Using Comparative Data to Reduce Medical Practice Variations and Save on Health Costs

Key Words – Innovation, Comparative Data, Practice Variations, Value-Based Purchasing, Physician Performance, Benefit Design

Summary of Interview with Jerry Reeves, MD, Chief Medical Officer of Hotel Employees and Restaurant Employees International Union (H.E.R.E.I.U.) Welfare Fund.

Doctor Reeves believes in using data to design benefit plans, reduce practice variation, increase value-based purchasing by payers, and promote higher levels of physician performance. He uses data to educate plan members, to persuade patients to visit their primary care rather than to go to the ER, to talk to doctors about their individual practice variation, and to reward them for providing care at lower costs.

" Q: You are Chief Medical Office of a nationwide union as well as a Principal of Health Innovations, Inc. What do you do in those two positions?"

"A: At Health Innovations, we work with self-insured employers, Taft-Hartley Trusts, and business coalitions on health to promote transparency and accountability as well as to engage people to make rational lifestyle choices."

"At H.E.R.E. I. U., the Hospital Employees and Restaurant Employees International Union, we work on benefit design to help beneficiaries take their meds, get their tests; see the same doctor regularly, and to better control costs and outcomes."

"Q: You recently collected information from claims and from health risk questionnaires and other biometric measures in 4 states to study practice variations. What did you find?"

"A: Patients with the same outcomes in the same specialty in the same town had 7 to 8 times variation in costs."

"The most expensive cardiologist who takes care of an episode of angina is 5 times as expensive as the least expensive cardiologist; the most expensive orthopedic knee surgeon is on average 2 ½ times more expensive than the least expensive."

"Can we as a country afford to sustain overpayment to outliers who are much more expensive than their peers in the same town achieving the same results?"

"We also sat down with doctors and shared comparative information. In some cases, there’s a reasonable explanation. We wanted to learn from them what a rational explanation might be. Often we get logical valid explanations. What we notice, though, is that after we’ve had these discussions, cost trends move more towards the middle."

"Costs variations depend on where patients enter the system. The typical hospital admission costs 12.7 times as an ER visit, an ER visit costs 10.7 times as much as an office visit, a hospitalization visit costs 136 times as much as an office visit going into the hospital or emergency room."

"Q: What incentives do you use to encourage doctors to perform better? What are your techniques? You’ve mentioned sitting down with them, showing them data, rewarding them with bonuses. Anything else?"

"A: Doctors deserve multiple opportunities to correct these variations. It should be three strikes before you’re out."

The most common comment I get back is: “Nobody ever told me this.” 'How come nobody has ever said this before?' It’s a little bit like patients when you tell them they have hypertension or diabetes. They often say, 'Nobody ever told me that.' The doctors are right. They aren’t many payers who give comparative performance feedback to rank and file physicians."

"Demographics, socioeconomics, and patterns of living drive cost variations. But when it comes to delivering effective, efficient care, 8 time differences are not believable."

"How long can we sustain this kind of variation and turn a blind eye to it?"

"In the future, we will see the rank ordering of various health care services much like in Consumer Reports. The day of secrecy and behind the scenes behaviors hidden to the public will soon be coming to an end."

"Value-based design of CMS plans and private plans works. Cost trends bend downward, and value and quality go up. They have to, if this country is going to survive in a competitive world economy. Along with 4 other people – a physician, a corporate leader, and a coalition person – I met with President Obama in the White House.
This was the day after his historic meeting with national health leaders – the AHA, the AMA, America’s health Insurance Plans, Parma, the Service Employees International Union - who pledged to reduce national health care spending by $2 trillion over the next decade.

President Obama and his administration are determined to reform the system to produce lower costs, greater savings, and higher quality. It will take better insurance plan design, the effective use of data collection and tracking, positive and negative incentives, and physician and patient engagement for this effort to succeed."