What Measures Do Managed Care Organizations Employ To Ensure Cost-effective Services

[Winter 2010]

Toll-effectiveness research pinpoints all-time values for express wellness care dollars—and the results may surprise you lot

An interview with Harvard School of Public Wellness's Milton Weinstein offers some revealing insights into how the U.Southward. health care system could salve money past focusing on the cost per year of healthy life that each medical intervention provides. Non all new technology is likewise costly, he says—nor is every prevention strategy a money saver.

Weinstein, an expert on cost-effectiveness in medicine, is the Henry J. Kaiser Professor of Health Policy and Management at the Harvard School of Public Health (HSPH) and professor of medicine at Harvard Medical School. He spoke withReviewguest editor Madeline Drexler.

Annual pap smears or dialysis?

Q:Why did and so many people equate cost containment in wellness intendance, and assessing the costs and benefits of medical technology, with "death panels"?

A: Because we don't like to have government—nosotros don't similar to accept everyone—brand decisions for us. We don't listen using markets to ration things. If the price of a canteen of wine is too high, so nosotros'll buy a dissimilar bottle of wine. Merely if a big sign says the U.S. Department of Agriculture has adamant that you can't have prime rib because information technology'south besides expensive, people don't similar it.

Q: How can studies by yous and others in toll-effectiveness research aid answer the question of how we might pay for universal wellness care coverage?

A: Cost-effectiveness looks at technologies and drugs and treatments through an economic lens. How much do they cost? What do they cost compared to alternatives? And non merely what do they cost, but is it worth the price?

For example, we developed a concept called the quality-adjusted life year, or QALY. It reflects how many years of high-quality life a patient gains with a item intervention. Another number that we use to mensurate value is the price-effectiveness ratio. Basically, information technology tells united states of america the "price" of buying more healthy years with a new treatment compared with the standard treatment, and whether it'due south a good value.

Q:On that calibration, what dollar amount is considered a expert value—or toll-effective?

A: The World Health Organization [WHO] has a dominion of thumb: Three times per-person income per quality-adapted life year gained is a cost-effective intervention. In this country, per-person income is about $forty,000, so an intervention that costs less than $120,000 per quality-adjusted life year would be considered cost-constructive according to the WHO dominion. David Cutler, the Harvard economist, has suggested $100,000 as a reasonable value.

Here are some examples. If a doctor prescribes a beta-blocker for a high-take chances patient after a heart attack, it costs about $5,000 to buy that person 1 quality-adjusted life year. If a doctor gives a patient with HIV combination antiretroviral therapy, it costs $twenty,000 to purchase i quality-adjusted life twelvemonth. Dialysis for end-stage kidney failure costs $50,000 to $60,000 per quality-adapted life yr, which is still a skilful value in this country.

Q: Are today's new, expensive treatments usually bad values?

A: Not necessarily. Some expensive breakthroughs not only bring better wellness outcomes, but are well worth the coin. One surprising example is the implantable cardioverter defibrillator, which uses electrical shocks to restore normal eye rhythm. Its cost-effectiveness ratio compares favorably to dialysis for finish-stage renal disease—which nosotros have as being worth the money.

Another example is a new class of drugs for breast cancer, called aromatase inhibitors. A colleague of mine was at a clinical meeting where a well-known cancer specialist said these drugs will never catch on, because they're also expensive—costing more twice as much equally the standard treatment. Well, it turns out that the cost-effectiveness ratio was on the gild of $twenty,000 per quality-adapted life yr. It'south an expensive drug, only the benefits are dramatic, generally in longevity.

Q:What are examples of routine interventions that are poor investments?

A: The annual Pap smear. The cost-effectiveness of screening every twelvemonth compared to screening every two years is almost a million dollars per quality-adapted life twelvemonth. It'due south not because it costs a one thousand thousand dollars to do a Pap smear every yr. It'due south because the gain in per-person life expectancy is on the gild of hours to days. By doing a Pap smear every twelvemonth on every adult female, you only catch a few treatable cervical lesions that you would accept missed if you did information technology every other year, just the actress cost of doing this for every adult female is much higher. That's not to say information technology's non worth doing Pap smears. Doing a Pap smear in one case every four years is extremely cost-effective. Doing it every three years instead of every four is withal cost-constructive. Every two years instead of every 3 years starts to go less cost-effective than the implantable cardioverter defibrillators I was talking nearly. And screening every year instead of every ii costs nearly $800,000 per life year gained compared to every two years.

That'south why the standard of care is gradually moving toward less frequent screening. If you get 3 consecutive normal Pap smears, it's OK to start doing them less frequently. If vaccination against the virus that causes cervical cancer—human being papillomavirus—catches on, then guidelines may well shift toward even less frequent screening.

Q:How much money could be saved if we thoroughly analyzed the price-effectiveness of medical care?

A: There are wide variations in how often doctors social club tests, prescribe medicines, practice surgeries—not just in unlike parts of the country, only in hospitals that are right side by side to each other. One place may practice many, many times more procedures of a item kind than the place next door.

And if you expect across regions of the state or across hospitals or states, you oftentimes see negative relationships between expenditures and outcomes: areas or states or hospitals that spend more practice worse past their patients.

One interpretation is that if nosotros could make the loftier-spending/poor-operation hospitals or regions or service areas more similar the lower-spending/better-outcome ones, we could save coin and improve health at the aforementioned time. Some people take that to mean there's waste material in the system. But the testify says that we already may have cut most of the waste.

Q:Then what's a better caption for these gaps in spending and functioning?

A: The low-price areas are doing things that the high-cost areas aren't. In other words, the low-cost areas are using more cost-effective services: counseling to quit cigarette smoking, colonoscopies, giving beta-blockers to patients after heart attacks. These are well-established interventions that are constructive and as well are cost-constructive. But they're underutilized.

Q:What about the loftier-spending systems? What are some of their overused practices that are not cost-effective?

A: Intensive care unit treatment for patients with several fatal conditions, extra diagnostic tests such as MRI, CT scans, and PET scans. They're expensive, and for many patients who don't accept clear indications of a illness, you get teeny-tiny gains. Sometimes you're talking about toll-effectiveness ratios of millions of dollars per quality-adjusted life year. Many of the same tests are cost-effective for the right patients, but very cost-ineffective for the wrong patients.

If y'all do more of those expensive things that have marginal value and less of the price-effective things that have proven value, then you go places that spend more and get worse outcomes.

Q:How do other nations handle this problem?

A: Most countries of the adult earth use price-effectiveness analysis to grade policy effectually their national health insurance plans. We don't have a national insurance plan, but nosotros do have Medicare, which is national health insurance for people over 65. All the same Medicare doesn't look at price.

Q: What'south at stake if we don't have a national discussion nigh the costs of medical technology?

A: Costs volition keep going up. People will continue demanding plush new procedures. More and more than people will have inadequate care. From a public policy viewpoint, we could end upward with more disparities in this country than nosotros already have—which is the worst in the developed world.

Q:In other words, rationing?

A: Yep. The biggest way we ration is by cutting people out of care. When 15 pct of people in this country have no health insurance, that'south rationing.

Q:If y'all were America'southward medical technology cess arbiter, with an unlimited budget and staff, what would you do to make this a rational, transparent system?

A: Inside a market-based system, we tin can create incentives to use more cost-constructive medical care. On the patient side, we currently have tiered co-payments for chemist's purchases. They could be linked to price-effectiveness. Patients could be required to pay up to a set amount per year, based on their income, for medicines that are not price-effective. For an antihypertensive medicine that's cost-constructive, you lot waive the co-pay. You tin can also reimburse physicians based on cost-effectiveness.

If I were the czar and I had the ear of the president, I would urge him or her to accept fireside chats. I'd say: Let's talk turkey. Let'south exist candid most how much of our wellness care dollar is going to interventions that offer benefits on the order of simply days or hours of improved health. Some of these interventions price a lot.

No president has talked about this, ever. They trip the light fantastic toe around it. They talk nearly cost savings and prevention and waste matter.

Q:Why can't they talk near it?

A: People don't want to think most it. They remember they can have their block and eat it too.

It'south amazing how uninformed people are. "I want the all-time bachelor medical care regardless of price"—xc percent of people concur with that. "I think that health intendance is as well expensive"—ninety percent of people hold with that. "I recall health care should be available for everyone"—ninety percent of people agree withthat. You can't have information technology all.

The price of health

How do economists calculate value for coin when it comes to delivering health care?

I way is to measure health comeback in terms of the "quality-adapted life twelvemonth," or QALY. This number reflects how many years of life are gained as a result of an intervention, on average, per patient, per episode—and weights the actress years of life by how patients subjectively describe the quality of those years.

Some other number used to measure value—the price-effectiveness ratio—is the net dollar increase in the cost of wellness care compared to the standard treatment, divided past the internet gain in health. Effectiveness and toll are always comparative, because ane treatment or process is always compared to another.

Toll-effectiveness calculations yield a number on a continuous scale, ranging from a very low number of dollars to gain a yr of life to a very high number of dollars to gain a year of life. An intervention that costs $100,000–120,000 or less per quality-adjusted life year is considered toll-effective.

Most medical treatments lack evidence that they are effective

More than than half of the medical treatments delivered today lack clear evidence that they work, according to the Institute of Medicine (IOM). To remedy the state of affairs, the U.S. Congress, in the American Recovery and Reinvestment Act of 2009, gear up aside $1.1 billion to leap-starting time enquiry on which interventions are and are not worthwhile.

In June 2009, the IOM, part of the National Academy of Sciences, issued a report that lists 100 areas where pop medical interventions need to be rigorously compared, caput-to-head. Height candidates for comparing are treatments for:

• Atrial fibrillation (the nearly mutual form of abnormal heart rhythm)—comparing surgery, catheter ablation, and drug therapy.

• Managing prostate cancer that has not spread across the prostate gland—comparing spotter-and-await, removal of the gland, and radiation therapy. Such studies would compare survival, recurrence, side effects, quality of life, and costs.

• Low-back hurting.

• Reducing baby mortality and preterm births among African American women—comparison prenatal care, nutrition counseling, smoking cessation, and substance abuse treatment.

• Preventing falls in older adults—comparing exercise and rest training versus clinical treatments.

A tale of two cities

In Texas, medical intendance is cheaper—and patients fare better—in El Paso than in McAllen. What departure does 800 miles make?

In 2006, per capita Medicare expenditures in McAllen, Texas, hovered around $15,000 per enrollee. In El Paso, 800 miles abroad, the figure was half equally much. What'due south behind the discrepancy? "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," writes Atul Gawande, associate professor in the Department of Wellness Policy and Management, in the June i, 2009, result ofThe New Yorker. "The principal cause of McAllen's extreme costs was, very simply, the across-the-board overuse of medicine."

In "The Cost Conundrum," which was apace touted every bit required reading in the Obama White House, Gawande describes McAllen as "the well-nigh expensive town in the most expensive country for wellness care in the globe." But his story isn't simply nearly irrationally lavish medical handling. McAllen'southward 5 largest hospitals also perform more poorly, on boilerplate, than El Paso's.

This confirms a large trunk of research from Dartmouth Medical Schoolhouse, suggesting that patients in high-cost areas often get more expensive treatments of marginal value but less of what actually made them better. One report, for instance, found that patients in high-toll areas were less likely to receive modestly priced preventive services, such every bit flu and pneumonia vaccines, faced longer waits at doctor and emergency room visits, and were less likely to accept a primary-care physician. According to Gawande, "They got more than of the stuff that costs more, only not more than of what they needed."

Gawande's prescription for alter? Emulate models such equally the Mayo Clinic, which is amid the highest-quality, lowest-cost health care systems in the nation. The clinic pools all the money doctors and the hospital organisation receive and pays anybody a salary, so that physicians aren't tempted to pad their ain incomes past ordering unnecessary procedures. It also carefully coordinates patient care, with a sprawling team of medical personnel working in sync with one another.

Gawande calls not merely for comparative effectiveness inquiry on specific treatments, just also for studies of what makes the best health intendance systems successful.

"I'k fascinated by the positive deviants of the world—the El Pasos that outdo the McAllens. They have learned something. And in fact, in that location are numerous communities beyond the country with lower-cost and higher-quality results," he observed recently.

"Nosotros need local medical leadership to acknowledge that we as clinicians are slowly bankrupting the land—and that nosotros take the power and responsibleness to work on our costly problems of overtreatment, undertreatment, and mistreatment." Otherwise, expenses volition go on to skyrocket and quality of intendance will remain uneven. As Gawande writes in "The Price Conundrum," "[W]eastward are witnessing a battle for the soul of American medicine."

Madeline Drexler is invitee editor of this issue of theReview

Photo: Christopher Thomas/Getty Images