Size, once past certain threshold values, may or may not matter during sex, there are too many interrelated variables to tease out a definitive statement.
However, size definitely matters in the ability of organizations to bear and spread risk. Insurance companies when they are operating in a manner that benefits the public are supposed to be experts at identifying and spreading risk throughout a population. The larger the population where risk can be spread, the closer the spread distribution of risk is to the absolute risk inherent in the population. The less variance between the risk pool and the aggregate risk, the cheaper the cost of covering and insuring against that risk becomes.
Obamacare has encouraged a trend that exisisted before 2009, and that is provider consolidation.
Thirty years ago, most docs either worked for themselves or worked for small practice partnerships where all of the docs knew all of the other docs in the practice. Today, more docs are working either directly for an insurer, for a hospital or are operating under one large corporate umbrella that has hundreds of doctors employed in dozens of specialties.
The same trend has occurred for hospitals. When there once was St. Patrick’s Hospital, East Nowhere General and Somewhere County Hospital in the city of East Nowhere, there is now the East Nowhere Medical Center with three campuses.
This trend was in place before Obamacare, but there were a couple of provisions within Obamacare that has encouraged the acceleration of this trend. The first and most important is the decision to reform payment models away from fee for service and towards a population health management model. The most notable program in this portfolio is the Accountable Care Organization project:
a capitation model where a provider group is given a fixed sum of money each year/month to take care of a roster of patients. This is the old HMO model, this is a part of the Accountable Care Organization (ACO) model, this is a “global budget” model. The idea behind this model is to get providers to be much more cost sensitive because their profit margin is dependent on not spending money.
A single hospital or a primary care provider group of four doctors and a thousand patients is too small to deal with the risk inherent in population health management. They may have the capacity to spread the costs of one or two patients whose costs are four standard deviations away from the acturarial mean but they can not take the cost impact of three of those patients. For instance a small PCP practice with two patients who have treatable Cystic Fibrosis would be financially destroyed in a ACO setting:
Laura and Cate’s daily regimen of two pills of Kalydeco costs $841 per day; that’s $307,000 each year, making it one of the world’s most expensive drugs. In most cases, private insurance picks up the bill. Medicare or Medicaid may pay as well. For patients themselves, the cost is about $15 for one month’s supply of the drug.
However a practice with one hundred providers and fifty thousand patients can more easily absorb the risk of having an unusually high number of CF patients both due to the size of their risk pool and the lower probability that there will be an unusual number of CF patients in that risk pool. For a small practice, the odds of getting at least one CF patient in a risk pool is low, but if there is one, there is a decent chance that patient has a sibling who also has CF.
There are two other significant policy changes that are driving provider consolidation. The first is the push by Medicare to pay for quality. Currently Medicare pays bonuses for hospitals and provider groups that have a very low rate of hospital re-admissions within thirty days of discharge, and penalties for groups that have poor rates of controlling re-admissions. Managing re-admissions means both performing high quality care in the hospital and aggressive risk management and follow-up out of the hospital. The follow-up and risk management (which can be as simple as making sure that Mrs. Smith gets a ride to her cardiologist three days after discharge) costs money. Centralizing follow-up has been a common business strategy.
The other major policy change has been the push towards electronic health records. Setting up an EMR system correctly is expensive and maintaining it so the data set is useful is also expensive. (Doing it on the cheap is extremely expensive and dangerous.)
However, the expense scales slower than patient volume, so a single EMR system covering 50,000 admissions is cheaper to implement and run then five systems covering 10,000 admissions apiece.
And finally there is the typical urge to merge for shareholder, consultant, and C-level capture of community and social value.
Consolidation increases the regional provider GINI co-efficient which means market power moves to favor providers marginally more.
Areas where there is a single dominant provider in either the entire market or a critical set of specialties will see the providers tell insurers “You either take my rate, or you can’t sell in this county as I’m the only provider in the region…”
We’ll come back to this point later next week. But before then, we’ll need to see what is happening with the insurance side of the payer-provider equations…
Hint… there may be some perverse incentives in play….
Corner Stone
Ummm, yeah. She was just letting you down easy on that one, Big Skip.
El Tiburon
More important than the length of the insurance plan is how robust, or the girth and width of the plan. If it covers a wider range of illnesses it will cause more satisfaction because the insurance hole will be filled more tightly. But, to for it really work to completion it may be necessary to pound thus point over and over again.
pseudonymous in nc
Here’s the problem: because hospital groups don’t want to be gobbled up by bigger hospital groups, they decide that it’s expansion or bust, and they start acquiring stuff like they’re dot-com companies because if you don’t acquire, you’ll be acquired. That leads to de facto monopolies on provision, without the benefits of a genuine monopoly subject to tight regulation.
Here’s another problem: your specialist gets acquired by a hospital group, and as if by magic, a bunch of the stuff that was once treated as “specialist outpatient” becomes “hospital outpatient”, and instead of specialist copays, they’re now billed against deductibles and coinsurance. So if, for example, your cardiologists’ tests are now done under the auspices of the local hospital behemoth, you’re left playing health insurance bistromaths once again because you have no idea what the hospital is going to bill, what the insurer has agreed to pay below the bullshit rack rate, and what you’re going to receive in the “pay in 14 days or else” letter afterwards.
Lolis
@Corner Stone:
Okay, that made me laugh. He pretty much walked into that one.
pseudonymous in nc
But let’s be honest here: the people deciding on EHR are generally not active users of EHR, and are receiving pitches from shiny-suited EHR salespeople who are also not active users of EHR and who would not be out of place on a used car lot. What tends to happen is that they go with the herd and buy into the proprietary system that their peers adopt — “nobody got fired for buying IBM” — when it might be more advantageous to go with a common framework like VistA that does not have as many shiny-suited salespeople.
jl
A dissonant note to consolidation is the practice of benchmarking everytihng (hospitals, medical practices, even individual doctors) to some standard. Often the benchmarking is done using opaque methods by rather arrogant and implacable self-proclaimed expert consulting companies.
Clinicians and administrators fear these benchmarking exercises. Just a few case in a hospital that require expensive biologic drugs may throw the budget out of whack, and make a hospital or a practice look bad for a year or two in a benchmarking exercise.
Even though the firms that do these benchmarks are supposed to sophisticated and expert (and honest?) I think that is hard to tell from their product. The reference groups used to establish a standard are often arbitrary, and I’ve never seen anyone adjust for the increase in variation that would be expected due to differences in what are effectively annual sample sizes seen in different organizations.
Often that expected variation is completely ignored and, as with managers fretting over next years open enrollment for employer plans, it reminds me of Mr. Micawber: one dollar per patient per year below benchmark, happiness, one dollar above, disaster.
It’s been almost ten years since I gave lectures on how to spot statistical problems with benchmarking for poor guinea pigs that endure it around my place,.so not sure how that has developed since then.
I wonder what distorting effect that kind of benchmarking has on clinical and management decision making among providers.
jl
A big problem is integrating the EMR with what is often called the MAR (Medication Administration Record). Integrating medications is a ferocious problem. But maybe Richard meant EMR to mean both. In any case, last I checked, the U.S. is a laggard in their development.
Kropadope
@jl: By “benchmarks” do you mean standards set by executives to maximize profits that will be used to pad their bank accounts instead of invested in the business?
scav
The other thread is dull, so I’ll go OT here, I mean, it’s the IgNobels! I’ll cite the medical one as doubly on-topic (although the probability one is good, we’re not discussing veterinary insurance).
jl
@Kropadope: Not sure if the two are related.
Benchmarking is an attempt to determine the relative economic efficiency or clinical performance of an organization. For economic efficiency, maybe a dozen hospitals will have to report cost-effectiveness measures and they are compared to each other, or sometimes to the average of some reference group of a second set of hospitals.
For clinical performance, it might be number of readmissions less than 30 days after discharge, or rate of medication errors.
Everyone has to compare themselves to the mean or median.
My experience with it back in the day is that it is a mess. Sometimes I have seen benchmarking stats where there aren’t even any data standards, the stats reported by an organization are not required to meet a detailed standard, and are not validated. So if you know how , you report some stat that you define yourself and game the system for your organization.
There are big consequences for organizations from benchmarking. Being in or out of payer network is one of them, as I recall. But I may have that wrong and Richard can correct me.
I hope that was clear.
And speaking of clear, I have clear out of here so will check in later to see any responses.
Bobby Thomson
@pseudonymous in nc: Never have tests done at the hospital. The
soulless vampirescarriers won’t pay.Tommy
I want hospitals and doctors paid on how they manage the wellness of their patients. I mean lets face it, if I was a doctor wouldn’t I want my patients to be sick? Need more of my services? Let me run more tests?
I’d think insurance companies would be behind this, since they make more money when you DON’T use their services.
mai naem
The length of time that the patient is going to be with the particular insurance co. should also come into play. The VA is supposed to be really good at taking care of a patient well overall because the assumption is that they’re going to have the patient for their whole life whereas insurance co.s are just looking at their annual revenue because you’ll hopefully dump the expensive patient next year.
Also, the Swedish system is supposed to have an annual bonus system where one geographically based health authority competing with multiple other regional authorities gets extra money for the new year based on outcomes from the previous year.
CONGRATULATIONS!
They are. Well, the not using their services part, anyway. They don’t give a shit if you stay healthy. Matter of fact, I think Alan Grayson pretty much nailed it with his “die quickly” statement.
Tommy
@CONGRATULATIONS!: Years ago I had a client, when I worked at an advertising agency, that was a hospital that also had a health plan in the DC metro area. We did a huge ad campaign for them each year around the open enrollment time for federal employees. One year I was tasked with looking at all our market research to determine what ads we should develop.
I recall coming across this amazing line item in their budget. It was for like a door hanger that you could put in the shower. Sent to all women in the plan, that explained how to conduct a self breast exam. They also had weekly classes women could attend to educate them about breast cancer.
Looking at the numbers, and I don’t recall exactly what they were, when they put this little program (and it costs them like pennies on the dollar) in place they saw a drastic increase in women finding their cancer sooner rather then later.
Putting aside the lives it saved, it saved the hospital countless millions.
There are a lot of folks out there smarter then myself, but I would have to think there are so many other things like this that could be done.
Kropadope
Oh, I just spent 45 minutes crafting a response, thought I identified some challenges and opportunities in health care and answered jl well. I hit submit and now it’s gone and I can’t retrieve it with my back browser button. I’m sad.
Villago Delenda Est
@Kropadope:
Ah, the prototypical FYWP moment.
I feel your pain.
Kropadope
But, in short, I think it depends on how the benchmarks are applied. Are issues you mentioned you mentioned, such as patient recidivism and medication errors treated as opportunities to improve outcomes, or are they weighed as less expensive of a problem than fixing it? Decades of short-term-centric promotion of the latter view have resulted in cost increases to the point where ordinary working people often can’t bear the expense, hurting current profitability. Fortunately, I think this is finally getting people to look at and find innovative solutions to these problems.
Kropadope
@Villago Delenda Est: Fiscal year work plan?
Villago Delenda Est
@Kropadope:
Frack You Word Press, the BJ commenting system.
Villago Delenda Est
OT but hilarious
Latest Newsmax Headline: Biden: House GOP Is ‘Neanderthal Crowd’
Well, duh!
Yatsuno
@Villago Delenda Est: SHRILL! UNCIVIL! PARTISAN! IMPEACH THEM BOTH!!!
(do I have the reaction right?)
Kropadope
@Villago Delenda Est: Does that mean that they are destined to extinction based on an inferior ability to cooperate than homo sapiens?
WereBear
I think it’s great that the new plan emphasizes the population health management model; especially if this leads to better outcomes.
Because “standard of care” gets degraded to standardization and messes people up.
The last ten years has been miserable for me; even though I GOT medical care. I had a highly regarded OB/GYN who stopped my birth control pills because I had hit The Age; even though they were keeping my endometriosis in check, and I didn’t have any risk factors. He refused to discuss alternative methods. So when it flared up with extreme pain, he wanted to take out the whole works and dangled cancer possibilities in front of me. I only agreed to the ovary and had an operation.
This turned into Sudden Menopause, and by the time I finally got some HRT help, I was frantic and was getting two hours of sleep a night. But then he started saying that I had to “taper off” this soon… because that’s the Standard.
I’ve since fired his mechanical ass and decided to find someone more flexible. Which is difficult in my rural area, but I do believe I’ve suffered enough.
Ed Drone
@Villago Delenda Est:
Isn’t that “Teanderthal?”
Glidwrith
With this encouragement towards consolidation, won’t this make the problem of the Catholic hospitals taking over secular ones even worse? If you are not familiar with the problem Richard, the Catholic-based hospitals after a merger will force the seculars to conform to their (questionable) ethics: no morning after pills for rape victims, no visitation rights for gay couples, no choice on end-of-life procedures (ie they force you to stay hooked up to machines no matter what your living will says, no sterilization for men OR women, no care for ectopic pregnancy (unless they reluctantly choose to butcher the woman and take out the entire fallopian tube, because then they are not directly responsible for the death of the fetus; or so their reasoning goes) and of course, the big one: no abortions even if the woman’s life is directly threatened.
Link that mentions some of the problems: http://thinkprogress.org/health/2013/05/13/2003121/catholic-hospitals-abortion-access/
Sister Rail Gun of Warm Humanitarianism
@Glidwrith: That was my first thought on reading the OP, too.
JoyfulA
@Glidwrith: That was the problem that derailed the merger of Abington Hospital and Holy Redeemer Hospital in the Philadelphia suburbs, via mass outrage.
Now Holy Spirit Hospital in Harrisburg is embarking on some kind of a partnership with the Geisinger system, which includes all the hospitals in eastern and central Pennsylvania north of Harrisburg and Allentown plus an insurance company. I seem to be the only person alarmed by the possibility that no one in Wilkes-Barre will be able to get a vasectomy.
Tim O
@Corner Stone: Really, it’s not your fault. I always yawn after sex.
RepubAnon
@jl: I’ve worked with some of these “experts” in benchmarking – the problem becomes that they MUST provide a number, whether or not they have relevant underlying data from which to derive a benchmark.
A blog post on Economists View titled Ten Things for Applied Econometricians to Keep in Mind (http://economistsview.typepad.com/economistsview/2013/09/ten-things-for-applied-econometricians-to-keep-in-mind.html) listed common problems for statistical economists analyzing problems, but could also serve a as list of the things that the benchmarking companies routinely ignore in their search for the one, true yardstick, especially rules 5 and 6:
pseudonymous in nc
@Bobby Thomson:
Yeah, my point is that ‘at the hospital’ can now mean ‘at the specialist’ or even sometimes ‘at the primary care provider’; once the deal has been struck with Hospital Behemoth Group, the same test or procedure or treatment in the same facility is now owned by HBG and billed accordingly.
I can see that working in the Kaiser Permanente integrated health model, but it doesn’t work with the standard tiered insurance reimbursement approach.
J R in WV
@Glidwrith:
You said “Catholic-based hospitals after a merger will force the seculars to conform to their (questionable) ethics:”
You meant: Catholic-based hospitals after a merger will force the seculars to conform to their
(questionable)total lack of ethics:FTFY!
J R in WV
@JoyfulA:
I strongly believe that no merger involving a Catholic institution shoud be approved without an iron-clad and inescapable clause requiring all medical providers to abide by the wishes of the patient regarding ethical decisions.
My ethics are the only ones that matter with regard to my health care, and anyone who disagrees with that statement has no ethics to operate from.
My Aunt had to get a lawyer and meet with hospital management to get my Grandmother out of the hands of a surgeon who was bound and determined to keep cutting a 93 year old woman until she healed for him. Management was informed that they were one mistaken decision by management from a malpractise-torture suit that would ruin their reputation and cost millions of dollars.
The doctor (using the term very loosely) was informed he was no longer allowed to be in the presence of the patient. Just in time to save his career.
Glidwrith
@J R in WV: Yes, I don’t think they’ve got much in the way of ethics. I loved one old granny’s take: “You can’t keep your priests from diddling children, what makes you think you have a say in how I choose to die?” And for what it’s worth, I am an ex-Catholic and hate their guts for what they’ve been doing.
StringOnAStick
@WereBear: Werebear, look for someone who prescribes bioidentical hormone replacement therapy; these are the people interested and trained in solving your individual problems in this area, rather than taking a “one size fits all whether you like it or not” approach. They tend to be the ones keeping up with the science as it evolves.
PS – our cat loves the Stinky Sox, wow!