Brian Klepper, PhD Page 1

Regulatory Capture:Why Only Non-Health Care Business Can Save America

From The Health Care Industry

Brian Klepper, PhD

Brian Klepper, PhD Page 2

Mis-Aligned Incentives

When an employer sits down with his health care relationships – broker, health plan, doctor, hospital, drug and device company – everyone else in the room wants health care to cost more, and they’re all positioned to make that happen.

Lynn Jennings, CEOWeCare TLC, LLC

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Health Care Cost

Growth

and the Potentialfor

Structural Failure

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Average Annual Health Insurance Premiums and Worker Contributions for Family Coverage, 2009-2011

Source: Kaiser/HRET Survey of Employer-Sponsored Health Benefits, 2009-2011.

$13,375 $13,770$15,073

$9,860 $9,773 $10,944

$3,515 $3,997$4,129

2009 2010 2011

Worker Contribution

Employer Contribution

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Cumulative Increases in Health Insurance Premiums, Workers’ Contributions to Premiums, Inflation, and Workers’ Earnings, 1999-2011

Source: Kaiser/HRET Survey of Employer-Sponsored Health Benefits, 1999-2011. Bureau of Labor Statistics, Consumer Price Index, U.S. City Average of Annual Inflation (April to April), 1999-2011; Bureau of Labor Statistics, Seasonally Adjusted Data from the Current Employment Statistics Survey, 1999-2011 (April to April).

Premium has grown 4x inflation for more than a decade.

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11/11/11 – Gallup/Healthways Survey of 90,000 American Adults

5% Drop in Employer Coverage 3 Years

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Projected Annual Total Household Compensation and Compensation Net of Health insurance Premiums

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Health Care’s Growing Burden on Federal Budget Crowds Out Other Needs, Like Education and Infrastructure Replacement

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Here’s Health Care’s Percentage of the Larger Economy Over Time

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Source: International Federation of Health Plans, Cited in NYTimes, 1/22/12

US Health Care Unit Pricing Is Much Higher

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And Lucrative Pricing Drives Higher Utilization

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And Lucrative Pricing Drives Higher Utilization

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An Inconvenient Truth

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Unnecessary/Inappropriate Care & Cost

“Our research found that wasteful spending in the health system has been calculated at up to $1.2 trillion of the $2.2 trillion (54.5%) spent in the United States.

[R]edundant, inappropriate or unnecessary tests and procedures [were] identified as the biggest area of excess, followed by inefficient healthcare administration and the cost of care necessitated by conditions such as obesity, which can be considered preventable by lifestyle changes.”

The Price of ExcessPricewaterhouseCoopers, 2008

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Perspective

• Congressional Super Committee was charged with identifying/saving $1.2 trillion over 10 years. (They failed.)

• In 2012 dollars, 54.5% of health care spending providing no value would equal almost $1.5 trillion annually.

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Health Care’s Excesses Threaten the Stability of Our Industry and the Larger US Economy

The Inescapable Conclusion

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Health Industry Lobbying & The AMA’s RUC

Regulatory Capture

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Lobbying & Health Care Policy

• In 2009 (during the reform proceedings), health care organizations spent $1.3 billion to lobby Congress.*

• 3,330 lobbyists participated: 6 for every member of Congress.*

In other words, policy is developed to favor the special rather than the public interest.

*Open Secrets. The Center for Responsive Politics

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Lobbying & Health Care Policy

A person can reach no other conclusion than this is a quid pro quo [this for that] activity.

Lobbyist for Public Citizen

They cut it. They chopped it. They reconstructed it. They didn’t bury it. I don’t think they wanted to.

Julian ZelizerPrinceton Professor of Public Affairs

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The AMA’s Relative Value Scale Update Committee (RUC)

• 29 physicians - 27 specialists & 2 PCPs

• CMS’ sole advisors on medical services valuation

• Secret proceedings, sham survey methods, composition unrepresentative of physicians in market, financially conflicted

• CMS has historically accepted 90+% of recommendations

• Commercial health plans typically follow Medicare’s payment lead

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Real World Impacts of RUC Influence

1. Over-values specialty services while under-valuing PC

2. Inhibits PC’s moderating influence and accountability function over specialty services.

3. Creates systemic incentives to perform more services, and more expensive services. (Specialists “practicing to the codes.”)

4. Payment disparities between PC and specialties. Crisis-level PC shortage now.

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Payment Disparities

Compare Primary Care Office Visit (99214) and Cataract Extraction with Intra-Ocular Lens Implant

• 99214 – 25 Minutes and 3 Different Problems. Could be anything. Palette is all medical knowledge. Medicare pays $111.36

• Cataract Extraction & Intra-Ocular Lens Implant – 15 minutes. Restores sight! 50 year old, low risk, repetitive procedure. Medicare pays $836.36.

• Hourly rate of Ophthalmologist pay is 12.5x PCP pay.

• PCP’s job is arguably more complex/challenging.

Klepper & Kibbe, Rethinking the Value of Medical Services, Health Affairs Blog, 8/1/11.

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Pt. Volumes – Primary vs. Specialty Care

• Typical 2012 established primary care office visit duration = 7.5-12 min. 30 years ago, it was 20-25

• PCPs paid by visit, so may refer time-consuming problems

•Most specialists profit from procedures

• Result: huge increases in specialty visits, Outpt diagnostics, procedures

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Procedural Volumes

• Lucrative procedures encourage specialists To “practice to the codes.”

• Physicians who own advanced imagers order them up to 6x more than those who don’t

• Stents are no more effective than “optimal drug therapy” and lifestyle changes, and they introduce significant risk/cost. Medicare spends $1.6 billion annually on drug-eluting stents.

• Endless examples.

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Procedural Volumes

Medicare spends a fortune each year on procedures that have no proven benefit and should not be covered.

When a procedure…is not supported by evidence, …taxpayers should have no obligation to pay for it.

Rita Redberg, MDEditor, Annals of Internal Medicine“Squandering Medicare’s Money”

NY Times, 5/25/11

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Health Plans & Primary Care

Question

If Empowered Primary Care Has Been Proven To Save Money, Why Don’t Health Plans Pay PCPs To Practice That Way?

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Winners & Losers

•Winners• Nearly Everyone in the Health Industry

(Except Primary Care)

• Losers• Patients – Unnecessary Care and Risk of Harm

• Purchasers (Employers, Taxpayers, Individuals) – Immense Unnecessary Cost

• Primary Care Physicians

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Major Health Care Structural Flaws

•Fee-For-Service Reimbursement

•Lack of Pricing/Quality/Safety Transparency

•Subjugation of Primary Care

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Will Non-Health Care

Business Save Us?

(They’re Our Best Bet, But It Doesn’t Seem Promising)

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The Prospects Aren’t Good

•They haven’t meaningfully mobilized to date

•Many seem resigned or are fleeing

•Appears to be no larger sense of enlightened self-interest

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The Employer’s Dilemma

We decided as a group to stop letting the health care industry take advantage of us.

Jane WolfeBenefits Manager

Fairfield ManufacturingLafayette, IN

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Collaboration in Lafayette, IN

• Relatively small community with concentration of mid-sized/large employers (e.g., Subaru, Purdue University).

• 2nd highest health care costs in IN

• Employers came together 6 years ago, pursued clinics, changed the market.

• This can work anywhere.

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Market-Based Reforms

Over the past 20 years, employers (& health plans) have:

• Significantly increased co-pays for “steerage.”• Introduced generic drugs and mail-order.• Introduced wellness, disease mgmt, lifestyle

coaching programs • Introduced incentives• Renegotiated network discounts.• Given employees “more skin in the game.”

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Market-Based Reforms

But we mostly haven’t

Managed the care process, like businesses would.

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Market-Based Approaches That Work• Empowering Primary Care

• Large Case Management

• Dynamic Pricing

• Data Collaboratives

• Medical Destinations

• New Technologies (e.g., Minimally Invasive Procedures, Genomics)

• Incentives/Patient Engagement

• Rx Step Therapies

• Lifestyle Management/Obesity Step Therapies

• Employer Leadership

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Case Studies

• Lowes & Cleveland Clinic

• Pepsico & Johns Hopkins

•Hannaford Grocers & Singapore Hospital

• Intel & Providence Health

• CalPERS, BSC, Hill and Catholic HC West

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Effective Onsite/Near-site Clinic Characteristics

• Outside FFS, So No Financial Conflicts, Incentive is for Appropriateness

• Comprehensive Medical Management Platforms That Incorporate Other Key Mgmt Approaches and Influence Care Throughout The Continuum.

• Strong Incentives For Participation. Free Visits, Drugs, Labs. Capture Them, Engage Them, So You Can Manage Anywhere In The System.

• Provable, Significant Savings. Based on hard data, not soft, productivity estimates.

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Onsite/Nearsite Clinics – Financial Impact

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Onsite/Nearsite Clinics – Competitive Advantage

Savings Grow Over Time, and Create

Competitive Advantage

Illustrative Only

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Acting In All Our Interests

•Health Care Organizations Comprise 1/6 of the US Economy and 1/11 of US Jobs.

•Only One Group is Larger, With the Influence to Overpower Health Care in Policy:

The Non-Health Care Business Community

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What Employers Must Do

• Re-Assess Your Health Care Relationships. Stop assuming that health care organizations put your interests first.

• Follow The Evidence. Institute value-based approaches that are proven to reduce cost while improving quality/population health status.

• Collaborate with other employers on health management approaches that work so that you change the market.

• Advocate. With other employers, pressure policy makers to develop health policies that are in the interests of you, your employees and their families.

Payment Reform Is Paramount!

Brian Klepper, PhD Page 43

Brian R. Klepper, PhDis a health care analyst and commentator. He is Chief Development Officer for WeCare TLC, LLC, an onsite primary care clinic and medical management firm based in Longwood, FL, and Managing Principal of Healthcare Performance Inc., a consulting practice based in Atlantic Beach, FL.

An active author and speaker, Dr. Klepper has provided health care commentary to CBS Evening News, the Wall Street Journal, the New York Times, and the Washington Post. He has published articles on Kaiser Health News, Medscape, Healthleaders, The New England Journal of Medicine, Modern Healthcare, Business Insurance and newspapers nationally.

In December 2010, he founded and now edits Care & Cost, an online professional health care magazine. He is a regular contributor to the Health Affairs Blog and other expert health care blogs. With his wife, he also maintains Elaine’s Journey, which details their struggle against Primary Peritoneal (Ovarian) Cancer.

Brian serves on the American Academy of Family Physicians’ Primary Care Services Valuation Task Force, and is a reviewer for Health Affairs and The Journal of Ambulatory Care Management. He serves on the Board of the Consortium for Southeast Hypertension Control (COSEHC), dedicated to translational medicine for vascular disease. He is an Advisor to the Lundberg Institute, the Patient-Centered Primary Care Collaborative, which advocates for medical homes, and the Center for Value Health Innovation, which helps business identify and implement approaches proven to improve quality while reducing cost.

In January 2011, with David Kibbe MD, he began a campaign, Replace the RUC!, that focuses on the most important driver of inappropriate health care cost. That effort has resulted in a lawsuit by six Augusta, GA primary care physicians against the US Centers for Medicare and Medicaid Services (CMS) over its longstanding inappropriate relationship with the AMA’s Relative Value Scale Update Committee (RUC).

Contact Brian at 904.395.5530 (o), 904.343.2921 (c), bklepper@gmail.com.