The AMA News in its July 24/31 issue reports on a “pay for quality” pilot conducted by Healthspring‘s Medicare Advantage plan and the Sumner Medical Group, a 15 doctor group in Tennessee. (I was in Nashville this week and greatly enjoyed a Tuesday performance of the Grand Ole Opry.)

In this program, Healthspring retained Healthways, a local disease management company, to provide Sumner Medical with free nursing support to track patients with chronic illnesses between visits, among other services. Healthspring also offered the Sumner Group doctors a 20% pay bonus for hitting quality targets.

Sumner Medical informed the AMA News that the program resulted in an improvement in their patients’ health outcomes. The doctors appreciated that the health plan assumed the cost of the disease management nurses and did not impose a financial penalty on the doctors. The health plan enjoyed the medical underwriting gain from the program. Healthspring is planning to extend the program to 12 other markets. Other health plans are evaluating Healthspring’s model.

The Centers for Medicare and Medicaid Services (CMS) announced last Friday its six month long project to determine the feasibility of integrating Medicare claims information into a personal health record for Medicare beneficiaries. “’By using emerging technologies and tools, people with Medicare will be better able to manage their health care, resulting in improved quality in the care they receive and ensuring that care is provided more efficiently,’” said CMS Administrator Mark B. McClellan, M.D., Ph.D. ‘The steps we are taking today will test whether Medicare’s current data will help to populate useful personal health records for Medicare beneficiaries.’” The work will be performed by ViPS and Capstone Government Solutions under CMS contracts, and the total cost of the project is $500,000.

OPM has posted information about the upcoming initial Supplemental Dental and Vision Benefits Open Season on its web site.

In 2001, Harvard Professor David Himmelstein created a stir with a paper concluding that unpaid medical bills are leading cause of bankruptcy filings. Since then several academics have debunked that conclusion. The latest is Aparna Mathur, a reseach fellow with the American Enterprise Institute, who released a paper on Medical Bills and Bankruptcy Filings last week.

The report explains that

Studies based on surveys of bankruptcy filers, such as Himmelstein et al. (2005) using data from the Consumer Bankruptcy Project, claim that families with medical problems and medical debts account for nearly half of all bankruptcy filings.4 However, their classification of a medical bankruptcy is too broad.5 A big drawback of the study is that it does not include non-filers in the sample. This is a problem because there may be non-filers who experienced similar problems but did not
file for bankruptcy. Thus the sample lacks an effective control group.

The AEI study “finds that while medical debts are significantly related to bankruptcy filings, the magnitude is not as high as is claimed by other authors” such as Professor Himmelstein.

Last Thursday July 20, the Senate Special Committee on Aging held a hearing on “The Generic Drug Maze: Speeding Access to Affordable, Life Saving Drugs.” One of the witnesses, the FDA’s Director of Generic Drugs explained that

Prior to the passage of the Drug Price Competition and Patent Term Restoration Act (Hatch-Waxman Amendments) of 1984, FDA’s primary statute, the Federal Food, Drug, and Cosmetic (FD&C) Act, did not provide for the approval of generic drugs. The Hatch-Waxman Amendments established the ANDA approval process, which permits FDA to approve generic versions of previously approved innovator drugs without the submission of clinical studies and other kinds of data that are required in a full new drug application (NDA). An ANDA refers to the previously approved NDA of the innovator drug and relies upon the Agency’s finding of safety and effectiveness for that drug. Also, with respect to each unexpired patent submitted to FDA by the owner of the innovator drug and published by FDA in the Orange Book1, an ANDA contains a certification that the ANDA applicant either will wait for the patent to expire before marketing the drug or that the applicant challenges thepatent as invalid or not infringed.

The first company to obtain such FDA receives the exclusive right to offer the generic product for 180 days after patent expiration subject to one exception.

The FDA representative urged Congress to provide more funding for his office which has a backlog of ANDAs. Sen. Herb Kohl (D Wisc.) reportedly has arranged for an additional $10 million of funding.

A brand name drug manufacturer with the expiring patent can offer its own “authorized generic” during this otherwise exclusive sales period. At the hearing, a generic drug manufacturer representative opposed this practice as undercutting the Hatch Waxman amendments, and the Pharmaceutical Research and Manufacturers of America’s (PhRMA) president supported the practice’s conttibution to a competitive market. Following the hearing, Sen. Jay Rockefeller (D Ark) introduced a bill (S. 3695) that would prohibit the marketing of “authorized generics.”

Also at the hearing a Federal Trade Commission representative explained to lawmakers that

there have been, and continue to be, competitive problems in pharmaceutical markets. Although many drug manufacturers – including both brand-name and generic companies – have settled their patent suits in a manner that does not harm competition, others have entered anticompetitive settlements without providing a corresponding benefit to consumers. Responding to some of these abuses, in 2003 Congress included provisions in the Medicare Modernization Act (“MMA”) that amended the Hatch-Waxman Act to require notice of settlement between brand and generic firms to the FTC and Department of Justice.

However, according to the FTC testimony, two federal courts of appeals rulings (Schering-Plough Corp. v. F.T.C., 403 F.3d 1056 (11th Cir. 2005); In re Tamoxifen Citrate Antitrust Litig., 429 F.3d 370 (2d Cir. 2005))have rejected FTC objections to patent litigation settlements in favor of “a lenient view of exclusion payment settlements, essentially holding that such settlements are legal unless the patent was obtained by fraud or that the infringement suit itself was a sham.” The Supreme Court declined to review the 11th Circuit ruling last month.

According to the FTC representative, “The economic implications of the courts of appeals’ rulings, which seem to invite collusive arrangements between brand-name drug companies and generic challengers, are staggering.” The FTC representative expressed the Commission’s “strong support [for] the intent behind S. 3582, the ‘Preserve Access to Affordable
Generics Act’ – bipartisan legislation introduced by Senators Kohl, Leahy, Grassley, and Schumer” on June 27, 2006.

Congress is only scheduled to be in session for one more week before its August recess begins on July 31.

In 1999, NIH’s Institute of Medicine (IOM) issued a report titled “To Err is Human” that rocked the medical community with its conclusion that medical errors cause 44,000 to 98,000 deaths annually in American hospitals. The report sparked a significant patient safety movement that the U.S. Office of Personnel Management has endorsed in connection with the Federal Employees Health Benefits Program.

Yesterday, the IOM issued a report concluding that at least 1.5 million Americans are sickened, injured or killed each year by errors in prescribing, dispensing and taking medications. The IOM report encourages the use of electronic prescribing to reduce the number of errors. IOM also released a fact sheet on how medication errors can be prevented. This would be a good publication to widely circulate.

Rep. Nancy Johnson (R-Conn.) chaired a House Ways and Means health subcommittee hearing on the topic of price transparency, a leading Administration initiative to control health care spending. The witnesses included

Regina E. Herzlinger, Ph.D., Nancy R. McPherson Professor of Business Administration, Harvard Business School, Boston, MA (whose work impresses me),
Robin Downey, Product Development Head, Aetna, Middletown, CT,
Daniel F. Evans, Jr., President and CEO, Clarian Health Partners, Indianapolis, IN,
Stephen Brenton, President, Wisconsin Hospital Association, Madison, WI, and
Ha T. Tu, Senior Health Researcher, Center for Studying Health System Change.

In her testimony, Prof. Herzlinger proposed the creation of an SEC for healthcare:

A Health Care SEC Societal Consequence of SEC-like Health Care Regulation The U.S. securities markets contain the characteristics desired for the health care:

• Prices are fair in the sense that they reflect all publicly available information, despite the inability or unwillingness of many buyers to avail themselves of this information.
• Buyers use this information to redirect capital so that it rewards productive firms and penalizes unproductive ones.
• Information and competition continually reduce transaction costs.

The presence of these characteristics in health care would achieve two important social goals: First, they would help the uninsured and the underinsured. Second, they would divert money from health providers that offer a bad buy to those that offer a good one. The bad buy providers would shrink or improve. The good buy providers would flourish. How to Make it Happen The key to achieving these desirable characteristics in health care is legislation for a health care SEC that replicates these essential elements of the SEC model.

1. An Independent Agency with Singular Focus. The SEC is an independent agency charged solely with overseeing the integrity of securities and the markets in which they are purchased. Because of these organizational characteristics, the SEC’s mission is not muddied–it is squarely lined up with the consumer–and it can be held clearly accountable for is performance.
2. Penalties. The SEC is armed with powerful penalties for undercapitalized and unethical market participants, including imprisonment, civil money penalties, and the disgorgement of illegal profits. A corresponding health care agency would oversee the integrity and require public disclosure of information for health care.
3. Private Sector Disclosure and Auditing. The SEC relies heavily on private sector organizations, which contain no governmental representation. The new health care agency should similarly delegate the powers to derive the principles used to measure health care performance to an independent, private, nonprofit organization that, like the FASB, represents a broad nongovernmental constituency. The agency would require auditing of the information by independent professionals, who would render an opinion of the information and bear legal liability for failure to disclose fairly and fully.
4. Private Sector Analysis. The evaluation process is primarily conducted by private sector analysts, who disseminate their frequently divergent ratings. To encourage similar private sector health care analysts, the new agency should require public dissemination of all outcomes for providers, including clinical measures of quality, and related transaction costs.
5. Focus on Outcomes, Not Processes. The SEC and FASB focus on measuring the financial performance of organizations. FDR firmly rejected dictating business processes or rating businesses as appropriate roles for the SEC.

The SEC is essentially a profit center, generating a substantial surplus from its filing and penalty fees, which offset its billion dollar budget.

Another electronic health records (EHR) implementation milestone was reached today. The Certification Commission for Healthcare Information Technology (CCHIT) made its first announcement of twenty ambulatory electronic health record (EHR) products that have attained CCHIT Certified status.

CCHIT certifies EHR products under a U.S. Department of Health and Human Services (HHS) contract for functionality (setting features and functions to meet a basic set of requirements), interoperability (enabling standards-based data exchange with other sources of healthcare information), and security (ensuring data privacy and robustness to prevent data loss). According to HHS, “CCHIT will certify health IT products in three initial phases:
First, outpatient or ambulatory EHRs; Second, inpatient, or hospital EHRs; and
Third, architectures, or systems that enable the exchange of information between and among health care providers and institutions.”

HHS Secretary Leavitt said that “This seal of certification removes a significant barrier to wide-spread adoption of electronic health records. It gives health care providers peace of mind to know they are purchasing a product that is functional, and interoperable and will bring higher quality, safer care to patients.”

A Massachusetts Institute of Technology economics professor, Amy Finkelstein, is publishing an interesting paper in the always scintillating Quarterly Journal of Economics titled “The Aggregate Effects of Health Insurance: Evidence from the Introduction of Medicare.”

The abstract for the paper reads as follows:

Abstract: This paper investigates the effects of market-wide changes in health insurance by examining the single largest change in health insurance coverage in American history: the introduction of Medicare in 1965. I estimate that the impact of Medicare on hospital spending is over six times larger than what the evidence from individual-level changes in health insurance would have predicted. This disproportionately larger effect may arise if market-wide changes in demand alter the incentives of hospitals to incur the fixed costs of entering the market or of adopting new practice styles. I present some evidence of these types of effects. A back of the envelope calculation based on the estimated impact of Medicare suggests that the overall spread of health insurance between 1950 and 1990 may be able to explain about half of the increase in real per capita health spending over this time period.

Eureka! This is what I always have suspected.

The health information technology (HIT) bills now pending in Congress presume that the widespread introduction of electronic medical records will reduce health care spending. At a party Saturday night, I asked an emergency medicine doctor for his opinion. He told me that while electronic prescribing is a vast improvement over paper based prescriptions, electronic medical records will simply slow down the practice of medicine, e.g., doctors will see fewer patients per hour, and thereby increase costs.

I therefore was very interested to learn that the upcoming issue of the Health Affairs journal includes an article by Jann Sidorov, MD, the medical director of Geisinger Health Plan’s Care Coordination Department and a practicing primary care internist titled “It Ain’t Necessarily So: The Electronic Health Record And The Unlikely Prospect Of Reducing Health Care Costs.”

The Health Affairs website provides the following summary of Dr. Sidorov’s article, which is in line with my friend’s opinion:

Electronic health record (EHR) advocates argue that EHRs lead to reduced errors and reduced costs. Many reports suggest otherwise. The EHR often leads to higher billings and declines in provider productivity with no change in provider-to-patient ratios. Error reduction is inconsistent and has yet to be linked to savings or malpractice premiums. As interest in patient-centeredness, shared decision making, teaming, group visits, open access,and accountability grows, the EHR is better viewed as an insufficient yet necessary ingredient. Absent other fundamental interventions that alter medical practice, it is unlikely that the U.S. health care bill will decline as a result of the EHR alone.