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Researchers Point to Cost of Services, including Medical Laboratories, for Healthcare Spending Gap Between the US and Other Developed Countries

Feb 28, 2018 | Laboratory Management and Operations, Laboratory News, Laboratory Operations, Laboratory Pathology, Laboratory Testing, Management & Operations, News From Dark Daily

As healthcare reform continues to impact revenues for medical labs and anatomic pathology groups in an effort to reduce healthcare spending, researchers reinforce claims that prices are to blame, not quantity or quality of care

All facets of the US healthcare system—be it massive health systems, medical clinics, independent anatomic pathology groups, or medical laboratories—are experiencing pressure as healthcare reform attempts to manage ever-growing healthcare spending.

Current healthcare trends in the United States focus on determining medical necessity, adopting personalized medicine, and on determining the value various aspects of care. What these trends have in common is a goal of lowering the cost of care while contributing to improved patient care. However, research dating back as far as 2003 suggests overall prices play a significant role in US healthcare spending, particularly when the cost of care in the US is compared to the cost of care in other developed countries.

US Spends More on Healthcare than Any Other Country

A study published last year was the subject of a recent story in the New York Times about why healthcare costs in the United States are so much higher than in other developed nations. The NYT story referenced multiple studies on the subject that all made a similar conclusion: utilization of healthcare in the US is at or below the median compared with other developed nations, and it is higher prices for these services that causes healthcare in the US to be so expensive.

Health Affairs published one such study in 2003, titled, “It’s the Prices, Stupid: Why the United States is So Different from Other Countries.” Written by Gerard F. Anderson, PhD; Uwe E. Reinhardt, PhD; Peter S. Hussey, PhD; and Varduhi Petrosyan, PhD, the paper compared data from the Organization for Economic Cooperation and Development (OECD) for 30 member countries in 2000.

“The data show that the United States spends more on healthcare than any other country. However, on most measures of health services use, the United States is below the OECD median,” researchers state. “These facts suggest that the difference in spending is caused mostly by higher prices for healthcare goods and services in the United States.”

In a New York Times article, Austin Frakt, PhD (above left), Health Economist with the federal Department of Veterans Affairs, and Aaron E. Carroll, MD (above right), pediatrician and Professor of Pediatrics at Indiana University School of Medicine, collated the various research into healthcare spending conducted in the past decade and a half. (Photo copyrights: JAMA/The Accidental Economist.)

“What was true in 2003 remains so today,” Ashish Jha, MPH, a physician with the Harvard T.H. Chan School of Public Health and the director of the Harvard Global Health Institute, told The New York Times (NYT). “The US just isn’t that different from other developed countries in how much healthcare we use. It is very different in how much we pay for it.”

New Data Shines the Spotlight on Old Concerns

Using data spanning from 1996 to 2013, researchers published similar findings in a 2017 JAMA original investigation. “Healthcare spending increased by $933.5 billion from 1996 to 2013,” stated study authors Joseph L. Dieleman, PhD, Assistant Professor at Institute for Health Metrics and Evaluation; Ellen Squires, MPH, Policy Analyst at Kaiser Family Foundation; and Anthony L. Bui, MPH, MD Candidate at David Geffen School of Medicine, UCLA Health. “Service price and intensity alone accounted for more than 50% of the spending increase, although the association of the five factors with spending varied by type of care and health condition.”

The JAMA study authors noted they could not separate price and care intensity in their data. However, as pointed out by NYT, four other studies published by The National Bureau of Economic Research, the OECD, JAMA, and the Annals of Internal Medicine between 2010 and 2017 also link the cost of care directly with healthcare spending in the US.

“The JAMA study found that, together, [care intensity and pricing] accounted for 63% of the increase in spending from 1996 to 2013,” noted The New York Times, “In other words, most of the explanation for American health spending growth—and why it

has pulled away from health spending in other countries—is that more is done for patients during hospital stays and doctor visits, they’re charged more per service, or both.”

For example, the OECD pilot study from 2010 states, “One of the key findings of the pilot study is that the price level of hospital services in the United States is more than 60% above that of the average price level of 12 countries included in the study.”

The More Things Change the More They Stay the Same

As a cornerstone of economics, transparency in both pricing and quality serves to empower buyers—or in this case patients—to choose products and services based on their overall value. This, in turn, encourages competition and helps to keep prices in check.

However, the US healthcare system offers little transparency—either for patient outcomes or for the prices to be charged—with many patients not having any clue what a service will cost until the bill for their recent hospital stay, lab tests, wellness visit, or ER visit arrives. This has led to increased pressure from employers and patient advocates for hospitals, clinical laboratories, and other service providers to make this information available to the public.

Yet, the opposite scenario is the current reality. Lobbyists and groups representing hospitals, insurers, pharmaceuticals, and other facets of the healthcare system continue to promote legislation at the federal and state levels to keep this information private and away from both the public and their competitors.

The NYT highlights the balance surrounding the issue citing claims of increased innovation with higher prices. However, this only works if the market can support said prices. “Though it’s reasonable to push back on high healthcare prices,” NYT’s noted, “there may be a limit to how far we should.”

—Jon Stone

Related Information:

Why the US Spends So Much More than Other Nations on Health Care

Decomposing Medical Care Expenditure Growth

Comparing Price Levels of Hospital Services Across Countries

The Anatomy of Healthcare in the United States

Price and Utilization: Why We Must Target Both to Curb Health Care Costs

Factors Associated with Increases in US Health Care Spending, 1996–2013

It’s the Prices, Stupid: Why the United States is So Different from Other Countries

US Health Care from a Global Perspective

Bundled Payments for Joint Replacements Cuts Costs for Medicare; Hospitals Held Accountable for Quality of Care

May 19, 2017 | Compliance, Legal, and Malpractice, Laboratory Operations, Laboratory Pathology, Managed Care Contracts & Payer Reimbursement

Clinical laboratories must stay informed about the success of bundled-payment initiatives because they will need to negotiate a share of these payments where medical laboratory testing is involved

Research published this year concluded that bundled payments for joint replacement services performed on Medicare patients reduce Medicare’s costs without negatively affecting patient outcomes. Because these types of surgeries do not generally utilize many lab tests, the question is still out as to whether bundled payments allow clinical laboratories to be adequately reimbursed for their services.

The study of the bundled payment program was published in the Journal of the American Medical Association (JAMA). The researchers sought to determine the cause of the reduction in Medicare payments and hospital savings when bundled payment models for joint replacement surgeries were used.

The research was performed by staff at the Perelman School of Medicine at the University of Pennsylvania (UPenn). They examined hospital costs and Medicare claims for patients requiring hip and knee replacements at the 5-hospital Baptist Health System (BHS) in San Antonio.  (more…)

Pathologists Performing Molecular Autopsy in Cases of Sudden Unexpected Death Could Identify Genetic Clues That Help Surviving Family Members Assess Their Own Risk

Apr 17, 2017 | Digital Pathology, Instruments & Equipment, Laboratory Instruments & Laboratory Equipment, Laboratory Management and Operations, Laboratory News, Laboratory Pathology, Laboratory Testing

Pathologists could benefit if postmortem genetic testing becomes more commonplace following incidents of sudden unexpected death

Pathologists are discovering that molecular autopsy, also called postmortem molecular testing, could boost the chance of discovering the likely or plausible cause of sudden unexpected death, according to preliminary results from a study published in the Journal of the American Medical Association (JAMA).

Researchers led by Ali Torkamani, PhD, Director of Genome Informatics at the Scripps Translational Science Institute (STSI) and Assistant Professor of Molecular and Experimental Medicine at the Scripps Research Institute, sequenced samples from 25 sudden death cases. They identified: (more…)

Leapfrog Group CEO Wants Healthcare Professionals to Stop Rallying Behind Quality Measure Critics

Apr 27, 2016 | Compliance, Legal, and Malpractice, Laboratory Management and Operations, Laboratory News, Laboratory Operations, Laboratory Pathology, Laboratory Sales and Marketing, Laboratory Testing, Management & Operations

Binder argues that groups opposing ‘value’ often diminish clinicians’ role in hospital quality and patient outcomes; clinical labs often have the data on the outcomes generated by different clinicians

As healthcare moves steadily toward a value-based reimbursement model, Leapfrog Group CEO Leah Binder is urging healthcare providers to rethink their opposition to quality measures and criteria that reward improved medical outcomes.

“Clinicians have a choice: Seize the momentum of the value movement to finally get rewarded for excellence, or recite tired political talking points that minimize your life’s work,” Binder stated in an editorial she penned for Modern Healthcare. “Value will succeed either way, but it will be so much better infused with the knowledge and gifts of practicing providers.”

Many clinical laboratory managers and pathologists know that the Leapfrog Group carries quite a bit of clout in healthcare. Its members include some of the largest corporations in the United States. Collectively, Leapfrog’s members provide health benefits to more than 37 million Americans in all 50 states, and spend tens of billions of dollars on healthcare each year, according to this 2009 Leapfrog Group Fact Sheet. This is why health insurers, hospitals, and physicians pay attention to Leapfrog’s programs and public statements.

“If all hospitals implemented just the first three of Leapfrog’s four ‘leaps’ (our recommended quality and safety practices): over 57,000 lives could be saved, more than 3 million medication errors could be avoided, and up to $12.0 billion could be saved each year,” states the fact sheet.

Physician Opposition to Value-based Reimbursement Models Will Backfire

Leapfrog’s Binder argues the value-based reimbursement movement will succeed for three reasons:

1. “Value” is enshrined in the Affordable Care Act, with the Centers for Medicare and Medicaid Services (CMS) now tying almost 6% of hospital Medicare reimbursement to performance, and Congress replacing the sustainable growth-rate (SGR) with a value-based formula.

2. Private insurers also are transitioning their payment models, with 40% of commercial payments linked to value, up from 9% a year earlier. In addition, consumers, who are paying more out of pocket, are increasingly sensitive to value.

3. Big data is enabling quality to be quantified. Binder pointed to the leadership of the National Quality Forum (NQF) and others in showing “we can defensibly measure the quality side of the value equation.”

Binder warns that arguments made in the name of clinicians to denounce specific quality measures can backfire. In particular, she pointed to a study published in the BMJ that concluded clinicians have little impact on the “standardized mortality ratio,” therefore they should not be held accountable for it.

“Here’s the damaging assumption in the study: The only way physicians or nurses improve patient survival is by avoiding killer mistakes. Surely clinical skill impacts mortality more than that,” Binder stated in her Modern Healthcare editorial.

Similarly, Binder pointed to a study published in the Journal of the American Medical Association (JAMA) that also minimized the impact of clinicians. The study compared how United States hospitals scored on CMS composite safety measures versus alternative measures the researchers invented based on process quality composites. She summarized the findings as stating, “Some hospitals excel on the invented quality composites but fail on the CMS safety composite. Illogically, the researchers conclude that the CMS safety composite is flawed. One might just as well conclude that the researchers’ composites are flawed.”

“Ultimately, this paints a dismal portrait of individual clinicians. … If you excel on some but not all measures, the measures are wrong and you don’t excel at anything,” she stated.

Leapfrog Group CEO Leah Binder is urging healthcare professionals to embrace the move toward value-based reimbursement and rethink their opposition to quality measures that reward high-quality patient care. “Clinicians have a choice: Seize the momentum of the value movement to finally get rewarded for excellence, or recite tired political talking points that minimize your life’s work,” Binder says. (Photo copyright: Aaron Eckels/Crain’s Detroit Business.)

Leapfrog Group CEO Leah Binder is urging healthcare professionals to embrace the move toward value-based reimbursement and rethink their opposition to quality measures that reward high-quality patient care. “Clinicians have a choice: Seize the momentum of the value movement to finally get rewarded for excellence, or recite tired political talking points that minimize your life’s work,” Binder says. (Photo copyright: Aaron Eckels/Crain’s Detroit Business.)

Leapfrog Group Advocates Transparency for Both Insurers and Patients

The Leapfrog Group was formed in 2000, a year after the Institute of Medicine’s (IOM’s) landmark report on medical errors, “To Err Is Human: Building a Safer Health System,” in which the IOM estimated that preventable medical errors caused 44,000 to 98,000 deaths annually, with an associated cost of $17 billion to $29 billion.

The watchdog organization operates out of Washington, D.C. and is made up of more than 170 of the nation’s largest purchasers of healthcare, including:

• AARP;

• Boeing;

• Lockheed Martin;

• Marriot International;

• University of Michigan; and

• the Florida Healthcare Coalition.

Through its annual hospital surveys and research, the non-profit urges insurers and patients to use transparency to improve the safety and quality of the healthcare system.

The Leapfrog Group’s movement for transparency has grown to include more than 1,700 hospitals that participate in its annual survey on safety, quality, and resource use. In 2015, a record 1,750 hospitals submitted a survey, representing 46% of hospitals nationwide. It also has focused attention on reducing early elective deliveries, launched a pay-for-performance program, and designed a Hospital Safety Score to help consumers to make better healthcare decision.

Providers Should Seek Transparency

While negotiations about quality measures have reached a fever pitch, Binder would like to see providers insist on transparency and accountability for their patients, a step she says would validate clinicians’ work and expertise.

“While thoughtful critiques of measures are important, politically-motivated denial of measures is destructive in unintended ways,” Binder stated in her editorial for Modern Healthcare. “It often follows the unfortunate pattern of these studies in assuming that providers perform at essentially the same level of quality and/or their actions can’t be linked to patient survival or healing,” she observed.

“If all physicians and nurses believed their work had such modest impact, the burnout problem might be even worse,” continued Binder. “People who choose a career in healthcare tend to be bright, competitive and caring, and they won’t last long if they believe their talents make virtually no difference.”

As noted above, since the Leapfrog Group represents many of the major purchasers of healthcare, Binder’s recent comments should grab the attention of pathologists and clinical laboratory executives. They would do well to anticipate continued calls for more quality and more measurement of quality in healthcare as the movement toward value-based reimbursement marches on. Contributing value to hospitals, physicians, and payers is quickly becoming the new paradigm for clinical laboratories and pathology groups.

—Andrea Downing Peck

Related Information:

Clinicians Must Push Back Against Critics Challenging the Role of Quality Measures

Standardized Mortality Ratios Should Not Be Used to Benchmark Hospitals, Study Concludes

Leapfrog Group Fact Sheet

Concerns About Using the Patient Safety Indicator-90 Composite in Pay-for-Performance Programs

To Err Is Human: Building a Better Health System

Internationally-respected Experts in Clinical Pathology and Laboratory Medicine Ask: Why Don’t We Know More about Theranos’ Technology?

Sep 21, 2015 | Compliance, Legal, and Malpractice, Instruments & Equipment, Laboratory Instruments & Laboratory Equipment, Laboratory Pathology, Laboratory Testing

This secretive start-up medical laboratory testing company has not disclosed how its diagnostic test technology works, nor has it given laboratorians an opportunity to examine the technology

Several internationally-respected clinical laboratory experts are asking serious questions about Theranos and its diagnostic testing technology, and they’ve gotten few answers to date. Though the number of experts is small, their credentials in the clinical laboratory profession are impressive. In addition, some have published their critiques of the start-up medical laboratory company in well-respected medical journals.

One question these clinical pathologists and laboratory directors ask is why Theranos has so far been unwilling to provide more information about the lab testing technology it uses to deliver medical laboratory test results to patients and their referring physicians. Even as the company has declined to speak to the medical laboratory profession, Theranos has mounted a major public relations campaign designed to make a big impression on investors, business partners, and most recently on health insurers.

The clinical laboratory company in Palo Alto, Calif., gets plenty of attention because it claims to have disruptive technology that will allow it to perform medical laboratory tests equivalent to the current standard of care. Theranos says it can do this using a capillary specimen and return results in four hours, while charging a price that is just 50% of Medicare Part B lab test fees. Given these assertions, it is natural that pathologists and laboratory scientists who perform tests for patients, are curious about the scientific basis of Theranos’ proprietary diagnostic technology and what evidence Theranos has developed to support its claims of comparable accuracy and reproducibility. (more…)

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