Saturday, July 31, 2010

Americans Cut Back in Visits To Doctors

Attached an article of concern published in the Wall Street Journal (July 29th, 2010) highlighting the fact that insured Americans are using fewer medical services. This may be a result of the increasing co-payments and deductibles which may force patients to see a doctor ONLY if it hurts and not for preventive medicine. Some speculate that we may face now a less "aggressive consumer of healthcare." The continued weak demand for healthcare services may slow the increasing healthcare costs and cut put pressure on health insurance companies to lower their premiums. I believe it when I see it!! Already, large insurance companies are reporting record profits. The top five earning insurance companies averaged profits of $12.2 billion, an increase of 4.4. billion, or 56% and so does the CEO compensation of those companies.

For family physicians the trend for less services may have significant adverse effects on the financial viability of their practices. Doctors visits have declined each month this year, including a 7.6% drop in May compared to May 2009! What can we do? Well, we need to trim as much as we can from our practice expenses. We also should make it more convenient and affordable for our patients to visit our offices. Early morning or late evening appointment, Saturday or Sundays, online consultation and discounted service packages for the uninsured. Patients will spend money for convenience and great customer service. . In the long term we have to abandon the fee-for-service system which forces us to see more patients for less.
Bundled payments may be an option too. Change is happening rapidly and quick adaptation and response to the changes guarantees survival. Its not too late!!

Americans Cut Back On Visits To Doctor

Insured Americans are using fewer medical services, raising questions about whether patients are consuming less health care as they pick up a greater share of the costs.

The drop in usage is showing up as health-care companies report financial results. Insurers, lab-testing companies, hospitals and doctor-billing concerns say that patient visits, drug prescriptions and procedures were down in the second quarter from year-ago levels

"People just aren't using health-care like they have," said Wayne DeVeydt, WellPoint Inc.'s chief financial officer, in an interview Wednesday. "Utilization is lower than we expected, and it's unusual."

Others say that consumers are beginning to forgo elective procedures like knee replacements. "We have a very weak economy and it's just a different environment for the elective parts of health care," said Paul Ginsburg, a health economist who runs the Center for Studying Health System Change and has been analyzing health-company earnings. But "this could go beyond the recession. Being a less aggressive consumer of health care is here to stay."

Continued weak demand could eventually put downward pressure on spiraling health-care costs, a long-sought goal of policy makers. It could also force insurers to lower premiums.

The new trend comes amid a broader drop in health-care use as more Americans lose their jobs and their health insurance. Such cutbacks have happened before in recessions, but the drop seems to be more pronounced this time, industry analysts say.

More Americans also are buying high-deductible health plans that force them to bear more of the upfront costs for health services. Some 18 million Americans bought high-deductible plans this year, compared with 13 million last year, according to Paul Mango, a director at consulting firm McKinsey & Co.

At the beginning of the year, Dan and Natalie Johnson, of Gig Harbor, Wash., used the website to buy a new plan with a high deductible, now set at $5,500 for their family. Their previous coverage had no deductible.

Now, the couple says they are thinking twice before scheduling doctor visits. Recently, when their 16-year-old daughter's allergy prescription ran out, Ms. Johnson called the allergist's office to ask for a renewal, without coming in for an appointment, as she would have done under their previous insurance.

And this spring, their son, 14, got his athletic physical at a local urgent-care clinic that charged just $40, instead of a doctor's office, which would have cost about $90. "We don't want to go through our savings going to the doctor," says Ms. Johnson, a photographer.

All this raises the question of whether, after a year of national attention on out-of-control health costs before the federal health overhaul passed in March, the trend portends a lasting change in the way Americans use the medical system.

Just a year ago, insurers reported surging health-care usage. Back then, more consumers were signing up for Cobra, the federal program that allows people who have lost their jobs to keep their insurance. The government had extended a subsidy to cover 65% of the cost of the coverage, which can be prohibitively expensive.

However, the Cobra subsidies only covered the unemployed for 15 months, and many people have hit the limit and dropped coverage. What's more, people who have lost their jobs since the end of May don't qualify for the Cobra subsidies.

To be sure, the change in behavior could be short-lived. On an earnings call last week in which it reported a decline in hospital usage, UnitedHealth Group Inc. said it thought utilization would rise again in the second part of the year, as Americans exhaust their deductibles and insurers start paying for services. Both Aetna Inc. and WellPoint said the utilization fall-off was new as of this year, and they had not seen the trend previously even as the economy has deteriorated. Some insurers also cited an unusually mild flu season this year as a temporary factor.

What's more, the federal health overhaul could cause usage to surge again. The new law will hand insurance cards to many Americans in 2014, which could unleash pent-up demand.

Utilization has ticked down in previous recessions, and tends to take a year or two to change because of how far in advance employers and insurers design their health plans, said Carl McDonald, an analyst at Citigroup Investment Research. He said the last time he saw utilization fall off was in 2003, adding that usage also dipped in the early 1990s. But he added the drop is bigger this time than in previous recessions.

The declines in utilization has boosted profits for insurers, who set their prices to cover anticipated medical costs. Insurance industry prices and profits have been under fire by Democrats and regulators this year. Insurers have justified high premiums by pointing to out-of-control medical costs. But the recent drop in usage could make it difficult for insurers to argue that continued price increases are necessary.

On Wednesday, Aetna said usage of health-care fell in the second quarter, feeding a 42% increase in profits. WellPoint reported a 4% earnings bump, saying that hospital admissions and usage of prescription drugs had dropped compared with a year earlier.

After the earnings releases, Rep. Pete Stark (D., Calif.) called on the companies to reduce their premiums since they are paying out less in medical care. In an interview, Aetna's chief financial officer Joseph Zubretsky said companies might eventually have to do just that. "If utilization stays down, it will have a favorable impact on rates," he said.

One company reporting evidence of lower utilization is CVS Caremark Corp., the drugstore giant. In its earnings announcement Wednesday it said it is seeing a drop-off in new prescriptions for maintenance drugs tied to a decline in physician visits.

People are "visiting fewer primary care doctors and specialists," said Chief Executive Tom Ryan, in a conference call with analysts.

Last week, Quest Diagnostics Inc., a laboratory-testing company, told investors that its volume fell 2.6% in the first quarter and 1.3% in the second partly because of decreasing physician visits. In addition, AmSurg Corp., an outpatient-surgery company, reported that same-store procedures declined by 2.6% compared to a year earlier.

Another sign that people are forgoing doctor visits or getting less care came from athenahealth Inc., which provides billing services and electronic health records for more than 1,700 medical groups. It said last week that the number of claims filed per physician, as well as the average value of the billing for each visit, had dropped from a year earlier.

Physician visits and hospital admissions are dropping this year, according to Thomson Reuters's healthcare business, which surveys doctors and hospitals. Doctor visits have declined each month this year, including a 7.6% drop in May from May 2009. Likewise, hospital admissions dropped in three of the first four months of this year compared to those months last year, including being down 2.3% in April from April 2009.

Monday, July 19, 2010

Pharmacists and the Patient Centered Medical Home

Attached an Op-Ed published in today's Wall Street Journal in which Pete Vanderveen, dean at the School of Pharmacy at the University of Southern California, emphasizes the role of pharmacists in chronic disease management to "alleviate the burden on physician," and to "fill the gap" in patient care. Furthermore, he calls for the change in reimbursement modalities to " allow pharmacists to play a larger role in patient care" admitting that it will initially increase medical costs.
I am not opposed to collaborate my patients care with pharmacists but we are missing the point.
By including additional providers in the health care delivery process we may inadvertently contribute to greater fragmentation and costs of care because we fail to coordinate such care. We may share the e-prescribing system with the pharmacists but not the entire medical record. We have to continue emphasizing that the patient centered medical home is not a loose collaborative of multiple provider. All health care professionals withing the PCMH will coordinate health care delivery along the horizontally and vertically structured health care delivery system to achieve, among others , the following goals: improved quality of care, decreased medical costs of care and to ascertain the outcome of care rendered.
Therefore, I do NOT agree with the position stated in the Op-Ed.
Looking forward to your comments.

How to Care for 30 Million More Patients

Pharmacists can help fill the gap and save money, too.

Many worry there won't be enough physicians to care for the estimated 30 million more patients who will be insured under the health law passed earlier this year. The Association of American Medical Colleges estimates a shortage that could reach 150,000 doctors by 2025.

Pharmacists, who number almost 300,000 today, could help fill the gap. The men and women who complete a four-year graduate professional program are trained to master complex medications—including more than 10,000 prescription drugs and dozens of new, more sophisticated ones approved annually by the Food and Drug Administration.

For patients with chronic diseases such as diabetes, hypertension and asthma who typically must take multiple drugs, pharmacists' knowledge of drug interactions can be life-saving. Yet pharmacists typically do little to help these patients. If they were allowed to take on some oversight duties, they could help alleviate the burden on physicians.

Pharmacists could review test results such as the blood glucose levels of patients with diabetes. They could adjust the dosage of prescribed drugs to achieve the goals for these patients set by physicians. They could keep an eye on patient use of other medications to avoid complications. And they could teach patients how to conduct self-administered tests, order lab tests when indicated, and monitor compliance with medication, diet and exercise regimens.

Considering that 40% of Americans have at least one chronic disease during their lifetime that requires regular oversight, the time savings for physicians could be substantial. And so might the costs of care.

This is not an untested theory. Pharmacists already manage some patients with chronic diseases. In 1996, the city of Asheville, N.C., a self-insured employer, began paying pharmacists to work with its diabetic employees. Known as the Asheville Project, the goal was to improve worker health and lower treatment costs for both employee and employer.

The results exceeded expectations. From 1997 to 2001, the city of Asheville reported that annual direct medical costs per worker dropped, on average, by $1,200 to $1,872—even as 15% more enrollees came within reach of their therapeutic goal.

The project has since been expanded to cover other chronic diseases, and Asheville estimates it has saved $4 for every $1 invested. Some 80 employers nationwide have adopted the treatment model, including Mohawk Industries, the national carpet manufacturer in Dublin, Ga.

At safety-net clinics in Los Angeles, Minneapolis and Pittsburgh, pharmacists have teamed with physicians to care for patients with chronic diseases while saving hundreds of thousands of dollars in treatment costs. This is remarkable because many of these patients struggle with homelessness, low literacy and unemployment. Now the federal Health Resources and Services Administration's Patient Safety and Clinical Pharmacy Collaborative is pushing for the presence of pharmacists at every community clinic in the nation.

Still, these projects are limited in scope because pharmacists are not considered health-care providers by Medicare and Medicaid. Private foundations or grants underwrite services at some safety-net clinics, while other clinics pick up the tab.

The next, critical step is to change the reimbursement codes of the Center for Medicaid and Medicare Services to allow pharmacists to play a larger role in patient care. Doing so may initially increase overall medical costs. But in the long run, as the Asheville Project demonstrates, it will save money and improve patient health.

Pharmacists are not spoiling for a turf war with physicians. The two professions already team up under "collaborative practice" agreements as in Asheville and Los Angeles that clearly define what the pharmacist can and cannot do.

The traditional medical model—in which a single physician provides all recommended care to patients—has run its course. With an aging population and millions of expected new patients, chronic disease rates are expected to rise. What we need is a new health-care delivery model in which the primary-care physician is complemented by a team of professionals and providers. Congress should enable pharmacists to become part of that team.

Mr. Vanderveen is the dean of the School of Pharmacy at the University of Southern California.

Wednesday, July 14, 2010

Medicare Fraud in the News Again

"In 2008, Medicare paid $520 million to Miami-Dade home healthcare agencies for treating diabetic patients
more than what the agency spent in the rest of the country combined, according to federal authorities."

Attached an article from today's Miami Herald highlighting the growing problem of Medicare fraud in South Florida and the efforts to contain its metastatic growth.
I still am puzzled WHY CMS cannot hold the contracted Medicare administrators in Florida accountable for their mistakes amounting to billions of dollars each and every year.
Its either a problem of political unwillingness to tighten the screws, or professional incompetency and absence of any oversight and control mechanisms.
Meanwhile, fraudsters getting away with hundreds of millions per incident and good physicians who are trying to serve Medicare patients are being nickled and dimed by CMS.
But our politicians do not have to worry to find a doctor who still takes new Medicare patients. They go to Walter Reed Medical Center to enjoy the benefits of a government controlled healthcare system. Go figure!!

Posted on Wed, Jul. 14, 2010
Magnitude of Medicare fraud in South Florida grows


As the feds squeeze tighter, South Florida's Medicare schemers have scurried into new territory to loot hundreds of millions of dollars from taxpayers, now billing the system for bogus mental health, physical therapy and other rehabilitation services.
The magnitude of the region's fraud is astonishing: Florida mental health clinics submitted $421 million in bills to Medicare last year -- about four times more than Texas and a whopping 635 times higher than Michigan, both also hotbeds of healthcare rackets, according to government records.

Florida rehabilitation facilities billed $310 million for physical and speech therapy -- 140 times more than New York and 10 times higher than California, records show.

Not all of that activity is criminal. But Florida's numbers are so much higher than other major states' that officials say the only logical explanation is fraud -- the bulk of it in Miami-Dade, Broward and Palm Beach counties.

Law enforcement and healthcare officials say that mental health and rehabilitation providers are the latest agents of pervasive theft in South Florida, long considered the nation's epicenter of Medicare corruption. The services are not needed or provided, yet the federal program for the elderly and disabled still foots the bill.

``This is like a game of whack a mole,'' U.S. Attorney Wifredo Ferrer told The Miami Herald. ``The numbers are off the charts.''

The vexing problem of Medicare corruption will take center stage on Friday, when Attorney General Eric Holder and Health and Human Services Secretary Kathleen Sebelius hold the nation's first healthcare fraud summit in Miami. The issue has gained a higher profile as the Obama administration pushes ahead with the expansion of government-subsidized healthcare for more than 30 million uninsured Americans.

FBI supervisory special agent Randy Culp, who joined the nation's first Medicare strike force in South Florida in March 2007, said the majority of fraud prosecutions still involve medical equipment such as powered wheelchairs, HIV medical services and home healthcare for diabetics.

But federal agents now are investigating more physical and occupational therapy schemes and looking at potential criminal cases against mental health centers, he said.

``We're seeing a shift of people moving into these areas,'' Culp said.

He and other experts said the transition occurred over the past year when Medicare imposed unprecedented caps on claims submitted by healthcare agencies for homebound patients seeking up to four daily nursing visits for insulin injections.

In 2008, Medicare paid $520 million to Miami-Dade home healthcare agencies for treating diabetic patients -- more than what the agency spent in the rest of the country combined, according to federal authorities.

``After we put pressure on them, they started moving their activities into other areas such as mental health and rehabilitation facilities,'' said Cecilia Franco, director of Medicare in South Florida. ``We see them move year after year from one business to another. Their patients' Medicare numbers carry great value, and they're always coming up with new ways to bill for them.''

Last year, for example, Florida's comprehensive rehabilitation facilities billed $171 million for physical, occupational and related services -- about 23 times higher than California and 26 times more than New York, records show.

Overall, Medicare fraud in South Florida costs taxpayers between $3 billion and $4 billion annually, according to experts. Nationwide, Medicare and other healthcare fraud is estimated to cost $68 billion annually -- about $18 billion more than the Obama administration plans to spend on education in the next fiscal year.

``The government has to stop pretending these are legitimate businesses and cut them off,'' said Washington attorney Kirk Ogrosky, former head of the Justice Department's healthcare fraud section, who oversaw hundreds of criminal prosecutions.

Last year, the Justice and Health and Human Services departments expanded criminal ``strike forces'' from Miami, Los Angeles and Houston to Detroit, Brooklyn, Baton Rouge and Tampa. They also committed about half a billion dollars to fraud-prevention efforts, and began working on sharing suspicious billing information with Medicare -- an agency that pays claims fast without verifying them -- to help stop fraud.

The fight to stamp it out is a constant struggle, despite convictions of about 1,000 defendants in South Florida alone who submitted roughly $3 billion in false Medicare claims since 2005. The region accounts for one-third of all healthcare fraud prosecutions in the nation.

During the past five years, thousands of Medicare fraud offenders have shown that they can outsmart the system. Their weapons: cash kickbacks to Medicare patients, repeated use of their ID numbers for unnecessary costly services, manipulation of medical records to justify phony charges, and submitting different billing codes to get around Medicare's technology to block false claims.

Authorities say the rising wave of Medicare fraud over the past decade is the result of more immigrants from Cuba and elsewhere switching from violent to white-collar crime, partly because the risks of getting caught and concurrent penalties are relatively low.

In South Florida, authorities have made a handful of major criminal cases against rehabilitation clinics.

In December, Dr. Fred E. Dweck of Hollywood, director of a Miami healthcare clinic, Courtesy Medical Group, was arrested along with 14 others, including nurses, operators and a patient.

Dweck, 74, was charged with accepting bribes to write prescriptions at $100 a pop for about 1,300 homebound patients at Courtesy and other local clinics. But the patients didn't need the prescribed diabetic, physical therapy and other costly services billed to Medicare,according to a federal indictment.

The Medicare bill from Courtesy and the other clinics: almost $41 million between 2006 and 2009. The government paid out nearly $24 million.

In April, a longtime Miami-Dade healthcare operator and his son, along with a business partner, were charged with bilking more than $2.8 million from Medicare in an undercover FBI case. Ernesto Angel Montaner, 69, and his son, Ernesto Montaner, 44, were accused of operating a chain of physical rehabilitation clinics in Miami-Dade that submitted millions of dollars in phony Medicare bills between 2003 and 2008.

Kickbacks were paid to assisted living facilities and others for Medicare referrals,prosecutor Ryan Stumphauzer said.

Ernesto Angel Montaner fled to Costa Rica in February 2009, five months after the FBI executed a search warrant at his four medical clinics, prosecutors said. He was arrested last week.

The son, Ernesto Montaner, and business partner Jose Antonio Varona, have pleaded guilty to one count of conspiring to commit healthcare fraud.

Sunday, July 11, 2010

CPI in Medicine: Change Management in Clinical Practice

"The health care industry could be on the verge of an efficiency revolution,
because it is currently so far behind in applying operations management methodologies

Attached a very interesting article from today's NewYork Times highlighting the advantages and benefits of applying continuous performance improvement (CPI) in hospital management.
These principles should not be restricted to inpatient care but should apply to the entire healthcare system. Therefore, physicians need to be taught how to apply CPI in their own offices to improve the quality of care, reduce costs and ascertain outcome of the treatments rendered. I hope that within organized medicine more enlightened leaders may emerge who challenge our profession to change. Unfortunately, ideological grandstanding and political cheerleading will not contribute to resolve the pressing healthcare financing and reimbursement issues we are facing. The translation of comparative effectiveness research into the clinical practice and the application of proven business management principles are of great value to maintain the practice of medicine. I hope that you can support and promote these issues.

New York Times, Sunday, July 11th, 2010

Efficiency Comes to the Hospital


TWO years ago, the supply system at Seattle Children’s Hospital was so unreliable that Susanne Matthews, a nurse in the intensive care unit, would stockpile stuff — catheters in the closet, surgical dressings in patients’ dresser drawers and clamps in the nurse’s office. And she wasn’t the only one.

“Nurses get very anxious when we can’t get our hands on the tools we need for our patients,” Ms. Matthews says, “so we grabbed them when we saw them, and stashed them away.” This, in turn, made the shortages more acute.

On a busy day last month in the I.C.U., it took Ms. Matthews just a few seconds to find the specialized tubing she needed to deliver medicine to an infant recovering from heart surgery. The tubing was nearby, in a fully stocked rack, thanks to a new supply system instituted by the hospital early last year following practices typically used in manufacturing or retailing, not health care.

There are two bins of each item; when one bin is empty, the second is pulled forward. Empty bins go to the central supply office and the bar codes are scanned to generate a new order. The hospital storeroom is now half its original size, and fewer supplies are discarded for exceeding their expiration dates.

The system is just one example of how Seattle Children’s Hospital says it has improved patient care, and its bottom line, by using practices made famous by Toyota and others. The main goals of the approach, known as kaizen, are to reduce waste and to increase value for customers through continuous small improvements.

Manufacturers, particularly in the auto and aerospace industries, have been using these methods for many years. And while a sick child isn’t a Camry, Seattle Children’s Hospital has found that checklists, standardization and nonstop brainstorming with front-line staff and customers can pay off.

“It turns out the highest-quality care also is the most cost-effective because we make fewer mistakes and create better outcomes,” says Patrick Hagan, the hospital’s president.

The program, called “continuous performance improvement,” or C.P.I., examines every aspect of patients’ stays at the hospital, from the time they arrive in the parking lot until they are discharged, to see what could work better for them and their families.

Last year, amid rising health care expenses nationally, C.P.I. helped cut Seattle Children’s costs per patient by 3.7 percent, for a total savings of $23 million, Mr. Hagan says. And as patient demand has grown in the last six years, he estimates that the hospital avoided spending $180 million on capital projects by using its facilities more efficiently. It served 38,000 patients last year, up from 27,000 in 2004, without expansion or adding beds.

Similar methods are now in place at other hospitals and health systems, including Beth Israel Deaconess Medical Center in Boston, Park Nicollet Health Services in Minneapolis and Virginia Mason Medical Center, also in Seattle. So many others have called for advice that Seattle Children’s put together a two-day workshop, presenting it to more than 200 medical workers and health care leaders from the United States and Europe.

“Some people think they have to choose between quality of care and saving money,” said Dr. David Chand, who attended the training and now uses C.P.I. methods at Akron Children’s Hospital in Ohio. “C.P.I. improves both patient outcomes and the hospital’s bottom line.”

To increase the number of surgeries the hospital could perform, Dr. Chand’s team spent about $20,000 overhauling the process to sterilize instruments, avoiding a $3.5 million expenditure to expand that department. More efficient scheduling in the M.R.I. department reduced the average waiting time for non-emergency M.R.I.’s from 25 days to 1 to 2.

All medical centers, especially larger ones, would have significant return on investment by using operations management techniques like C.P.I., says Eugene Litvak, president and chief executive of the Institute for Healthcare Optimization and an adjunct professor of operations management at the Harvard School of Public Health.

The health care industry could be on the verge of an efficiency revolution, because it is currently so far behind in applying operations management methodologies,” says Professor Litvak.

TO be sure, not everyone believes that factory-floor methods belong in a hospital ward.

Nellie Munn, a registered nurse at the Minneapolis campus of Children’s Hospitals and Clinics of Minnesota, thinks that many of the changes instituted by her hospital are inappropriate. She says that in an effort to reduce waste, consultants observed her and her colleagues and tried to determine the amount of time each of their tasks should take. But procedure times can’t always be standardized, she says. For example, some children need to be calmed before IV’s are inserted into their arms, or parents may need more information.

“The essence of nursing,” she says, “is much more than a sum of the parts you can observe and write down on a wall full of sticky notes.”

On June 10, Ms. Munn helped lead a one-day strike by the Minnesota Nurses Association against six local health care corporations, including her employer, partly in protest of lower staffing levels her union thinks have resulted from hospitals’ “lean” methods. “We felt the cuts created an unsafe environment for patients,” she said. The nurses’ contract was settled on July 1, with no increase in staff levels.

Brian Lucas, a spokesman for Children’s Hospitals and Clinics of Minnesota, says the lean efforts have been used to reduce unnecessary tasks and have not resulted in lower nurse-to-patient ratios. “To the contrary,” he said, “they have allowed nurses to spend more time delivering care to patients.”

Techniques like C.P.I. may indeed be hard for many hospitals to put into effect, says Mark Graban, a senior fellow at the Lean Enterprise Institute, a nonprofit research, education and publishing company. The process takes a large amount of time and requires a culture shift that many hospitals may not be able to accommodate or sustain. “If the leadership tries to force new ways of doing things, the staff may chafe under the successive changes,” he says.

And George Lebovitz, a management professor at Boston University, says there are limits to performance-improvement methods in hospitals. “Human health is much more variable and complex than making a car,” he said, “so even if you do everything ‘right,’ you can still have a bad outcome.”

Physical layouts can also interfere with changes that hospitals want to make, like reducing the distance a chemotherapy patient has to walk. And the techniques can fall short of their potential if they are used in just one area of a hospital, because a patient typically moves through many different departments.

At Seattle Children’s Hospital, Dr. John Waldhausen, the division chief of pediatric general and thoracic surgery, acknowledges that he and other doctors weren’t initially very enthusiastic about C.P.I. because they thought it would take some decisions about patient care out of their hands.

Over time, he changed his mind, and he is now a vocal advocate of C.P.I. “When you look closely, C.P.I. is the same scientific method we learned in medical school, including hypotheses, data collection and analysis,” he says. “It is not opinion and conjecture — it is data-driven.”

TEN years ago, Seattle Children’s set a goal to become the top hospital of its type in the country, and hired Joan Wellman & Associates, a process improvement consulting firm in Seattle, to help it get there. Ms. Wellman, who had worked with Boeing on its lean-manufacturing processes, suggested that the hospital apply similar principles.

Mr. Hagan says he became enthusiastic about lean manufacturing and C.P.I. after doing research and visiting local manufacturers. He directed the hospital staff to examine the “flow” of medicines, patients and information in the same way that plant managers study the flow of parts through a factory.

In a typical workshop at Seattle Children’s, a group of doctors, nurses, administrators and representatives of patients’ families set aside a 40-hour week to work through C.P.I. methods. They plot each “event” a patient might encounter — like filling out forms, interacting with certain staff members, having to walk various distances or having to wait for assistance — and brainstorm about how each could be improved, or even eliminated.

The hospital staff has been rolling out the program in stages over the last decade. “We have probably made over 1,000 small changes, and frankly it never ends,” says Mr. Hagan.

In his C.P.I. training, Dr. Bryan H. King, director of the department of psychiatry and behavioral medicine, was one of the first Seattle Children’s staff members to visit Japanese manufacturers. He learned that “waste” could be viewed as any action that didn’t add value to the customer.

Turning to his psychiatric inpatient unit, he and his team worked to pinpoint the goal of each child’s stay and to communicate daily with families. They also made other changes, like starting to arrange outpatient resources as soon as children enter the unit, rather than waiting until they are ready to leave. These kinds of changes increased satisfaction ratings from families and helped cut the average time in the hospital from 20 days to 10. The unit can now accommodate 650 children a year instead of 400.

Changes like these are celebrated by the hospital administration. “Their support fosters the idea that everyone can make positive changes to their departments,” Dr. King said.

Dr. Howard E. Jeffries, the hospital’s medical director of C.P.I., is a fan of visual aids. One favorite is a white board at the entrance of the cardiac intensive care unit. A map of the rooms, labeled with patient names, provides a quick status report on how full the unit is and how ill the patients are. Stick-on stars indicate a patient who needs to be in isolation; a blue circle shows a patient on a ventilator.

“At a glance, staff coming in for their shift can get an idea of what’s going on and what to be aware of,” Dr. Jeffries says.

The same types of visual cues are used for inventory levels or inspection status in factories.

Another of his favorites is the “Days Without Infection” poster, like a construction site’s “Days Without an Accident” sign. “It keeps our new safety protocols top of mind for people,” he says.

Standardization is also a C.P.I. cornerstone. Last year, 10 surgeons at Seattle Children’s performed appendectomies, and each doctor wanted the instrument cart set up differently. The surgeons and other medical staff members used C.P.I. to come up with a cart they all could use, reducing instrument preparation errors as well as inventory costs.

Dr. Lynn D. Martin, director of the anesthesiology and pain medicine department, says changes previously were instituted only when existing systems failed. Using C.P.I., teams can now make changes any time they think they can improve a process. When the operating room team saw that a tonsillectomy procedure involved filling out 21 separate forms, it sat down with the print vendor to remove duplications — and cut the number to 11.

The staff doesn’t have to wait for the perfect solution, Dr. Martin says, just a better one, because they can “keep making improvements year after year.”

Using C.P.I., the hospital has reduced the waiting time for many surgeries from three months to less than one. Recently, the bottleneck was not the surgeons’ time, but a lack of available inpatient beds for recovery. Examining the hospital’s census, administrators saw that there were empty beds on weekends. They realized that by scheduling more surgeries on Fridays, patients could recover over the weekend, when more beds were free. The change also benefited parents and patients who would miss fewer work and school days.

Lack of space in the recovery room was another logjam, and the hospital planned a $500,000 renovation to enlarge it. But a C.P.I. team saw that if a child’s parents went to a common waiting room during surgery, instead of an individual recovery room, more surgeries could be scheduled. Parents were given beepers to alert them when their child would arrive in the recovery room — and maps and colored lines on the walls helped point the way. Plans for the expensive renovation have been scrapped.

IN the hospital’s largest C.P.I. project yet, Lisa Brandenberg, the chief administrative officer, used the method to design a new $70 million clinic and surgical facility in Bellevue, Wash., just east of Seattle.

Medical buildings often have standard benchmarks — basing the number of examination rooms, for example, on the expected volume of patients. Ms. Brandenberg and her team instead used C.P.I. to map out common paths that patients, staff members, supplies and information would flow through. They worked in an empty office building, using cardboard mock-ups of surgical sites, recovery rooms, anesthesia areas and waiting rooms. Fifty staff members then play-acted various scenarios to test the design’s effectiveness.

The final design reduces walking distances and waiting times for patients by grouping related facilities together and creating rooms that can be used for more than one purpose. The hospital was able to shave 30,000 square feet and $20 million off of the new building, which is to open July 20.

“We can’t wait to see it in use,” says Ms. Brandenberg.

Use of Synthetic Marijuana on the Rise:

Attached you find an article from today's New York Times highlighting the increasing use of synthetic marijuana (K-2) and the efforts to curb the metastatic spread of these substances. A food store next to my office sells it as incense to teenagers and I have tried convincing the shop-owner to stop its sale. Her argument " if I stop selling it the kids go to the other guy around the corner and I loose customers."
I urge you to read this article and to consider what actions can be taken. I would NOT wait for the FMA to step in because government regulation is not part of their political agenda. This is an urgent public health issue and we need to act fast.
Looking forward to your comments.

New York Times, Sunday, July 11, 2010:

Synthetic Marijuana Spurs State Bans

ST. LOUIS — Seated at a hookah lounge in the Tower Grove district, Albert Kuo trained his lighter above a marbleized glass pipe stuffed with synthetic marijuana Inhaling deeply, Mr. Kuo, an art student at an area college, singed the pipe’s leafy contents, emitting a musky cloud of smoke into the afternoon light.

Mr. Kuo, 25, had gathered here with a small cohort of friends for what could be the last time they legally get high in Missouri on a substance known popularly as K2, a blend of herbs treated with synthetic marijuana.

“I know it’s not going to kill me,” said Mr. Kuo, who likened the drug’s effects to clove cigarettes. “It’s a waste of time, effort and money to ban something like this.”

On Tuesday, Gov. Jay Nixon, a Democrat, signed a bill prohibiting possession of K2. Missouri is the nation’s eighth state this year to ban the substance, which has sent users to emergency rooms across the country complaining of everything from elevated heart rates and paranoia tovomiting and hallucinations.

Investigators blame the drug in at least one death, and this month, Gov. Mike Beebe of Arkansas, a Democrat, signed an emergency order banning the substance. Similar prohibitions are pending in at least six other states, including Illinois, Louisiana, Michigan, New Jersey, New York and Ohio, according to the National Conference of State Legislatures.

“It’s like a tidal wave,” said Ward Franz, the state representative who sponsored Missouri’s legislation. “It’s almost an epidemic. We’re seeing middle-school kids walking into stores and buying it.”

Often marketed as incense, K2 — which is also known as Spice, Demon or Genie — is sold openly in gas stations, head shops and, of course, online. It can sell for as much as $40 per gram. The substance is banned in many European countries, but by marketing it as incense and clearly stating that it is not for human consumption, domestic sellers have managed to evade federal regulation.

“Everybody knows it’s not incense,” said Barbara Carreno, a spokeswoman for the federal Drug Enforcement Administration. “That’s done with a wink and a nod.”

First developed in the lab of a Clemson University chemist, John W. Huffman, K2’s active ingredients are synthetic cannabinoids — research-grade chemicals that were created for therapeutic purposes but can also mimic the narcotic effects of tetrahydrocannabinol, or THC, the active ingredient in marijuana.

In a statement, Mr. Huffman said the chemicals were not intended for human use. He added that his lab had developed them for research purposes only, and that “their effects in humans have not been studied and they could very well have toxic effects.”

Nevertheless, pure forms of the chemical are available online, and investigators believe that many sellers are buying bulk quantities, mixing them with a potpourrilike blend of herbs and labeling the substance K2.

“It’s not like there’s one K2 distributor — everybody is making their own stuff, calling it K2 and selling it, which is the most unnerving aspect,” said Dr. Christopher Rosenbaum, an assistant professor of toxicology at the University of Massachusetts who is studying the effects of K2 in emergency room patients.

The American Association of Poison Control Centers reports that so far this year there have been 567 K2-related calls, up from 13 in 2009. But investigators add that no one is really certain what is in K2, and people are arriving at emergency rooms with symptoms that would not normally be associated with marijuana or a synthetic form of the drug.

“I don’t know how many people are going for a box of doughnuts after smoking K2, but they’re sure getting some other symptoms,” said Dr. Anthony Scalzo, a professor of emergency medicine at the St. Louis University who first reported a rise in K2-related cases and is collaborating with Dr. Rosenbaum in researching K2’s effects. “These are very anxious, agitated people that are requiring several doses ofsedatives.”

Dr. Scalzo, who is also the medical director for the Missouri Poison Control Center, added that although tests had found cannabinoids in K2, it was unclear “whether the reaction we’re seeing is just because of dose effect, or if there’s something in there we haven’t found yet.”

That question remains at the center of an investigation into the death of David Rozga, an Iowa teenager who last month committed suicideshortly after smoking K2. Mr. Rozga, 18, had graduated from high school one week earlier and was planning to attend college in the fall.

According to the police report, Mr. Rozga smoked the substance with friends and then began “freaking out,” saying he was “going to hell.” He then returned to his parents’ house, grabbed a rifle from the family’s gun room and shot himself in the head.

“There was nothing in the investigation to show he was depressed or sad or anything,” said Detective Sgt. Brian Sher of the Indianola Police Department, who led the investigation. “I’ve seen it all. I don’t know what else to attribute it to. It has to be K2.”

But many users say they are undaunted by reports of negative reactions to the drug. K2 does not show up on drug tests, and users say that while they would like to know what is in it, they would take their chances if it means a clean urine test.

The Missouri ban, which goes into effect Aug. 28, prohibits several cannabinoids that investigators have found in K2 and related products. Nevertheless, investigators and researchers say that bans like the one in Missouri are little more than “Band-Aids” that street chemists can sidestep with a slight alteration to a chemical’s molecular structure.

“Once it goes illegal, I already have something to replace it with,” said Micah Riggs, who sells the product at his coffee shop in Kansas City. “There are hundreds of these synthetics, and we just go about it a couple of them at a time.”

Investigators say that a more effective ban might arise once the Drug Enforcement Administration completes its review of cannabinoids, placing them under the Controlled Substances Act. Currently, however, only one such substance is controlled under the act, though the agency has listed four others as “chemicals of concern.”

“It’s hard to keep up with everything,” said Ms. Carreno of the D.E.A., adding, “The process of scheduling something is thorough and time consuming, and there are a lot of gifted chemists out there.”

Meanwhile, states are largely on their own when it comes to controlling this new breed of synthetic cannabis, which often comes down to a game of cat-and-mouse where law enforcement agents, politicians, users and their families must formulate new responses as each iteration of a drug comes to market.

“Where does a parent go to get answers?” asked Mike Rozga, who said he learned of K2 only after his son’s death. “We talk to our kids about sex. We talk to our kids about drugs, and we talk to our kids about drinking and being responsible. But how can you talk to your kids about something you don’t even know about?”

Tuesday, July 06, 2010

Electronic Health Records and Privacy

Attached two very interesting articles from today's Miami Herald highlighting the issue of EHR usage in South Florida and privacy issues.
I am actually more concerned about the uncontrolled mailing and faxing of medical records between doctors offices and hospitals WITHOUT adherence to privacy rules. Just today I was castigated by a front-desk clerk who took issue that I had the audacity requesting a medical record release before releasing the records of one of my patients.
Using an Electronic Health Record for > 12 years I can attest to the very basic privacy features in EHRs: 1) audit trail- I can document who has accessed a specific record and when it happened,b) prevent access through passwords, c) can encrypt and secure stored files. NONE OF THESE FEATURES are available in paper records!!!
Anybody can open and read a paper record, doors to the record room are often unlocked, and stored paper records cannot be encrypted or secured except with mechanical locks. So why are we talking about privacy issues? Because of the FEAR of the UNKNOWN!!! A fear stoked by those who often do not want to change and prefer to adhere to past and obsolete procedures. Many of my colleagues belong to this group too. I do have hope though that we can overcome this fear because nobody avoids using his/her ATM of computer to manage their financial transactions.
Looking forward to your comments.

Posted on Tue, Jul. 06, 2010
Medical records go online, but at what cost to privacy?


Allison Grisham learns how to navigate her medical records with help from Dr. David Seo, a cardiologist at University of Miami Miller School of Medicine.
You're a South Florida resident on vacation in Boise or Bogotá. You suffer stomach pains and visit a local doctor. You whip out your BlackBerry, punch in your access code and show the doctor a list of your medications, allergies, past illnesses, tests, surgeries and advice from your physician back home.
Electronic medical records, or EMRs, are quickly becoming a reality for doctors and hospitals in South Florida and beyond.

If EMRs work, they'll be high-tech marvels -- letting patients access their own medical records on their home computers, helping doctors coordinate tests with each other to avoid duplication, giving medical researchers access to millions of medical records.

Nearly every major South Florida hospital and many doctors are joining a push by the Obama administration to spend $19.2 billion in federal stimulus money to help create a national EMR system by 2014.

Allison Grisham of Miami Beach just got her own EMR from her doctor at University of Miami Hospital, which is spending $100 million on a new Epic brand system. She hopes it can help end medical errors like one she barely avoided a few years ago.

``I was in a hospital once and the nurse tried to give me the wrong medication. We only stopped it because my mother and I refused to let her put it in the IV,'' she said. ``It could have been serious.''

There are drawbacks. Patient advocates worry that EMRs could pose a threat to privacy. Doctors and hospitals say they're not being given enough time to set up the complex electronic systems or enough financial help to pay for them. The systems can cost $50 million to $100 million for hospitals and $15,000 to $50,000 for private doctors.

But the potential pluses outweigh those complaints, many doctors and hospitals believe. The new systems are voluntary, but federal financial incentives for using them and penalties for failing to do so have most medical officials at least resigned to making the change.

Here's what else EMRs will do:

You're a university medical researcher and you suspect a popular diabetes drug is causing heart problems. On your PC, you study the records -- with patient permission, and without their names -- of all the millions of people taking the suspect drug and compare them to those who aren't.

``A researcher could access the records of nearly every patient in the country and solve problems quickly,'' said Dr. Pascal Goldschmidt, dean of the UM Medical School.

Or you're a hospital CEO, and EMRs help you communicate better and faster with other hospitals and doctors around the country -- something most hospitals can't do today even if they have older, simpler electronic medical records.


``That would eliminate a lot of duplication,'' said Linda Quick, president of the South Florida Hospital & Healthcare Association. She cited an example: an acquaintance had an EKG from his private doctor, was sent to the hospital next door for follow-up and was given another EKG 90 minutes later.

``Patients will take control of their own records. Exchange of information will be very fluid,'' said Tom Gomez, head of a Florida International University initiative promoting hospital information sharing.

``When we have the whole system, it will be as easy as using an ATM card,'' said Quick.

Still, experts predict years of hard work getting all the new EMR systems -- Epic, Cerner, Seimens and other brands -- to communicate with each other.

``This is going to be complicated,'' says Gomez. ``And we're in the very early stages. It's probably 10 years away.'' There are problems. Private doctors, especially in small practices, say they lack the money and technical staff to implement EMRs -- buying computers, hiring techs to run and repair them, taking time for the training to operate them.

``It's the wave of the future, fortunately or unfortunately,'' says Dr. Tony Prieto, a sole-practitioner family medicine physician in Plantation. ``I agree it's needed. I'm not saying I can afford it.''

Even some big hospitals say the program is moving too fast.

``The goal is noble, but the timeline is unrealistic,'' said Mimi Taylor, Baptist Health South Florida's vice president for IT. ``You have to give hospitals time to do it right.''

Baptist Health's six-hospital, 2,000-doctor system will spend $96 million by 2013 to install a Siemens Soarian system to meet the new federal requirements. An informal Miami Herald survey of 26 South Florida hospitals found every one is putting in a new system or upgrading an old one. In addition to UM Hospital and Baptist Health, hospitals installing new or upgraded systems include Broward's six-hospital Memorial Healthcare System, Tenet's 10-hospital chain, Miami Children's Hospital and Mount Sinai Medical Center.

At UM Hospital, six clinics already have begun offering patients a personal electronic medical record called MyUHealthChart. By July, all clinics on the Miller School campus are to have them. By December, patients will be able to schedule appointments and pay their bills electronically. Even Jackson Health System, with its financial woes, is upgrading its current Cerner EMR system as part of the federal push.

``We have to do it to remain competitive,'' said Fernando Martinez, Jackson's chief information officer.

The Obama administration is using both carrots and sticks to persuade hospitals and doctors to put in EMRs. The president set aside $19.2 billion from the American Recovery and Reinvestment Act of 2009 to subsidize the systems. Doctors who start implementing EMRs by 2011 can get up to $44,000 in extra reimbursements from Medicare or $63,000 from Medicaid.


Hospitals will get bigger reimbursements, although their financial officers can't say how much yet. Local administrators estimate federal subsidies will repay 20 percent to 50 percent of the cost of an EMR system.

The problem, said Prieto, the Plantation physician, is that the expense is up front for the EMR system, but the reimbursement is after the fact.

``I have 26,000 patient charts. I can't imagine what that will cost me.''

The reimbursement ``won't even be close'' to the expense, he said.

``If you're a solo practitioner, you have to go out and buy a new system and educate your staff to use it,'' said Cynthia Peterson, head of the Broward Medical Association. The stick: Doctors and hospitals that don't comply by 2015 will see their Medicare and Medicaid payments reduced by 1 percent in 2015, 2 percent in 2016 and 3 percent in subsequent years.

A Congressional Budget Office report predicts 90 percent of hospitals and doctors will have EMRs by 2019.

Posted on Tue, Jul. 06, 2010

In online medical records, worries about privacy breaches


If millions of patients across America have electronic medical records they can access 24/7 by punching a code into a home computer or BlackBerry, how safe are those records from identity thieves?
Even today, even without a nationwide data-sharing electronic medical record system, attempts to steal medical records are alarming.

Actress Farrah Fawcett, who died of cancer in 2009, in her final days helped expose an employee of a Los Angeles hospital who was paid to leak her medical records to a tabloid magazine.

Won't putting the records online make them even more vulnerable?

``I would never say a system can't be hacked,'' said Sam Butler, spokesman for Epic Systems, which is creating a $100 million EMR system for University of Miami Hospital. ``But we're not aware that our medical records have ever been violated.''

A typical new EMR system has security programs similar to those for ATM cards or other bank records. Patients get 20-digit personal IDs and must answer questions such as date of birth or mother's maiden name to access their records.

Many users are resigned to some risk.

``Today if you have a paper record, you don't know who sees it,'' said Jacquelyn Liberto, executive director of strategic operations at UM Hospital. ``With Epic it's more secure,'' she said, because nurses or assistants will be able to access only the parts of a patient's records needed for their duties.

In the push for nationwide EMRs, Congress has tightened privacy rules, increasing penalties for leaking information, requiring immediate notification of patients if their records are leaked.

It's not enough, argued a 2009 editorial in The Journal of the American Medical Association that said the law still does too little to protect patients' records and is too restrictive in giving legitimate access to medical researchers.

``The result is that patients' medical records are not well protected, and researchers cannot effectively search for important discoveries,'' the editorial said.

Some patients are afraid insurance companies or potential employers might use their medical conditions to deny them coverage or jobs. Others fear that lawyers might demand to see their records.

In 2003, Florida prosecutors subpoenaed medical records of radio host Rush Limbaugh, who was charged with improper doctor-shopping after he acknowledged he was addicted to painkillers. The Florida Supreme Court gave some of the records to prosecutors but kept others private.

``Electronic records are wonderful tools for research, but there's so much concern about protecting privacy that it becomes a challenge,'' says Liberto.

Read more:

Sunday, July 04, 2010

Medicare Payment Reform

Attached a very interesting article published today on the HEALTH AFFAIRS web site.
It contains a thorough and very readable analysis of the Medicare payment and SGR quagmire.
Several important quotes stand out:

* "Eliminating the SGR targets and permanently freezing Medicare physician fees at the 2009 level would cost $276 billion between 2011 and 2020."

* "The SGR system was supposed to give physicians incentives to practice more efficiently and thus gain higher fee increases, or at least avoid decreases. But the incentives don't work for individual physicians."

* "Medicare has a total cost problem, not just a physician cost problem."

The proposed solutions in my opinion could boost the role of primary care physicians:

"Whatever happens to the SGR targets, there is general agreement that long-range savings will require other reforms in the current payment system. Incentives for physicians are driven not just by the overall level of Medicare prices, but also by the prices for specific services. MedPAC and others have contended that certain services are "overvalued": The price is too high relative to the difficulty of providing the service or the physician's overhead costs.

Because overvalued services can be profitable, physicians have incentives to furnish more of them, while the system discourages the delivery of primary care and other undervalued services. Over time, misaligned incentives can even affect career choices, driving physicians into specialties with the most profitable services. CMS has been taking action on its own to correct some of these pricing problems, and further changes are mandated in the new health reform law.

Many observers argue that Medicare needs to move beyond the basic idea of paying physicians for each service that they provide to each patient. Paying service by service may encourage the fragmentation of care and the delivery of unnecessary services.

There are numerous proposals for payment changes that would promote integrated care delivery and encourage cost-effective medical treatment. One option is the bundled payment, a single payment to a provider for all services related to a specific disease or condition during some fixed period. Another is to encourage the development of accountable care organizations (ACOs), networks of physicians and other providers that would accept responsibility for the overall care of a population of Medicare patients, perhaps in return for a fixed per capita payment."

As family physicians we must realign and recalibrate our medical practice and learn to collaborate to meet the demands of integrated healthcare delivery.
The use of electronic health records and the development of a PCMH is one important step in this process.
Its just a matter of time until fee-for-service will be replaced by bundled payments. Escaping from the reality is not a solution and organized medicine seem to do just that.
Happy 4th of July.

Paying Physicians For Medicare Services

It is widely agreed that the existing payment system is broken. Congress has again enacted a short-term fix to a long-term problem that it will have to revisit.

What's the issue?
Congress has voted to halt and delay for six months a scheduled 21.5 percent cut for physician fees under Medicare that had gone into effect in June 2010. The change gives physicians a 2.2 percent rate increase retroactive to June 1. But unless a longer-term solution is found, this short-term "doc fix" will expire November 30, 2010, at which point the previously scheduled reduction will kick in.

This latest episode represents the fourth time this year that scheduled Medicare fee cuts to physicians have been averted at the last moment--or even later. A longer-term repair is needed, but will be costly for U.S. taxpayers.

A Broken System: There is widespread agreement that the existing system for paying for physician services under the Medicare program is broken. Under current Medicare rules, intended to restrain growth in spending, payments to physicians have been subject to supposedly "automatic" cuts for a number of years. However, Congress has consistently postponed those cuts and instead raised physician fees or held them constant.

The latest scheduled cut for physician fees was the 21.5 percent reduction that took effect in June. In May, the House passed a proposal to provide rate increases in 2011 and 2012, followed by an even sharper 35 percent rate cut in 2012. But the Senate was unable to pass similar legislation, contained within a long-stalled bill to extend unemployment benefits and provide Medicaid assistance to the states. Instead, the Senate approved the six-month, 2.2 percent rate increase in late June.

The Centers for Medicare and Medicaid Services (CMS) was for a time holding June bills, pending possible congressional action, but as of June 18 it had begun paying doctors' bills at the reduced rates required by current law. When it became clear that the Senate would not be able to approve the longer-term House bill, members in the House voted on June 24 to adopt the shorter Senate version, and President Obama signed it on June 25.

The Problem Is Money: A permanent "doc fix" that would override both pending and expected automatic cuts in future years could add as much as $276 billion to federal spending over the next decade. There is no agreement in Congress on how best to make the fix or on how to pay for it, whether by raising taxes, cutting other federal spending, or simply adding the amount to the federal deficit. This brief describes the likely options for congressional action in the months and years ahead.

What's the background?
Medicare pays physicians using what is called a fee schedule, or list of prices. This list sets a fixed maximum price for each type of service, such as an office visit, a particular surgical procedure, or a specific diagnostic test. Current law requires CMS to update these prices each year.

In computing the annual update, CMS starts with an estimate of inflation but then adjusts this amount upward or downward, depending on how rapidly overall spending for physician services has been growing. If spending has stayed within set targets, physicians get a bonus--a price increase greater than inflation. But if spending has exceeded the targets, the updated prices may rise more slowly than inflation or even be reduced.

The current system of spending targets was put into place by the Balanced Budget Act of 1997. The aim was to give physicians an incentive to restrain the growth in the number of services they furnished to patients, and to discourage them from providing higher-price services in place of lower-price ones.

The spending targets are set using a "sustainable growth rate" formula, often referred to as the SGR. The formula is complicated, but its basic goal is to keep spending for each beneficiary from growing faster than the per capita increase in the gross domestic product (GDP). GDP growth is included in the formula on the theory that it is not sustainable for Medicare physician spending to grow faster than the national economy.

Hope Not Realized: The expectation that this payment system would control spending was not realized. In the first few years under the 1997 rules, physician spending did stay within the targets, and physicians were rewarded with price increases greater than inflation. For 2002, however, the update formula in the law required a reduction in physician fees of almost 5 percent. Congress allowed the reduction to take effect. But when the formula dictated a further reduction for 2003, Congress overrode the Balanced Budget Act rules and approved a small fee increase.

That action set a precedent that has continued to this day. In each year since 2003, although the statutory formula would have led to a fee cut, Congress has instead granted an increase or at least frozen the rates and prevented a decrease.

Although Congress has repeatedly intervened to prevent rate cuts, it has never changed the formulas that dictate these cuts. Each time it has set the fee increase, Congress has specified that fee updates for later years should be computed as if it had not acted. What's more, Congress has never modified the SGR targets themselves.

Meanwhile, the number of services that physicians provide has been growing steadily, and the services are increasingly costly and complicated. That means that there has been a widening gap between actual spending each year and the amount allowed by the targets. Under the law, this ballooning deficit is supposed to be recouped by even steeper automatic rate cuts in the future.

Payment Cuts Kick In: In November 2009, CMS announced that under the formula, physician fees for 2010 would be 21.5 percent less than 2009 levels. The cut would have been even larger except for two factors. First, CMS on its own made some changes in the methods used for setting the targets. Second, the law limits how much fees can be reduced in any one year. However, cuts not made in 2010 would simply carry over into future years. Unless the law is changed, by 2014, rates could be about 40 percent less than 2009 levels.

Why has Congress consistently acted in this "Perils of Pauline" fashion, overriding automatic cuts on a short-term basis nine times so far? The answer is that a longer-range fix could greatly increase the federal deficit. Congress relies on the Congressional Budget Office (CBO) to measure the budgetary impact of proposed legislation. The CBO establishes a "baseline," projections of future spending and revenues that assume all current laws will be enforced. The baseline includes all of the physician cuts scheduled to take effect in future years, which will produce substantial savings for Medicare.

As a result, legislation that overrides future cuts would be "scored" by the CBO as increasing the deficit, in contrast with the current baseline. Eliminating the SGR targets and permanently freezing Medicare physician fees at the 2009 level would cost $276 billion between 2011 and 2020.

Postponing the cuts month by month or year by year, as Congress has done, has a smaller apparent budgetary impact. Yet even the six-month rate increase most recently passed by the House and Senate was scored as costing more than $6 billion, although the bill included savings provisions to offset that amount. Unless something is done before the end of this year, Congress will, once again, encounter pressure to avoid even bigger rate cuts in 2011 and later years.

Fixing The "Doc Fix": Few members of Congress wish to see physician payments slashed, and many would prefer to see some permanent "fix" so that they would not have to revisit the issue. Yet there are also mounting concerns about the overall size of the future federal deficit. In this context, many members on both sides of the aisle are reluctant to enact a costly fix without finding some way of paying for it.

What Are The Longer-Range Options?
Now that another short-term fix has been passed, Congress has several longer-range options. It could do nothing and let future cuts take effect. It could drop the SGR system and simply freeze future rates or let them rise with inflation. It could keep the current system but adopt various proposed modifications. It could adopt other fee schedule changes that might help slow spending growth. Or it could develop entirely new ways of paying for physician services.

Do Nothing: Congress could simply allow scheduled fee reductions to take effect. Without a fix, physician payments would drop as much as 40 percent from 2009 levels over the next several years. Although the government would save money, there are concerns about the potential impact that such large cuts would have on Medicare beneficiaries' access to health care. If Medicare rates fall too far behind those paid by private insurers, physicians might turn away current Medicare patients or stop accepting new ones. That would be more likely to happen if physicians have enough non-Medicare patients to make up for the income losses. The best guess is that physicians' ability to replace Medicare patients with those who have private insurance is likely to vary by geographic area and physician specialty.

Another possibility is that physicians would make up for lower Medicare fees by increasing the volume or intensity of services furnished to Medicare beneficiaries. However, it is unlikely that such "behavioral" changes could offset a 40 percent fee cut.

Whatever the potential effects of rate cuts might be, some people contend that the entire SGR approach has proved unworkable. The SGR system was supposed to give physicians incentives to practice more efficiently and thus gain higher fee increases, or at least avoid decreases. But the incentives don't work for individual physicians.

The problem is that if some doctors provide extra services, they will make more money in the short term than those who don't--yet the resulting penalties fall on everyone. Because of these perverse incentives, critics contend, aggregate spending targets may never be workable and should be replaced by more-focused cost containment methods.

Abandon The Sustainable Growth Rate System: Congress could decide to eliminate the formula that ties fee updates to trends in spending growth. Those who favor this step argue that since Congress is unlikely ever to allow the full scheduled rate cuts, it would be better and arguably more honest to take the full budgetary hit at once, instead of year by year. With no system in place for updating the fee schedule, Congress might at some point come up with a better approach.

A contrary view is that repeated short-term fixes to the SGR system are actually preferable. If the threat of rate cuts were permanently removed, Congress would never get around to fixing the system.

Others have suggested shelving the problem for some years, rather than a few months at a time, in the hope that additional breathing room would make it possible to develop a consensus around more comprehensive reforms in the system. But even that kind of half-measure would cost a great deal. For example, the CBO estimates that freezing the rates through 2014 would raise the deficit by $89 billion.

Make Long-Term Modifications To The SGR System: There are numerous proposals on the table to continue the current system of SGR targets, but with various modifications. CMS could simply wipe the slate clean and base future targets on actual current spending levels. In effect, past overspending would be forgiven, offering physicians a new chance to restrain spending but threatening them with penalties in the future if they failed to do so.

This approach, known as "rebasing," would be almost as costly as getting rid of the targets altogether. And rebasing would not correct the distorted incentives in the current system. Over time, physicians might once again ramp up service delivery until the formula dictated rate reductions.

Other options include setting separate spending targets for different services, different geographic areas, or even specific providers or groups of providers. For example, Congress could allow more spending growth in services such as primary and preventive care, while clamping down on such fast-growing areas as x-rays and other imaging services.

Another approach might be to establish separate targets for areas with lower and higher average per capita spending. Physicians in some areas deliver or order far more services for Medicare beneficiaries than do physicians in other areas, and there is little evidence that patients in high-volume areas have better health outcomes. Geographically based targets would arguably focus on constraining spending in high-cost areas.

Although these options are more focused than the current system, there is still a risk that they would penalize some efficient providers or reward some inefficient ones. To prevent this, updates or targets could be set for specific providers.

Under one proposal, CMS could identify physicians who provide or order an unusually high number of services and could reduce fee updates for those who fail to change their behavior. Any such option would be controversial. It would require extensive data collection and some consensus on how to distinguish inefficient providers from those who are treating difficult cases.

Finally, payment targets could be broadened to include a wider scope of services. The Medicare Payment Advisory Commission (MedPAC) has suggested that if payment targets are retained, they should apply to all health care sectors. MedPAC notes: "Medicare has a total cost problem, not just a physician cost problem." In this view, systemwide targets could pressure physicians, hospitals, and other actors to collaborate in order to reduce unnecessary or duplicative services.

Make Other Payment Reforms: Whatever happens to the SGR targets, there is general agreement that long-range savings will require other reforms in the current payment system. Incentives for physicians are driven not just by the overall level of Medicare prices, but also by the prices for specific services. MedPAC and others have contended that certain services are "overvalued": The price is too high relative to the difficulty of providing the service or the physician's overhead costs.

Because overvalued services can be profitable, physicians have incentives to furnish more of them, while the system discourages the delivery of primary care and other undervalued services. Over time, misaligned incentives can even affect career choices, driving physicians into specialties with the most profitable services. CMS has been taking action on its own to correct some of these pricing problems, and further changes are mandated in the new health reform law.

Many observers argue that Medicare needs to move beyond the basic idea of paying physicians for each service that they provide to each patient. Paying service by service may encourage the fragmentation of care and the delivery of unnecessary services.

There are numerous proposals for payment changes that would promote integrated care delivery and encourage cost-effective medical treatment. One option is the bundled payment, a single payment to a provider for all services related to a specific disease or condition during some fixed period. Another is to encourage the development of accountable care organizations (ACOs), networks of physicians and other providers that would accept responsibility for the overall care of a population of Medicare patients, perhaps in return for a fixed per capita payment.

Many people think these approaches could eventually yield real savings. Still, it could take many years for CMS to develop new payment systems and for providers to form the organizations that can receive the payments. In the interim, most Medicare physician services will still be paid on a fee-for-service basis. And Congress will still face the task of balancing budgetary concerns with the goal of maintaining access to quality care for Medicare beneficiaries.

What's next?
Because the six-month fix has now been signed into law, Congress will have to revisit the issue before December 1, 2010. Senate leaders are still hoping to negotiate a longer-term fix that would be part of a larger jobs and Medicaid assistance package for the states. The coming days and weeks will determine whether Congress is likely to consider more-permanent payment reforms, or take other steps to thwart a looming, major doctors' fee cut in an election year.

Centers for Medicare and Medicaid Services, "Payment Policies under the Physician Fee Schedule and Other Revisions to Part B for CY 2010: Final Rule," Federal Register 74, no. 226 (Nov. 25, 2009): pp. 61738--62188.

Congressional Budget Office, "Budgetary Effects for an Act to Provide a Physician Payment Update, to Provide Pension Funding Relief, and for Other Purposes (as provided by staff on June 18, 2010)."

Congressional Budget Office, "CBO Estimate of Changes in Net Federal Outlays from Alternative Proposals for Changing Physician Payment Rates in Medicare," April 30, 2010.

Congressional Budget Office, Letter to Rep. John Spratt, Chairman, House Budget Committee, on potential effects of reductions in physician payment rates, March 27, 2009.

Crosson, Francis J., et al., How Can Medicare Lead Delivery System Reform? (New York: Commonwealth Fund, November 2009).

Government Accountability Office, "Medicare Physician Payments: Trends in Service Utilization, Spending, and Fees Prompt Consideration of Alternative Payment Approaches." Statement before Health Subcommittee, House Energy and Commerce Committee, July 25, 2006.

Medicare Payment Advisory Commission, Report to the Congress: Assessing Alternatives to the Sustainable Growth Rate System (Washington: MedPAC, March 2007).

Medicare Payment Advisory Commission, Report to the Congress: Medicare Payment Policy (Washington: MedPAC, March 2010).