Health for life

Goin goin gone!

The Disease Management Care Blog recalls years ago when it was walking with some residents and students through a decommissioned wing of a hospital as a short-cut between patient floors.  Our footsteps echoed off the dreary beige tile while we chatted up the likelihood that we could get the next patient home this afternoon.  Then the  DMCB paused and took in the eerie fluorescent silence. "What you see around you," it mused, "is some valuable and unused capital."  The team then resumed the pace. Thats when the DMCB looked at the young docs and said "If we keep it up, theyll need to close another wing!" 

The fly in the ointment.  The monkey in the wrench.  The docs raised hand at a hospital board of trustees meeting.  Call it what you like, but sometimes our most cherished assumptions and best laid plans have a way of going all akimbo.  True to that tradition, curmudgeonly Dartmouth authors Stephen Rauh, Eric Wadsworth, William Weeks and James Weinstein examine the "illusion" of  expecting "lower costs" to come out the back end of a health system system after "quality" is put in the front end. 

The authors real focus is on hospitals and define "quality" as any intervention that reduces the utilization of health care services (versus other definitions). Despite the narrow view, the Disease Management Care Blog believes the article makes an important and yet obvious point: large and small health care organizations have rigid cost structures that cannot be flexed.  As a result, any increase in quality - such as reducing length of stay, admissions, readmissions or surgeries -  mostly results in additional dead space capacity, not bottom line savings.

Clinical improvement can reduce costs is in the general category of supplies and medications.  Unfortunately, those costs are at the margins.  Just because there are fewer readmissions wont mean all those expensive operating rooms. equipment, personnel costs and other administrative overhead will simply go away.  They dont.  Theyll be idle and cost just as much.

Some economists will argue that hospitals can take beds off line and furlough nurses.  Its also been pointed out that multiple health systems can regionally consolidate high-cost low-frequency services.
Unfortunately, the quarter to quarter business cycle facing the typical hospital administrator doesnt really accommodate that kind of wishful thinking.  The only way out is to find other revenue by either charging more or providing other services.

Despite many valiant attempts, the DMCB never managed to close another hospital wing.

Nothing like academic fisticuffs to capture the Disease Management Care Blogs interest. The well timed punch that exposes a methodologic weakness.  The counter punch that quotes past research.  The bob and weave of spin and framing.  Misquoting blows below the belt. Statistical pokes in the eye.  The DMCB says its better than foreign politicians brawling, Kill Bill sword fights and lurid professional wrestling.

Which is why its enjoying a big dust-up over the Community Care of North Carolinas medical home initiative in the "Letters to the Editor" section of the January 2013 issue of American Journal of Managed Care (AJMC).

Regular readers may recall this early 2009 DMCB alert about the CCNCs actuarially derived claims of savings with its medical home.  Al Lewis of the Disease Management Purchasing Consortium eventually caught-up the the DMCB with his own three-fold roundhouse of a punch directed at CCNC that was published in August 2012 AJMC:

1. Claims of $250 million in avoided hospitalization costs on a baseline 2006 cost of $114 million is very unlikely,

2. Outside data indicate that Medicaid admissions in the state only fell from 36 to 34 per thousand, which also makes any claim of hundreds of millions in savings suspect, and

3. Two neighboring states without a medical home initiative experienced the same modest declines in hospitalizations without the same savings.

Well, the actuaries involved in the original Community Care report have jabbed back:

1. The baseline that was used was an actuarial projection of what costs would have been, based on prior trends, not 2006

2. The observed savings were never ascribed to avoided hospitalizations

3. The medical home initiative had been in place for many years, which could explain its impact.

The CEO of Community Care also penned his own counter-strike.  He argues:

"Evaluating complex programs is a difficult and evolving science, but [the] approach to estimating CCNC’s impact is reasonable, measured, and up to the latest standards in the field. Its analysis plays by the same actuarial rules as everyone else—including disease management vendors calculating a return on investment and insurance companies setting rates."

.The rest of the letter uses terms like "disturbing," "facile" "erroneous" "mistakes" "misrepresents" "circular erences." Ouch.

The DMCB fully expects the spat to continue and looks forward to enjoying its ringside seat.  In the meantime, its sticking to its original point from more than 3 years ago: the CCNC analysis was an opaque actuarial analysis that was never subjected to the scrutiny (and editing) from independent peer review.  If it had been, the reviewers would have spotted many of Mr. Lewis concerns and forced the authors to be more transparent with their methods.

Lesson learned.

Even the modest Disease Management Care Blog has to agree that its recent Patient Centered Primary Care Collaborative webinar on supporting care coordination within the medical home was a huge success.  Not only did it get to learn about the impressive work underway at North Shore-Long Island Jewish Health System, but the questions from a record 522 listeners helped the DMCB sharpen its focus.

Here’s one of the better questions that was emailed after the webinar was concluded:

What shared savings arrangements can happen on a small scale, for example a 4 doc office?

The (gently edited) DMCB reply:

None.

The month-to month variability in the insurance claims (think 95% confidence intervals) from a small practice makes it practically mathematically impossible to confidently compare an observed dollar amount to a target dollar amount. 

There are methods that can be applied to diminish the variability (such as censoring “excess” claims and using “risk adjustment”) but, at the end of a fiscal year, a lack of documented savings could be the result of either a) poor care coordination or b) an “underpowered” or mathematically suspect claims analysis.  The skeptical insurer will say it was the former and the screwed docs will say it was the latter.  When that happens, docs lose.

This is an example of the “law of large numbers” and why the shared risk arrangements in Medicare ACOs have to be based on a minimum of “5000” persons. By having that many observations, the variability is blunted and measures of central tendency hold up in an actuarial basis.

And then there are the two policy implications.  First of all, shared risk contract involving a relatively small practice is perilously close to the bad old days of capitation and HMOs, vs. the approach of spreading accountability across a large system that is armed with all the requisite care coordination resources  A four person group can’t match that.  Secondly, the insurers have little interest in putting together a payment system that could financially cripple a four person clinical practice, especially if its primary care.

The DMCB will examine accountable-like arrangements for a small group practice in a future post.