Vertical Integration: Hospital Ownership Of Physician Practices Is Associated With Higher Prices And Spending

By Laurence C. Baker, M. Kate Bundorf and Daniel P. Kessler
Health Affairs, May 2014

The share of US physician practices owned by hospitals more than doubled from 2002 to 2008. This trend toward vertical integration between hospitals and physicians means that more producers of complementary services that were once independent are now either commonly owned or related by contract.

Whether this trend has been good for consumers has been the subject of considerable debate. On the one hand, vertical integration has the potential to improve the quality and efficiency of care by reducing what are broadly described by economists as “transaction costs.” For example, closer ties between physicians and hospitals can improve communication across care settings and reduce wasteful duplication of diagnostic tests.

On the other hand, vertical integration may hurt consumers by allowing hospitals and physicians to raise prices. By employing or contracting with physicians, hospitals may increase their market power by amassing control over a larger bundle of services or by depriving their rivals of a source of or destination for referrals. In addition, vertical integration may increase physicians’ incentives to supply unnecessary treatments if such treatments are used as a vehicle to pay what are effectively kickbacks for inappropriate referrals.

Understanding how vertical integration of physicians and hospitals affects spending and the quality of care has become especially important in recent years. The Affordable Care Act creates incentives that are likely to intensify the historical trend toward vertical integration. The act rewards doctors and hospitals that join together in an accountable care organization (ACO) by making them eligible for cash bonuses from Medicare. In theory, ACOs affect only how providers relate to Medicare. However, most health policy analysts believe that in practice, these organizations will increase the extent to which doctors and hospitals bargain with private purchasers jointly instead of independently.

From the Discussion

Vertical integration can have both socially beneficial and socially harmful effects. There is almost universal agreement that greater coordination of care, especially between physicians and hospitals, would be in patients’ best interests. At the same time, health policy analysts have expressed the concern that integration can have unintended harmful consequences for consumers. According to economic theory, vertical integration has the potential to increase the market power of providers, especially hospitals, and to encourage physicians to supply inappropriate treatments by facilitating hospitals’ payments of kickbacks that would be illegal if they were made formally.

Our study had two key findings. First, in its tightest form, vertical integration appears to lead to statistically and economically significant increases in hospital prices and spending. This is consistent with the hypothesis that vertical integration increases hospitals’ market power. We found that a one-standard-deviation increase in the market share of hospitals that own physician practices was associated with significant increases in prices and spending of 2–3 percent. In comparison, a one-standard-deviation increase in the hospital Hirschman-Herfindahl index increased prices and spending by 4–6 percent.

Second, the consequences of looser forms of vertical integration were more benign and potentially socially beneficial. Increases in these forms of integration did not appear to increase prices or spending significantly and may even decrease hospital admission rates. This finding is consistent with the hypothesis that vertical integration can improve the coordination of care.

However, the effects on volume associated with these types of integration were small — so small that they did not generate a significant reduction in hospital spending. In addition, although our estimates of the effect of contractual integration on price were statistically indistinguishable from zero, the imprecision of our estimates limited our ability to confidently assess their true impact.

http://content.healthaffairs.org/content/33/5/756.abstract

An intent of the Affordable Care Act was to reduce health care spending through the establishment of more efficient integrated health systems, operating as accountable care organizations. The ultimate integration is for hospitals to assume ownership of physician practices. This study demonstrates that this form of vertical integration does not reduce prices and spending but rather increases them, likely through the anti-competitive effects of such consolidation. Looser forms of vertical integration (contracts rather than ownership) also failed to achieve a reduction in hospital spending.

One important aspect of this study that will likely escape the attention of the policy community is that they used data from Truven Analytics MarketScan – a data base of claims filed by privately insured people who obtained insurance through a participating employer. Thus the ineffectiveness in recovering through lower prices the efficiencies of the consolidated systems represents a failure of the private insurance industry, whether functioning as insurers or as administrators for self-insured employers.

So maybe vertically integrated systems, in which the hospitals own physician practices, have the market clout to prevent efficiency savings from being passed on to the purchasers of health care, but if we had a single payer financing system, our public stewards would ensure that we paid the right amount through administered pricing rather than being victim to unfairly leveraged market negotiations. We need to replace marketplace oligopolies with our own public monopsony – an improved Medicare for all.

The Problem With Free Health Care

By H. Gilbert Welch
The New York Times, April 30, 2014

The Affordable Care Act does have its flaws. Here’s a big one: It favors screening over diagnosis.

While the distinction may seem arcane, it has real-world implications. Screening is what we offer to the well; it’s the effort to find abnormalities in those who do not have signs or symptoms of disease. Because screening is considered part of preventive care under the Affordable Care Act, it is provided at no charge.

Diagnosis is what we offer to those who do have signs or symptoms of disease. Because diagnosis is not preventive care, it is subject to deductibles and co-payments.

I wish money wasn’t such a powerful incentive in medical care. But the economists are right: Incentives matter. Right now they favor lower risk patients (those being screened) over higher risk ones (those with signs and symptoms).

They also encourage a feeding frenzy among providers to recategorize diagnostic testing as screening. Free screenings were seen as a way to get people through the door and ideally to find and address problems before they become more dangerous and expensive.

But in practice, it may not work this way. Some hospitals offer free screening knowing full well that the costs will be more than made up for by all the subsequent services required. More testing, false alarms and overdiagnosis are all part of screening. And if you make it free, patients are less likely to give proper consideration to these potential harms — not to mention the potential for a lot of out-of-pocket costs down the line.

Here’s the fix: Eliminate the incentive mismatch between screening and diagnosis. Treat them equally.

We need people to consider medical care carefully, and that’s what cost sharing is all about.

****

When Cost Deters Care

Letters, The New York Times, May 8, 2014

To the Editor:

H. Gilbert Welch is right to be concerned that patients will forgo diagnostic mammograms, colonoscopies and other kinds of care for serious conditions if they aren’t free, as “prevention” is under the Affordable Care Act (“The Problem With Free Health Care,” Op-Ed, May 1).

Studies show that even patients who need emergency care for a potentially serious problem will go without it if they are in a high-deductible health plan (although this increases their risk of subsequent hospitalization). And therein lies the problem. While cost sharing discourages overuse of medical care, it worsens a greater problem, that of underuse.

In an 11-nation survey by the Commonwealth Fund, more than a third (37 percent) of Americans reported not going to the doctor when sick or not filling a prescription because of cost, compared with a small percentage of people in Britain, Sweden and Norway. The difference: They have single-payer systems in which care is generally free at the point of service.

Ida Hellander

Chicago, May 2, 2014

The writer is director of health policy and programs for Physicians for a National Health Program.

****

Access, Affordability, and Insurance Complexity Are Often Worse in the United States Compared to 10 Other Countries

By Cathy Schoen, Robin Osborn, David Squires, and Michelle M. Doty 
The Commonwealth Fund, November 13, 2013

Synopsis

A 2013 survey conducted in 11 countries finds that U.S. adults are significantly more likely than their counterparts to forgo health care because of the cost, to have difficulty paying for care even when they have insurance, and to deal with time-consuming insurance issues.

http://www.commonwealthfund.org/Publications/In-the-Literature/2013/Nov/Access-Affordability-and-Insurance.aspx

USPSTF A and B Recommendations: http://www.uspreventiveservicestaskforce.org/uspstf/uspsabrecs.htm

Comment:

By Don McCanne, MD

H. Gilbert Welch has been a leading voice in warning us about the costs and adverse consequences of overdiagnosis. When there is little benefit but greater potential harm and expense for a given diagnosis, it usually would be better if that diagnosis had never been made. This is especially true when a screening test is done on a healthy individual if it leads to a diagnosis that will be of no help but could result in harm to the patient.

When should screening tests be done? The decisions should be made by patients after their health care professionals provide them with adequate information regarding the potential benefits and adverse consequences of the screening procedures. That advice should reflect the latest information available from sources such as the U.S. Preventive Services Task Force (USPSTF). In fact, the Affordable Care Act specifically covers, without charge, level A and B preventive service recommendations of the USPSTF. (Link above – USPSTF recommendations are updated as new information becomes available.)

Dr. Welch would add one other consideration. He would require patients to pay a portion of the costs for the screening tests just as they would for diagnostic testing used to evaluate specific symptoms or signs. It is well known that if people have to pay for screening tests that they should have, many will decline them simply because of the expense. This can result in adverse health outcomes or even death. If a screening test warrants an A or B USPSTF rating, its benefits do outweigh the potential harm, and it should be offered to the patient without placing it behind a “paywall” (deductible, coinsurance or copayment).

Dr. Welch has it backwards. We should eliminate the incentive mismatch between screening and diagnosis, but we should do that by removing the paywalls for diagnostic and therapeutic services rather than creating new ones for preventive screening.

PNHP’s director of health policy, Ida Hellander, has it exactly right. Rather than overuse, we have a much greater problem with underuse of beneficial health care services, and cost-sharing paywalls worsen that problem.

The Commonwealth Fund study that Dr. Hellander cites shows that the United States has a much greater cost-related access problem than do the other ten wealthy nations studied, yet those nations spend far less on total health care than we do, without the necessity of erecting these paywall financial barriers to care.

We can thank Dr. Welch for his great work in explaining to us the potential negative consequences of screening tests. With this information we can better inform the patient who has to make the decision on undergoing screening. But we can also thank Dr. Hellander for her great work on explaining to us why health care should be based on patient need rather than on the patient’s ability to pay.

Quite simply, patients should have the care that medical science dictates they should have, if they want it, but not denied that care because they feel they cannot afford it.

The Problem With Free Health Care

By H. Gilbert Welch
The New York Times, April 30, 2014

The Affordable Care Act does have its flaws. Here’s a big one: It favors screening over diagnosis.

While the distinction may seem arcane, it has real-world implications. Screening is what we offer to the well; it’s the effort to find abnormalities in those who do not have signs or symptoms of disease. Because screening is considered part of preventive care under the Affordable Care Act, it is provided at no charge.

Diagnosis is what we offer to those who do have signs or symptoms of disease. Because diagnosis is not preventive care, it is subject to deductibles and co-payments.

I wish money wasn’t such a powerful incentive in medical care. But the economists are right: Incentives matter. Right now they favor lower risk patients (those being screened) over higher risk ones (those with signs and symptoms).

They also encourage a feeding frenzy among providers to recategorize diagnostic testing as screening. Free screenings were seen as a way to get people through the door and ideally to find and address problems before they become more dangerous and expensive.

But in practice, it may not work this way. Some hospitals offer free screening knowing full well that the costs will be more than made up for by all the subsequent services required. More testing, false alarms and overdiagnosis are all part of screening. And if you make it free, patients are less likely to give proper consideration to these potential harms — not to mention the potential for a lot of out-of-pocket costs down the line.

Here’s the fix: Eliminate the incentive mismatch between screening and diagnosis. Treat them equally.

We need people to consider medical care carefully, and that’s what cost sharing is all about.

http://www.nytimes.com/2014/05/01/opinion/the-problem-with-free-health-c…

****

When Cost Deters Care

Letters, The New York Times, May 8, 2014

To the Editor:

H. Gilbert Welch is right to be concerned that patients will forgo diagnostic mammograms, colonoscopies and other kinds of care for serious conditions if they aren’t free, as “prevention” is under the Affordable Care Act (“The Problem With Free Health Care,” Op-Ed, May 1).

Studies show that even patients who need emergency care for a potentially serious problem will go without it if they are in a high-deductible health plan (although this increases their risk of subsequent hospitalization). And therein lies the problem. While cost sharing discourages overuse of medical care, it worsens a greater problem, that of underuse.

In an 11-nation survey by the Commonwealth Fund, more than a third (37 percent) of Americans reported not going to the doctor when sick or not filling a prescription because of cost, compared with a small percentage of people in Britain, Sweden and Norway. The difference: They have single-payer systems in which care is generally free at the point of service.

Ida Hellander

Chicago, May 2, 2014

The writer is director of health policy and programs for Physicians for a National Health Program.

http://www.nytimes.com/2014/05/09/opinion/when-cost-deters-care.html?ref…

****

Access, Affordability, and Insurance Complexity Are Often Worse in the United States Compared to 10 Other Countries

By Cathy Schoen, Robin Osborn, David Squires, and Michelle M. Doty 
The Commonwealth Fund, November 13, 2013

Synopsis

A 2013 survey conducted in 11 countries finds that U.S. adults are significantly more likely than their counterparts to forgo health care because of the cost, to have difficulty paying for care even when they have insurance, and to deal with time-consuming insurance issues.

http://www.commonwealthfund.org/Publications/In-the-Literature/2013/Nov/…

USPSTF A and B Recommendations:http://www.uspreventiveservicestaskforce.org/uspstf/uspsabrecs.htm

H. Gilbert Welch has been a leading voice in warning us about the costs and adverse consequences of overdiagnosis. When there is little benefit but greater potential harm and expense for a given diagnosis, it usually would be better if that diagnosis had never been made. This is especially true when a screening test is done on a healthy individual if it leads to a diagnosis that will be of no help but could result in harm to the patient.

When should screening tests be done? The decisions should be made by patients after their health care professionals provide them with adequate information regarding the potential benefits and adverse consequences of the screening procedures. That advice should reflect the latest information available from sources such as the U.S. Preventive Services Task Force (USPSTF). In fact, the Affordable Care Act specifically covers, without charge, level A and B preventive service recommendations of the USPSTF. (Link above – USPSTF recommendations are updated as new information becomes available.)

Dr. Welch would add one other consideration. He would require patients to pay a portion of the costs for the screening tests just as they would for diagnostic testing used to evaluate specific symptoms or signs. It is well known that if people have to pay for screening tests that they should have, many will decline them simply because of the expense. This can result in adverse health outcomes or even death. If a screening test warrants an A or B USPSTF rating, its benefits do outweigh the potential harm, and it should be offered to the patient without placing it behind a “paywall” (deductible, coinsurance or copayment).

Dr. Welch has it backwards. We should eliminate the incentive mismatch between screening and diagnosis, but we should do that by removing the paywalls for diagnostic and therapeutic services rather than creating new ones for preventive screening.

PNHP’s director of health policy, Ida Hellander, has it exactly right. Rather than overuse, we have a much greater problem with underuse of beneficial health care services, and cost-sharing paywalls worsen that problem.

The Commonwealth Fund study that Dr. Hellander cites shows that the United States has a much greater cost-related access problem than do the other ten wealthy nations studied, yet those nations spend far less on total health care than we do, without the necessity of erecting these paywall financial barriers to care.

We can thank Dr. Welch for his great work in explaining to us the potential negative consequences of screening tests. With this information we can better inform the patient who has to make the decision on undergoing screening. But we can also thank Dr. Hellander for her great work on explaining to us why health care should be based on patient need rather than on the patient’s ability to pay.

Quite simply, patients should have the care that medical science dictates they should have, if they want it, but not denied that care because they feel they cannot afford it.

Hospitals plot the end of insurance companies

By Rob Garver
The Fiscal Times, March 27, 2014

At The Atlantic’s Health Care Forum in Washington on Thursday [March 27], health care and business professionals said that there’s an increasing trend in the industry toward cutting insurance companies out of the process entirely, as large, regional hospital systems move into the insurance business. 

Dr. Kenneth L. Davis, CEO and president of Mount Sinai Health System, the largest health care provider in the state of New York, said that starting next year, Mt. Sinai will begin offering its own Medicare Advantage plan. It will look for other opportunities to bring premium payments directly into the hospital system, rather than filtering them through insurance companies.

Davis said he expects organizations similar to his to move in the same direction. “Inevitably the large systems are going to move to take part of the premium dollar,” he said.

For both non-profit systems like Mt. Sinai and for-profit systems, he said, retaining more and more of the health care premiums paid by consumers is essential to providing a full spectrum of care. He said that his system’s St. Luke’s Hospital in New York runs a psychiatric program that loses $14 million per year. It’s “not sustainable,” he said, so the system needs to cross-subsidize the money-losing services that it nonetheless must continue to provide, with income from more profitable services, such as orthopedic surgery.

http://www.thefiscaltimes.com/Articles/2014/03/27/Hospitals-Plot-End-Insurance-Companies

****

Comment:

By Kip Sullivan, JD

The media is doing a good job of telling the public that consolidation within the hospital industry accelerated dramatically after the Affordable Care Act was enacted. The media is doing a terrible job of explaining why. 

The flabbiness of managed-care speak is part of the problem. So too is the tendency of merger partners in all sectors of the economy to feign disinterest in market power and to claim their merger was motivated only by a desire for greater efficiency. These problems were on display during a recent interview of Dr. Kenneth Davis, CEO of Mount Sinai Health System (an enormous hospital-clinic chain), by Corby Kummer, a senior editor for the Atlantic. http://www.theatlantic.com/live/events/health-care-forum/2014/ 

The Fiscal Times summary of that interview, quoted above, accurately portrays what Davis said. He mentioned two motives for his recent acquisition of other hospitals: (1) to ensure that services that lose money for Mt. Sinai, such as pediatrics, psychiatry, and obstetrics, are cross-subsidized by money-making services such as orthopedics; and (2) to create an entity large enough to bear insurance risk. But Dr. Davis failed to explain why Mt. Sinai should have to cross-subsidize anything or bear any insurance risk, and Mr. Kummer’s vague questions failed to clarify Dr. Davis’s opaque remarks. 

Dr. Davis was one of several experts convened on March 27 by The Atlantic for a forum on “fundamental questions underlying” the Affordable Care Act. Mr. Kummer began the interview with this gentle question: “How should people be viewing… the size of these health care systems?”

Dr. Davis first replied with his cross-subsidization argument. He claimed cross-subsidization was possible only “in an integrated health care system” that can create “efficiencies both in clinical care and corporate infrastructure.” He said the Roosevelt Hospital was going to become a “real mecca for orthopedics,” and that in turn would make adequate financing of underfunded services possible. 

Note the unspoken, undocumented assumptions lurking under these statements, including: 

• Control of numerous hospitals and clinics by a single corporation results in “efficiencies;” 
• Mt. Sinai’s management, not society through its government, should decide how much doctors should be paid, and
• Mt. Sinai should seize the power to do that by gobbling up other providers.

Some version of the second question did enter Mr. Kummer’s mind, but he couldn’t figure out how to pose it. “Is one way of bending the cost curve trying to equalize that hierarchy of reimbursement, or is that just too much to hope for?” he finally blurted out. Davis dodged the question (see Davis’s answer at 5:30 into the interview).

Rather than rephrase his question, Kummer raised another subject. He asked Davis if Mt. Sinai intended to start its own insurance company. Davis said it wasn’t clear yet whether Mt. Sinai would create an insurance company in partnership with an existing insurer or “with our own license,” but he had no doubt Mt. Sinai would become an insurance company. 

Rather than question why hospitals should be branching into the insurance business, Kummer asked: “Does the Affordable Care Act make it easier for you to think in terms of offering this product?”

“No, it’s the macroeconomics of health care that is forcing this,” Davis replied. “It’s large systems coming together that are large enough to take actuarial risk…. You need a certain size and scale to be able to take risk.”

Can you imagine a more abstract answer? Some force majeure was making Davis build an empire so he could “take actuarial risk.” Kummer bought it.

A good interview would have helped listeners understand the policies that have triggered periodic spasms of merger fever in our health care system, and the arguments for and against letting those policies persist. The most important cause of the rapid consolidation of our health care system is the 40-year-old campaign waged by the powerful managed care movement to blame the fee-for-service method for overuse of health care, and to replace that method with capitation and other methods of forcing doctors and hospitals to bear insurance risk. The zenith of this campaign was reached in March 2010 with the enactment of the Affordable Care Act. This campaign conveniently ignores the role of high administrative costs inflicted on the system by our multiple-payer system and by managed care itself.

The media occasionally drops a hint that the attack on fee-for-service is the original cause in the chain of causes leading to merger fever. For example, the New York Times article on Mt. Sinai’s merger with Continuum Health Partners last year quoted Richard Ravitch, a member of Mt. Sinai’s board, saying: “‘The fee-for-service system is going to be history shortly,” it will be replaced with a system of “bundled payments” that shift insurance risk to hospitals, and to handle that new system hospitals will “need a population that’s larger than what any one [hospital] has … today.” http://www.nytimes.com/2013/07/17/nyregion/2-hospital-networks-agree-to-merge-raising-specter-of-costlier-care.html 

But the article made no effort to explain why the fee-for-service method should be terminated, why a system of “bundled payments” would be better, and who is promoting these notions. The nation badly needs the mainstream media to connect the dots between the demonization of fee-for-service and the latest merger spasm in our health care system.

The dots could be connected quite simply, as follows: 

• Managed care advocates, including leaders of both political parties, think overuse is the cause of our health care crisis, and that overuse is caused by the fee-for-service method; 
• The managed care movement’s demonization of fee-for-service and its lionization of shifting risk onto hospitals and doctors means providers must consolidate in order to bear insurance risk. 

Once the dots are connected, society can then ask, Is it true that overuse is our main problem and fee-for-service causes it, and if not, is there a better way to solve the health care crisis? 

For single-payer advocates, the answer is clear. It makes utterly no sense to replace the existing insurance industry with a hospital-based insurance industry. The existence of multiple, privately controlled insurers is the problem. Shifting control over those insurers from the traditional insurance industry to the hospital industry does not solve that problem. We need one publicly controlled insurer.

Changes in Mortality After Massachusetts Health Care Reform: A Quasi-experimental Study

By Benjamin D. Sommers, MD, PhD; Sharon K. Long, PhD; and Katherine Baicker, PhD
Annals of Internal Medicine, May 6, 2014

Abstract

Background: The Massachusetts 2006 health care reform has been called a model for the Affordable Care Act. The law attained near-universal insurance coverage and increased access to care. Its effect on population health is less clear.

Objective: To determine whether the Massachusetts reform was associated with changes in all-cause mortality and mortality from causes amenable to health care.

Design: Comparison of mortality rates before and after reform in Massachusetts versus a control group with similar demographics and economic conditions.

Setting: Changes in mortality rates for adults in Massachusetts counties from 2001 to 2005 (prereform) and 2007 to 2010 (postreform) were compared with changes in a propensity score–defined control group of counties in other states.

Participants: Adults aged 20 to 64 years in Massachusetts and control group counties.

Measurements: Annual county-level all-cause mortality in age-, sex-, and race-specific cells (n = 146 825) from the Centers for Disease Control and Prevention’s Compressed Mortality File. Secondary outcomes were deaths from causes amenable to health care, insurance coverage, access to care, and self-reported health.

Results: Reform in Massachusetts was associated with a significant decrease in all-cause mortality compared with the control group (−2.9%; P = 0.003, or an absolute decrease of 8.2 deaths per 100 000 adults). Deaths from causes amenable to health care also significantly decreased (−4.5%; P < 0.001). Changes were larger in counties with lower household incomes and higher prereform uninsured rates. Secondary analyses showed significant gains in coverage, access to care, and self-reported health. The number needed to treat was approximately 830 adults gaining health insurance to prevent 1 death per year.

Limitations: Nonrandomized design subject to unmeasured confounders. Massachusetts results may not generalize to other states.

Conclusion: Health reform in Massachusetts was associated with significant reductions in all-cause mortality and deaths from causes amenable to health care.

From the Discussion

Although we cannot rule out unmeasured confounders, it is challenging to identify factors other than health care reform that might have produced this pattern of results: a declining mortality rate in Massachusetts since 2007 not present in similar counties elsewhere in the country, primarily for health care–amenable causes of death in adults aged 20 to 64 years (but not elderly adults), concentrated among poor and uninsured areas and not explained by changes in poverty or unemployment rates.

http://annals.org/article.aspx?articleid=1867050

***

Could Obamacare save 24,000 lives a year?

By Harold Pollack
healthinsurancee.org, May 5, 2014

It is a pleasure to read beautifully conducted studies on important subjects. Annals of Internal Medicine published one such study today by Benjamin Sommers, Sharon Long, and Katherine Baicker, three of the most prominent people researching health reform.

Using ten years of mortality data over the period 2000-2010, these authors compare trends in Massachusetts counties to those observed in similar counties in states that did not expand insurance coverage.

Some details are complicated. The final results are admirably clear. Deaths from causes amenable to health care declined by about 4.5 percent in Massachusetts compared with comparison counties. The annual number of deaths declined by an additional 8.2 per 100,000 non-elderly adults in Massachusetts, with larger results for counties with low average incomes and ones that began with lower rates of insurance coverage.

Sommers, Long, and Baicker then perform an intriguing calculation. They estimate that 830 adults would need to gain health insurance coverage to prevent one death per year.

The absolute numbers are also striking. The Congressional Budget Office estimates that ACA will reduce the ranks of uninsured adults by something like 20 million people. I rather heroically extrapolated the authors’ 1/830 estimate to the entire uninsured population across the U.S. This back-of-the-envelope calculation implies that ACA will prevent something like 24,000 deaths every year. That’s almost the number of Americans who die in auto crashes. It’s more than the number who die of AIDS or the number who are murdered every year.

That’s a crude calculation, of course. The authors understandably avoided such a calculation in their paper. One study of Massachusetts can hardly pin down the mortality reduction we can expect from a huge national policy. Still, the findings allow us to glimpse an order of magnitude, which is pretty impressive.

http://www.healthinsurance.org/blog/2014/05/05/could-obamacare-save-24000-lives-a-year/

Comment:

By Don McCanne, MD

This highly credible study of the changes in mortality before and after health care reform was implemented in Massachusetts indicates that one death was prevented for each 830 adults under age 65 gaining health insurance. The deaths that were prevented were concentrated in conditions most likely to be amenable to health care. Health insurance does save lives.

Prior international studies of deaths due to conditions that a well functioning health care system should prevent have shown that the United States has one of the worst rates of preventable mortality. Using the results of this study, it would be easy to conclude that the fact that we have the lowest rate of insurance coverage of all wealthy nations is a major contributor to our high rate of preventable mortality. 

Although the authors of this paper state that other confounders cannot be excluded as causes, nevertheless, they write, “it is challenging to identify factors other than health care reform that might have produced this pattern of results.” Conservative critics are already discrediting this study, yet they certainly are not providing any other reasonable explanation for the improved mortality.

Professor Harold Pollack of The University of Chicago has extrapolated the ratio of one life saved for each 830 insured and applied that to the estimated 20 million additional people who will be insured when the Affordable Care Act (ACA) is fully implemented. He estimates that 24,000 lives will be saved.

Using the same extrapolation for the roughly 30 million people who will remain uninsured after full implementation of ACA, we can estimate that about 36,000 people will die each year who would not have had they been insured. Do we really have the gall to passively accept these 36,000 deaths each year just because a few audacious individuals keep telling us that an improved Medicare for all is not politically feasible? Come on! It’s an imperative!

Changes in Mortality After Massachusetts Health Care Reform: A Quasi-experimental Study

By Benjamin D. Sommers, MD, PhD; Sharon K. Long, PhD; and Katherine Baicker, PhD
Annals of Internal Medicine, May 6, 2014

Abstract

Background: The Massachusetts 2006 health care reform has been called a model for the Affordable Care Act. The law attained near-universal insurance coverage and increased access to care. Its effect on population health is less clear.

Objective: To determine whether the Massachusetts reform was associated with changes in all-cause mortality and mortality from causes amenable to health care.

Design: Comparison of mortality rates before and after reform in Massachusetts versus a control group with similar demographics and economic conditions.

Setting: Changes in mortality rates for adults in Massachusetts counties from 2001 to 2005 (prereform) and 2007 to 2010 (postreform) were compared with changes in a propensity score–defined control group of counties in other states.

Participants: Adults aged 20 to 64 years in Massachusetts and control group counties.

Measurements: Annual county-level all-cause mortality in age-, sex-, and race-specific cells (n = 146 825) from the Centers for Disease Control and Prevention’s Compressed Mortality File. Secondary outcomes were deaths from causes amenable to health care, insurance coverage, access to care, and self-reported health.

Results: Reform in Massachusetts was associated with a significant decrease in all-cause mortality compared with the control group (−2.9%; P = 0.003, or an absolute decrease of 8.2 deaths per 100 000 adults). Deaths from causes amenable to health care also significantly decreased (−4.5%; P < 0.001). Changes were larger in counties with lower household incomes and higher prereform uninsured rates. Secondary analyses showed significant gains in coverage, access to care, and self-reported health. The number needed to treat was approximately 830 adults gaining health insurance to prevent 1 death per year.

Limitations: Nonrandomized design subject to unmeasured confounders. Massachusetts results may not generalize to other states.

Conclusion: Health reform in Massachusetts was associated with significant reductions in all-cause mortality and deaths from causes amenable to health care.

From the Discussion

Although we cannot rule out unmeasured confounders, it is challenging to identify factors other than health care reform that might have produced this pattern of results: a declining mortality rate in Massachusetts since 2007 not present in similar counties elsewhere in the country, primarily for health care–amenable causes of death in adults aged 20 to 64 years (but not elderly adults), concentrated among poor and uninsured areas and not explained by changes in poverty or unemployment rates.

http://annals.org/article.aspx?articleid=1867050

***

Could Obamacare save 24,000 lives a year?

By Harold Pollack
healthinsurancee.org, May 5, 2014

It is a pleasure to read beautifully conducted studies on important subjects. Annals of Internal Medicine published one such study today by Benjamin Sommers, Sharon Long, and Katherine Baicker, three of the most prominent people researching health reform.

Using ten years of mortality data over the period 2000-2010, these authors compare trends in Massachusetts counties to those observed in similar counties in states that did not expand insurance coverage.

Some details are complicated. The final results are admirably clear. Deaths from causes amenable to health care declined by about 4.5 percent in Massachusetts compared with comparison counties. The annual number of deaths declined by an additional 8.2 per 100,000 non-elderly adults in Massachusetts, with larger results for counties with low average incomes and ones that began with lower rates of insurance coverage.

Sommers, Long, and Baicker then perform an intriguing calculation. They estimate that 830 adults would need to gain health insurance coverage to prevent one death per year.

The absolute numbers are also striking. The Congressional Budget Office estimates that ACA will reduce the ranks of uninsured adults by something like 20 million people. I rather heroically extrapolated the authors’ 1/830 estimate to the entire uninsured population across the U.S. This back-of-the-envelope calculation implies that ACA will prevent something like 24,000 deaths every year. That’s almost the number of Americans who die in auto crashes. It’s more than the number who die of AIDS or the number who are murdered every year.

That’s a crude calculation, of course. The authors understandably avoided such a calculation in their paper. One study of Massachusetts can hardly pin down the mortality reduction we can expect from a huge national policy. Still, the findings allow us to glimpse an order of magnitude, which is pretty impressive.

http://www.healthinsurance.org/blog/2014/05/05/could-obamacare-save-2400…

This highly credible study of the changes in mortality before and after health care reform was implemented in Massachusetts indicates that one death was prevented for each 830 adults under age 65 gaining health insurance. The deaths that were prevented were concentrated in conditions most likely to be amenable to health care. Health insurance does save lives.

Prior international studies of deaths due to conditions that a well functioning health care system should prevent have shown that the United States has one of the worst rates of preventable mortality. Using the results of this study, it would be easy to conclude that the fact that we have the lowest rate of insurance coverage of all wealthy nations is a major contributor to our high rate of preventable mortality.

Although the authors of this paper state that other confounders cannot be excluded as causes, nevertheless, they write, “it is challenging to identify factors other than health care reform that might have produced this pattern of results.” Conservative critics are already discrediting this study, yet they certainly are not providing any other reasonable explanation for the improved mortality.

Professor Harold Pollack of The University of Chicago has extrapolated the ratio of one life saved for each 830 insured and applied that to the estimated 20 million additional people who will be insured when the Affordable Care Act (ACA) is fully implemented. He estimates that 24,000 lives will be saved.

Using the same extrapolation for the roughly 30 million people who will remain uninsured after full implementation of ACA, we can estimate that about 36,000 people will die each year who would not have had they been insured. Do we really have the gall to passively accept these 36,000 deaths each year just because a few audacious individuals keep telling us that an improved Medicare for all is not politically feasible? Come on! It’s an imperative!

Report of The National Commission on Physician Payment Reform

Society of General Internal Medicine, March 2013

Recognizing that the level of spending on health care in the United States is unsustainable, the return on investment is generally poor, and the way that physicians are paid contributes substantially to the high cost of health care, The Society of General Internal Medicine (SGIM) convened The National Commission on Physician Payment Reform in March 2012 to recommend new ways to pay physicians that will ultimately improve patient outcomes but also rein in health care costs.

The commission’s recommendations focus on the near-term, calling for drastic changes to the current fee-for-service payment system and a five-year transition to a physician- payment system that rewards quality and value-based care. The recommendations pertain to the way physicians are paid throughout the health care system — both public and private payers.

http://physicianpaymentcommission.org/wp-content/uploads/2013/03/physician_payment_report.pdf

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Do We Get What We Pay For? Transitioning Physician Payments Towards Value and Efficiency

By Malathi Srinivasan and Mark D. Schwartz
Editorial, Journal of General Internal Medicine, May 2014

In March 2013… the National Commission on Physician Payment Reform (NCPPR), released a report with twelve recommendations to reform how physicians are paid, linking incentives to quality in patient care to curtail rising health care costs.

In this issue, SGIM ad hoc Committee members offer three Comments addressing the Commission’s recommendations. First, Selker and colleagues review the first three recommendations, which argue for phasing out the current volume-based, fee-for service (FFS) reimbursement model over 5 years, to be replaced by a system emphasizing value and efficiency, with incentives that promote high quality, coordinated, and cost-effective, patient-centered care. Then Siddiqui et al., addressing Commission recommendations four through nine, contend that while transitioning away from FFS, the US must strengthen the primary care foundation of high performing healthcare systems, notably evaluation, management and preventive services. Finally, Patel and Nadel examine the Commission’s last three recommendations, arguing that Medicare’s Sustainable Growth Rate (SGR) formula be repealed and replaced with policy that rewards value rather than volume, and that is based on a valuation of physician work that rectifies the current relative value unit (RVU) bias in favor of procedural compared with cognitive-based services.

http://link.springer.com/article/10.1007/s11606-014-2818-9/fulltext.html

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Global Amnesia: Embracing Fee-For-Non-Service — Again

By David U. Himmelstein, MD and Steffie Woolhandler, MD, MPH
Editorial and Comment, Journal of General Internal Medicine, May 2014

Now SGIM’s Commission has joined the growing policy bandwagon to reanimate the HMO strategy. There are semantic changes — ACO has replaced HMO, and when insurers drop expensive doctors (e.g. the 1,000-member Yale Medical Group5), it’s called “network optimization” not “delisting”. In a new twist on gag clauses, today’s ACO patients (e.g. seniors in Medicare’s Pioneer ACOs) aren’t told they’re enrolled. But the diagnosis and prescription are unchanged.

As in 1971, fee-for-service is the culprit. A shift to “bundled payment, capitation, and increased financial risk sharing” is the solution, with “risk adjustment… to avoid physicians and other providers cherry-picking the healthiest patients”; and “quality measures… to assure that evidence- based care is not denied as a cost-saving mechanism.”

Twentieth century risk adjustment and quality monitoring were overmatched by HMOs’ gaming and deception. Despite additional decades of work to devise bullet-proof risk adjustment, gaming remains so powerful and pervasive that cost and quality rankings are often distorted, or even inverted. No solution is on the horizon.

Conclusion

Like the SGIM Commission, we rue the toxic incentives of the current fee-for-service system. But in the profit-maximizing milieu of American medicine, capitation risks making things even worse. “Risk-sharing” too often means that physicians earn bonuses for denying care — a danger perceived by patients, who take a dim view of capitation. Risk-sharing is not simply the inverse of fee-for-service, but of fee splitting, the illegal practice of kickbacks for referrals.

There are many bad ways to pay doctors, and no particularly good ones. Other nations have achieved better outcomes, lower costs and fairer compensation of physicians using a variety of methods: fee-for-service, capitation, and salary; none is clearly best. The common theme isn’t mode of payment, but a universal system with regulations that restrain costs and minimize the opportunities for profit and the risk of loss.

Payment reform should focus not on manipulating greed, but on dampening it. Then the real motivations for good doctoring — altruism, social duty, and the glow we feel when we help our patients — can flourish.

Use the following link to read the entire article or to download the PDF: http://link.springer.com/article/10.1007/s11606-013-2745-1

Comment:

By Don McCanne, MD

Regarding controlling health care spending, the meme of this decade seems to be that we must start paying based on value and not volume, as if the greatest value would be realized by reducing the volume of health care to as close to zero as possible.

There are plenty of articles on how this might be accomplished, many of them centering on concepts such as accountable care organizations and bundling of payments. What seems to be missing are comprehensive discussions of how unrealistic and misdirected these proposals are.

That is why it is important that you download the article by Himmelstein and Woolhandler. It should be used in your advocacy work to move us away from the empty managed-care promise of supposedly replacing volume with value, so that we can move forward with reform that actually will improve value – a single payer national health program.