Category Archives: health market quality

Amplio – surgeon score cards

https://medium.com/backchannel/should-surgeons-keep-score-8b3f890a7d4c

Making the Cut

Which surgeon you get matters — a lot. But how do we know who the good ones are?

“You can think of surgery as not really that different than golf.” Peter Scardino is the chief of surgery at Memorial Sloan Kettering Cancer Center (MSK). He has performed more than 4,000 open radical prostatectomies. “Very good athletes and intelligent people can be wildly different in their ability to drive or chip or putt. I think the same thing’s true in the operating room.”

The difference is that golfers keep score. Andrew Vickers, a biostatistician at MSK, would hear cancer surgeons at the hospital having heated debates about, say, how often they took out a patient’s whole kidney versus just a part of it. “Wait a minute,” he remembers thinking. “Don’t you know this?”

“How come they didn’t know this already?”

In the summer of 2009, he and Scardino teamed up to begin work on a software project, called Amplio (from the Latin for “to improve”), to give surgeons detailed feedback about their performance. The program—still in its early stages but already starting to be shared with other hospitals — started with a simple premise: the only way a surgeon is going to get better is if he knows where he stands.

Vickers likes to put it this way. His brother-in-law is a bond salesman, and you can ask him, How’d you do last week?, and he’ll tell you not just his own numbers, but the numbers for his whole group.

Why should it be any different when lives are in the balance?

Andrew Vickers

The central technique of Amplio, using outcome data to determine which surgeons were more successful, and why, takes on a powerful taboo. Perhaps the longest-standing impediment to research into surgical outcomes — the reason that surgeons, unlike bond salesmen (or pilots or athletes), are so much in the dark about their own performance — are the surgeons themselves.

“Surgeons basically deeply believe that if I’m a well-trained surgeon, if I’ve gone through a good residency program, a fellowship program, and I’m board-certified, I can do an operation just as well as you can,” Scardino says. “And the difference between our results is really because I’m willing to take on the challenging patients.”

It is, maybe, a vestige of the old myth that anyone ordained to cut into healthy flesh is thereby made a minor god. It’s the belief that there are no differences in skill, and that even if there were differences, surgery is so complicated and multifaceted, and so much determined by the patient you happen to be operating on, that no one would ever be able to tell.

Vickers said to me that after several years of hearing this, he became so frustrated that he sat down with his ten­-year-­old daughter and conducted a little experiment. He searched YouTube for “radical prostatectomy” and found two clips, one from a highly respected surgeon and one from a surgeon who was rumored to be less skilled. He showed his daughter a 15­second clip of each and asked, “Which one is better?”

“That one,” she replied right away.

When Vickers asked her why, “She looked at me, like, can’t you tell the difference? You can just see.”

Would you want to be cut by this surgeon?

Or this one?

A remarkable paper published last year in the New England Journal of Medicine showed that maybe Vickers’s daughter was onto something.

In the study, run by John Birkmeyer, a surgeon who at the time was at the University of Michigan, bariatric surgeons were recruited from around the state of Michigan to submit videos of themselves doing a gastric bypass operation. The videos were sent to another pool of bariatric surgeons to be given a series of 1-to-5 rating on factors such as “respect for tissue,” “time and motion,” “economy of movement” and “flow of operation.”

The study’s key finding was that not only could you reliably determine a surgeon’s skill by watching them on video — skill was nowhere near as nebulous as had been assumed — but that those ratings were highly correlated with outcomes: “As compared with patients treated by surgeons with high skill ratings, patients treated by surgeons with low skill ratings were at least twice as likely to die, have complications, undergo reoperation, and be readmitted after hospital discharge,” Birkmeyer and his colleagues wrote in the paper.

You can actually watch a couple of these videos yourself [see above]. Along with the overall study results, Birkmeyer published two short clips: one from a highly rated surgeon and one from a low-rated surgeon. The difference is astonishing.

You see the higher-rated surgeon first. It’s what you always imagined surgery might look like. The robot hands move with purpose — quick, deliberate strokes. There’s no wasted motion. When they grip or sew or staple tissue, it’s with a mix of command and gentle respect. The surgeon seems to know exactly what to do next. The way they’ve set things up makes it feel roomy in there, and tidy.

Watching the lower-rated surgeon, by contrast, is like watching the hidden camera footage of a nanny hitting your kid: it looks like abuse. The surgeon’s view is all muddled, they’re groping aimlessly at flesh, desperate to find purchase somewhere, or an orientation, as if their instruments are being thrashed around in the undertow of the patient’s guts. It’s like watching middle schoolers play soccer: the game seems to make no sense, to have no plot or direction or purpose or boundary. It’s not, in other words, like, “This one’s hands are a bit shaky,” it’s more like, “Does this one have any clue what they’re doing?”

It’s funny: in other disciplines we reserve the word “surgical” for feats that took a special poise, a kind of deftness under pressure. But the thing we maybe forget is that not all surgery is worthy of the name.

Vickers is best known for showing exactly how much variety there is, plotting, in 2007, the so-called “learning curve” for surgery: a graph that tracks, on one axis, the number of cases a surgeon has under his belt, and on the other, his recurrence rates (the rate at which his patients’ cancer comes back).

As surgeons get more experience, their patients do better. This “learning curve” shows patients’ 5 year cancer-free rates rise with procedure volume.

He showed that in incidents of prostate cancer that haven’t spread beyond the prostate — so-called ‘organ-confined’ cases — the recurrence rates for a novice surgeon were 10 to 15%. For an experienced surgeon, they were less than 1%. With recurrence rates so low for the most experienced surgeons, Vickers was able to conclude that in organ-confined cancer cases, the onlyreason a patient would recur is “because the surgeon screwed up.”

There’s a large literature, going back to a famous paper in 1979, finding that hospitals with higher volumes of a given surgical procedure have better outcomes. In the ’79 study it was reported that for some kinds of surgery, hospitals that saw 200 or more cases per year had death rates that were 25% to 41% lower than hospitals with lower volumes. If every case were treated at a high-volume hospital, you would avoid more than a third of the deaths associated with the procedure.

But what wasn’t clear was why higher volumes led to better outcomes. And for decades, researchers penned more than 300 studies restating the same basic relationship, without getting any closer to explaining it. Did low-volume hospitals end up with the riskiest patients? Did high-volume hospitals have fancier equipment? Or better operating room teams? A better overall staff? An editorial as late as 2003 summarized the literature with the title, “The Volume–Outcome Conundrum.”

A 2003 paper by Birkmeyer, “Surgeon volume and operative mortality in the United States,” was the first to offer definitive evidence that the biggest factor determining the outcome of many surgical procedures — the hidden element that explained most of the variation among hospitals — was the procedure volume not of the hospital, but of the individual surgeons.

“In general I don’t think anyone was surprised that there was a learning curve,” Vickers says. “I think they were surprised at what a big difference it made.” Surprised, maybe, but not moved to action. “You may think that everyone would drop what they were doing,” he says, “and try and work out what it is that some surgeons are doing that the other ones aren’t… But things move a lot more slowly than that.”

Tired of waiting, Vickers started sharing some initial ideas with Scardino about the program that would become Amplio. It would give surgeons detailed feedback about their performance. It would show you not just your own results, but the results for everyone in your service. If another surgeon was doing particularly well, you could find out what accounted for the difference; if your own numbers dropped, you’d know to make an adjustment. Vickers explains that they wanted to “stop doing studies showing surgeons had different outcomes.”

“Let’s do something about it,” he told Scardino.

Dr. Scardino

The first time I heard about Amplio was on the third floor of the Chrysler Building, in a room they called the Innovation Lab — the very room you’d point to if the Martians ever asked you what a 125-year old bureaucracy looks like. As I arrived, the receptionist was trying to straighten up a small mess of papers, post-its, cookies, and coffee stirrers. “The last crowd had a wild time,” she said. Every surface in the room was gray or off-white, the color of questionable eggs. It smelled like hospital-grade hand soap.

The people who filed in, though, and introduced themselves to each other (this was a summit of sorts, a “Collaboration Meeting” where different research groups from around MSK shared their works in progress) looked straight out of a well-funded biotech startup. There was a Fulbright scholar; a double-major in biology and philosophy; a couple of epidemiologists; a mathematician; a master’s in biostats and predictive analytics. There were Harvards, Cals, and Columbias, bright-eyed and sharply dressed.

Vickers was one of the speakers. He’s in his forties but he looks younger, less like an academic than a seasoned ski instructor, a consequence, maybe, of the long wavy hair, or the well-worn smile lines around his eyes, or this expression he has that’s like a mix of relaxed and impish. He leans back when he talks, and he talks well, and you get the sense that he knows he talks well. He’s British, from north London, educated first at Cambridge and then, for his PhD in clinical medicine, at Oxford.

The first big task with Amplio, he said, was to get the data. In order for surgeons to improve, they have to know how well they’re doing. In order to know how well they’re doing, they have to know how well their patients are doing. And this turns out to be trickier than you’d think. You need an apparatus that not only keeps meticulous records, but keeps them consistently, and throughout the entire life cycle of the patient.

That is, you need data on the patient before the operation: How old are they? What medications are they allergic to? Have they been in surgery before? You need data on what happened during the operation: where’d you make your incisions? how much blood was lost? how long did it take?

And finally, you need data on what happened to the patient after the operation — in some cases years after. In many hospitals, followup is sporadic at best. So before the Amplio team did anything fancy, they had to devise a better way to collect data from patients. They had to do stuff like find out whether it was better to give the patient a survey before or after a consultation with their surgeon? And what kinds of questions worked best? And who were they supposed to hand the iPad to when they were done?

Only when all these questions were answered, and a stream of regular data was being saved for every procedure, could Amplio start presenting something for surgeons to use.

A screen in Amplio shows how a surgeon’s patients are doing against their colleagues’

After years of setup, Amplio now is in a state where it can begin to affect procedures. The way it works is that a surgeon logs into a screen that shows where they stand on a series of plots. On each plot there’s a single red dot sitting amid some blue dots. The red dot shows your outcomes; the blue dots show the outcomes for each of the other surgeons in your group.

You can slice and dice different things you’re interested in to make different kinds of plots. One plot might show the average amount of blood lost during the operation against the average length of the hospital stay after it. Another plot might show a prostate patient’s recurrence rates against his continence or erectile function.

There’s something powerful about having outcomes graphed so starkly. Vickers says that there was a surgeon who saw that they were so far into the wrong corner of that plot — patients weren’t recovering well, and the cancer was coming back — that they decided to stop doing the procedure. The men spared poor outcomes by this decision will never know that Amplio saved them.

It’s like an analytics dashboard, or a leaderboard, or a report card, or… well, it’s like a lot of things that have existed in a lot of other fields for a long time. And it kind of makes you wonder, why has it taken so long for a tool like this to come to surgeons?

The answer is that Amplio has cleverly avoided the pitfalls of some previous efforts. For instance, in 1989, New York state began publicly reporting the mortality rates of cardiovascular surgeons. Because the data was “risk-adjusted”—an unfavorable outcome would be considered less bad, or not counted at all, if the patient was at risk to begin with — surgeons started pretending their patients were a lot worse off than they were. In some cases, they avoided patients who looked like goners. “The sickest patients weren’t being treated,” Vickers says. One investigation into why mortality in New York had dropped for a certain procedure, the coronary artery bypass graft, concluded that it was just because New York hospitals were sending the highest-risk patients to Ohio.

Vickers wanted to resist such gaming. But the answer is not to quit adjusting for patient risk. After all, if a given report says that your patients have 60% fewer complications than mine, does that mean that you’re a 60% better surgeon? It depends on the patients we see. It turns out that maybe the best way to prevent gaming is just to keep the results confidential. That sounds counter to a patient’s interests, but it’s been shown that patients actually make little use of objective outcomes data when it’s available, that in fact they’re much more likely to choose a surgeon or hospital based on reputation or raw proximity.

With Amplio, since patients, and the hospital, and even your boss are blinded from knowing whose results belong to whom, there’s no incentive to fudge risk factors or insist that a risk factor’s weight be changed, unless you think it’s actually good for the analysis.

That’s why Amplio’s interface for slicing and dicing the data in multiple ways matters, too. Feedback systems in the past that have given surgeons a single-dimensional report — say, they only track recurrence rates — have failed by creating a perverse incentive to optimize along just that one dimension, at the expense of all the others. Another reminder that feedback is, like surgery itself, fraught with complication: if you do it wrong, it can be worse than useless.

Every member of the Amplio team I spoke to stressed this point over and over again, that the system had been painstakingly built from the “bottom up” — tuned via detailed conversations with surgeons (“Are you accounting for BMI? What if we change the definition of blood loss?”) — so that the numbers it reported would be accurate, and risk-adjusted, and multidimensional, and credible. Because only then would they be actionable.

Karim Touijer, a surgeon at MSK who has used Amplio, explains the system’s chief benefit is the fact that you can vividly see how you’re doing, and that someone else is doing better. “When you set a standard,” he says, “the majority of people will improve or meet that standard. You tend to shrink the outliers. If I’m an outlier, if my performance leaves something to be desired, then I can go to my colleagues and say what is it that you’re doing to get these results?” Touijer sees this as the gradual standardization of surgery: you find the best performers, figure out what makes them good, and spread the word. He said that already within his group, because the conversations are more tied to outcomes, they’re talking about technique in a more objective way.

In fact, he says, as a result of Amplio he and his team have devised the first randomized clinical trial that is solely dedicated to surgical maneuvers.

Touijer specializes in the radical prostatectomy, considered one of the most complex and delicate operations in all of surgical practice. The procedure — in which a patient’s cancerous prostate is entirely removed — is highly sensitive to an individual surgeon’s skill. The reason is that the cancer ends up being very close to the nerves that control sexual and urinary function. It’s an operation unlike, say, kidney cancer, where you can easily go widely around the cancer. If you operate too far around the prostate, you could easily damage the rectum, the bladder, the nerves responsible for erection, or the sphincter responsible for urinary control. “It turns out that radical prostatectomy is very, very intimately influenced by surgical technique,” Touijer says. “One millimeter on one side or less than a millimeter on the other can change the outcome.”

Option B in the first A/B test for surgery: “A second bite is taken deeply into the fascia of the lateral pelvic fascia”

There’s a moment during the procedure where the surgeon has to decide whether to make a particular stitch. Some surgeons do it, some don’t; we don’t yet know which way is better. In the randomized trial, if the surgeon doesn’t have a compelling reason to pick one of the two alternatives, he lets the computer decide randomly for him. With enough patients, it should be possible to isolate the effect of that one decision, and to find out whether the extra stitch leads to better outcomes. The beauty is, since the outcomes data was already being tracked, and the patients were already going to have the surgery, the trial costs almost nothing.

If you’ve worked on the web, this model of rapid, cheap experimentation probably sounds familiar: what Touijer is describing is the first A/B test for surgery. As it turns out this particular test didn’t yield significant results. But several other tests are in the works, and some may improve some specific surgical techniques—improving the odds for all patients.

In Better, Atul Gawande argues that when we think of improving medicine, we always imagine making new advances, discovering the gene responsible for a disease, and so on — and forget that we can simply take what we already know how to do, and figure out how to do it better. In a word, iterate.

“But to do that,” Scardino says, “we have to measure it, we have to know what the results are.”

Scardino describes how when laparascopy was first becoming an option for radical prostatectomy, there was a lot of hype. “The company and many doctors who were doing it immediately claimed that it was safer, had better results, was more likely to cure the cancer and less likely to have permanent urinary or sexual problems.” But, he says, the data to support it were weak, and biased. “We could see in Amplio early on that as people started doing robotic surgery, the results were clearly worse.” It took time for them to hit par with the traditional open procedure; it took time for them to get better.

After a pilot among prostate surgeons, Amplio spread quickly to other services within MSK, including for kidney cancer, bladder cancer and colorectal cancer. Vickers’s team has been working with other hospitals — including Columbia in New York, the Barbara Ann Karmanos Cancer Institute in Michigan, and the MD Anderson Cancer Center in Texas — to slowly begin integrating with their systems. But it’s still early days: even within their own hospital, surgeons were wary of Amplio. It took many conversations, and assurances, to convince them that the data were being collected for their benefit — not to “name and shame” bad performers.

We know what happens when performance feedback goes awry — similar efforts to “grade” American schoolteachers, for instance, have perhaps generated more controversy than results. To do performance feedback well requires patience, and tact, and an earnest imperative to improve everyone’s results, not just to find the negative outliers. But Vickers believes that enough surgeons have signed on that the taboo has been broken at MSK. And results are bound to flow from that.

It’s all about trust. Remember the Birkmeyer study that compared surgeons using videos? It was only possible because Birkmeyer had built up relationships by way of a previous outcomes experiment in Michigan that meticulously protected data. “That’s a question that we get really frequently,” Birkmeyer told me when we spoke about the paper. “How on earth did we ever pull that study off?” The key, he says, is that years of research with these surgeons had slowly built goodwill. When it came time to make a big ask, “the surgeons were at a place where they could trust that we weren’t gonna screw them.”

Amplio will no doubt have to be able to say the same thing, if it’s to spread beyond the country’s best research cancer centers into the average regional hospital.

In 1914, a surgeon at Mass General got so fed up with the administration, and their refusal to measure outcomes, that he created his own private hospital, “the End Result Hospital,” where detailed records were to be kept of every patient’s “end results.” He published the first five years of his hospital’s cases in a book that became one of the founding documents of evidence-based medicine.

“The Idea is so simple as to seem childlike,” he wrote, “but we find it ignored in all Charitable Hospitals, and very largely in Private Hospitals. It is simply to follow the natural series of questions which any one asks in an individual case: What was the matter? Did they find it out beforehand? Did the patient get entirely well? If not — why not? Was it the fault of the surgeon, the disease, or the patient? What can we do to prevent similar failures in the future?”

It might finally be time for that simple, “childlike” concept to reach fruition. It’s like Vickers said to me one night in early November, as we were discussing Amplio, “Having been in health research for twenty years, there’s always that great quote of Martin Luther King: The arc of history is long, but it bends towards justice.”

How Medical Care Is Being Corrupted

 

 

http://www.nytimes.com/2014/11/19/opinion/how-medical-care-is-being-corrupted.html?_r=0

 

Photo

CreditAlex Merto

WHEN we are patients, we want our doctors to make recommendations that are in our best interests as individuals. As physicians, we strive to do the same for our patients.

But financial forces largely hidden from the public are beginning to corrupt care and undermine the bond of trust between doctors and patients. Insurers, hospital networks and regulatory groups have put in place both rewards and punishments that can powerfully influence your doctor’s decisions.

Contracts for medical care that incorporate “pay for performance” direct physicians to meet strict metrics for testing and treatment. These metrics are population-based and generic, and do not take into account the individual characteristics and preferences of the patient or differing expert opinions on optimal practice.

For example, doctors are rewarded for keeping their patients’ cholesterol and blood pressure below certain target levels. For some patients, this is good medicine, but for others the benefits may not outweigh the risks. Treatment with drugs such as statins can cause significant side effects, including muscle pain and increased risk of diabetes. Blood-pressure therapy to meet an imposed target may lead to increased falls and fractures in older patients.

Physicians who meet their designated targets are not only rewarded with a bonus from the insurer but are also given high ratings on insurer websites. Physicians who deviate from such metrics are financially penalized through lower payments and are publicly shamed, listed on insurer websites in a lower tier. Further, their patients may be required to pay higher co-payments.

These measures are clearly designed to coerce physicians to comply with the metrics. Thus doctors may feel pressured to withhold treatment that they feel is required or feel forced to recommend treatment whose risks may outweigh benefits.

It is not just treatment targets but also the particular medications to be used that are now often dictated by insurers. Commonly this is done by assigning a larger co-payment to certain drugs, a negative incentive for patients to choose higher-cost medications. But now some insurers are offering a positive financial incentive directly to physicians to use specific medications. For example, WellPoint, one of the largest private payers for health care, recently outlined designated treatment pathways for cancer and announced that it would pay physicians an incentive of $350 per month per patient treated on the designated pathway.

This has raised concern in the oncology community because there is considerable debate among experts about what is optimal. Dr. Margaret A. Tempero of the National Comprehensive Cancer Network observed that every day oncologists saw patients for whom deviation from treatment guidelines made sense: “Will oncologists be reluctant to make these decisions because of an adverse effects on payments?” Further, some health care networks limit the ability of a patient to get a second opinion by going outside the network. The patient is financially penalized with large co-payments or no coverage at all. Additionally, the physician who refers the patient out of network risks censure from the network administration.

When a patient asks “Is this treatment right for me?” the doctor faces a potential moral dilemma. How should he answer if the response is to his personal detriment? Some health policy experts suggest that there is no moral dilemma. They argue that it is obsolete for the doctor to approach each patient strictly as an individual; medical decisions should be made on the basis of what is best for the population as a whole.

We fear this approach can dangerously lead to “moral licensing” — the physician is able to rationalize forcing or withholding treatment, regardless of clinical judgment or patient preference, as acceptable for the good of the population.

Medicine has been appropriately criticized for its past paternalism, where doctors imposed their views on the patient. In recent years, however, the balance of power has shifted away from the physician to the patient, in large part because of access to clinical information on the web.

In truth, the power belongs to the insurers and regulators that control payment. There is now a new paternalism, largely invisible to the public, diminishing the autonomy of both doctor and patient.

In 2010, Congress passed the Physician Payments Sunshine Act to address potential conflicts of interest by making physician financial ties to pharmaceutical and device companies public on a federal website. We propose a similar public website to reveal the hidden coercive forces that may specify treatments and limit choices through pressures on the doctor.

Medical care is not just another marketplace commodity. Physicians should never have an incentive to override the best interests of their patients.

How to Make Health Care Accountable When We Don’t Know What Works

 

https://hbr.org/2014/11/how-to-make-health-care-accountable-when-we-dont-know-what-works

How to Make Health Care Accountable When We Don’t Know What Works

NOVEMBER 25, 2014
How to Make Health Care Accountable When We Don’t Know What Works
NOV14_25_83286050

Accountable care organizations (ACOs) are widely regarded as part of the solution to a fragmented health care system — one plagued by duplicative services, avoidable errors, and other impediments to efficiency and quality. But 20 years of reform efforts have led to a wave of provider consolidation that has made little headway in efficiently coordinating care. Providers continue to follow a strategy that has shown minimal evidence of success.

We should admit that we don’t know what works and, instead, test a variety of potential solutions that could address fragmentation. Before I explore the concrete steps we can take to encourage that kind of innovation, let me provide some important historical context.

Payment Reform’s First Life

Early efforts to promote coordinated care emphasized payment reform. Toward that end, managed-care and health maintenance organizations used payment schedules and gatekeeper physicians to create provider networks. In addition, the Clinton administration introduced proposals to implement “pay for performance” and dedicated quality-improvement initiatives, suggesting that financial pressures might force the coordination and rationalization of care. But Congress rejected payment-focused reform, and market preferences eliminated managed-care pressures.

Commentators then suggested that payment reform could happen only in conjunction with provider-based reforms, and the Institute of Medicine later issued a series of reports calling for pairing payment solutions with structural reform. Then, when the Affordable Care Act instituted Medicare’s Shared Savings Program in 2010, it invited providers to create ACOs and to accept changes in reimbursement that allowed them recoup part of any savings they generated. Eventually, however, prospective ACOs were given the option ofcontinuing under Medicare’s traditional fee-for-service payments. In other words, providers were encouraged to pursue structural reform while being permitted to avoid any constraint from payment reform.

INSIGHT CENTER

  • Innovating for Value in Health Care
    SPONSORED BY MEDTRONIC

    A collaboration of the editors of Harvard Business Review and the New England Journal of Medicine, exploring best practices for improving patient outcomes while reducing costs.

The Disappointments of Provider Reform

The continued failure of payment-driven reform has sadly given provider-based reform a blank check. The U.S. health sector has been in a merger-and-acquisition frenzy for nearly 20 years, and much of the integration has been justified as an effort to construct ACOs. Buzz phrases such as “clinical integration” and “eliminating fragmentation” are routinely paraded before regulators who scrutinize proposed mergers.

The problem, of course, is that after waves of acquisitions, most hospital markets are now highly concentrated and lack meaningful competition. And, consistent with basic economic theory, hospital systems that acquired dominant market shares dramatically increased prices for health care services. Perhaps even worse is that these large entities have shown little capacity for achieving the efficiencies they promised through coordinated care. Newly integrated delivery systems retain their inefficiencies and bring higher prices without any evident reduction in costs or errors.

We don’t know exactly why efforts at integration have not yielded efficiencies, and it seems we simply didn’t think very hard about it. The health reform debate focused primarily on a handful of success stories we all can repeat in our sleep: Kaiser, Geisinger, Intermountain. The plan was to have other hospital systems mimic them. That is like instructing all high-tech companies to mimic Apple, as if what makes Apple successful is an easy-to-follow cookbook for large-scale structural change.

It is a curiosity about the U.S. health system that producers with better outcomes and lower costs than their competitors cannot dominate the market. Kaiser, for example, has tried but failed to enter more local markets. But it is foolhardy to think that the systems that have not achieved Kaiser’s success can replicate it simply with the help of government regulators. This duplication strategy at best seems mindless, and at worst smacks of a Khrushchev-era economic policy.

The truth is, despite a glut of business press and how-to manuals, we still understand very little about why certain organizations succeed and others do not. With all the complexities of delivering medical care, we should expect even more variation among health care providers than among manufacturers. We likewise should be very hesitant to claim we understand what works and prescribe nationwide structural reforms.

Concrete Steps for the Future of ACOs

Precisely because we don’t know what works at this juncture, we cannot continue encouraging the formation of vast integrated systems that are difficult to disentangle. Until we have more evidence that integration yields efficiencies, regulators should continue to halt mergers that harm competition.

But scrutinizing mergers will only prevent further damage. We also must improve our delivery system, and we cannot give up on the ACO as a potential source of innovative configurations. Specifically, we should:

  1. Redefine and broaden our concept of an ACO. Too much ACO formation has emphasized linking hospitals with other providers. Instead of this top-down approach, we should work from the bottom up by linking providers withconsumers and payors, so that the focus is on serving patients’ needs and managing budgets.
  2. Encourage nontraditional parties — such as social workers, professionals who help people navigate the health care system (often called “navigators”), and IT companies — to lead efforts at ACO formation. These parties would be well equipped to construct networks that provide accountability, given their expertise in connecting consumers to complex organizations and advocating on behalf of those consumers.
  3. Use contract-based and virtual provider collaborations instead of relying on mergers. Joining providers under common ownership might not be necessary. Electronic health records (EHRs) and other information technologies have the potential to create platforms that enable coordination without incurring the high costs of integration. EHR tools can also allow patients to control their own information and tailor collaborations to individual patients’ needs.
  4. Entertain disruptively innovative reconstructions of the health care delivery system — ones that make use of mobile health, medical tourism, and informatics. Many technology companies that traditionally have not participated in the health sector are now offering improvements to our delivery system. Because business scholarship tells us that outsiders frequently introduce the most valuable innovations to a market, we should ensure that regulatory barriers do not preclude participation from unconventional participants.
  5. Perhaps most important, we cannot pursue structural reform withoutpayment reform. We will distinguish valuable provider reforms from ineffective ones only if sustained revenue pressures force ACOs to be truly “accountable” to consumer demands and other economic realities.

Not every solution we try will work, but we’re likely to have more success letting providers figure out what works than telling them how to do it.


Barak Richman is the Edgar P. and Elizabeth C. Bartlett Professor of Law
 and a professor of business administration at Duke University.

 

Why Big Health Insurance is pouring money into startups

 

http://fortune.com/2014/09/24/health-insurance-invest-startups/

Why Big Health Insurance is pouring money into startups

A part of the Affordable Care Act forces insurers to redeploy capital rather than distribute it to shareholders. And that’s where things get interesting.

One effect of the Affordable Care Act, a.k.a. Obamacare? A spike in venture interest in health care startups. Digital health care companies raised $2.3 billion in the first half of 2014, which surpasses the total raised in all of 2013, according Rock Health, a health care-focused seed fund. That figure is impressive given that 2013 was already a record year at $1.9 billion raised. (That’s a 39% increase year over year, even as biotech investment grew just 8% and medical devices investment fell by 17%.)

Funding rounds that engaged traditional venture capital firms grabbed most of the headlines: Flatiron Health raised $130 million in May, Doxmity raised $54 million in April, Zenefits raised $66 million in June, Teledoc raised $50 million this week. Look past the big VC firms, though, and you may notice that non-traditional investors—in particular, large health insurance companies—are increasingly participating and investing in the startup ecosystem.

In August, Blue Cross and Blue Shield of Florida, a Jacksonville-based insurer better known as Florida Blue, established an accelerator for health care startups based in Jacksonville. The program is run by Healthbox, an accelerator company that has invested in at least 47 health care startups—and, on its own behalf, raised seed funding from Blue Cross Blue Shield Venture Partners. BCBSVP has also funded its own incubator, called Sandbox Industries, that invests in startups. Lemhi Ventures, which invests in health care services companies, is said to be backed by UnitedHealth Group UNH -2.49% , though the firm declined to comment on its limited partners. The firms have been around for some time—Sandbox was founded in 2003, Lemhi was founded in 2006—but ramped up deal activity in the last year.

On Tuesday, Horizon Healthcare Services, a New Jersey insurance provider with 3.7 million members, announced it invested $3.7 million into Cota, a big data company focused on oncology. Glenn Pomerantz, Horizon’s chief medical officer, said the company has been investing in startups for the past three years. (He refused to disclose how many startups the company has backed.) The investments are part of the health insurance industry’s transition to a more “value-based” system, he says. “This is a dawn of a new day for us. You have the state’s largest insurance company taking an equity interest in the supply side of technology . . . That is a real shift.”

Insurers are interested in startup investments for the same reason venture capitalists are: because the Affordable Care Act is shaking things up.

For insurance companies, an esoteric part of the Affordable Care Act mandates that insurers spend somewhere between 80% and 85% of the premiums they collect from patients on quality and efficiency measures. Called the medical loss ratio rule, it forces insurers to redeploy capital rather then distribute it to shareholders. Josh Kaye, a partner at the multinational law firm DLA Piper, believes the rule has been a big driver of venture deals for insurance companies. “They’re mandated by law to use these funds in a variety of different ways,” he says. “Why not use it in a way that could result in additional returns while at the same time meeting the requirements?”

The ACA’s emphasis on efficiency measures is intended to lower the cost of health care by removing incentives to conduct unnecessary tests and procedures. In turn, health care providers are looking to big data and data analytics technologies to create best practices, make better decisions, and get better outcomes.

In this way, the Affordable Care Act blurs the categorical line between insurance company and health care provider by making insurers more responsible for measuring the quality and efficiency of providers. Meanwhile, providers take on more risk by conducting fewer tests and procedures, even if they’re deemed unnecessary. “Payers and providers who learn to work as if they are owned by a single entity are going to drive the marketplace,” Pomerantz says.

Corporate venture investors tend to have a bad reputation in the startup and venture capital world. At best, they are a potential acquirer of the startups they invest in. At worst, they cull ideas and strategies from the startups in which they invest, only to compete with them down the road. (In the words of prominent venture investor Fred Wilson, “They suck” because they may not be interested in the success of the company or of the entrepreneur. He later clarified his position by stating that some corporate VC firms are better than others.) With health insurance companies serving as investors, they have the chance to help ambitious but possibly naïve startups figure out the country’s complicated healthcare system.

Health Data “Interoperability”: A $30 Billion Unicorn Hunt

too funny

http://www.forbes.com/sites/theapothecary/2014/09/03/health-data-interoperability-a-30-billion-unicorn-hunt/

Health Data “Interoperability”: A $30 Billion Unicorn Hunt

Having cheered as $26 billion of taxpayers’ money has been spent since 2009 inducing hospitals and physicians to install electronic health records (EHRs), many champions of the effort are dismayed that the EHRs are not interoperable. That is, they cannot talk to each other – which was the whole point of subsidizing the exercise.

All this money has achieved a process goal: There has been a significant uptake of EHRs. According to a recent review, the proportion of physicians who have at least a basic EHR has increased from under 22 percent to 48 percent. Doctors were motivated by the bounty offered, plus the threat of having reimbursements being clawed back in 2015 if they have not adopted EHRs. The proportion of hospitals has similarly increased from 12 percent to 44 percent.

But these EHRs do not  talk to each other. According to the same review, “only 10 percent of ambulatory practices and 30 percent of hospitals were found to be participating in operational health information exchange efforts.”

All those billions of taxpayers’ dollars were paid out to providers who attest to “meaningful use” of EHRs. However, there are three stages of meaningful use.  Stage 1 was relatively simple. Stage 2 was originally supposed to be achieved by 2013, but that has been pushed back until 2016. The hang up is that stage 2 has a high hurdle for interoperability.

According to the final rule published in September 2012, requirements include “the expectation that providers will electronically transmit patient care summaries with each other and with the patient to support transitions in care. Increasingly robust expectations for health information exchange in Stage 2 and Stage 3 would support the goal that information follows the patient.”

Despite the delay, providers are still complaining that the requirements are too demanding. According to Russell Branzell, president and CEO of the College of Healthcare Information Management Executives: “Now the very future of Meaningful Use is in question.”

So it should be: Evidence from Congressional investigations suggests that meaningful-use bounties have encouraged the adoption of EHRs that are deliberately closed to exchange with other parties. The problem is that exchanging data with competitors is fundamentally against the self-interest of the party which created the data. Nobody would expect The U.S. Department of Transportation to set up a fund to incentivize car-markers to exchange data with each other, or the U.S. Department of Agriculture to set up a fund to incentivize grocery stores to exchange data with each other.

670px-obama_signing_health_care-201003231

That is not to say that there would be no value to such data exchange. IfSafeway were out of my favorite brand of breakfast cereal, I’d love for the clerk to tell me that Giant had plenty in stock just down the road, instead of selling me something similar. However, the amount of government funding required to overwhelm competitors’ resistance to doing this would surely not be worth it.

I’m sure readers can come up with many examples that would demonstrate the public benefit of competing hospital systems sharing data seamlessly. An epidemic or terrorist attack are easy ones. However, advocates of health information exchange emphasize how it would reduce friction in the day to day operations of our health system.

But at what cost? $26 billion has not done the trick. It is unlikely that the remaining $4 billion in the pot will get the job done. The Office of the National Coordinator of Health IT has been promoting a ten-year plan for more funding – even a trust fund like the Federal Highway Trust Fund!

When the Office of the National Coordinator of Health IT was established during the Bush Administration, its purpose was to “coordinate,” not underwrite nor regulate. Congress should be wary of appropriating yet more funding to hunt the unicorn of health data interoperability.

On medical disinvestment…

Nice and punchy oped on low value care…

https://www.mja.com.au/insight/2014/34/richard-king-what-not-do

Richard King: What not to do

Richard King
Monday, 15 September, 2014

EARLIER this year, articles appeared in the New York Times and the Australian Financial Review on low-value health care and the response from doctors.

These articles reflect to the public the worldwide drive by health care organisations, governments and doctors towards disinvestment in ineffective or inappropriately applied practices in health care. It has been described as a growing priority for health care systems to improve the quality of care and sustainability of resource allocation.

Identification of procedures and practices for disinvestment has increased, particularly in the past 4 years, with the UK National Institute for Health and Care Excellence introducing “do not do” recommendations, followed by the American Board of Internal Medicine’s “Choosing Wisely”campaign.

Choosing Wisely, an initiative that is about to be introduced in Australia, was developed after about 60 medical colleges and societies in the US put together an evidence-based list of five investigations or procedures in each specialty that had little or no value, and that should not be done.

In Australia, a list of 156 practices that had questionable benefit or low value was published in theMJA in 2012.

A second way to identify inappropriate procedures is to find articles in high-impact journals that produce solid evidence showing current procedures should not be done. One team of US researchers identified 146 articles published over a 10-year period to 2010 that reversed established practice.

A third way is to identify the procedures or devices that will be replaced or substituted when a new technology is introduced. Examples of this were identified at the 2013 National Workshop on Disinvestment and outlined in the final report of the Health Policy Advisory Committee on Technology, including endobronchial ultrasound to biopsy and diagnose mediastinal lung tumours, which resulted in significant disinvestment in its pre-existing surgical comparator, mediastinoscopy, saving millions of dollars.

However, implementation of disinvestment in low-value health care is not well developed. We need action at federal, state and hospital levels.

At a federal level, the Medical Services Advisory Committee (MSAC) has the power to review procedures on the Medicare Benefits Schedule (MBS) and recommend their removal if they are not effective. This did happen in 2006 when MSAC recommended the introduction of magnetic resonance cholangiopancreatography and removed the general use of diagnostic endoscopic retrograde cholangiopancreatography. However, there have been no other recommendations since.

The federal Department of Health and Ageing did report at the 2013 Workshop on Disinvestment that it was looking at 20 items on the MBS being considered for removal.

At a state level, the Queensland Health Clinical Senate in 2013 devoted a lot of time to disinvestment, which it regarded as a priority in Queensland.

In Victoria, the Department of Health’s Victorian Policy Advisory Committee on Technology is looking at how a coordinated approach in hospitals might be achieved through cooperation across the sector. This is still in early days.

Monash Health has a disinvestment subcommittee as part of its New Technology Committee which has been active since 2009. It has recommended the cessation of various procedures such as vertebroplasty for osteoporotic vertebral body fractures and stenting of artherosclorotic renal arteries for hypertension, based on a similar method to identifying articles in high-impact journals that show current procedures should not be done.

There are many impediments to stopping existing practices. It has been said that to get a technology onto a schedule such as the MBS requires the same level of evidence as for civil trials — the balance of probabilities.

To take something off a schedule requires the same level of evidences as for a criminal conviction — beyond reasonable doubt.

If our health system is to remain sustainable, disinvestment must become part of the health care process.

As Dr Lowell Shipper, chair of a task force on value in cancer care at the American Society of Clinical Oncology, told the New York Times: “We understand that we doctors should be and are stewards of the larger society as well as of the patient in our examination room.”

Associate Professor Richard King is the medical director of medicine at Monash Health and chair of the Victorian Policy Advisory Committee on Technology.

Faux: The pitfalls of outsourcing Medicare

 

http://blogs.crikey.com.au/croakey/2014/09/09/outsourcing-medicare-is-it-as-easy-as-%CF%80/

Outsourcing Medicare: Is it as easy as π?

Following on from the range of issues raised by Croakey contributors about the outsourcing of MBS and PBS payments, Margaret Faux discusses the most appropriate role for the private sector in supporting core government functions and the risks involved when private sector interests conflict with the central role of government. She writes:

In a U.S managed care styled initiative, private insurers have been given the right to tender to manage the operation of the government’s new Primary Health Networks, which will soon replace existing Medicare Locals. And recently, the government’s expression of interest from the private sector to provide outsourced claims and payment services for the Medicare Benefits Schedule (MBS) and the Pharmaceutical Benefits Schedule (PBS) was closed.

There’s nothing new or surprising about governments outsourcing service provision to the private sector. Recognising that key policy issues can sometimes be better addressed by tapping into private sector innovation and expertise is an important role of government. But when outsourcing amounts to the abrogation of core functions of the state, the inherent risks can be high.

The commission of audit recommendation to outsource MBS and PBS payment processing suggested that outsourcing these payments was a potentially high risk undertaking and specifically warned against outsourcing the assessment of entitlements. The problem however is that almost all MBS claims require assessment of entitlements. And given that there is not yet one third party payer of medical claims in Australia who has successfully mastered the complexity of this work, the prospect of outsourcing it tocontenders such as banks, Australia Post or even the private health insurers is cause for serious concern.

The business of paying for medical services in Australia – whether related to workers compensation, third party matters, the public or private provision of services, veterans entitlements, consultations at the GP or a specialist, in or out of hospital or anywhere else – takes place across an astonishingly fragmented industry in which each third party payer has its own requirements, rules, procedures and fees. Some private health insurers even pay different rates in different states.

But of all of these payers, the most effective, efficient and accurate in terms of the core business of processing and paying claims, is Medicare. This is a basic and undeniable truth accepted by those who interact daily with all payers in the medical billing industry. So it is interesting that rather than outsourcing areas in which Medicare struggles, such as claim adjustments, complex claim assessments, provider liaison and MBS interpretations, the government has instead chosen to seek expressions of interest in the one area in which Medicare excels.

In 1973 the architects of the original Medibank Scheme, Scotton and Deeble, understood very well the importance of having a separate department to manage the complexities of medical claims processing.

“In the fragile chain of decisions on which the successful implementation of Medibank hung, the decision to establish the Health Insurance Commission must have been one of the most critical.”1

The battle for an independent body of experts to administer the new national insurance scheme was hard fought and finally won when Bill Hayden agreed to the establishment of the Health Insurance Commission (HIC).

And this was long before private health fund schemes accessed the Medicare bucket of tax payer money, when there were approximately 5000 less Medicare services than there are today, well before some modern medical specialties had been thought of, before Magnetic Resonance Imaging (MRI) and Computerised Tomography (CT) scanning existed and at a time when the concept of Telehealth would have been considered science fiction.

But the HIC was dissolved in 2005 and with it went much needed expertise, and today no-one and no software has been able to conquer what is highly specialised and still largely manual work.

In order to consider the possible outcome of any future outsourcing of Medicare payments let us look at a frontline experience of the recent outsourcing of medical claims, which was undertaken by the Department of Defence. In 2012 government processing of Australian Defence Force (ADF) medical claims was outsourced to the private sector. In a four year $1.4 billion deal, a contract was awarded toGarrison Health Services (a business arm of Medibank Health Solutions) to provide a national, integrated solution which included the processing of ADF personnel medical claims.

Conceptualising the process was easy, however the execution was not.

Midway through 2013 many billers noticed that ADF claims, which had previously been processed without too much fuss, were not being paid. The 90 day arrears on these claims had reached unacceptable levels as had practitioner complaints. Numerous calls and enquiries later, one medical billing company had almost $100,000 worth of ADF claims returned indicating there was a new arrangement and advising that the claims should be redirected to Medibank Private as part of a new government outsource initiative.

But after redirecting the claims as instructed, they were again returned as no-one at Medibank knew anything about them. Some months later, advice was received indicating that a new branch within Medibank had taken over the role, but that before any claims could be paid, every doctor first had to register, by signing a new form. Hundreds of signed forms later the claims were rejected again, this time because the amounts were considered incorrect. ADF claims had always been paid at the AMA rates (for as many years as memory serves) but apparently a unilateral decision had been made to instead apply Medibank’s no-gap rates, which are significantly lower. It was then of course only a matter of time before the medical profession would protest against the resultant 27% reduction in remuneration, which had been imposed without consultation.

After reprocessing hundreds of claims for the third time, the first payments started to trickle in, though the anticipated calls from doctors enquiring as to why the fees they were receiving were below the AMA rates were not far behind. Within weeks a full blown dispute had erupted between the payer and one group of doctors, while others had started requiring ADF personnel to pay their medical bills at the point of service, informing them that they should sort out their reimbursements themselves. The official letters came next, in which doctors were reminded of the legal barrier which prevented them from requiring ADF personnel to pay for medical services. It fell on deaf ears.

In subsequent advice it appeared that Garrison had changed its process yet again by adopting its own new fee schedule and that no further accounts would be paid without the correct new fees, as well as the inclusion of the defence approval number (DAN), to which the EP ID number (an unexplained extra piece of data) was later added – two additional pieces of data for the one soldier were considered better than one. Many DAN inclusive but EP exclusive rejected claims later, it was discovered that the mysterious EP was apparently unknown to anyone – neither clinicians nor hospital account administrators. But with a steely resolve and tenacious spirit EPs were finally tracked down and claims could be submitted again. However one must note here that it takes on average an hour on the phone to obtain the DAN and EP for each ADF claim.

As at today, ADF claims continue to be a significant cause of patient and doctor complaints, which has escalated to a point where some doctors are considering whether they may exclude ADF personnel from their practices altogether – patients always come off worse in these scenarios. The process is manual, labour intensive, slow and from the point of view of integration and efficiency, an abject failure.  It was far simpler and much more efficient before it was outsourced.

Because profit will often usurp clinical outcomes as the main priority in private sector participation in health, the potential risks of the proposed outsourcing of management of the new Primary Health Networks is also apparent. In fact corporate involvement in general practice has long been identified as an area of concern, and one which has contributed to increased health spending, for which individual doctors are sometimes blamed.

Since 2006 the Professional Services Review Scheme (PSR), whose objective is to protect the public interest in the standard of MBS and PBS services, has commented that the corporatisation of medical practices is a contributor to inappropriate and excessive MBS claiming by doctors. Having signed contracts binding them to daily, weekly and monthly targets (both in terms of the number of patients seen and the types of services provided) doctors have reported feeling pressured to reconcile targets with real patients. It is not uncommon for doctors working in these corporate practices to end up in front of the PSR where their MBS claiming behaviour comes under review. And due to regulatory limitations, the corporation itself will rarely be held to account.

Our current workers compensation system (which is managed care by another name) provides another example, as well as important evidence, of the potential poor health outcomes and increased costs that can result when care is managed outside of the doctor patient relationship, and is driven by private sector profits.

Outsourcing works best when the private sector is used to support core government activity. But when it is the core government activity that is outsourced, the private sector will inevitably find itself conflicted between profit and service.

While Aristotle might have outsourced the preparation of his meals by hiring a cook, he would never have outsourced geometry.  He would rather have eaten an outsourced pie than outsource the discovery of π itself.

1. The Making of Medibank, RB Scotton and CR Macdonald, Australian Studies in Health Service Administration, No 76

The “pay less, get more” era of health care

Excellent summary of current US funding situation…

http://www.vox.com/2014/9/10/6121631/the-pay-less-get-more-era-of-health-care

The “pay less, get more” era of health care

Health care spending has, for decades, followed a consistent pattern. America pays more and more for health care — and gets less and less.

Between 1990 and 2012, the insured rate in the United States fell two percentage points, from 86.6 to 84.6 percent. If the insured rate had just held steady, six million more people would have been covered in 2012.

While we were covering less people, we kept spending more on health care. National health spending, over that time period, rose from 12 percent of the economy in 1990 to 17.2 percent in 2012. Adjusted for inflation, health-care spending rose from $1.1 trillion to $2.8 trillion over those 22 years.

health spend more get less

That’s been the typical story of American health care: a lousy deal where we get less and spend more.

But there’s a growing body of evidence that this trend is changing; that we’re starting to get a shockingly better deal in a way that has giant consequences for how America spends money. Call it the “get more, pay less” era.

The “get more, pay less” era of health care spending

There are two big trends that, taken together, suggest we may be fundamentally different era of health care spending.

The first is lots more people getting coverage. This is mostly Obamacare: the health care law is expected to expand insurance coverage to 26 million people by 2024. In 2014 alone, most estimates suggest about 5 million people have gained health coverage through the law. The recovering economy is likely playing a supporting role, too, with those gaining jobs also gaining access to employer-sponsored coverage.

The second big trend is in what we spend: actuaries expect that health care costs will grow slower over the next decade than they did in the 1990s and 2000s.

More specifically: health care costs grew, on average, 2 percent faster than the economy between 1990 and 2008. Health spending took over an ever-growing share of the economy. Workers barely got raises; skyrocketing premiums ate up most of their additional wages.

The next decade is now expected to be different. Actuaries at the Center for Medicare and Medicaid Services project health care costs to grow 1 percent faster than the rest of the economy between 2013 and 2023.

“We are seeing historic moderation in costs now over a considerable period of time,” Kaiser Family Foundation president Drew Altman says. HIs group recently released data showing slow growth of employer-sponsored coverage. “It’s absolutely true we’re seeing that and any expert will tell you that.”

This is startling: over the next decade, forecasters think our health spending will grow at a slower rate, even as millions and millions of Americans gain access to health insurance. After two decades of spending more and getting less, we’re entering an era of spending less and getting more. It’s bizarro health spending world.

There are signs of this throughout the health care system

One thing that’s so striking about the “get more, pay less” trend is that it isn’t limited to one particular insurance plan or program. It’s starting to crop up in lots of new health care data, suggesting this change has become pervasive in the health care industry.

Start with private health insurance: the Kaiser Family Foundation recently published research finding the average price of Obamacare’s benchmark will fall slightly in 2015. As my colleague Ezra Klein wrote recently, this just about unprecedented. “Falling is not a word that people associate with health-insurance premiums,” he writes .”They tend to rise as regularly as the morning sun.”

Lower premiums make health care dollars stretch further: Obamacare shoppers will be able to buy the coverage they had last year at a slightly lower price. That’s a big deal when you’re talking about paying for a health insurance program meant to cover tens of millions of Americans.

Increasingly narrow health insurance networks are another sign of “get more, pay less” era. Over the past few years — and especially under Obamacare —insurers have gravitated towards cheaper premium plans to offer access to a smaller number of doctors.

narrow network graph

These plans’ more limited doctor choice can have a big impact on spending. Research from economists Jon Gruber and Robin McKnight found that, in one example, switching enrollees to these plans cut overall spending by one third. And while patients had access to fewer hospitals, the hospitals that were in network were of equally good quality.

Then there’s the Medicare side of the equation, where there has been a unprecedented decline in per person spending. Margot Sanger-Katz at the Upshot has had two fantastic posts on Medicare’s cost slowdown. One of them points out the fact that, since 2010, per patient spending has grown slower than the rest of the economy. You can see that in this graph, which charts “excess cost growth” in Medicare (health wonk speak for cost growth above and beyond inflation). For the past few years, excess growth has been replaced by slower-than-the-economy growth.

medicare excess cost growth

(The New York Times)

As Sanger-Katz points out, there are two trends at play in Medicare. One is that younger baby boomers keep aging onto the program. They’re younger than Medicare’s really old patients, and typically less expensive to care for. That drives down per person spending for the whole population.

But there’s something else going on that looks to be a more permanent trend: Medicare patients are using less expensive care. They go to the doctor more, and the hospital less. You can see this in new data from the Medicare Trustees’ report, which shows per person spending on Medicare Part A (the program that covers inpatient care) falling over the past few years.

medicare

Because of this shift away from hospital care, Medicare Part A now spends less money to cover more people. It paid $266.8 billion covering 50.3 million people in 2012. In 2013, the the same program spent $266.2 billion to cover 51.9 million people.

Will “pay less, get more” health care stick?

We have had periods of relatively slow health care growth before. In the mid-1990s, for example, there was a stretch of time when health spending grew at the same rate as the rest of the economy. You can see that in this graph.

health spending growth

Most health economists attribute that to the rise of health maintenance organizations, or HMOs, that sharply limited access to specialists. Patients, unsurprisingly, didn’t like those limitations and there was a backlash. HMOs declined and health spending rose again.

But some health economists say that this time feels different. For one, the changes are happening in private insurance and Medicare, suggesting there’s no single — and thus easily reversible — force driving the change.

And while there are more patients in narrow network products, something akin to HMOs, consumers are often choosing to be there. These are shoppers on the Obamacare exchanges who have decided to make a trade off: they’re take lower premiums for less choice of doctor.

“In the 1990s, people were essentially stuck in HMOs,” M.I.T economist Gruber says. “This time, people are given an option and make a choice. That’s why I’m more confident this slower growth will stick.”

Medicare actuaries are not fortune tellers; they do not have a crystal ball that conjures up the future of health care with perfect clarity. But at least at this particular moment, there are lots of signs cropping up to suggest something very important in health care is changing, and it’s for the better.

CARD 3 OF 15LAUNCH CARDS

How does American health-care spending compare to other countries?

The United States has higher per-person health-care spending than all other industrialized nations. The most recent international data from the OECD estimates that the United States puts 17.7 percent of its economy towards health care (slightly higher than CMS’s estimate of 17.2 percent). The OECD average is 9.3 percent.

Health_care_oecd

Much of the difference between health care spending abroad and in the United States has to do with prices. Americans don’t actually go to the doctor a lot more than people in other countries. But when we do, our medical care costs more. Specific services, like MRIs and knee replacements, have significantly higher price tags when delivered in the United States than elsewhere.