Medical Insurance Battle Wastes $20 Billion a Year

AthenahealthRevenueGraph.gif   Source of graph:  online version of the WSJ article cited below.

 

(p. A1)  Four years ago, Paluxy Valley Physicians of Glen Rose, Texas, was struggling to recoup more than $500,000 in denied or unpaid claims from insurers. Two of its eight doctors left the practice, while three others had to borrow $100,000 to keep it afloat.

To turn things around, the medical practice turned to Boston-based athenahealth Inc., one of the biggest of hundreds of companies in a lucrative niche: helping doctors wring payments from health plans. Athenahealth’s software flagged and corrected the complex coding for thousands of claims, preventing them from getting hung up in insurers’ Byzantine rules. Today, Paluxy Valley has whittled its claims outstanding to $179,000 and repaid the bank loan. No longer in a revenue crunch, its doctors have stopped moonlighting in the emergency room to make money.

"The insurers outcode us, they outsmart us and they have more manpower," says Shari Reynolds, the administrator at Paluxy Valley, which pays athenahealth a little over 3% of the $2.5 million it collects annually from insurers. "Now at least we have a fighting chance." 

Doctors increasingly complain that the insurance industry uses complex, opaque claims systems to confound their efforts to get paid fairly for their work. Insurers say their systems are designed to counter unnecessary charges and help keep down soaring health-care costs. Like many tug-of-wars over the health-care money pot, the tension has spawned a booming industry of intermediaries.

It’s called "denial management." Doctors, clinics and hospitals are investing in software systems costing them each hundreds of thousands of dollars to help them navigate insurers’ systems and head off denials. They’re also hiring legions of firms that dig through past claims in search of shortchanged payments and tussle with insurers over rejected charges. "Turn denials into dollars," promises one consultant’s online advertisement.

The imbroglio is costing medical providers and insurers around $20 billion — about $10 billion for each side — in unnecessary administrative expenses, according to a 2004 report by the Center for Information Technology Leader-(p. A18)ship, a nonprofit health-technology research group based in Boston.

 

For the full story, see: 

VANESSA FUHRMANS.  "BILLING BATTLE; Fights Over Health Claims Spawn a New Arms Race; Insurers and Doctors Try for Upper Hand; Firms Help Both Sides."  The Wall Street Journal  (Weds., February 14, 2007):  A1 & A18.

(Note:  I noticed some minor differences between the titles and texts of the print and online versions.  My excerpt gives the online version.) 

 

In Health Care “the U.S. is a Model of Inefficiency”

HealthcareSpendingG7graph.gif   Source of graph:  online version of the WSJ article cited below.

 

When it comes to managing its citizens’ health, the U.S. is a model of inefficiency.

Recently released figures from the U.S. Centers for Medicare and Medicaid Services show that in 2005, the U.S. health-care tab came to 16% of gross domestic product, more than any other country. France spends 10.5% of its GDP on health care, according to the Organization for Economic Cooperation and Development, while Japan spends 8%.

Americans don’t seem to be getting much for the money. In both France and Japan, the average life expectancy is higher than in the U.S., and the infant mortality rate is lower. This is true in most other OECD countries, so green tea and red wine don’t explain it all.

This is a drag on U.S. companies, raising their costs, pulling money out of consumer pockets and giving overseas firms a competitive edge.

 

For the full commentary, see: 

JUSTIN LAHART.  "AHEAD OF THE TAPE; Rethinking Health Care And the GDP." The Wall Street Journal (Thurs., January 25, 2007):  C1.

 

In Health Care the “Zeal to Treat and Spend May Actually Hurt Patients”

HeartAttackCostsBenefits.jpg   Source of graphic:  online version of the NYT article cited below.

 

EXPERTS have long been puzzled by the existence of large regional disparities in medical care in the United States. Even for diseases for which the appropriate treatment is widely accepted, doctors across the country take vastly different approaches, often leading to enormous expense without making any appreciable improvement in their patients’ health.

Consider heart attacks. Prescribing beta blockers immediately after a heart attack is a well-established, cheap and efficient treatment. In Iowa, nearly 80 percent of victims in 2000 received the drugs within 24 hours of a heart attack. In Alabama or Georgia, by contrast, fewer than 6 out of 10 patients received the drugs.

“What makes the lag in beta-blocker adoption puzzling is that the clinical benefits have been understood for years,” wrote Jonathan S. Skinner and Douglas O. Staiger, economists at Dartmouth, in a recent study about these regional patterns.

Congress has decided that some treatment decisions may be best taken out of doctors’ hands. In one of their last acts this year before adjourning, lawmakers passed a bill entitling doctors to a bonus from Medicare if they report data on the quality of their care, using criteria like whether they prescribe aspirin or beta blockers to heart attack victims. In the future, this data would permit Medicare to reward doctors who followed government guidelines.

. . .

. . . , much spending on health care provides enormous benefits. A study published this year by Mr. Skinner, Mr. Staiger and Dr. Elliott S. Fisher of Dartmouth Medical School found that Medicare spending on hospital care for heart attack victims surged two-thirds from 1986 to 1996, after accounting for inflation. But the percentage of victims who were alive a year after their attacks also increased, though by just 10 percentage points, to roughly 68 percent.

The relationship — rising costs bringing increased benefits — has broken down recently. From 1996 to 2002, Medicare spending on treatments for heart attack victims increased about 14 percent, after inflation. But there was virtually no improvement in survival rates.

There is mounting evidence that the zeal to treat and spend may actually hurt patients. The study by Mr. Skinner, Mr. Staiger and Dr. Fisher found that hospitals in regions where spending grew fastest from 1986 to 2002 had some of the worst practices, in terms of providing tried-and-true therapies, and recorded the smallest gains in survival rates.

Treatment of heart disease underscores the deeply idiosyncratic nature of many choices made by America’s doctors and hospitals. Coupled with a fee-for-service system that encourages aggressive treatment, these choices stimulate health spending that provides little benefit to patients. “A lot of the innovation and spending growth are going into gray areas that are not helping people that much,” Mr. Skinner said.

 

For the full commentary, see: 

EDUARDO PORTER.  "ECONOMIC VIEW; The More You Pay, the Better the Care? Think Twice."  The New York Times  (Sun., December 17, 2006):  5.

(Note:  ellipses are added.)

 

 

Good Intentions Are Not Enough

 

Another lesson from an intriguing book by Steven Johnson, is that Edwin Chadwick’s good intentions were not enough to beat the cholera epidemic in London.  Johnson tells of Chadwick’s two catastrophic illusions:

 

The first was his belief that, since the mephitic odors of private cesspools posed such a clear and present danger to health, sewage ought instead to be discharged down public drains into the Thames, from which most Londoners took their drinking water. As the great builder Thomas Cubitt remarked: "The Thames is now made a great cesspool instead of each person having one of his own."

The consequences of this well-intentioned blunder were worse even than those of the decision of the Lord Mayor during the Great Plague of 1665-66 to exterminate all the city’s dogs and cats because of the false rumor that they were spreading the plague, thus allowing an exponential increase in the population of the rats who were the real transmitters.

Having contaminated a large part of the population he was trying to protect, Chadwick committed his second mistake, sternly setting his face against the simple explanation that would bring about a cure. To his dying day — which did not come until 1890 — Chadwick remained an unrepentant miasmatist, as proponents of the airborne explanation for cholera were known. So was Florence Nightingale. The Lancet, the leading medical journal, venomously denounced the waterborne theory and its dogged proponent, John Snow.

 

For the full review, see: 

FERDINAND MOUNT.  "BOOKS; Lost in a Time of Cholera; How a doctor’s search solved the mystery of an epidemic in Victorian London."  The Wall Street Journal   (Sat., October 21, 2006):  P8.

 

The reference to the book is:

Johnson, Steven. The Ghost Map: The Story of London’s Most Terrifying Epidemic – and How It Changed Science, Cities, and the Modern World. New York: Riverhead Books, 2006.  299 pages, $26.95

 

Empirical Science at Its Best

   Source of book image:  http://images.barnesandnoble.com/images/11460000/11468284.jpg

 

I have not yet read The Ghost Map, but from the review excerpted below, it sounds like a wonderful book.  One lesson from the book appears to be that much good can come from a careful collection of evidence, and that much harm can come from sticking to a theory in spite of the evidence.  It is also interesting that in this tale, the villain turns out to be the advocate of public works, whose good intentions resulted in much death and suffering. 

 

(p. P8) The sociology of error is a wonderful subject. Some university ought to endow a chair in it — and then make Steven Johnson the first professor. Mr. Johnson last provoked the public with his counterintuitive polemic "Everything Bad Is Good For You," in which he argued that TV and videogames actually improve our cognitive skills. In "The Ghost Map" he tells the story of how for 30 years and more the medical establishment in Victorian London refused to accept what was staring them in the face, namely that cholera was a waterborne disease.

Thousands of Londoners died while doctors and public-health officials stubbornly clung to the view that the plague was an airborne miasma that hung in the foul atmosphere of the slums and was inhaled by the wretched creatures who lived there. Every kind of cure was proposed: opium, linseed oil and hot compresses, smoke, castor oil, brandy — everything but the simple, obvious remedy of rehydration, which reduces the otherwise fatal disease to a bad case of diarrhea.

The fact that the cholera toxin tricks the cells in the lining of the colon into expelling water at a terrifying rate (victims have been known to lose 30% of their body weight in a matter of hours) should surely have alerted someone to the possibility that putting this Niagara back into the body might be worth trying. Only one doctor, Thomas Latta, hit upon the answer, in 1832, just a few months after the first outbreak ever in Britain. His mistake was not to inject enough salty water, and his lone initiative was soon overwhelmed by the brainless babble of the quacks.

Chief among the villains of Mr. Johnson’s unputdownable tale was the man whom we were brought up to revere as the father of public sanitation, Edwin Chadwick. This dour, tactless, unpopular reformer laid the foundations for all the government interventions in public health that we now take for granted. Yet in this story he labored under not one but two illusions that proved catastrophic.

. . .

With the austere teetotaller and vegetarian Dr. Snow and his devoted helper in the Soho slums, the Rev. Henry Whitehead, "The Ghost Map" gains not one but two heroes. Patiently they mapped the patterns of victims and survivors and narrowed down the most likely source of the cholera plague to the Broad Street pump. But even after the pump handle was removed so that Londoners could no longer fill their buckets there and the illness subsided, the miasmatists were not convinced. Snow then tramped the streets of Battersea and Vauxhall to demonstrate that those who had their water from higher up the Thames, above the reach of the tide, remained unharmed, while those who took it from the foul tidewater perished in the hundreds. This was no easy task, since the pattern of water pipes under London’s houses was as tangled as the pattern of Internet service providers are today.

Why did it take so long? Because mapping epidemics was only in its infancy, though Snow’s famous map was not quite the first. Because the questions that Chadwick’s public-health board researched were self-fulfilling, all having to do with the smells and personal habits of the poor and not with the water they drank. The researchers mistook correlation for causation: Nobody died on the high ground of Hampstead, where the air was purer, therefore higher was safer — or so it seemed until a Mrs. Eley, who had retired thither, arranged to receive a jugful of water from her beloved Broad Street pump and got cholera.

But above all Chadwick and his crew were certain of themselves because the stench of the slums was so utterly disgusting and because smell acts so powerfully on our imaginations. Only the most careful and dispassionate investigators were free of the obsession with stench. Henry Mayhew, for example, noted in his "London Labour and the London Poor" (1851) that sewer-hunters, who scavenged deep underground knee-deep in muck, lived to a ripe old age. The Great Stink of 1858, which finally persuaded the government to commission Sir Joseph Bazalgette to lay down the magnificent network of sewers that have lasted to this day, did not kill a single Londoner — yet still Chadwick did not believe.

 

For the full review, see: 

FERDINAND MOUNT.  "BOOKS; Lost in a Time of Cholera; How a doctor’s search solved the mystery of an epidemic in Victorian London."  The Wall Street Journal   (Sat., October 21, 2006):  P8.

(Note: ellipsis added.)

 

The reference to the book is:

Johnson, Steven. The Ghost Map: The Story of London’s Most Terrifying Epidemic – and How It Changed Science, Cities, and the Modern World. New York: Riverhead Books, 2006.  299 pages, $26.95

 

SnowJohn.jpg   Dr. John Snow.  Source of photo:  online version of the WSJ article cited above.

ChadwickEdwin.jpg   Edwin Chadwick.  Source of photo:  online version of the WSJ article cited above.

 

Health Care Spending Increases Faster than Inflation, But Slower than Previous Year

HealthCareSpendingGraph.gif   Source of graph:  online version of NYT article cited below.

 

WASHINGTON, Jan. 8 — Spending on health care in the United States increased in 2005 at the slowest pace in six years, mostly because of much slower growth in spending on prescription drugs, the government reported Monday.

It was the third consecutive year of slower growth in the nation’s medical bills. Total health spending reached nearly $2 trillion in 2005, growing only a bit faster than the economy as a whole, officials said.

But with new medical technology becoming available every month and with a generation of baby boomers approaching old age, federal officials made no bold claims about having tamed health costs.

“It is unclear whether this phenomenon is temporary or indicative of a longer-term trend,” said Aaron C. Catlin, the principal author of the government’s annual report on health spending, published in the journal Health Affairs.

 

For the full story, see: 

ROBERT PEAR. "In ’05, Medical Bills Grew At Slowest Pace in 6 Years."  The New York Times  (Tues., January 9, 2007):  A13.

 

The Mere Threat of “Hillary-Care” Reduced Investment in Drug R&D


TaurelSidneyCEOEliLilly.jpg   CEO of drug company Eli Lilly.  Source of image:  online version of WSJ artcle cited below.

 

NEW YORK — Is the future of your health riding on what happens in Washington?  Sidney Taurel thinks it might be.  The Eli Lilly CEO ticks off a list of former "death sentences" being cured or turned into chronic conditions — "AIDS, leukemia, Hodgkins, hopefully solid tumors within the next few years.  The potential for medical research is unlimited.  We just need to make sure we don’t interdict it by the wrong policies."

And what might those "wrong policies" be?  Anything, it would appear, that reduces the financial incentives for drug companies to invest in research and development.  Mr. Taurel points without hesitation to the mere threat of HillaryCare in the early 1990s as an episode that reduced investment in R&D, as drug makers, including his own, redirected money toward the purchase of pharmacy benefit management companies.  As another example, he offers the anti-drug industry crusade of Sen. Estes Kefauver in the late 1950s and early ’60s:

"At that point companies started to diversify.  We bought Elizabeth Arden, we went into animal health and agricultural chemical products, later on in medical instruments and so forth.  All other companies did similar things.  And for a while after that we saw fewer new products.  When this threat subsided the companies focused again on R&D and we saw a golden era in the ’80s and ’90s with a lot of new products and breakthroughs."

 

For the full interview, see:

ROBERT L. POLLOCK.  "THE WEEKEND INTERVIEW with Sidney Taurel; Of Politics and Pills."  The Wall Street Journal  (Sat., December 2, 2006):  A8. 


Hugely Wasteful Health-Care Spending

CureBK.jpg   Source of book image:  http://www.encounterbooks.com/books/cure/

 

Milton Friedman is gone now, but the new book reviewed below, includes a forward written by him.  Friedman can be praised for many reasons; a minor one is that he was tireless and generous in offering praise and support for others who were seeking to better understand free markets. 

 

About 10 years ago, I broke my leg playing basketball.  After I came out of surgery, with a cast stretching from my ankle to the top of my leg, an orderly asked me whether I had ever used crutches before.  I hadn’t, so he showed me what to do, swinging through them from one end of the room to the other.  The whole lesson lasted about 90 seconds.  When I got my hospital bill, I saw that I had been charged $150 for "gait training on crutches."  I did what all insured Americans do:  I forwarded the bill to my insurance company.  Why should I care?  I wasn’t paying for it.

One of the problems with American health care, as David Gratzer notes in "The Cure," is precisely a payment system that takes the patient out of the equation.  In the early 1960s, the average American paid out of pocket one of every two dollars that he spent on health care; today the figure is one dollar in seven.  The inevitable effect is hugely wasteful spending (and inflated hospital bills like mine).  In fact, per-patient costs have gone up almost exactly in inverse proportion to the share of spending borne by the consumer.

Dr. Gratzer cites a remarkable Rand Corp. study that tracked health-care spending by 2,000 families over eight years.  The families who got free health care spent 40% more than the families with cost-sharing arrangements.  And yet the health outcomes for the two groups were the same.  The lesson:  Market-based health insurance systems, such as health savings accounts, cut out inefficiencies and lower costs without compromising quality.

. . .

. . . :   America is clearly at a crossroads in medical care.  Within the next decade we will get either some version of Hillary-care or more free-market medicine, starting with universally available health savings accounts.  Let’s hope that our nation’s policy makers read "The Cure" before they decide.  They will learn that the government route flattens costs only by holding back the pace of technology, artificially controlling its price and rationing its use.  That is not a prescription for better health.

 

For the full review, see: 

STEPHEN MOORE.  "BOOKS; The Market and Its Medicine."  The Wall Street Journal  (Tues.,  By  December 5, 2006; Page D6. 

 

The reference to the book under review, is: 

Dr. David Gratzer.  The Cure: How Capitalism Can Save American Health Care.  Encounter Books, 2006.  (233 pages, $25.94)

 

Standard Heart Therapies Do Little to Fight “Vulnerable” Plaque

Most people have of a clear image of how atherosclerosis, popularly known as hardening of the arteries, causes a heart attack — fatty deposits called plaque build up in a coronary artery until the day the blood flow that sustains the heart is blocked.

If only they were right.  In reality, severe coronary artery blockages almost always cause chest pain known as angina and other symptoms as they form.  But among those who suffer heart attacks, half of the men and two-thirds of the women report never experiencing a warning symptom.  And autopsies of such victims frequently show blood clots jammed into arteries that have been only modestly narrowed.

Standard atherosclerosis therapies include bypass surgery to route blood around blockages, angioplasty and stenting to clear blockages from inside the artery, and drugs like statins that reduce cholesterol levels to slow the formation of plaque.  But they have not been enough to prevent 200,000 to 500,000 American deaths annually from what doctors refer to as coronary artery disease.

As a result, many researchers have turned their attention from atherosclerosis in general to the tendency of some patients to develop a form of plaque prone to inflammation and rupture, which can spill a stew of cells into the bloodstream that can incite rapid clotting.  Such plaques have been called ”vulnerable” plaque. 

 

For the full story, see:

BARNABY J. FEDER.  "In Quest to Improve Heart Therapies, Plaque Gets a Fresh Look."  The New York Times  (Mon., November 27, 2006):  C1 & C3.

 

Doctors Earn More When They Rush Colonoscopies

ColonoscopyGraph.gif   Source of graph:  online version of the NYT article cited below.

 

For years, patients and many doctors assumed that a colonoscopy was a colonoscopy.  Patients who had one seldom questioned how well it was done.  The expectation was that the doctor conducting the exam would find and cut out any polyps, which are the source of most colon cancer.

But a new study, published today in The New England Journal of Medicine, provides a graphic illustration of how wrong that assumption can be, gastroenterologists say.  The study, of 12 highly experienced board-certified gastroenterologists in private practice, found some were 10 times better than others at finding adenomas, the polyps that can turn into cancer.

One factor distinguishing the physicians who found many adenomas from those who found few was the amount of time spent examining the colon, according to the study, in which the gastroenterologists kept track of the time for each exam and how many polyps they found.

They discovered that those who slowed down and took their time found more polyps.

. . .

The Rockford study was preceded by other signs that colonoscopies are by no means foolproof.   But as problems have been pointed out, they have all too often been met with disbelief among doctors, Dr. Rex said.

The first indication that colonoscopies were not as effective as widely believed came with two studies, one in 1991 and a larger one, in 1997, in which patients had two colonoscopies on the same day.  Those studies showed that doctors were missing 15 to 27 percent of adenomas, including 6 percent of large adenomas.

Then, in the last few years, two studies of so-called virtual colonoscopies, which use a CT scan to view the colon, found that the rate of overlooked adenomas in traditional colonoscopies was even higher.  Patients in those studies had traditional and virtual colonoscopy on the same day.   Traditional colonoscopies missed 12 to 17 percent of the large adenomas detected in the virtual colonoscopies.  But many doctors dismissed those findings, saying — if they believed them at all — that they applied to other doctors, not to themselves, Dr. Rex said.

Dr. Schoen, for one, said he was a believer.  The conclusions of the adenoma detection studies were reinforced, he said, by studies finding that colonoscopies missed not just polyps but actual cancers.

That finding emerged from studies testing ideas about how to prevent polyps, like taking beta carotene or calcium pills or sticking to a low fat, high-fiber diet.

The patients in all the studies had at least one adenoma detected on colonoscopy but did not have cancer.  They developed cancer in the next few years, however, at the same rate as would be expected in the general population without screening.

. . .

The study by the group in Rockford suggests a way to improve colonoscopy:  by slowing down.  “If you rush things, you miss things,” Dr. Schoen said.

That happens in part because reimbursement rates for colonoscopies have fallen in recent years, and some doctors are doing the exams faster than ever, Dr. Schoen and others say.

“I have heard of people who do it in 30 seconds,” Dr. Schoen said.  “Whoosh, and it’s out.”

 

For the full story, see: 

GINA KOLATA.  "Study Questions Colonoscopy Effectiveness."  The New York Times  (Thurs., December 14, 2006):  A23.

 

 

Feynman: Nothing in Biology Requires Us to Die

   Source of book image: http://stochastix.wordpress.com/files/2006/08/the-pleasure-of-finding-things-out.gif

 

(p. 100)  It is one of the most remarkable things that in all of the biological sciences there is no clue as to the necessity of death.  If you say we want to make perpetual motion, we have discovered enough laws as we studied physics to see that it is either absolutely impossible or else the laws are wrong.  But there is nothing in biology yet found that indicates the inevitability of death.  This suggests to me that it is not at all inevitable, and that it is only a matter of time before the biologists discover what it is that is causing us the trouble and that that terrible universal disease or temporariness of the human’s body will be cured.   

 

Source: 

Feynman, Richard P.  The Pleasure of Finding Things Out: The Best Short Works of Richard P. Feynman.  New York:  Perseus Books, 1999.