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random rants about news, the law, healthcare law, economics and anything I find amusing

Variations in Healthcare Spending – Anchor-Tenant Theory and Fraud and Abuse?

The New Yorker recently had a very interesting expose discussing one of the fundamental economic challenges of healthcare reform.  (Gawande, Atul, The Cost Conundrum: What a Texas town can teach us about health care, June 1, 2009).  Peter Orszag gave a presentation last year at the American Health Lawyers meeting in San Franscisco that I was able to hear.  Mr. Orszag, President Obama’s budget director and formerly head of the Congressional Budget Office, has observed repeatedly (and is quoted in this article as saying) that “[n]early thirty per cent of Medicare’s costs could be saved without negatively affecting health outcomes if spending in high- and medium-cost areas could be reduced to the level in low-cost areas.”  He, and many healthcare economists’ observe, that there is a tremendous amount of variation in healthcare spending throughout various regions of the country that simply cannot be explained after controling for demographics, illness indexes/cases mixes, cost indexes and other similar factors.  And, most importantly, outcomes are no better in higher spending areas.

This New Yorker article paints a narrative story surrounding this frequent observations by looking at case of McAllen, Texas.  McAllen has the particular notoriety of having the highest per capital Medicare spending in the nation.   I think it is an important read for healthcare counsel because of some of the author’s tangential commentary linking McAllen’s higher per capita spending with a culture that could have support higher incidents of fraud and abuse.

According to the article, McAllen spends (using 2006 data) approximately $15,000 per Medicare enrollee.  This is more than twice of what El Paso, Texas, with very similar demographics and population factors, pays.  It is also more than twice what the region surrounding the Mayo Clinic spends.  Ironically, the per capital Medicare spending is more than McAllen’s per capita income.

The New Yorker author discusses this fact with some local physicians who have no idea of this distinction for their community:

One night, I went to dinner with six McAllen doctors. All were what you would call bread-and-butter physicians: busy, full-time, private-practice doctors who work from seven in the morning to seven at night and sometimes later, their waiting rooms teeming and their desks stacked with medical charts to review.  Some were dubious when I told them that McAllen was the country’s most expensive place for health care. I gave them the spending data from Medicare. In 1992, in the McAllen market, the average cost per Medicare enrollee was $4,891, almost exactly the national average. But since then, year after year, McAllen’s health costs have grown faster than any other market in the country, ultimately soaring by more than ten thousand dollars per person. “Maybe the service is better here,” the cardiologist suggested. People can be seen faster and get their tests more readily, he said.  Others were skeptical. “I don’t think that explains the costs he’s talking about,” the general surgeon said. “It’s malpractice,” a family physician who had practiced here for thirty-three years said. “McAllen is legal hell,” the cardiologist agreed. Doctors order unnecessary tests just to protect themselves, he said. Everyone thought the lawyers here were worse than elsewhere. That explanation puzzled me. Several years ago, Texas passed a tough malpractice law that capped pain-and-suffering awards at two hundred and fifty thousand dollars. Didn’t lawsuits go down? “Practically to zero,” the cardiologist admitted. “Come on,” the general surgeon finally said. “We all know these arguments are bullshit. There is overutilization here, pure and simple.” Doctors, he said, were racking up charges with extra tests, services, and procedures.  The surgeon came to McAllen in the mid-nineties, and since then, he said, “the way to practice medicine has changed completely. Before, it was about how to do a good job. Now it is about ‘How much will you benefit?’ ”

via Annals of Medicine: The Cost Conundrum: Reporting & Essays: The New Yorker.

What is the basis for the higher per capita Medicare spending?

To determine whether overuse of medical care was really the problem in McAllen, I turned to Jonathan Skinner, an economist at Dartmouth’s Institute for Health Policy and Clinical Practice, which has three decades of expertise in examining regional patterns in Medicare payment data. I also turned to two private firms—D2Hawkeye, an independent company, and Ingenix, UnitedHealthcare’s data-analysis company—to analyze commercial insurance data for McAllen. The answer was yes. Compared with patients in El Paso and nationwide, patients in McAllen got more of pretty much everything—more diagnostic testing, more hospital treatment, more surgery, more home care.  The Medicare payment data provided the most detail. Between 2001 and 2005, critically ill Medicare patients received almost fifty per cent more specialist visits in McAllen than in El Paso, and were two-thirds more likely to see ten or more specialists in a six-month period. In 2005 and 2006, patients in McAllen received twenty per cent more abdominal ultrasounds, thirty per cent more bone-density studies, sixty per cent more stress tests with echocardiography, two hundred per cent more nerve-conduction studies to diagnose carpal-tunnel syndrome, and five hundred and fifty per cent more urine-flow studies to diagnose prostate troubles. They received one-fifth to two-thirds more gallbladder operations, knee replacements, breast biopsies, and bladder scopes. They also received two to three times as many pacemakers, implantable defibrillators, cardiac-bypass operations, carotid endarterectomies, and coronary-artery stents. And Medicare paid for five times as many home-nurse visits.

The author discusses the high utilization and costs with various hospital executives, who, like the physicians interviewed, also do not know that McAllen is the most expensive place in the country for Medicare beneficiaries.  The executives of the hospitals, to the author’s belief, authentically did not know their peculiar notariety and, not even recognizing it as an issue, had no truly thoughtful responses as to why it might be.

Local executives for hospitals and clinics and home-health agencies understand their growth rate and their market share; they know whether they are losing money or making money. They know that if their doctors bring in enough business—surgery, imaging, home-nursing referrals—they make money; and if they get the doctors to bring in more, they make more. But they have only the vaguest notion of whether the doctors are making their communities as healthy as they can, or whether they are more or less efficient than their counterparts elsewhere. A doctor sees a patient in clinic, and has her check into a McAllen hospital for a CT scan, an ultrasound, three rounds of blood tests, another ultrasound, and then surgery to have her gallbladder removed. How [are the hospital executives] to know whether all that is essential, let alone the best possible treatment for the patient? It isn’t what they are responsible or accountable for.  Health-care costs ultimately arise from the accumulation of individual decisions doctors make about which services and treatments to write an order for. The most expensive piece of medical equipment, as the saying goes, is a doctor’s pen. And, as a rule, hospital executives don’t own the pen caps. Doctors do.

The article suggests, with only a little explanation, that the variation between communities such as McAllen and, in contrast, El Paso or other lower cost regions (with at least the same if not better quality institutions) might be due to an  “anchor tenant theory of economic development.”  Certain markets develop their own economic character, similar to how a mall may be defined by its anchor tenant.  So, the theory goes, certain “anchor tenants” in a market may allow, for example, the development of regional specialization (e.g., biotechnology development in certain cities – Boston, San Franscisco and not in others with similar apparent resources).   Twisting this model a bit, the author posits that the entrepenurial focus of physician medicine in McAllen, changing from the 1990s to present, may be a significant part of the increase in costs.  McAllen was near the median in per capita spending a decade ago.  Importantly, the author then goes on to point out anecdotal evidence of some serious antikickback statute violations — solicitation by certain unnamed physicians of medical directorships in exchange for referrals to hospitals and home health agencies.

This linkage — which is not well developed by the author — is nonetheless a beware moment.   If higher per capita Medicare spending is linked by government enforcement agencies as a proxy for potential higher rates of fraud and abuse behavior, one might see a new horizon for focusing fraud enforcement .  Perhaps this is a stretch – but an interesting linkage is being made here by the author.  It is all the more important due to the prestige of the publication and that the fundamentals of this story find their genesis in the economic theory of healthcare inflation that is the focus of leaders within the current administration.

The author goes on to make a fairly classical example of the challenges of asymetical information in healthcare coupled with the fee-for-service basis of physician payments:

Providing health care is like building a house. The task requires experts, expensive equipment and materials, and a huge amount of coördination. Imagine that, instead of paying a contractor to pull a team together and keep them on track, you paid an electrician for every outlet he recommends, a plumber for every faucet, and a carpenter for every cabinet. Would you be surprised if you got a house with a thousand outlets, faucets, and cabinets, at three times the cost you expected, and the whole thing fell apart a couple of years later? Getting the country’s best electrician on the job (he trained at Harvard, somebody tells you) isn’t going to solve this problem. Nor will changing the person who writes him the check.

The author aruges that changing the payor (i.e., government plan competitor, single payor system) will not change this problem.  Even putting the consumer on the hook through medical savings accounts or high deductible plans won’t solve it (if a physician recommends a cardiac bypass, is the patient going to negotiate with the cardiologist, radiologist, anesthesiologist, cardiothoracic surgeon and hospital over expense or the scope of the procedure?).

Then the author suggest that only flipping the economic model might fix this.  The author isn’t quite specific in how this might be accomplished, although he goes to length to contrast the McAllen “anchor-tenant” model with other “anchor-tenant” models of healthcare (e.g., Mayo), suggesting this is the crux of the problem – what kind of medical care provision culture the United States will be developing based upon the economic incentives that are established by insurance payor systems we perpetuate or change through reform.  Not by who cuts the check.

This is worth the read because it sets a story narrative for the harder data Mr. Orszag and others have frequently discussed as healthcare reform is debated.

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Filed under: AKS, Comparative Effectiveness Rearch, Health Law, Reform, , , , ,

Effect of Exposure to Small Pharmaceutical Promotional Items on Treatment Preferences, May 11, 2009, Grande et al. 169 (9): 887

A new study finds that subtle exposure to branded pharmaceutical items, even without the social interactions of gifting, influence medical school student attitudes towards brands.  The study has some interesting discussion regarding “boomerang” response by some of the students from the institution that had strong rules prohibiting gifts.  This reaction may have some bearing on current efforts to ban gifts and marketing materials at healthcare institutions as well as the so-called “Sunshine Laws” at the federal and state levels regarding transparency of pharma and medical device marketing and financial arrangements, including gifting.

From the study’s commentary:

Our study finds that subtle exposures to branded pharmaceutical promotional items influences implicit attitudes of medical students toward pharmaceutical brands. The observed effect was modified by training year and school. Among third-year medical students, no significant experimental effects were observed. However, among fourth-year medical students there were significant effects at both schools in our study. Students at Miami responded as we hypothesized, shifting their preferences in the direction of the branding exposure (ie, Lipitor). However, students at Penn had a boomerang response, ie, a behavioral response opposite of the implied marketing intent.22 The most likely explanation for the difference across class year is that, as students advance in their training, they begin to form attitudes toward various treatment options that can be primed with branded promotional items. In comparison to third-year students, fourth-year students have had greater clinical experience and greater exposure to their clinical teachers and prevailing institutional practices.

The divergent effects at our 2 study schools are an interesting finding. At Penn, exposure to the branded items produced less favorable implicit attitudes. One potential explanation for this effect is that the strong school policy provided an external warning about specific persuasion tactics underlying pharmaceutical marketing. This information may have motivated some form of resistance by the audience23 that could have taken the form of simple message rejection or active counterarguing or careful message scrutiny.24 The policy therefore may have heightened the ability of the Penn students to exercise what has been termed “persuasion coping effectiveness”,25 which produces a goal within oneself to achieve one’s own current learning or attitudinal goal independently of what the marketer seems to be trying to accomplish. The differential attitudes observed in the marketing survey, with the Penn students exhibiting significantly more negative attitudes than those in the national sample or for the Miami students where no policy exists, support this explanation. At Miami, where students had more positive attitudes toward marketing, exposure to a branded promotional item likely primed more positive implicit associations.

via Arch Intern Med — Effect of Exposure to Small Pharmaceutical Promotional Items on Treatment Preferences, May 11, 2009, Grande et al. 169 (9): 887.

Filed under: Conflicts of Interest, Health Law, , , ,

Sunshine in Vermont… Again. Vermont Senate Bill (S-048)

As reported in the NY Times Blog yesterday, the State of Vermont, which already had fairly strict provider financial arrangement reporting requirements for pharmaceutical companies doing business in the state, is slated to significantly limit gifts to providers by both pharmaceutical and medical device companies.  The new law, which, according to the NYT blog, will be signed by the governor, will prohibit all but certain enumerated gifts, revise reporting requirements by pharmaceutical companies and expand the reporting requirements to medical device manufactures.

The legislative bodies findings and intent, obviously influenced by the reporting thus far provided under the previous version of the law, outline its concerns, stating its belief that marketing practices can influence the rise in health care spending and that “state of Vermont has a substantial interest in cost containment and the protection of public health.” The legislature cites a number of findings leading to its adoption of the legislation:  (i) an IOM study linking gifts to prescribing behavior, (ii) recent federal crackdowns on medical device manufacturers’ alleged antikickback  violations (see my related post on the federal Sunshine Act), (iii) significant spending in the relatively small state of Vermont on pharma marketing (“[i]n fiscal year 2008, pharmaceutical manufacturers reported spending $2,935,248.00 in Vermont on fees, travel expenses, and other direct payments to Vermont physicians, hospitals, universities, and others”), (iv) the pharma industry’s focus on 100 physician opinion leaders for almost two-thirds of pharma’s spend (“approximately $2.1 million in payments went to physicians…[with the] top 100 individual recipients received nearly $1,770,000.00 in fiscal year 2008”) and prevalence of pharma’s spend throughout Vermont’s 4,573 licensed health care professionals, with 2,280 being recipients.   Based upon the legislation, the Vermont lawmakers certainly are frowning on the nearly $1M spent on food, noting that many food recipients received $1,000 or more spent on them.  One individual recipient, in fact, apparently receive over $15,000 in food.

The legislature concludes that the “act is necessary to increase transparency for consumers by requiring disclosure of allowable expenditures and gifts to health care providers and facilities providing health care [in order] to reduce real or perceived conflicts of interest which undermine patient confidence in health care providers and increase health care costs by influencing prescribing patterns.  Limitations on gifts and increased transparency are expected to save money for consumers, businesses, and the state by reducing the promotion of expensive prescription drugs, biological products, and medical devices, and to protect public health by reducing sales-oriented information to prescribers.”

The new law prohibits “any manufacturer of a prescribed product or any wholesale distributor of medical devices, or any agent thereof, to offer or give any gift to a health care provider.”  It provides that the  attorney general “may bring an action in Washington superior court for injunctive relief, costs, and attorney’s fees and may impose on a manufacturer that violates this section a civil penalty of no more than $10,000.00 per violation. Each unlawful gift shall constitute a separate violation.”

Permitted items that are not deemed prohibited gifts include:  (i) samples, (ii) limited short term evaluation use loaners of medical devices not exceeding 90 days, (iii) reasonable quantities of medical device demonstration or evaluation units to a health care provider to assess the appropriate use and function of the product, (iv) provision, distribution, dissemination, or receipt of peer-reviewed academic, scientific, or clinical articles or journals and other items that serve a genuine educational function, (v) scholarship or other support for medical students, residents, and fellows to attend a significant educational, scientific, or policy-making conference or seminar of a national, regional, or specialty medical or other professional association if the recipient of the scholarship or other support is selected by the association, (vi) rebates and discounts for prescribed products provided in the normal course of business.  Certain items are not prohibited and are considered “allowable expenditures.”  These include (i) certain limited sponsorship of a significant educational, medical, scientific, or policy-making conference or seminar, (ii) certain limited honoraria and payment of the expenses of a health care professional who serves on the faculty at a bona fide significant educational, medical, scientific, or policy-making conference or seminar, (iii) bona fide clinical trial arrangements, (vi) certain limited bona fide research projects, (v) expenses relating to technical training of individual health care professionals on the use of a medical device pursuant to a written agreement.

Manufactuers need to report “any allowable expenditure or gift … to any health care provider” or “to an academic institution or to a professional, educational, or patient organization representing or serving health care providers or consumers” in the following categories:

  • “The loan of a medical device for a short-term trial period, not to exceed 90 days, to permit evaluation of a medical device by a health care provider or patient.”
  • “The provision of reasonable quantities of medical device demonstration or evaluation units to a health care provider to assess the appropriate use and function of the product and determine whether and when to use or recommend the product in the future.”
  • “The provision, distribution, dissemination, or receipt of peer-reviewed academic, scientific, or clinical articles or journals and other items that serve a genuine educational function provided to a health care provider for the benefit of patients.”
  • “Scholarship or other support for medical students, residents, and fellows to attend a significant educational, scientific, or policy-making conference or seminar of a national, regional, or specialty medical or other professional association if the recipient of the scholarship or other support is selected by the association.”
  • “Labels approved by the federal Food and Drug Administration for prescribed products.”

Manufacturers must report, on form specified by the attorney general, the value, nature, and purpose of each allowable expenditure, and permitted gift along with (i) the name of the recipient, (ii) the recipient’s address, (iii) the recipient’s institutional affiliation, (iv) prescribed product or products being marketed, if any; and (v) the recipient’s state board number.

Failure to manufacturer of prescribed products that fails to disclose as required by the law subjects the manufacturer to a civil penalty of no more than $10,000.00 per violation. Each unlawful failure to disclose, however, constitutes a separate violation.

The legislation also directs the attorney general’s office to conduct a review, in consultation with the commission on health care reform, of the advisability of modifying the law to require the disclosure of information about the provision of pharmaceutical samples to health care providers.   At present, samples are expressly excluded from the reporting regime.

If signed into law, the law will take effect July 1, 2009, but reporting activities under new regime will be implemented in 2010 reporting period.

Clearly the legislature had cost on its mind in enacting the law, as it also has tasked a state workgroup to explore generic alternative formularie recommendationss.   The workgroup is to report to the legislature by January 15, 2010 on the list generated.

Filed under: AKS, Conflicts of Interest, Health Law, , , , ,

Physician Payments Sunshine Act of 2009

Interesting bill introduced in the 111th Congress (SB 301) by Mr. Grassley.  After recent settlements involving Medtronics and then a host of other medical device manufacturers in late 2007 (Johnson & Johnson subsidiary DePuy Orthopaedics, Zimmer, Biomet and Smith & Nephew) who provided lavish trips and sometimes sham consulting and IP royalty payments to physicians allegedly to induce their ordering of the firms’ devices, the Congress is considering forcing pharma and medical device manufacturers to disclose all financial arrangements with physicians and medical groups greater than $100/year.  The financial arrangements would be posted in a manner that would be accessible to the public.  Failure to disclose would subject the companies to up to $150,000 (if innocent) or $1m Civil Monetary Pentalties if knowingly.  It is of note that disclosure was used by the OIG in the deferred prosecution agreements with these companies.   See, for example, Zimmer’s home page at www.zimmer.com.

Search Results – THOMAS (Library of Congress).

Filed under: AKS, CMP, Conflicts of Interest, Health Law, , , , ,

New York Medicaid Provider Self-Disclosure Process

As reported in the March 13, 2009 BNA Health Law Reporter, The New York State Office of the Medicaid Inspector General (OMIG) on March 12 announced the release of the Provider Self-Disclosure Guidance.  According to the the OMIG, this will “enabling health care providers to identify, reveal, and return to the OMIG overpayments they have received from the Medicaid program.”  BNA reports that the guidance is significantly more expansive in scope than the Department of Health and Human Services Office of the Inspector General’s Self-Disclosure Protocol.   OMIG reports that it hopes to save up to $820 million in Medicaid costs in the 2009-2010 fiscal year.  The OMIG also “highly discourages” providers from attempting to avoid the self-disclosure process when circumstances warrant its use and it will not accept full and final payments for self-disclosed violations before the investigatory process is finalized. See  http://www.omig.state.ny.us/data/images/stories/self_disclosure/omig_provider_self_disclosure_guidance.pdf for the new guidelines and http://www.omig.state.ny.us/data/images/stories/self_disclosure/voluntary_disclosure_form.pdf for the disclosure form.

Filed under: AKS, Fraud and Abuse, Health Law, Medicaid, , , , ,

OIG Finds No Grounds for Penalties on SNF’s Transportation Proposal for Residents’ Family

Health Law Reporter.  As reported in 3/19/2009 BNA Health Law reporter and published by the OIG on 3/13/2009, the OIG granted a favorable advisory regarding transportation program for friends and families of SNF residents, where the SNF is located in a geography difficult for such individuals to reach.  According to the OIG, “[m]any arrangements involving free transportation have important and beneficial effects on patient care, especially where such arrangements are narrowly tailored to address issues of financial need, limited transportation resources, treatment compliance, or safety.”  But the OIG cautions that transportation programs may also be “schemes” to lead to “inappropriate steering of patients, overutilization, and provision of medically unnecessary” services.  The OIG lists some examples:

• Providers offering out-of-state patients free transportation to receive services at their facilities;
• Van drivers soliciting, and offering free transportation services to, Medicaid patients for health care providers who compensate the drivers on a per patient or per service basis;
• Providers offering residents of nursing facilities and other congregate care facilities free transportation services to and from their offices for services of questionable necessity;
• Providers offering patients free limousine services;
• Hospitals or other providers offering patients free ambulance services without making individual determinations of financial need; and
• Hospitals or other providers inducing referrals from physicians by offering the physicians’ patients free transportation to the physicians’ offices or to a facility where the physician furnishes services.

The OIG indicated that it will look at factors such as (i) whether transportation is offered in a manner related to referrals; (ii) the type of transportation and if it is luxury or specialized; (iii) whether the transportation is within or outside of the primary service area of the provider; (iv) the availability of other forms of transportation; (v) how the program is marketed or advertised; (vi) who bears the cost of the transportation — whether the provider itself or beneficiaries or the federal healthcare programs through cost reporting; (vii) whether the destination is to the primary provider or if the transportation is to other providers of care; (viii) whether there is a healthcare provision nexus between the provider and those receiving the transportation — particularly in this case where it is not the patient, but family and friends receiving it.

It goes without saying, but the gating issue also is if the transportation can fit into the other unofficial safe harbor that the OIG has set out — that is, services at less than $10/instance, $50/annually.  Here the program would likely exceed at least the $50/annual guideline.

What the OIG liked about the program:

(A) It was not for or related directly to the patient receiving care and it was not about the patient going to another healthcare provider;

(B) The program is open to all friends and family members of patients, regardless of payor source, means or other potentially problematic factors.

(C) Transportation is reasonable – a van running between public pick-up locations – not a limo or specialized transit.

(D) Marketing is local, limited to local papers and patient/family/friends themselves.

(E) There truly is limited public transportation and the cost to access the facility is hampered by a large “toll-bridge” toll.

(F) It’s good for patients to have the companionship of friends and family and, therefor, supports the SNF’s mission.

(G) The costs will not be on the provider’s cost report.

This is a reasonable and good opinion on a practice that I have a feeling is widespread in the industry and that can be structured in a manner that is good for the patients and the care that they receive and structured in a way that does not increase risks to the Medicare program.

Filed under: AKS, CMP, Health Law, Transportation, , , , ,

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