Going Below the Surface E-Newsletter: September 2018

Each month, we try to bring together a blend of health spending topics that are trending or merit a closer look. As always, we encourage you to share, subscribe and follow us between issues using #GoingBelowTheSurface. Questions or comments to help us improve the newsletter? Drop us a line.

Digging Deeper

Since the launch of this e-newsletter, we’ve taken a look at a variety of health care cost drivers in the U.S. This month, there were a number of research and news articles published about hospitals, causing us to pause and take a deeper dive into what’s behind these data.

Incentives in Hospital and Physician Care

Hospital costs and physician costs are among the elements with the largest impact of health spending in the United States, so the surge in efforts to realign incentives to encourage more cost-effective care are critically important. This month saw some of the most rigorous analysis to date about whether new incentives for cost-effective care are working. On the physician side, an analysis published in the New England Journal of Medicine found that accountable care organizations (ACOs) run by physicians generated savings for Medicare — more than a quarter-billion dollars in 2015 — in contrast to hospital-integrated ACOs, which accounted for essentially no savings. The Journal of the American Medical Association looked at a different effort around pay-for-performance care, publishing both a study that found that bundled payments for joint replacements reduced post-acute care, as well as research on joint replacements that found that bundled payments didn’t impact overall volume, suggesting that physicians didn’t try to game the system by performing more surgeries. The study also caught the attention of the New York Times, which came to a similar conclusion: “they ‘appear promising’ with more work to be done.”

Why It Matters: There is, unquestionably, good news in this spate of studies that incentives are driving change in the direction of lowering costs. But the impact is still small: Physician-directed ACOs saved Medicare $250 million, a drop in the $600 billion — with a “b” — bucket that is Medicare. And the drop in patients discharged to post-acute care under bundled payments was a meager, if statistically significant, 2.9 percentage points. Celebrating victories is important, but so is recognizing the distance to be traveled.

More on Hospitals and Physicians: What’s Behind Prices and Markups?

In a world where “transparency” is the biggest health care buzzword, there remains a steady stream of news around the parts of the system where transparency fails, as well as new efforts to address such areas. We’ve known for some time that there are wide differences in how hospitals price the same type of surgery or treatment. New efforts have shed light on those differences in recent months. A new analysis by Axios found extreme variation in list prices around joint replacement. PhRMA released a study that found that 20 percent of hospitals marked up drugs by 700 percent or more. And the Laura and John Arnold Foundation announced a new, $3.4 million effort to address physician and hospital costs, aimed at “skyrocketing costs” that are “the product of a dysfunctional market.”

Why It Matters: List prices at hospitals and physician practices generally bear little relation to the prices that payers reimburse. Nonetheless, those prices are the starting point for discussions — and the actual price for the uninsured and underinsured — making it critical that we understand where they come from and how they impact access to care.  

What We're Reading

This month we saw a “latte” — and thankfully not of the pumpkin spice variety — of news articles and research on health care spending. Below, we share some articles you can read while enjoying your caffeinated beverage of choice.

• Health Care USA: A Cancer on the American Dream. Schieber SJ and Nyce SA. September 4, 2018, Willis Towers Watson and the Council for Affordable Health Coverage. A white paper sponsored by the Council for Affordable Health Coverage and conducted by Willis Towers Watson details how rising health care costs are taking a bigger bite out of employees’ paychecks. The paper examines the economic trends and benefit designs that are worsening the situation, especially for lower-income employees.
• How to Tame Health Care Spending? Look for One-Percent Solutions. Sanger-Katz M. August 27, 2018, New York Times. Everything adds up, no matter how small. Sanger-Katz writes, “A group of about a dozen health economists has begun trying to identify policy adjustments, sometimes in tiny slices of the health care system, that could produce savings worth around 1 percent of the country’s $3.3 trillion annual health spending.”
• Levers to Reduce Use of Unnecessary Services: Creating Needed Headroom to Enhance Spending on Evidence-Based Care. Budros M and Fendrick AM. American Journal of Managed Care, August 2018. The authors suggest there are pragmatic, adaptive, and results-driven strategies to reduce low-value care, such as alternative payment models and better use of electronic health records.

Dialogues on Health Care Spending

This month, there’s been a lot of buzz about Going Below the Surface and other groups that are getting together to tackle health care spending. Heard something you’d like us to share? Do tell! Email us or tweet using #GoingBelowTheSurface.

• AcademyHealth, NPC Kick Off Webinar Series: Mark your calendars for Oct. 18 at 12 p.m. Eastern Time, when AcademyHealth and the National Pharmaceutical Council (NPC) will kick off a series of webinars on health spending, beginning with “Starting a Serious Conversation About Health Care Spending: What Can We Learn From the Past and From Elsewhere?” Corinna Sorenson of Duke University and Craig Mitton of the University of British Columbia will discuss new research examining the differences between European and U.S. spending models, including budget thresholds.
• AJMC Podcast Digs Into Going Below the Surface: In a podcast hosted by the American Journal of Managed Care, NPC Chief Science Officer and Executive Vice President Robert W. Dubois, MD, PhD, discusses the need to have a broader dialogue about health care spending and how the Going Below the Surface initiative is moving that conversation forward.
• Everybody’s Talkin’: In recent weeks, we’ve noticed a number of other organizations beginning to discuss health care spending in a broader way, including the Laura and John Arnold Foundation (LJAF), which announced that it will fund a new initiative examining rising health prices in the private insurance market. According to the LJAF press release, the initiative will use a multi-pronged approach to define causes behind the increases, develop evidence-based policy recommendations to address the problem and provide assistance in implementing those changes. In addition, Axios reported that an informal group of health care CEOs has been meeting to discuss ways to make the health care system more affordable and sustainable.

About Going Below the Surface The Going Below the Surface initiative was launched by the National Pharmaceutical Council in 2018 to broaden and improve the conversation around how health care resources are used in the United States. The initiative is aimed at better understanding the roots of the nation’s health spending and investments by promoting a discussion that is firmly based in health policy and systems research. Our goal is to provide clarity on how best to optimize health care spending so that patients receive the right care while simultaneously providing the right incentives to sustain next-generation innovation to improve patient well-being and health system efficiencies.

To view the Going Below the Surface partners, visit www.goingbelowthesurface.org.

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