human Rights leadership board.

I had exposure through Regis to a nursing program and affiliation we had in Haiti, and we learned days after the earthquake that 70 of the nursing students whom we had provided services to had died when the nursing school in Haiti collapsed.

We had all of these resources on the medical information side and I kept scratching my head asking myself what can we do?  Obviously you can send funds and help out that way, but what else can you do?

I was having dinner with Kerry Kennedy, the daughter of Senator Robert F. Kennedy and President of the RFK Center. She was already prepared to head off to Haiti to assess the situation to see what the RFK Center could do.  I said why don’t you take a dozen of our mobile devices, which we will download with medical information, the Rx drug guide and other resources that I think could be critical to nurses or physicians in the village. Tools that could help them to bring a safer and more effective way to treat patients.

Kerry took these twelve devices and throughout her trip I was receiving information from her that people were thrilled.  Historically they were guessing about dosing but now they had an automated drug guide that would help equip them with the proper dosing information for patients.

When she came back, we started talking about taking this idea to other countries and underdeveloped communities here in the United States. The idea was to work with organizations like Physicians for Human Rights and Doctors Without Borders to see, when there is a disaster, if we could be part of the early responders and make these medical devices available.

We came up with the name Health eVillages.  I then recruited some top talent to serve on our advisory board: GlenTullman, chairman of Allscripts, and John Boyer, chairman of MAXIMUS.  We brought in people from the pharmaceutical arena: Steve Andrzejewski, former CEO of Nycomed; Alex Baker, Chief Operating Office of Partners Community Healthcare; Neil Versel, one of the most talented technology innovators and writers. Each one of those folks stepped forward and instantly said yes, I want to serve on this board. They also followed their commitment with a significant donation.

The next challenge we had was to convince the board of the RFK Center to allow this new program to reside within the RFK Center, because I felt strongly that that would give it validation and we would have the exposure to many representatives across the world who are associated with the Center to help us identify where the needs might be.

That brought us to this summer when we started meeting with political leaders in Congress and the Senate. One individual we came across was former Senator Bill Frist.  As you know, the Senator has been a pioneer and beacon in working in underserved communities since he left the Senate. He was impressed.  We were on the phone for about an hour and we talked to him about the various aspects of this program. Within 48 hours I received a message back from Senator Frist alerting me that he had an idea about a village in Kenya that was being served by a single physician associated with Vanderbilt and how they had a gap and a need for textbooks.

One of the things we do with the devices is to repurpose medical textbooks and get them onto the mobile.  He was telling me that the text books out there are 60 or 70 years old. They’re outdated and there’s only a few of them.

So we brought Dr. Mark W. Newton over and signed up his facility to be in a pilot with us.

Then Kerry Kennedy went to Louisiana this summer with the RFK Center delegation to reassess health issues arising out of the Gulf oil spill. We asked Kerry to take a dozen devices with her delegation and put them into the hands of the people who are faced with new diseases as a result of exposure to the toxic waste.  We got reports back that this was an amazing tool because it had the capacity, with our SmartLink application, to bring multiple data sets and information together to help them better identify new diseases that might be progressing as a result of the toxic waste.  So that really brought forth validation.

We had a pilot going on in Haiti as a result of the earthquake.  We had a pilot going on in Louisiana as a result of the Gulf oil spill.  We had a pilot going on with Dr. Newton in Kenya.

Also, our board member Glen Tullman was kind enough to bring us into a situation where he was making available physicians to go to Uganda to help out in communities there.  We asked if we could be a part of that program and now we have a fourth pilot going on in Uganda.

So there you have Health eVillages, in a short period of time, becoming a significant opportunity.  We’re doing small things to help people do big things.

Williams: That’s exciting.  Do you have a plan for how you would continue to scale it up? Are there other organizations you will partner with?

Tramuto: This is where the Kennedy Center really helps.  I’ll start with the second part of your question.  Because of the RFK Center affiliation, we are working with them and their affiliation with Physicians for Human Rights and Doctors Without Borders to tie into their response.  They are certainly rapid responders to disasters so we are tied in with them.

One of the interesting yearly events that the RFK Center conducts is that they identify an individual from a country who has been the Martin Luther King of that country and not only honor that person, but also stay with that person for five years to see through the respective issue that they are addressing.

The Kennedy Center provides funding, but also political support, spiritual support and physical support.  We will work with the Kennedy Center on issues that have a health care bent, making devices and information available.

In terms of scaling, since we made this announcement we’re getting a significant number of requests to provide devices in these countries. We’re also getting a significant number of requests from organizations who want to tailgate with us to add a feature.

For example, when I was speaking at the Health 2.0 conference in San Francisco, we met an organization with the capacity to convert video content into any language. We said it would be great if we could make the information available in any language.  So we’re now discussing with them how to do it, but it needs a program director.  We are interviewing and are near a decision on someone who will be the director of this program. The candidate has a great international background, has been in the political field as an elected official, has an enormous number of contacts and has worked in these underserved communities.  I’m very pleased that the board has stepped forward to say we need to put some significant representation here.

Williams: It sounds like you’re starting with used devices, repurposing them and downloading apps onto them.  I imagine that internet connectivity is not a given, but on the other hand, perhaps it’s coming farther and wider.  Will you go beyond reference tools to make use of internet connectivity when it’s available?

Tramuto: Good question.  First of all, our work does not depend on internet connectivity.  It would be great if they have it because the devices can be updated daily with more information.  We have provided a concept in the Health eVillages organization that if in fact there is a community that has no electricity due to the disaster that occurred, we’ll ship out small generators with the devices and make sure that they can be charged.

The other thing to keep in mind is not just the repurposing of textbooks.  We have incorporated our proprietary Rx drug guide, which now has pictures and automation of dosing calculators. The feedback we’re getting is that they used to guess about the dosing.  Now they put the weight in, they put the drug in and they come back with the right dosages.

Our goal here is that we want not only a more just and peaceful community and world, we also want to make sure that people have access to safe and efficient and effective health care. That’s our ultimate goal.

Williams: Beyond your personal involvement, is Physicians Interactive as a company involvemed with Health eVillages?

Tramuto: Absolutely.  We have been one of the donors of devices. We have been a significant donor in terms of the cash contribution to launch this along with the other board members that I have mentioned to you.  The entire organization and I are very committed to this and true believers.

You have got to commercialize.  Obviously we’re a for-profit company.  We can’t do these things if we’re not commercializing them, but we do balance it with everyone’s responsibility to give back.  We’ve donated the website design.  We’ve donated the creativity that goes into this. There are scores of people in the organization who are working on this as well.

Williams: You mentioned contributions, both cash and in kind from board members.  If regular folk want to be involved by providing a cash donation or through other means, is there a mechanism for them to do that?

Tramuto: Yes there is. If they get on the Physicians Interactive website they’ll go right to Health eVillages.  Or they can get on the RFK Center’s site. We really do encourage folks to get involved.  It’s been very encouraging and uplifting over the last two weeks since we launched this that there has been an enormous response of people wanting to get involved and in fact, that’s how we identified our potential director.  So those two entry points would get folks connected to us and in contact with either myself or other folks.

Williams: I’ve been speaking today with Donato Tramuto, founder, CEO and vice chairman of Physicians Interactive. We’ve been discussing Health eVillages where he is co-founder.  Donato, thanks so much.

Tramuto: Thank you very much.

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It’s definitely a challenge for the Boston area, where biotech startups in particular have been a good source of new, high-skill jobs and the infrastructure spending that accompanies business formation and growth. Quarterly figures bounce around, and the overall year still looks ok. But the trend is clearly something to worry about here.

The long-term (15-100 year) potential of life sciences is amazing, and I do expect investment to increase dramatically over the course of the next few decades. Still, the near term picture is not so pretty. Commentators are quick to blame difficulties with the FDA and the choppy IPO market for the slowdown in investing. There’s some truth underlying their whining about FDA on the medical device side, but in general the explanations are too simplistic and off base.

Investing in biotechnology drugs has always been a big gamble, and it’s unclear to me whether there’s ever been a great return on investment argument for early stage investors, considering the time, cost and risk of development. The additional problem now is that it’s unlikely that society will be prepared to pay rich rewards for those few products that do make it to market. A lot of biotech drugs are priced at tens to hundreds of thousands of dollars annually per patient. That worked ok when drugs like Cerezyme were introduced with breathtaking pricing. Insurance companies actually liked to point to the high reimbursement for those products as proof of their compassion. The unit costs were high but the number of patients was very low.

Life’s different today now that everyone’s latched onto the idea of pricey cancer treatments. As a society we haven’t yet faced up to the fact that we can’t afford to pay so much, especially for products that have only modest benefits on average. However, investors have already concluded that by the time newly funded drugs make it to market that day or reckoning will have arrived. And I agree with their conclusions.

VC-funded drug and device companies have generally contributed to the growth of medical costs by introducing expensive substitutes for existing treatments or layering additional therapies on top of existing approaches. That game is ending, but luckily a new one is beginning. For the next 10 to 20 years the name of the game is constraining the growth of health care costs while increasing quality and improving the patient experience. There is a (small) role for drugs and devices, but much larger opportunities in health care service innovation and health information technology. Some of these emerging opportunities are appropriate for venture funding, but others don’t require much capital or lack the potential for venture-style returns.

Some specific growth areas include:

• Clinical decision support for clinicians and patients
• Navigation tools for patients and providers that take into account clinical and financial choices
• Remote patient monitoring
• Provider/patient/plan communications
• eLearning to replace traditional continuing medical education approaches
• Consumer oriented tools to enhance the patient experience in the outpatient and inpatient settings
• Tools to speed and reduce the cost of clinical development of pharmaceuticals and devices

There is a mobile overlay to all of these points.

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Researchers –and presumably their subjects, too– are looking for ways to extend the health span and bring it as close to the lifespan as possible. Techniques include medication adherence apps, vital sign monitoring systems, and seeking medications to improve muscle function. The article doesn’t discuss non-medical interventions, but there is a photo of residents lifting weights so presumably that’s an important part of the approach. I sure hope so.

“If you can attack the intersection between aging and chronic disease, you could really improve the health and independence of older people,” says Dr. [James] Kirkland, [head of Mayo's Center on Aging].

“This could substantially decrease health costs, especially if we are able to extend health span and shorten the period of disability at the end of the life span,” he adds.

I hope it works out.

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Tramuto is also founding partner, CEO and vice chairman of Physicians Interactive.

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Cain has some sharp words for President Obama and the “liberals in Congress” who have introduced what he calls health “deform.” He says:

Let’s level the playing field under the current tax code and allow the deductibility of health insurance premiums regardless of whether they are purchased by the employer or the employee.

But the 9-9-9 plan calls for a flat tax of 9% on businesses and individuals, plus a 9% national sales tax. For individuals, the plan is based on:

• Gross income less charitable deductions.
• Empowerment Zones will offer additional deductions for those living and/or working in the zone.

Unless health insurance premiums are classified as charitable deductions, I don’t see how Cain’s plan would allow them to be deducted. Also, the cost of health insurance for a family is about $15,000 on average, which is a lot more than 9 percent of median household income of about $50,000. If insurance is fully deductible that will wipe out the tax for many.

Maybe Cain is suggesting allowing deductibility of health insurance as an interim step until 9-9-9 is in place. But since he proposes that the Super Committee –which is meeting now– push for 9-9-9, I don’t think that’s likely.

Meanwhile Huffington Post speculates that 9-9-9 came from SimCity. I have a hard time taking this guy seriously.

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I wish the impact were more substantial and more transparent. In fact, the best would be for seniors to get a letter explaining that they would have seen an increase of 3.5 percent but instead will get zero, thanks to rising health care costs. That would mirror what’s happening in the private sector, where increases in the cost of employer sponsored health care have largely offset wage growth. Come to think of it, maybe employers should also make this phenomenon explicit by showing employees a hypothetical wage increase and illustrating how the raise is being withheld to pay the rising health insurance bill.

This plan would make it a lot clearer how failure to act on health care cost control is taking money out of people’s pockets.

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