Payment Policy

COST: We Made the Hospital Bed, So Lie In It

Tom Emswiler — Tue, 08 Apr 2008 16:06:00 -0400

I want to expand on Joanne's excellent and thorough post yesterday on the new Dartmouth Atlas Project report. One sentence in the AP/WaPo story especially caught my eye: the supply of beds in a locality is a key driver of how many days patients spend in the hospital. In other words, the more beds you have, the more patients you will admit. According to the Dartmouth report, this doesn't affect the fairly clearcut necessary hospital stays, an elderly patient with a hip fracture for instance. But, when the decision to hospitalize a patient is "more discretionary—as is the case for patients with heart failure and most other medical conditions—admission rates are strongly correlated with the local supply of hospital beds." Hmm.

Further:

The degree of variation is remarkable: during the five-year period 2001-05, on average, patients with chronic illnesses living in the region using the least supply-sensitive care spent about 6.1 days in hospitals during their last six months of life, while those living in the region using the most supply-sensitive services spent an average of 21.9 days as inpatients during the last six months of their lives.

That means one patient could spend over 3½ times as many days in the hospital as another patient with the same condition who lives in a community with fewer beds. The AP/WaPo story explains why this is bad:

Dr. Elliott Fisher, who led the study, said that more days in the hospital did not necessarily lead to better outcomes. Those patients were usually seen by more specialists, and they spent more time in the intensive care unit, but they did not live longer, on average.

"We know that hospitals are dangerous places if you don't need to be there," Fisher said, referring to the risk of infection or, for elderly patients, falls.

And the cherry on top: these hospitalizations cost Medicare (and thus taxpayers) more money and drive up the cost of health insurance for everyone else.

Now I'm not saying that any specific number of days in the hospital is right for someone in need of inpatient care. What I am saying is that if there is little variation for hip fracture patients, it's possible that there shouldn't be that level of variation for other medical conditions. And if what Dr. Fisher said is correct, we should try to reduce hospital days for patients.

Okay, so, let's just reduce the oversupply of hospital beds in those areas, and let's maybe take the rest of the afternoon off. Are the Nats playing today? But wait, Jane Sarasohn-Kahn has a thoughtful post today about Why It's Impossible to Close a Hospital. She says:

Always remember that one worker's income is another one's cost. For some communities, the hospital is the local monopsony providing the lion's share of meaningful employment.

The chart on the right from the AHA study illustrates that in many states, hospitals provide at least 1 in 10 jobs: this is true for Maine, North Dakota, Pennsylvania, and nearly 1 in 10 for Massachusetts, Michigan, Missouri, Ohio and West Virginia, among others.

The microeconomy of the hospital is thus a major contributor to the states' and nation's macroeconomy.

When there's talking of closing hospitals, there's no doubt why it's so tough to do so. Financing hospitals, appropriately, has implications well beyond "the bed" and the individual patient.

With closing hospitals off the table, we must look at reorganizing them. Dr. Guy Clifton posted recently how we could start:

The U.S. has been in the midst of a hospital building boom, but the evidence is that it has focused on high-margin operations such as back surgery, orthopedic surgery, and heart surgery and not on the kinds of services needed by patients with emergency medical conditions, which are less profitable for hospitals.

It all comes down to payment policy. Primary, preventative, emergency, and uncompensated care are currently undervalued by our health care system. Reimbursement for other high-margin procedures must be reduced so that we can increase payment to these four high-value areas of care.

QUALITY: Oops, We're Not Paying Again

Paul Testa — Thu, 03 Apr 2008 19:37:00 -0400

"Oops I did it again," may have made millions as a pop song, but for 11 preventable medical errors, it will no longer get you paid by the Indianapolis-based insurer, WellPoint, according to an article in today's Indianapolis Star.

WellPoint joins a growing number of public and private payers in efforts aimed at promoting quality, reducing errors, and controlling costs in our medical system. WellPoint's new policy adopts the steps taken by the Centers for Medicare and Medicaid Services last fall to no longer pay for preventable medical errors, injuries and infections that occur in hospitals.

Like CMS, WellPoint will make sure that neither it nor its patients pay for three so-called "never events"—surgical mistakes that should never happen under any circumstances. They are:

Surgery on the wrong body part
Surgery on the wrong patient
The wrong surgery performed on a patient.

Additionally the insurer will limit payments for the following events, all of which are highly preventable when evidenced-based guidelines are adhered to:

Object left in the body during surgery: Typically instruments, sponges, or towels.
Air embolism: Occurs when an intravenous line introduces oxygen into the bloodstream which can create potentially life-threatening blockages.
Blood incompatibility: Wrong blood type given to the patient.
Catheter-associated urinary tract infection: Account for 32 percent of health-care associated infections-largely a product of poor hygiene practices.
Decubitus: Bed sores which occur when a patient is not turned frequently enough (about every 2 hours)and cost Medicare on average $40,000 a patient.
Vascular catheter-associated infection: Like catheter-associated UTIs, a product of poor wound and catheter hygiene.
Mediastinitis: Infections inside the wound after coronary artery bypass graft (CABG) surgery.
Hospital-acquired injuries: Fractures, dislocations, intracranial injuries, crushing injuries and burns—preventable with proper supervision and care.

The CDC estimates that about 1.7 million infections are acquired each year in hospitals and other health-care facilities.That translates into roughly 90,000 deaths and $4.5 billion in extra costs. Preventing errors and injuries listed above represent the tip of the iceberg in terms of improving quality and reducing costs (CMS estimated the new payment policies would produce yearly savings in the millions).

But the approaches taken by CMS, WellPoint and others to such problems are both innovative and important: Doctors, nurses, and hospitals already should be doing the things that prevent these errors. Designing payment systems that reflects evidence-based standards of care can help ensure that they do. And paying for performance is something we can all sing "Gimme More" to.

QUALITY: Can What Works for Toyota Heal Hospitals?

Tom Emswiler — Tue, 18 Mar 2008 18:11:00 -0400

There's a great story out of the Seattle Post-Intelligencer this morning by Cherie Black on the innovation at Virginia Mason Medical Center in Seattle. Central to their work is the Toyota Production System, which seeks to eliminate wasted time and mistakes. It works with cars - what about health care?

Virginia Mason said benefits include an 85 percent reduction in how long patients wait to get lab results back, and $1 million savings on inventory costs.They've redesigned facilities to make patient and staff work flow more productive. The hospital reduced overtime and temporary labor expenses by $500,000 in one year and increased productivity by 93 percent. While direct cost savings aren't passed on to patients with the new system, less waiting, increased safety and more efficient care are.

(CEO Gary) Kaplan's vision is to have patients start their appointment in the parking garage with a smart card that triggers their entire appointment process. No more waiting rooms, just move directly from the garage to an examination room.

Total flow -- no waiting, no waste and it's all about the patient.

"We have more than enough resources in health care," Kaplan said. "We just need to stop wasting it and only do what's appropriate and value-added and we'd save billions."

Additionally, the Wall Street Journal's Vanessa Fuhrmans had a great article last year (subscription required) about how as the quality of care at Virginia Mason improved, their reimbursement worsened. As the piece states, they've begun to work with a limited number of employers on a reimbursement system that emphasizes high-quality care.

I first learned about Virginia Mason in fall 2006, when Kaplan testified before the Medicare Payment Advisory Commission (MedPAC), which advises Congress on Medicare policy. I found his testimony so fascinating (his starts on page 120 of the transcript; see page 131 for a great story on flu shots) that it prompted me to read The Toyota Way by Jeffrey Liker to understand "lean manufacturing." Liker's book (along with Michael Lewis' Moneyball) changed the way I think about how the world works. In a nutshell: life is full of assumptions, and many of them are wrong.