SMC Business Councils

ONE DOZEN INCONVENIENT TRUTHS ABOUT HEALTH CARE

2007-03-12T15:54:00.000-04:00

A long overdue debate is about to commence in Harrisburg about how to improve access to health insurance coverage in our state. At the same time, the presidential candidates-in-waiting are floating their ideas for re-shaping national health care policy.

The political air is filled with terms like “universal access,” “health insurance connectors,” and “pay-for-performance.” These are political inventions that mean very different things to different sets of stakeholders. Furthermore, none of these newly popular ideas and slogans is aimed at the root causes of our nation’s health care crisis. In order to assure affordable access to high-quality health care services for all Americans, we must face up to a number of inconvenient, sometimes brutal realities.

We already spend enough on health care to meet the needs of every person in the U.S. Adjusted per-capita health care spending in our country is much higher than in any other developed nation. But America lags far behind in most health benchmarks (e.g., life span, infant mortality, chronic disease). Experts agree that at least one-third of health spending in the U.S. is wasted.

Health care costs are growing rapidly and will soon consume one-fifth of U.S. gross domestic product (GDP). No matter how this enormous bill is divided among employers, individuals, and government, the steep upward trajectory of health care costs is damaging our economy, slashing American workers’ take-home pay, and tearing down our standard of living.

We get what we pay for. The fundamental problems with health care are money-driven, but financing gimmicks won’t cure them. Americans have become persuaded that good health care means more -- more of the most expensive, most intensive health care services for every conceivable malady, without regard to the fact that much of it is of highly variable quality and efficacy. Americans also expect someone else to pay. What we should insist on – and pay for -- is consistently excellent health care services that begin with an emphasis on health and illness prevention.

Apart from the costs of health care coverage, employers have a huge economic stake in the health status of their workers. Healthy people miss fewer workdays due to illness, are much less prone to disabling injury and illness, are involved in fewer workplace accidents, and are significantly more productive.

There is a societal interest in assuring adequate health care access for all children. Many childhood maladies, untreated, set the stage for long-lasting, very costly adult health problems. Also, unhealthy children can’t learn as well or as quickly, another costly problem that mushrooms during adult life.

A person who becomes ill through no particular fault of his or her own ought to pay less for health insurance than someone whose unhealthy lifestyle choices (e.g., obesity, smoking) cause or contribute to serious illness.

President Bush is unequivocally right about at least one thing. It’s nonsense that there is a huge tax subsidy for some Americans’ health insurance costs, but not for others.

Medicare is actuarially bankrupt. It is technically solvent for now largely because Congress and the White House have for decades required providers to accept less than actual cost for Medicare beneficiaries’ health care services. Unless modestly painful changes are made soon, severe benefits reductions and much higher payroll taxes will be required within a decade in order to save Medicare.

Health care delivery is not as good or as safe as it should be or could be. Patient safety ought to be the first priority in every health care setting, but it isn’t.

There are significant differences in performance and price among hospitals, physicians, and other health care providers. The most expensive/least efficient providers are often the worst performers. (U.S. News and World Report provides no useful information about these differences – see next point.)

The most meaningful measure of health care quality is risk-adjusted patient outcomes: mortality rates, surgical complication rates, hospital admission and readmission rates, incidence of hospital-acquired infections and medication errors, long-term health/functionality/quality of life. Health care providers should be held accountable and be paid according to risk-adjusted patient outcomes.

We spend far too much on end-of-life care that is often horribly painful, gruesome and disfiguring, doesn’t increase life span, and greatly diminishes life quality and dignity at exactly the moment when maximizing both ought to be the highest priority.

Rxxx of the Day

2007-02-09T16:38:00.000-05:00

A CRITICAL DEBATE FINALLY BEGINS

“We can no longer stand by while health care costs spiral out of control, leaving some 767,000 adult Pennsylvanians without the basic health care they need and creating a drag on our economy.” (Governor Ed Rendell, January 17, 2007)

Actually, if one relies on U.S. Census Bureau figures rather than somewhat idiosyncratic numbers developed by the Pennsylvania Insurance Department, there are more than 1 million uninsured in our state. But let’s not quibble about exactly how many Pennsylvanians don’t have health insurance. More important is that the very large population of uninsured is still growing because unprecedented numbers of Pennsylvania employers and workers who once had job-based health insurance can no longer afford it.

It was fashionable last year in some political quarters to blame declining rates of health care coverage on Wal-Mart. In fact, there were, at most, 7,500 Wal-Mart employees on the state’s Medicaid rolls last year – not a statistic to be proud of, to be sure, but less than 1% of the nearly 800,000 Pennsylvanians who have lost job-based coverage since 2000.

The real crisis is the skyrocketing costs of small employer coverage and the quickening pace at which these employers and their employees are being priced out of the health insurance market. Failure to address small employers’ health insurance affordability problems will doom the Governor’s health care reform plan. Unless small businesses get help (ASAP), our uninsured population will continue to swell, and larger and larger fractions of the state budget will be consumed by last resort, taxpayer-supported health care coverage programs.

A summary of Governor Rendell’s ambitious health care reform plan appears on page __. Important details have yet to be released (e.g., where the money will come from to pay for a series of proposed new programs). But it’s already apparent that many parts of the Governor’s plan will face opposition from powerful health care industry lobbies, including health insurers, hospitals, and pharmaceutical manufacturers.

Several aspects of the Governor’s “Prescription for Pennsylvania” will cause consternation among many small business owners, too. For instance, the proposed assessments on small businesses that don’t sponsor job-based health insurance coverage are already generating controversy. Nevertheless, I would argue (see page __) that business owners ought to consider carefully before making up their minds.

In the meantime, it’s important to note that Governor Rendell’s plan calls for action on two issues that are of special importance to SMC and small businesses generally: (a) modified community-pool rating for setting small businesses’ health insurance rates, rather than group rates based on individual employees’ health status (aka, medical underwriting); and (b) an explicit limitation on health insurer profits.

Ours is one of only two states that still allows medical underwriting, a practice through which health insurers effectively “red-line” (by doubling, tripling, quadrupling the premiums that would otherwise be charged) small businesses that employ one or more people with serious health conditions. Uncapped medical underwriting is the means through which insurers boost rates for some small businesses by 50-100% annually (or more). This extreme premium volatility is the reason that Pennsylvania is losing job-based coverage faster than any other state.

Banning medical underwriting and substituting community pool rating has been for several years SMC’s number-one health insurance priority in Harrisburg. Restraining insurers’ windfall profits has been a close second. Governor Rendell’s support is a big step forward for our legislative efforts, but hard fights in the General Assembly still remain on these and other issues.

Philosophy versus Practicality

In the context of any universal coverage scheme, the hottest political flash points is bound to be whether to mandate that employers offer job-based health insurance, or to levy assessments (aka, new taxes) on employers that don’t sponsor such benefits.

The Prescription for Pennsylvania chooses the latter course. A new state program (CAP -- Cover All Pennsylvanians) would be established. Employers that don’t offer job-based coverage could be assessed as much as 3% of payroll in order to underwrite state-sponsored coverage for the working uninsured, including a new state program (CAP – Cover All Pennsylvanians) that would be available to lower income workers and their employers.

What’s the difference between an explicit employer mandate and a de facto mandate in the form of assessments on employers that don’t provide coverage? Not much, in practical terms. If one is philosophically opposed to legislating a requirement that employers provide health insurance benefits, as most business seem to be, one is probably also opposed to the employer assessments Governor Rendell is proposing.

But there are practical considerations, too, that are revealed by following the money that employers currently spend on health care.

As depicted graphically below, Medicare beneficiaries comprise the largest share of hospital patients (47.6%), but Medicare payments to hospitals amount to just 38.5% of hospitals’ revenues. On the other hand, commercially insured patients account for only 32% of hospitalizations, but commercial insurance payments to hospitals are 42.4% of total hospital revenue. And by the way, Medicare patients are, on average, significantly sicker than commercially insured patients.

[Insert charts here, if possible]

The truth is that Medicare bankruptcy has been postponed by dint of the federal government paying hospitals substantially less than it actually costs to care for Medicare patients. Since hospitals can’t operate in the red indefinitely, they offset Medicare underpayments by overcharging commercially insured patients – by the equivalent of 15-20 cents on every premium dollar. Medicare was established on the basis of payroll tax that would be paid by all, but there is today a 15-20% surcharge on commercial health insurance premiums that is paid only by employers and employees who have job-based coverage. Is this fair?

There’s more. Hospital services for uninsured persons in our state total about $500 million annually -- categorized as “uncompensated care.” In actuality, however, such care isn’t uncompensated. Hospitals offset the costs of free care for uninsured patients by raising prices for commercially insured patients’ bills. Once again, these extra costs are borne only by employers and employees that have job-based health insurance. Is this fair?

In light of the above, the coming debate over the Governor’s proposal to impose new levies on employers that don’t offer coverage seems like the political intersection of philosophical purity versus practicality. Employers that don’t provide employee health insurance certainly won’t want to pay a new tax. But what about the dwindling numbers of employers that offer job-based coverage? Should they and their employees shoulder – alone -- a 20-25% surcharge on their health insurance premiums in order to give others (including Uncle Sam) a free ride?

THE RIGHT PRESCRIPTION FOR PENNSYLVANIA?

Pennsylvania Governor Ed Rendell’s sweeping health care reform proposal, entitled “Prescription for Pennsylvania," aims to increase significantly Pennsylvanians access to affordable health care coverage. Although the plan’s universal access provisions are similar to those put forward in other states (e.g., Massachusetts and California), it also includes unique and substantial emphases on health care quality, eliminating waste and re-work, and bringing down the costs of health insurance."We can no longer stand by while health care costs spiral out of control,” Governor Rendell said. "It is no longer a question of whether we can afford to act. The cost of inaction is far greater in terms of individual health consequences and from theincreasing burden on taxpayers.”

Rendell also is focusing on the economic consequences of skyrocketing health care costs, describing high health insurance costs paid by Pennsylvania employers as a “tremendous deterrent” to business development, particularly among small businesses.

Among the provisions of Prescription for Pennsylvania of greatest likely interest to business owners: Cover All PennsylvaniansOne of the most controversial parts of the new plan is the proposed Cover All Pennsylvanians (CAP) program, through which affordable basic health coverage would be offered to eligible small businesses and to individuals. Although Governor Rendell’s reform plan includes no individual or employer health insurance mandates, the CAP at least suggests the possibility of some type of mandate in the future.

All uninsured individuals would be eligible to purchase basic coverage through the CAP, with premiums set according to income. Certain businesses would be permitted to participate in CAP, too: if they have not offered group health insurance to their employees during the preceding six months, if they have fewer than 50 employees, and if their employees earn less than the state’s average annual wage (~$39,000). Eligible businesses that choose to join the program would pay approximately $130/employee/month; covered employees would pay on a sliding scale, ranging from $10 to $70, depending on income.Related to creation and financing of the CAP is the Governor’s proposed “fair-share assessment” of 3% of payroll on all employers that do not sponsor coverage (companies with fewer than 50 workers would be exempted from this assessment in the first year).Small Business Health Insurance Rates The Governor now endorses “adjusted community rating” for setting small business health insurance rates. This approach would preclude the use of individual health status and gender in setting small group rates, and eliminate much of the terrible rate volatility that causes thousands of small employers to drop coverage each year. Community rating is and has been SMC’s top health care priority in Harrisburg.

Also in the Governor’s plan is a proposed limitation on health insurer profits, via a requirement that at least 85% of premium revenue be expended on medical services for subscribers.

Waste, Errors, and Inefficiency

In his official announcement Governor Rendell asserted that, “Pennsylvania businesses, consumers and taxpayers pay at least $7.6 billion for unnecessary and avoidable health care costs.” This estimate includes more than $6 billion for treatment of preventable hospital-acquired infections; failures of chronic disease care that lead to unnecessary hospitalizations, and hospital readmissions due to avoidable complications and other medical errors. The Governor proposes to eliminate this waste and re-work by: (a) ceasing to pay health care providers for obvious flaws in care for state employees; and (b) embarking on an effort to improve health and wellness and chronic disease management.

Outlook

Details about how the Governor’s plan is to be financed aren’t to be released until after Dynamic Business goes to print. As many as four-dozen separate pieces of legislation will be required in order to implement the entire Prescription for Pennsylvania. SMC and others will push for additional components, including full transparency in health care pricing and quality of care, tax policy support for health savings accounts, tax credits for small businesses that implement active health and wellness efforts.

Rxxx of the Day 11/13/06

2006-11-12T12:40:00.000-05:00

Rxxx of the Day.

Tuesday afternoon, November 14, will see the Pennsylvania Health Care Cost Containment Council publish a first hospital-by-hospital report of the incidence of hospital-acquired infections. The purposes of this report are to illuminate a key indicator of patient safety in acute-care hospitals, and to furnish information (and encouragement) to patients, policy-makers, purchasers, and, most of all, physicians and other health care providers in order to catalyze needed changes.

What constitutes a hospital-acquired infection has become a more-and-more complicated and contentious question as patient safety concerns have become more public and acute. Infection control specialists and health care experts are divided about how exactly to define HAI’s, as they have come to be known, and the rest of us can’t help but be uncertain.

Nevertheless, there is a tendency to have the perfect become the enemy of the good in this area of improving patient care. The critical challenge isn’t perfect reporting of HAI’s; the most important matter is that health care providers become jointly and individually engaged in zeroing out unnecessary, “extra” infections among those who are hospitalized.

Urinary tract infections, bloodstream infections, methicillin-resistant staph infections, surgical site infections, ventilator-associated pneumonia, and other types of recurring HAI’s all present different problems, in terms of how to identify and classify as HAI’s, and how to treat and prevent. That the health care community as a whole has made a significant start – but only a start – toward resolving these problems is encouraging. That isolated pockets have developed of what seems to be revolutionary change on behalf HAI detection and prevention is exciting. But if Pennsylvania hospitals’ initial (incomplete) public reporting of HAI’s discloses at least 30,000/year, there is a long, long road to traverse before patient safety reaches an acceptable level.

There will be a great deal of commentary from the physician and policy-making communities in the wake of this Tuesday’s release. We’ll need to pore over those comments and think carefully. But we also ought to keep a few key points in mind.

The numbers in next week’s report aren’t contrived or extrapolated. They represent actual patient infections reported by Pennsylvania hospitals to the Health Care Cost Containment Council. That said, the numbers to be reported aren’t 100% accurate. Not only is there disagreement at the edges about what constitutes HAI’s, but individual hospitals (and departments within hospitals) have warmed to the state-required task of reporting ALL HAI’s with varying degrees of enthusiasm and alacrity.

Most, if not all, instances of common hospital-acquired infections are preventable. This has been demonstrated repeatedly in hospitals and other health care settings. Those who imply or say that this is impossible are part of the usual 10-year lag time in health care between the discovery of a better clinical practice and its widespread adoption.

Individual hospitals’ HAI rates reflected in next week’s report will be a very mixed bag. A few hospitals, which have invested the most time and resources in acknowledging and reporting HAI’s in the most aggressive fashion (including use of proven, but expensive, electronic surveillance tools) will appear to be the least safe (i.e., have the highest rates of HAI’s). In fact, these hospitals may very well be the safest of all, as they have resolved large cultural and technical problems associated with recognizing HAI’s and are actively engaged now in preventing them (i.e., improving patient safety). Conversely, some large hospitals that will report seemingly low rates of HAI incidence are actually not reporting fully/accurately. It would not be unfair to conclude that some or all of these hospitals aren’t yet adequately engaged in preventing infections either.

Although the upcoming report won’t pinpoint the numbers of patient deaths, disabilities, and injuries caused by HAI’s, nor calculate exactly the (huge) additional costs attributable to treating HAI’s, there is no question but that the human and financial costs of HAI’s are enormous. A patient who contracts any kind of HAI is likely to spend a much longer time in the hospital than average and several times more likely to die in the hospital than otherwise. Infection control specialists may argue that HAI’s occur more frequently among patients that are sickest (and there is some research underway that looks into this question), but the right response is, “Does the fact that a patient has had a complex surgery, or is hospitalized for a serious illness, etc. relieve health care providers of the responsibility to prevent (preventable) HAI?”

The report to be released on Tuesday is not a result; it is a first step in a process toward improved care and better patient outcomes, a process that will include quarterly public reporting, to be sure, but must have as its crucial, underlying focus encouraging and helping health care providers to perfect the care delivery systems and other improvements that are required in order to protect patients from contracting dangerous diseases while they are hospitalized.

Rxxx of the Day:

2006-11-06T09:10:00.000-05:00

After a long hiatus, we return to the fray. Today’s subject is Pay for Performance (P4P).

Health care and health insurance costs threaten job-based coverage, and business owners’ and employees’ access to needed health care services. Skyrocketing premiums hit businesses directly at their bottom lines, subtract from employee take-home pay, make it more difficult to attract and retain needed workers, affect productivity and operating costs, and damage individual businesses’ and entire sector’s competitiveness in global markets. Having heard a succession of head-in-the-sand physicians, health care administrators, and other stakeholders wring their hands about all of the pitfalls of P4P, it’s fair for employers to ask them, “Is the status quo working for you? If it isn’t, what’s your Plan B?”

Business owners and managers are generally confounded by the health care industry’s frequent lapses in what are for them everyday imperatives like producing goods and services of consistent quality, striving for exceptional customer service, calculating return on investment (ROI) impact before making important decisions, cost of re-work, etc. They are also at a loss to understand the health care industry’s incomplete adoption of modern information management technology, poor systems engineering, and the absence of effective safety protocols to protect patients and health care workers.

Business owners don’t know how to “fix” health care, and they can’t/won’t try to practice medicine. But they do understand that the status quo isn’t working for most stakeholders, e.g., employers, employees/consumers, taxpayers, physicians, hospitals (particularly those with disproportionately older and poorer patient populations).

It’s obvious to them that something drastic must be done. Because (P4P) seems at least to hold out the hope of health care reformation along principles and using tools that are familiar to business people, most private employers understand P4P (nebulously, to be sure) as a potential means of resolving health care problems. That is their (hopeful) starting point.

What Is P4P? It is the Tower of Babel. There is no common P4P language among stakeholders. Even among employers alone, there is no common understanding of what P4P is, nor a consensus about how to proceed down the P4P path.

Most employers are waiting for insurers and/or government to develop and implement P4P programs. However, the Leapfrog Group (consortium of large corporate HC purchsers) is one of several P4P trailblazers, and (as a work in progress) is developing new health care purchasing specifications (e.g., required/preferred hospital CPOE, high-volume “centers of excellence” for complex surgeries). Many of Leapfrog’s specs emanate from recommendations of the National Quality Forum (FYI, updated NQF recommendations to be released in mid-November). The federal government is also forging ahead in its various guises (CMS, VA, etc.) with P4P initiatives.

Some (that would be me) worry that these early P4P iterations start at least partly in the wrong direction – focusing on prescribed processes of care rather than patient outcomes, measuring compliance with proxy standards for quality of care rather than patient results, developing new administrative and billing criteria rather than driving change in health care delivery.

My view is that a P4P concept that embeds in federal regulations detailed rules for delivering care will fall short of the magnitude of change that is needed in order to rationalize health care costs, eliminate waste and errors, and improve outcomes. Asserted more floridly, if the feds write rules down the detail level of when, how much, and by whom peri-operative aspirin should be administered to cardiac surgery patients, we will be assured of winning literally countless small bureaucratic battles about the processes of care, and guaranteed to lose the war to transform and save health care as we know it in the United States.

At this stage, no one has a copyright on the right approach to P4P – and certainly not yours truly-stupid. But we ought to consider some ideas that could inform the creation of effective P4P systems.

1. Employers need to wrap around the idea that there is more to think about than medical claims when assessing the ROI of health care benefits. Employee health (physical and mental) and well-being has direct, measurable, financial effects on productivity, absenteeism/presenteeism, workplace safety, disability, and recovery from illness or disability. Employers should calibrate ROI (and P4P) on the value of their human capital, not just year-to-year medical claims. Furthermore, employers need to move beyond one-size-fits-all health care benefits. For example, health savings accounts, as currently structured, won’t be relevant or helpful to employees with chronic diseases. The economic value of health and wellness programs is growing, as chronic diseases and high-risk behaviors increase, as is the validity of pegging employer contributions to employee benefits on the basis of (voluntary or involuntary) employee compliance with medically-indicated health maintenance and improvement actions that flow from annual health risk assessments and screenings.
2. Flowing from an appreciation of human capital is a constructive way to approach P4P: the goal of P4P ought to be development of tangible means of recognizing the quality and effectiveness of health care services provided to each patient, and aligning financial and other incentives so as to encourage provision of highest quality, most effective health care services to every patient in every setting. P4P focused on improving patient care is best means of sustaining medical, political, financial, and medical success.
3. Although patients ought to be at the center of P4P, patients frequently don’t know what their best interests are: they smoke, overeat, don’t exercise, and tend to understand health care quality in terms of maximum utilization of HC resources when illness occurs. In order to align all incentives correctly, P4P will need to recognize and compensate for these behaviors.
4. A quality measurement system to support P4P developed without physicians’ participation (at the outset and ongoing) will fail. Corollary to this, employers and government bureaucrats and elected officials and benefits consultants must resist the temptation to practice medicine via command-and-control regulations and benefits specifications. This course would stifle innovation, and invoke the law of unintended consequences (to the detriment of patients).
5. In order to develop useful quality measurement systems, all stakeholders must be engaged collaboratively: employers, consumers, public and private payors, physicians and other providers. The perfect shouldn’t be the enemy of the good in these collaborations. Concordance, shared values, and good faith among stakeholders is required, not 100% up-front agreement on every detail.
6. A crucial measuring stick for health care quality and value is risk-adjusted patient outcomes. Customer/patient satisfaction, consideration of ROI for all stakeholders involved in change, administrative claims/payments data, consideration of clinical best standards, and other factors will also be important. Various stakeholders will want to find faults and weaknesses in all measurement criteria. The best/only means to consensus is a blending and weighting of different criteria that strikes a constructive balance between patient interests and appropriate provider accountability for what happens to patients.
7. If we don’t know what it costs to do a thing, we are lost in trying to construct a business model. If we don’t know the price of a thing, we can’t possibly know if we can afford it. If we can’t relate costs and prices to objective performance criteria for a good or a service, we can’t know value. Without transparency as to costs and prices for health care services, a rational P4P system can’t be designed.

The fact is that we already have P4P in health care, but the manners in which we pay for “performance” in health care are perverse. For instance,

• Providers tend to be paid according to effectiveness of their marketing campaigns and their (cultivated) reputations.
• Benevolent monopoly is the preferred industry model, for both insurers and providers.
• Medical malpractice laws punish acknowledgement of problems and impede systems improvement.
• Insurers profit according to risk selection and networks built on either ubiquity or price (not objective quality).
• Managed care gatekeepers have gone the way of the dinosaur, but higher deductibles, co-pays, etc. are proving effective in suppressing health care utilization.
• Healthy individual behavior isn’t rewarded; unhealthy behavior isn’t disincented.

When we talk about aligning incentives (all) in the right direction, incremental change won’t do, and re-aligning health care delivery alone won’t do, either. We need fundamental and continuing change on the parts of all stakeholders.

Employers are on the cusp of having tools to measure objective value of health care services across entire continuum of prevention and wellness, acute care, and chronic care, and according to patient outcomes, patient safety, and adherence to best medicine … to differentiate among providers and insurers’ provider networks on the basis of these measures … to understand the ROI that emanates from high quality of job-based health care in terms of health care costs, workers’ compensation costs, disability costs, absenteeism, and presenteeism, productivity… to offer ROI-validated wellness and health promotion programs, and to differentiate job-based benefits on the basis of individual responsibility and choices.

Individuals covered by private pay insurance are potentially at the beginning stages of a benefits transformation that will offer better coordinated and more valuable services to further their personal health and well-being, but will also relate benefits to appropriate lifestyle and health care choices, including provider selection. A transformation of employee benefits, coupled with maturation of electronic health records, more effective education and outreach, and better use of information management tools, could make it possible for individuals to take a much larger and constructive role in their and their health care.

What are the barriers to P4P implementation?

From the standpoint of providers, P4P can’t help but instill fear that it is, at root, a stalking horse for reducing fees and reimbursements. P4P also engenders anxiety about comparison/competition/reputation among providers, particularly if envisioned in terms of invalid comparisons that affect competitive position, reputation, and finances negatively. A crucial consideration for providers, however, ought to be the certainty that current and anticipated (e.g., Medicare insolvency) political/financial conditions preservation of the status quo in health care and health care financing will result in lower and lower provider reimbursements. Notwithstanding understandable anxiety about the unknown, physicians should be forward-leaning about P4P as the last, best hope for strengthening the patient-physician relationship and regaining a primary role in health care decision-making.

From the perspective of employers, there is also uncertainty; P4P may or may not treat their most pressing HC problems (i.e., runaway costs and the necessity of incrementally trimming or terminating job-based coverage). Furthermore, ongoing involvement in establishing objective standards for health care quality, and differentiating payments to providers on such standards, seems like a vast time sink for which employers are ill-equipped. It would be helpful and encouraging for employers if proofs of ROI could be disseminated broadly in advance of asking them for their buy-in. (They have an alternative which seems less and less odious at each health insurance renewal -- limping along until a single payor system comes about.)

Insurers are generally comfortable, at least on paper, with P4P. But there is among insurers an inescapable imperative to differentiate themselves on the basis of proprietary quality and value measures and initiatives. Under an effective P4P regime, there would be common objective standards for evaluating quality of care. Insurers would derive competitive standing from the effectiveness of their intercessions to maintain the health of their subscribers, assure that right HC services are delivered at the right time by the right provider, drive objective value competition among providers. It may be that insurers will be the biggest obstacles to P4P success.

Individual consumers are basically powerless, unless their personal health circumstances (of the moment) make them desirable customers/risks for insurers. Lacking information about price of health care services, no consumer who has need for health care services can make a rational decision and contribute to P4P. Will price transparency occur soon, and will it be voluntary or involuntary? If price information becomes available, consumers will need help in order to make sense out of pricing. Will this help come from employers, insurers, government?

Government and large HC purchasers are moving forward with P4P concepts now, and these initiatives will loom large in coming months and years. Any stakeholders who hope to influence P4P – which is to say HC delivery and financing in the future – must be engaged now, or will have no choice but to adapt to what is decided inside the Beltway.

As matters seem to be progressing currently, P4P standards that are focused chiefly on compliance with prescribed steps (e.g., peri-operative aspirin for CABG) are taking shape. Will this approach improve patient outcomes, reduce waste and errors, resolve the medical malpractice conundrum (political and clinical), reward providers that deliver HC of highest value to patients, incent healthy behavior, restrain lifestyle-driven health care utilization and the incidence of preventable chronic disease, etc.? I doubt it very much. It seems to me there is only one potentially promising course – a perfected variation on the ideas above.

Rxxxof the Day 022706

2006-02-27T14:09:00.000-05:00

(From an interesting opinion-page piece authored by Charles Farrell (vice president of Dorman Farrell LLC, Medina, Ohio) that appeared in today’s WSJ.)

“… employers should get out of the business of guaranteeing health care benefits, just as most employers have gotten out of the business of guaranteeing retirement benefits … By guaranteeing benefits, there is an expectation that no matter how high the price, the employer must provide the benefit. This is not the best method for establishing a market rate for employment [and] … will lead to more employers dropping coverage and more uninsured Americans.”

“A better method is for employers and employees to negotiate total pay in dollars, not in benefits or lifestyles. Employees can then use a portion of their total pay to purchase health insurance, fund their retirement, pay their mortgage, buy a car, or whatever else they think is important. Employers can serve as a portal to facilitate access to financial services, and use their size and negotiating power to improve the quality of offerings …”

“ … To allow more direct consumer purchasing of health care, we need new insurance underwriting standards, revisions to our tax code, increased health care data-management systems, and a paradigm shift in the employer-employee relationship …”

SOMETHING MUST BE DO

2006-02-20T11:58:00.000-05:00

SOMETHING MUST BE DONE

“Something must be done to fix the current system.  My premium for an employee with family coverage is now … over TEN THOUSAND DOLLARS per year!”

SMC Business Councils conducted an online survey last week of 150 local small business owners current thinking about issues related to skyrocketing health care costs.

Business owners’ frustrations with seemingly uncontrollable health insurance costs are mounting.  Passing along more costs to their employees – or even dropping job-based coverage altogether – is seen by larger and larger numbers of entrepreneurs as a financial and competitive necessity.  And although deep misgivings remain about the consequences and costs of a national, single-payer health care system, there is increasing agreement that this outcome may be inevitable.

Highlights of the results (individual respondents’ additional comments in italics):

Health Savings Accounts.  More than one-half of the small business owners who responded agreed that health savings accounts (HSA) and more individual responsibility can make a measurable difference in containing health care costs.  But only one-fifth of respondents indicated that they are actively considering an HSA option right now.  More than one-half believe that the President’s proposals will have no effect on the likelihood of their organization offering an HSA option in the future.

“There is one significant problem with the move to HSA-based insurance.  Insurers can decline coverage or coverage for pre-existing conditions to consumers of individual policies.  This is a huge deterrent for those who would otherwise favor HSA/high deductible coverage.”

Controlling health insurance costs.  Among respondents whose organizations offer job-based health insurance coverage, nearly 60% reported 2005 health insurance premium increases of 10% or more.  Among these, about 40% said their 2005 premiums rose by 20-100%.

Most indicated an intention to pass some or all of future coverage cost increases to their employees.  Three out of five respondents said they would consider rewarding employees in the future for maintaining healthy lifestyles or taking steps to improve unhealthy behaviors.

     “Everybody wants to pay for a Kia and drive a BMW.”
     “Health insurance is just too costly for small businesses and individuals.”
     “Health insurance costs are killing our company’s profitability.”

One-out-of-eight respondents whose organizations offer job-based coverage today said that they would seriously consider terminating job-based coverage this year if upcoming premium hikes were similar to 2005.

Although relatively few small employers offer HSA’s currently, larger numbers are switching to high-deductible health insurance coverages in order to pass along some of increased coverage costs to employees.  More than one-fifth of respondents to the SMC survey have already switched to high-deductible coverage, and more than two-fifth’s of remaining respondents indicated that they plan to consider switching to a high deductible plan at next renewal.

How to control rapidly rising societal health care costs.  Survey respondents selected their three “most significant drivers of health care costs.”  Their cost-driver nominees were virtually identical to those identified in parallel SMC online polls in 2004 and 2005.

An aging population that needs more health cares services (61%)

Prescription drug prices and increased utilization of Rx (52%).

Profiteering by insurers (50%).

Medical malpractice lawsuits (47%).

Too little individual responsibility for health care costs (30%)

Virtual monopolies by a few large hospital systems (23%)

Nearly two-thirds of SMC respondents said they thought that a national, single-payer system was undesirable – but nearly one-half of all surveyed agreed that a national, single payer system is (politically) inevitable.

     “Most health care reform tends to re-arrange the deck chairs on the Titanic.”
     “American business is at a huge disadvantage due to high health care costs.”
“A national health care system is an absolute necessity to keep this country’s businesses competitive with the rest of the world.”

Rxxx of the Day

2005-11-22T10:43:00.000-05:00

Here’s a newspaper headline and lead that can be described as unlikely, to the point of absurdity. (Nevertheless, it is true.)

From the November 12, 2005 edition of the The News & Observer in Raleigh, North Carolina:

"INSURER HAILS LOWER PROFITS

Blue Cross and Blue Shield of North Carolina reported more good news on Friday: Profits continued to slide during the first nine months of the year."

(May we live so long as to see a similar headline about any other Blue Cross Blue Shield affiliate, or any other health insurer.)

Rxxx of the Day

2005-11-01T09:15:00.000-05:00

From today’s online Kaiser Family Foundation daily bulletin: “Out-of-pocket health care costs and medical error rates are higher for patients in the U.S. than in five other Western nations, according to a Commonwealth Fund survey published on Thursday in the online version of Health Affairs, the Washington Post reports. For the report, researchers surveyed 6,957 adults between March and June 2005 who recently had been hospitalized, had surgery or reported health problems in the U.S., Australia, Canada, Britain, New Zealand and Germany. The survey, which is the largest to examine health care in several nations during the same time period, found that U.S. residents were more likely to forego medical care than patients in other nations because of costs. In addition, U.S. respondents reported the easiest access to specialists but the most difficulty getting care during nights and weekends (Stein, Washington Post, 11/4). Patients from all six countries reported medical errors, uncoordinated care and poor management of chronic diseases (CQ HealthBeat, 11/3).

An earlier issue of Health Affairs documented hugely disproportionate health care spending in the U.S., compared to any other developed nation, without any offsetting benefit in health status or life expectancy. (In fact, Americans are rather less healthy and long-lived that the citizens of most developed nations). The extra incidence of medical errors in the U.S. is a significant (but certainly not sole) cause of our bloated national bill for health care. And unlike ordinary waste, in the realm of medical errors, we are actually paying hundreds of billions of dollars extra each year for health care services that injure or kill us.

Rxxx of the Day

2005-10-31T15:54:00.000-05:00

More about Wal-Mart – which is taking an awful pounding in the public media for its internal discussion of limiting corporate health care benefits costs by hiring more healthy workers.

Here’s a fact.  In Pennsylvania, most small employers that still offer employee health insurance coverage are already acutely sensitive to the effect that hiring and firing decisions have on coverage costs.  It may not be possible to act on the basis of this sensitivity.  For instance, the most-qualified, or perhaps only qualified, job candidate may be a morbidly obese woman of child-bearing age who smells of cigarettes.  Or perhaps one learns indirectly after a hiring that the new employee has a serious chronic health condition that is punctuated irregularly by hospitalizations.

But owners and operators of small businesses – and to an increasing extent, the employees of small businesses – understand that the health and risk characteristics of covered employees and dependents dictate monthly premium rates.  In the good old days, if you will, a 25% premium hike was a significant irritant, coming on top of monthly family coverage premiums of, say $400 per month.  These days, however, a premium increase of 25% is akin to a neutron bomb going off at a small firm, boosting by one-quarter family coverage costs that are already north of $1,000 per month.  When annual changes in health care coverage costs are the difference between making a profit and recording a loss, only head-in-the-sand politicians can fail to understand that small employers have been and will continue to be preoccupied – within the limits of the law, of course – with the health care coverage cost consequences of hiring and firing.

At the end of the day, why do employers continue to offer employee health insurance benefits?  Unlike their larger corporate relations, small business owners are disposed to offer benefits because they retain a paternal impulse to take care of the extended family represented by their workers and covered dependents.  Wrapped up in this are factors like the owner and family relying on the same benefits as the rest of the company’s workers, and the human connections and empathy that accompanies knowing every worker.

But as the costs of coverage rise higher and higher, the fundamental calculus is this, no matter what the size or culture of a business:  employee compensation, including wages and fringe benefits like health insurance coverage, is driven by what is necessary in order to attract and retain the kinds of workers that are required to operate a particular business successfully.

Employers of relatively unskilled workers, therefore, are much less apt to offer coverage than, say, firms that employ only those with advanced engineering degrees.  For all of the breast-beating about Wal-Mart’s skimpy employee benefits, one must ask if it is reasonable in a competitive retail marketplace to award $50,000 salaries and Cadillac health care benefits to employees whose skill levels are such that they can’t/don’t add offsetting value through their labor?  Is it rational to offer disproportionately high salaries and benefits if one can attract and retain needed workers for less?

We all want decent health care benefits for ourselves and all of our neighbors, but we are arriving at an uncomfortable national reality, which is that few among us are prepared to shoulder the (increasingly astronomical) costs of providing same.  There is also an even darker reality, which is that the United States as a whole is becoming less able to insist on such benefits and remain competitive in a global marketplace.

These are the realities that Wal-Mart is driving up the national esophagus to a chronic condition of acid-reflux.  We can demand legislation that requires all employers to provide generous health care benefits, or pay a large offsetting tax to support a public program.  We can require Wal-Mart and other employers to provide “adequate” employee benefits, or not allow them to locate in our communities or states.  But we can’t legislate or dream away the impending bankruptcy of Medicare, the runaway disasters of Medicaid funding shortfalls in every state, the budget crises that are provoking strikes in local school districts (and at SEPTA in Philadelphia), or the creeping inability of the private sector to maintain health benefits (including an alarming magnitude of cost-shifting from publicly funded programs) if their costs are open-ended.

No one is piling on General Motors for a corporate strategy that is aimed at unloading a large fraction of its current workers, its retirees, and their benefits costs in favor of new U.S. hires (younger, healthier) or farming more activity out to foreign locations where employee compensation costs are much lower.  There is a general appreciation of the dire nature of GM’s situation, and the impossibility of not taking unpleasant steps.

So why should we carry on so about Wal-Mart?  It’s only doing what it must in order to avoid becoming General Motors.  And do we really doubt that every small, mid-sized, and large employer in the country isn’t, if you will, praying in the same church these days?

Rxxx of the Day

2005-10-28T00:29:00.000-04:00

I have been thinking (in the shower mostly) about General Motors and Delphi and the United Auto Workers, and about Wal-Mart, and about what all of this change means.  For whatever it’s worth ...

Runaway health care costs for current workers and retirees are a big part of General Motors running itself into a deep, muddy ditch.  No one at GM, from the board room to the UAW union hall, appears to have the courage to do what is needed.  Uncle Sam’s Towing Service, however, may not render the same emergency service that Chrysler received a generation ago.  The whole firmament of American auto making has been altered.  Chrysler is now an underperforming asset within a global German auto conglomerate.  Japanese cars made in the U.S. frequently have more American-made content than the GM and Ford.

GM – aided and abetted by the UAW – has been abjectly stupid and irresponsible, and I believe that a majority of Congress and American taxpayers are prepared to let GM fail.

How could senior management and directors of a corporation that lost money and market share throughout most of the past three decades commit to a series of literally insane labor agreements that guaranteed no layoffs?  How could they have agreed to contract provisions that allowed use of robots only if all inactive autoworkers were maintained, at full wages and benefits, in a “job bank?”   And so on and on.

GM blue collar workers are to be gingerly introduced to modest co-pays for health care services.  But their health care benefits will still rank in the top 1% of all U.S. job-based benefits.  Someone at GM or in the UAW needs to stand up and tell the truth.  Everyone who works for GM is in a zero-sum situation.  If there are immediate, draconian cuts in jobs, pay scales, work rules, and benefits, more jobs (which will still be good-paying jobs) can be salvaged in the long run.  If painful decisions aren’t made soon, however, there may not be any GM in not too many more years.

Some analysts have commented that GM’s agonies won’t have much or any effect on other U.S. companies, since just about every other major employer (and every small one, for that matter) undertook major surgery on health care benefits years ago.  What if the very public GM agonies, combined with the unremitting steep rise in health care coverage costs, causes employers generally to conclude that they can make further benefits reductions without jeopardizing recruitment and retention of needed employees?

I’ll have more to say about the recent news about Wal-Mart, but Wal-Mart and GM connect as follows.  While America’s original global giant corporation indulged in decades of uninterrupted insanity that brought it to its knees, America’s newest global colossus, Wal-Mart, is showing an unequivocal, hard-hearted willingness – and capability -- to do whatever is necessary to further its corporate interests.  This is what is in store for most Americans – not because corporations are heartless monsters (they must make money or cease to exist), but because we Americans can’t compete globally with mediocre public education, an out-of-control legal system, health care insanity, and tax and regulatory policies that prevent economic growth.

Rxxx of the Day

2005-10-23T21:38:00.000-04:00

Congressman Tim Murphy continues to be highly focused on health care cost and quality issues. His rumored opponent is a local sportscaster. The notion that this would be a formidable foe seems like a bad joke, unless you’re the kind of knucklehead that prefers celebrity over substance.

Here is Murphy’s latest on health care and chronic diseases.

Rx: Healthcare FYI #26 Taking Control of Chronic Conditions: Patient Care Management Lowers Health Care Costs
Washington, Oct 19 -
The problem: Almost 80% of the nation’s total medical care costs (including Medicaid expenditures) is spent on the treatment of chronic conditions.5 Chronic disease often involves multiple diagnoses, complications, hospitalizations, tests and treatments. What is Patient Care Management? • Individualized health plans for chronic condition patients that coordinates treatments among healthcare providers, uses nurses or caseworkers to monitor patient compliance and involves patients in their own care to improve patient outcomes and lower health care costs. The annual direct medical costs of the following chronic conditions: • Diabetes: $44 billion. • Arthritis: $22 billion. • Cardiovascular disease (Heart Disease and Stroke): $300 billion. • Depression: $12.4 billion. • Asthma: $5.1 billion. Patient care management lowers health care costs: • A study of 363 Medicare patients who received follow-up protocol for seniors with coronary artery disease reduced hospital readmissions by 16% for a savings of $1 million in Medicare costs. • A comprehensive diabetes patient care management program of 20,539 Medicare patients improved health status in the short-term and reduced the severity of complications in long term care with average savings of $1.5 million per 1,000 patients with diabetes. • A patient care management program that provided an individual care plan and case management from nurses for 11,000 Medicaid patients with diabetes, asthma and congestive heart failure in Oregon saves $6 million annually in reduced health care costs and improved outcomes. For example, the program improved the management of blood sugars and lowered lipid counts among diabetes patients with high cholesterol • A study of 300,000 children (under age 21) on Medicaid enrolled in a pediatric asthma management program had a 34% lower hospital admission rate and an 8% lower emergency room rate, compared to children not in the program. An example of success: • A program at the Washington Hospital of Southwestern Pennsylvania taught patients to self-manage their disease through diet, lifestyle changes, medication monitoring and depression screening resulting in an over 50% decrease in hospital readmission rates. The Federal Government’s Role: • The Centers for Medicare and Medicaid Services (CMS) in a February 2004 letter announced it would match state costs of running disease management (patient care management) programs aimed at improving health outcomes while lowering the medical costs associated with chronic diseases. States can develop these programs under either a Medicaid waiver or state plan amendment. Almost half of states have implemented or are in the process of implementing Medicaid disease management (patient care management) programs. Research on the impact of state Medicaid disease management programs is currently being collected. • The new Medicare Prescription Drug, Improvement and Modernization Act (MMA) establishes two new programs, the Voluntary Chronic Care Improvement Program and the Care Management Performance pilot program to further explore the potential of disease management techniques. o The Voluntary Chronic Care Improvement program will provide guidance to beneficiaries with chronic diseases that could be responsive to disease management (patient care management) interventions. o The Care Management Performance Demonstration is a three-year Medicare pay-for-performance demonstration with physicians to promote the adoption and use of health information technology to improve the quality of patient care for chronically ill patients. Doctors who meet or exceed performance standards established by CMS in patient outcomes will receive bonus payments. It will be implemented in four states: Arkansas, California, Massachusetts, and Utah with the support of local Quality Improvement Organizations. It was announced on October 14, 2005 and is accepting applications until December 13, 2005. Recommendations: • Continue pay-for-performance incentives that improve the quality of care and improve outcomes. • Use Electronic Medical Records to coordinate care across disciplines, improve communication and patient monitoring to manage and prevent disease. • Reduce costs in federal Medicare and Medicaid spending by implementing patient care management programs.

Rxxx of the Day

2005-10-19T14:57:00.000-04:00

The General Motors – UAW détente, fleeting though it may be, ought to be a wake-up call for the country.  The roof is caving in on job-based coverage.

There isn’t any miracle, pain-free fix.  Medicare is going bankrupt as we speak; the new prescription drug benefit will only hasten the day when Medicare runs out of money.  In the meantime, Congress and the White House are resorting to increasingly desperate and unsustainable cuts in provider reimbursements.  Guess who pays higher fees in order to offset Medicare underpayments?  Anyone who thinks that turning the whole mess over to a single-payor, government-run system doesn’t get the joke that Medicare can’t afford to pay actual-cost for beneficiaries’ health care services.

And what about financing a single-payor system?  One well-intentioned group rallied in Harrisburg yesterday, promising that a new 10%-of-payroll levy on employers and a 3% income tax on all working Pennsylvanians would produce the money needed to finance universal care.  No need to get out the calculator, however, as even if all of that new tax revenue was sufficient to pay the nation’s health care bill for the first year, at least ten percent more would be required the next year … and ten percent more the year after that … and so on.

If we don’t get a grip on unnecessary health care costs, there won’t be much health care security in our national – and individual – future.

Electronic health records aren’t going to save us.  Even if the technology were perfected and available off the shelf today … even if a common electronic information format had been agreed to and adopted by all users across the country … even if hospitals and physicians stepped up agreed to absorb the unreimbursed $750+ billion cost of implementation ... electronic medical records wouldn’t catalyze a great rolling back of the forces that are driving health care costs.

A perfect, seamless EHR system wouldn’t prevent hospital-acquired infections, wouldn’t prevent most medication errors, wouldn’t force physician adherence to best clinical practices, etc.  Make no mistake; seamless electronic access to patient information is a big deal for patients and health care providers.  It will improve care and efficiency, and prevent some mistakes.  Let’s join the optimists and hope that a national HER system will be up and running by the middle of the next decade.  (Let’s hope we all live that long.)

Before we buy into the extravagant promises being made by the information technology geeks (and their mouthpieces in Washington), who see dollar signs dancing in front of them whenever EHRs are mentioned, let’s think about what’s driving health care costs:  utilization, utilization, and utilization.  And among all of the causes of increased utilization, the choices we are making as individuals figure most prominently of all.  Under what circumstances will a shiny, new, coast-to-coast HER system impact the following?

Meticulous hand-washing (at home, at work, in general) is the single most important thing that each of us can do to avoid getting sick and avoid transmitting illness to others.  Nevertheless:

43% of Americans say that they never wash their hands after coughing or sneezing.

One-third of us admit to not washing our hands after using a public restroom.

One-third of us don’t wash our hands before eating lunch.

And studies show that more than one-half of us who actually wash our hands don’t do so long enough and thoroughly enough to remove germs and dirt.

Obesity is the fastest growing lifestyle-driven cause of illness and poor health. Yet we go on supersizing, sitting on our asses, and feeling good about ourselves (73% of us, in one survey, pronounced ourselves satisfied with our overall health and appearance). The facts are that:

Two-thirds of Americans are overweight or obese, more than one-half of us don’t get enough exercise, and one-fourth of us get virtually no exercise.

Obesity rates have been increasing steadily for a generation. In Pennsylvania, more than 20% of the population is considered to be clinically obese – double the rate of just twenty years ago. Even worse, the situation is worsening fastest among children and young adults, which amounts to a bow wave of obesity that is on track to exceed 25% of our population in the next several years.

Among many other illnesses for which obesity is a direct or contributing factor, the near-epidemic of adult-onset diabetes can be directly linked to overweight and obesity. (The literature says that, on average, the risk of diabetes is greatly reduced if an individual reduces his or her weight by just 7%.)

Smoking and tobacco use remains the leading lifestyle cause of death, disease and poor health (with obesity running an increasingly close second). Notwithstanding enormous new taxes and a far-reaching public information campaign, the rate of smoking and tobacco use is not cycling decisively downward.

More than one-fifth of Pennsylvanians still smoke, and less than one-quarter of our smokers admit to ever trying to quit.

Rxxx of the Day

2005-10-17T22:32:00.000-04:00

From July 18, 2005 edition of Business Journal of Portland

Oregon employers and workers that carry employer-sponsored health plans subsidized the Medicare and Medicaid systems to the tune of 14.4 percent, or $634 million, in 2004.

Using data from the Oregon Price Point Web site, consultant Geoffrey cost shift to private insurance plans from Medicare and Medicaid is roughly 14.4 percent, varying widely within the state.

Payment shortfalls from Medicare totaled $399 million, according to Brown's data, and Medicaid shortfall was $235 million from Medicaid.
"This means higher insurance premiums for public and private employers" and for their health plan enrollees, said Kevin McCartin, an insurance consultant and president of McCartin Analytical Services.

While Medicare and Medicaid rates are non-negotiable, hospitals have more leeway in charges to private insurance. "When you have three customers, and two routinely pay less than the cost of doing business, the third payer becomes critically important," said Kevin Earls, vice president of finance for the Oregon Association of Hospitals and Health Systems. "Without the money you make up from [private insurance] you can't make up the losses you incur treating Medicaid and Medicare patients."

Brown's analysis did not include the additional cost shift from growing rates of uncompensated care for the uninsured, but a study released last month by consumer health care advocacy group Families U.S.A. revealed private health insurance premiums in Oregon shoulder a cost shift of 10.2 percent for the uninsured.

Rxxx of the Day

2005-10-13T14:21:00.000-04:00

Health care costs continue to increase, and without reform, the "number of uninsured and underinsured will grow, as more employers scale back benefits or quit extending coverage to workers altogether," Karen Davis, president of the Commonwealth Fund, writes in a Seattle Times opinion piece.

Davis writes that employers and others must begin to examine the supply side rather than the demand side of the health care market to reduce costs. She recommends 10 proposals "that show promise":

Reduce high-cost hospitalizations, such as those for readmitted heart failure patients;

Reduce payment disparities for patients with similar conditions;

Reduce use of unnecessary medical tests and procedures;

Eliminate payments to hospitals for complications related to medical errors;

Negotiate reduced prescription drug prices;

Standardize health insurance products to reduce administrative costs;

Increase use of evidence-based medical guidelines for tests and procedures;

Guarantee patient access to a regular health care provider to direct and supervise their care;

Eliminate of duplication of medical tests and procedures; and

Implement health information technology.

Davis writes, "It is time to devote the necessary resources to study and test out the utility of these 'supply side' approaches." She concludes, "None will be painless to implement, but these are real-world examples that could not only save money but also save lives"
(Davis, Seattle Times, 10/13).

(SMC has been advocating just about all of these changes for a long, long time. They won’t be “painless” to implement, for sure. But they’re no more or less wrenching and revolutionary than what the average business owner would do to solve a workplace problem that threatened to kill employees and customers, or to respond to a marketplace change that threatened to put one out of business.)

Medicines

2005-10-13T10:16:00.000-04:00

A provocative half-dozen paragraphs about why societal prescription drug costs are out-of-control and how nonsensical are our priorities in this area (expressed as patent protections and financial incentives): http://hcrenewal.blogspot.com/2005/10/most-drug-expenditures-for-me-too.html

Rxxx of the Day

2005-10-10T13:03:00.000-04:00

Flipping (figuratively) through the Kaiser Family Foundation website recently, here’s a really-not-fun fact.  Between 2000 and 2003, more than 5.8 million working Americans lost employment-based health insurance coverage (net loss!), and there were 660,000 Pennsylvania workers among these.  Since Pennsylvania accounts for give-or-take 5% of U.S. population, shouldn’t be shocked that our state accounted for more than 10% of the net loss of job-based health care coverage?  (Although the KFF hasn’t yet crunched state-by-state numbers for 2005, it’s certain that the same trends – nationally and in our state – have continued.

Pennsylvania remains a state with a relatively low (but growing) incidence of uninsured.  But the recent, devastating losses of employment-based coverage have forced dramatic increases in publicly subsidized health coverage programs.  The waiting lists for AdultBasic, even after a budget increase and $1 billion from the Blues, are going to lengthen, and more Pennsylvania workers and families will be uninsured or under-insured.  The overwhelming majority of those affected are small business workers.

There is an underlying national problem that is the size of Melville’s whale, and that is the exploding costs of all of the health care services and resources that we Americans consume.  In Pennsylvania, however, we make this even worse by managing to have the most destructively regulated small group health insurance market in the country.  The debate among insurance industry lobbyists rolls on and on, but the numbers in the first paragraph above are the equivalent of giant billows of smoke emanating from under our state’s regulatory teepee.  As for the people who still want us to believe that there is no fire producing the poisonous miasma that is causing hundreds of thousands of small business workers and their families to lose health insurance coverage, I just don’ think that they will ever get it.

Finally, here’s a website worth looking at:  www.everydaychoices.org.

Food for Thought

2005-09-29T14:44:00.000-04:00

Food for Thought

#1.  “I think you would have to say that Blue Cross always has a lot of money lying around, and that the ways it is being used isn’t helping those individuals who are paying thousands a month in premiums.”

     (Chrissy Pearson, spokesperson for the North Carolina Department of Insurance, commenting on the compensation packages for the top-10 executives of North Carolina Blue Cross and Blue Shield, which increased 70% during the past two years.

Health insurance purchasers would like to know about compensation trends for Pennsylvania Blue Cross and Blue Shield executives, too.  Odds that the Pennsylvania Insurance Department will come see fit to collect and publish the information?  (ZERO)  Maybe someone else or some other group should do this…

#2. “If the continue with unhealthy habits, I have to pay for it eventually.”

(Howard Weyers, founder of Michigan-based WEYCO, Inc., which gave employees 15 months to quit smoking – with the help of smoking cessation programs – or lose their jobs, saying that employees with unhealthy habits cost his company money in extra sick days and health insurance premium increases.)

Recall that WESCO subsequently fired several employees that failed to quit (or try to quit) smoking.  Weyers is absolutely right about the extra employer costs of smoking (and obesity, etc.)    There are also extra costs for all employees, who must make larger premium contributions and out-of-pocket payments as health insurance costs escalate.  Employees argue that employers shouldn’t be able to dictate behavior during non-work hours.  Among the relevant rebuttals is the fact that employer-sponsored health care coverage is 24/7, 365 days per year.

Rxxx of the Day

2005-09-28T16:54:00.000-04:00

Rxxx of the Day

Community pooling for health insurance, about as sensible a concept as I can think of, is being destroyed in Pennsylvania.  The health insurance marketplace for small employers that sponsor employee coverage is rapidly bifurcating into:  (1) a population of actuarially fortunate types (better described as temporarily actuarially fortunate, as we're all getting older) that can get very affordable health insurance coverage they don’t much need, and (2) a larger population comprised of middle-aged and older workers, females (especially females of child-bearing age), African-Americans, those with pre-existing medical conditions, etc., who need health care coverage but are either on the verge of not being able to afford it, or have passed that point already.

Although there has been some legislative activity in Harrisburg on this problem, it is by no means clear that anything is going to happen legislatively.  During the past several months, there has been an increasingly loud chorus from commercial health insurers in our state about the threat to competition that community rating poses.  The legislators who are buying this horse tranquilizer of an argument need to shake themselves awake.

What competition?  I never hear numbers or facts from those who moan about the impending threat to competition in health insurance.  There is certainly competition for small employers that employ actuarially and demographically favorable groups of workers and covered dependents.  There’s so much competition that rates for these employers went DOWN this year and last – by as much as 40%.  Frankly, I’m not even sure this kind of cut-throat competition is working very well for commercial insurers, as they can’t be duplicating their recent history of windfall annual profits if rate-cutting continues.

But if there is competition for the 35-50% of small employers who are considered to be attractive risks, there is NO COMPETITION for all other small employers (i.e., the ones that employ one or more people that are older, female, and/or black … the ones that employ one or more people who have cancer, diabetes, asthma, high blood pressure, etc.).  There is no such thing as comparing competitive rates for these employers and their employees.  They get the demographically-banded Blue Cross rate, and that’s it.  And the older, more female, and less actuarially attractive your workforce, the more likely that your Blue Cross rate has been increasing by 35-80% annually.

As a result, thousands of affected PA small businesses, particularly very small businesses, are dropping or skinnying down (e.g., $20,000 annual deductibles) health insurance coverage.

If the above describes a constructively competitive market, God bless us all.  Until the PA General Assembly understands that the real problems are about small employers, their workers, and their families, NOT health insurers, PA will continue to have (literally) the most medieval, ineffective, perverse, and destructive small group health insurance market in the country.

What's worse, we're also stuck as a society with some fairly gruesome long-range trends in health care costs. As Boomers age, the average age of the overall population is increasing by larger increments each year. With that increased age comes greater frequency of both acute and chronic illness, and increased utilization of health care services. Health care services themselves are proliferating -- new drugs, surgical approaches, and treatments. This is great, of course, but paying for everything isn't so great.

Hospitals have consolidated in the last decade into larger systems that can demand and get significantly higher payments from insurers (see UPMC Health System threatening to withdraw from Highmark networks, and Highmark subsequently caving in to UPMC contract demands). For their parts, insurers no longer care much about big market shares, only about profits, so there are no bargains or special deals to be had.  Unless you are 25, single, white, and male, health insurance increases of large magnitude are virtually guaranteed for years to come.

Finally, government, particularly the federal government is doing small employers no favors. The costs of caring for the uninsured are indirectly embedded in our rates.  Premiums for individuals who have pre-existing medical conditions and no employment-based coverage are paid for by a 2.5% state tax on our premiums. Medical malpractice costs and mandated benefits costs are part of our premium dollars. And the federal government has reduced its Medicare reimbursement rates to hospitals and doctors to levels that are below costs -- and guess who pays more in order to keep hospitals in the black.

Rxxx of the Day 2

2005-09-23T23:55:00.000-04:00

Rxxx of the Day (2)

Benefits tiering has significant potential for to moderate costs for health insurance purchasers.  Buying simply on the basis of cost-per-unit of health care services is full of potential problems.  For instance, a hospital that charges less but has a significantly higher rate of hospital-acquired infections, medication errors, etc. isn’t a bargain.  Patient outcomes data and cost information are needed in order to make for constructive comparisons among providers.

The Pennsylvania Health Care Containment Council (www.phc4.org) arguably leads the nation in publication of risk-adjusted patient outcomes that draw valid comparisons among hospitals.  However, parallel comparisons among physicians are problematic, except in the cases of a few, high volume specialties (e.g., advanced cardiac care).  Volume and/or valid means of measuring patient outcomes are obstacles.  And measurement of physician performance on the basis of process measures (e.g., was aspirin administered pre-operatively) or payment data is unreliable.

More on issues relating to benefits tiering, taken from the current issue of Health Leaders.

“Tiering presents challenges for each demographic group.  [Out-of-pocket] Cost increases in high-income households, for example, are more likely to cause a switch from a PPO to an HMO.  High-income households are also better positioned to accept the additional risk of moving to a higher deductible.  The working poor – those with annual household incomes of $15-25,000 – often face more serious choices.  Faced with paying rent or paying for health insurance, low-income households are more likely to drop health insurance altogether or delay treatment.”

Rxxx of the Day

2005-09-23T20:24:00.000-04:00

Rxxx of the Day

Tiered-benefit health plans are ones that provide different benefit levels, according to subscribers’ choices of preferred product or service providers.  One of the most widely used types of tiered benefit is prescription drug coverage (86% of employer-sponsored plans) that varies according to selection of generic, preferred non-generic, and other medications (which describes a three-tier benefit for which different drug co-pays would apply).

Tiered benefits are also emerging for hospitals and physicians.  From a subscriber’s point of view, this could be very helpful – if the subscriber’s health plan ranked hospitals and physicians according to risk-adjusted patient outcomes, compliance with significant care benchmarks, etc, and implemented reduced co-pays for the subscriber’s patronage of the most effective health care providers.

Lacking sufficient valid comparative data about competing health care providers, health plans are resorting to rankings based on variation in costs.  For instance, California’s PacifiCare calculates that during its FY2003-4 there was the following variation:  (1) for bariatric surgery, minimum case payment was about $6,600, but the maximum was more than $57,000; (2) minimum case payment for chemotherapy was a little more than $4,000, but maximum was $32,500; (3) the minimum case payment for an appendectomy was about $2,100, but the maximum was nearly $12,000; and (4) payments for vaginal baby delivery ranged from $1,600 to nearly $8,800.

These numbers are not altogether illuminating, as it isn’t at all clear that the above numbers are apples-to-apples comparisons.  Furthermore, quality of care isn’t directly correlated with costs/payments; the highest quality providers seldom are the ones that get paid most.  Nevertheless, such wide variations in costs/payments is stimulating interest in differentiating benefits/co-pays according to costs.

HERES A GOOD IDEA

2005-09-22T22:37:00.000-04:00

HERE’S A GOOD IDEA THAT ALIGNS PATIENT CARE WITH POSITIVE FINANCIAL INCENTIVES …
State Rep. Phyllis Mundy today explained to fellow lawmakers why they should approve a bill she has introduced to cut down on medical errors and rein in health-care inflation.
Mundy’s legislation (H.B. 743) would provide a 20 percent discount on medical malpractice premiums to health-care providers that implement a total quality management system designed to reduce medical errors, improve patient outcomes and reduce health-care costs. Mundy secured House passage of her proposal in 2003 by attaching it to a broader patient safety bill, but the Senate failed to act on that legislation.
Her bill has been attracting national attention. Modern Healthcare Magazine featured it last month under the headline “Tying quality to premiums,” and Mundy also has received inquiries about the bill from across the nation.
According to Mundy, fewer medical errors mean fewer lawsuits, lower insurance payouts and lower health-care costs. A number of medical facilities across the country are currently using total quality management systems such as ISO 9000, Baldrige and Six Sigma and have experienced positive outcomes as a result.

Rxxx of the Day

2005-09-22T22:22:00.000-04:00

Rxxx of the Day

The Equal Employment Opportunity Commission (EEOC) is reportedly considering whether to initiate complaints against employers that are pioneering a new health care coverage containment tactic -- asking employees to participate in annual, employer-sponsored health screenings/assessments and undertake recommended (by health insurer/personal physician) follow-up activities (e.g., smoking cessation class, weight loss program). Individual employees who participated in this voluntary activity would be rewarded with sweetening of their regular health care benefits, granting a few extra days of paid time off, etc. The EEOC is philosophically opposed to any arrangement that results in differentiating benefits among employees, but it is also apparently aware that this new approach is producing consistently significant health care utilization rates (aka, lower health insurance costs) and fears public criticism.

If you believe that healthier individual lifestyles and lower rates of health care utilization are essential to controlling costs and assuring adequate, affordable health insurance, this anecdote ought to give pause in terms of a government-run, single payor system. You can pretty much depend that a government-run system would designate morbidly obese individuals, heavy smokers, sedentary people as specially protected classes, and their hugely disproportionate health care expenses would be embedded in the steadily higher taxes that would be required to support the government-run system.

Rxxx of the Day

2005-09-16T01:35:00.000-04:00

I’ve been doing some thinking about the extent to which those who have commercial group insurance are subsidizing everyone else, from Medicare beneficiaries to the uninsured to those who have individual coverage. Combing the internet will yield some better numbers, but consider these:

In Pennsylvania, there is a 2% premium surcharge on group health insurance premiums, the proceeds of which are used to subsidize rates for guaranteed-issue individual insurance coverage.

Medicare (i.e., the federal government) pays hospitals and doctors less than commercial insurance for just about every kind of health care encounter. In fact, Medicare most often pays so much less that Medicare payments don’t even cover health care providers’ costs. Since even non-profit hospitals can’t run at a loss indefinitely, commercial insurers (i.e., the insurers who are paying out our money to hospitals and doctors) pay more than otherwise. According to a recent analysis done in Oregon, Medicare cost-shifting adds an average of 16% to commercial health insurance premiums. (This is in addition to the payroll taxes we all pay to finance Medicare.)

When the uninsured (and under-insured) receive treatment (e.g., in hospital emergency rooms), and aren’t able to pay for the costs of these treatments, these aren’t “free” services. Once again, hospitals can’t run in the red, so those of us who have insurance are charged more in order to offset hospitals’ losses on the uninsured.

There’s more to think about in this area, but we ought to be very, very concerned because things are going to get worse in a hurry:

The individual health insurance market is a disaster, and legislators will be under increasing pressure (in order to avoid still more uninsured) to deepen individual market premium subsidies for those who don’t qualify for medically-underwritten coverage, and the most obvious place to look for more money is a hike in the group insurance premium surcharge.

Medicare is actuarially bankrupt and will be literally so in no more than a decade or so. Medicare bankruptcy would be a political disaster for whoever were to occupy Congress and the White House at that moment, so we should expect further collusion in Washington to shift costs to the commercially insured population (via further reimbursement rate cuts to providers), and thus postpone Medicare bankruptcy for a few extra years.

The number of uninsured is increasing, states’ budgets are being destroyed by exploding Medicaid costs, and the percentage of employers that offer employment-based coverage will dip below 60% in 2006. This will increase the amount of unreimbursed care provided by hospitals, and the bill for this care will be divvied up among fewer employers who still offer employee health benefits. With next fiscal year’s Medicaid funding shortfall in PA expected to exceed $1 billion (other states are in no better shape, by the way), we should also expect either a state tax increase, diversion of revenue from other state programs, or both.

Rxxx of the Day

2005-09-14T17:34:00.000-04:00

Sorry about the long silence. First, there was family vacation, and then there was a span during which I couldn't get back into this space in order to vent more spleen. The make-up period begins today.

New reports released this week cast a harsh light on the future of employment-based health insurance coverage in the United States (separate releases by the Kaiser Family Foundation/Health Research and Educational Trust, Robert Woods Johnson Foundation, and USA Today).

Any small business owner could tell you that skyrocketing coverage costs are killing small businesses and their employees. These new reports paint a clear, composite picture of just how rapidly the situation is worsening.

According to the 2005 Annual Employer Health Benefits Survey from the Kaiser Family Foundation and the Health Research and Educational Trust:

Ø The percentage of businesses offering employee health insurance benefits declined to 60% in 2005, down from 69% in 2000. This change is attributable almost entirely to a continuing steep drop in the number of small businesses that offer employment-based coverage.
Ø Premiums increased by an average of 9.2% in 2005, down from 11.2% in 2004, but still on the same general glide path that has seen premiums jump by 74% since 2000. Premium inflation still outstrips wage growth and overall inflation by a wide margin.
Ø The survey pegged average annual premiums for family coverage at more than $10,000 – slightly higher than gross earnings for a full-time minimum wage worker.
Ø The average worker paid more than $2,700 toward premiums for family coverage in 2005.
Ø Among firms that do not offer health benefits to their workers – the preponderance of which are small employers -- nearly three in four (73%) said that the costs of health insurance benefits were “very important” to their decision.
Ø Employers have little confidence in the latest strategies to contain rising health-care costs. Employers rated these cost control methods as “very” effective: consumer-driven health plans (16%), higher employer cost-sharing (12%), disease management programs (14%), and tighter managed care networks (7%).
Ø More than 40% of large firms said they are “very likely” to ask employees to pay more in premiums next year, but just 15% of smaller firms say they plan to do so. About 1% of all respondents acknowledge that they are “very likely” to drop health coverage entirely in the near future.

The Robert Wood Johnson Foundation also introduced new survey results, “Attitudes of Business Leaders Regarding Health Care Coverage,” in Washington, D.C. earlier this week.

Ø Four in five business owners (79 percent) who anticipate increases in their health care costs say they are concerned about their employees’ ability to shoulder the projected increases.
Ø Respondents anticipate that health care coverage costs will jump an additional 12% over next year, and expect to continue to ask their employees to shoulder a large share of the increases. Survey respondents estimate that their employees currently pay, on average, 29 percent of the cost of their own health insurance premiums - up six percentage points from 2003.
Ø More than one-third (35 percent) of businesses that report an expected increase in health care costs say it is likely their employees would consider dropping their health care coverage because of this increase in out-of-pocket costs.
Ø The goal of “‘making health care more affordable’” is a top priority among businesses, with half (53 percent) citing this as the most important health care goal that should receive the greatest attention in health care reform efforts.
Ø When asked which ideas would help “a lot” to increase the number of Americans with health coverage, business leaders responded:
· Allowing the self-employed and small businesses to purchase private health insurance at group rates. (53%)
· Providing tax incentives for small businesses to encourage them to provide health coverage to their employees. (41%)
· Enrolling more Americans who are eligible for government-funded health care programs. (27%)
· Expanding Medicaid coverage to include a greater number of lower-income Americans. (26%)
· Providing tax credits for low-income Americans to help them afford private insurance. (23%)
· Allowing Americans to set up tax-free health savings accounts. (21%)

Finally, USA Today recently embarked on a three-part series of articles that looked at the effect of health care costs on the insured as well as the uninsured, based on a nationwide survey of adults by USA Today, the Kaiser Family Foundation, and the Harvard School of Public Health.

Ø 62% of respondents who asserted that they are struggling to pay medical bills are insured.
Ø Hardest hit by medical costs are the uninsured. 70% of uninsured respondents said that high costs kept them from getting coverage.
Ø Next hardest hit were insured adults under the age of 65 with household income of less than $75,000/year.
Ø Moderate income families with insurance were the fastest growing cohort among those who said they struggled to pay medical bills.
Ø More than one-third of respondents reported skipping medical treatments or medications due to costs.
Ø Nearly one-fifth of those surveyed said health care costs were their biggest monthly expense, after rent or mortgage payments.

Health care costs are an unequivocal national crisis. We must come to grips with the underlying drivers of out-of-control health care costs, and embark on urgently needed and wrenching reforms of the ways that health care services are delivered, paid for, and consumed. Anything less than sweeping, fundamental changes assures that next year, and the year after, and the year after will bring even worse news about our health security.

Business owners have little faith in new health care financing schemes or insurers’ and government’s cost control nostrums. They know the consequences of overdue bills and the price that must eventually be paid for working around obvious problems.

Employers, consumers, the health care industry, and government must come to a common understanding about the underlying causes of runaway costs and what must be done to control them.

· Reform health insurance markets for Pennsylvania small businesses, and end the regulatory perversity that causes community-pooled group coverage to be the most expensive alternative, and enables health insurers to earn windfall profits.
· Acknowledge that less-than-optimum health care is killing thousands of Pennsylvanians annually and injuring tens of thousands more – and adds billions of dollars in unnecessary expenses. Private and public payors must radically reform the way that they pay for health care services, and pay only for that which helps patients.
· Medical malpractice laws are in urgent need of reform, but reform isn’t just caps on damages. That would guarantee more preventable patient injuries and deaths. We need fundamental change that incents doctors and hospitals to acknowledge unexpected outcomes immediately, compensate injured patients fairly and quickly, and take decisive steps to prevent recurrences of patient injuries.
· Regulation of the pharmaceutical industry by the federal government is a mess. Price controls aren’t the answer, but neither is the current circumstance in which it is much more profitable for giant pharmaceutical companies to spend billions on lobbying, advertising, and law suits than it is to pursue research on new medicines for critical public health problems.
· Embark on a sustained private-public education program and create incentives for employers and employees to cooperate in order to improve individuals’ health, reduce rates of smoking and obesity, and control hugely expensive chronic diseases.

Rxxx of the Day

2005-07-31T22:33:00.000-04:00

Here's the bottom line on hospital-acquired infections.

The PA General Assembly stood tall in the saddle, leading the way nationally by enacting a law that requires PA hospitals to report all (ALL) hospital-acquired infections (HAI's). (This groundbreaking legislation was a major setback for the hospital trade association, which was last seen trying to kill the state agency (PA Health Care Cost Containment Council - PAHC4) to which PA hospitals must report patient outcomes information.)

Reporting of HAI's began in January 2004. In order to give hospitals "room" to adapt to the new reporting requirement, PAHC4 asked for just four types of HAI's to be reported by hospitals. Through the first four quarters of 2004, a literal handful of hospitals made what could be considered to be a full, good faith effort. Butler Memorial, Carlisle, Hamot, and Allegheny General were among these. Most hospitals reported only a small fraction of predicted HAI's, but seemed to be making small improvements each quarter. And about 20 hospitals reported that they had no or practically no HAI's. It is conceivable that a couple of small community hospitals in this last group actually had no infections. But when larger hospitals like Mercy in Pittsburgh report virtually no HAI's during the course of a 12-month period, it's an outrage -- patient safety sacrificed due to either a total failure of leadership at a hospital or simply flouting the law.

When PAHC4 released a report a few weeks ago that summarized the 2004 reporting by PA hospitals, it did not name hospitals. PAHC4, however, did name numbers: nearly 12,000 HAI's reported (with most hospitals reporting only a fraction of predicted HAI's), about 1,500 deaths associated with HAI's that shouldn't have occurred, about $2 billion in hospital charges for treating the reported HAI's. This report, which buttressed earlier alarms from the Centers for Disease Control and the Institute of Medicine about widespread patient injuries and deaths (up to 98,000 attributable deaths annually in the U.S.), hit the state and national media, to say nothing of the health care industry, like a bomb. As it should have.

But not a word of support, not even a word of acknowledgement from the Governor of Pennsylvania or anyone who works for him. Not a word from the Governor's press office (presumably it was more important to get out the latest news about progress toward opening PA's first slots casino), not a word from the Governor's Secretary of Health (rumor has it that he thinks the whole business about patient safety and patient deaths is overblown) not a word from the Governor's health care quality czarina (who, in fairness, hasn't spent enough time this year away from her home digs in Philadelphia to know what's going on in Harrisburg or anywhere else in PA).

By ignoring the 600 pound gorilla sitting in the middle of our state capital, the Governor has (intentionally) encouraged several hospitals to work together toward a lawsuit aimed at overturning the state law that requires hospitals to report preventable patient injuries by infection. If the lawsuit proceeds, if some overcautious judge issues an injunction to halt reporting, if the lawsuit actually succeeds, one hopes our Governor and his senior advisors lose some sleep. Because the only way to reduce the number of people who are dying and suffering needlessly due to HAI's is to shine a spotlight on the problem. Turn off the lights, and the cockroaches will throw a party.

Here's what the Governor ought to do (at a minimum): (1) acknowledge the terrible reality represented by the PAHC4 report; (2) call on all PA hospitals to achieve full HAI reporting during 2005; (3) instruct the Secretary of Health to notify non-compliant hospitals that failure to comply with the relevant PA law will put state licensing at risk; (4) ask the PA Attorney General to consider legal action against non-compliant hospitals; and (5) instruct the Secretary of Public Welfare to prepare a plan for identifying HAI's that affect covered state employees and Medicaid beneficiaries, and for zero-ing out state payments to hospitals for treating such preventable infections.

Interesting/disturbing confirmation of what most small employers already know

2005-07-26T11:20:00.000-04:00

Health Care Costs Slow Company Profits
By THERESA AGOVINO, AP Business WriterMon Jul 18, 8:55 AM ET

Employees are facing a double whammy when it comes to health care costs: Many companies are likely to ask workers to pay more for their insurance while rising health care costs means companies may dole out lower raises.

Half of large U.S. companies said that increased health care costs have contributed to slower profit growth and as a result more than 75 percent may ask employees to bear an even greater share of the cost, according to a new study by PricewaterhouseCoopers released Monday.

Twenty-five percent of the companies said double-digit health care cost increases may force them to lower wage hikes for employees and one in five expects to slow hiring of new permanent workers in the year ahead. The executives at the 150 companies surveyed said per-employee health care costs had risen 12 percent over the last year and were expecting an 11 percent increase in the coming year if no changes are made to the plans.

While various indicators may point to improvement in the economy, health care costs are squeezing companies ability to hire more workers and raise pay, said PricewaterhouseCoopers consultant Barry Barnett. Right now, he said between 12 percent and 15 percent of company's payroll costs stem from health care, up from around 8 percent five years ago.

"Health care costs are the reason job growth isn't where the Bush administration would like it to be," Barnett said.

For example, in June the economy saw the addition of 146,000 jobs — less than the 195,000 jobs economists were predicting.

Barnett said that while the auto industry has been vocal about health care costs dragging on profits, the problem extends to many sectors with a large unionized work force.

Employer seem conflicted over the best ways to reduce costs. Seventy percent said that requiring employees to pay higher deductibles would lead to a reduction of discretionary health care spending. But 60 percent said that would cause employees to defer seeking necessary care and risk long-term problems.

More than 80 percent of employers said they believed the most promising option for reducing health care cost increases was to provide financial incentives for employees to live a healthier life style. Still, only 48 percent of companies said that employees with unhealthy habits such as smoking should be responsible for paying a larger share of their benefits.

Rxxx of the Day

2005-07-25T16:59:00.000-04:00

Some reflections on last week's report about the first installment of info regarding hospital-acquired infections (HAI) in PA. But, first, some basics for people who start with as little knowledge of this as I did.

What is a hospital-acquired infection, as defined in the report released last week by the PA Health Care Cost Containment Council? The report dealt only with four types of HAI's (keeping in mind that this is the layman's version, not a physician's):

(1) Bloodstream infections occur as a result of bacterial contamination through the site of a central line (CLAB's). Central lines are typically installed for intensive care patients who need to be able to receive medicine, etc. quickly and directly into the bloodstream. CLAB's are very, very dangerous because infections in the bloodstream put one's body under immediate stress and are generally difficult to cure. CLAB's most often occur because a central line is installed in the wrong place on the body (e.g., shouldn't be inserted in the groin because there is a high concentration of bacteria there), because they aren't re-bandaged and revised at regular intervals, and because central lines have been installed or maintained incorrectly. These are, almost without exception, problems that can be prevented through comparatively simple steps. Hospitals complain, with some limited justification, that many CLAB's originate with central lines that were originally installed in nursing homes or other hospitals. But hospitals can prevent most of these by ensuring upon admission that any defective or questionable central line is replaced. CLAB's are sometimes resolved with a course of antibiotics and a few extra days in the hospital (i.e., additional expense of several thousand dollars), but it's hardly rare for treatment of a CLAB to cost hundreds of thousands of dollars, require weeks of hospitalization (followed by rehab in a nursing care facility), and are life-threatening.

(2) Urinary tract infections (UTI) occur via a Foley catheter inserted to facilitate/assure regulation urination. UTI's are the most common type of HAI -- because Foley catheters are used often in hospitals and because many health care professionals seem to regard them as relatively unimportant (very few people die as a result of UTI -- although this seems to ignore the toll on patients that suffer the discomfort and additional one or two days of hospitalization). UTI's are generally relatively inexpensive to treat (average payment to hospitals for treating a UTI is less than $5,000), but there are lots of them (tens of thousands per year just in PA), and the costs mounts up. The most frequent cause of UTI seems to be failure to remove a catheter within a prescribed number of days (yes, as simple as that). Apart from the perception that UTI isn't a real threat to patients, hospital personnel argue that some patients are admitted with UTI's (particularly transfers from nursing homes who have already had Foley catheters inserted). Again, this has some limited validity, but it's impossible to square the significant incidence of UTI's in hospitals with the large majority of patients who aren't admitted from another hospital or nursing home.

(3) Surgical site infections -- aka SSI -- are straightforwardly those infections that occur at the site of the surgical incisions, inside the body or on the skin surface). Just as with CLAB's, these tend to be serious threats to patients, as invasive surgery puts the body under significant stress and a surgical site infection is, by definition, not a superficial one. SSI's occur for a variety of reasons, depending on the type of surgery. In general, these infections occur as a result of a failure to take certain steps before surgery (e.g., administration of an antibiotic), or a defect in the surgical procedure itself that causes a break in sterile field. When an SSI occurs, it has a large effect on the likelihood that the patient will have a lengthy recuperation/extended hospitalization and/or die.

(4) Ventilator-associated pneumonia (VAP) is infection that occurs in the wake of a tube inserted down the throat in order to ease breathing. Once again, hospital managers disagree about the extent to which VAP is preventable. Infection control research, however, shows a big decrease in VAP through two steps -- weaning patients off ventilators as soon as possible, and keeping patients' heads elevated to a minimum angle. VAP is no joke, particularly for patients who are already weakened by illness or injury. VAP's can be very expensive to treat, often adding tens of thousands of dollars to the cost of a hospitalization.

These four types of infection were chosen as the starting point for infection reporting by PA hospitals under a 2004 law that requires hospitals to report all HAI's. The four types are known as device-related infections for obvious reasons (i.e., associated with catheters, ventilator tubes, invasive surgery).

Medical research indicates that these four types of infection occur in hospitals in 3-5% of patient admissions (small community hospitals would be expected to have lower rates because the severity of illness of their patients is less). Hospital billing records in PA indicate that hospitals bill us for treating more than 100,000 of these four infections annually. Hospital billing records, however, are notoriously unreliable (another big problem). That's why the new PA law requires hospitals to report actual infections. To date (after five quarters of reporting), most PA hospitals are making slow progress toward reporting the expected number of infections. A literal handful of hospitals (among more than 150) are reporting most of the infections thus far, and about 20 hospitals are still reporting no or virtually no infections. Five quarters ago, this failure could be attributed to tghe challenge of complying with new reporting. At this point, however, failure to report indicates unwillingness to comply and/or a belief on the part of a hospital that patient suffering due to HAI is either not important or is a source of important hospital revenue.

More on all of this in a few days, including the shocking lack of interest and support for hospital improvement displayed by the Rendell Administration.

Rxxx of the Day - Part Deux

2005-07-15T09:45:00.000-04:00

Here is a report from North Carolina. Note the heretofore unheard of genius of the declaration that the best way to increase the number of people with health insurance coverage is to moderate/reduce the costs of same. This wisdom, shall we say, is absent from our Governor's plan to accept $1 billion from the PA Blues to underwrite government programs, in exchange for which the Blues will get to make hundreds of millions in profits (on top of $4+ billion in reserves). AS FOLLOWS:

North Carolina Blue Cross works to lower profits

By Kara Olsen, for HealthLeaders News, July 15, 2005

The idea behind the creation of nonprofit health insurance plans was that people could pool their risk with a premium based on what it costs to care for those people, plus some administrative costs. Nonprofit health plans generally don't even like to use the word "profit" when they describe their earnings. So it was awkward and complicated when Blue Cross and Blue Shield of North Carolina found itself recently making too much money while many people in the state were uninsured...

... after a year and a half of battling the state insurance department over its desire to convert to for-profit status, Blue Cross abandoned the cause. Early in 2004, the insurer revealed that it made a record $196.3 million in net income for 2003-a margin of more than 6 percent.

Realizing that the critics' ire was likely to escalate, Blue Cross launched a pre-emptive strike aimed at quieting accusations that it was overstepping the unwritten financial boundaries of its nonprofit status. Leaders promised to rein in profits so that they would fall into an "ideal range"-somewhere between 3.5 percent and 4.5 percent. CEO Bob Greczyn deemed the year "exceptional, but not repeatable." Lawmakers postured, emboldened by the fact that other states, like Pennsylvania, were starting to criticize their Blues plans' profits and to consider forcing premium rebates. The state insurance department readied legislation that would boost regulatory control.

Meanwhile, as the insurer furiously sought ways to show less profit-short of premium cuts or rebates-the state press all but accused the giant insurer of engaging in a spending spree. Free flu shots, free generic drug offers and a spate of television ads were cited as examples of the insurer's excesses. By the time 2004 was in the books, earnings dropped by 21 percent to $155.9 million.

Not out of the woods

Health plans' excess margins have fueled debate in many states, not just North Carolina. Just before Pittsburgh-based nonprofit Blues plan Highmark Inc. announced 2004 net income of $309 million compared with $105.8 million in 2003, Gov. Edward Rendell made an announcement of his own concerning a deal he negotiated with the state's four Blues plans to create the Annual Community Health Reinvestment initiative. Under the agreement, which avoids contentious premium regulation, the plans will pay a combined $1 billion over six years to fund coverage of the uninsured and other state health initiatives. According to a statement from the governor's office, the program aims to more clearly define "the nature, scope and extent of the (plans') community health contributions."

Similarly, after the abandoned North Carolina conversion, the state took a hard look at the insurer's finances. Insurance department consultants determined that Blue Cross premium increases forced more small businesses to stop offering health insurance, resulting in a greater number of uninsured, says Adam Searing, a consumer advocate and director of the North Carolina Justice Center's Health Access Coalition, a Raleigh-based nonprofit group. At the end of April, the North Carolina Institute of Medicine in Durham released a study declaring that nearly 20 percent of the state's population lacked health insurance. At about the same time, new bills aimed at bringing Blue Cross' high profit margin to heel were introduced. One is modeled along the lines of the Pennsylvania initiative, and another would give the insurance commissioner a heavier hand in setting Blue Cross' premium rates.

"It's simple; you reduce rates and more people can afford coverage," Searing says...

How low can you go?

Simply showing proof of lower profits on the balance sheet is not enough. Sure footing with regulators also depends on what the plan does with its money.

"You don't have to do much to lower profits," Glaser acknowledges. A nearly 2 percent uptick in 2004 expenses for hospital care, physician care and prescription drugs lowered profits back down to the comfortable level of around 4.5 percent. Glaser also cites the insurer's two-year IT upgrade, its 250 new hires to service 185,000 new members, and lower rate increases for bringing it in line with financial targets. Critics see the spending as an attempt to drop profits below the state's radar and out of range of premium regulation.

Conover says insurers generally have some leeway with reserve funds when they decide it's time to make IT upgrades or get a consumer-friendly makeover. Searing doesn't doubt that Blue Cross has spent a great deal on tangible consumer improvements. It's the considerable amount left over that rubs him the wrong way, along with the fact that lowering premiums isn't considered an option. "If you're still bringing in hundreds of millions of dollars, that is not acting like a nonprofit. That money should be going back to reduce premiums," Searing says. Glaser says the company has set its earnings target based on keeping capital at a level that will maintain financial stability. Ideally, operating near the 3.5 percent profit level will shrink reserves. Hitting the 4.5 percent mark will add slightly to reserves, he says. To Conover, the question for insurers and regulators alike is what level of reserves provides adequate protection to weather cyclical downturns. The rule of thumb, he says, is between three and six months of reserves. In December 2004, Blue Cross' reserves totaled $865.5 million, or enough for 3.7 months.

Hitting the "sweet spot"

For now, the insurer continues to work at lowering profits. Glaser says 2003's 6 percent profit margin was the result of miscalculation. The 2003 medical loss ratio declined to 77.9 percent, down from 83 percent in 2002, meaning the insurer's medical trends estimates-which predict the frequency with which members will use medical services-were too high and the company shelled out less money for claims than it anticipated. At the same time, Conover adds that Blue Cross made it known during the conversion attempt that it aspired to reach a profit level of between 4 percent and 6 percent-a level with which regulators were uncomfortable even then. "That was a point of contention in terms of the hearings," Conover recalls.

But Glaser notes that having millions of enrollees makes aiming for the 3.5 percent to 4.5 percent "sweet spot" a difficult task. Conover says the cyclical nature of health insurance underwriting is also a cause for the Blues plan's struggles. "It's not that a plan acts in bad faith," he says, "but you just can't predict with perfection."

Rxxx of the Day

2005-07-15T09:20:00.000-04:00

Below is a summary of news reports from earlier this week about the incidence of hospital-acquired infections in PA. It's only the tip of the iceberg, representing under-reporting by PA hospitals by a factor of 10 or more (although a couple of hospitals, notably Allegheny General and Butler are doing a tremendous job of both generating accurate numbers about the incidences of such infections and taking measurably effective steps to reduce them). Likewise, the follow-up news report about a 20-hospital regional collaboration to reduce central-line associated bloodstream infections (CLABs) is good and illuminating news. But the collaboration enjoyed widely/wildly varying rates of good faith participation among the 20 hospitals, with only a few ever acknowledging the full scope of the patient injuries and deaths occurring as a result of CLABs at their facilities (and the collaboration has just about fallen apart in recent months anyway). Moral of the story: news reports that shed light on this big, deadly problem are a very good thing, but no one should be under the delusion that the hospital industry in our state is doing what it ought to do (yet).

"Hospital-acquired infections last year accounted for
1,793 deaths in Pennsylvania, according to a study released on
Tuesday by the Pennsylvania Health Care Cost Containment
Council, the Philadelphia Inquirer reports (Goldstein,
Philadelphia Inquirer, 7/13). The study used billing data and
reports from hospitals in the state to determine the rate of
infections (Connolly, Washington Post, 7/13). Sixteen of the 173
hospitals involved in the study reported no infections (Appleby,
USA Today, 7/13). For the study, PHCCCC collected reports on
surgical site infections for orthopedic procedures, neurosurgery
and cardiovascular surgery, in addition to data on urinary
catheter, ventilator and bloodstream infections (Philadelphia
Inquirer, 7/13). According to the study, based on billing data,
Pennsylvania hospitals reported 11,668 infections in 2004,
although the actual number could exceed 115,000 (Rundle, Wall
Street Journal, 7/13). The study found that 7.5 of every 1,000
hospital patients developed infections in 2004, but the actual
number likely is higher, PHCCCC Executive Director Marc Volavka
said (USA Today, 7/13). The mortality rate among hospital
patients who developed infections was 15.4% in 2004, compared
with 2.4% among other patients, the report found (Fahy/Snowbeck,
Pittsburgh Post-Gazette, 7/13). The study found that mortality
rates were highest at 32% among Pennsylvania hospital patients
who developed pneumonia from the use of a ventilator. Urinary
tract infections developed through use of a catheter were the
most common infection reported, the study found. The study found
that the average cost to treat Pennsylvania hospital patients
who developed infections was $29,000 in 2004, compared with
$8,300 for those who did not. The infections cost an extra $2
billion in care in Pennsylvania (Washington Post, 7/13). In
addition, infections were associated with an additional 205,000
hospital days for Pennsylvania patients, the study found. Based
on the results of the study, Volavka estimates that as many as
125 hospital patients die daily from infections nationally, at a
cost of $50 billion in hospital bills annually (Wall Street
Journal, 7/13)."

Rxxx of the Day

2005-07-05T17:22:00.000-04:00

The CMS (Medicare) P4P (pay-for-performance) demonstration initiatives are really encouraging, in that something other than preaching is finally being done to stimulate health care improvement. In terms of what ought to come next by CMS: (1) go faster and more boldly, which will necessitate butting heads with health care industry types who see P4P evolving over a span of a decade or more (can't wait that long out here, and it's also morally wrong to treat thousands of avoidable patient deaths as less than an overarching priority for the industry); and (2) don't allow P4P to be co-opted by those who envision performance measurement on the basis of compliance with government regulations, rather than on the basis of what actually happens to patients.

On the first point, if the usual suspects among the political leadership of hospital and physician groups are allowed to dictate the pace of change, you and I won't live to see measurable improvement in the tens of thousands of avoidable patient deaths (and hundreds of thousands of preventable serious patient injuries) that occur each year. Hospitals make highly complex, complicated decisions and implement them expeditiously when building a new hospital or opening an advanced heart center or transplant unit. It's fair to ask/demand the same decision-makers and senior staff to achieve significant results on patient safety in a year or two.

In re the second point, some major business groups and a long list of consultants are hell-for-leather in the direction of process measures for P4P. Process measures are, for instance, the frequency with which complex surgeries are done at hospitals that do a lot of them (i.e., more experience means better care), administration of aspirin after cardiac bypass surgery, etc. In other words, process measures are about measuring how things are done, rather than patient outcomes, which are about how things turned out.

If the idea is to start with process measures because we can start there right away, while we're developing patient outcomes standards, fine. But CMS (and state governments and private employers that purchase health insurance benefits) ought to be very busy laying the groundwork for a P4P approach that is about apples-to-apples comparisons of patient outcomes. Unfortunately, this isn't happening, and the main reason appears to be that measuring health care processes creates a lot more work for consultants and bureaucrats.

Is our long-term national interest and our individual health care security best served by having an army of consultants and bureaucrats compose (and oversee) a vast cookbook for practicing medicine, or is it in using the economic model that prevails in the rest of the economy to stimulate rapid, measurable improvement in health care delivery?

The health care industry is slave to the concept that fees and payments for services will be based on the total volume of health care services (i.e., more is better because you get paid more). Hospitals will readily understand the joke if P4P is implemented according to process measures. For instance, if administration of aspirin after cardiac bypass surgery is a key performance standard, one can be pretty sure that hospital billings will quickly reflect the administration of aspirin to all cardiac bypass surgery patients -- as well as to more than a few hysterectomy patients, hemophiliacs, etc. How will we know that all of this aspirin is helping patients (because we paid for it?)? How will we know how often mis-administration of aspirin leads to patient injuries? Wouldn't it be a lot simpler and directly relevant to our interests if we compared hospitals and cardiac docs on the basis of risk-adjusted patient mortality rates, complication rates, and readmission rates? The answer, of course, is that the only thing we'll know is that more aspirin has been dispensed (and paid for).

Here's an illustration of how far afield health care process measurement can lead us. A certain hospital in PA is in the process of receiving a handsome bonus from CMS for its participation and performance in the P4P demonstration program. This same hospital has for years ranked at the bottom among all PA hospitals in terms of patient mortality and complications in no fewer than 11 important disease categories (according to comprehensive patient outcomes' data supplied by the hospital). In other words, all things being equal in terms of age, severity of disease, and co-morbidities, you or I would be measurably less likely to leave this hospital alive and well. This isn't an isolated contradiction, and ought to give us pause about the long-term advisability of concentrating on process measures for P4P. Do we want to pay for bureaucrats to measure medical details ad nauseum, or do we want payors (public, private, individual) to be able to spend their money where patient outcomes are best?

Rxxx of the Day

2005-06-29T09:57:00.000-04:00

Consultants, special pleaders within the health care industry, and the usual suspects among the know-nothing-but-control-everything class that populates the ranks of government are hard at work -- ruining the promise of the Medicare pay-for-performance initiatives. By adopting process standards (instead of patient outcomes statistics) as the bases for incentive payments to hospitals and doctors, CMS and its horde of hangers-on will achieve predictable results -- and will then claim to be confounded by those results.

Using process standards, rather than patient outcomes, is the equivalent of GM buying defective parts from a supplier. Would GM pay bonuses to the supplier if the supplier demonstrated that the parts were being fabricated according to accepted industry practices? Would GM pay for defective parts at all? Would GM continue to buy parts from a supplier who consistently sent defective parts? Well, hell, of course not. But that's the substance of the idiocy into which CMS is wondering.

Apart from the sheer lunacy of politicians, federal government bureaucrats and their hired guns writing detailed standards for patient care, there is the predictable effect that such standards will have on the practice of medicine. For instance, if the feds dictate that bonuses will be paid if cardiac bypass surgery patients are administered post-operation aspirin, you can pretty much guarantee that every single heart bypass patient will get aspirin -- as will a significant number of patients who gall bladder surgeries, hysterectomies, and hernia repairs. The health care provider sector has been trained (by payors) to do one thing very, very well, and that is to bill for as much health care activity as possible. Because this "talent" has nothing to do with improving patient care, one can bet the ranch and the dog that dictating aspirin use. will cost small mountains of extra money, probably save some lives, and probably kill some other people who shouldn't have gotten aspirin.

Patient outcomes are what matter. Risk-adjusted, age-adjusted, scientifically valid, hard numbers as to what happened to human beings when they received health care? Perfect patient care isn't doing everything according to a government cookbook. Perfect patient care is about the patient.

Here ought to be the coup de grace for CMS' wrongheaded approach to pay-for-performance. According to the process measures/standards that CMS is using for its initiative, a certain Pennsylvania hospital has qualified for a handsome bonus. However, according to patient outcomes data supplied by that hospital to the PA Health Care Cost Containment Council, it ranks at the bottom of the heap among PA hospitals in risk-adjusted patient mortality rates in no fewer than 11 key areas (e.g., cardiac bypass surgery outcomes). Associated with this hospital's outsized patient death and complication rates is also the fact that all of this carnage costs public and private payors (i.e, us) tens of millions of dollars extra every year. This PA hospital, judged from the question of whether one leaves it dead or alive, is arguably one of the two or three worst-performing institutions in our state. But CMS has figured out a (lunatic) way to send it a big check and a kiss for treating patients the Medicare way.

We won't get out of the health care mess we are in until or unless CMS, and payors and consumers generally, wrap around the idea that we should buy health care services on the basis of what happens to patients.

Rxxx of the Day

2005-06-21T10:59:00.000-04:00

Congressman Tim Murphy, from the Pittsburgh suburbs, is, among other accomplishments, a health care professional (psychologist) who is beginning to make a mark as a Congressional leader on health care issues. To date, he is putting patients' interests first and showing a pleasing willingness to say what needs to be said. For instance, electronic information tools can be revolutionary and helpful, but safer patients, not more electronic, is the only goal that matters. A poorly conceived electronic patient record, or a system that allows inaccurate information to be recorded in an electronic record, or a failure to train health care workers to use an electronic system properly -- these and other potential problems can/will cause as much patient injury and death as what we have now. Just as in all other areas of health care, design each system of care so as to minimize or eliminate opportunities for error, and ensure that perfect care is delivered the first time and every time. (Note, however, that perfect care doesn't mean that we all get to live forever.)

Here's the headline, if you will, for the most recent health care posting from Congressman Murphy:

"Defensive medicine occurs when medical procedures are undertaken to avoid liability rather than to directly benefit the patient. It increases the health care costs to the Federal Government by $23.66-42.59 billion per year. A national survey of physicians, hospital based nurses and administrators found that the majority of doctors are practicing defensive medicine. Such practice takes a toll on the patient-physician relationship. Doctors often agree to patient demands for expensive and unnecessary diagnostic studies or refuse to care for patients with prior complications, noncompliant patients, workers' compensation cases, and obese persons."

Rxxx for the Day 2

2005-06-14T12:43:00.000-04:00

Medical malpractice insurers' payouts in PA (out of $4.3 billion nationally, and reflecting a 13.5% increase from 2003 to 2004):

1991 - $182.5 million
1995 - $233.3 million
2000 - $350.8 million
2003 - $394.5 million
2004 - $448.0 million

There is not a shred of evidence or data that can be offered to show that any of the patient pay-outs embedded in these huge numbers produced measurable improvement in patient safety or patient outcomes, or reduction of the huge amount of money wasted on correcting medical mistakes and misadventures.

Rxxx of the Day

2005-06-14T12:30:00.000-04:00

Pennsylvania is struggling with a projected $600 million Medicaid funding shortfall for next fiscal year. As much news as this is making and is going to make, it is only a downpayment on the similar-sized Medicaid shortfalls that are almost guaranteed annually for as far as the eye can see. Pennsylvania is not unique in this regard; some other states have much worse Medicaid funding problems.

The lack of any good fix for the current PA budget shortfall illustrates the coming end of the wonderfully good days of being able to punt, pass, or kick the bill for health care to someone else.

If the brunt of the fix for PA this year is for Medicaid to pay hospitals less, hard-pressed hospitals will respond by increasing revenue from commercial payors (that's us), just as Congress has been doing with Medicare for more than a decade.

If people are kicked off of Medicaid, more uninsured people will seek (unreimbursed) care in hospital emergency rooms, and the costs of this care will be passed through to commercial payors.

If a sales tax increase or some other tax increase is levied in order to makeup the projected Medicaid deficit, businesses and consumers will pay more (indirectly) for health care.

If WalMart is required to make special payments to the state treasury in order to "make up" for the fact that it provides very skinny health care benefits for its employees, it will embed in its prices the costs of doing so.

One fact to put on the record, which belies claims that the federal government is abandoning states and poor people. The federal share of all Medicaid spending in 1996 was 52.93%. In 2005, it is projected to be 53.84%. The federal share of Medicaid spending rose incrementally from 1996 to 2002-3, and has since then fallen. The earlier increase in federal Medicaid spending enabled states to liberalize benefits and eligibility a bit. The current federal spending trend forces states to come to grips with the financial consequences of this liberalization.

However one feels about expanding or contracting or maintaining Medicaid at status quo, the underlying reality is the same. We are, as a society, arriving at the point at which the bills for health care must be paid.

Rxxx of the Day

2005-06-13T15:41:00.000-04:00

Yesterday's Pittsburgh Post-Gazette featured a wonderful piece (Business Section, guest commentary) by SMC member Eileen Anderson. I'll post the URL as soon as possible, for those who don't have direct access to the P-G. It's worth reading, and then some, because it makes a first-class, first-hand case for how and why health care coverage costs are killing small businesses.

Eileen was generous in her praise for and endorsement of SMC Business Council's prescriptions for fixing things. If you agree with these positions, great. If not, more power to you. But in either event, please consider sharing your situation/predicament vis a vis health insurance -- with the local newspaper, with your state and federal legislative representatives, with your peers. Nothing is going to change unless there is a stirring of debate/interest/complaint/screaming.

For those on the Left who want a single-payor system for the U.S., the recent unheaval in Canada's national health care system ought to be a warning about the political pitfalls of promising more than can be delivered. Americans simply aren't going to accept the premise that it's OK to wait an average 80 days for a necessary surgical procedure, nor will there be political tolerance for the middle of the U.S. paying for extraordinarily heavy (read "monumentally excessive") utilization of health care services on the East, West, and Southeastern Coasts.

Lest those on the Right get complacent, how about acknowledging that the current course of employment-based health care benefits is an untrammelled disaster. More than one-third of the country's employers (and their employees) can't afford without health care coverage, unpaid health care bills are the leading cause of personal bankruptcies, more than one-seventh of the country's GDP is accounted for/consumed by health care, the average cost of family coverage is climbing steadily toward the average wage, and American companies are finding it harder and harder to compete globally against foreign counterparts who pay their workers annual wages that are less than one American worker's monthly health insurance premium. Health savings accounts are a good idea, but they won't do much more than dull the edge of the compounding effects of annual double-digit increases in health care expenses.

Orthopedic Surgery

2005-06-08T13:30:00.000-04:00

According to the Pennsylvania Health Care Cost Containment Council, an analysis of all Pennsylvania hospital admissions for orthopedic surgery during 2004 revealed the following information:

> Patient readmissions following hip and knee joint replacement surgeries resulted in $35 million in additional hospital charges, and nearly 7,700 extra hospital days.

> Among these, readmissions due to deep joint infection and device (i.e., artificial joint) failure occurred in 2.4% of cases, and resulted in $30 million in additional hospital charges.

> Readmissions due to blood clots following surgery occurred in 1.3% of cases, and for surgical wound infection occurred in .5% of cases.

> Between 1993 and 2002, knee replacements in PA hospitals have increased by 70% and hip replacements by 49%. Also, the frequency with which both knees or both hips are replaced during the same hospitalization has doubled.

Based on earlier studies of Pennsylvania results and comparison with (less detailed) information from other states, the success rate/post-surgery complication rates for joint replacement surgery in our state has been improving and compares favorably with results in hospitals in other parts of the state.

There continues to be, however, wide variation in the incidence of joint replacement surgery among those who present comparable physical conditions and symptoms. There seems to be a strong correlation between the richness of an individual patients health insurance coverage and the likelihood of joint replacement surgery.

Also, some numbers suggest that males are more likely than females to have joint replacement surgery, but that females are more likely to complete the optimum physical therapy regime after joint replacement surgery.

Hospital readmission rates after joint replacement surgery is a good indicator of the quality and efficiency of work done by a particular physician and at a particular hospital. But a fuller picture of success depends on analyzing patients' physical functionality at the 12 month mark after surgery.

For more information about this analysis, go to www.phc4.org.

Numbers, Numbers, Numbers

2005-05-26T22:23:00.000-04:00

According to the experts at the federal Centers for Disease Control, 5% of hospital admissions result in a hospital-acquired infection. About 80% of hospital-acquired infections fall into one of four categories: surgical site infections, ventilator-associated pneumonia, device-related bloodstream infections, and Foley catheter-related urinary tract infections.

From pioneering work done in a number of hospitals around the country, including several in Pennsylvania, it has been proven that virtually all of these infections can be prevented through careful training of health care workers, effective teamwork among health care professionals, and the adoption of what can only be described as common sense adjustments in the way that patients are cared for. This is a key fact. It is hugely expensive to treat patients who are afflicted with serious infections while in hospitals (costs that are born by health insurance purchasers). Even more important, among patient populations that have been adjusted for age and health status, the chances of in-hospital mortality is about twice as high for those affected by hospital-acquired infections.

In 2004, a new state law required hospitals to report all hospital-acquired infections to the Pennsylvania Health Care Cost Containment Council (PHC4). In order to help hospitals to comply with the new state law, the PHC4 required hospitals to report only vent-related pneumonia, bloodstream infections, urinary tract infections, and a certain fraction of surgical site infections during the first year -- which, in total, amount to about 50% of all hospital-acquired infections.

There were approximately 1.9 million hospital admissions in Pennsylvania in 2004. According to the Centers for Disease Control's calculation of a 5% overall infection rate among hospital patients, there would have been ~95,000 cases of hospital-acquired infections in 2004. Since the PHC4's initial requirement for Pennsylvania hospitals' reporting under the new state law encompassed just one-half of all hospital-acquired infections, the number of infections that was expected to be reported to PHC4 for 2004 was 45-50,000.

In fact, Pennsylvania hospitals reported 12,665 hospital-acquired infections to PHC4 for 2004. A small number of hospitals (notably Allegheny General and Butler Memorial) made demonstrably credible reports to PHC4. About one-half of hospitals aren't making credible reports yet, but are making (slow) progress toward meeting their reporting requirements. But one-third of PA hospitals reported no infections during 2004.

The first step toward resolution of any problem is acknowledging its existence. Until all Pennsylvania hospitals acknowledge the full extent of hospital-acquired infections, until there is a credible institution-by-institution counting of infections in order to establish a benchmark against which to measure the progress of subsequent efforts to reduce and eliminate infections, there is going to be modest or no progress toward resolving a terrible patient safety problem that kills or injures upward of 100,000 Pennsylvanians each year. (And, it's worth noting that embedded in our health insurance bills is no less than $500 million annually to treat these 100,000 preventable infections.)

Report from the Front Lines

2005-05-25T13:31:00.000-04:00

SMC members and staff traveled to Harrisburg on May 9 in order to meet with legislators and discuss/emphasize the crisis in health care and health insurance affordability for small businesses. SMC members and staff visited Washington, D.C. on May 11 and 12, in order to emphasize the same concerns and promote the same ideas to the PA Congressional Delegation.

During those three days in May, ~100 SMC members visited 178 Congressional and state legislative offices, talked directly to scores of Members of Congress and legislators, presented detailed position papers on health care issues like medical malpractice reform and small group reform, and left behind petitions signed by more than 4,000 SMC members and their employees.

SMC's position papers can be found at www.smc.org.

This hard, time-consuming work is making a difference, propelling health care issues to the top of the legislative priority list, rather that the bottom (which is where it has been for too long). For more information, or to get involved, contact cliff@smc.org.

Addendum to yesterday's Rx of the Day

2005-05-25T12:00:00.000-04:00

Here is the URL for the Pittsburgh Post-Gazette article (Suanday, May 22) alluded to yesterday: www.post-gazette.com/pg/05142/508488.stm

Rx of the Day

2005-05-23T10:59:00.000-04:00

Yesterday's Post-Gazette Business Section (Sunday, May 22) featured small businesses' problems with skyrocketing health insurance costs. The largest article, by Chris Snobeck, covered a lot of relevant ground, and did as much justice to a very complicated subject as can be done in a single article. With the benefit of more space and spadework, however, some other relevant points could have been explored:

1. All health insurers, profit-motivated or non-profit (Blue), are making record profits. Although Highmark's obscene $300+ million profit in 2004 has gotten all of the ink in the press, the national for-profit insurers' after-tax earnings are no less offensive (arguably moreso, in fact). The point that no one seems to take is that small businesses and their employees are no better than an afterthought for insurers and, until very recently, for regulators and legislators. For-profit insurers simply won't write coverage that isn't profitable, and don't blush a bit when they quote premiums at $2,500+/month or more (which is the actuarially nice way of saying, "We don't want to/won't cover your business.") For their parts, Highmark, Capital Blue Cross, and the other Blues will defend multi-hundred-million dollar profits and multi-billion dollar reserves in one moment, and in the next plead extreme financial duress due to losses among their small group books of business. Health insurance is about making money for insurance organizations, not about health care security for individuals and families.

2. Wasn't it interesting that the Post-Gazette article alluded to "small group reform legislation" as protecting the ability of Highmark and other insurers to use age and gender in determining individual businesses' health insurance premiums? This notion didn't come from SMC, the Chamber of Commerce, or any business owner interviewed for the article. In fact, the legislation pending in Harrisburg that these business groups support says, "A carrier offering health benefit plans to small employers shall develop a community rate for each benefit plan and may only vary the community rate for geographic area and family composition." Family composition means: single-only, husband and wife, parent and children, etc. Do Highmark and the other Blues plan, for the first time, to interpret "family composition" to mean age and gender, too? If so, and if this legislation is ever written into law, I'll say flatly that SMC will litigate on this point.

3. I'm still amazed that not a single women's group or purported women's issue leader of any stripe has had a peep to say about 60% health insurance rate increases for female-owned small businesses. The Post-Gazette article draws the picture pretty starkly, but self-styled advocates in gender-based polemics are apparently blind on this count. Shame. Shame.

4. Mark Twain's cliche, which I overuse, about "lies, damned lies, and statistics," found new expression in Highmark's claim (within the Post-Gazette article) of a 9.5% average premium increase for small employers renewing on July 1. Actually, that's not exactly what Highmark claimed. When Highmark says its rates went up by an average of 9.5% for July 1, it's not referring to its current customers' rates. Rates for its current customers went up by an average of about 20%. Highmark pulled a fast one on the P-G reporter by describing the theoretical effect of its new rates on a hypothetical population of customers. In doing so, Highmark accomplished two objectives: (a) it gained a free advertisement for new, low rates --- for small employers that employ mostly young, single guys; and (b) it implied that the 2005 renewal wasn't that painful for most of its small group customers -- a blatant, cynical misrepresentation of the truth. This kind of distortion is possible because none of the Blues, in spite of the fact that they have tax-preferred status, must ever make public any but sanitized numbers about anything. And this kind of distortion will continue to be commonplace until or unless the Governor and General Assembly continues to treat the Blues as having not just tax-preferred, but disclosure-preferred status.

5. The next several press releases on health insurance from our Governor's office ought to be entitled, "Governor Endorses Health Insurance Discrimination Against Women and Older Workers ... Governor Rendell Wants to Make Leukemic Babies and Families Financially Responsible ... Governor Says Lifestyle Choices to Blame for Juvenile Diabetes." I'll bet if someone started deducting $1,000 more out of his salary each month, in order to recognize the inevitable health care cost consequences of a diet heavy on cheese steaks and banana cream pie, there would be a mighty noise emanating from the Governor' Mansion. And he and his people have the nerve to defend a legal compulsion to turn over employees' confidential medical information before small employers can get quotes from health insurers? This is what happens when you sleep with people who give you money.

Rx of the Day

2005-05-03T12:36:00.000-04:00

Back after an absence necessitated by the onset of Highmark's July 1 contract renewal season. A number of thoughts, ideas, and outrages in the wake of receiving the annual, horribly painful news from Highmark. Here's one, for starters.

Could someone please explain to me why not a single women's rights outfit, not a single anti-discrimination organization, not a single women's business group, not even on female elected thing can be bothered to notice and comment on the fact that working women are getting screwed by health insurers? For-profit insurers have routinely charged women more than men for health insurance: for single women, for women heads-of-household, for small companies that employ mostly women.

It's been impossible in the past to quantify the magnitude of this discriminatory surcharging, but it's substantial. And even if the discrimination isn't strictly illegal, it's nevertheless discrimination.

But now comes the addition of gender as a small group health insurance rating factor for Highmark and (presumably, since they invariably follow each other) the other Blue Cross affiliates. Brace yourself for up to a 35% boost in health insurance costs if you are a self-employed woman, if you own a company that employs mostly women, if you are a man and add your wife to your health insurance coverage.

The actuarial facts that drive this pricing discrimination is undeniable: (1) women's reproductive health care expenses far exceed men's; (2) only women can have babies, and therefore all of the risk of the huge expenses that accrue from a sick new-born are apportioned to women; and (3) women use preventative health care services, visit their physicians when they are sick, take prescribed pills, etc. (and men generally don't).

In other words, from a business point of view, health insurers would prefer not to insure women, who pile up modest health care expenses year-after-year and also eventually have babies. (Insurance company actuaries regard babies in the same way Baptists look at sin.)

Better to insure men, for whom the leading causes of death through the first several decades of life are sudden (and relatively cheap) misfortunes like auto accidents, gunshots, and heart attacks.

I personally don't think it is fair to pay women less than men for doing the same work, but that can be a complicated subject. On the other hand, it's impossible for me to think of anything complicated at all about charging working women a lot more for health insurance. It's wrong. It's wrong on any number of counts. What's left of the concept of "insurance" if we are all diced and sliced by age and sex and occupation and body type and lifestyle into teeny-tiny risk categories that cause each of us to pay in monthly premiums almost exactly as much as we use in health care services?

Shouldn't insurers refrain from penalizing (even reward) individual behavior that diminishes risk of serious illness?

Shouldn't insurers treat pregnancy and childbirth as something different than a preventable lifestyle disease that afflicts only women? Even if you're persuaded that there is a business case to be made for not carrying on the human species, to the best of my knowledge, and notwithstanding consistently loutish behavior by virtually every man I know, pregnancy and childbirth implies intervening, hopefully consensual, frequently awkward but always purposeful, and ultimately exculpatory male activity. (And, in the final analysis and I'm serious on this point as well as meaning to make a little mischief, isn't this kind of reproductive discrimination particuarly unfair to lesbians?)

Enough on this subject. If I have anything to say about it, SMC is going to continue to say impolite things impolitely about discrimination against women vis a vis health insurance. But where, O WHERE, is a female voice on this subject?

An unlikely conclusion

2005-04-24T22:52:00.000-04:00

Liberal newspaper columnish Paul Krugman is, in my humble estimation, a cranky, ideological dope. I come by this opinion honestly and over a span of time. That said, his recent short series of articles about health care have been mostly on-target. When the liberals take a break from advocating new taxes and fresh flagellations of those who work and pay taxes, and advocate fundamental change and upheaval of the status quo in health care delivery as a major facet of assuring access to health care, well, maybe there is a sea change coming.

In the meantime, a quick review of Highmark's July 1 small business health insurance rates punctuates the fact that to be a female and buying health insurance is to be among the wretched of the earth. Actuaries are well-aware that women incur more medical expenses than men. Women generally are apt to seek care when they need it and tend to have relatively steady, incrementally increasing utilization patterns throughout their adult lives; men typically don't visit their doctors or pay attention to health care needs, and most of their lifetime health care utilization revolves around a few major illnesses (often both preventable and life-threatening). Women also have gender-driven health care needs that men don't have, and actuaries attribute all of the costs of baby delivery to them -- a major attribution in that insurer actuaries worry about huge health claims from sick babies as much as they do about anything.

Until this year, only for-profit insurers doing business in western Pennsylvania adjusted small businesses' health insurance on the basis of gender (aka, discriminated against women). Now, thanks to the pliability of the same folks at the PA Insurance Department that acted as brokers for the Blues to pay $1 billion in order to maintain their financial reserves at ridiculously high levels, Highmark and the other PA Blues can make large adjustments in small employers' HI rates on the basis of sex. As a direct consequence, female-dominated (in terms of proportion of a small employer's workforce) small groups are about to receive July 1, 2005 health insurance increases of 30-50%. And self-employed women over the age of 50 are in for even bigger jolts.

One gathers that this extra revenue is important to a multi-billion dollar non-profit organization that earned a $300 million after-tax profit last year.

This is just one more awful illustration of how much of a mess are Pennsylvania's laws and regulations governing the health insurance market for small employers. It isn't just the Blues; all health insurers are making as much money as possible, and as fast as possible, in anticipation of a government takeover in the coming years.

2005-04-19T11:08:00.000-04:00

THE HEALTH CARE INDUSTRY ACCOUNTED FOR ONE-FOURTH OF
ALL LOBBYIST SPENDING REPORTED IN THE PENNSYLVANIA
SENATE DURING THE LAST TWO-YEAR LEGISLATIVE SESSION,
MORE THAN ANY OTHER CATEGORY.

According to industry officials, state subsidies of
doctors' malpractice insurance rates, which were
approved in both years, and proposed caps on pain and
suffering awards in malpractice lawsuits, which were
rejected, were the top issues for health care
lobbyists, reported the Associated Press. In all,
lobbyists and their employers reported spending around
$200 million, the Associated Press noted, citing an
analysis by the Senate Republican staff of disclosure
reports filed in the Senate for the two-year session
that ended Nov. 30. The analysis revealed that the
health care industry - including hospitals, nursing
homes, advocacy groups and medical professionals -
reported spending $52.8 million on items such as office
expenses, salaries, dinners with lawmakers and
advertising for or against bills, the Associated Press
added.

Associated Press, April 12, 2005

2005-04-14T09:03:00.000-04:00

Small Business Takes on Harrisburg

Feedback on Fred Honsberger's interview with Cliff Shannon

2005-04-14T08:58:00.000-04:00

Got your e-mail just in time. Cliff sounded great on the radio. Thanks for the heads up.

I think the world is so complex today that the typical CEO is sufficiently overwhelmed and feels there is nothing he can do about the health care issue but cross his fingers. SMC has given us a clear focus that our voice can make a difference and that there are practical solutions that can bring relief.

I thoroughly enjoyed the opportunity to exercise my rights and responsibilities to inform my congressional representatives yesterday about our plight. SMC's message rings a sound of hope. Keep up the good work. Elaine

Rxxx of the Day

2005-04-13T21:21:00.000-04:00

Fred Honsberger, the very popular talk show host on KDKA-AM, featured health care costs for small businesses for a time yesterday afternoon. Honsberger has himself undergone a kind of personal health epiphany in recent years, dropping a very large amount of weight. He probably met the clinical definition of "morbidly obese" before his big weight loss (was it via conventional dieting and exercise only, or did he have gastric bypass surgery?).

As broadcast journalists go, he has a very good understanding of the issues that attend the health care affordability crisis, and he would seem to be generally in synch with most small business owners - except in one area.

Honsberger, perhaps in part because of his personal journey, seems to feel strongly about personal accountability/responsible behavior. If individuals make lifestyle choices (e.g., smoking, obesity due to over-eating, etc.) that increase or are likely to increase the utilization of health care services, they should pay more for health insurance.

In terms of individual health insurance coverage, many/most people, including business owners and their employees, would agree with Honsberger. The problem, if you will, is that he apparently sees insurers' use of individual medical status information through the same prism: if a small company employs one or several people who engage in unhealthy behavior, that small company's health insurance costs ought to be higher.

There are at least three problems with this approach. First, doesn't it make sense to differentiate between health care utilization that is due to genetic and other factors that aren't influenced by personal choices (e.g., breast cancer, juvenile diabetes, sickle cell anemia, leukemia, etc., etc.) and that which results from unhealthy behavior? If not, then one is apparently in favor penalizing people and small businesses simply because employees and covered dependents need health care services, whatever the reason or triggering factor. Mr. Honsberger suggested that he would draw a line between setting small business HI rates on the basis of individual lifestyle choices and on the basis of illnesses that had genetic (and other?) origins. Figuring this distinction out would be a huge challenge.

Second, is it fair to penalize every employee of a small business if one or a few engage in unhealthy behavior (or simply have health care needs)? That's certainly the result when insurers' are able to use individual medical status to calculate rates. For instance, in a company with 10 employees, let's imagine that there is one employee with Type II diabetes (a generally preventable -- and manageable -- disease, but one with huge implications for lifetime health care needs among those who take care of themselves) and one employee with a covered child afflicted with hydrocephalis (better known as water on the brain, a condition that arose shortly after birth and was resolved by insertion of a brain shunt, but accompanied lifetime risk of complication/shunt failure). If all 10 employees and covered dependents were pretty healthy, the resulting rate rate for first-dollar PPO family coverage would probably be in the $500-600/month/employee range. But in the hypothetical company with the diabetic employee and child-at-risk, the best price for equivalent coverage will probably be in the range of $1.500/month/employee.

Faced with a best quote of $1,500/month/employee due to the two illnesses cited above, a business owner would have several (lousy) options under current PA law, none of them good for any employee: (a) drop coverage altogether; (b) opt for a (cheaper) high-deductible coverage, that would exact substantially higher out-of-pocket expenses for all employees; (c) opt for a different coverage option with slimmer benefits and higher co-pays, that would mean higher out-of-pocket expenses for all employees; (d) initiate or increase all employees' payroll contributions to monthly premium costs.

Current PA law, which allows for-profit insurers to set small group (fewer than 50 employees) rates on the basis of individual medical status, guarantees that a large majority of small employers, sooner rather than later, will face a situation and a set of lousy choices like the one set forth above. Most small business owners, most small business employees, most people, and a majority of 48 of 50 state legislatures don't think such situations are fair, and prefer to prohibit insurers' access to confidential medical information.

The third issue that is conjured up by unfettered medical underwriting (the industry term for using individual medical information to calculate health insurance rates) is stability. Health insurance costs can be accurately described as "runaway," "volatile," etc. under all circumstances. But for PA small businesses, the instability from one year to the next that is caused by medical underwriting is a huge problem.

Let's return to the hypothetical 10-employee company introduced above. Let's say that in Year 1, all 10 employees and covered dependents are pretty healthy, and the business owner buys medically underwritten health insurance for $500/month/employee. But during the 12-months of Year 1, the business owner loses an employee, the new hire turns out to have Type II diabetes. (The business owner not only isn't allowed to ask about an employee's health status, federal law and regulation has extravagant penalties for inadvertently finding out health information.) Let's also suppose that one of the other (healthy) employees becomes a parent, and the newborn is born with water-on-the-brain.

In response to these changes, at the next annual renewal the for-profit insurer would quote a renewal rate of, say, $2,000/month/employee. This would cause the business owner to shop for a lower rate or lower cost option (see lousy choices above), and the only lower rate would be through the local Blue Cross affiliate's community-rated pool of small businesses. Because that (large) pool includes hugely disproportionate numbers of less-than-healthy small business employees, the "lower" rate will be in the vicinity of $1,500/month/employee.

Is this jump in health insurance cost disruptive for the small employer and his or her employees? Against a backdrop of a total payroll of, say, $400,000, health insurance benefit costs would have increased in one year from $60,000 to $180,000 annually. Can a small business raise prices for its goods or services to cover this spike in costs? Can a small business cover this surge in employee benefits costs by reducing other costs? By reducing profits? Is there any realistic scenario under which employee pay and other benefits wouldn't be affected by adding $120,000 to health insurance costs?

Any small business that is actuarially fortunate in its workforce today and thereby realizes relatively lower health insurance rates is almost certain to become actuarially less fortunate at some point, and suffer a debilitating jolt in health insurance costs. And most small business owners understand this inevitability and the potential for health insurance rate instability to smash carefully laid business plans.

The Insurance Federation of Pennsylvania (on behalf of the for-profit insurers that use individual medical information in order to avoid insuring companies that employ some less-healthy people) and the National Federation of Independent Businesses (which has a lucrative national contract with an insurer that specializes in selling inexpensive, medically underwritten coverage to healthy people) are fighting to maintain insurers' right to use medical underwriting in PA. If you think these two organizations have it right, please ring 'em up and offer your support.

If you believe they are wrong, and that medical underwriting ought to be prohibited in 49 states (i.e., in PA, too), please (PLEASE) let your legislator know, and maybe give Fred Honsberger an on-air call, too.

Rxxx of the Day

2005-04-12T09:26:00.000-04:00

Fresh off a trek to Harrisburg in order to talk with state legislators about health insurance costs, a few impressions (mine only):

1. Legislators are preoccupied with other issues and haven't, for the most part, accepted health insurance costs for small businesses as a full-blown crisis.

2. Most legislators have some (imperfect) ideas about how small group health insurance markets work.

3. A shocking number of legislators pronounce themselves to be pessimistic about any reforms opposed by the Insurance Federation of Pennsylvania, which leads one to ask if the loss of health insurance coverage for small businesses and employees is more or less important than what a segment of the insurance industry counts to be in its best interests.

4. The battle lines over medical malpractice caps on damages are deeply dug, and until health care providers signal that they want to try a Reform Plan B there is unlikely to be any change in the trench warfare over caps.

5. The most ridiculous response given by either elected representative or staff yesterday was a staffer for a Democratic state senator from Beaver County who unburdened himself of the news that Democrats had nothing to say or do with what happens in the General Assembly, that if SMCers wanted to pin the blame they needed look no further than the Republicans (and keep the Dems out of it). I knew this state senator a long time ago, when he was a county commissioner, and this sort of nonsense is pretty disappointing.

6. State Representative Joe Preston and State Senator Jay Costa were particularly generous with their time yesterday, and Mr. Preston was able to give us assurance on the spot that he would support small group reform.

7. Several legislators remarked about the deal between the Governor and the Blues about allowing the Blues to keep their reserves. Senator Jubilerer's legislative counsel thanked SMC for bringing the issue to the forefront and indicated that a Senate investigate hearing was planned for the next few days.

8. SMC members who traveled to Harrisburg are heroes.

9. We made a dent in recent weeks, but follow-up to our trip -- with more petitions, letters, phone calls, and face-to-face visits are needed.

10. Look for SMC to turn up the pressure in the public media in the coming days.

Rant of the Day

2005-04-08T15:50:00.000-04:00

Off to Harrisburg on Monday, April 11 for a rally ("HEALTH CARE COSTS ARE KILLING SMALL BUSINESSES") of about 100 business owners in the State Capitol, followed by face-to-face visits with legislators. We'll be plugging for small group reform, medical malpractice reform, legislative oversight and intercession into the Blues' surpluses and huge profits, and more. In addition to local coverage in Harrisburg and Pittsburgh, the Philadelphia Inquirer and Yahoo News have also reached out. Here's hoping we can persuade our elected things to take action.

2005-04-07T11:56:00.000-04:00

HERE IS A SINGULARLY BOLD AND VERY ENCOURAGING STATEMENT FROM CONGRESSMAN TIM MURPHY (R-PA) -- cs

Health Care FYI from
Congressman Tim Murphy
504 Washington Road, Pittsburgh, PA 15228 412-344-5583
322 Cannon Office Building, Washington, DC 20515 202-225-2301
2040 Fredrickson Place, Greensburg, PA 15601

Visit Us On the Web: murphy.house.gov
E-mail: murphy@mail.house.gov

Rx: Health Care FYI #7
Subject: Stop Paying for Hospital Acquired Infections

From: Rep. Tim Murphy (PA-18)

The Problem: Preventable infections acquired in hospitals cost $4.5 billion per year and contributed to more than 88,000 deaths-one death every 6 minutes.

[1] Hospital Acquired Infections Are on the Rise: There are over 250,000 hospital acquired pneumonias and 23,000 related deaths in the U.S. every year.
[2] Second only to Japan, the U.S. has the highest rate of methicillin-resistant Staphylococcus aureus (MRSA) or staph infections that are resistant to antibiotics.[3] Infections caused by bacteria that are resistant to common antibiotics, including MRSA and vancomycin-resistant enterococci (VRE) or streptococcus infections, lead to higher costs, longer hospital stays, and more deaths for patients.
[4] In the U.S., MRSA accounts for 51 percent of bacteria acquired by Intensive Care Units (ICUs).
[5] Although ICUs which care for the sickest of hospitalized patients, have less than 10 percent of beds, they account for over 20 percent of acquired infections. (Note: Patients in ICUs are at higher risk for infections and may be taking immunosuppressive medications which weaken the body's natural defense against infections.)

Hospital Acquired Infections Costs Money and Lives: According to the CDC, there are 80,000 infections caused when an IV or tube (catheter) is inserted into a large vein that contains bacteria and infects the bloodstream. These are also called central line infections and cost up to $2.3 billion and up to 20,000 deaths per year in American ICUs. Pneumonias caused from bacteria from ventilators costs over $1.5 billion and accounts for 1.75 million additional hospital days a year.

The Patient's Role:

Demand that hospital staff wash their hands or use anti-bacterial soaps before treating you for any condition.
Demand that hospital staff always follow guidelines for patient safety regarding infection control.
Infections are caused by staff not washing their hands, unclean medical instruments (including stethoscopes, latex gloves, etc.) and bacteria found on hospital charts, beds, medical equipment (x-ray machines, wheelchairs, etc.).

Examples of Success:

Allegheny General Hospital reduced the rate of central line acquired infections from nineteen to near-zero within 90 days and eliminated acquired blood stream infections and related deaths completely. One year hospital savings were estimated at $1.12 million and 18 lives were saved. This was accomplished by:
Educating and training health care staff on infection control;
Physicians washing their hands, cleaning equipment, using clean scrubs, and patient generated reminders; and
Determining the root cause analysis of infections as they occurred.
The rate of central line acquired infections in Southwestern Pennsylvania hospitals has been reduced by 55 percent over three years from an infection rate of 4.2 to 1.9 for every 1,000 days by instituting patient safety measures. [9]
A major teaching hospital in St. Louis reported a reduction in central line acquired infection rates through introduction of a 10-page educational program with mandatory tests for all staff. Fact sheets and posters were also posted. The estimated cost savings following the introduction of this educational program was between $103,600 and $1,573,000. [10]
The VA Pittsburgh Healthcare system has reduced MRSA infections by 85 percent in an inpatient surgical unit. This was accomplished by:
Improving placement of hand hygiene and protective equipment helped lead to a 50 percent increase in soap and sanitizer use;
Training 100 percent of the staff on how to prevent transmission of pathogens; and
Making sure clean, correct supplies are available.

The Federal Government's Role/Potential Solutions:

Expand Pay for Performance programs to use the Federal Government's role as the largest payer of health care to reward health care providers that reduce health care acquired infections nationwide.
Work with states to decrease acquired infections by tying increases to Medicare and Medicaid payments to hospitals that reduce infections.
Provide support for health information technology to improve reporting of hospital acquired infections.

If you would like to comment on this Health Care FYI, please e-mail your name, phone number, address and comments to: Murphy@mail.house.gov or visit our Web site at Murphy.house.gov.

2005-04-06T19:53:00.000-04:00

RANT OF THE DAY

Highmark’s July 1, 2005 premium hikes for small businesses aren't as large as 2004, but they are painfully consistent with what has been happening here, elsewhere in Pennsylvania and around the country in recent years. SMC members and staff have met repeatedly with our state and federal representatives in order to press for specific reforms that would stabilize chaotic health insurance markets (e.g., prohibit medical underwriting, limit demographic raing adjustments, create new "value plans" that are coverages exempted from state benefits mandates), end the madness of current medical malpractice laws, rein in prescription drug costs, and shield us from paying (billions of dollars) for health care services that either don’t help patients or injure them.

SMC is making incremental progress on most of these issues. On one, the prohibition against medical underwriting, there has been significant recent movement in our direction, as 27 (out of 50) state senators have cosponsored S. 671, and about three dozen state representatives (out of 203 -- so we still have work to do) have cosponsored the House version.

I am frankly mystified, however, that no other business organization has bellied up to the bar, so to speak, and undertaken the sort of focused effort that SMC's Board of Directors has committed our organization to. I also wonder why no other business advocates have been willing to join SMC in speaking out -- against the Governor soliciting a “voluntary” $1 billion contribution from the Blues in exchange for allowing the Blues to keep excessive financial reserves of more than $4 billion, or in criticism of the shocking $300+ million profit earned in 2004 by Highmark, or the predatory underwriting practices of for-profit insurers that generate windfall profits while forcing premiums through the ceiling for most small businesses.

SMC isn’t going to give up, no matter what, and we still hope to convince other business groups of the urgency of fighting to curb health care costs (for their members and ours). But maybe an unwillingness to fight is the problem. There's no unpleasant downside to crowding around the trough and gobbling up as much money as possible via state and federal programs. But when it comes to actually confronting powerful people and tough issues, when it comes to putting some skin in the game instead of holding others' coats while they carry on the fight, I'm beginning to have the sense that SMC is alone, and that we're going to remain alone.

Letter and Response to Highmark CEO on Health Costs

2005-03-29T16:22:00.000-05:00

February 22, 2005

Attn: Kenneth Melani, M.D., President and Chief Executive Officer
Re: Health Care Reform

Dear Dr. Melani,

I would like to take this opportunity to introduce myself and hope to
leave the door open so that in the future I may continue a dialogue with
you concerning Health Care Reform. I have become a political activist
by necessity and am determined to work to improve the health care system
in any way that I can. I tell people it is my parallel career.

For the past several years I have been collecting articles from the Post
Gazette and the Wall Street Journal. (I have a file on you and
Highmark). I read textbooks on health policy and health politics etc. I
have developed a keen interest in Health Care Reform for several
reasons. I am a self-employed small businessperson and as you can
imagine, have had many years worth of insurance problems. As a health
care consumer I have witnessed the blizzard of incorrect paperwork that
accompanies outpatient surgery, ER visits etc. I served on the Suburban
General Hospital Board of Directors until January 1st when they merged
with Allegheny General. I also have a son who is on track to enter
Drexel University College of Medicine in fall '06 so medical malpractice
is often on my mind. Recently I joined SMC Business Councils and there I
am on the Government Relations committee and the ad hoc Health Care
committee. Cliff Shannon and I recently met with Jerry Fedele to discuss
health care policy.

In the early years I really did not understand insurance and my husband
and I and our two kids hopped from policy to policy. We always thought
we were buying a service, like a utility, and accepted the riders on
numerous body parts as they were handed to us. In retrospect the great
fork in the road came when my son was four years old. We were rejected
from CompleteCare because he had experienced several ear infections
(which never amounted to anything). I wish today that I had that policy.
I wouldn't be writing this letter. We had an MSA for 7 years and over
the past several years watched as the premiums increased at
unsustainable rates even with a $4,800 deductible. During 2003 I had two
routine out patient surgeries and one ER visit. The accumulated bills
from previous years, current bills, premiums, and self-employment taxes
on all of that equaled a third of our income.

Today, purely out of defense, my husband and I have a new policy with
$20,000 worth of deductibles in order to keep the premium reasonable.
So, in essence, we pay all medical expenses out of pocket and insure our
assets. I stopped requesting Highmark group quotes in 2003. The quote
that year was over $15,000 for 3 of us. Adding on our dental and vision
expenses and self-employment tax I estimate that the cost would have
approached $20,000. You must remember your the July 4th interview with
Linda Dickerson "In groups under five we lost the business to the
uninsured." I am close to that point but not there yet. At this point in
time my choices are to 1) work at Wal-Mart or 2) refine my negotiating
skills. I choose the latter.

I can't envision national health care in such an anti-tax society. I
cannot picture what would tip the scales in favor of creating policy to
cover the uninsured. I know that your concerns are rising costs and the
uninsured. I have a folder of articles entitled "Pressures on Hospitals"
The unfortunate part of the picture is that hospitals are left to deal
with the problem of the uninsured. I have thrown up my hands on that
huge effort but will work for other reforms. At one point last fall I
had my own list of 10 reforms which I distributed. My central focus then
was getting the consumer back into the loop, thinking that if the
consumer was paying himself use would slow as he made more thoughtful
purchases. After talking to Fedele and Shannon I have come to a better
understanding of the pursuit of quality. I have aligned my thinking with
the Porter & Teisberg piece "Redefining Competition in Health Care"
from the Harvard Business Review June '04 ONPOINT collection. It makes
sense. That is the mantra of the great management guru, Peter Drucker-
Focus on the Customer and Manage for Quality. That's what we do in our
business and what any other excellent company does. So why not in
health care?

I have adopted and actively support the SMC agenda for reining in health
care costs. I am very impressed with Cliff and Company. Many people,
many organizations TALK about Health Care Reform. Not many actually do
anything. (I have told Cliff that's because any one who writes a policy,
an article, crafts a piece of legislation, is insured. They do not have
the pre-requisite "Skin in the Game"). At SMC they actually DO things
and that's because small businesses are severely threatened. Their
reforms are aimed at slowing the growth of the underlying cost structure
of health care.

1. REIN IN PRESCRIPTION DRUG COSTS

2. MEDICAL MALPRACTICE REFORM

3. INSURANCE MARKET REFORM

4. INDIVIDUAL RESPONSIBILITY FOR HEALTH & PAY FOR PERFORMANCE

I think that in the future the consumer will have a larger role in
transforming the health care system. For now, though, the necessary step
to take is Pay for Performance and the pursuit of Quality. That will
help to reduce unnecessary health care expenditures for preventable
mistakes, preventable hospital acquired infections, and preventable
medical errors. We really have no choice but to go down that road.

I intend to focus most of my efforts on Medical Malpractice Reform and
Insurance Market Reform. I do not know exactly what I can accomplish. It
is definitely not a straight-line activity. I will continue to prod
those who are in a position to act. "It does not take a majority to
prevail, but rather an irate, tireless minority keen to set brush fires
in people's minds." .... Samuel Adams

If you have any input I would like to hear it.

Sincerely,

Eileen Anderson
Red Clay Tile Works
Member, SMC Business Councils

Response from Kenneth R. Melani, M.D.

2005-03-29T12:57:00.000-05:00

March 14, 2005

Dear Ms. Anderson:

I am responding to your February 22, 2005 letter. I read the letter with great interest because it raises a variety of questions about the multiple challenges and potential solutions to problems facing the health care delivery and financing system. Before addressing some of these points, however, I'd like to stress that many of the issues affecting the availability and affordability of health insurance are beyond the control of any single participant in the industry. All key industry stakeholders - health insurers, physicians, hospitals, consumers, employers, labor and the public sector - must work cooperatively to address the many factors that are driving up medical costs and increasing the number of people without health insurance.

Your letter indicates strong support for the SMC Business Councils' plan to rein in rising medical costs. I agree that escalating costs are the basic problem with health care. Everyone is affected by increasing medical costs, the young and the old, the employed and the unemployed, the fledgling small business and multi-national enterprises. Rising costs are putting the price of health insurance out of reach for some employer group plans, especially smaller businesses, and individuals. More than 43 million Americans, including approximately 1.3 million Pennsylvanians, have no health insurance. These concerns about cost and access to quality health care are forcing many of us to rethink our country's health care policy.

I could write volumes on the topic of rising costs. Suffice to say, there is not single reason why costs continue to climb at three times the rate of general inflation. A number of separate, but often intertwined, forces are fueling the increase in health care costs, including:

Labor costs
Medical malpractice insurance
Government mandates
Consumer demand
Technology
Demographics and lifestyles

Some of these factors - labor costs, medical malpractice insurance and mandates - can be controlled somewhat through legislative or regulatory changes at the state and federal levels, and may have short-term impact on overall costs. However, consumer demand, technology and demographics and lifestyles present more systemic challenges that may not be easily managed in the long run.

It's important to discuss demographics and lifestyles because it underscores the fact that consumers can influence health care costs and improve their quality of life. Pennsylvania's health care cost are higher than other states because of our unhealthy lifestyles. A fourth of the state's adults smoke, higher than the national average. Our residents are sedentary, with 25 percent reporting no leisure-time physical activity. And nearly 60 percent of Pennsylvanians are overweight.

The good news is that more individuals and employers are starting to take action to improve their lifestyles. More of our members are availing themselves of Highmark's on-line lifestyle programs that focus on weight management, stress reduction, smoking cessation and health eating habits. In addition, more than 300 employers are using our worksite wellness programs to improve the health of their employees. These activities can go a long way toward helping more people lead healthier lives, and ultimately controlling the incidence of chronic medical conditions that contribute to soaring medical costs.

As you correctly point out, opportunities exist to improve the delivery of medical care, and to change the way health plans pay physicians and health care professionals to promote higher-quality care. For example, in September 2004, Highmark and the Rand Corporation joined with a variety of Pittsburgh-area organizations to coordinate a large summit to explore possible solutions for cost, quality and access to care issues in Western Pennsylvania. The program focused on ways in which the business and provider communities can collaborate to improve health care performance while controlling health care costs.

One message that emerged from the summit was that the current methods for paying health care providers do not reward the right behavior. In other words, health plans should pay for performance, meaning providers should be paid based on producing positive clinical outcomes. To be succinct, why should health plans pay physicians to operate on the left leg when they should have operated on the right leg? We would not pay an auto mechanic to replace a tire on the right passenger side of a car, when it was the tire on the left driver's side that needed changing.

Highmark already has some programs in place that provide additional payments to physicians for delivering higher quality care. We have also worked with some hospitals in the region on "pay-for-performance" programs that tie some of their payments to measurable improvements in quality and patient safety, such as appropriate drug prescribing methods. But there is much more do be done. Over the next three years, we plan to step up our efforts, in conjunction with health care institutions, to better align provider payment methods to encourage the delivery of high quality care.

The summit also reached an overwhelming consensus on the need to better automate the transmission and exchange of information in the health care system. The reasons for greater electronic connectivity in health care are apparent: it will reduce some of the paperwork and administrative costs associated with the system, and it will help ensure that providers have more accurate clinical information to better diagnose and treat patients.

Over the next few years, I anticipate steady movement in the health care community toward developing an electronic health record. An e-health record represents an important foundation for sharing information, although there are number of issues relating to privacy and competition among health delivery systems that will have to be addressed before we have more widespread use of electronic medical records. In the near term, however, I am hopeful that the community can work collaboratively toward greater acceptance of electronic drug prescribing tools. Electronic prescribing systems can help increase efficiency in managing the requirements of multiple drug formularies, increase informed patient use of new drugs, and reduce medication errors.

Finally, I want to address the need for reform of the health insurance market for small employers. Increasing the accessibility and affordability of insurance for small employers must be a focal point of health care policy in our state, as you mention in your letter. Legislation will be debated this year that will being to lay the foundation for achieving great stability in the small group health insurance market.

The proposed legislation will help expand the choice of health insurance and make health insurance more affordable for small employers with workers in poorer health. Today, many insurers use a method known as medical underwriting to set insurance rates, meaning that they will ask small employers to fill out health questionnaires to determine the health status of a small employer's workforce. Companies with workers it ill health or with chronic medical conditions can receive outrageously high rates, sometimes forcing them to drop coverage.

The proposed legislation will help restore the true purpose of health insurance, which is spreading the costs of health care over a large population of people so that people in good health help to cover the cost of services for people in poorer health. I believe that health insurance should be more affordable to all small employers - not only the healthy.

Pennsylvania is the only one of two states with a "double standard" for setting small employer insurance rates. This double standard allows certain for-profit insurance companies to target small employers in good health while avoiding small companies with employees in poor health.

Despite the growing support for small group reform legislation among trade associations and many segments of the small business community, its passage in the Pennsylvania General Assembly is far from certain. Small business allies across the state are working collaboratively to mobilize advocacy efforts to obtain legislative support for reform. They are educating legislators on the issue, letting them know that small businesses want more choice of affordable health insurance options.

I want to thank you for taking the time to discuss these important - although complex - cost and quality issues. It underscores the fact that everyone must become more informed and engaged on health care policy matters in order to craft reasonable solutions that promote the public's best interest.

Sincerely,

Kenneth R. Melani, M.D.

Rant of the Day - 3/24/05

2005-03-24T17:45:00.000-05:00

If you're angry about health insurance costs, you can either suffer from elevated blood pressure or do something about it. If you're drive to distraction by yesterday's announcement that Highmark made $310 million after taxes in 2004, you can either bitch about it or do something it. If you're someone who believes that nothing that you or anyone else does will make a difference, that nothing will ever get any better, shame on you for giving up. I spent most of my working life in politics with one Governor and two U.S. Senators, and I can guarantee you that if enough constituents stand up and demand change, that elected representatives will feel that they must respond.

If you're not willing to give up, before you write your next check for health insurance, go to www.smc.org, and do one or more of these three things:

> Sign up online to join the group that is traveling to Harrisburg on Monday, April 11 for a rally in the State Capitol and lobbying individual legislators. We're going to make a lot of noise at once, and we're going to demand action. (And we'll have some fun, while we're at it.)

> Download a petition form at www.smc.org that asserts how concerned you are about health care costs, sign it, and circulate it among your co-workers, business associates, immediate family members, and neighbors. Return the signed petition to SMC. We're going to put several thousand on the desks of legislators in Harrisburg and Washington, D.C. when we visit them.

> See the draft letters-to-legislators at www.smc.org and the online tool for finding out who your legislator is. Then sit down a pen a person letter to your legislator about skyrocketing health insurance costs.

Author: Cliff Shannon, President - SMC

Rant of the Day - 3/22/05

2005-03-22T15:47:00.000-05:00

Health savings accounts have been touted in Pittsburgh repeatedly in recent days. Senator Santorum, Congresswoman Hart, and Congressman Murphy held a half-day seminar last week, featuring one hosanna after another for the coming of HSAs. Local business organizations, insurance agencies, and other "experts" are holding forth on the transformative potential of HSAs whenever a crowd of more than 5 people gathers for any reason (and SMC Business Councils has certainly been part of all of this). Just a few days ago the CEO of AetnaUSHealthcare paid a visit to Pittsburgh and pronounced himself well-satisfied both that HSAs as a concept would save us from skyrocketing health insurance costs and that his company was far ahead of the competition in terms of delivering a coherent HSA + high deductible health insurance combination that would usher in a new era of consumer-driven health care spending restraint.

Here's the fly in the ointment. If you want to put your financial and health care security into an HSA plan, you assume the capability to make sensible decisions about spending your hard-earned dollars. Unfortunately, both the contracts between hospitals and insurers, and new law written last year in Pennsylvania, prevent you or any other consumer from knowing in advance what any hospital-delivered health care service will cost. That's right. Hospitals and insurers have obligated themselves via contracts not to ever divulge what hospitals are actually paid. And the General Assembly passed a law last year that forbids the PA Health Care Cost Containment Council (which would otherwise publish hospital payment information) from ever publishing information for consumers.

If you are in the mood for an experiment, call your local hospital on three consecutive days, make sure you speak to three different people, and ask what it would cost you, as a patient with an HSA and high-deductible insurance policy, to: get ordinary stitches in the ER ... or get an MRI ... or have a baby delivered. You won't ever get the same answer (or any answer). And the only information that hospitals have to release is their master charge lists, which are used only for those who don't have insurance (i.e., those unfortunate people pay full retail). Actual hospital billings for insured patients amount to 30-50% of master charge list, depending on insurer and type of health care service.

Now, explain to me how even the most discerning consumers are going to make sense out of consumer-directed health care?

Author: Cliff Shannon, President - SMC

Rant of the Day - 3/18/05

2005-03-18T11:35:00.000-05:00

MEDICAL MALPRACTICE. The release of a report that concluded no net reduction in total medical malpractice awards (i.e., economic AND non-economic damages in cases decided by juries) after states legislated caps on non-economic damages is not a surprise. It appears that juries tend, like the rest of us, not to be preoccupied with distinguishing between economic and non-economic categories. They look at the severity of the injury (primarily) and come up with total figure for the injured patient, which they then apportion between economic and non-economic according to state law (and whim).

The results of this report are a further setback for chances of enacting caps on non-economic damages -- both in Harrisburg and in Washington, D.C. Even if this seems to be bad news, it has the potential for forcing legislators and the health care industry to look at different solutions to the very real medical malpractice crisis.

Apart from the numbers, the single biggest drawback to caps is that it forces a political alignment of patient advocates (self-styled ones, like the trial lawyers' lobbyists, and real ones) on one side, and the health care industry (and business allies) on the other. This is a stupid outcome for several reasons. First, caps are meaningful for only a very, very small fraction of injured patients. 200,000+ Pennsylvania hospital patients contracted a serious, preventable hospital-acquired infection in 2004, of whom at least 2,000 died. Approximately the same patient injury numbers apply for medication errors. Several thousand additional patients had things left inside them after surgery, the wrong limbs operated on, contaminated blood put into them during surgery, etc. In other words, there were more than a half-million serious patient injuries and death last year, but the total number of medical malpractice cases that went to trial by jury was less than 2,000. Tell me again why patient advocates should be in such a shrieking frenzy about caps on non-economic damages.

Second, even for patients who stand to be potentially affected by caps, such caps should the least of their concerns. Their reality, which they don't understand and which no one ever talks about, is that it takes an average of 6 years for an injured patient or a surviving family member, to ever receive a dime from a medical malpractice lawsuit. In most cases, there is a real need for immediate financial assistance (e.g., to care for person who suffered injury), whereas both plaintiffs' and defendants' lawyers interests are generally served by a longer process that produces maximum dollars. With that in mind, it should come as no surprise that a Harvard Business Review piece from June 2004 asserted that less than 30 cents of the medical malpractice premium dollar is paid out to patients/families; the other 70+ cents goes to transaction costs represented by lawyers, expert witnesses, insurer overhead and profits, etc. As if all of this didn't add up to a really bad joke on legitimately injured patients, who deserve reasonable compensation, the US Supreme Court handed down a predictable ruling a few months ago that will reduce patients' net recovery even more: medical malpractice awards are fully taxable income for the recipients. Furthermore, the current state of contracts with patients' lawyers will have the tax bill paid as follows: first, the patient pays the tax man (e.g., $350,000 or so on a $1 million award), then the patient pays his or her attorney 40% + expenses, based on the $1 million gross amount of the award. Please tell me again how the current system works for patients.

Third, as if the financial deal weren't raw enough for those unfortunates who need health care, there is the matter of the ongoing carnage itself. The numbers above about hospital-acquired infections, medication errors, and other awful misadventures aren't exaggerated. They are confirmed both by government and independent studies. Furthermore, in almost all instances, these mistakes are preventable -- and this has been demonstrated in real hospitals with real doctors and real nurses. (Don't believe hospital spokespersons and unthinking physicians who tell newspapers that most errors are just the unavoidable consequences of health care complexity. They are absolutely, provably wrong.) So, why don't the mistakes get fixed, rather than the same mistakes occurring over and over and over again. Organizational and individual inertia is part of the problem. The way we pay for health care is also a big part of the problem (i.e., we pay more (often hundreds of thousands of dollars more) for health care that injures patients than we pay for perfect care). But the biggest issue of all is the constant pressure to conceal problems or refusal to acknowledge problems for fear of legal liability. You can't fix a problem you don't acknowledge, and you can't fix a problem you won't measure.

So, PA law provides for patients to get compensated only rarely, and then only to the extent of pennies on the dollar compared to others who feed at the medical malpractice lawsuit trough. And hundreds of thousands of Pennsylvanians are injured year and year in the same ways because our laws are a huge incentive to improve patient safety. Is this a pro-patient set-up, or what?

How about some meaningful medical malpractice reforms in Harrisburg, perhaps starting with:

1. Caps on attorney fees on awards that exceed $250,000.
2. Mandated arbitration for the first 12 months after a lawsuit is filed, in order to head off expensive, lengthy litigation.
3. Excluding health care providers' statements in arbitration from discovery in the event a lawsuit goes forward. What patients and family members want most of all, in almost every case, is to know what happened. Allow doctors to tell them, face-to-face, without giving lawyers ammunition.
4. Provide different penalties/liabilities for those who are demonstrably not safe health care providers, but also some incentive, in the form of limits on legal liability, for health care providers that are measurably at the head of the class in terms of patient safety. In other words, if a physician has two "bad" medical malpractice cases in a year, that physician ought to be in jeopardy of losing licensing. But if a physician is rarely sued and is provably engaged in recognizing and eliminating real threats to patient safety (e.g., always block-write prescriptions, so there is never, ever a legibility mistake), it ought to be recognized.

Author: Cliff Shannon, President - SMC

SMC Business Councils

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