Highlights from the Health Wonk Review: Comparative Effectiveness Research; Why Reform Will Mean Fewer, Larger Insurers; Skilled Nursing Facilities; Low-Income Seniors, and Insurers Under Investigation

This week The New Health Dialogue’s Meredith Hughes, Allison Levy and Sam Wainwright host a round-up of some of the best health care posts of the past two week.  Below, just a few highlights. (To read the entire review, click here )

On the Health Business Blog, David Williams asks New England Health Care Institute’s Valerie Fleishman to explain the definition of comparative effectiveness research, describe CER provisions contained in the ARRA and ACA and discuss the challenges in disseminating new information to be used at the point of care.  It’s an excellent interview which tells you everything you need to know about Comparative Effectiveness Research –and how the research will be used at point of care.

Fleishman begins by explaining that comparative effectiveness research was first established as part of the Recovery Act in 2009 as part of the stimulus legislation. That legislation had in it a $1.1 billion investment for comparative effectiveness research and laid the foundation for what appeared in the Affordable Care Act (ACA) in March.  The ACA strengthens this plank of reform by

  • Establishing  a non-profit corporation called the Patient Centered Outcomes Research Institute (PCORI).  That institute is set up as a non-governmental, private entity to oversee the federally funded investment that in comparative effectiveness research. The ACA says that the institute will identify priorities for comparative effectiveness research, will help to carry out the research agenda, create advisory panels, establish peer review processes, and will also in part be responsible for releasing the research findings and coordinating the research that gets done;
  • Stipulating that comparative effectiveness research must take into account different subpopulations to avoid one-size-fits-all results;
  • Setting up a trust fund so comparative effectiveness research can be funded on an ongoing basis. The $1.1 billion put in as part of the stimulus was really just for the first couple of years. The trust fund creates a pool of funding of about $600 million per year from both the Medicare trust and a fee on health plans;
  • Stipulating that none of the reports or findings can be used as mandates, guidelines or policy recommendations and that the findings cannot be used as sole evidence in making determination decisions. [This suggests that Medicare might use CER is one of several factors in decide what to cover.]

But physicians are free to make use of comparative effectiveness information as they see fit when prescribing treatments for patients, and Fleishman talks about the opportunities to disseminate the information.  “There is an enormous opportunity, particularly when you . . . think about the computerized physician order entry systems and others that will be part of this. Meaningful use clearly stipulates that these systems have to have some form of clinical decision support. One of the hurdles to adoption for CER is that clinicians themselves don’t have ready access to the latest information on what the evidence says about different forms of treatments or procedures. Providing the information technology infrastructure and tools to clinicians at the point of care so they can have access to the data will go a long way toward making the data accessible.”
Over at the Healthcare Economist Jason Shifrin analyzes how skewed financial incentives encourage skilled nursing facilities to transfer patients back to hospitals. This is important information, because misaligned incentives are expensive–and they are hurting older patients who are bouncing back and forth from hospital, to SNF, to SNF   As Shrifin  points out, between 2000 and 2007, the rate of potentially avoidable re-hospitalizations for five key conditions –congestive heart failure, respiratory infection, urinary tract infection, sepsis, and electrolyte imbalance–increased from 13.7% to 18.5%.  Shifrin’s post explores a Kaiser Family Foundation brief which examines these SNF incentives.  It will be worth watching the pilot projects that unfold under the ACA to see how they address the problem.
Writing on Managed Care Matters, Joe Paduda offers shrewd analysis of the Justice Department suit against Blue Cross Blue Shield of Michigan for allegedly violating antitrust laws. BCBSMI is accused of requiring hospitals to give BCBSMI 'most favored nation' pricing, thereby increasing the prices paid by other health plans and stifling competition.  “According to the New York Times,” Paduda explains, “the Blues contracts had clauses stipulating that no insurance companies could obtain better rates from the providers than Blue Cross. Some of these contract provisions, known as ‘most favored nation’ clauses, require hospitals to charge other insurers a specified percentage more than they charge Blue Cross — in some cases, 30 to 40 percent more, the lawsuit said."

Pauda’s in-depth analysis demonstrates how the lawsuit  highlights three  extremely important issues:

  • “First, there is no free market in health insurance. Most markets are dominated by one, or at most two big plans.” This suit suggests that the Feds want big insurers to make room for smaller companies. But Paduda points out “smaller health plans cannot compete with the big boys because they don't have the medical dollars required for bargaining purposes. Why would St Tony's Hospital give a big discount to Mom and Pop's Health Plan? The answer is simple – they wouldn't, because they don't have to – Mom and Pop don't have any patient dollars that they would (potentially) move to another hospital, so there's no reason for St Tony to do a deal.(This basic fact is lost on those politicians and pundits who think that selling health insurance across state lines is a panacea.” Paduda adds. “Health plans' costs are primarily, and overwhelmingly, determined by the medical costs in the areas they operate – and legalizing cross-border sales of insurance will do nothing to reduce premiums or improve access. The suit is apparently an effort by the Feds to address this reality, and may well be part of a larger strategy to improve competition ahead of implementing health reform.”
  • Second, “many health plans and insurers have most favored nation clauses in their contracts – workers comp payers too. This suit may – and most certainly should – encourage those payers to reconsider the purpose of and risk in those clauses”
  • “Finally, this highlights the symbiotic payer – provider relationship that is the fabric of our current health system – dominant health plans and dominant health systems working very closely together. If we as a society decide this isn't the health system we want, than we're going to have to get very litigious for a very long time.” 

But is this really what we want? Granted, that close payor-provider relationship stifles competition, but here Paduda refuses to fantasize about what free makets can and can’t do:

“Let’s get serious:  how effectively could a newcomer, or even a second tier health plan, really compete without the huge dollars necessary for investments in IT; care management; provider contracting, analysis, and relations; marketing and brand development; and distribution?

He answers his own question: “It couldn't, and it can't. Like it or not, competing in health insurance, as in many industries, puts a premium on size and scale.

Paduda concludes, as I have in the past, that  eform will lead to consolidation within the health insurance industry. Only larger insurers will survive. As Paduda puts it: “Survival in the post-reform world will require size, and scale, and money far beyond the grasp of mostsmaller health plans.

This is not necessarily bad news–as long as these insurers are tightly regulated. Think of utilities such as gas and electric companies that provide heat and light. Like health insurers, they are selling a necessity, and for that reason, the government oversees them to make sure that they don’t gouge customers, and that everyone has access to the energy they need. Small utility companies wouldn’t have the capital needed to provide reliable service and maintain the needed infrastructure.  Utility companies are expected to be more than a pipeline delivering electricity: if the lights go out, government expects that they get the system up and running in the shortest time possible.

Similarly, under reform, health insurance, insurers are expected to add value to the system. (If they cannot do that, then one has to ask: “Why have insurance companies?) To prove their worth, insurers are going to have to do more than just pass on higher prices in the form of higher premiums. They will be expected to help make sure that health care is affordable and effective.  This means insurance companies will need deep pockets in order to invest in Health IT, create high-quality networks of providers, and report back to the government and the public, demonstrating that those hospitals and doctors are delivering the evidence-based, efficient care that patients deserve.

Many have worried that under reform, low-income seniors on Medicare might suffer. Writing on Health Affairs  Dan Mendelson offers some reassuring news. When it comes to prescription drugs, the Affordable Care Act is already helping millions of low-income seniors.   Mendelson points to new analysis from Avalere Health. 

Avalere reports that: “One-third of prescription drug plans are offering some form of gap coverage in 2011, up from 20 percent in 2010.” This will greatly improve beneficiaries’ access to affordable medications– and significantly lessen the impact of the donut hole experienced by many seniors, “particularly those with multiple chronic illnesses. On average, beneficiaries will have a choice of 11 different plans that offer gap coverage.” In addition, the number of prescription drug plans (PDPs) offering coverage of brand name drugs in the coverage gap has increased  from 2 percent of the market to 10 percent.”
The Colorado Health Insurance Insider’s Louise Norris offers some less hopeful but provocative news: Even after paying fines for misrepresenting the policies they are selling a group of Midwest insurers continue to mislead customers. .

Norris spotlights the insurers being investigated– along with two shareholders (Blackstone and Goldman Sachs) that purchased the parent company in 2006.  Hat-tip to Norris for calling attention to this story.. will be worth following the investigation to see if, this time, the fines are bigger than the profits the companies have been reaping while duping customers.

2 thoughts on “Highlights from the Health Wonk Review: Comparative Effectiveness Research; Why Reform Will Mean Fewer, Larger Insurers; Skilled Nursing Facilities; Low-Income Seniors, and Insurers Under Investigation

  1. Oh my no, no, no. The bigger they are I think the more leverage they have to skewer the community. PLease please no no no!