Managing Healthcare Costs: waste

Today’s Managing Health Care Costs Indicator is 5

Don Berwick ended his 17 month run as Center of Medicare and Medicaid Services Administrator –and it’s too bad that we won’t have his willingness to be disruptive and his vision to lead CMS through these critical next few years.

Kaiser Health Networks praises Berwick for his top 5 accomplishments:

1. Made CMS less bureaucratic and more responsive
2. Made CMS a force for U.S. health improvement.

3. Pushed hospitals to improve patient safety.

4. Started to move Medicare from paying by the procedure to paying based on outcomes.

5. Encouraged "innovative" health care delivery models

Perhaps to be symmetrical, Berwick gave an interview to the New York Times as he was packing his bags, and noted that “20 percent to 30 percent of health spending is “waste” that yields no benefit to patients.” He cited five key areas of waste in health care.

Berwick’s top five list, with my annotation.

Overtreatment of patients

There is certainly plenty of overtreatment – especially in Medicare patients at the end of life. Much of the underlying reason is cultural –and cultural changes take a long time.

Failure to coordinate care

The sickest 1% of our population represents 20% of costs –and patients are on polypharmacy (more than 8-10 medications a day), and it’s hard to find a hospital discharge that includes appropriate discharge instructions.

Administrative complexity

By definition a system that has multiple payers will be complex- and the Affordable Care Act increases that complexity further through a series of regulations to protect patients – but which require compliance efforts that some will find burdensome.

Burdensome rules

One person’s burdensome rules are another’s critical protection. Some rules can simplify choices (like Massachusetts’ requirement that plans offered by the health care exchange are easily comparable), while others just make for higher cost (like requiring an RN or MD license to give injections, even though medical assistants are well trained for this). We’ll have to take a surgical scalpel to rules, not a bulldozer.

Fraud

Fraud is certainly rampant in health care, and health plans and Medicare are doing a better job of ferreting it out. Fraud settlements are the highest they’ve ever been in the last two years. Building fraud detection into payment systems, rather than waiting for someone to complain, is critical. There are tradeoffs in combating fraud, too. Some systems to interdict fraud might delay payment to legitimate providers, and could increase the cost of providing care.

This is a good list, but it’s not exhaustive. I was surprised and a bit happy not to see variation on the list. It’s pretty hard to get to rural Minnesota levels of utilization in urban Boston or New York – but that type of variation is usually included in estimates of health care waste. Just because there’s waste, doesn’t mean that it will be easy to remove that waste. I was also surprised not to see medical errors and health care acquired complications and infections. Berwick, as the CEO of the Institute for Healthcare Improvement and as CMS Administrator, has worked tirelessly to reduce health care complications, and there is still plenty of work left to do.

Don Berwick, I’m sure, will still be working to improve health care in his next role.

Today’s Managing Health Care Costs Indicator is

$7 billion dollars

Even in health care, $7 billion is a lot of money. Athenahealth, a major force in physician billing, puts out a “pain in the butt” index each year, indicating how difficult each insurer makes it for physicians to collect their fees. Athenahealth suggests that the excess cost of physician billing due to the multitude of different rules and different requirements from health plans is $7 billion. There, I’ve said it three times.

A few ‘fun facts’ from the NPR Planet Money podcast about this:

o The average physician gets 1000 faxes from insurers each month
o Athenahealth bills 1700 different insurers. This vastly understates the issue, since each insurer has hundreds or thousands of plan designs, often dictated by self-insured employers.

Researchers at the Mass General Physicians Organization published an insightful article in Health Affairs a few months back simulating how much money this physician practice spends coping with the myriad of different insurer rules and requirements. I’m pretty sure this article is where the $7 billion figure comes from. The researchers built a new staffing model assuming that there was a single payer with uniform Medicare-like rules, and were able to reduce their total office costs by 12%.

A few critical findings from this study (of 2006 claims)

o 18.2% of claims were rejected in the first place on ‘nonclinical’ grounds. It’s hard to reject a clain on clinical grounds!
o They calculated wasted physician time per physician at 4 hours per week, and wasted nurse time at 5 hours per week.
o 4 out of every 5 rejected claims were eventually paid

The MGH researchers only calculated the cost of this patchwork system in the physician office. This calculation doesn’t include the cost of processing on the health plan side.

There’s no perfect answer to this mess. HIPAA had requirements for standardizing billing requirements, and billing is much better structured already then, say, electronic medical records

I’m not confident that eliminating administrative waste alone would make health care affordable,. But clearly creating administrative efficiency will be critical to managing health care costs.