A data-driven quality-score system for rating drug products and its implications for the health care industry.

The quality of drug products in the United States has been a matter of growing concern. Buyers and payers of pharmaceuticals have limited insight into measures of drug-product quality. Therefore, a quality-score system driven by data collection is proposed to differentiate between the qualities of drug products produced by different manufacturers. The quality scores derived using this proposed system would be based upon public regulatory data and independently-derived chemical data. A workflow for integrating the system into procurement decisions within health care organizations is also suggested. The implementation of such a quality-score system would benefit health care organizations by including the consideration of the quality of products while also considering price as a part of the drug procurement process. Such a system would also benefit the U.S. health care industry by bringing accountability and transparency into the drug supply chain and incentivizing manufacturers to place an increased emphasis on the quality and safety of their drug products.

The relationship between pharmacy benefit managers (PBMs) and the cost of therapies in the US pharmaceutical market: A policy primer for clinicians.

Pharmaceutical benefit managers (PBMs) are playing an increasingly important role in establishing access to pharmaceutical products for patients. PBMs set retail prices for pharmaceutical products, negotiate "rebates" from manufacturers based on total sales volume of products, and achieve several types of postsale price concessions and payments from pharmacies. All of these activities describe a complex flow of funds that has not been transparent to clinicians or to patients. In this article, we describe these terms and processes to better understand how pharmaceutical products are financed in the United States. In 2016, US pharmaceutical manufacturers reported gross pharmaceutical sales of $462 billion and net pharmaceutical sales of $318 billion. The difference between gross and net sales is largely due to the different "payments" from manufacturers to PBMs and other intermediaries in the marketplace. We examine the flow of funds through the US pharmaceutical distribution system over time using data from the annual reports of 13 major pharmaceutical manufacturers for the period 2011-2016. Overall, we find that net revenues for our sample of firms grew by an average of 2.7% annually between 2011 and 2016, whereas rebates and other payments increased by 15% annually over the same period. Our examination of the pharmaceutical market reveals the enormous scale of payments from pharmaceutical manufacturers to intermediaries. We observed that these payments have been growing disproportionally to manufacturer net income over the past 5 years. We also found a lack of transparency regarding the flow of funds through intermediaries. This entire marketplace is now the subject of intense public debate.

Engaging Medicare Beneficiaries in Coverage Choices.

This Viewpoint discusses the recently announced monthly Medicare Part B premium hike and the limited role beneficiaries play in decisions about their coverage, and proposes ways to engage Medicare beneficiaries in program decisions.

AI Alone Will Not Reduce the Administrative Burden of Health Care.

This Viewpoint considers AI's limits in solving the medical billing quagmire and argues that standardizing health insurance claim forms and simplifying billing must occur before AI can shoulder the load.

Administrative Costs Associated With Physician Billing and Insurance-Related Activities at an Academic Health Care System.

Importance: Administrative costs in the US health care system are an important component of total health care spending, and a substantial proportion of these costs are attributable to billing and insurance-related activities. Objective: To examine and estimate the administrative costs associated with physician billing activities in a large academic health care system with a certified electronic health record system. Design, Setting, and Participants: This study used time-driven activity-based costing. Interviews were conducted with 27 health system administrators and 34 physicians in 2016 and 2017 to construct a process map charting the path of an insurance claim through the revenue cycle management process. These data were used to calculate the cost for each major billing and insurance-related activity and were aggregated to estimate the health system's total cost of processing an insurance claim. Exposures: Estimated time required to perform billing and insurance-related activities, based on interviews with management personnel and physicians. Main Outcomes and Measures: Estimated billing and insurance-related costs for 5 types of patient encounters: primary care visits, discharged emergency department visits, general medicine inpatient stays, ambulatory surgical procedures, and inpatient surgical procedures. Results: Estimated processing time and total costs for billing and insurance-related activities were 13 minutes and $20.49 for a primary care visit, 32 minutes and $61.54 for a discharged emergency department visit, 73 minutes and $124.26 for a general inpatient stay, 75 minutes and $170.40 for an ambulatory surgical procedure, and 100 minutes and $215.10 for an inpatient surgical procedure. Of these totals, time and costs for activities carried out by physicians were estimated at a median of 3 minutes or $6.36 for a primary care visit, 3 minutes or $10.97 for an emergency department visit, 5 minutes or $13.29 for a general inpatient stay, 15 minutes or $51.20 for an ambulatory surgical procedure, and 15 minutes or $51.20 for an inpatient surgical procedure. Of professional revenue, professional billing costs were estimated to represent 14.5% for primary care visits, 25.2% for emergency department visits, 8.0% for general medicine inpatient stays, 13.4% for ambulatory surgical procedures, and 3.1% for inpatient surgical procedures. Conclusions and Relevance: In a time-driven activity-based costing study in a large academic health care system with a certified electronic health record system, the estimated costs of billing and insurance-related activities ranged from $20 for a primary care visit to $215 for an inpatient surgical procedure. Knowledge of how specific billing and insurance-related activities contribute to administrative costs may help inform policy solutions to reduce these expenses.

Modeling the Potential Economic Impact of the Medicare Comprehensive Care for Joint Replacement Episode-Based Payment Model.

BACKGROUND: The Medicare program has initiated Comprehensive Care for Joint Replacement (CJR), a bundled payment mandate for lower extremity joint replacements. We sought to determine the degree to which hospitals will invest in care redesign in response to CJR, and to project its economic impacts. METHODS: We defined 4 potential hospital management strategies to address CJR: no action, light care management, heavy care management, and heavy care management with contracting. For each of 798 hospitals included in CJR, we used hospital-specific volume, cost, and quality data to determine the hospital's economically dominant strategy. We aggregated data to assess the percentage of hospitals pursuing each strategy; savings to the health care system; and costs and percentages of CJR-derived revenues gained or lost for Medicare, hospitals, and postacute care facilities. RESULTS: In the model, 83.1% of hospitals (range 55.0%-100.0%) were expected to take no action in response to CJR, and 16.1% of hospitals (range 0.0%-45.0%) were expected to pursue heavy care management with contracting. Overall, CJR is projected to reduce health care expenditures by 0.5% (range 0.0%-4.1%) or $14 million (range $0-$119 million). Medicare is expected to save 2.2% (range 2.2%-2.2%), hospitals are projected to lose 3.7% (range 4.7% loss to 3.8% gain), and postacute care facilities are expected to lose 6.5% (range 0.0%-12.8%). Hospital administrative costs are projected to increase by $63 million (range $0-$148 million). CONCLUSION: CJR is projected to have a negligible impact on total health care expenditures for lower extremity joint replacements. Further research will be required to assess the actual care management strategies adopted by CJR hospitals.

Are Patient Satisfaction Instruments Harming Both Patients and Physicians?

In this Viewpoint, Richman and Schulman argue that patient satisfaction surveys may not actually reflect clinical performance or assist efforts to improve patient experience and are not useful tools to measure physician performance.

Tools for Economic Analysis of Patient Management Interventions in Heart Failure Cost-Effectiveness Model: A Web-based program designed to evaluate the cost-effectiveness of disease management programs in heart failure.

BACKGROUND: Heart failure disease management programs can influence medical resource use and quality-adjusted survival. Because projecting long-term costs and survival is challenging, a consistent and valid approach to extrapolating short-term outcomes would be valuable. METHODS: We developed the Tools for Economic Analysis of Patient Management Interventions in Heart Failure Cost-Effectiveness Model, a Web-based simulation tool designed to integrate data on demographic, clinical, and laboratory characteristics; use of evidence-based medications; and costs to generate predicted outcomes. Survival projections are based on a modified Seattle Heart Failure Model. Projections of resource use and quality of life are modeled using relationships with time-varying Seattle Heart Failure Model scores. The model can be used to evaluate parallel-group and single-cohort study designs and hypothetical programs. Simulations consist of 10,000 pairs of virtual cohorts used to generate estimates of resource use, costs, survival, and incremental cost-effectiveness ratios from user inputs. RESULTS: The model demonstrated acceptable internal and external validity in replicating resource use, costs, and survival estimates from 3 clinical trials. Simulations to evaluate the cost-effectiveness of heart failure disease management programs across 3 scenarios demonstrate how the model can be used to design a program in which short-term improvements in functioning and use of evidence-based treatments are sufficient to demonstrate good long-term value to the health care system. CONCLUSION: The Tools for Economic Analysis of Patient Management Interventions in Heart Failure Cost-Effectiveness Model provides researchers and providers with a tool for conducting long-term cost-effectiveness analyses of disease management programs in heart failure.

Health City Cayman Islands and the globalization of health services delivery.

We describe a new health care campus under development in the Cayman Islands, Health City, based on the low-cost "focused factory" model. The construction of a multispecialty hospital opening in February 2014 less than a 4-hour flight away from the United States and convenient to both Central and South America for patients who already travel to the United States for clinical care could reshape the US health care marketplace and enhance access to affordable specialty health care in the region.