Message from the Director [Continued]

Value-Based Purchasing for Medical Devices

Economic Efficiency in Orthopedics and Cardiology

Aligning Consumer Cost Sharing with Provider Payment Reform

Peer-Reviewed Publications: CER and VBID

Peer-Reviewed Publications: Hospital Pricing and Profitability for Device-Intensive Procedures

Global Technology Policy Initiatives

Expanding the BCHT: New Research and Management Staff

Value-Based Purchasing for Medical Devices

Our project on value-based purchasing (VBP) for medical devices—conducted cooperatively with the Integrated Healthcare Association (IHA) and supported by the California HealthCare Foundation and the Blue Shield of California Foundation—has been wrapped up, but these themes carry over into our current project on orthopedic and cardiac service line efficiency (see below). These Issue Briefs cover device use and costs plus the total costs, length of stay, complication, reimbursement, and related economic characteristics for:

Total Knee Replacement
Total Hip Replacement
Coronary Angioplasty with Drug-Eluting Stents
Cardiac Valve Replacement
Lumbar Spine Fusion
Cervical Spine Fusion
Cardiac Rhythm Management Device Insertion (Pacemakers, Defibrillators)

Economic Efficiency in Orthopedics and Cardiology

Earlier this year, BCHT was awarded a grant from Institute for Health Technology Studies (InHealth) for a mixed-methods study comprised of econometric and case study analyses of hospital economic performance in device-intensive service lines. The goal of the study is to improve the understanding of the economic dynamics of device- intensive service lines (orthopedic and cardiac) on the part of hospital executives and managers, physician leaders, health insurance executives concerned with the rising costs of hospital care, and policymakers seeking to balance affordability with innovation for these high-value service lines.

In-person case study interviews are underway in the five hospital systems in our target market in Orange County (Kaiser Permanente, St. Joseph of Orange, MemorialCare, Hoag Hospitals, and Tenet California). The interviews target hospital executives, medical director roles within the cardiac and orthopedic service lines, purchasing/supply chain roles, and quality management roles. Econometric patient-level data for 2010 is being gathered from participating hospitals and analyzed relative to prior 2006 and 2008 data to assess trends around major orthopedic and cardiac procedures performed at each hospital.

Aligning Consumer Cost Sharing with Provider Payment Reform

Kim: insert two paragraphs plus issue brief URLs

Peer-Reviewed Publications: CER and VBID

The past year was one of great policy interest and investments in Comparative Effectiveness Research, often portrayed as a means for the moderation of health care cost inflation. New clinical evidence on what works well and what works poorly very often does not result in changed behavior, however, especially if change would interfere with established economic interests and preconceived notions. We have argued that, to be effective, new clinical evidence needs to be embedded in economic incentives, as these exert a more direct and immediate influence on behavior than does new information alone. I developed these ideas in two peer-reviewed papers published in Health Affairs:

Comparative Effectiveness Research: From Clinical Evidence to Economic Incentives examines how the four principal incentive mechanisms used by health plans to manage care should be adapted to incorporate new findings from comparative effectiveness research. These incentives include conditional coverage policy, consumer cost-sharing, provider payment, and pharmaceutical procurement and pricing.

Applying Value-Based Insurance Design to High-Cost Health Services examines how insurance benefit design and consumer cost-sharing can be restructured to promote access to proven and effective uses of high-cost specialty drugs, implantable devices, and radiology, while discouraging unproven and ineffective uses.

Peer-Reviewed Publications: Hospital Pricing and Profitability for Device-Intensive Procedures

Insert material

Global Technology Policy Initiatives

While the demand side of the market for health care technology—composed of insurers, hospitals, and patients—is local or national in focus, the supply side of the market—composed of drug, device, and diagnostics firms—is multinational or global in focus. The reach of the Center originally was centered on the U.S. context, but in the past year, and increasingly in the years to come, we will be participating in colloquia and making speeches presenting our research and perspective to audiences outside the United States. The most recent such initiatives have taken Associate Director Kim MacPherson and me to France, Canada, and Singapore. We are scheduled for an educational mission to Australia for next March.

Kim MacPherson has published a new Issue Brief—Top Myths of the Canadian Health Care System: Implications for the United States—in which she discusses several of the structural and perceptual “myths” that were debunked during the Canadian mission and offers some thoughts on what the U.S. could learn from Canada as we proceed to reform.

Educational Initiatives

The educational mission of the Center is to increase the number of courses and workshops on technology policy and management available to UC Berkeley students and to professionals and managers off-campus. In the past year, Kim MacPherson organized joint student/professional workshops at the UCB Faculty Club on biosimilars, consumer cost-sharing, and health care reform; we developed a series of roundtables for industry thought leaders on efficiency and value purchasing in orthopedics and cardiology; and I provided one of the keynote presentations to the IHA’s successful summit on Accountable Care Organizations.

In the Fall 2011 semester, I will teach a new course on health care technology strategy, jointly with Scott Howell, MD, of Genentech and John Hernandez, PhD of Abbott Vascular. I will also be teaching a new version of my course on health care technology policy, with an emphasis on FDA regulation, insurance coverage and reimbursement, and a variety of special topics such as biosimilars.

Expanding the BCHT: New Research and Communications Staff

Kim: insert discussion of Tim, Jenn, Peg

Future Initiatives

Looking forward for the remainder of the year from the research, educational, and policy perspectives, we highlight our three areas of concentration:

Provider integration and its implications for technology evaluation and reimbursement. Given the trend towards hospital employment of physicians and towards “Accountable Care Organizations,” the nation’s health care system is moving away from traditional relationships and methods of evaluating and purchasing implantable devices and biopharmaceuticals. The larger and stronger provider organizations will take on some of the functions traditionally played by insurers and by individual physicians, requiring technology companies to restructure elements of their distribution systems and to come to terms with a more sophisticated and perhaps more aggressive purchaser and user bases. We will continue to study the evolution of ACOs, their supply chain management, relations with health plans, and role in technology management.
Payment methods, especially episode-of-care pricing. The IHA has been awarded a major three-year grant from the U.S. Agency for Healthcare Research and Quality (AHRQ) to expand the pilot program for bundled episode payment from orthopedic surgery, PPO products, and a geographic focus on Southern California to include cardiac procedures, HMO products, and a statewide geographic reach. Working with Dr. Kevin Bozic of UCSF and colleagues at RAND, I will be gathering and analyzing insurer and hospital data to assess the impact of the changed payment method on the use and cost of care.
Benefit design and consumer cost-sharing. The rising costs of care and growing recognition of the role of the individual patient in selecting treatment is inducing employers and insurers to increase the patient’s out-of-pocket payment responsibility. While cost-sharing in the past has emphasized increases in deductibles, initiatives in the coming years are likely to use reference pricing and coinsurance to target patient use of high-cost drugs, devices, and diagnostics. The Center’s project on cost-sharing and use of biopharamaceuticals for rheumatoid arthritis is underway using 2005-10 claims data from CalPERS. We have been authorized to expand our scope beyond rheumatoid arthritis to oncology and other auto-immune diseases.