Her Cup of Tea? Looking at What Taxes the System

“If I were queen of managed care…,” muses the president of the New England Healthcare Institute, who wants to see how new technologies fit in with the entire system, not just pieces of it.

As president of the New England Healthcare Institute (NEHI), Wendy Everett, ScD, heads an organization whose board includes insurers, purchasers, suppliers, researchers, medical educators, hospital executives, physicians, and private industry CEOs. Their goal is to identify, analyze, and solve critical health care problems facing the people of New England by finding workable solutions to those problems and driving change in the public and private sectors.

This year, NEHI is conducting research in four areas: the regional economic impact of health care, the value of adopting beneficial medical and health care innovations, the effects of shifting health care’s focus from treating illness to preventing and managing disease, and the costs and impact of new health financing and insurance approaches.

In addition, Everett chairs the board of the Health Technology Center (HealthTech), a San Francisco-based group that provides independent assessments of new technologies in four categories: medical devices, biotechnology, pharmaceuticals, and medical informatics. She is also chairwoman of the board of the Sierra Health Foundation, a Northern California charitable foundation that focuses on children’s health issues.

To all of these endeavors, Everett brings perspective gained through clinical experience as a neonatal ICU nurse and later as a nurse practitioner, academic experience acquired while earning master’s and doctoral degrees in health policy and management from Harvard University, management experience gained at executive positions at Brigham and Women’s Hospital in Boston and at the University of California, San Francisco Medical Center, and entrepreneurial experience as cofounder of a medical software company. She spoke recently with Senior Contributing Editor Patrick Mullen.

MANAGED CARE: NEHI’s most recent research report predicts that “biotechnology and biomedicine may mean to the first half of the 21st century what electronics and computers meant to the latter half of the 20th century,” and says that a race is under way to determine which locations will be the dominant health care centers. What factors will decide how that race will turn out and what are the implications for health costs and quality?

EVERETT: One component is how quickly we can more fully understand and develop pharmacogenomics. That involves some fairly sophisticated analyses. For instance, we’re finding that drugs may have an effect on diseases other than their initial target. For example, the drug Gleevec was first approved and used to treat some forms of chronic myeloid leukemia (CML). Now it’s also showing promise as a treatment for gastrointestinal stromal tumors (GISTs). Some biotech drugs are going to be successful with other diseases beyond their initial indication, particularly with cancers. We need to find out how broad new drugs’ applicability might be and how quickly they can get to market and to patients.

MC: Health plan executives and employee-benefit directors could then face a quandary. A new biotech drug may prove to be effective but at an upfront cost that is an order of magnitude greater than other treatments.

EVERETT: That’s not always the case. When Gleevec first came on the market for CML patients, it was a very cost-effective choice because the other major treatment option was a bone-marrow (stem cell) transplant, which, depending on where it’s done, costs from $125,000 to $200,000 per procedure. They’re also pretty gruesome experiences to go through, with some chance of success but also some chance of failure. So an insurer paid $200,000 for a modest outcome before this drug came along. Now they’re paying $22,000 a year for a drug that works well, where the patient gets up in the morning and takes a pill, without the three-month hospital stays that sometimes happen in extreme bone marrow transplant cases. Now look four years down the road. How do you start to model what else might happen? What are the long-term cost benefits, drivers, and barriers to adopting a technology that is clearly fabulous clinically?

MC: For one thing, there will be that many fewer surgeries, so hospitals that depend on big-ticket surgeries as profit centers could be in trouble. What does that mean for hospitals?

EVERETT: In some cases, it could mean that hospitals themselves become a barrier to adopting new therapies. If I were the queen of managed care, I’d be ecstatic about new drugs and the procedures they could displace. But if I were the CEO of a large teaching hospital, I might look at it differently. Drug-eluting stents, for example, are excellent for patients because they can reduce the number of angioplasty procedures by as much as half. But if I’m running a hospital where interventional cardiologists are an incredible revenue center, fewer procedures represent a financial hemorrhage. NEHI’s role is to look at the whole health care system, do great research, and gather good data so we understand the benefits, drivers, and barriers to adopting innovations in health care. Then it becomes possible to create a new system that allows beneficial technologies to be adopted quickly. We’ll conduct regional research and create demonstration models with national impact, research that others around the country could adopt and take to the policy-recommendation level.

MC: What are some mindsets that need to change before policy ideas that emerge from your research are likely to be adopted?

EVERETT: It’s important to get purchasers and insurers to think about population-based health insurance, the notion that you’re my health plan member for life, and I’ll work with you to prevent illness, which is the model that Kaiser Permanente works under.

MC: However worthy a goal, that idea has never worked out in practice.

EVERETT: True. Two-plus years is still the average time Americans keep whatever health coverage they have, not necessarily just in managed care, but across the board. The shortsightedness of how we as a country have structured the reimbursement and delivery systems in health care is goofy.

MC: Who’s in the best position to drive changes in the system?

EVERETT: Over the next year and a half, changes in health care financing are more likely to happen at the state level than at the federal level. Given the difficulty the Senate and House have been having settling their differences on a Medicare drug provision, they’re probably not going to get to universal coverage. I think we’ll see some innovative programs passed and financed at the state level.

MC: With so many state budgets in such trouble and with Medicaid being such a huge part of that, it stops being a liberal-conservative question and becomes a financial survival question.

EVERETT: It does, and it also becomes a taxation question. It gets into a lot of difficult issues. According to the Centers for Medicare and Medicaid Services, the United States will spend $3.1 trillion on health care by 2011, up to 16 percent to 17 percent of the gross domestic product. This is a growing industry and to some degree, it’s great that it’s growing because the fact is that we’re living longer. People can demonize managed care and the pharmaceutical industry, but that doesn’t change two facts: Our average life expectancy has doubled since the beginning of the twentieth century, and for each decade that you live after age 30, you double your consumption of medical care services. So the problem isn’t that when Bill Clinton, George W. Bush, and all the other baby boomers born in 1946 turn 65 in eight years, that they’re going to break the system. It’s that all of us baby boomers have been constantly chewing up more health care resources. We now have innovative drugs and devices for our arthritis and our chronic diseases, the conditions that earlier generations either died from or learned to live with. We’re taking advantage of those advances, so health care is a growing industry for some good reasons. The question is: What are we going to do to pay for it? Are we going to continue cost shifting to employees? So far that seems to have been an effective cost-containment strategy, at least for those who still have health coverage. However, of the 42 million uninsured in this country, 83 percent are working. Health care is becoming unaffordable, particularly for small businesses.

MC: As new technology arrives, it becomes more important to figure out which new tools are worth the cost. You chair the board of HealthTech, the Health Technology Center, a not-for-profit group that seeks to help with that task. Explain what HealthTech does and what it’s achieved so far.

EVERETT: Four years ago, Molly Joel Coye, who was New Jersey’s commissioner of health and later director of California’s Department of Health Services, established the Health Technology Center because she believed that over the next three to five years, some very interesting and beneficial medical and information technologies would come into the health care market. She also realized that people in the integrated delivery systems and payers wouldn’t know which ones to adopt and what effects these technologies would have on the delivery system. So HealthTech set up a high quality research program to look at innovations in technology and their impacts. They look at such broad areas of innovations as robotics, changes in biotechnology, and changes in drug-delivery systems, and then publish reports and conduct workshops for their members, so that people can anticipate and adapt to these changes in a positive way.

MC: What would be an example?

EVERETT: HealthTech has a superb working group on the future of the health care environment. Say I’m the CEO of Sutter or Ascension or Kaiser, I run many hospitals, and I’m contemplating renovating old buildings or building new ones. HealthTech has done a big project on what the health care environment of the future will look like. As we move to wider use of implantable devices, it might make sense to build your bioengineering department as part of the emergency room. When my implanted pacemaker runs out of juice, I’ll need to get to the emergency room. As director of a hospital system, I want somebody to be there 24/7 to fix those devices. HealthTech helps its members understand the forces that will come to bear on future decisions.

MC: Do you have a feedback loop that lets members share how they’ve done with technology they’ve installed?

EVERETT: Yes. These are large systems, including VHA, Premier, Kaiser, Sutter, Ascension, and Blue Cross and Blue Shield plans. These people have the resources to test new ideas and enough vision to realize that it’s ridiculous to put up a building that’s going to last for 30 years without contemplating what health care delivery is going to look like in ten.

MC: Isn’t that to some degree unknowable?

EVERETT: I would take the position that it’s more knowable than we allow ourselves to contemplate. Innovations that will hit the market in four years are in development now, particularly devices or drugs that have to get through the FDA approval process. It’s possible to model the effects of new technologies, particularly if you have access to smart people across the country through an expert panel, as HealthTech does. So we can look at things like picture archiving and communications systems, radiology systems, new drugs, and genomics. Few organizations have the resources to do this kind of research, and whether for-profit or not-for-profit, they still have a quarterly result mentality. HealthTech is a support system that makes forecasts. If you’ve done forecasting for any length of time and are good at it, you can come up to 70 percent to 80 percent accuracy.

MC: Even with access to research about new technologies, health organizations face the hurdle of paying for them. HealthTech has proposed a health care information technology revolving loan fund program to help prime the pump. How would it work?

EVERETT: It’s hard to argue that ideas like electronic prescribing or computerized physician order entry systems aren’t the right thing to do. Providers say they can’t afford to buy those tools or don’t have the data standards that they need. A lot of people would argue that standards exist; they’re just not widely accepted or used. But no one would dispute that there’s a lack of capital. The idea behind the revolving loan fund is to get money to smaller delivery organizations and physician groups that cannot afford a computer system. Loans on very reasonable terms would finance the purchase of equipment and software. Once paid back, the money becomes available to others. As the proposal stands now, the federal government would make available $800 million and require a 4-1 state match. The money would be given to the states, which would work with groups at the community level to decide who would get loans. HHS Secretary Tommy Thompson and I were on a panel recently and he said he thought the federal government should take half of the Medicare fraud and abuse fund and make it available to capitalize this program. Half of that fund would be about $500 million. That’s a thoughtful and interesting idea, but when it comes to getting it through Congress, to quote the proverb, “There’s many a slip ‘twixt cup and lip.”

MC: NEHI recently completed research on the economic impact of health care in New England. What were some findings that might have national implications?

EVERETT: When we first began thinking about creating a different kind of research organization, we realized that people in New England believe that health care is a very large and significant employer that has great influence in the region, but people didn’t have a strong factual basis to back up that belief. So it seemed reasonable to find out exactly where we stand. We worked with the Milken Institute, a not-for-profit research group based in Santa Monica that studies regional economics. We looked at each metropolitan area in New England, each of the six New England states, the New England region, and the country as a whole. We can tell you exactly where each metropolitan region in the country stands and each state and each census region in terms of the variables we examined. We looked at employment in 13 health care industry sectors in the SIC, the Standard Industry Classification system, everything from home health to hospitals, insurance claims, biomedical research, biotech, and medical devices. We looked at point-in-time comparisons and we looked at a five-year trend from 1996 to 2001. We looked at direct employment, indirect employment, and what we call induced effects. An attorney at a law firm that primarily represents health plans would be indirectly a health care employee. An example of induced effects would be when Novartis opens a new plant that brings 1,400 new jobs to Cambridge, some of those people buy houses and all of them buy groceries. Keep in mind that the average income of people in health care is $6,000 more than people not in health care. There’s also an economic multiplier effect. Adding one pharmaceutical job creates 4.3 more jobs. The numbers vary among the 13 sectors, but on average one new health care job creates 1.15 jobs in other sectors of the economy.

MC: What are the major findings of the research?

EVERETT: There were two or three critical findings. One, we ratified the belief people had that of the nine regions of the country, New England has the highest concentration of health care workers. Two, we dispelled the notion that all of those jobs are in or near Boston. It turns out that five out of the six states in New England are in the top 10 in the country for employment. For example, there’s an enormous amount of electronic claims processing that goes on in Maine for companies all over the country. Maine is one of the top two or three states in the country for doing medical claims processing. Our whole premise is that we have data-driven policy recommendations. You can’t really ask questions about why something has happened until you’ve looked at the data that tells you what has happened. Three, we found that New England is dead last in the country in terms of health care growth. That came as more than a surprise. That was a shock to everyone because people assumed that since New England has the strongest concentration of health care in the country, we’ve always been the strongest and will continue to be the strongest. The facts do not support that. We’re just starting to look at where those jobs are going. We’re looking at specific sectors in which New England is losing jobs, and as much as we can from interviews trying to understand why. For example, we know that Massachusetts has lost almost 50 percent of its anesthesiologists in the past several years. We’re looking into the reasons for that. We know that proactive places are trying to attract jobs out of New England. North Carolina has made it a top priority to attract biotechnology companies. The governor of North Carolina comes to Massachusetts, meets with the CEOs and says, “Here’s your $5,000 per-capita tax credit, here’s your housing, and here’s Research Triangle Institute for the intellectual piece.” Idaho has put in T1 lines everywhere so that people can set up cottage industries the way they did in Maine. Idaho’s angling for Massachusetts’s and New England’s hospital business so they can clean data before it gets sent someplace else for processing. So while you can’t move a hospital or a health plan, you can move much of their back-office operations just about anywhere.

MC: Thank you.

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