Category Archives: costs

How my PCP alerted me to the potential for abuse in telehealth

by Tom Liu

I recently called my primary care physician (PCP) for the first time in years to get my immunization records, and encountered a strange message saying he was not currently seeing patients. My mom had apparently encountered the same message weeks ago. “Maybe he retired,” she suggested.

I did a quick google search of my PCP’s name to find an alternate contact number, and instead found a shocking article from the local newspaper. Apparently my PCP has been indicted for falsifying tax returns and participating in an online pharmacy organization that provided prescription drugs without an in-person physician examination.

Remote Prescribing: Lucrative, Pervasive, and Very Illegal

I did a quick search online and confirmed that the practice of offering prescription drugs through a “cyber doctor” prescription, relying only on a questionnaire is indeed very illegal.

It is also very pervasive. The National Association of Boards of Pharmacy (NABP) reviewed 10,700 websites selling prescription drugs and found that 97% of them were “Not Recommended”. Of these, 88% do not require a valid prescription and 60% issue prescriptions per online consultation or questionnaire only.

What struck me was how this appeared to be a case where the market came together to produce a “triple win” for profit-seeking internet pharmacies, shady physicians (such as my own), and a subset of patients willing to pay a premium to access drugs (most commonly weight loss drugs, erectile dysfunction drugs, and commonly-abused antidepressants and painkillers).

According to one analysis, one such website offering prescriptions from its own doctors listed prices for fluoxetine (brand name Prozac) and alprazolam (brand name Xanax) that were roughly 400% to 1800% higher than prices from a more traditional Internet pharmacy not offering prescriptions. The fact that such “remote prescription” websites remain in business despite the huge price differential suggests that they are attracting patients willing to pay that premium to avoid seeing their regular doctor. And as for where that money is going—well, my doctor was alleged to have received roughly $2.5 million over six years.

Similar Incentives Could Exist for Telehealth Writ Large

Given the clear business case driving abuse in this model of “remote prescribing”, I wondered about the risks of overuse and abuse in the rapidly burgeoning field of telehealth more broadly. After all, one of the promises of telehealth is its ability to make the delivery of services more convenient for both patients and providers. A physician could vastly expand the number of patients he/she sees without leaving the office—which has been identified as a potent way to alleviate the physician shortage problem.

But that would only hold true if the proliferation of telehealth does not generate additional, potentially unnecessary demand. And substantial evidence points to the presence of physician-induced demand under a fee-for-service system. Currently, Medicare pays for a limited set of telehealth services under the same fee-for-service payment model used for in-person visits. Within Medicaid, while select states are experimenting with bundled or capitated payments that include telehealth, others are retaining their fee-for-service model.

In a testimony before the House Energy and Commerce Committee last month, Dr. Ateev Mehrotra, an expert on telehealth, noted, “To reduce health care costs, telehealth options must replace in-person visits.” I’m not convinced this is the case—especially when there is a clear financial incentive to provide more care.

“The very advantage of telehealth, its ability to make care convenient, is also potentially its Achilles’ heel. Telehealth may be ‘too convenient.’” — Ateev Mehrotra

In some cases, fee-for-service payments for telehealth may result in outright fraud, as my physician may have done. In others, it may simply encourage providers to err on the side of providing more care given uncertainties in a practice environment. In fact, a study led by Dr. Mehrotra found that PCPs were more likely to prescribe antibiotics during e-visits than in-person visits.

As various constituencies continue to debate the best approach for paying for telehealth, it is imperative for us to better understand how the incentives and convenience of telehealth interact to affect overall utilization. Blindly carrying our existing fee-for-service system into the new world of telehealth options may produce some unintended consequences.


Tom is a healthcare researcher with experience in public health and blindness prevention. Follow him on Twitter at  @tliu14 or check out his blog.


Saving money in healthcare, PCMH edition

by Allan Joseph

I wanted to quickly follow up on Tom’s excellent post from yesterday on patient-centered medical homes (PCMHs), which nicely outlined some conflicting results from recent research on the model. (Edited to complete the sentence.)

It really shouldn’t surprise us that PCMHs only saved money in the 10% of patients with the highest risk. Why? Take a look at this chart from the NIHCM, which is one of my favorites in all of health policy:

Distribution of Healthcare Spending

Notice that the top 10% of spenders (not the same as the top 10% of risk scores, but pretty close) account for just about two-thirds of healthcare spending. The vast majority of patients account for very little spending — there’s no savings to be had there. Healthcare spending is highly concentrated at the top.

Now let’s look at spending from another angle. According to the Robert Wood Johnson Foundationtwo-thirds of healthcare spending is on patients with multiple chronic conditions. That means at minimum, roughly one-third of healthcare spending in America is spent on those patients in the top 10% with multiple chronic conditions. (To get even deeper, at least 16% of spending is on patients in the top 10% with three or more chronic conditions.) Of course, that’s only a lower bound — I’d be surprised if the number wasn’t much higher.

So what does this have to do with PCMHs? Well, the core idea behind a PCMH is greatly increased care coordination. That’s precisely the type of intervention that will help sick patients who have multiple chronic diseases — or the very group that accounts for a huge portion of our healthcare spending. No wonder the investment in PCMHs paid off for the sickest patients. They’re the ones where all the money to be saved is.

Given that the vast majority of patients who might use PCMH services account for little health spending, we should expect spending money to build a broad PCMH structure to save money on net. Nor should we be surprised that there’s money to be saved by better coordinating the care of the sickest patients. That’s the whole idea of the “hotspotting” movement. That’s also why Tom was spot-on to focus on the idea of “risk-adjusted population health,” such as focusing care managers on the sickest patients or designing separate clinics that focus exclusively on high-risk patients.

Sometimes it’s worth stepping back and taking stock of our intuitions about what might reduce healthcare costs. If an intervention isn’t aimed at the sickest patients, it’s probably not going to save a lot of money. Don’t be surprised when it doesn’t.


Allan Joseph is a first year medical student at the Warren Alpert Medical School of Brown University, where he is pursuing an MD/MPP. You can follow him on Twitter @allanmjoseph.

Not-so-breaking: Incentives matter

by Allan Joseph

Normally, I don’t pay too much attention to surveys, especially when it comes to the nitty-gritty of how policy changes might affect a complex healthcare system. The average poll respondent tends to have better things to do than understand the minutiae of health policy, and rightfully so. But last week, Health Affairs released a survey of hospital executives that I found particularly telling about the American healthcare system.

There’s a lot going on here — as Ezra Klein noted, hospital executives are much more sanguine about the ACA’s effect on the healthcare system than anyone else, and they see their hospitals shedding costs over the next few years.

But I wanted to highlight this chart, which you’ve seen if you follow me on Twitter:


Look at the top three items on that list. Those are things you want a healthcare system to minimize! You want people to be healthy, and not come to the hospital. When they do come to the hospital, you want them to leave healthy enough to not come back. You hope to minimize the amount of emergency care, which is expensive and often high-acuity. Those are uncontroversially good goals, and they’re the top three ways hospital executives would respond to incentives to reduce costs.

The list goes on, of course — there are a lot of worthwhile goals, even if some of them might hurt the pharmaceutical or medical device companies, but I keep coming back to those top three. Those are the things we want. If we incentivize hospitals to do them, they will. That’s utterly unsurprising, but it also prompts the question of why they haven’t been done already.

Well, hospitals make money from having people in beds. So we incentivize them to hospitalize people. If we change the incentives, we can change the results.

Now, of course there are caveats. It’s easy for a hospital executive to say that these are things they would do in a hypothetical scenario. We don’t know if they’d actually do them — maybe they’d prefer to spend their time and money lobbying against the change in payment structures instead of implementing these changes. These are also fairly varied responses. Only two of the options have about 50% support as “top three” ways to reduce expenses. That suggests we can’t exactly predict what incentivizing cost reduction would result in.

But this is the promise of ACOs. This is why economists never shut up about incentives. And this is why the phrase “every system is perfectly designed to produce the results it gets” results in 13.3 million Google hits, attributed variously to Dr. Don Berwick and Dr. Paul Batanden.

There aren’t that many hard-and-fast truths about health policy. But there is one: incentives matter.


Allan Joseph is a first year medical student at the Warren Alpert Medical School of Brown University, where he is pursuing an MD/MPP. You can follow him on Twitter @allanmjoseph.

Why hospitals aren’t cutting costs nearly as much as they could (in one chart)

by Karan Chhabra

The more you read about healthcare delivery, the easier it is to get discouraged about slaying the healthcare cost monster. Absent huge and damaging price cuts, there aren’t a ton of quick fixes. But as you get closer to clinical care, patterns of waste emerge. Those seeing patients every day know them best. But it probably takes a push to get them questioning the dogmas of their practice. Enter this paper (gated) on a cost reduction project from UCSF’s neurosurgery residents, prompted by a hospitalwide incentive program for residents:

OBJECT: Given economic limitations and burgeoning health care costs, there is a need to minimize unnecessary diagnostic laboratory tests.

METHODS: The authors studied whether a financial incentive program for trainees could lead to fewer unnecessary laboratory tests in neurosurgical patients in a large, 600-bed academic hospital setting. The authors identified 5 laboratory tests that ranked in the top 13 of the most frequently ordered during the 2010–2011 fiscal year, yet were least likely to be abnormal or influence patient management.

RESULTS: In a single year of study, there was a 47% reduction in testing of serum total calcium, ionized calcium, chloride, magnesium, and phosphorus. This reduction led to a savings of $1.7 million in billable charges to health care payers and $75,000 of direct costs to the medical center. In addition, there were no significant negative changes in the quality of care delivered, as recorded in a number of metrics, showing that this cost savings did not negatively impact patient care.

CONCLUSIONS: Engaging physician trainees in quality improvement can be successfully achieved by financial incentives. Through the resident-led quality improvement incentive program, neurosurgical trainees successfully reduced unnecessary laboratory tests, resulting in significant cost savings to both the medical center and the health care system. Similar programs that engage trainees could improve the value of care being provided at other academic medical centers.

In a nutshell, each year UCSF offers its residents about $400 each if they can achieve the goals of a quality improvement project that they design and execute. Their neurosurgery house staff, working with their hospitalist service, found that certain lab tests they ordered rarely affected their plan of care. So they designed a protocol describing exactly when those tests ought to be used, advertised the protocol and the incentives, and within a year cut those tests’ use by 47%–without compromising their patients’ quality of care. Considering that it’s just one service with just 18 residents, the cost savings are staggering:

ucsf cost savings

Amazing results. But think about who really won here. The hospital saved $75,000 in lab costs. The payers saved $1.7 million in billable charges. There’s almost no comparison. That $1.7M is actually a loss to UCSF, because if they’d billed it, they would have gotten much (if not all) of it back as revenue. Think about that for a second, because it’s key to understanding much of what’s wrong with American healthcare: this amazing project, which saves gobs of money without hurting patients, probably causes UCSF immediate financial harm.

UCSF is not the VA, or Kaiser Permanente, or the British NHS. It has just one ACO contract for San Francisco city employees, so it’s not a true accountable care model either. For organizations like UCSF–in this sense, for the vast majority of American hospitals—if they don’t do something, they can’t bill for it. Which means they don’t get paid.

Fortunately, UCSF is a forward-thinking institution. I’m sure its leaders are looking to the future and realizing that they’ll have to encourage many more of these projects to make it through the decades ahead. UCSF is an academic institution, too, where quality improvement competitions serve a valuable educational purpose. But let’s not forget what reality is like for the hospital down the street hawking its proton beam facility to patients with prostate cancer. When they save the system money, they lose.

We have reason to believe this will change. As episodic bundling and accountable care spread across the country, hospitals’ incentives will come closer to encouraging what the system needs as a whole. But we need to make sure these progressive payment models aren’t confined to Medicare, and are embraced by enough payers to bring hospitals to the tipping point where lower charges actually are a financial win. Till that happens, feel-good stories like UCSF’s will remain just that.


Karan is a student at Robert Wood Johnson Medical School and Duke graduate who previously worked in strategic research for hospital executives.

Follow him on Twitter @KRChhabra or subscribe to the blog.

Would all Medicare ACO beneficiaries please stand up?

by Ross White

Accountable Care Organizations (ACOs) remain a central piece of the ACA’s efforts to help improve the quality and reduce the costs of health care, but recent developments suggest more work is needed. As Mike highlighted a couple of months ago, first-year results from the Pioneer program are promising. They suggest that certain health care systems, particularly those that are highly integrated and have experience with advanced payments models—pay  for performance, capitation,  bundling, etc—can in fact meet the dual goal of improved outcomes and lower costs.  However, not all providers are ready for the full wave of accountable care and many challenges lay ahead, particularly for Medicare-sponsored ACOs that lack the flexibility of their commercial-payer counterparts.

Regardless of your perspective on the true promise of ACOs, it is hard not to acknowledge that provider and patient incentives often do not align. The provider perspective in an ACO is very akin to that of a managed care plan responsible for total patient care, costs, and quality. On the other hand, the patient perspective is more like traditional fee-for-service, since Medicare ACOs are by statute not allowed to limit what providers an attributed patient visits, thus leading individuals to seek care—some unnecessary—at  non-ACO providers. As a result, the ACO is held accountable for the cost and quality of care that they are not providing.  Jim Hinton, President and CEO of Presbyterian Healthcare Services, recently said this was a major reason that Presbyterian was one of two Pioneers ACOs that decided to completely leave the Medicare ACO program. Seven other Pioneers shifted to the less risky Shared Savings Program, some for similar reasons.  So, what can we do about this?

One approach is to give ACOs the power to limit attributed patient choice to a set of providers that may not perfectly align with patient needs. However, limiting patient choice and not allowing them to share in any of the savings generated from restricted networks could lead to serious disapproval. Alternatively, CMS could allow ACOs to use financial incentives in order to keep patients in their provider network. A number of recent proposals aim to do just that.

Last week, at the most recent MedPAC meeting, committee staff recommended creating, “Medicare Select supplemental plans” that encourage patients to seek care in a single ACO through lower cost-sharing when they stay within the ACO provider network.  These financial nudges could help to address tensions between providers and patients likely to arise as Medicare phases in penalties for ACOs that fail to meet quality and cost targets. The proposal would begin with only primary care providers, but specialty care is likely to be added. In addition, the MedPAC Chair, Glenn Hackbarth, suggested that CMS should consider letting senior share in savings from ACOs, in order to make patients more loyal to the ACO provider network and prevent a replay of the often-cited managed care backlash of the 90s.

A similar proposal was set forth by the Bipartisan Policy Center (BPC) in their April report, A Bipartisan Rx for Patient-Centered Care and System-wide Cost Containment. The joint report by Tom Daschle, Pete Domenici, Bill Frist and Alice M. Rivlin suggested the creation of Medicare Networks that allow enrolled beneficiaries to be guaranteed at least a $60 annual discount on their Medicare premiums for the first three years and adjusted in subsequent years. The proposal includes lower cost-sharing for services from providers within the network and higher cost-sharing for certain services outside of the network. When the Medicare Network meets quality goals and generates savings, some of the government’s share in the savings will be passed onto through reduced premiums for network enrollees. Unlike the existing Medicare ACO program, beneficiaries are given the freedom to decide if and what accountable care arrangement to enroll in and subsequently have personal responsibility to manage their care in a cost conscious way.


The most recent Brookings Institution’s Bending the Curve report, Person-Centered Health Care Reform, written by a host of highly-regarded health economists, former government officials, and other health policy scholars recommends a shift away from Medicare fee for service to Medicare Comprehensive Care (MCC), in which financing becomes more closely aligned with the goal of better, higher-value care for each beneficiary. Similar to MedPAC and BPC, the authors encourage Medicare to provide beneficiaries incentives to choose accountable care-like arrangements. Beneficiaries could choose to seek care from MCC providers, with the potential for reductions in Medicare premiums and co-pays if the MCCs demonstrate lower actuarial costs.

These reforms, intended to encourage more patient loyalty and buy-in to accountable care arrangements, will not be a panacea for all of the challenges facing ACOs and other evolving delivery and payment systems, but they recognize the power of having patients who understand and want to be a part of the changing health care landscape. Absent regulatory changes that keep patients within ACO provider networks, many Medicare ACOs may continue to experience patient leakage and struggle to meet financial and quality benchmarks.  MedPAC has a great opportunity to begin addressing these issues by taking seriously the recommendations of its staff. The time is ripe to pursue this path and consider including these regulatory changes in the next round of rulemaking, likely to occur next year.  The larger Medicare ACO experiment will ultimately fail if patients are not empowered and committed to the goals of an ACO.


Ross is a Project Manager in the Engelberg Center for Health Care Reform at The Brookings Institution. Follow him on Twitter at  @rossswhite or subscribe to the blog.