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Scott Gottlieb

Study: Bundling medical payments, a key feature of Obamacare, can harm patients

By Scott Gottlieb

May 11, 2012, 9:43 am

The New York Times has a story today on the unintended consequences of a new Medicare payment system. It’s an ominous outcome that was largely predictable. There’s a better alternative for how these payment approaches should operate.

At issue is a new payment scheme that pays renal doctors a lump sum, or “bundled payment,” for taking care of dialysis patients. Under the program, the doctors mostly get one fixed payment regardless of how much time they spend with patients, or how many drugs and procedures they use in caring for these folks.

These “bundled payments” are a key feature of the Obama health plan. That legislation uses various forms of capitation to shift financial risk onto providers in a bid to cut down on the use of costly, and some argue wasteful, medical services.

A new study shows that the use of some important, but also expensive, drugs has gone down sharply as a result of this payment approach.

At issue are drugs used to boost red blood cells. Most dialysis patients end up with anemia as a result of their kidney failure. The diseased kidneys are unable to produce a hormone that stimulates the generation of red blood cells.

So most patients are given drugs like epogen that mimic these hormones and are used to boost the production of new red blood cells. But the drugs are costly, and use has gone down sharply under the new payment system. The new study finds that the number of patients needing blood transfusions as a result has risen sharply.

The problem is with the bundled payment itself. The scheme pits the physician’s reimbursement directly against the cost of his choice of technology used in caring for an individual patient. It’s not a surprise that the use of technology would go down under such an incentive system.

A more optimal approach to bundling payments would have the services and the technology paid separately. If Medicare wants to bundle payments to providers, then the technology that the doctor uses should be paid outside the bundle, ideally in a competitively bid system (like Medicare Part D) to help make sure Medicare is getting a competitive price for what it purchases. But the doctor’s salary, and his use of a particular drug, should not be put at direct odds with one another, unless we want to see more outcomes like this study finds.

Physicians can be reimbursed with a bundled payment that is based on the outcomes they achieve and some overall measure of their efficiency without having their salaries so directly pit against the cost of the treatment choices they make.

This is having consequences for patient care. As the article states: “In each of the first nine months of 2011, the share of dialysis patients covered by Medicare who received blood transfusions increased by 9 to 22 percent over the corresponding months in 2010… There had been virtually no change in transfusion rates between 2009 and 2010. The implications can be foreboding for patients awaiting kidney transplants because transfusions… can change body chemistry and make it more difficult to find a compatible organ. That makes them more likely to be among the 4,500 Americans who die each year while waiting for kidney transplants.”

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Scott Gottlieb

New ruling reveals the future of Washington-directed healthcare

By Scott Gottlieb

May 2, 2012, 10:11 am

Yesterday, the Centers for Medicare and Medicaid Services issued a watershed set of conditions in a decision to cover a new device for repairing damaged heart valves.

Patients and product developers take note. The ruling is a vivid example of how our healthcare is going to get reimbursed now that Washington calls more of the shots.

At issue is a device for repairing the main valve carrying blood out of the heart. As people age, this aortic valve can become brittle. As the valve narrows, it can cause debilitating heart failure, and even death.

Fixing the problem used to require open-heart surgery. In November, FDA approved a device that lets doctors repair the valve using a tiny catheter that introduces a replacement valve through an artery in the leg. FDA only approved the device for patients who are too sick to have the open-heart procedure. Yesterday, CMS said it will pay for the procedure, but with a lot of extraordinary strings attached.

First, CMS only agreed to cover the device for its FDA approved use and only if the manufacturer agrees to continue studying the device in its FDA approved indication. The FDA approval, already based on unusually large and long-term trials that enrolled thousands of patients, was not enough to secure clear Medicare coverage.

CMS is also going to tightly control the ability for the device to be used in less sick patients. It will require any patient who wants the procedure to be assessed by two separate cardiac surgeons to certify they were not suitable for open-heart surgery.

If CMS agrees to cover use of the new valve in some patients who are also eligible for open-heart surgery, then Medicare will only pay for these procedures in the context of ongoing clinical trials. The agency has flirted with requiring “superiority” trials for this purpose—a high burden of proof that would force patients to be randomly selected to receive the new valve device or the open-heart procedure.

CMS is also restricting the number of doctors that can perform the new procedure.

CMS’ goal here is to cut down on the number of procedures. The same device has been approved in Europe for almost 5 years and has gained widespread use by patients who want to forgo very invasive open-heart surgeries—for good reason. The minimally invasive approach poses a lot less hardship on patients.

This ruling will force people to get open-heart surgeries that might have been avoidable. These decisions used to be left to patients and doctors. Now it’s clear that for costly procedures, Washington will be making more of these choices for us.

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Scott Gottlieb

The problem with Obamacare’s bundled payments initiative

By Scott Gottlieb

April 18, 2012, 3:32 pm

The Centers For Medicare and Medicaid Services (CMS) just issued guidance laying out the parameters on the Obama Administration’s new bundled payments initiative.

Bundled payment arrangements are a signature feature of the payment reforms included in Obamacare. The concept is that doctors will get a lump sum of money for taking care of patients with certain conditions such as cancer or heart failure. It will then be up to the doctors to decide how the money gets spent. If doctors end up using more resources to care for patients, there will be less money left over for the physician.

The idea is to put the financial risk on doctors and give them an economic incentive to economize on their use of resources. It’s a form of capitation—an old concept that was widely used by HMOs in the 1990s to bring down healthcare spending. The scheme works, but proved unpopular with patients who didn’t want their doctors to have a veiled economic incentive to ration care. A backlash against capitation eventually led to the introduction of the “Patients Bill of Rights” in 2001.

The biggest flaw in the Obama approach to bundling is that the administration is lumping the doctors’ services along with the cost of the technology that physicians use to treat patients and paying for both in the same “bundled” payment. That means that if a physician chooses to use newer but pricier drugs to treat a cancer, for example, then the cost of the medicines will come out of the doctors’ bottom line.

One year into the Obama Administration’s first test of a bundled payment arrangement—put in place for paying providers to treat dialysis patients—we are already seeing signals that this financial conflict may be leading to degradation in patient care. Over the first year that the dialysis bundle was in place, parathyroid hormone levels in the dialysis patient community rose 25%. This is a clinical parameter that is closely followed in dialysis patients for monitoring the effects of their kidney dysfunction. The rising levels may be an early indication that doctors are underutilizing certain key drugs in caring for these patients.

Ideally, a bundled payment would pay only for the doctors’ time and services. The cost of the technology she uses (such as drugs and medical devices) would get paid separately, preferably in a competitively bid market similar to the arrangement created by Part D program for pills. One private health plan, United Healthcare, is pioneering such an approach for bundling the payment of cancer treatment. United described its approach in the current issue of Health Affairs.

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Scott Gottlieb

Obamacare makes young docs gloomy about profession

By Scott Gottlieb

April 12, 2012, 10:55 am

Young doctors are pessimistic about the position of the medical profession and deeply skeptical that the Affordable Care Act will lead to a better outlook for doctors and patients. The Physicians Foundation ran an online survey of 500 young physicians (age 40 and under).

Some highlights from the survey:

The “new healthcare legislation” ranked as the top reason for gloom; 49% of docs said they believe PPACA will negatively (highly negative 28% and somewhat negative 21%) impact their profession;  57% are pessimistic (26% somewhat pessimistic and 31% highly pessimistic) about the U.S. healthcare system.

In contrast, only 4% are “highly optimistic,” and 18% who are “somewhat optimistic”. When asked (open-ended) reasons for their pessimism, responses covered a wide spectrum of negatives – with the “new healthcare legislation” and “government involvement” standing out.

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Scott Gottlieb

Study: Obama healthcare reform raising costs, forcing workers out of existing plans

By Scott Gottlieb

March 13, 2012, 9:03 am

 

The Willis Report of Employers is out and it has some major implications for Obamacare:

– Employers report that their healthcare costs have increased by about 2-5%—mainly due to new mandates in the new health law such as requirements that young adults can continue coverage under their parents’ policies, first dollar coverage of routine services, and the removal of annual lifetime limits for “essential health benefits.”

– More than half of the employer respondents expect to pass on these ACA-endowed rising costs to employees.

– Moreover, fewer than 30% of employers say they were able to maintain grandfathered status of their healthcare plans. This rapid loss of grandfathered status far outpaces Obamacare’s original estimates of what would happen. The preamble to the June 2010 regulations noted that by the end of 2011, the Obama administration expected 78% of employers would retain grandfathered status. By the end of 2012, they forecast that 62% would still be grandfathered, and by the end of 2013, 49% would retain their grandfathered status.

The new report states: “The accelerated loss of grandfathered status suggests that employers have had to make many plan changes to offset cost increases, and perhaps employers have been more willing to give up grandfathered status in order to take other steps to control costs.”

The upshot: If you like your health plan, you won’t be able to keep it.

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Scott Gottlieb

Avastin and the FDA’s culture of risk aversion

By Scott Gottlieb

November 18, 2011, 3:12 pm

The FDA’s decision to strip the drug Avastin of the indication for treating metastatic breast cancer is of a piece with the agency’s aversion to risk—not just the risk of safety problems, but the risk of benefits.

For years, the FDA’s risk aversion was confined mostly to the agency’s focus on drug safety. But now, this culture is applying equally to its evaluation of drug efficacy, as the agency shows an increasing unwillingness to take a chance that the magnitude of the benefit that it observes in clinical data may not be as strong as it seems.

To guard against this “risk,” the FDA has pushed sponsors harder to conduct “perfect experiments” where patients are neatly randomized to artificial treatment groups for purposes of getting a pure statistical answer. That’s the case even if it means that the clinical trial, and in turn the information it yields, has less correlation to the kinds of practical information that doctors and patients are going to need to make prescribing decisions. Clinical trials, especially in cancer, increasingly randomize patients to treatment arms that don’t approximate how doctors treat patients in the real world. For this reason, more and more of these trials must be run in Eastern Europe, where patients are more likely to enroll in trials that randomize to outdated treatment regimens just to get access to the drugs.

The most vivid example of this regulatory approach was evidenced with the FDA’s recent handling of drugs for the treatment of Hunter’s Syndrome and Gaucher’s Disease. The agency required rigorous, and, some argued, unethical trials where babies with these degenerative diseases were randomized for up to a year to receive infusions of a promising medicine or an inert placebo. Many of the babies on the placebo arm were permanently impaired by forgoing active therapy. The drugs worked. Having run a perfect experiment, FDA had incontrovertible evidence of the drug benefits. Its final regulatory decision was an easy one for the FDA. But at what cost?

There are statistical constructs that would allow FDA to have its cake and eat it too—to get firmer answers to questions of a drug’s benefits, while enabling these decisions to be reached perhaps more quickly, and in clinical trials that don’t require patients to subject themselves to hard clinical or ethical choices to be randomized to sham treatments. But the agency has been painfully slow to embrace new science when it comes to clinical trial design. The FDA commissioner recently committed to put out guidance on these “enriched” trial designs. FDA first promised those guidance documents in 2005.

In the case of Avastin, these enriched trial designs might allow doctors to more easily glean which subgroups of patients are getting a benefit from the drug. Even the FDA commissioner acknowledged that some patients seemed to be responding to the medicine. But when these patients are averaged across all of those included in the trials, this evidence of benefit starts to get diluted. In announcing its decision on Avastin, FDA made an odd distinction between the information it uses to guide its regulatory decision and information issued by institutions such as the National Comprehensive Cancer Network, that “provide clinicians with ready access to synthesized information they can use in making patient decisions.” It begs the question what FDA thinks its role is in clinical medicine—and in this case, how much practical value the agency believes its own judgment has for patients.

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Scott Gottlieb

A Promising FDA Proposal for Increased Transparency

By Scott Gottlieb

May 19, 2010, 12:11 pm

Today the Food and Drug Administration released its long-awaited report on how it plans to improve “transparency.” One recommendation deserves special attention: the FDA’s proposal to start releasing the contents of “Complete Response” or “CR” letters. These are letters that FDA sends to drug companies when it decides to delay approval of a new drug. The manufacturers will oppose this proposal, but they shouldn’t.

Right now, drug companies prefer to be the ones that frame for investors why the FDA has decided to delay their drug approval. But it’s in the long-term interests of patients, doctors, and drug companies that these letters be released. If the FDA were obligated to publicly justify and explain its decisions to delay new drug approvals, much like the European regulatory process requires, it might be harder for the agency to make bad decisions. There have been cases where the FDA delayed important new drugs in part to preserve its regulatory traditions and prerogatives. If the FDA had to face the American people and explain that sometimes its rationale turns less on bottom line public health considerations and more on bureaucratic prerogatives (such as the FDA’s desire to see two positive trials before approval, not one, even in diseases without approved therapies, to take one recent example), then I believe making those kinds of decisions would become much harder for FDA.

The FDA could probably start releasing these CR letters right now, without the need for new authority. Some elements of the CR letters would need to be redacted, such as comments that relate to manufacturing processes where trade secret information is being discussed. One caution to the FDA leadership: Don’t take this step without also making sure the FDA does a better job writing those letters. Right now the FDA asks for certain new commitments (such as the need for additional trials with an experimental drug) but doesn’t explain fully why. The agency should be compelled to explain its decisions—and its rationale—in plain language. We should have done all of this a long time ago.

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Scott Gottlieb

Bad Deal for Doctors, Worse Deal for Patients

By Scott Gottlieb

December 19, 2009, 1:50 pm

The Democrats released the final text of their 2,000-page plan to “fix” healthcare but they couldn’t find even a few words to mend the system under which Medicare underpays doctors and reduces medical access for seniors.

Medicare currently pays doctors about 75 cents on the dollar compared to private plans. In some cases, the program doesn’t even cover doctors’ costs. More and more physicians are limiting the number of new Medicare patients they are willing to see as a result.

Yet taken out of the final legislation was not only a proposal to permanently fix this system, but Section 3101 of the manager’s amendment that Senator Harry Reid released today strikes a provision in the original Reid bill, which provides for a 0.5 percent increase in Medicare reimbursements to physicians. The new text released this morning reads: “SEC. 10310. Repeal of Physician Payment Update: The provisions of, and the amendment made by, section 3101 are repealed.”

What does this mean?

The Department of Defense appropriations bill that the Senate passed yesterday freezes Medicare physician payment rates for January and February of 2010 at 2009 levels, returning to a scheduled 21 percent cut to reimbursement rates that doctors are set to take on March 1, 2010 because of the broken scheme that is used to set their reimbursement rates. Presumably the Democrats plan to pass a separate bill sometime early next year to plug that looming cut.

But then, why did they strip out even the 0.5 percent increase to physicians from the current bill? As a result of that provision, physician fees between now and next spring will remain flat from 2009 rates even as medical costs have risen.

Democratic leaders probably needed the extra money in order to secure the vote of Senator Ben Nelson. To wit, included in the final legislation is a provision that puts the federal government on the hook for paying for the Medicaid costs of all new beneficiaries in Nebraska, forever. That dandy surely factored heavily in Senator Nelson’s calculations.

As for doctors, the American Medical Association (AMA) was willing to sign onto provisions in this bill that will lead to vast new regulation of the practice of medicine in exchange for securing a permanent fix to the reimbursement scheme by which doctors are paid by Medicare. In the end, the AMA didn’t even get a temporary raise. It’s a bad deal for the doctors for sure. It’s a worse deal for their patients.

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Scott Gottlieb

Senate Effort to Import Price Controls Is Bad Policy

By Scott Gottlieb

December 8, 2009, 2:51 pm

Five years ago, a bipartisan group of Senators tried to use a program designed to bring treatments for AIDS to Africans as a way to push a political agenda on drug pricing.

The Senators wanted billions in taxpayer money under the U.S. President’s Emergency Plan for AIDS Relief (PEPFAR) to be used to buy illegal copies of branded AIDS medicines that were being marketed by Indian generic drug firms.

The ostensible purpose of the policy was lowering costs—the Indian drugs were cheaper than the branded counterparts. Thus, more treatments could be delivered for the same money. But for the political class, this was a chance to advance their goal of eroding drug patents and legalizing importation of pills into the United States from low cost countries that impose price controls on medicines. The logic went like this: if U.S. taxpayer money could be used to buy the copied drugs for PEPFAR, then why not for Medicare and Medicaid?

In this debate, the political commodity isn’t the drugs themselves, but the price controls that other countries attach to the drugs. Importation is a way to import price controls into the United States without the necessity of an honest political debate on whether these controls make good policy.

The PEPFAR episode bears remembering, as a bill is pending right now in the Senate to legalize importation of prescription drugs into the United States from low cost, price-controlled countries such as Canada. Those Indian drugs that Senators wanted to buy for African AIDS patients turned out, in many cases, to be adulterated—in other words, they didn’t work. It could have caused a public health catastrophe had the United States been forced down this path of legalizing such imports. Now a similar group of politicians are trying to use health reform as a wedge to advance the same political agenda.

The United States erected controls on the importation of drugs almost two decades ago as a way to stem the flood of illegally copied and sometimes dangerous medicines that were flooding our market. The legislation that closed our borders to drugs that didn’t go through rigorous regulatory checks, called the Prescription Drug Marketing Act of 1987 (PDMA), was a direct response to an episode in which a counterfeit antibiotic for urinary infections ended up sickening many American women.

The world market in counterfeit drugs has grown only larger and more sophisticated since PDMA was originally passed. More counterfeits are already making their way into the United States. Yet we are poised to dismantle the protections that have helped keep Americans relatively safe for more than 20 years.

The historical lessons of PEPFAR should have proven that it is bad policy to try and advance an anti-pharmaceutical agenda for drug price controls on the ledger of drug safety protections. If U.S. politicians want to advance drug price controls, let’s have an open debate on it.

There was never any accounting for the positions some took during the PEPFAR debate when the facts about those Indian counterfeits eventually emerged. So some in the Senate are back at it, pushing the same agenda. This time under the guise of U.S. health reform.

Dr. Gottlieb has consulted with branded drug companies.

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Scott Gottlieb

What I Learned at the ABC White House Event

By Scott Gottlieb

June 25, 2009, 12:27 pm

The best line of the evening came during one of the commercial breaks when President Obama reached for a large glass of water resting on the table next to him and one of the audience members shouted to the president, “how’s that water?” The crowd of about 160 was hot and thirsty after waiting for more than an hour just outside the steamy Rose Garden before we were shuffled into the East Room. There were no drinks allowed in the ornate room, with its antique rugs.

The consensus among many of those there—both right and left—was that ABC News pulled off a solid event and the questioning was fair but unexpectedly tough. Diane Sawyer and Charlie Gibson did a good job engaging the audience and following up when the president tried to skirt some of the harder questions.

Before the event the producers queried audience members on their likely questions but it was a strictly hands-off affair, and there was a sense in the room that even the reporters didn’t know precisely what people were going to ask once they were handed the microphones.

During commercial breaks, President Obama got up to greet the audience, shaking hands and engaging people in small conversation. It wasn’t clear if that was a practice of good politics, or an effort to escape Charlie Gibson, who continued to ask the president probing questions even off camera.

There were a couple of presidential gaffes, and more critical questions left in the balance, without a direct presidential response. For example, there were some nervous murmurs when the president said, in response to an audience member who was concerned about the potential for “rationing,” that “maybe you’re better off not having that surgery but taking a painkiller instead.” It was made as a general statement and not in direct response to the woman’s particular health concerns, for sure, but the crack seemed to stoke the very concerns it perhaps was meant to assuage.

As for the political conservatives in the room, we all seemed to be seated together, ironically to the right of the stage. There was some set lighting hanging above our heads, and we mused about how well it was attached, and whether it could fall. I was thinking: this may drop on my head at the very moment the president is taking away my health insurance.

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