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Lawsuit Sheds Light on PBM Fees

Express Scripts v. Kaleo illustrates what we have long suspected, that PBMs are re-labeling rebate dollars with another name to retain the value. Only now, we have insight as to what that value might be.

Thanks to Robert Ferraro R.Ph at Conduent and Barry Cross at Michelin for passing this along, from ProPublica.

Express Scripts Lawsuit Should Raise Everyone’s Eyebrows 

For years, every PBM has refused to disclose the “rebates” that it earns on a drug-by-drug basis. As a result, no one has been able to detect the “net cost” of any drug (factoring in rebates), which means no one can assess whether a PBM’s formularies and programs favor higher-cost or lower-cost drugs.

Every PBM has also refused to disclose how much in “other monies” the PBM is secretly being paid by manufacturers to favor the manufacturers’ products. As a result, no one has been able to determine how much a PBM is earning from its secret “deals” with manufacturers, or the amount that the PBM’s clients lose in potential savings because a PBM re-labels “rebates” with another name to avoid sharing those monies with its clients.

But a few days ago, Express Scripts filed a lawsuit against the drug manufacturer Kaleo, and, while Express Scripts’ lawyers heavily redacted the complaint, they did not redact certain information that Express Scripts has long maintained as closely guarded secrets.

The information that’s revealed is shocking.

According to Express Scripts’ complaint, Express Scripts entered into “rebate agreements” with Kaleo in 2014 concerning its opioid overdose treatment Evzio that required Kaleo to pay Express Scripts far more in secret “administrative fees” (that Express Scripts presumably retained for itself) than Kaleo paid in “formulary rebates” (that Express Scripts presumably passed through to its clients). The complaint reveals that in four of its monthly invoices to Kaleo, Express Scripts invoiced Kaleo $26,812 in total “formulary rebates” but $363,160 in total “administrative fees.”

Thus, based on the structure of Express Scripts’ rebate contracts, Express Scripts would pass through in these four months about 6.9% of the total amount it collected. Stated otherwise, Express Scripts would retain about 13 times more in “administrative fees” than Express Scripts would pass through in “formulary rebates” to its clients.

Here’s a summary of the information included in the complaint:

What was Express Scripts doing – if anything – to earn so much in administrative fees? Obviously, no one knows.

But every plan administrator and fiduciary should demand full disclosure of this information. After all, unless Express Scripts was engaged in actual work meriting these payments, Express Scripts should have used the label “rebates” for the “administrative fees” it collected and passed through all such monies to plans to reduce their costs.

The federal government should also want to know what work Express Scripts actually performed to earn its “administrative fees” under the Medicare contracts. And the government should ensure that Express Scripts appropriately reported the amounts as Medicare obligates Express Scripts to do.

Medicare rules require that Express Scripts only retain the “fair market value” of services that Express Scripts actually performed, and that Express Scripts report such money to the government as “bona fide service fees.” Therefore, assuming Express Scripts retained these monies, Express Scripts was obligated to perform services commensurate with the amounts it retained.

See also: Is This the Largest Undisclosed Risk?  

On the other hand, if Express Scripts did nothing – or little – to earn these fees, Medicare rules require that Express Scripts label whatever amounts did not represent the “fair market value” of its services as “direct and indirect remuneration”, and report and pass through those amounts to the government.

Bottom line: The federal government should determine whether Express Scripts is accurately categorizing and reporting its “bona fide service fees” and “direct and indirect remuneration” or whether it is retaining and hiding monies that the government would otherwise benefit from.

Also, we think the government should determine whether any activities that Express Scripts did perform under its Medicare contracts were actually in the interests of the government and Medicare beneficiaries, or contrary to those interests.

As a taxpayer, wouldn’t you want the government to investigate and obtain answers on all these matters?

Why Did Express Scripts’ Earnings Increase? 

In this day and age, everyone knows that most manufacturers of brand drugs are continually increasing their prices. And some manufacturers are raising their prices exponentially. But no one knows what PBMs are doing to prevent such price increases. Nor does anyone know the extent that PBMs are profiting from manufacturers’ price increases.

The complaint discloses that Express Scripts “administrative fees” in January 2016 were $24,963, but in April 2016 they had soared to $129,517 – an increase of more than 400%.

In a separate paragraph, the complaint states that Evzio’s price dramatically increased in February 2016 from $937.50 to $4,687.50. Our investigation into other data reflects that, nationally, the number of Evzio scripts that were dispensed spiked during this period, too.

Unfortunately, we can’t tell from the heavily redacted complaint why Express Scripts earned far more in “administrative fees” in April. Was it because the structure of Express Scripts’ contract enabled it to earn more when the drug’s price increased – or more when the number of dispensed scripts increased – or both? Does Express Scripts earn “administrative fees” based on a percentage of the “total dollar volume of drugs sold”?

Regardless, obvious questions arise: Did Express Scripts actually perform more work in April 2016 than it did in January 2016? Did its work load increase by more than 400%, meriting increased payments of more than 400%? Or does Express Scripts simply structure its rebate contracts to get paid more and more secret money, as drug prices increase or more scripts are dispensed, regardless of the activities that Express Scripts actually performs?

The Plot Thickens: “Price Protection Rebates”

Based on the complaint, Express Scripts included an additional provision in its contracts if Kaleo increased the price of Evzio, namely “price protection rebates.”

From conversations with other industry experts, we’ve long known that some PBMs sometimes include price protection provisions in their manufacturer contracts. These provisions typically state something like the following: “If the manufacturer increases the drug’s list price by more than _%, the manufacturer must provide a price protection rebate reimbursing the PBM for all price increases above the stated amount.”

Express Scripts’ complaint reveals it entered into two rebate contracts with Kaleo – for its commercial business and for Medicare. Assuming Express Scripts’ “price protection rebates” created the above-described types of “caps” on acceptable price increases, how much were those “caps”? Unfortunately, the redacted complaint does not provide us with an answer. But note the following:

Even if Express Scripts named relatively low “caps”- say, 2% – plans and Medicare would be totally exposed to 2% of Evzio’s price increase. If Express Scripts named a higher “cap” – say, 10% – plans’ and Medicare’s costs would inevitably soar.

What conclusion can we reach about Express Scripts’ “price protection rebates”? While Express Scripts may have positioned itself in its “rebate” agreements to experience an “upside” if Kaleo increased its price, its “price protection rebates” left plans and Medicare exposed to higher costs from price increases.

Note that Express Scripts – and all other PBMs – could theoretically write “price protection rebate” provisions that entirely offset the full amount of any price increase. But according to everything we’ve learned, they don’t. It’s reasonable to ask “why not?”Is it because PBMs are profiting from manufacturers’ price increases?

Another bottom line: Every plan administrator and fiduciary – and the federal government and taxpayers – should want to find out the amount of Express Scripts’ price protection “caps” – for Kaleo’s Evzio and for other manufacturers’ drugs as well. Shouldn’t everyone want to know the extent that Express Scripts (and other PBMs) are leaving their clients and the government exposed to price increases? And how that exposure compares with the additional profits that Express Scripts (and other PBMs) may be realizing from the very same price increases?

In fact, there’s a host of basic questions that every entity should ask of its PBM: What percentage of the PBM’s manufacturer contracts include “price protection rebate” provisions? How many manufacturer contracts don’t include any “price protection rebates” at all? For those contracts with these “protections,” what’s the range of the “caps” below which plans are entirely exposed to the manufacturers’ price increases? How many manufacturer contracts have “caps” above 5% (or any other number you want to select)? How many manufacturer contracts ensure that the PBM will earn increased revenues if prices increase? How much additional revenues has the PBM earned in the past year (or two or three) as a result of manufacturers’ price increases?

Do Express Scripts – and Other PBMS – Actually Pass Through “Price Protection Rebates”? 

Every Express Scripts client – and every other PBM client, as well – should also demand that its PBM state in writing whether the PBM is passing through all “price protection rebates” that the PBM collects from manufacturers. And every plan that is trying to put in place a new PBM contract – including by conducting a PBM RFP – should explicitly demand that its new PBM pass through 100% of its earned price protection revenue.

That’s especially true, given the immense sums these rebates represent. The  Express Scripts’ complaint makes that patently clear.

According to the complaint, in just the four months of invoices that are identified in the Express Scripts complaint, Express Scripts expected to collect more than $8.4 million in total “price protection rebates.”

Express Scripts filed its lawsuit against Kaleo because Express Scripts claims that Kaleo failed to pay Express Scripts most of the money (and some of the “formulary rebates” and “administrative fees” that Kaleo also purportedly owed). But assuming Express Scripts collects the $8.4 million in “price protection rebates,” who will actually benefit?

Will Express Scripts pass through all the money to its clients? Some? Or none?

Are other PBMs passing through all – or some – or none – of the “price protection” revenues that they collect to all their clients?

Or do some PBMs only pass through some “price protection” revenues to some clients?

In recent PBM RFPs that our firm has conducted, we’ve observed that the rebates that many PBMs are now promising are far higher than the rebates that PBMs have promised in the past, or that PBMs are passing through to their existing clients. Are PBMs trying to win new clients by sharing some or all “price protection” revenues with new clients, even though PBMs are retaining “price protection” revenues that manufacturers pay PBMs in connection with PBMs’ existing clients? Are plans that are relying on PBM contracts that are a few years old losing out on large sums of potential rebates?

Every plan administrator – and plan fiduciary – should want to know whether its existing contract is obsolete, and if there are ways to dramatically reduce costs by ensuring that all “price protection” revenues are passed through.

Winners and Losers

The revelations in Express Scripts’ complaint reflect that Express Scripts likely positioned itself to be a big winner regardless of Kaleo’s actions. If Kaleo kept its price “flat,” Express Scripts likely would collect far more in “administrative fees” than it would pass through to its clients in “formulary rebates.” If Kaleo raised its prices (which it did) – or dispensed more scripts (which it also did) – Express Scripts’ “administrative fees” would likely increase. And there’s an open question whether Express Scripts would also benefit from retaining some or all of the “price protection rebates” that it included in its rebate agreements.

But Express Scripts placed plans in a far different position. If Kaleo kept its price “flat,” the only “rebates” that plans would likely collect on Kaleo’s high-price drug were the paltry “formulary rebates” revealed in the complaint. If Kaleo raised its prices – and Express Scripts structured its “price protection rebates” as they are typically written – plans were likely left completely exposed to price increases up to a stated amount. And to the extent that Express Scripts doesn’t pass through its “price protection rebates” to some or all plans, those plans were likely left exposed to price increases above any “cap” that Express Scripts imposed.

Note that when Express Scripts penned its “rebate agreements” with Kaleo in 2014 – before Kaleo raised Evzio’s price dramatically – Express Scripts made the decision to include Evzio on its standard formulary, exposing all plans to Evzio’s far higher costs even though lower-cost alternative drugs were available.

Evzio is an auto-injector that delivers a single dose of naloxone, a drug that can reverse the effects of an opioid overdose. In 2014, Evzio cost approximately $690 for a two-pack of single-use auto-injectors. Depending on dosage strength, generics made by Hospira and Mylan ranged from about $23 to about $63 for a single injectable vial. And there’s a third product that the FDA approved in 2015 – a nasal spray containing naloxone called Narcan – which cost approximately $150 for a two-pack.

Evzio is an innovative product that talks to those using it and explains how to use the auto-injector, as reflected in this Kaleo video. But the generic injectors work just as well, as does the nasal spray Narcan (as long as a person is breathing).

Based on the Express Scripts complaint, in late 2016 when Kaleo refused to pay Express Scripts all invoiced amounts, Express Scripts decided to exclude Kaleo’s Evzio from its standard formulary and solely provide coverage for the lower-cost alternatives. Because Express Scripts blocked Evzio in 2016 based on Express Scripts’ own financial interests, Express Scripts obviously could have made that decision far earlier based on plans’ financial interests and saved plans a lot of money.

Turning to the federal government and Medicare Plan Beneficiaries, how did they fare as a result of Express Scripts conduct? Assuming Express Scripts passed through all “formulary rebates” but retained all “administrative fees,” the government lost out on a disproportionate amount of potential savings. Depending on Express Scripts’ price protection “cap,” the federal government was also exposed to some unknown amount of Kaleo price increases. If Express Scripts reported on and passed through all “price protection revenues” as “direct and indirect remuneration,” the government benefited from that money. But if Express Scripts didn’t do so, or only passed through some of those revenues, the government did not, and it was exposed to even more of Evzio’s exponential price increases.

As for Medicare beneficiaries, because Express Scripts doesn’t negotiate to reduce the drug’s actual cost for beneficiaries – and the government retains all rebates it is paid – Medicare beneficiaries without “gap coverage” were exposed to Kaleo’s price increases. Each user’s exposure differed, depending on the phase of coverage the individual was in (deductible, initial phase, donut hole phase, etc.). But Express Scripts’ conduct did nothing to protect Medicare beneficiaries.

See also: What Should Prescriptions Cost?

The complaint also raises questions for the federal government in connection with its Medicaid program. The government requires all manufacturers – including Kaleo – to report the maximum amount of price reductions they provide in the commercial marketplace – known as their “best prices” – and to match those price reductions for the government when invoicing for Medicaid beneficiaries.

Is Kaleo doing so? Are other manufacturers that are secretly entering into contracts with PBMs and agreeing to pay large “price protection rebates” doing so?

The federal government should want to know. As a taxpayer, you should want the federal government to know.

What about plan beneficiaries? How did they fare? Unfortunately, there’s no simple answer, other than “it depends.”

Some beneficiaries weren’t hurt at all. While Kaleo inked its secret “deal” with Express Scripts (and perhaps other PBMs) – and raised its prices exponentially – Kaleo also did all it could to prevent consumers from screaming in outrage about its price increases. Kaleo made a savings card available to all who want to use it.

As a result, the drug is free to all users who obtain the downloadable savings card. And everyone with insurance coverage who learns about the “Evzio Direct” program can obtain the drug directly from Evzio, while Evzio balance bills PBMs (meaning ultimately PBMs’ clients) for the the drug’s inflated price.

Note that Evzio may be deducting out each user’s copay or coinsurance and deductible – or it may be balance billing for the entire cost of the drug – meaning your plan will be forced to absorb the cost of your beneficiaries’ cost share. Check your claims data to find out, because your PBM may not be bothering to do so.

Plans should also want to know whether Express Scripts (and other PBMS) are indirectly assisting Kaleo in running its savings card program by giving Kaleo information about beneficiaries who are using Evzio or doctors who are prescribing it. Or Express Scripts (and other PBMs) may even be directly informing users or doctors about Kaleo’s savings card program. If any PBMs are doing so, they would obviously be secretly acting against plans’ financial interests, because PBMs would be end-running plans’ deductible and copay and coinsurance designs.

For plan beneficiaries who don’t obtain access to Evzio’s savings card, those with  deductibles or coinsurance that need to be satisfied are hurt by Evzio’s inflated price and aren’t helped by any of Express Scripts’ secret rebate deals. As a result, from 2014 to 2016, they may not have been able to afford Evzio’s clever “talking treatment” to reverse opioid overdoses. And now that Express Scripts has blocked coverage of the drug for all plans relying on Express Scripts’ standard formulary, all affected plan beneficiaries will have to buy an alternative drug – or pay for Evzio entirely on their own – unless they can get Kaleo to cover the drug’s costs through a patient assistance program.

obamacare

Next PR Problem for Obamacare

There is a big PR problem brewing, one receiving very little attention in the media or in industry publications. It’s one I think will resonate among those who typically support the politicians who supported the Affordable Care Act.

The issue stems from the delay in the 1094/1095 reporting under section 6055 and 6056 of the IRS code specifically created under the Affordable Care Act. In English: This is the reporting requirement for carriers and employers that lets the government know if an offer of coverage was made to a particular employee, if it met certain requirements and if it was “affordable” according to one of several calculations set forth by the bill. If an “applicable large employer” does not report or does not meet the minimum requirements for coverage and affordability, there are serious fines at play.

The deadline for the first reports, barring any further delays, is March 31.  (The initial deadline was pushed back because of the burden on employers.)

Why is this important? Well, Obamacare established subsidies to help reduce out-of-pocket costs. The subsidy amount is based on household income in relation to the federal poverty level. Your job also must not offer insurance that meets the requirements about the base level of coverage and affordability. Without employer reporting, however, the government has, thus far, relied on individuals’ assessments of coverage and affordability.

Even if the employer plan meets the affordability test, most people would still call their plans through their employer “unaffordable.” The confusion is compounded by something the industry refers to as the “family glitch.” Let’s say I am offered coverage at my job, and my employer pays 80% of the premium for me. But my employer pays nothing toward the cost of carrying my dependents, an all-too-common scenario. This coverage would likely meet the affordability test for my coverage alone, on the lowest-cost plan my employer offers. If my employer pays nothing toward my family, however, it could easily cost me $1,000 or more per month out of my pay to cover my family. That’s clearly not affordable to most Americans, but, because my coverage met the test, the entire household becomes ineligible for a subsidy.

You could have hundreds of thousands of people who honestly believed their coverage was not affordable, didn’t think their employers plan met the coverage requirements or outright lied because there appeared to be no one checking. These people received what could amount to significant subsidies they weren’t entitled to.

Technically, they received an advanced tax credit. If it is determined you were not eligible for that tax credit, you now have a liability, and it is widely believed the IRS will have the right to garnish wages, freeze assets and place liens on property.

How much are we talking here? Well, I have seen subsides as big as $1,500 per month. The average is around $2,890 per year, per person (according to the Kaiser Family Foundation). So, if a family of four owes the entire year back at the average subsidy, we are talking more than $10,000 a year plus (most likely) penalties and interest from the IRS.

What is the average working person going to do if he gets a demand for $1,000 from the IRS? $10,000?  More? And if the IRS exerts the same force it does on normal tax debts, things such as frozen bank accounts, liens and garnished wages could follow pretty quickly.

All in all, this reporting we are now preparing for employers will likely have significant financial impact on many American workers who should not have received the subsidy to begin with. In all likelihood, many did not fully understand that.

The timing of all this will largely depend on how quickly the government aggregates the data it is collecting from numerous sources.

But get ready for what I believe will be a vocal, angry and desperate group of people with compelling stories facing a very difficult financial situation.

New Way to Lower Healthcare Costs

Managers are more likely to limit rental cars to $30 a day than limit an open heart surgery to $100,000 — for ethical and regulatory reasons, many executives steer clear of involving themselves in healthcare decisions, other than selecting the broadest possible network access. But few expenses that executives know so little about matter more than those involved in healthcare do.

This article speaks to a cultural shift that could provide tremendous impact for employers. They can now lower costs while also improving outcomes.

Until now, employers have used two main strategies:

–They offloaded costs to employees, hoping that giving them more skin in the game would reduce their spending on healthcare. But the continuing lack of transparency about healthcare costs, combined with costs that rose faster than employers shifted them, resulted in insurance picking up more cost and consumerism being driven down.

–Employers also invested in wellness programs. But wellness programs are most attractive to the already healthy. And they attempt to reduce how often enrollees encounter the system. But we know that everyone will encounter care at some point. It is each encounter’s volume and cost that is at the heart of this out-of-control system.

The new, better approach was demonstrated in a whirlwind, 48-hour trip I took with some incredible healthcare leaders.

First, we met with the executives of Rosen Hotels in Orlando, who have saved hundreds of millions of dollars compared with average employer healthcare costs. Rosen’s single-digit employee turnover would delight most employers, but it is spectacular in the hospitality industry. Rosen achieves this turnover with a benefit-rich plan most employees would drool over: e.g., no-cost prescriptions, $750 max hospital out-of-pocket.

How does Rosen accomplish this? First, its healthcare thinking is based on what it wants to achieve rather than what it has to provide. Beginning with the CEO, Rosen’s top executives really care about every one of their employees, as evidenced by the more than a few employees who have been there for 40-plus years. (Remember, this is a hotel chain, not a hedge fund with six-digit salaries). The strategies deployed vary, but they mainly support making the highest value care as accessible as possible.

Value—a fair return or equivalent in goods, services or money in exchange for something—is seriously lacking in American healthcare. Rosen took it upon itself to provide healthcare whenever and wherever possible, using its clout to lower costs. The company arranged special prescription drug discounts with Walmart. Rosen has on-site medical directors who personally engage with each employee’s health. The directors visit employees in the hospital and help arrange home delivery of costly specialty medications from lower-cost pharmacies. The company monitors and supports sick employees’ recovery and progress. It also built a health-and-wellness center for all employees and dependents with primary care, prescriptions, fitness instruction and more. I know all this sounds expensive, but the impact far outweighs the cost.

The second part of our adventure involved a flight to the Caribbean island of Grand Cayman, just south of Cuba, a beautiful tropical setting an hour-long flight from Miami (and with direct flights from a dozen other U.S. cities). The morning after our late arrival, we enjoyed the beautiful sunrise for exactly 20 seconds before we were bused to a facility called Health City Cayman Islands (HCCI). The single building on 200 acres (with significant future expansion plans) is clean, new and functional, though it is not nearly as grand as many U.S. mega-hospitals. Now two years old, HCCI is a joint venture between Ascension Health (a non-profit U.S. health system) and Narayana Health, a top Indian health system based in Bangalore. HCCI’s Indian roots are very important, because that country has no national healthcare or insurance system. The Indians have a novel approach to healthcare: You pay for it.

Narayana Health, which has achieved Joint Commission International (JCI) accreditation, performs a volume of procedures unprecedented in most hospitals. This volume is produced by a highly experienced team with quality outcomes that equal or exceed the best U.S. hospitals, but the team does it at far lower cost. Dr. Devi Shetty, Narayana’s founder and a cardiologist who has performed more than 25,000 heart surgeries, is focused on reducing the price of an open heart surgery to $800. (It currently sits around $1,400). Compare that with a 2008 Millman report that pegs U.S. open heart surgery costs around $324,000.

Some employers—Carnival Cruise Lines, for example—are so convinced of HCCI’s value (better health outcomes at far lower cost) that they will pay for all travel, including a family member’s accommodations for the length of a stay, and often waive an employee’s out-of-pocket costs associated with the procedure.

While HCCI’s pricing is higher than its Indian sister facility, many people could afford to pay for HCCI’s care with their credit card, if that were necessary.

HCCI charges a single, bundled fee that covers all associated costs, plus the cost of most complications — the director says, “Why should the patient pay for something if it was our mistake?” Compare that attitude with that at U.S. facilities, which have financial incentives to deliver as much care for as long as possible, and which get paid more if they make mistakes. HCCI’s upfront pricing model creates a serious incentive for efficiency and quality, because the facility is financially responsible for complications, infections and extra tests.

Patients and purchasers (i.e. employers and unions) should realize that nearly all U.S. healthcare—hospitals, doctors, drug companies and even insurance carriers—are structured to benefit from more care, rather than good, efficient or innovative care.

This means that purchasers and patients must use any available levers to get the best healthcare value they can. As Rosen and HCCI have proven, those levers are increasingly available.

Missing the Boat on ACA Online Tools

The number of brokers considering a human resources insurance system (HRIS) to handle compliance with the Affordable Care Act is staggering. It’s the No. 1 topic of conversation at every industry function I attend. I just left a top producer event for a carrier, and when I shared with a group of attendees that we we not only have fully embraced a tool for this, but make it mandatory for doing business with us, some jaws dropped.

Certainly, the number of options have proliferated as of the last couple of years. But let me say, and please excuse me for being blunt, if you are considering an HRIS now, you are way too late! If you don’t already have a single system you work with AND the people in-house to manage and build that system, you are way behind.

Many brokers I talk to think that picking and paying for a system is a big decision and a big investment…well, in my experience, that’s the easy and far less expensive part. By far the bigger piece is having the in-house experts needed to build the tools for each client, educate each client and get the employers and employees dependent on it for their day-to-day concerns related to benefits (and those little things called IRS codes 6055 and 6056). In my agency, our in-house lead, Joan, can get me from employer decisions to open enrollment-ready in less than four hours!

In my humble opinion, this tool is not something you use for your biggest and best clients. After all, there is a huge learning curve for most of us on this technology, and that curve is only elongated if you use the system sparingly. Instead, if you embrace it fully, wrap your arms around it and give it a big hug, it becomes more valuable to you and your clients in a far quicker fashion.

If you are already an expert in a particular system and have in-house resources to build it and use it, you are light years ahead of your competition. And if you do this, doesn’t this put you on par with Silicon Valley start-ups the technology front while blowing them away on the solutions side? Some industry gossip puts start-ups’ retention around 60%!

A little advice, if I may, on which system to go with:

1) Make sure there is no per-user, per-month (PEPM) charge.

2) Make sure the system is not tied to a particular carrier.

3) Make sure the employee interface is beautiful.

4) Make sure it can handle all clients, large and small.

5) Make sure it has very terrific ACA capabilities — which should be obvious.

6) Most importantly, make sure you get behind a system that you have 100% confidence will stay ahead of the rapid changes, and will always be dedicated to brokers.

Why U.S. Healthcare Is So Mediocre

In my capacity as benefits consultant, I often hear employees say they know we have the most expensive system in the world, but they feel that is a fair trade-off because we have the U.S. healthcare system is the best in the world.

Well, let me disavow you of that notion. Every metric measurable shows that we have a mediocre system, at best! The World Health Organization ranks the U.S. healthcare system as 37th in the world, strictly based on outcomes. That puts us tied with Slovenia but significantly behind Costa Rica, Saudi Arabia, Colombia and the bankrupt country of Greece.

Part of the reason for the poor results, I believe, is because we don’t ask hard questions on the quality of care we receive (and likely wouldn’t get answers, if we did). Does anyone know the readmission rate or infection rate of the hospital they are about to have a surgical procedure in?

Stephen Dubner of Freakonomics fame asked the following question: There are two major cardiology conferences each year, where more than 7,000 of the top cardiologists and thoracic surgeons go for one to two weeks each; what happens to the quality of care in their facilities while they are gone?

I tried to imagine: Would I want to even go to the hospital knowing the top doctors were away?

To get to the answer on quality of care, Dubner used 10 years of data from Medicare looking at more than 10,000 patients with emergency types of heart conditions (like heart attacks) so that patient choice of facility is largely removed as a variable. The baseline for the comparison against the work of these top doctors was data from teaching hospitals, even though conventional wisdom says, “Take me to the facility with the top doctors and keep me away from a teaching hospital. I don’t want any residents cutting their teeth on me!”

The answer: If you were brought to a teaching hospital for a heart attack, your mortality rate was about 15%. Mortality rate at a non-teaching hospital, with those top doctors, the week before or week after the convention was 25%! This is a HUGE swing! This means that, for every 100 heart attacks brought in, 10 more people die when the top doctors are around!

Let me put this in perspective. If you look at all treatments given for a heart attack, like beta blockers, Plavix, stents, angioplasty, aspirin….all these COMBINED reduce mortality by 2% to 3%!

Here is another interesting point. The amount of invasive treatments, like angioplasty and stents, are used in about 33% FEWER cases when the cardiologists are away.

Okay, so wait a second. Did I just say that better care is given when the top doctors are away, and, at the same time, less severe treatments are being administered and fewer dollars are being spent?

That sounds pretty counter-intuitive. Let me give my take on why.

When I think of a “top” cardiologist, an image comes to mind. He has lots of gray hair (not sure why my mind imagines a male, but it does), and has been doing cardiac surgery for decades. Does this sound about right?

Well, this doctor was trained in medical techniques 30 or 40 years ago, and he has likely been sued for malpractice, perhaps multiple times (which leads to “defensive” medicine). He frequently has ownership or at least compensation tied to the profitability of the facility where he practices. These traits lead to more care and often inappropriate (or unnecessary) care. The younger doctors, meanwhile, are less jaded by malpractice, less engaged in profits and more recently trained.

I ask you to question EVERYTHING when it relates to care. Assume nothing. One thing is clear; the more involved the patient is in her own care, the better the outcomes (and the lower the costs, too)!