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Transcript of THE COMMONWEALTH FUND Hospital Pricing and Patient Financial Risk Karen Davis President, The...
THE COMMONWEALTH
FUND
Hospital Pricing and Patient Financial Risk
Karen DavisPresident, The Commonwealth Fund
June 22, 2004
Hearing on Pricing Practices of HospitalsSubcommittee on Oversight
Committee on Ways and MeansU.S. House of Representatives
THE COMMONWEALTH
FUND
Average Annual Growth in Hospital Costs, 1988–2002
8.8
3.54.0
7.5
9.5
0
1
2
3
45
6
7
8
9
10
1988–1993 1993–1997 1997–2000 2000–2001 2001–2002
Percent
Source: K. Levit et al., “Health Spending Rebound Continues in 2002,” Health Affairs (January/February 2004): 147–159.
1
THE COMMONWEALTH
FUND
Hospital Costs Are a Major New Source of Increased Outlays, 2002
0%
20%
40%
60%
80%
100%
Share of Spending Increase
Hospital 34%
Physician 22%
Rx Drugs 16%
All other* 34%
* Includes spending for dental, other professional, and other personal health care services; home health and nursing home care; durable and other nondurable medical products; administration and insurance net cost; government public health; medical research; and medical construction.
Source: K. Levit et al., “Health Spending Rebound Continues in 2002,” Health Affairs (January/February 2004): 147–159.
2
THE COMMONWEALTH
FUND
3.1%2.6%
1.8%
0.6%
-1.0%
3.9%4.6%
4.0%
3.1%
2.1%
2.5%
3.4%
-2%
0%
2%
4%
6%
1994 1995 1996 1997 1998 1999
AHCs A ll Hospitals
Source: Commonwealth Fund; Report by Allen Dobson, Lane Koenig, Namrata Sen, Silver Ho, Lewin Group, Analysis of AHA Annual Survey data.
Trends in Operating Margins of All Hospitals and Academic Health Centers, 1994–1999
Note: Operating Margin = (Net revenue - Non-operating Revenue - Hospital Expense)/(Net Revenue - Non-Operating Revenue). AHC includes reported community hospitals data only; Total includes reported and imputed community hospital data only.
3
THE COMMONWEALTH
FUND
Current Financial Situation of U.S. Hospitals
Insufficient to maintain current levels of
service30%
Sufficient to maintain current levels of service
38%
Allows for some improvement or
expansions of care32%
4
Source: 2003 Commonwealth Fund International Health Policy Survey of Hospital CEOs.
THE COMMONWEALTH
FUND
Trends in Payment to Cost Ratios by Payer for All U.S. Hospitals, 1994–1999
Payment to Cost Ratio
Note: Includes reported community hospital data only.Source: Commonwealth Fund; Report by Allen Dobson, Lane Koenig, Namrata Sen, Silver Ho, Lewin Group, Analysis of AHA Annual Survey data.
1.24 1.241.22
1.17 1.16 1.15
1.001.021.041.020.99
0.97
0.960.970.960.950.940.94
0.80
0.90
1.00
1.10
1.20
1.30
1.40
1994 1995 1996 1997 1998 1999
Private Payer Medic are Medic aid
5
THE COMMONWEALTH
FUND
Health Care Costs Concentrated in Sick Few
0%
10%
20%
30%
40%
50%60%
70%
80%
90%
100%
U.S. Population Health Expenditures
1%5%
10%
55%
69%
27%
Source: A.C. Monheit, “Persistence in Health Expenditures in the Short Run: Prevalence and Consequences,” Medical Care 41, supplement 7 (2003): III53–III64.
Distribution of Health Expenditures for the U.S. Population, By Magnitude of Expenditure, 1997
50%
97%
$27,914
$7,995
$4,115
$351
Expenditure Threshold
(1997 Dollars)
6
THE COMMONWEALTH
FUND
Percent of Hospitalized Patients with Out-of-Pocket Costs Exceeding 10% of Income by
Cost-Sharing Amount
Source: S. Trude, Patient Cost Sharing: How Much is Too Much? Center for Studying Health System Change, December 2003.
716
2432
66
010
2030
4050
6070
Modest
Copayments*
$100
Deduc tible*
$500
Deduc tible*
$1000
Deduc tible*
$2500
Deduc tible*
Percent
* Notes:Modest Co-payments Option has $20 co-pay for physician visits, $150 co-pay for ED visits, and $250 co-pay per day inpatient hospitalization; $100 Deductible Option has 10% in-network coinsurance and 20% out-of-network coinsurance; $500 Deductible Option has 20% in-network coinsurance and 30% out-of-network coinsurance; $1000 Deductible Option has 20% in-network coinsurance and 30% out-of-network coinsurance; $2500 Deductible Option also 30% in-network coinsurance, 50% out-of-network coinsurance; Maximum out-of-pocket limits are set at $1,500 more than deductible for all options.
7
THE COMMONWEALTH
FUND
Two of Five Adults Have Medical Bill Problemsor Accrued Medical Debt:* Uninsured and
Low Income Most at Risk
32
53
41
576260
29
45
35
0
25
50
75
Total Income less than $35,000 Income $35,000 or more
All Uninsured Continuously insured
Percent of adults ages 19–64 with any medical bill problem or outstanding debt
* Problems paying/not able to pay medical bills, contacted by a collection agency for medical bills, had to change way of life to pay bills, or has medical debt being paid off over time.
Source: The Commonwealth Fund Biennial Health Insurance Survey (2003).Note: Income groups based on 2002 household income.
8
THE COMMONWEALTH
FUND
Average Annual Growth Rate of Total Health Care Spending per Capita Between 1991 and 2001 in
Selected Countries
4.1 4.1 3.9
3.1 3.1 3.02.4 2.4
2.1
0.0
1.0
2.0
3.0
4.0
5.0
Austra lia U nited
K ingdom
J apan New
Zealand
U nited
States
OECD
Median
F ranc e Germany Canada
Source: U.E. Reinhardt, P.S. Hussey, and G.F. Anderson, “U.S. Health Care Spending in an International Context,” Health Affairs (May/June 2004): 10–25.
Percent
9
THE COMMONWEALTH
FUND
Hospital Spending per Capita in 2000Adjusted for Differences in the Cost of Living
1,498
929
703618 581
823
0
200
400
600
800
1,000
1,200
1,400
1,600
U nited
S tates
F ranc e Canada Germany Aus tralia J apanba
a 1998b 1999
Dollars
10
Source: G. Anderson et al., Multinational Comparisons of Health Systems Data, 2002, The Commonwealth Fund, October 2002.
THE COMMONWEALTH
FUND
205 204
154 151
11899
155
0
50
100
150
200
250
Germany F ranc e Australia OE CD
Median
E ngland United
S tates
Canada
Hospital Admissions for Acute Careper 1,000 Population in 2000
a a
a 1999
Number of admissions per 1,000 population
11
Source: G. Anderson et al., Multinational Comparisons of Health Systems Data, 2002, The Commonwealth Fund, October 2002.
THE COMMONWEALTH
FUND
9.6
7.16.4 6.2 6.2 5.9 5.5
4.9
0.0
2.0
4.0
6.0
8.0
10.0
Germany Canada OECD
Median
A ustralia England U nited
States
Franc e N ew
Zealand
Average Length of Hospital Stay for Acute Care
ba
b
b
cb a
a
a 2000b 1999c 1998
Days
12
Source: G. Anderson et al., Multinational Comparisons of Health Systems Data, 2002, The Commonwealth Fund, October 2002.
THE COMMONWEALTH
FUND
Kidney Transplant Five-YearRelative Survival Rate
100 104 104 106113
0
20
40
60
80
100
120
U nited
S tates
U nited
K ingdom
New
Zealand
Aus tralia Canada
Standardized Performance on Quality Indicator100=Worst Result; Higher Score=Better Results
Source: P.S. Hussey et al., “How Does the Quality of Medical Care Compare in Five Countries?” Health Affairs, May/June 2004.
13
THE COMMONWEALTH
FUND
Satisfaction with the Health Care System
82937776
47
84
1612
4
0
25
50
75
100
A US CA N NZ UK US
Somew hat satisfied V ery satisfiedPercent
Source: 2003 Commonwealth Fund International Health Policy Survey of Hospital CEOs.
14
THE COMMONWEALTH
FUND
Disclosing Hospital Quality Information to the Public: Views of Hospital CEOs
in Five Nations
Source: 2003 Commonwealth Fund International Health Policy Survey of Hospital CEOs.
Percent saying should NOT be released to the public:
AUS CAN NZ UK US
Mortality rates for specific conditions
34% 26% 18% 16% 31%
Frequency of specific procedures
16 5 4 13 15
Medical error rate 31 18 25 15 40
Patient satisfaction ratings 5 2 0 1 17
Average waiting times for elective procedures
6 1 0 1 29
Nosocomial infection rates 25 10 25 9 29
15
THE COMMONWEALTH
FUND
If You Had New Funding to Invest in a One-Time Capital Improvement to Improve Quality of Patient Care in One Area of Your
Hospital, What Would it Be?
Percent saying: AUS CAN NZ UK US
Electronic medical records/IT 35% 47% 46% 38% 62%
Emergency room/OR/Critical care facility
26 18 4 22 13
Basic hospital/patient facilities 17 14 21 22 3
Diagnostic equipment/medical technology
9 16 11 10 3
Source: 2003 Commonwealth Fund International Health Policy Survey of Hospital CEOs.
16
THE COMMONWEALTH
FUND
Average Annual Rate of Increase in Real Community Hospital Expenses, 1950–1986
8.3
11.6
6.1
8.7
3.1
7.8
3.2
0
2
4
6
8
10
12
14
1950–1965* 1966–1971* 1972–1974 1975–1977 1978–1980 1981–1983 1984–1986
Percent
Source: K. Davis et al., Health Care Cost Containment, Baltimore: Johns Hopkins University Press, 1990, p. 171.
Private Health
Insurance
Medicare & Medicaid
ESP
Post-ESP
HCC & VE
Market Era
Medicare PPS
17
* Annualized.
THE COMMONWEALTH
FUND
Cost-Sharing Reduces Likelihood of Receiving Effective Medical Care
56
85
5971
0
20
40
60
80
100
Low -Inc ome in Cost-Sharing P lans H igher-Inc ome in Cost-Sharing
P lans
Children Adults
Source: K.N. Lohr et al., Use of Medical Care in the RAND HIE. Medical Care 24, supplement 9 (1986): S1-87.
Percent
Probability of receiving highly effective care for acute conditions that is appropriate and necessary compared to those with no cost-sharing
18
THE COMMONWEALTH
FUND
Cost-Sharing Reduces Both Appropriateand Inappropriate Hospital Admissions
22
27
0
5
10
15
20
25
30
Appropriate Admiss ions* Inappropriate Admiss ions*
Percent reduction in number of hospital admissions per 1,000 person-years
Source: A.L. Siu et al., “Inappropriate Use of Hospitals in a Randomized Trial of Health Insurance Plans,” New England Journal of Medicine 315, no. 20 (1986): 1259–1266.
* Based on Appropriateness Evaluation Protocol (AEP) instrument developed by Boston University researchers in consultation with Massachusetts physicians
19
THE COMMONWEALTH
FUND
Cost and Quality Vary Widely Across HospitalsCoronary Artery Bypass Graft:
Observed/Expected Cost vs. Observed/Expected Quality Outcomes by Hospital
0.0
0.5
1.0
1.5
2.0
0.0 0.5 1.0 1.5 2.0 2.5
Poor Outcomes - Observed/Expected
Co
st p
er C
ase
- O
bse
rved
/Exp
ecte
d
High Quality Low Quality
High Cost
Low Cost
Source: S. Grossbart, Ph.D., Director, Healthcare Informatics, Premier, Inc.,“The Business Case for Safety and Quality: What Can Our Databases Tell Us,”5th Annual NPSF Patient Safety Congress, March 15, 2003.
20
THE COMMONWEALTH
FUND
Pay for Performance Programs
• There are over 75 pay-for-performance programs across the U.S.– Provider driven (e.g., Pacificare)– Insurance driven (e.g., BC/BS in MA)– Employer driven (e.g., Bridges to Excellence— Verizon, GE,
Ford, Humana, P&G, and UPS)– Medicare
• 2003 Medicare Rx legislation demonstrations of Medicare physicians a per-beneficiary bonus if specified quality standards are met
– Medicaid• RIte Care will pay about 1% bonus on its capitation rate to
plans meeting 21 specified performance goals• 4 other states built performance-based incentives into
Medicaid contracts—UT, WI, IO, MA• Evaluation of impact still pending
Source: Leapfrog report, draft for Commonwealth Fund.
21