Category: Economics

Air ambulance reality warp in Wyoming

published date
September 3rd, 2019 by
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How much for a ride?

From reading (Why Red Wyoming Seeks The Regulatory Approach To Air Ambulance Costs) it appears that the laws of economics have been repealed and that the state’s rugged individuals have gone soft on us. But really, it’s just another take on the absurdity of the air ambulance business.

I had to laugh at this passage:

The air ambulance industry has grown steadily in the U.S. from about 1,100 aircraft in 2007 to more than 1,400 in 2018. During that same time, the fleet in Wyoming has grown from three aircraft to 14. [A]n oversupply of helicopters and planes is driving up prices because air bases have high fixed overhead costs. [C]ompanies must pay for aircraft, staffing and technology… before they fly a single patient.

But with the supply of aircraft outpacing demand, each air ambulance is flying fewer patients… So, companies have raised their prices to cover their fixed costs and to seek healthy returns for their investors.

Imagine if there were three gas stations in a town and then there were 14. Would prices go up or down? [Hint: Down.]

But healthcare doesn’t work like that, somehow. Ambulances in general and air ambulances in particular are great examples of why not. In particular, you can’t really refuse to be transported by ambulance and if you have private insurance the ambulance companies can stay out of network and stick you –the consumer– with the bill.

In this case, Wyoming is doing the right thing in trying to socialize the industry by pushing everything into Medicaid.  The legislature would be wise to use this as an opportunity to reconsider its opposition to Medicaid expansion, which it has rejected in the past, even it added a hard hearted and counterproductive work requirement.

I first covered the topic in March 2005, the first week I started writing this blog. What I wrote then (Air ambulances: costly, dangerous, slow?) is still worth recalling:

According to today’s Wall St. Journal, not only are air ambulances liable to crash (a crew member who worked 20 hours/week for 20 years would have a 40% chance of being killed), they are often slower than ground ambulances, and are used to transport patients who aren’t that sick.

Of course, there are situations where air ambulances make sense, such as in rural areas. On the other hand, even speedy air ambulances can’t do much about the 10-20 hours waits I mentioned in yesterday’s post on Mass General.

  • After 9-year-old Tyler Herman fell and broke his jaw in the wilds of Arizona, doctors at a community hospital decided the boy should fly to Phoenix to undergo plastic surgery for a gash on his face. During the flight he was well enough to sit up and remark on the scenery. Upon arriving in Phoenix, he waited nearly 20 hours to undergo surgery. “We could have driven him there in four hours,” says Sharon Herman, the boy’s mother. Her insurance didn’t cover air transport, leaving the Hermans with a bill for $25,000.

Wyoming is a rural state, and the picture that air ambulances conjure up is people being rescued from car crashes or heart attacks in remote areas. Of course that’s the story the owners of air ambulance services want you to believe.  Here’s what the lobbyist in Wyoming says about it:

“How many of these 4,000 people a year [flown by air ambulance] are you willing to tell, ‘Sorry, we decided as a legislature you’re going to have to take ground ambulance?’” Mincer said during a June hearing on the proposal.

Sure enough, in Wyoming the situation now is like it was in Arizona a decade and a half ago. “On-scene trauma responses,” represent just a small portion of the flights. In this case, supply creates its own demand and in many cases a ground ambulance would be a better option.

It’s tempting –but too easy– to place all the blame on private equity investors for the problem. State and federal government, health plans, physicians and even consumers have the power to make it stop.


By healthcare business consultant David E. Williams, president of Health Business Group.

#CareTalk Shorts – Trump sends dialysis patients home

published date
July 29th, 2019 by

Kidney dialysis is one of the most opaque and problematic sectors of the healthcare economy. It’s controlled by a duopoly that extracts big dollars from private payers while maintaining a symbiotic relationship with the Federal government. Patients aren’t particularly well served and costs are rising.

President Trump’s executive order aims to encourage the use of home dialysis. That’s a good thing, as CareCentrix CEO John Driscoll and I discuss in this edition of #CareTalk Shorts.

By healthcare business consultant David E. Williams, president of Health Business Group.

Should ICER be NICER? The case for analyzing the value of drugs

published date
June 20th, 2019 by
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It’s a tree of ICE, for those who hold fast to it

The headline in today’s Boston GlobePrice watchdog’s influence on drug makers expands; As nonprofit assesses treatments, some fear it inhibits key options— could have been written by a drug industry lobbyist. [And maybe it was, since the online headline instead uses the squeaky phrase ‘mouse that roared.’]

The article itself is more balanced. Of course it quotes the parents of a couple of kids who take expensive meds, objecting to anyone putting a price tag on their lives. But it also quotes health economics experts pointing out that the price can’t be infinity.

The Institute for Clinical and Economic Review (ICER) follows a data-based approach to assessing the value of drugs, utilizing Quality Adjusted Life Years (QALY) and other well developed metrics. It provides guidance on what a drug could be worth, both on an absolute basis and relative to other treatment options. It doesn’t set prices or prevent a drug from being made available by a public or private health plan. At most, it helps contain the prices of drugs that enter the market and points out cases of outright rip-offs.

Elsewhere in the world (pretty much everywhere) there are real forces limiting drug prices and impacting access. In the UK for example, the National Institute for Health and Clinical Excellence (NICE) decides which drugs and treatments will be provided to patients in the National Health Service. Sometimes drugs are rejected or their use is heavily restricted. On the flip side, patients don’t pay for the drugs that are approved.

In the US the drug pricing forces are heavily weighted in favor of higher prices. We shouldn’t fret about an entity like ICER.

Many drug companies have decided to play ball with ICER by providing data to help justify the value of their products. Some, like Vertex and Serepta have pulled back, saying ICER is biased against drugs for rare diseases. I don’t read ICER’s analyses that way.

The quality of ICER’s research is high, but of course the reports are limited by the data and analytical techniques that are available to the organization. The correct response is to build up the availability of real world evidence (RWE), especially from clinical registries that demonstrate how a drug actually improves (or doesn’t improve) the lives of patients. Patient-generated data and information from claims and electronic medical records can be helpful as well.

With better data we can have answers we are more confident in, and we can accumulate evidence on how drugs perform after they are launched, which can offer a refined understanding of their value.

Thanks to the 21st Century Cures Act, enacted in 2016, there is an increased demand for the generation of RWE. The industry is ramping up its spending on RWE for drug approval, safety monitoring, and reimbursement. New analytical techniques and enhanced data availability from wearable devices and other electronic sources are ushering in a heyday for RWE.


By healthcare business consultant David E. Williams, president of Health Business Group.

 

 

You’ve come a long way baby! And thanks to Ovia, your mom’s employer knows all about it

published date
April 25th, 2019 by
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There’s an app for that

The Denver Post (Tracking your pregnancy on an app may be more public than you think) has published an interesting and disturbing article about the rise of Ovia, an app that collects detailed and personal data from pregnant women and those hoping to conceive. I’m not surprised that the business model is to provide data to employers about their workforce in order to save on medical costs and reduce time away from work. But I am a little surprised at how much data employees are willing to enter on topics like their sex life, color of cervical fluid, miscarriages and so on, while the app also track things like what medical conditions they looked up.

“Maybe I’m naive, but I thought of it as positive reinforcement: They’re trying to help me take care of myself,” said [Diana] Diller, 39, an event planner in Los Angeles for the video-game company Activision Blizzard. The decision to track her pregnancy had been made easier by the $1 a day in gift cards the company paid her to use the app: That’s “diaper and formula money,” she said.

As I remind people using “free” apps –or ones they are paid to use– you’re not the customer, you’re the product. There’s plenty written on this topic so I won’t bother to rehash it here, but it’s worth remembering that the data provided by Diller and others can be combined with tons of other data from their use of Google, Facebook, Waze, exercise trackers, and more to create incredibly detailed and personal profiles.

In 2008 I wrote a brief blog post called Baby formula in the mailbox. “Honey, is there something I should know?” I was puzzled to see that it still gets a lot of hits in 2019 and that readers are still commenting about their own experiences. Back then, an au pair who worked for us had received baby formula from Abbott Nutrition. Somehow, some marketer thought she was pregnant. It was kind of embarrassing and of course could be problematic for a family relationship or if the pregnancy had ended prematurely.

Online data gathering has come a long way in the past decade. If Abbott once guessed you were pregnant, imagine how much more they –or many others– knows about you now. Maybe the users of these apps aren’t naive, just fatalistic about the idea that everyone knows everything anyway, so why not just take the formula and diaper money and run?

In a few years, Diller’s child will probably find the Denver Post article or maybe even this blog post. If that person is you, I’d be interested to know how you feel about it.

By healthcare business consultant David E. Williams, president of Health Business Group.

 

Partners opens lucrative outpatient clinics. I’m quoted in the Boston Globe

published date
December 10th, 2018 by

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An under-appreciated consequence of the BI-Lahey merger is that Partners now feels it can act with impunity. Until recently, Partners HealthCare dominated the Eastern Massachusetts market. As such it was the focus of government and public sector scrutiny and was somewhat constrained in its ability to act.

But now, Beth Israel Deaconess Medical Center and Lahey Clinic have received approval to consummate their merger. BI-Lahey and Partners are similar size, so now the pressure is off Partners to show restraint. In fact, it is taking the opportunity to catch up in some areas where’s it been lacking.

The Boston Globe (Partners HealthCare plans new outpatient clinics) documents one way Partners is taking advantage of the new market reality:

Partners chief financial officer Peter K. Markell said the merger didn’t trigger Partners’ plans to open new clinics. “I think we would have done it anyways — but it doesn’t hurt,” he said in an interview.

Partners and other hospital systems often charge facility fees at their outpatient locations.

“People like to talk about how big we are, but if you look at us geographically, we’re not well-rounded,” Markell said.

“We’re going to put a lot more focus on ambulatory growth,” he added.“That’s where we think the marketplace is going.”

I’m quoted in the middle of the article

“Partners is expanding in the most lucrative lines of business that they can — putting outpatient facilities in high-income suburbs,” said David E. Williams, president of the Boston consulting firm Health Business Group. “This is a very good way to make money. Previously, Partners might have faced more scrutiny for making these kinds of expansions, but now with BI-Lahey, they won’t get as much pushback as they might have gotten before.”

Partners is quite happy with the BI-Lahey merger. Those paying insurance premiums and healthcare bills are going to be a little less enthusiastic.


 

By healthcare business consultant David E. Williams, president of Health Business Group.