PNHP

How are health insurance investors betting on the election?

How are health insurance investors betting on the election?

Investors in Health Care Seem to Bet on Incumbent

By Andrew Ross Sorkin
The New York Times, August 20, 2012

Who is going to win the presidential election?

You might want to ask Mark T. Bertolini. He just bet $5.7 billion on President Obama.

Mr. Bertolini is the chief executive of Aetna, which on Monday agreed to acquire Coventry Health Care, a huge provider of Medicare and Medicaid programs. His $5.7 billion bet makes a lot of sense if you believe that the Affordable Care Act — otherwise known as Obamacare — will not be repealed.

Mitt Romney has pledged to repeal the act “on my first day if elected,” so any gamble that Obamacare stays intact could be fairly described as a wager that President Obama will remain in office.

At a minimum, the stock market, which is an indicator of future earnings, seems to be in disagreement, at least somewhat, with the steady drumbeat of C.E.O.’s and investors who have said that President Obama’s administration, in the words of Daniel Loeb, the outspoken activist hedge fund investor, “is openly hostile to most businesses and unable to articulate or implement policies to spark growth and reduce unemployment.”

Mr. Loeb is a frustrated Obama voter who now backs Mr. Romney.

But take a look at some of his most recent investments in the health care field. In the last quarter, he reported in Securities and Exchange Commission filings, he picked up shares of Aetna, Cigna, Humana, UnitedHealth and WellPoint, among others. All of those companies stand to benefit while Obamacare remains in force; a repeal of the bill could send those shares reeling.

Aetna is not the only company to make a bet on the White House. WellPoint agreed to acquire Amerigroup for $5 billion in July, just a little over a week after the Supreme Court’s decision to uphold the Affordable Care Act. Before that, Cigna paid $3.8 billion for HealthSpring in another bet on the expansion of Medicaid and Medicare.

Companies like Aetna, WellPoint and Cigna have all gravitated to rivals with a foothold in government-sponsored programs because the prevailing view is that margins for private customers are going to steadily erode. According to Aetna on Monday, the acquisition of Coventry will “substantially increase Aetna’s Medicaid footprint, creating more opportunity to participate in the expansion of Medicaid and to pursue high acuity positions as they move into managed care.” Aetna’s revenue from the government will jump to 30 percent from 23 percent.

David Einhorn of Greenlight Capital recently made the contrarian case that companies like Cigna would actually do better if the law were to be repealed, ostensibly because of the margin compression that is likely as a result of the new law.

“While the stocks are already cheap, there is the additional unpriced upside in the possibility that the election changes the political landscape, resulting in a possible modification or repeal of Obamacare,” he wrote in a letter to investors last month.

Still Mr. Einhorn, through smarts or luck, made a big investment in Coventry in the last quarter. With the sale to Aetna, irrespective of his investment thesis, Mr. Einhorn’s firm just made about $72 million.

http://dealbook.nytimes.com/2012/08/20/investors-in-health-care-seem-to-bet-on-incumbent/

Comment: 

By Don McCanne, MD

Although this article suggests that presidential election politics may influence the future of the private health insurance industry, the message is really nonpartisan. No matter who is elected president, there will be a lot on money to be made by investing in private insurers. Regardless of the election outcome, this message is terrible news for the patients in our health care system.

How are health insurance investors betting on the election?

Investors in Health Care Seem to Bet on Incumbent

By Andrew Ross Sorkin
The New York Times, August 20, 2012
Who is going to win the presidential election?
You might want to ask Mark T. Bertolini. He just bet $5.7 billion on President Obama.
Mr. Bertolini is the chief executive of Aetna, which on Monday agreed to acquire Coventry Health Care, a huge provider of Medicare and Medicaid programs. His $5.7 billion bet makes a lot of sense if you believe that the Affordable Care Act — otherwise known as Obamacare — will not be repealed.
Mitt Romney has pledged to repeal the act “on my first day if elected,” so any gamble that Obamacare stays intact could be fairly described as a wager that President Obama will remain in office.
At a minimum, the stock market, which is an indicator of future earnings, seems to be in disagreement, at least somewhat, with the steady drumbeat of C.E.O.’s and investors who have said that President Obama’s administration, in the words of Daniel Loeb, the outspoken activist hedge fund investor, “is openly hostile to most businesses and unable to articulate or implement policies to spark growth and reduce unemployment.”
Mr. Loeb is a frustrated Obama voter who now backs Mr. Romney.
But take a look at some of his most recent investments in the health care field. In the last quarter, he reported in Securities and Exchange Commission filings, he picked up shares of Aetna, Cigna, Humana, UnitedHealth and WellPoint, among others. All of those companies stand to benefit while Obamacare remains in force; a repeal of the bill could send those shares reeling.
Aetna is not the only company to make a bet on the White House. WellPoint agreed to acquire Amerigroup for $5 billion in July, just a little over a week after the Supreme Court’s decision to uphold the Affordable Care Act. Before that, Cigna paid $3.8 billion for HealthSpring in another bet on the expansion of Medicaid and Medicare.
Companies like Aetna, WellPoint and Cigna have all gravitated to rivals with a foothold in government-sponsored programs because the prevailing view is that margins for private customers are going to steadily erode. According to Aetna on Monday, the acquisition of Coventry will “substantially increase Aetna’s Medicaid footprint, creating more opportunity to participate in the expansion of Medicaid and to pursue high acuity positions as they move into managed care.” Aetna’s revenue from the government will jump to 30 percent from 23 percent.
David Einhorn of Greenlight Capital recently made the contrarian case that companies like Cigna would actually do better if the law were to be repealed, ostensibly because of the margin compression that is likely as a result of the new law.
“While the stocks are already cheap, there is the additional unpriced upside in the possibility that the election changes the political landscape, resulting in a possible modification or repeal of Obamacare,” he wrote in a letter to investors last month.
Still Mr. Einhorn, through smarts or luck, made a big investment in Coventry in the last quarter. With the sale to Aetna, irrespective of his investment thesis, Mr. Einhorn’s firm just made about $72 million.
http://dealbook.nytimes.com/2012/08/20/investors-in-health-care-seem-to-bet-on-incumbent/

Although this article suggests that presidential election politics may influence the future of the private health insurance industry, the message is really nonpartisan. No matter who is elected president, there will be a lot on money to be made by investing in private insurers. Regardless of the election outcome, this message is terrible news for the patients in our health care system.

HCA hasn't changed

A Giant Hospital Chain Is Blazing a Profit Trail

By Julie Creswell and Reed Abelson
The New York Times, August 14, 2012

During the Great Recession, when many hospitals across the country were nearly brought to their knees by growing numbers of uninsured patients, one hospital system not only survived — it thrived.

In fact, profits at the health care industry giant HCA, which controls 163 hospitals from New Hampshire to California, have soared, far outpacing those of most of its competitors.

The big winners have been three private equity firms — including Bain Capital, co-founded by Mitt Romney, the Republican presidential candidate — that bought HCA in late 2006.

The financial performance has been so impressive that HCA has become a model for the industry. Its success inspired 35 buyouts of hospitals or chains of facilities in the last two and a half years by private equity firms eager to repeat that windfall.

HCA’s emergence as a powerful leader in the hospital industry is all the more remarkable because only a decade ago the company was badly shaken by a wide-ranging Medicare fraud investigation that it eventually settled for more than $1.7 billion.

Among the secrets to HCA’s success: It figured out how to get more revenue from private insurance companies, patients and Medicare by billing much more aggressively for its services than ever before; it found ways to reduce emergency room overcrowding and expenses; and it experimented with new ways to reduce the cost of its medical staff, a move that sometimes led to conflicts with doctors and nurses over concerns about patient care.

In late 2008, for instance, HCA changed the billing codes it assigned to sick and injured patients who came into the emergency rooms. Almost overnight, the numbers of patients who HCA said needed more care, which would be paid for at significantly higher levels by Medicare, surged.

As HCA’s profits and influence grew, strains arose with doctors and nurses over whether the chain’s pursuit of profit may have, at times, come at the expense of patient care.

http://www.nytimes.com/2012/08/15/business/hca-giant-hospital-chain-creates-a-windfall-for-private-equity.html?_r=2&hp&pagewanted=all

Comment:

By Don McCanne, MD

Nobody expected the for-profit HCA hospital chain to change its fundamental practices. It hasn’t. It is an investor-owned corporation designed to make money, which it does very effectively. The PNHP model of single payer reform calls for an end to for-profit, investor-owned corporations in health care. You need only to read this fairly long article to understand why.

HCA hasn’t changed

A Giant Hospital Chain Is Blazing a Profit Trail

By Julie Creswell and Reed Abelson
The New York Times, August 14, 2012

During the Great Recession, when many hospitals across the country were nearly brought to their knees by growing numbers of uninsured patients, one hospital system not only survived — it thrived.

In fact, profits at the health care industry giant HCA, which controls 163 hospitals from New Hampshire to California, have soared, far outpacing those of most of its competitors.

The big winners have been three private equity firms — including Bain Capital, co-founded by Mitt Romney, the Republican presidential candidate — that bought HCA in late 2006.

The financial performance has been so impressive that HCA has become a model for the industry. Its success inspired 35 buyouts of hospitals or chains of facilities in the last two and a half years by private equity firms eager to repeat that windfall.

HCA’s emergence as a powerful leader in the hospital industry is all the more remarkable because only a decade ago the company was badly shaken by a wide-ranging Medicare fraud investigation that it eventually settled for more than $1.7 billion.

Among the secrets to HCA’s success: It figured out how to get more revenue from private insurance companies, patients and Medicare by billing much more aggressively for its services than ever before; it found ways to reduce emergency room overcrowding and expenses; and it experimented with new ways to reduce the cost of its medical staff, a move that sometimes led to conflicts with doctors and nurses over concerns about patient care.

In late 2008, for instance, HCA changed the billing codes it assigned to sick and injured patients who came into the emergency rooms. Almost overnight, the numbers of patients who HCA said needed more care, which would be paid for at significantly higher levels by Medicare, surged.

As HCA’s profits and influence grew, strains arose with doctors and nurses over whether the chain’s pursuit of profit may have, at times, come at the expense of patient care.

http://www.nytimes.com/2012/08/15/business/hca-giant-hospital-chain-creates-a-windfall-for-private-equity.html?_r=2&hp&pagewanted=all

Comment:

By Don McCanne, MD

Nobody expected the for-profit HCA hospital chain to change its fundamental practices. It hasn’t. It is an investor-owned corporation designed to make money, which it does very effectively. The PNHP model of single payer reform calls for an end to for-profit, investor-owned corporations in health care. You need only to read this fairly long article to understand why.

First, do no harm. Second, nationalize

By Teryl Zarnow, columnist
The Orange County Register, Aug. 17, 2012

It sounds like a golden age in medical care.

You went to the doctor and received medical care. You didn’t jump through hoops such as prior authorization, referrals, or network providers.

“Insurance didn’t interfere,” recalls Dr. Don McCanne, who practiced family medicine for 31 years in San Clemente before retiring in1997. “You just took care of the patient.”

Then in the 1990s came the “managed care revolution.”

Suddenly, he says, the private sector “intruded in the relationship between the physician and the patient.”

In his practice, McCanne worked evenings and weekends to treat the poor or undocumented without health insurance. Today he sees the same problems getting worse: Medical costs have soared, and many people still don’t have access to health care.

McCanne, now 74, volunteers as a policy fellow for Physicians for a National Health Program (PNHP) where he was a past president. His group favors a single-payer national health program often called “Improved Medicare for All.”

It’s not socialized medicine, just socialized insurance.

I can’t decide if the doctor is out of touch with reality or a prophet in blue jeans.

•••

The idea is to take health insurance down to the studs.

The Patient Protection and Affordable Health Care Act, which survived a judicial cliffhanger in the Supreme Court, only remodeled the existing structure.

McCanne believes the act corrects several issues, but doesn’t go far enough. His group’s position is that when the law is fully implemented in 2017, more people will be insured, but under plans that won’t provide adequate coverage. Many low-income families could be left out altogether, and medical costs will continue to rise.

“It didn’t fix the system,” he says.

McCanne describes an alternative that sounds stunning in its simplicity:

Everyone would be automatically enrolled in a national health plan at birth. There would be no deductible, no out-of-pocket, no coinsurance, and no networks. It’s similar to Canada’s national insurance.

“It returns choice to the patient and removes monetary barriers to care.”

Doctors and hospitals would deal with only one plan, cutting administrative costs and improving planning. Today, McCanne notes, 31 cents of every health care dollar is spent on administrative costs.

We would pay for this insurance through an employer payroll tax and income tax. Physicians for a National Health Program believes most taxpayers would spend less than they do now.

The passion of McCanne and others seems to be fueled by front-line exposure.

This summer a group of doctors and nurses caravanned across California to rally support for national insurance. Participants included PNHP, as well as Campaign for a Healthy California and the California Nurses Association.

Sharon Speck, a pediatric trauma nurse at UCI Medical Center, was on the tour. She doesn’t see herself as a radical, more as a compassionate advocate for her patients.

She remembers a 5-year-old who died from leukemia, without the bone marrow transplant that might have saved his life. His insurance didn’t cover it.

“It’s a social justice issue,” Speck says. “I think something’s got to change.”

•••

McCanne doesn’t seem like a doctor who could hustle you in and out of his office in seven minutes without making eye contact. He also doesn’t seem like a policy wonk.

The son of a doctor, he seems like a guy fundamentally offended by the way things work today. Too many uninsured patients came to him too late, ignoring a malady until it has reached a late stage.

“We are the only nation that rations health care based on ability to pay… As a doctor, if someone needs health care, I give them health care. That’s just the way it should be.”

McCanne’s group – a non-partisan think tank that seeks to educate the public about what works and what doesn’t work in health reform — believes we won’t control health care costs until we reform the way we pay for them. The group estimates a single, national insurance plan could save over $400 billion per year in administrative costs.

McCanne also argues we should stop allowing medical costs to drive families into bankruptcy.

“Half of all personal bankruptcies have medical debt as a contributor and of those … three-fourths were insured… so insurance is not providing the financial protection it’s supposed to.”

I see the logic, but isn’t it a little naive to think the insurance industry and lawmakers are going to fall into line behind a change simply because it makes sense?

“I’m a pragmatic idealist,” he responds. “I’m not for incrementalism, which doesn’t work at all. … Or for supporting legislation because it’s what we can get passed….

“We support policy that really works.”

A little perspective helps.

Hard to remember, for example, the American Medical Association was originally against Medicare. California’s Legislature has twice passed statewide single payer insurance bills, vetoed by the governor in 2006 and 2008.

The argument catches my eye now because it’s backstroking upstream. Vice presidential candidate Paul Ryan would introduce private insurance back into Medicare. At a time when we’re prioritizing shortages, these folks argue against settling.

McCanne sees obstacles in today’s more conservative political climate, for sure. Most people who are covered by an employee plan, he believes, don’t want to change what they already have for something that sounds uncertain.

Ultimately, though, he believes a single-payer plan will prevail. He thinks the day will come when people will view their health insurance, like Social Security, as another entitlement.

“I don’t hold high ideals. The nation holds low ideals on what our health care should be. We should just be doing it right.”

In McCanne’s upstairs office, underneath the Hippocratic Oath hanging on the wall, is a model of David and Goliath. Against the odds, David scored a knockout.

For information visit: www.pnhp.org.

http://www.ocregister.com/articles/health-368877-insurance-care.html

Journal editorial: Pay-for-performance a faulty policy in medicine

By Chelsea Conaboy
The Boston Globe, White Coat Notes, Aug. 15, 2012

Programs that reward doctors and hospitals for hitting certain quality targets are being rolled out in Massachusetts and across the country. A major focus of the health care law signed by Governor Deval Patrick last week is that doctors should be paid for keeping patients healthy, rather than for the volume of tests or treatments they order. Yet, several recent publications question whether pay-for-performance systems actually lead to better care for patients.

The programs are meant to push doctors to think about a patient’s overall care and to consistently do things that are thought to improve health outcomes, such as give appropriate counseling to people with heart conditions or timely antibiotic treatment to people with pneumonia.

A review of seven studies of primary care programs that paid doctors extra for meeting certain targets, published by the Cochrane Collaboration in September, was inconclusive about the effect on quality of care. “Implementation should proceed with caution,” the authors wrote.

A study published in March in the New England Journal of Medicine found that a large Medicare pilot program that paid providers more if they met certain process targets — and docked pay for those who did poorly — did not reduce short-term patient mortality rates. A version of the program is being rolled out nationally. The authors of the paper called the results “sobering.”

In an editorial published Tuesday in BMJ, formerly known as the British Medical Journal, two public health professors and a best-selling author in the field of behavior economics explain why they think paying doctors more based on quality metrics is inherently problematic.

Hospitals and doctors can easily change their reporting practices to improve their quality scores, they wrote. And financial incentives can undermine doctors’ intrinsic desire to help their patients, Drs. David Himmelstein and Steffie Woolhandler, both professors at City University of New York and visiting professors at Harvard, and Duke University Professor Dan Ariely wrote.

Himmelstein and Woolhandler are long-time advocates for a national health system. Ariely is an author of several books, including The (Honest) Truth about Dishonesty.

“Incentives may mutate honesty into legal trickery; gaming can so thoroughly distort reality that rewards become uncoupled from performance,” they wrote.

The idea that people will be motivated to do better if they are paid more as a result may seem like common sense, but medicine is complex, Himmelstein said. Often the measures used to determine success do not match the conditions of care or patient outcomes the program is meant to address, he said. The editorial points to trouble the government has faced in accurately measuring avoidable readmissions, when patients return to the hospital soon after being discharged because they do not receive the appropriate follow-up care.

Himmelstein said other fields have struggled with pay-for-performance programs. Under national education policy, schools that score poorly on standardized tests receive less funding.

“They’re the ones who need it most,” Himmelstein said. “Is the right reaction to poor quality that those institutions need fewer resources, not more?”

The editorial accompanied a paper by Australian researchers outlining criteria that quality standards should meet in order to be used in a pay-for-performance program, starting with whether the metric actually results in better health for patients.

http://www.boston.com/whitecoatnotes/2012/08/15/journal-editorial-pay-for-performance-faulty-policy-medicine/kPo1dkw2StIcksYhDMHijL/story.html

Medical journal cautions that 'pay for performance' may adversely affect health care

By Bill Toland
Pittsburgh Post-Gazette, Aug. 15, 2012

With insurers and Medicare hoping that they can cajole doctors and hospitals into providing better care by paying them for good performance, a pair of articles in a top medical journal is now arguing the opposite — that so-called “pay for performance” programs can have a detrimental effect, prompting some physicians to game the system in order to bring about desired results.

Insurers have their own evidence suggesting that paying doctors and hospitals extra money for carrying out certain standardized procedures can bring about improvements in quality, but the writers whose work appears in the peer-reviewed British Medical Journal this morning say that the long-term effect on patient outcomes is unclear.

“Despite a dearth of robust evidence that [pay-for-performance] is clinically effective in health care, payers charge ahead with implementing everywhere an intervention that has proven to work nowhere,” the authors wrote in an editorial that accompanies the main analysis.

Pay-for-performance programs presume that “as long as we just arrange the incentives correctly, people will figure out the exact things to do to maximize the revenue,” said Dan Ariely, one of the authors and a professor of behavioral economics at Duke University.

Often, they do figure it out — but while they are being rewarded for certain outcomes and processes, they are “neglecting some of their [other] obligations,” Mr. Ariely said.

In their editorial, the writers — several of whom are affiliated with Physicians for a National Health Program, which advocates for a single-payer health plan — note that “a growing body of evidence from behavioral economics and social psychology indicates that rewards can undermine motivation and worsen performance.”

The editorial also differentiates between “process-based” incentives — those tied to certain tasks — and “outcomes-based” incentives, which reward or punish a health care provider based on patient results.

Outcomes-based incentives are inherently less fair because they can reward, or punish, a provider for results or risk factors that may be partly out of their control. Some of the incentive schemes try to adjust for those risk factors, but that, too, can lead to unintended consequences.

For example, if a hospital knows that it can earn higher incentive payments by getting better outcomes on more complex medical cases, that can lead to “upcoding,” a practice wherein one diagnosis is re-coded as a more serious one. “Embellishing diagnoses [makes] patients seem sicker on paper, and hence boosts risk adjusted quality scores,” the paper said.

What about the many insurers that tout, say, vastly reduced Methicillin Resistant Staphylococcus Aureus (MRSA) infections and central-line bloodstream infection rates as evidence that pay-for-performance systems are working at hospitals?

“That’s not a scientific method,” said Steffie Woolhandler, a physician and professor of public health at the City University of New York.

A reduced infection rate does not necessarily mean that the payment was specifically responsible for the reduction — in other words, correlation does not equal causation.

Carey Vinson, vice president of quality and medical performance management at Pittsburgh’s Highmark Inc., said that the papers’ concerns are well-known in medical circles and, in some cases, well-founded. “There are limitations to research showing” the effectiveness of pay-for-performance, Dr. Vinson said.

But he also noted that there is plenty of evidence to suggest the current “fee-for-service” model, which reimburses hospitals and doctors for every test and unit of care, isn’t working, either.

“We agree that we’re not there yet,” he said. Insurers must take caution in designing and implementing performance programs, he said, and insurers and providers alike have to find a better way to link quality to payments.

One attempt to do so is Medicare’s new program that will penalize hospitals, starting Oct. 1, if their “preventable” readmission rates are too high, meaning patients are reentering the hospital too soon after discharge.

According to an analysis by Kaiser Medical News, more than 2,000 hospitals nationwide will be penalized, including more than 100 in Pennsylvania and most of the hospitals in southwestern Pennsylvania.

Dr. Woolhandler, and others, argue that “penaliz[ing] low-scorers can make matters worse, effectively punishing patients who have nowhere else to go,” especially those in urban and low-income areas.

Read the editorial at https://pnhp.org/docs/nc/bmj-incentives-edit.pdf.

Read more: http://www.post-gazette.com/stories/business/news/top-journal-dont-bet-on-performance-pay-649020/#ixzz246MNZ730

Medical journal cautions that ‘pay for performance’ may adversely affect health care

By Bill Toland
Pittsburgh Post-Gazette, Aug. 15, 2012

With insurers and Medicare hoping that they can cajole doctors and hospitals into providing better care by paying them for good performance, a pair of articles in a top medical journal is now arguing the opposite — that so-called “pay for performance” programs can have a detrimental effect, prompting some physicians to game the system in order to bring about desired results.

Insurers have their own evidence suggesting that paying doctors and hospitals extra money for carrying out certain standardized procedures can bring about improvements in quality, but the writers whose work appears in the peer-reviewed British Medical Journal this morning say that the long-term effect on patient outcomes is unclear.

“Despite a dearth of robust evidence that [pay-for-performance] is clinically effective in health care, payers charge ahead with implementing everywhere an intervention that has proven to work nowhere,” the authors wrote in an editorial that accompanies the main analysis.

Pay-for-performance programs presume that “as long as we just arrange the incentives correctly, people will figure out the exact things to do to maximize the revenue,” said Dan Ariely, one of the authors and a professor of behavioral economics at Duke University.

Often, they do figure it out — but while they are being rewarded for certain outcomes and processes, they are “neglecting some of their [other] obligations,” Mr. Ariely said.

In their editorial, the writers — several of whom are affiliated with Physicians for a National Health Program, which advocates for a single-payer health plan — note that “a growing body of evidence from behavioral economics and social psychology indicates that rewards can undermine motivation and worsen performance.”

The editorial also differentiates between “process-based” incentives — those tied to certain tasks — and “outcomes-based” incentives, which reward or punish a health care provider based on patient results.

Outcomes-based incentives are inherently less fair because they can reward, or punish, a provider for results or risk factors that may be partly out of their control. Some of the incentive schemes try to adjust for those risk factors, but that, too, can lead to unintended consequences.

For example, if a hospital knows that it can earn higher incentive payments by getting better outcomes on more complex medical cases, that can lead to “upcoding,” a practice wherein one diagnosis is re-coded as a more serious one. “Embellishing diagnoses [makes] patients seem sicker on paper, and hence boosts risk adjusted quality scores,” the paper said.

What about the many insurers that tout, say, vastly reduced Methicillin Resistant Staphylococcus Aureus (MRSA) infections and central-line bloodstream infection rates as evidence that pay-for-performance systems are working at hospitals?

“That’s not a scientific method,” said Steffie Woolhandler, a physician and professor of public health at the City University of New York.

A reduced infection rate does not necessarily mean that the payment was specifically responsible for the reduction — in other words, correlation does not equal causation.

Carey Vinson, vice president of quality and medical performance management at Pittsburgh’s Highmark Inc., said that the papers’ concerns are well-known in medical circles and, in some cases, well-founded. “There are limitations to research showing” the effectiveness of pay-for-performance, Dr. Vinson said.

But he also noted that there is plenty of evidence to suggest the current “fee-for-service” model, which reimburses hospitals and doctors for every test and unit of care, isn’t working, either.

“We agree that we’re not there yet,” he said. Insurers must take caution in designing and implementing performance programs, he said, and insurers and providers alike have to find a better way to link quality to payments.

One attempt to do so is Medicare’s new program that will penalize hospitals, starting Oct. 1, if their “preventable” readmission rates are too high, meaning patients are reentering the hospital too soon after discharge.

According to an analysis by Kaiser Medical News, more than 2,000 hospitals nationwide will be penalized, including more than 100 in Pennsylvania and most of the hospitals in southwestern Pennsylvania.

Dr. Woolhandler, and others, argue that “penaliz[ing] low-scorers can make matters worse, effectively punishing patients who have nowhere else to go,” especially those in urban and low-income areas.

Read the editorial at https://www.pnhp.org/sites/default/files/docs/nc/bmj-incentives-edit.pdf.

Read more: http://www.post-gazette.com/stories/business/news/top-journal-dont-bet-on-performance-pay-649020/#ixzz246MNZ730

Is health care a commodity?

Health care’s new maverick

By Geoff Colvin
Fortune, August 13, 2012
What’s the future of American health care?
Dr. Ralph de la Torre, CEO of Steward Health Care System, may represent the answer. Steward, owned by the private equity firm Cerberus Capital Management, is a growing Massachusetts-based group of community hospitals, and industry analysts say de la Torre is one of the most dynamic and influential executives in the business. He’s consolidating hospitals, finding efficiencies, investing big in infotech, and creating a new model that he says won’t change much regardless of how Obamacare’s future plays out. De la Torre, 46, is the son of Cuban immigrants and became the chief of cardiac surgery at Harvard’s Beth Israel Deaconess Medical Center at age 38, then gave up practicing medicine to become a CEO.
You’ve hosted the President at your house for a Democratic fundraiser. Have you advised him on health care policy?
I always give my opinions, but they’re not always listened to by either side of the aisle. One of the harder realities is that health care reform is not about public health. That’s the mistake people make…
Health care reform is public finance. And when you get into public finance, it’s not about doing a study to guide policy; it’s about creating a business plan…
You’ve bought a lot of community hospitals, and it wouldn’t be surprising if you bought more. Is this consolidation trend going to become a nationwide phenomenon?
It has to. In deference to those who love the individual hospital, you have to look back at America and the trends in industries that have gone from being art to science, to being commodities. Health care is becoming a commodity. The car industry started off as an art, people hand-shaping the bodies, hand-building the engines. As it became a commodity and was all about making cars accessible to everybody, it became more about standardization. It’s not different from the banking industry and other industries as they’ve matured. Health care is finally maturing as an industry, and part of that maturation process is consolidation. It’s getting economies of scale and in many ways making it a commodity.
http://management.fortune.cnn.com/2012/08/02/steward-health-de-la-torre/
Merriam-Webster
Commodity:
: an economic good
: something useful or valued
: a good or service whose wide availability typically leads to smaller profit margins and diminishes the importance of factors other than price
: one that is subject to ready exchange or exploitation within a market
http://www.merriam-webster.com/dictionary/commodity

Massachusetts has been leading the way in health care reform, even if in the wrong direction. Now, instead of reform heading in the direction of public health, we are seeing the commoditization of health care. Even Puck could see what fools these mortals be.
Comment by Quote of the Day subscriber Sarah K. Weinberg:

Dear Don,
Americans seem to get stuck on the idea of health care as a privately traded commodity, and therefore, in general, something the government should not interfere with. The rest of the world (all of the industrialized nations and most of the less developed nations as well) views health care as an essential service that is a governmental obligation to provide for all its citizens. In my opinion, we will not get a universal health care system in the U.S. until we change our view of the role of government.
This particular American exceptionalism goes back to our founding fathers, who had just fought a nasty war to separate us from England. Much of the impetus for fighting for independence was unhappiness over excessive intrusion by the British crown in American life, especially in levying excessive (punitive?) taxes. Our first attempt at an independent government was a confederation with an extremely weak central government. I don’t know much about this period except that it didn’t last more than a decade at most, and I believe it was unable to raise the funds necessary to pay off debts incurred to fight the War of Independence. So we convened a constitutional convention to draft a better central government structure.
So you can see that the mindset of the founding fathers at that convention was to set up a government that would be just strong enough to manage defense against an enemy attack, with just enough taxation power to fund such a war. The rest was to be left to the states to manage as they liked. Even our “cherished” Bill of Rights was an afterthought, put in as the first 10 amendments to the constitution. Unlike other democracies, our Bill of Rights is all negative – spelling out what the federal government is NOT permitted to do to individual citizens or states.
Contrast that with the United Nations Declaration of Human Rights (1948), which spells out obligations of governments toward their citizens (and includes medical care as one such right). The U.S. signed the UN Declaration, but has never incorporated its principles into our laws, let alone our constitution. Other democracies have followed the UN Declaration in writing their constitutions and/or laws, which makes it MUCH easier to create and maintain a national health care system supported by general taxes of some sort.
Somehow Americans have to get beyond the myth of us all as rugged individualists and recognize that we are all in this together and need to share our resources enough to provide for all those who need support. We like to look down our noses at “socialist” Europe, assuming that all those nations are inferior to us, but actually, most of them are doing very well with good social infrastructures that are not bankrupting them.

Republicans join Democrats in supporting Medicare as a defined benefit program

Republicans, like Democrats, opposed to cutting Medicare benefits, wary of privatization

Kaiser Health Tracking Poll
August 2012

When it comes to Medicare, one of the most notable aspects of Republicans’ views is how uncharacteristically similar they are to those of Democrats and Independents, according to this month’s Post/Kaiser poll. A large majority of Republicans (69 percent) say they are opposed to reducing Medicare benefits, even in the service of debt reduction. At the same time, roughly six in ten Republicans would support cuts in benefits if they were targeted only at high income seniors. In both cases, these views put Republicans on the same side of the issue as Democrats, a rare occurrence of late.

At the same time, a majority of Republicans (55 percent) currently say they prefer that Medicare continue as a defined benefits program, rather than changing to a system in which seniors are guaranteed a fixed amount of money to be used to buy coverage either from Medicare or from a private plan, an option supported by 39 percent of Republicans. Here again, the balance of opinion among Republicans puts them closer to the views of Democrats and Independents than usual in this area. The issue is set up to be an important one this fall given Representative Ryan’s advocacy of moving toward some sort of premium support model, though both Representative Ryan and Governor Romney have explicitly stated that any such change would not impact today’s seniors but would take effect for younger people when they become eligible for Medicare in the future.

Democrats share with Republicans a preference for keeping Medicare as it is rather than switching to a premium support system (68 percent prefer to keep the current system, compared to 29 percent that would back the change). They are also opposed to cutting Medicare benefits as a way to reduce the federal budget deficit (85 percent oppose), unless those cuts are targeted only at the rich, in which case two in three would be supportive.

http://www.kff.org/kaiserpolls/upload/8342-F.pdf

Comment:  

By Don McCanne, MD

A large majority of Americans, regardless of political affiliation, are supportive of Medicare and do not want to see its benefits reduced, nor do they want it privatized through a defined contribution, premium support, or voucherized program. As dissatisfaction with our current dysfunctional health care financing system increases, it is inevitable that the public will eventually support an improved Medicare for everyone.

One concern in this poll is that Republicans and Democrats alike believe that Medicare benefits should be reduced for the wealthy. That would be a terrible mistake, and not only because of the administrative headache that would be created trying to match benefits with labile incomes. The wealthy will have to contribute more, but that should be done through progressive tax policies that are used to finance the entire system. The full complement of benefits should always be there for all of us, reinforcing the importance of social solidarity that is characteristic of the very successful health care programs in other nations.

Pay-for-performance a faulty policy in medicine

By Chelsea Conaboy
Boston Globe, August 15, 2012

Programs that reward doctors and hospitals for hitting certain quality targets are being rolled out in Massachusetts and across the country. A major focus of the health care law signed by Governor Deval Patrick last week is that doctors should be paid for keeping patients healthy, rather than for the volume of tests or treatments they order. Yet, several recent publications question whether pay-for-performance systems actually lead to better care for patients.

The programs are meant to push doctors to think about a patient’s overall care and to consistently do things that are thought to improve health outcomes, such as give appropriate counseling to people with heart conditions or timely antibiotic treatment to people with pneumonia.

A review of seven studies of primary care programs that paid doctors extra for meeting certain targets, published by the Cochrane Collaboration in September, was inconclusive about the effect on quality of care. “Implementation should proceed with caution,” the authors wrote.

A study published in March in the New England Journal of Medicine found that a large Medicare pilot program that paid providers more if they met certain process targets — and docked pay for those who did poorly — did not reduce short-term patient mortality rates. A version of the program is being rolled out nationally. The authors of the paper called the results “sobering.”

In an editorial published Tuesday in BMJ, formerly known as the British Medical Journal, two public health professors and a best-selling author in the field of behavior economics explain why they think paying doctors more based on quality metrics is inherently problematic.

Hospitals and doctors can easily change their reporting practices to improve their quality scores, they wrote. And financial incentives can undermine doctors’ intrinsic desire to help their patients, Drs. David Himmelstein and Steffie Woolhandler, both professors at City University of New York and visiting professors at Harvard, and Duke University Professor Dan Ariely wrote.

Himmelstein and Woolhandler are long-time advocates for a national health system. Ariely is an author of several books, including The (Honest) Truth about Dishonesty.

“Incentives may mutate honesty into legal trickery; gaming can so thoroughly distort reality that rewards become uncoupled from performance,” they wrote.

The idea that people will be motivated to do better if they are paid more as a result may seem like common sense, but medicine is complex, Himmelstein said. Often the measures used to determine success do not match the conditions of care or patient outcomes the program is meant to address, he said. The editorial points to trouble the government has faced in accurately measuring avoidable readmissions, when patients return to the hospital soon after being discharged because they do not receive the appropriate follow-up care.

Himmelstein said other fields have struggled with pay-for-performance programs. Under national education policy, schools that score poorly on standardized tests receive less funding.

“They’re the ones who need it most,” Himmelstein said. “Is the right reaction to poor quality that those institutions need fewer resources, not more?”

The editorial accompanied a paper by Australian researchers outlining criteria that quality standards should meet in order to be used in a pay-for-performance program, starting with whether the metric actually results in better health for patients.

Republicans join Democrats in supporting Medicare as a defined benefit program

Republicans, like Democrats, opposed to cutting Medicare benefits, wary of privatization

Kaiser Health Tracking Poll
August 2012
When it comes to Medicare, one of the most notable aspects of Republicans’ views is how uncharacteristically similar they are to those of Democrats and Independents, according to this month’s Post/Kaiser poll. A large majority of Republicans (69 percent) say they are opposed to reducing Medicare benefits, even in the service of debt reduction. At the same time, roughly six in ten Republicans would support cuts in benefits if they were targeted only at high income seniors. In both cases, these views put Republicans on the same side of the issue as Democrats, a rare occurrence of late.
At the same time, a majority of Republicans (55 percent) currently say they prefer that Medicare continue as a defined benefits program, rather than changing to a system in which seniors are guaranteed a fixed amount of money to be used to buy coverage either from Medicare or from a private plan, an option supported by 39 percent of Republicans. Here again, the balance of opinion among Republicans puts them closer to the views of Democrats and Independents than usual in this area. The issue is set up to be an important one this fall given Representative Ryan’s advocacy of moving toward some sort of premium support model, though both Representative Ryan and Governor Romney have explicitly stated that any such change would not impact today’s seniors but would take effect for younger people when they become eligible for Medicare in the future.
Democrats share with Republicans a preference for keeping Medicare as it is rather than switching to a premium support system (68 percent prefer to keep the current system, compared to 29 percent that would back the change). They are also opposed to cutting Medicare benefits as a way to reduce the federal budget deficit (85 percent oppose), unless those cuts are targeted only at the rich, in which case two in three would be supportive.
http://www.kff.org/kaiserpolls/upload/8342-F.pdf

A large majority of Americans, regardless of political affiliation, are supportive of Medicare and do not want to see its benefits reduced, nor do they want it privatized through a defined contribution, premium support, or voucherized program. As dissatisfaction with our current dysfunctional health care financing system increases, it is inevitable that the public will eventually support an improved Medicare for everyone.
One concern in this poll is that Republicans and Democrats alike believe that Medicare benefits should be reduced for the wealthy. That would be a terrible mistake, and not only because of the administrative headache that would be created trying to match benefits with labile incomes. The wealthy will have to contribute more, but that should be done through progressive tax policies that are used to finance the entire system. The full complement of benefits should always be there for all of us, reinforcing the importance of social solidarity that is characteristic of the very successful health care programs in other nations.