Explaining drug spending trends: does perception match reality?

Several recent studies have made clear that drug expenditures are rising more rapidly than other health care spending. What has not been clear, however, is how much drug spending is driven by price rather than volume and whether volume increases are appropriate. This DataWatch takes a closer look at the components and drivers of drug spending using large claims databases from managed care and employer-sponsored health benefit plans. In both environments this study found volume, not price, to be the largest driver of drug spending for seven diseases studied. For four of the diseases, we review the clinical issues that may have influenced volume growth.

A clinically detailed risk information system for cost.

The authors discuss a system that describes the resources needed to treat different subgroups of the population under age 65, based on burden of disease. It is based on 173 conditions, each with up to 3 severity levels, and contains models that combine prospective diagnoses with retrospectively determined elements. We used data from four different payers and standardized the cost of most services. Analyses showed that the models are replicable, are reasonably accurate, explain costs across payers, and reduce rewards for biased selection. A prospective model with additional payments for birth episodes and for serious problems in newborns would be an effective risk adjuster for Medicaid programs.

The assessment of appropriate indications for laminectomy.

We have developed criteria to determine the appropriate indications for lumbar laminectomy, using the standard procedure developed at the RAND corporation and the University of California at Los Angeles (RAND-UCLA). A panel of five surgeons and four physicians individually assessed 1000 hypothetical cases of sciatica, back pain only, symptoms of spinal stenosis, spondylolisthesis, miscellaneous indications or the need for repeat laminectomy. For the first round each member of the panel used a scale ranging from 1 (extremely inappropriate) to 9 (extremely appropriate). After discussion and condensation of the results into three categories laminectomy was considered appropriate in 11% of the 1000 theoretical scenarios, equivocal in 26% and inappropriate in 63%. There was some variation between the six categories of malalignment, but full agreement in 64% of the hypothetical cases. We applied these criteria retrospectively to the records of 196 patients who had had surgical treatment for herniated discs in one Swiss University hospital. We found that 48% of the operations were for appropriate indications, 29% for equivocal reasons and that 23% were inappropriate. The RAND-UCLA method is a feasible, useful and coherent approach to the study of the indications for laminectomy and related procedures, providing a number of important insights. Our conclusions now require validation by carefully designed prospective clinical trials, such as those which are used for new medical techniques.

The development of indications for the preoperative use of recombinant erythropoietin.

OBJECTIVE: To develop indications for the preoperative use of recombinant erythropoietin (rHuEPO) alone and in conjunction with preoperative autologous donation (PAD). DESIGN: A 2-round modified Delphi-consensus process. PARTICIPANTS: Nine physicians representing multiple clinical specialties, practice environments and geographic locations. METHOD: From evidence tables and a literature summary (MEDLINE database from January 1985 to August 1996) provided and using the RAND-UCLA appropriateness method, the physicians developed 264 indications for the preoperative use of rHuEPO by permuting 7 clinical factors (age, history of transfusion or antibody incompatibility, hemoglobin level, anemia of chronic disease, expected blood loss, presence of cardiovascular or cardiopulmonary disease and patient anxiety). These indications were rated on a 9-point appropriateness scale. Median scores and measures of agreement were determined. OUTCOME MEASURES: The significance of cost constraints or cost and blood supply constraints and the impact of each clinical factor on the ratings as judged by statistical analysis. RESULTS: Of the 264 indications, 54% were rated appropriate, 18% uncertain and 28% inappropriate. Expected blood loss had the greatest impact on the ratings (high expected blood loss had a 5.9 point more appropriate rating on the 9-point scale than low expected blood loss [p < 0.0001]). Preoperative hemoglobin level also significantly influenced the ratings (p < 0.0001). Compared with the clinical context, the ratings under the cost constraint were 1.0 less appropriate (p < 0.0001) for rHuEPO alone and 1.2 less appropriate for rHuEPO and PAD (p < 0.0001). The ratings for patients with moderate expected blood loss were significantly influenced by the cost constraint (less appropriate). CONCLUSIONS: Expected blood loss and preoperative hemoglobin level were the best indicators of rHuEPO appropriateness. Different contexts modify the appropriateness ratings of an expensive drug like rHuEPO.

Gastrointestinal illness in managed care: healthcare utilization and costs.

Identification of inefficiencies is a first step to improving the quality of gastrointestinal (GI) care at the most reasonable cost. This analysis used administrative data to examine the healthcare utilization and associated costs of the management of GI illnesses in a 2.5 million-member private managed care plan containing many benefit designs. An overall incidence of 10% was found for GI conditions, with a preponderance in adults (patients older than 40 years) and women. The most frequently occurring conditions were abdominal pain, nonulcer peptic diseases, lower GI tract diseases, and other GI tract problems. These conditions, along with gallbladder/biliary tract disease, were also the most costly. Claims submitted for care during GI episodes averaged $17 per member per month. Increasing severity of condition was associated with substantial increases in utilization and costs (except for medication use). For most GI conditions, approximately 40% of charges were for professional services (procedures, tests, and visits) and 40% of charges were for facility admissions. The prescription utilization analysis indicated areas where utilization patterns may not match accepted guidelines, such as the low use of anti-Helicobacter pylori therapy, the possible concomitant use of nonsteroidal anti-inflammatory drugs in patients with upper GI diseases, and the use of narcotics in treating patients with lower GI disease and abdominal pain. Also, there was no clear relationship between medication utilization and disease severity. Thus, this analysis indicated that GI disease is a significant economic burden to managed care, and identified usage patterns that potentially could be modified to improve quality of care.

Appropriateness of upper gastrointestinal endoscopy: comparison of American and Swiss criteria.

OBJECTIVE: Examine the reproducibility of the RAND method for developing criteria for the appropriateness of medical procedures. DESIGN: Comparison of two sets of explicit criteria for appropriateness of upper gastrointestinal (UGI) endoscopy, developed by separate expert panels from two countries. SETTING: United States, Switzerland. STUDY PARTICIPANTS: National experts from different medical specialties involved in the referral or application of UGI endoscopy. INTERVENTIONS: Each panel was presented with about 500 clinical scenarios (indications) that were rated on a nine-point scale as to the appropriateness of performing UGI endoscopy for a patient with that clinical presentation. MAIN OUTCOME MEASURES: (1) distribution of appropriateness ratings and intrapanel agreement categories between the two panels, (2) between-panel agreement of assigning appropriateness for comparable indications and, (3) percentage of indications with major between-panel differences. RESULTS: Ratings for 2/3 of indications could be compared. The Swiss panel showed higher intrapanel agreement (54.6% versus 46.2%, P = 0.002). Seventy-eight per cent of comparable indications were assigned to identical categories of appropriateness by both panels (kappa = 0.76, P < 0.001). For 93% of the 376 comparable indications, there were no major interpanel differences. CONCLUSION: Separate expert panels in different countries, using a standardized methodology, produce criteria for appropriateness of medical procedures that are similar. Given the resources being invested throughout the world in developing criteria and guidelines, international collaboration in seeking optimal use of limited health care resources should be intensified.

Underutilization of upper gastrointestinal endoscopy.

BACKGROUND & AIMS: Efforts to reduce costs in health care may raise concerns about underuse of medical procedures. This study prospectively assessed underuse of upper gastrointestinal endoscopy in a cohort of patients in whom we have recently published data on overuse of endoscopy. METHODS: Underuse was identified by formal necessity criteria for endoscopy, obtained by an explicit panel process. Outpatients were consecutively included in two clinical settings. Setting A consisted of 20 primary care physicians and 7215 patient visits that occurred within 1 month. Setting B consisted of 920 visits that occurred during 3 weeks at an outpatient clinic. RESULTS: During these 8135 visits, 611 patients complained of upper digestive symptoms; 63 of them underwent endoscopy. Underuse was identified in 72 patients (11.8%). The two clinical situations mainly responsible for underuse of endoscopy were uninvestigated peptic symptoms resistant to treatment and dysphagia. At first follow-up, 29 of the patients with initial underuse still fulfilled criteria of necessity (underuse rate, 4.7%). One-year follow-up showed underuse of endoscopy in 5 patients. CONCLUSIONS: This prospective evidence shows that underuse of a medical procedure exists. The estimated overuse and underuse of endoscopy in this cohort were approximately equal (5%). Improving quality of care will require reductions of both overuse and underuse of medical procedures.

Efficacy of lumbar discectomy and percutaneous treatments for lumbar disc herniation.

The changing health care environment necessitates careful re-evaluation of all costly elective procedures. Low back surgery is a typical example. This article reviews the current literature addressing the efficacy of surgery and invasive percutaneous treatments for discogenic sciatica. It also discusses the prospects for the continuation of reimbursement for these procedures under a system of managed health care. Relevant articles were identified using the MEDLINE and Current Contents databases, from bibliographies of articles identified from these databases, from recommendations of experts in the field, and from the Canadian Cochrane++ Collaboration. The review includes randomized clinical trials, meta-analyses, published practice guidelines and large case series. The literature is classified and discussed in these quality strata. The review includes 9 randomized trials, 6 meta-analyses or review articles, one evidence-based practice guideline, 38 surgical case series and 35 additional references. Though incomplete, the existing evidence indicates that open discectomy shortens the duration of discogenic sciatica in selected patients. Neurologic outcomes are similar in operated and unoperated patients. Predominant leg pain, evidence of nerve root tension and concordant symptoms and imaging findings, are associated with favorable surgical results. Chemonucleolysis is also associated with more rapid pain relief than conservative treatment, but provides less certain benefit than standard discectomy. Available data on other percutaneous disc treatments do not currently support a statement on efficacy. Various percutaneous techniques are available but there is no solid scientific evidence of efficacy. The benefits of open discectomy, principally reduced duration of pain, appear to justify its use in carefully selected patients when discogenic sciatica fails to improve with conservative measures. Though elective, the procedure will probably continue to be available under managed care, but with increasing scrutiny of operative indications.

Managing prescription drug costs: a case study.

Pharmacy costs in most private insurance companies and public concerns have risen over the past several years. To address the problem of increased expenditures in its government employee pharmacy program, the State of New York sought bids from outside vendors to help it control pharmaceutical costs. The following is a case study of the tools the state employed in that effort. Over time, both prescription drug coverage and mental health and substance abuse benefits were carved out of the medical plan and are now provided under free-standing programs. In order to participate, an independent pharmacy must accept a discount of 10% off the average wholesale price of brand name drugs and 25% off the average generic price of generic drugs.

The medical appropriateness of tympanostomy tubes proposed for children younger than 16 years in the United States.

OBJECTIVE: To describe the clinical reasons tympanostomy tubes are proposed for children and to assess their appropriateness. DESIGN: Analysis of data previously collected prospectively by a national utilization review (UR) firm during a two-step UR process to assess the medical appropriateness of tympanostomy tube placement. Nurses interviewed otolaryngologists' and primary care physicians' office staff to collect clinical data. For a randomly selected subsample of cases found inappropriate, we reviewed subsequent interviews of the otolaryngologists by physician reviewers, who looked for possible extenuating clinical circumstances or additional clinical data that might have changed the appropriateness category. SETTING: Otolaryngologists' practices from 49 states and the District of Columbia. PATIENTS: All 6611 children younger than 16 years who were insured by three clients of the UR firm and whose proposal to receive tympanostomy tubes were reviewed by this system from January 1, 1990, through July 31, 1991. The insurance companies in the study insured 5.6 million Americans at the time of the study. MAIN OUTCOME MEASURE: The medical appropriateness of tympanostomy tube surgery according to explicit criteria developed by an expert panel using the RAND/University of California-Los Angeles modified Delphi method. RESULTS: A total of 6429 (97%) of the cases were proposed for recurrent acute otitis media, otitis media with effusion, or both. Making generous clinical assumptions, 41% of the proposals for these reasons had appropriate indications, 32% had equivocal indications, and 27% had inappropriate ones. Considering the additional information available from the subsample review, the proportion appropriate was 42%, equivocal 35%, and inappropriate 23%. CONCLUSION: About one quarter of tympanostomy tube insertions for children in this study were proposed for inappropriate indications and another third for equivocal ones.

Adjusted hospital death rates: a potential screen for quality of medical care.

Increased economic pressure on hospitals has accelerated the need to develop a screening tool for identifying hospitals that potentially provide poor quality care. Based upon data from 93 hospitals and 205,000 admissions, we used a multiple regression model to adjust the hospitals crude death rate. The adjustment process used age, origin of patient from the emergency department or nursing home, and a hospital case mix index based on DRGs (diagnostic related groups). Before adjustment, hospital death rates ranged from 0.3 to 5.8 per 100 admissions. After adjustment, hospital death ratios ranged from 0.36 to 1.36 per 100 (actual death rate divided by predicted death rate). Eleven hospitals (12 per cent) were identified where the actual death rate exceeded the predicted death rate by more than two standard deviations. In nine hospitals (10 per cent), the predicted death rate exceeded the actual death rate by a similar statistical margin. The 11 hospitals with higher than predicted death rates may provide inadequate quality of care or have uniquely ill patient populations. The adjusted death rate model needs to be validated and generalized before it can be used routinely to screen hospitals. However, the remaining large differences in observed versus predicted death rates lead us to believe that important differences in hospital performance may exist.