Traditional Medicare Part A reimburses hospitals for inpatient care based on a prospective pricing system (PPS) . The Centers for Medicare and Medicaid Services (CMS) updates the PPS annually. CMS issued a notice of the proposed Fiscal Year 2007 PPS updates and rates in August and on October 11 CMS published the final update in the Federal Register. “CMS is continuing to estimate that payments to hospitals will increase by $3.4 billion or an average of 3.5 percent.” CMS is requiring hospitals to report quality data in order to receive the full FY 2007 PPS update. CMS reported last month that

Out of the nation’s 3,490 acute care hospitals eligible to participate, 99 percent of those chose to report quality data. Out of those hospitals eligible to receive a 2 percent annual payment update from Medicare for participating, 171 failed to meet the FY 2007 reporting requirements (143 failed the submission requirements and 28 chose not to participate).

The Robert Wood Johnson Foundation, working with researchers from the GWU University Medical Center and the Massachusetts General Hospital, released a report today that the U.S. Department of Health and Human Services commissioned to establish a baseline for judging the Nation’s progress toward achieving the President’s goal of widespread electronic health record (EHR) use by 2014. The report is sobering.

While 25% of doctors use EHRs to improve patient care, but only “5 percent of hospitals used computerized physician order entry.” Moreover, “less than one in 10 are using what experts define as a “fully operational” system that collects patient information, displays test results, allows providers to enter medical orders and prescriptions, and helps doctors make treatment decisions.”

The Foudation spotlights the following findings from the report:

• Hospital adoption trends are unknown. Assertions to the contrary, there are not enough high-quality, reliable surveys of hospital use of EHRs. The research team reliably estimates, however, that about 5 percent of America’s 6,000 hospitals have adopted computerized physician order entry (CPOE) systems, a component of EHRs, to help reduce medical errors and ease care delivery.
• There is no evidence yet of a digital divide. There remains “considerable uncertainty” about the existence and size of gaps in use of EHRs among physicians who care for vulnerable populations. Tracking the adoption and use of EHRs among these providers, understanding unique barriers to adoption, and identifying policies to close this gap are important steps. The study did find that patient characteristics matter, however. Physicians who treat fewer Medicaid patients are more likely to report using EHRs than those with a larger share of practice revenue from the insurance program.
• A better definition of EHRs is essential. There really is no standard definition of what an EHR is and what adoption means. Consequently, a lot is left to interpretation when surveys are conducted. The report says that the U.S. could more adequately measure EHR adoption trends over time if there was a consistency in terminology and survey methods related to adoption practices.
• Adoption depends on many factors. The report points to four key things that drive adoption: financial incentives and barriers, laws and regulations, the state of the technology and organizational influences such as the size of a practice or hospital or payer mix; and how integrated a health care system is.

There’s a lot of work still to be done.

The Washington Post reports today that following up on a recent Institute of Medicine study, five drug safety experts have published an article in the Annals of Internal Medicine with the following recommendations:

Both the Institute of Medicine and the five experts would ban consumer
advertising of newly approved classes of drugs until they have been on the
market long enough for any problems to emerge; give the agency new powers to
fine drugmakers that fail to complete required safety studies; and take steps to
limit conflicts of interest and broaden the range of expertise on panels
appointed by the agency to review scientific data on proposed drugs.

But the experts went further by calling for a Center for Drug Safety outside of the CDER and increased FDA funding for safety monitoring, perhaps through a fee of a few cents on every prescription. They also recommend giving “conditional approval”
to some drugs to require drugmakers to demonstrate a drug’s safety or else risk
seeing it pulled from the market.

Focus on drug safety stems from such recent problems as Merck’s withdrawal of Vioxx from the market. Drug safety legislation is expected to be a hot topic in the next Congress, which convenes in January 2007.

The Wall Street Journal’s lead story on Friday was a fascinating report on the tentative settlement of a lawsuit against First Databank, the Hearst subsidiary that publishes the most popular pharmaceutical Average Wholesale Price (AWP) list. Prescription benefit managers (PBM) often use this list to price brand name drugs for their health plan customers. The Wall Street Journal quips that AWP also means ain’t what’s paid or as Kramer put it on Seinfeld “only suckers pay retail.”

The lawsuit being settled was brought by the New England Carpenters Health Benefits Fund and AFSCME District Council 27 Health and Security Plan in the federal district court in Boston. The lawsuit alleges that First Databank and the drug wholesale McKesson conspired to crank up the AWP prices in 2002 using on a “survey” of only one wholesaler — McKesson. (McKesson has denied any liability, but the plaintiff’s lawyers are continuing to pursue McKesson.)

Under the settlement, without conceding liability, First Databank agrees to reduce many of its AWP prices by 4% and to phase out publishing its AWP listing in 2008. An economist hired by the plaintiffs’ lawyers reportedly projected that this settlement will produce $4 billion in prescription drug cost savings for health plans and Medicaid in 2007. The tentative settlement report negatively impacted the stock prices of pharmacies, drug manufacturers, drug wholesalers, and prescription benefit managers on Friday. A federal judge in Boston must approve the tentative settlement before it can become final and binding.

CVS, the major pharmacy chain, already is fighting back with an announcement that it will negotiate higher fees.

The 2006 Nobel Prize for Chemistry was awarded to an American scientist from Stanford University Roger Kornberg for his pioneering work in RNA transcription — the process through which “information stored in genes is copied and transferred to other parts of the cell. While dioxyribonucleic acid (DNA) is the blueprint for life, ribonucleic acid (RNA) is the actual builder that decodes the blueprint. Although all cells carry a full set of DNA code, each cell must activate, or express, different genes to do their specialised work. Kornberg apparently figured out how this happens, using X-ray crystallography to ‘photograph’ RNA-polymerase, the molecule used by RNA to read and transcribe the DNA code. This groundbreaking work will help researchers better understand the process of transcription, where even minute flaws could lead to illnesses like cancer.” Dr. Kornberg’s father won a Nobel Prize in 1959, and as the Chicago Tribune points out this is not the first time that parent and child have won Nobel Prizes. Can there be truth in the saying that the apple does not fall far from the tree?

Meanwhile, the X Prize Foundation, which offered a $10 million prize for private spaceflight, announced that it will award $10 million to the first group that is able to decode the genomes of 100 people in 10 days. Such a machine, which is estimated to be only five years away, would pave the way to individualized medicine, according to various reports. The editorial board of Scientfic American questions the “cash for breakthoughs” approach.

The Washington Post reports today about a British study of schizophrenia drugs concluding that the newer drugs, such as Zyprexa, produce the same results over the long term as the lower cost drugs they were designed to replace, such as Haldol. The British psychiatrist who lead the study, Dr. Peter Jones, and an American psychiatrist from the Veterans Administration, Dr. Robert Rosenheck, observed that

[T]he problem with many drug company studies that seemed to show that new drugs are better is that they focused on short-term results — a symptom or side effect — rather than the big picture: how patients fare long-term.”The story of these newer antipsychotic drugs is a story that reveals an institutional gap,” Rosenheck said. “It should not have needed 10 years to get three government studies.”

This study strikes me as further evidence of the wisdom of the recent Institute of Medicine recommendations that all new drugs undergo a new round of testing five years after their introduction.

The Nobel Foundation awarded the 2006 prize in Physiology and Medicine to two American researchers, Dr. Andrew Z. Fire, of MIT, and Dr. Craig C. Mello, of Harvard, who discovered “a fundamental mechanism for controlling the flow of genetic information.” The Nobel Foundation explains that their discovery is expected to lead to novel therapies for viral infections, among other uses.

Abraxane , manufactured by Abraxis BioScience, and Taxol, manufactured by Bristol Myers Squibb, have equivalent survival rates in treating late stage breast cancer. The generic version of Taxol known as Paclitaxel is $150 per dose. Abraxane, which is easier to administer than Taxol, is $4,200 per dose. According to the New York Times, “About 20,000 people have now been treated with the drug, and Dr. [Patrick] Soon-Shiong [, the Abraxsis CEO,] expects its sales to approach $200 million this year. By 2010, Abraxane’s annual sales could reach $1 billion, analysts say.”

I highly recommend that you read this fascinating New York Times article by Alex Berenson to learn why. (If you want to read more, check out this history of the “tortured” development of Taxol.)

From today’s Wall Street Journal (p. A7),

Americans spent $1.58 trillion on medical care over the past year — the highest category of personal consumption expenditure. Americans spent $1.37 trillion on housing and $1.27 trillion on food.

The federal law governing the consumer driven option known as a health savings account (HSA) coupled with a high deductible health plan (HDHP) provides for annual inflation adjustments to the minimum and maximum health plan deductible, the out-of-pocket expense maximum, etc. The inflation adjustment for the next year is computed based on the change in the consumer price index (urban or CPI-U) from August of the prior year to August of the current year — the same adjustment that is used for income tax factors that are inflation adjusted.

After the Department of Labor recently released the August 2006 CPI-U data, the HSA mavens quickly performed the calculation and projected the inflation adjusted HSA/HDHP factors for 2007. The IRS will release the official adjustments later this fall.