Hospice: A runaway winner

The magazine Modern Healthcare held a “tournament” in 2011 to determine what “one person, event, organization or innovation had the biggest impact on the health-care delivery system in the past 35 years.” Hospice was “seeded” No. 12 at the beginning of voting. It was the landslide winner, beating out the Institute for Healthcare Improvement by a 3-to-1 margin.

Hospice care focuses on caring rather than curing. Most hospice care is provided in the patient’s residence. However, it is also available in hospice centers, some hospitals and long-term-care facilities.

Hospice caregivers use a variety of alternative therapeutic techniques to comfort patients. They use massage, group therapy, music therapy and pet therapy and guided imagery to supplement traditional pain-relief tactics.

Nearly 1.5 million patients were treated in hospice programs in 2008, compared with only 25,000 in 1982 when it first became a Medicare benefit. It is also covered by Medicaid and most private insurance plans. The average length of time in hospice is about 21 days. The National Hospice and Palliative Care Organization estimates that nearly 40 percent of 2008 U.S. deaths were in a hospice setting.

The three leading causes of death in hospice programs – cancer, Alzheimer’s disease and kidney disease – also are the easiest to predict remaining life expectancy, and they impose the greatest burdens on family caregivers.

Hospice care remains largely a white, upper-class and upper-middle-class phenomenon. Evidence indicates minority-group members generally are suspicious of the health-care system and are less open to the idea of withholding curative care. Many have had to forgo medical care most of their lives and have a different view of what it’s like to have nature take its course. A survey of more than 4,000 newly diagnosed cancer patients found that 80 percent of blacks said they were willing to exhaust their resources to extend life, compared with 64 percent of Hispanics and 54 percent of whites.

As with palliative care, hospice sometimes prolongs life. In a 2007 study, hospice patients survived nearly a month longer than non-hospice patients with comparable conditions did. Hospice care improved survival in 4 of 6 disease categories. The largest difference was for congestive heart failure, where average survival rose from 321 to 402 days.

Nonetheless, it is difficult for some patients to choose hospice because forgoing medical care seems like accepting a death sentence. However, research shows that patients who choose hospice care do not die faster than those who do not.

In a pilot test, Aetna allowed a group of policyholders with a life expectancy of less than a year to receive hospice care without abandoning medical care. The number of patients who chose hospice shot up to 70 percent from 26 percent. The cost of care for these patients was 25 percent less, despite the concurrent care. They visited the emergency room half as often as non-hospice patients with life-limiting conditions. Their hospital and ICU use dropped by two-thirds.

For Medicare patients, hospice care saves an average of $2,309 per patient. A 2007 study found that Medicare costs would be lower for 70 percent of hospice recipients if such care were provided earlier. Cost of care was less expensive for cancer up to 233 days and non-cancer cases up to 154 days. Thereafter, hospice costs more than conventional care. However, the authors said, “More effort should be put into increasing short stays as opposed to focusing on shortening long ones.”

For example, a study of men with advanced prostate cancer showed that about half eventually turned to hospice care but often waited until a week or two before death to enter the program. Brief hospice care delivers far fewer benefits.

More than two-thirds of hospice patients receive the services at home. However, a growing number of freestanding facilities are sprouting to meet demand. Construction of new hospice centers has increased by more than 40 percent since 2000. Nearly every U.S. citizen lives within 60 minutes of a hospice center, and 88 percent live within 30 minutes.

According to a 2010 study, the length of time that nursing-home patients are in hospice has doubled in the past decade, from 46 to 93 days. The study speculated that the increase was associated with a 50 percent growth in the number of nursing-home hospice programs. Medicare pays nursing homes far  more for hospice care than the facilities would receive for standard care from Medicaid. The Medicare Payment Advisory Commission has recommended that standards for hospice certification be strengthened to ensure nursing-home programs are qualified to provide care.

Family history trumps genetic tests

Genetic tests have the aura of being scientific. But the old-fashioned family history appears to be more accurate and much less expensive.

A Cleveland Clinic researcher recruited 44 people to assess their risk of cancer by either preparing a  family history or relying  on a genetic test. Both indicated that about 40 percent had above-average risk – but picked the same people half the time. The genetic test did not identify the nine people who had a significant family history of colon cancer.

Likewise, researchers collected 101 genetic variants that had been tied statistically to heart disease in genome studies. They assessed and followed 19,000 women for 12 years to attempt to forecast disease. They concluded that the family history was a better predictor.

One reason family histories can be more accurate is that environment is a powerful influence on health. Family members generally share a common background, so the history reflects how shared genes expressed themselves in a given situation.

Family members often take important genetic information to their graves inadvertently without sharing it with relatives. According to one study, about 1 in 5 dying cancer patients could have shared important information with relatives through genetic counselors regarding the heritability of their conditions. In some instances, they could have left behind blood and tissue samples for future DNA testing. That would be a valuable legacy. (Genetic counselors help people understand their risk for genetic conditions. The National Society of Genetic Counselors website, www.nsge.org, lists them by zip code.)

Less than one-third of U.S. families have documented a health history, and many physicians are not particularly insistent that they have one. The U.S. surgeon general has established a website – https://familyhistory.hhs.gov – to help families create a history and share it with other relatives.

Many scientists have concluded that DTC genetic tests offer very little value. They say the increased risk posed by any given gene is so small that it is not information worth acting on. The best predictors of disease and death are already well known: age, gender, family history, health behavior and biomarkers such as blood pressure, blood glucose and cholesterol.

An international research consortium identified 18 new gene sites associated with obesity and 13 others tied to fat distribution in the body in 2010. The two studies, which one of the researchers called “exciting,” will not have much immediate clinical impact.

Michael Jensen, an obesity expert at the Mayo Clinic, told The Wall Street Journal, “If you just ask people whether their parents were obese or not, the ability to predict whether a person is going to be obese is better” than by examining the identified genes.

Medicare: So few supporting so many

The trajectory of Medicare financing is sobering. Annual Medicare expenditures are expected to grow from $519 billion in 2010 to $929 billion in 2020. Spending is highly concentrated on the program’s sickest beneficiaries. About 25 percent of recipients account for 85 percent of the program’s spending. One study calculated that nearly all of the growth in Medicare expenditures from 1987 to 2002 could be traced back to beneficiaries with five or more chronic conditions.

The number of beneficiaries is expected to rise from 47 million in 2010 to 80 million in 2030. During that same period, the number of workers supporting each Medicare enrollee will decline from 3.5 to 2.3.

Medicare spending historically has grown about 2.5 percentage points faster than the economy, adjusted for inflation. This trend is a greater threat to the program’s financial sustainability than the aging of the population, according to the CBO.

The typical couple who turned 65 in 2010 and earned an average household income of $86,200 during their careers paid $109,000 in Medicare taxes over a lifetime. However, that same couple will receive an average of $343,000 in Medicare benefits. The federal government must pay the $234,000 shortfall from other revenue sources or cut spending elsewhere.

Health-care costs are also crimping Medicare beneficiaries’ household budgets. Median out-of-pocket spending as a share of income rose from about 12 percent in 1997 to more than 16 percent in 2006.

Yet a majority of Americans are not convinced Medicare is in trouble. A spring 2011 Wall Street Journal/NBC News poll showed that only 15 percent believe the program needs a major overhaul and an additional 28 percent say it needs “major changes.”

Medicare trustees estimated in May 2011 that the program will run out of money by 2024 because of a sluggish U.S. economy and longer life-expectancy projections for beneficiaries. The Obama administration projected in 2010 that Medicare savings in the health-reform law would extend the solvency of the program from 2017 to 2029.

Congressional resolve continues to evaporate in the face of hard choices on Medicare. The sustainable growth rate (SGR), a formula it created in 1998 to calculate physician fees and control costs, has been overridden numerous times. The SGR attempts to control total Medicare spending on physician services. In theory, the more the volume of care increases, the more prices must be cut the following year. The cuts are supposed to be cumulative and retroactive to 1998.

The overridden fee cut in 2010 was supposed to be 21 percent, with additional 5 percent cuts in subsequent years. Policymakers correctly feared that enacting such cuts would result in a mass exodus of physicians from the Medicare program, and create a potential crisis in access to health-care services for the elderly.

Health reform continues the charade. An SGR fix that would waive the cumulative fee cuts originally was part of the reform bill, but it was abandoned because proponents wanted to keep reform’s price tag below $1 billion. The Medicare trustees point out that, if the SGR formula continues, Medicare payment rates would fall to 27 percent of what private insurance pays and less than half of projected Medicaid rates by 2085. It would also render 40 percent of participating health-care providers unprofitable by 2050.

At this point, SGR is little more than an accounting fig leaf that understates the federal government’s future financial obligations. It also gives Congress the illusion that it somehow can control escalating Medicare costs, despite its clearly demonstrated impotence.

The hospital’s foggy future

As government and health insurance plans desperately seek to contain costs, hospital care has become a whipping boy.

Charges can run as high as $18,000 a day. In 2008, two million of the most expensive hospital stays cost nearly $200,000 per person. Days spent in the hospital declined in the 1980s and early 1990s and then stabilized after the federal government changed the way it paid hospitals. Hospitals’ portion of health-care costs declined from 43 percent in 1980 to 33 percent in 2009. However, it remains the largest category of health-care spending.

According to the late management guru Peter Drucker, the four hardest jobs in America, in no particular order, are president of the United States, university president, hospital CEO and pastor. Hospitals are under constant pressure to lower costs while improving quality.

The implications of hurried care are reflected in hospital metrics: dismal safety records and high re-admissions, which induce higher costs than if there had been proper initial care. Nonetheless, hospitals are tied with supermarkets as the most trustworthy industry, according to a Harris Interactive poll.

Drucker’s observation certainly rings true, given the current health-care climate. The recession has hit the nation’s hospitals hard. About 3 out of 4 hospitals treated fewer patients and performed fewer elective surgeries. Nearly all have had to treat more patients who cannot pay.

Hospitals, especially the nonprofits, rely on income from investments and community donations. According to an American Hospital Association (AHA) survey, 90 percent of U.S. hospitals say attracting charitable gifts is becoming more difficult. A similar percentage reported extreme difficulty in securing tax-exempt bonds. Two-thirds have had to delay projects because of difficulty accessing capital markets.

Most hospitals have cut administrative costs and reduced staff. About 1 in 4 has cut services. A financially struggling hospital creates economic ripples. It is often one of the largest employers in town. Hospitals employ more than 5 million U.S. workers, the second largest employer category, behind only restaurants. According to the AHA, they support nearly 1 in 10 U.S. jobs based on the goods and services they buy. Average hospital profit operating margins were 4 percent in 2006, with one-third of hospitals losing money on operations.

There are three kinds of hospitals: nonprofit, for-profit and public.

The primary goal of a nonprofit is to serve its community rather than maximize profits. However, nonprofit health-care organizations must be run like for-profit businesses to sustain themselves. The three main sources of capital are reinvestment of earnings from ongoing operations, philanthropic gifts and tax-exempt municipal bonds. They generally must spend a portion of their revenue on charity care and community benefit. Nonprofits are exempt from federal and state income taxes, as well as sales and property taxes.

Public hospitals are also nonprofit organizations, owned and operated by local governments. They have an additional revenue source, because they can levy taxes. That is critical because many of their patients are either uninsured or have government insurance that reimburses the hospital at less than the cost of care.

For-profit hospitals either distribute profits to their owners or reinvest them in the company. Unlike nonprofits, for-profit hospitals can raise capital in risk-based equity markets.

About 58 percent of hospitals are nonprofit, about 20 percent are for-profit and 22 percent are public hospitals.

The importance of knowing life expectancy

Predicting life expectancy is far from an exact science. Statistical modeling may be mathematically precise, but assumptions are far more subjective. A 2009 study confidently stated that most babies born in the U.S. and Western Europe today should live to 100. Another group of scientists predicts life expectancy at birth will be 100 years by 2060, based on current trends. A more modest projection by the United Nations arrived at the same figure by the year 2300.

On the other hand, an influential article in the New England Journal of Medicine estimated that the effect of obesity could trim as much as five years of life by the middle of this century.

Other research echoes this. Researchers used a forecasting method that accounts for the delayed effects of accumulated health risks among younger adults. The results suggested the effects of rising obesity on future life expectancy and health-care costs could be far worse than currently anticipated.

Projecting life expectancy is much more than an academic exercise. If it is underestimated by just one year, that would mean an extra 53 million years lived by Americans 65 and older between 2000 and 2050. That would have enormous implications for Medicare and Social Security costs.

If life expectancy continues to grow and disease is kept at bay, life stages – education, work, retirement – will continue to be blurred.  Young people are taking longer to complete higher education because of steeply rising costs and dim career prospects. Meanwhile, the elderly are delaying retirement because of eroded stock portfolios, the security of health-insurance benefits in the workplace or self-fulfillment – especially if they are in robust health.

One trend is clear: The world is going gray. The number of people 65 and older will double to 1.3 billion globally by 2040. The elderly will outnumber children under age 5 for the first time in history.

At this point, there is no technology to extend the human lifespan. Dr. Nortin Hadler, in his book Worried Sick: A Prescription for Health in an Overtreated America, contends that the best we can hope for is 85 disease-free years – at which point life’s warranty expires. Any time beyond that is a bonus. He argues that medicine has little impact on longevity because it saves the lives of only a small percentage of the population.

Medical technology drives spending

Medical technology is the engine that drives health-care costs. It accounts for an estimated one-half to two-thirds of spending growth.

Technology can come in the form of new procedures, drugs, medical devices or support systems such as telemedicine or electronic health records. The National Center for Health Statistics took a snapshot of technology changes from 1996 to 2007. Use of advanced imaging technology in outpatient facilities tripled during that time. Knee and hip replacements increased 60 to 70 percent. Angioplasty surgeries open blocked or narrowed coronary arteries. Nearly two-thirds of angioplasties involved no stents in 1996. By 2006, more than 90 percent included stents – and more than three-quarters of those were coated with drugs.

All of these procedures are expensive. Technology expansion contributed mightily to the fact that Medicare Part B reimbursement, which covers doctor and outpatient services, more than doubled, to $14.1 billion, from 2000 to 2006.

Outpatient care does not require an overnight stay in a hospital. It can take place in a doctor’s office, hospital or outpatient surgery center. Health-care providers have aggressively expanded outpatient care for a number of reasons. The centers are highly profitable, sometimes exceeding a 25 percent margin. Outpatient procedures often result in quicker patient recovery and can be performed less expensively than during hospitalization. However, lucrative fee-for-service reimbursement and customer convenience encourage excessive use of services. In other words, it is doubtful that the need for advanced imaging tripled in a decade. Moreover, health outcomes were not twice as good for a Medicare patient in 2006 as they were in 2000.

Technology serves a useful purpose for providers, beyond the possibility of improved treatment. Health-care innovation leads to higher prices for services. There is scant resistance to this from patients, because they pay so little of the bill. Government programs and health plans also offer little resistance,  because they do not want to be accused of denying patients access to the latest medical tools.

Hospitals also like to market their cutting-edge technology to attract physicians and their patients,  because it serves as a proxy for quality. The consequence in many markets is a medical arms race as hospitals try to match their competitors, creating an oversupply of facilities and a temptation to overuse the equipment to justify the expense. Even the most efficient health-care organizations must grapple with acquiring technology and charging high prices for procedures. This can offset – even overwhelm – their best efforts at supplying more cost-efficient care in other services.

At best, the evidence is spotty that all of this technology is bettering health outcomes – or even is an improvement over the services they replace. Health care arguably is not an important determinant of health. Other factors – health behavior, genes, education and income – play much greater roles in health outcomes. Health care rarely cures disease. It mostly helps patients cope with what they have.

Why medical costs are rising

Wealthier nations all spend more on health. However, the U.S. spends well above what would be expected, compared with its peers. McKinsey Global Institute used data from 13 industrialized nations to develop a measure it called Estimated Spending According to Wealth (ESAW). By McKinsey’s calculations, $477 billion of the $1.7 trillion the U.S. spent on health care in 2003 was in excess of what it should have spent based on its wealth. Analysts said the condition of Americans’ health did not explain the higher costs. Hospital and physician care accounted for 85 percent of the excess spending.

McKinsey said a huge driver of costs is the fact that providers are expanding capacity, in part because they can produce their own demand. This echoes ample research showing that health-care use rises when facilities expand or open, independent of population health. McKinsey also cited technological innovation that invariably delivers more expensive care, and the fact that patients are insensitive to high prices because their out-of-pocket costs are, in general, so low.

In a classic Health Affairs journal study called “It’s The Prices, Stupid: Why The United States Is So Different From Other Countries,” the researchers argued that Americans spend more on health care even though they use fewer health services than other developed nations. The difference, they said, was that the U.S. health-care providers charged higher prices.

For example, the U.S. consumes 10 percent fewer drugs per capita than other industrialized nations. However, the U.S. spends 70 percent more for drugs. The U.S. also has comparatively lower disease prevalence because it has a younger population and lower smoking rates. It also has the lowest hospital usage compared with 10 peer nations and ranks eighth out of 10 in the number of physician visits.

The reason for higher U.S. prices is that buyers lack negotiating power – or choose not to exercise it. Other nations consolidate their bargaining power either in their governments or as cooperatives. They negotiate one standard – and invariably lower – price for health services and pharmaceutical drugs. In the U.S., there is no government purchaser willing to bargain on behalf of constituents. The continuing consolidation of hospitals and physicians leaves health plans in weaker negotiating positions.

The government shies away from using its buying power. Mike Leavitt, Health and Human Services secretary under President George W. Bush, said he opposed negotiating Medicare drug prices because “it really isn’t about government negotiating drug prices. It’s a surrogate for a much larger issue, which is really government-run health care.”

During the health-reform debate, the Obama administration dropped the “public option” insurance plan, even though it would have been one of several available options on the health insurance exchanges. It also decided not to seek to negotiate lower drug prices for Medicare.

Other nations do not have a choice on whether to drive a hard bargain with health-care providers. If they spent the same portion of GDP as the United States did, the required tax burden likely would cripple their economies. The United States is not at that point, but is well on its way.

The International Federation of Health Plans surveyed 12 industrialized nations on the costs of 14 common procedures. Each nation but the U.S. reported one price. The U.S. reported a range of prices because of its fragmented negotiating landscape. The price differences were significant. The cost of delivering a baby was $2,667 in Canada, $2,147 in Germany and an average of $8,435 in the U.S. A comparable length of hospital stay cost $1,679 in Spain, $7,707 in Canada and ranged from $14,427 to $45,902 in the U.S..

Even though U.S. physicians deliver less care than doctors in other industrialized nations do, their average income is about three times greater. The ratio of physician income to that of the average U.S. employee is 5.5, compared with 1.5 in Great Britain and Sweden.

Health reform attempts to reduce the amount of care consumed, rather than attempt to control prices. It will encourage doctors and hospitals to form accountable care organizations (ACOs) and pays them a fixed sum to discourage unnecessary care. The law also funds comparative-effectiveness research in an effort to reduce less effective treatments. However, many health-policy analysts consider these  measures too weak to counteract the proliferation of expensive procedures and emerging, costly technologies.

The fragmented health-care sector is also larded with excessive administrative costs. The McKinsey Global Institute estimated that administration accounted for 21 percent of ESAW. Most of that is because of the incredibly complex U.S. private insurance system. The U.S. spends about six times more on insurance administration than other industrialized nations.

Consumers weigh in

Few health consumers blame technology and market power for rising health-care costs. Instead, they point to favored demons, real and imagined. In a HealthDay/Harris Interactive poll, 6 out of 10 blamed insurance companies and pharmaceutical firms. About half blame hospitals.

Health economists say insurance and drug-company profits account for about 2 percent of total health-care spending. A 2009 analysis of hospital finances found that the median profit margin for U.S. hospitals was zero.

More than 1 in 3 poll respondents blamed obese and overweight people. The least-cited reason: Their own excessive use of health services.

Sin taxes for unhealthy food

Whether to impose excise taxes on unhealthy food – much like those on tobacco and alcohol – is a matter of continual debate in health-policy circles and state governments. Advocates assert that the increased cost of food with dubious nutritional value would reduce consumption of it. They have an attentive audience in state legislators, who legally must balance their budgets. Opponents argue that such a tax would be regressive, unduly penalizing low-income residents who spend a greater percentage of their household budgets on food.

Most states already tax soda sold in grocery stores and vending machines, but not at a level that significantly affects sales. A study of North Carolina young adults showed that a 10 percent increase in the price of pizza and soda was associated with a 7 percent decrease in calories consumed in soda and 12 percent decrease in pizza.

A U.S. Department of Agriculture analysis estimated that a 20 percent price increase in sugar-sweetened beverages – including some fruit juices – would decrease average consumption by 37 calories a day, lowering the adult incidence of obesity and being overweight by 10 percent each.

Scientists tested the effectiveness of “sin taxes” compared with price discounts for healthier food. A group of volunteers – all mothers – shopped at a simulated grocery store. First, they bought groceries at regular prices. Researchers then imposed taxes of 12.5 percent, then 25 percent on unhealthy items, or they decreased the prices of healthy food comparably. The result: Sin taxes were more effective than discounts in raising the nutritional value of the shopping basket.

Doctors are seething

Family doctors are mad. Who can blame them?

Primary-care physicians are the front line of medicine. They are the first stop for people who need care. They treat the patient as a whole person, not a body part or disease. They determine where to send the patient  for more care if necessary.

Their income essentially has stayed the same since the 1990s, while their practice expenses have steadily increased. After accounting for inflation, their average income fell 7 percent from 1995 to 2003. This obviously is an unsustainable business model.

Their workdays are brutal. A Philadelphia practice kept track of what its physicians did in a day’s time. The average doctor saw 18 patients, wrote 12 prescriptions, reviewed 14 consultation reports from specialists, studied 11 X-rays or other imaging reports, and wrote or answered 17 email messages.

Many patients do not get the recommended care. If everyone did, it would destabilize the U.S. primary-care system. A physician with a typical 2,000-patient base would have to spend more than 17 hours a day to meet all of the guidelines for preventive care and chronic-disease management.

Physicians have to fight for every dollar. Plumbers and attorneys do not have to call a third party to verify that they will be paid when they fix leaky faucets or draw up wills. Doctors must follow strict health-plan guidelines or they will not be reimbursed. State and federal health-insurance programs continue to squeeze the rates they pay physicians to compensate for rising costs. Many practices lose money when they treat Medicaid and Medicare patients.

Primary-care physicians’ share of the U.S. health-care dollar is only 7 cents. If payers cut reimbursement for physician services by 25 percent – certainly a doomsday scenario for doctors – the average rate of medical inflation would decrease from 6.2 percent to 5.7 percent.

However, primary-care doctors control 80 cents of every health-care dollar by sending their patients to hospitals, referring them to specialists and handing out prescriptions. This is a key paradox: Primary-care physicians arguably are the most powerful players in the health-care system but are underappreciated and comparatively undercompensated. In a 2006 survey, nearly 8 out of 10 characterized themselves as “junior partners” or “second-class citizens” in the health-care galaxy.

The threat of malpractice suits weighs heavily on physicians. Medical-liability system costs, including defensive medicine, represent less than 3 percent of total health-care spending. However, physician concerns are the same regardless of whether they live in states that have adopted medical malpractice reforms.

They are deeply suspicious of health reform. Two-thirds said their initial reaction to the law was negative. Almost 90 percent said primary care is on “shaky ground” or “is a dinosaur soon to go extinct.”

Lou Goodman, president of the Physicians Foundation and chief executive officer of the Texas Medical Association, predicts that physician practices will vanish because of market forces and the new law’s effects.

Health reform’s newly insured will be clamoring for physician services, which will become increasingly scarce because supply is not expanding with demand. The federal government soon will penalize physicians who do not use electronic health records, an expense and service disruption that many physicians cannot afford.  Many solo practitioners or small practices are banding together, selling themselves to hospitals or simply going away.

Some see primary care in a death spiral. Because it is so challenging and relatively underpaid, few medical students choose that route. This places greater pressure on existing practices, forcing even more to drop out. Primary-care doctors have little bargaining power. Their reimbursement from Medicare and Medicaid has remained relatively flat over the past decade, and private insurance plans have followed suit.

Even though the workload is expanding, physicians are slowing the speed of the treadmill. The average workweek decreased from 55 hours in 1996 to 51 hours in 2008. That is the equivalent of losing 36,000 doctors in a decade. The financial incentive to work harder, they say, is simply not there.

Only 1 out of 4 say that in three years, they will still work as hard as they always have. The remainder say they will cut back their hours, retire or seek nonclinical employment. The recession has prompted many to delay retirement. The health-care industry experience the largest decline in retirement rates  of all economic sectors. In 2009-2010, about 1.5 percent of full-time works retired, compared with 4 percent in 2004-2007.