The Trump administration has proposed a new rule that would require direct-to-consumer TV advertisements for prescription drugs to disclose the price of their products.

The Centers for Medicare & Medicaid Services (CMS) said the disclosures would help consumers “make informed decisions that minimize not only their out-of-pocket costs, but also expenditures borne by Medicare and Medicaid, both of which are significant problems.”

The idea enjoys broad public support, since medical care and drug costs continue to skyrocket.  A U.S. Senate report earlier this year revealed that the cost of the 20 most commonly prescribed brand-name drugs have risen tenfold in the past five years.

In a June 2018 poll, 76 percent of Americans favored required drug advertisements to include a statement about how much the drugs cost.

But Michelle Mello, a Stanford Law School professor and Stanford Medicine professor of health research and policy, writes in this New England Journal of Medicine perspective that the proposed rule raises substantial public health and legal concerns.

A potential unintended consequence of price disclosure may be to dissuade patients from seeking care, writes Mello and her co-author, Stacie B. Dusetzina of Vanderbilt University School of Medicine, because of the perception that they cannot afford treatment. For example, Trulicity, a widely advertised drug for type 2 diabetes has a list price of $730 a month.

“Patients who could benefit from diabetes treatment may assume that they cannot afford it, when in fact insured patients’ costs for Trulicity may be much lower, and cheaper treatment options available,” they write. Metformin, for instance, costs $4 per month for patients who pay cash.

CMS would demand drug makers use the list prices from the Wholesale Acquisition Cost (WAC) in their television ads, including that costs “may be different” for those who are insured.

“This wording doesn’t communicate that costs to patients are probably much lower than the WAC,” writes Mello, a core faculty member at Stanford Health Policy.

This could have important legal implications as well, as compelled disclosures in advertising impinge on commercial speech protected by the First Amendment. Furthermore, they write, “disagreement about whether the WAC accurately represents a drug’s price could affect how courts assess the rule when constitutional challenges are inevitably filed.”

The researchers say three aspects of the proposed rule undercut the government’s ability to argue that it would improve patient decision-making and reduce drug spending: 

1. Price information does little to inform consumer decisions if it inaccurately represents actual cost.
2. Consumers can already obtain information on cash prices online and their own cost from their insurer.
3. The rule contains no meaningful enforcement mechanism; CMS plans only to list violators on its website, calling into question whether companies will comply.

“We think that a better alternative would be making patient-specific cost information accessible at the point of prescribing, “ the authors write. 

The cost of prescription drugs should become a routine part of clinician-patient discussions, although they acknowledge that this would put more time constraints on medical practices.

“Providing salient cost information at the right time could help reduce drug spending while preserving patient choice, but we believe that direct-to-consumer advertising is the wrong vehicle,” they write.

Research by Stanford Health Policy’s Michelle Mello looks at what happens when a group of hospitals started systematically acknowledging adverse outcomes in care by apologizing and proactively offering compensation where substandard care caused serious harm. 

Hospitals have traditionally “crouched in a deny-and-defend posture when things go wrong in medical care,” said Mello, a professor of law at Stanford Law School and a professor of health research and policy. The new approach, called “a communication-and-resolution program,” or CRP, is being adopted by an increasing number of health-care facilities.

“None of the hospitals experienced worsening liability or trends after CRP implementation, which suggests that transparency, apology, and proactive compensation can be pursued without adverse financial consequences,” Mello and her co-authors write in the study published Monday in Health Affairs. However, despite the growing consensus that CRPs are the right thing to do, concerns over liability risks remain.”

Stanford Health Policy asked Mello some questions about the research:

Could this new approach to resolving patient conflict be a thing of the future?

Hospitals that adopt CRPs believe they will help improve patient safety and are consistent with the ethical obligation to disclose medical errors; they also hope they will reduce liability costs. However, there is a lot of uncertainty about their effects on costs. On the one hand, being honest with patients could avoid the anger that prompts patients to sue, and compensating injured patients early on saves on litigation expenses. On the other hand, in the traditional system, very few patients injured by substandard care ever get compensated. Offering up admissions of error and early compensation could mean a lot more patients receive payment, raising total costs. Uncertainty about this issue continues to be a barrier to widespread adoption of the CRP approach.

What were the key findings in your study?

We evaluated the liability effects of CRP implementation at four Massachusetts hospitals by examining before-and-after trends in malpractice claims, volume, cost, and time to resolution. We then compared those to trends among similar hospitals in the state that did not adopt CRPs. We found that CRP implementation was associated with improved trends in the rate of new claims and legal defense costs at the two big hospitals that implemented these programs — favorable developments that were not seen at comparison hospitals with no communication-and-resolution programs in place. CRP implementation was not associated with significant changes upward or downward in trends of new claims receiving compensation, compensation costs, total liability costs, or average compensation per paid claim, nor was it associated with a significant change in time to resolution.

So then why are the findings important?

The study helps resolve uncertainty about the liability effects of admitting and compensating medical errors, especially since the study design was much stronger than that of previous studies. We found that the CRP approach does not expand liability risk and may, in fact, improve some liability outcomes. Therefore, hospitals can “do the right thing” — be honest about errors, apologize, and compensate patients who are injured by negligence — without adverse financial consequences.

Who began the CRP approach and what is the average payment proactively made to patients who did not receive proper care?

The approach dates to the late 1990s and was first publicized by a Veterans Affairs hospital in Kentucky and then by the University of Michigan Health System, both of which reported very positive outcomes.  Stanford was also an early adopter.

The model calls for patients to be compensated at about what the hospital estimates their claim would be worth in traditional litigation. In our study in Massachusetts, the median payment to patients was $75,000. That’s a lot lower than the median payment in the tort system, but the mix of injuries is different. In traditional litigation, 85 percent of claims involve very serious injuries or deaths, because smaller claims aren’t attractive to plaintiff attorneys. They just go uncompensated. In CRPs, it’s easier for patients with moderate-severity injuries to have access to justice.

Some 450 million patient visits to primary care clinics occur in the United States each year. And as the shortage of doctors grows larger each year, primary care teams face increasing pressure both during patient encounters and outside the examining room.

The growing time constraints on primary care clinics — conducting patient consults faster, logging results in EMRs sooner, keeping up with regulatory changes — are worrying patients and physicians alike. 

Stanford Health Policy’s Kathryn M. McDonald and colleagues wanted to better understand the organizational influences of time stressors and the impact they are having on patients.

“Patients get interrupted often when doctors and their care teams are rushed,” said McDonald, MM, PhD, executive director of the Center for Health Policy and Center for Primary Care and Outcomes Research. “They worry about whether their concerns and needs will be addressed adequately. Getting the right diagnosis, treatment and support are all important to patients, so any risk of experiencing suboptimal care due to time stressors is worth understanding better.”

In a study published in the American Public Health Association journal, Medical Care, McDonald and her colleagues wrote that despite concern about the impact time pressure has on the delivery of health care, “scant evidence exists about types of time stress, the organizational factors that shape such stressors in routine care settings, and consequences for patients and practitioners alike.” 

So the researchers analyzed cross-sectional survey data collected from January to August 2016 from primary care teams at 16 randomly selected primary care practices associated with two large Accountable Care Organizations (ACOs) and their patients with cardiovascular disease, diabetes, or both. Through April 2016, they gathered data from 353 physicians and staff members of the clinics.

Then from May to August 2016, the researchers surveyed 1,291 patients by mail and telephone follow-up calls to ask about their concerns.

They determined that the responses translated into two types of stressors related to the lack of time: practice-level time pressure and encounter-level time pressure.

“The stressor condition is similar to the weather—determined by both barometric pressure and temperature — in potentially different way,” they posited.

They found that different organizational factors are associated with each form of time pressure. A patient-centered culture, for example, may include specific patient engagement initiatives, and is associated with reductions in encounter-level time pressure. Similarly, health information systems that provide true support for clinical workflow and good teamwork also corresponded with less encounter-level time pressure. A different organizational influence — leaders that are responsive to the clinic teams — was associated with reductions in practice-level time pressure.

The potential consequences for patients are missed opportunities in patient care and inadequate chronic care support — two very important factors behind successful health care.

“The findings underscore the importance of linking all levels and aspects of physician practice organizations to mitigate  the negative effects of time pressure on patient care” said Stephen Shortell, principal investigator of the Patient Centered Outcomes Research Institute (PCORI) grant that funded the study.  Their other co-author is Hector Rodriguez at the UC Berkeley School of Public Health.

They discovered that one-third of medical team respondents indicated they work in a chaotic practice atmosphere, juggling patient calls, documentation, quality reporting, and many other tasks. The more senior the staff member was, reports of working in a chaotic environment lessened.

Only 31 percent of those respondents said that during patient visits, it was very unlikely for the team to miss all seven specific opportunities related to screening, diagnosis or treatments. 

“Doctors’ offices may increase their chances of preventing adverse effects of time stressors by becoming more patient-centered, coordinating care among team members better and assuring that information technologies make work easier,” McDonald said in an interview about how the results might lead to some solutions. 

“I was struck by the importance of leadership’s responsiveness to their frontline team’s input about changes needed when doctor’s offices are more chaotic,” she said. “Likewise, for clinics that are part of larger groups, like Accountable Care Organizations, the corporate office’s decisions seem to play a role in the perception of time stressors at the practice level.”

The United States is in the grip of an opioid epidemic, which is affecting millions of Americans and claiming thousands of lives. Many trace their opioid dependence back to their doctor’s office, the drugs prescribed for pain after an injury, surgery, or dental procedure. Were these painkillers over prescribed? Did drug manufacturers exaggerate opioids’ effectiveness while deliberately underplaying their danger? Did drug distributors and retailers take necessary steps to ensure that pills weren’t falling in to the wrong hands?  

In this Q&A, Stanford Law Professors Michelle Mello, an expert in health law and core faculty member at Stanford Health Policy, and Nora Freeman Engstrom, an expert in tort law and complex litigation, explain the scope of the opioid problem and discuss the latest cases and legal challenges.

Just how big of a problem is the opioid crisis in the United States? Can you describe the problem’s scope and seriousness? 

Engstrom: The opioid problem is monstrous. Some 2.4 million Americans have an opioid use disorder, and the epidemic has already claimed 300,000 American lives, including 42,000 in 2016 alone. Worse, if the problem isn’t addressed, death tolls will rise: opioids are on track to claim the lives of another half-million Americans within the next decade. That’s like wiping out the entire city of Atlanta. The economic cost is also astronomical. The Council of Economic Advisors has estimated that, in 2015, “the economic cost of the opioid crisis was $504.0 billion, or 2.8 percent of GDP.”

Mello: If there’s one picture that brings home the shocking toll, it’s this one, showing trends in U.S. deaths based on data from the Centers for Disease Control and Prevention.  Nearly all of the “Poisoning” deaths shown here are opioid related. In terms of what’s killing Americans, opioids dwarf car crashes and guns.

Opioid lawsuits are now making news . Some of the actions are criminal, pursued by the states and federal government. Others of those suits are being initiated by cities, counties, and even states. What do those latter suits allege and what damages are the public plaintiffs trying to recover?

Engstrom: In the past four years, roughly 400 cities, counties, and states have initiated lawsuits seeking recovery for their additional public spending traceable to the opioid epidemic. The governmental entities claim they have been injured because defendants—typically, opioid manufacturers, distributors, and big retail pharmacies—have pumped opioids into the hands of their citizens and, in so doing, increased their spending for governmental services. Everything from policing, education, foster care, the provision of health care, even the operation of coroner’s officers, have all been made more expensive because, as compared to a healthy citizenry, an opioid-addicted populace is far less productive and needs much more by way of government help. Facing these spiraling costs, the governmental plaintiffs contend that the opioid defendants—who, they contend, caused and profited from this crisis—should foot the bill.

So, the typical defendants in these cases are opioid manufacturers, distributors, and big retail pharmacies. What is it that the plaintiffs are alleging these defendants did wrong?

Mello: There are some variations state to state, but for manufacturers, plaintiffs are typically claiming that they made false statements to prescribers and others that the drugs were safer and less addictive than alternatives, even when mounting evidence showed otherwise; that they failed to warn physicians and patients about the risks; and that the products were defectively designed—for example, because manufacturers didn’t make the pills tamper-resistant. For distributors and retailers, the claims are that these defendants failed to monitor, detect, investigate, and report suspicious orders of prescription drugs, even though reasonably prudent suppliers would have done so and the federal Controlled Substances Act requires suppliers to maintain effective controls against diversion of controlled substances to illicit markets.

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There is a wealth of data that could help hospitals cut costs while still providing high-quality service for patients, if physicians were willing to join forces with administrators to truly understand how much their services cost, according to a new article by Stanford researchers.

The Centers for Medicare and Medicaid Services (CMS) has been pushing physicians and providers toward population-based payment, which requires that providers reduce their internal costs below payment levels.

In this effort, the beleaguered health-care payer for the elderly has been undertaking innovative payment models, such as accountable care organizations (ACOs) and bundled payment that require providers to better coordinate care and reduce reimbursements and unnecessary or redundant patient procedures.

“However, it has proven challenging for the models, which focus on costs from the payer perspective, to achieve the desired effect of reduced Medicare spending,” writes Merle Ederhof, PhD, in this Health Affairs Blog. The researcher who focuses on issues at the intersection of health-care and accounting is with Stanford’s Clinical Excellence Research Center.

Her co-authors, Alexander L. Chin, MD, MBA and Jeffrey K. Jopling, MD, MSHS, are also at the center, which is dedicated to discovering, testing and evaluating cost-saving innovations in clinical care.

Changing old patterns at hospitals and among physicians

“Highly detailed cost data generated by internal cost accounting systems already exist in a large, and growing, number of health-care organizations,” says Ederhof. 

As Ederhof wrote in this New England Journal of paper last year, the data collected by the Healthcare Information and Management Systems Society shows that more than 1,300 U.S. hospitals have adopted sophisticated internal cost accounting systems.

The authors argue that the cost data produced by these accounting systems can be used in hospitals internally to lower their costs of providing services to all their patients, both within and outside the Medicare system. But physicians must get on board.

“The high adoption rate of these cost-measurement systems is not surprising, considering that the systems are designed around the existing data infrastructure that providers must have in place for billing purposes,” the authors write. “However, while provider administrators have used such cost accounting systems for some time, we are only now beginning to see them being used by interdisciplinary teams involving physicians to restructure clinical processes.”

Some large health-care systems have already started using these accounting systems alongside teams of physicians.

Partners HealthCare in Boston has started to use this approach to analyze costs for a set of services, for example, in a recent project a team of spine surgeons reviewed and discussed unblinded comparisons at the episode and cost-category levels. 

“Analysis of the costs in the individual categories revealed variation in clinical processes across surgeons, which was very illuminating to the team,” the authors wrote.

Leaders at NYU Langone Health have also started to use the cost data in the organization’s “Value-Based Management” initiative. A key feature of the initiative, the authors write, is a dashboard that is accessible to all physicians. For each specific diagnosis-related group (DRG), the dashboard shows cost averages for each physician performing the procedure, at the procedure level and at the level of individual cost categories, such as the ICU, laboratory, operating room and therapies.

“Physicians have been highly engaged and interested in the dashboard since it allows them to compare their costs to their peers and external benchmarks, and to learn how they can restructure clinical processes to lower their costs,” the authors write.

This Value Based Management initiative at NYU, which incorporates cost savings targets, development-level incentives and quality components, has apparently resulted in substantial cost savings for the organization.

Stanford Health Care has also joined the movement to promote value-based care, recently launching its Cost Savings Reinvestment Program. 

Compare, for example, the average cost for a hip replacement surgery among five surgeons who perform the surgery in the same hospital. Then take the “positive outlier,” or the surgeon with the lowest cost for the surgery.

“Once positive outliers are identified, detailed analysis that combines physicians’ clinical expertise and administrators’ insight can uncover ways in which clinical processes can be restructured to deliver high-quality care at lower total episode cost,” the authors wrote.

Then the interdisciplinary team of physicians and administrators must try to understand why that surgeon’s costs are lower and what he or she does differently. Did she order physical therapy sooner after the hip-replacement surgery? Did he use a different anesthesia approach that resulted in a shorter recovery for the patient? 

But you still have to get those four, more expensive surgeons to adopt the less-expensive treatments. And that can go to the heart of a physician’s identity.

“Even just a few years ago concern for the cost of providing health-care services still heavily clashed with physicians’ professional identity,” Ederhof said in an interview. 

The authors believe there is no turning back.

“In my view, the shift in recent years is attributable to the fact that physicians are starting to realize that the rising costs of the U.S. health-care system are no longer sustainable and that things will have to change — with or without their collaboration,” Ederhof said.

New research finds that even though members of an advisory committee for Medicare are biased toward physician specialties, the partiality often bridges across specialty lines and may improve the quality of its price-setting recommendations.

For the first time, David Chan a core faculty member at Stanford Health Policy and faculty fellow at the Stanford Institute for Economic Policy Research, and his colleague Michael Dickstein from New York University, gained access to more than 4,000 fee proposals that were reviewed over a 21-year span by the committee, which is part of the American Medical Association (AMA). Their independent analysis is in a working paper just released by the National Bureau of Economic Research.

The finding is a surprising insight. Until now, behind-closed-doors deliberations meant nobody has known for sure how the physician-based committee reaches its recommendations for health-care service prices, which Medicare typically adopts. And longstanding criticisms of conflicts of interest have been largely based on anecdotal evidence and the assumption that tasking doctors with setting their own prices must be the equivalent of the fox guarding the henhouse.

But according to the empirical research, even if committee members were entirely neutral, only 1.9 percent of the $70 billion Medicare spends annually on physician care would be redistributed across all services.

“Though the analysis is not a complete vindication of the AMA committee, we find that committee bias has subtle implications for different medical fields and for Medicare,” said Chan, an assistant professor of medicine at Stanford.

“Primary care doctors once thought to be disadvantaged by the presence of specialty physicians on the committee actually benefit from shared interests with other types of physicians,” he says. “And overall, Medicare gets higher-quality information when the committee has connections with specialties.”

Benefits of bias

In their research, Chan and Dickstein, an assistant professor of economics at NYU, set out to uncover whether committee members exhibit bias in their recommendations and, if they do, how much it affects overall prices.

Since 1992, Medicare has tasked the AMA committee, formally known as the Relative Value Scale Update Committee (RUC), with calculating the time and effort component which, together with service costs, accounts for 96 percent of the Medicare reimbursement rate. Most private insurers also establish their payment rates based on Medicare pricing.

The lopsided composition of the committee – specialists significantly outnumber primary care physicians – has also fueled suspicions that prices for complex procedures are rising quickly because doctors on the committee are inclined to increase the cost of the procedures that either fall under or are closely related to their practice areas.

After reviewing internal deliberations on 4,423 fee proposals from 1992 to 2013, the researchers found an increased likelihood that committee members will recommend higher prices for specialties they are connected with. For example, a spinal surgeon on the committee is likely to agree with a price increase for a hand surgery procedure because both share revenue from orthopedic procedures.

The researchers then measured how closely connected a proposed price change was to the specialties represented on the committee and the effect that affiliation had on the recommended reimbursement. They found that the more connected the overall committee was to specialties representing a procedure, the more likely it was to go along with a suggested rate increase.

So why would Medicare rely on a biased industry group to determine its prices? The evidence, Chan said, suggests an explanation: The lack of impartiality on the committee is offset by the finding that the information members contribute to the price-setting process is of higher quality than input from neutral advisers.

“There is this trade-off between bias and the quality of information,” Chan explained. “An unbiased but very imprecise price may be worse than a biased price that is closer to the truth.”

Positive impact on primary care

Contrary to common perception, the researchers also suggest that primary care doctors are not always harmed by these biases. They found that services performed by primary care doctors and specialists often overlap, which means that Medicare pricing policies affect them in similar ways more often than people think. For example, primary care physicians who are internists and family medicine doctors perform some procedures that cardiologists and radiologists do. So, if the price of an electrocardiogram goes up, primary care doctors stand to gain financially from the procedure as much as cardiologists and cardiothoracic surgeons.

And because primary care specialties already benefit from affiliations with other specialties, doubling the number of internists on the committee and quadrupling the number of family medicine practitioners would increase their specialty revenues by less than 1 percent.

Further, the analysis showed that such shared interests — and the closer connection between committee members and the specialties communicating the costs of a procedure — helped boost the overall quality of information behind committee decisions.

“There are very likely several features in Medicare’s pricing structure that disadvantage primary care,” Chan said. “But our research suggests that the arrangement of the RUC is not one of them.”

At age 94, with an extensive collection of health policy research and publications under his belt, Victor Fuchs has a lot to say about the health care system.

The high cost. The uninsured. The fragmentation.

During a speech at the Stanford Institute for Economic Policy Research (SIEPR), the pioneering health economist narrowed his gaze to whether a single-payer system is the fix to those problems.

The answer is complicated, and it depends on the questions behind the question, said Fuchs, a SIEPR Senior Fellow and the Henry J. Kaiser, Jr., Professor of Economics and Health Research and Policy, emeritus. He is also a senior fellow at the Freeman Spogli Institute for International Studies and a core faculty member at Stanford Health Policy.

Recent challenges to the Affordable Care Act have rekindled a debate over the merits of a single-payer health care system — where one entity, namely the federal government, would foot the bill for essential services for all — and Fuchs spoke at SIEPR to succinctly explain what a single-payer system could achieve, what would probably never happen, and why.

The problem, Fuchs pointed out, is that the United States spends the most of any high-income country on health care, yet Americans are not achieving better health outcomes. Part of the solution would have to address the nation’s higher administrative costs, higher prices for prescription drugs, and the expensive increasing mix of services and specialists.

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Fuchs contended a single-payer system would lower costs. For one, it would create the bargaining power needed to offset the monopolistic powers of those providing the drugs, medical services and equipment.

To control costs, “we must move to something like a single-payer plan, but that alone will not be sufficient,” Fuchs said. “It will depend on what kind of single-payer plan it is.”

Even as it provides for universal health care insurance coverage, a single-payer system could take on various forms, including a blend of private and public controls.

And to have any chance at success, Fuchs said, the single-payer system would have to be simple, require minimum bureaucracy, and provide choice.

Then comes the rub, of course: The political will has historically tread against single-payer.

Americans are not willing to provide subsidies for those too poor to afford health insurance; neither do they have a compulsion for everyone to acquire coverage and contribute to those subsidies.

“The country as a whole has not been willing to fully embrace these two principles,” he said. “And I feel you need to have a strong majority of both if you’re going to have universal coverage.”

And unfortunately, Fuchs added, he does not believe universal health coverage would necessarily improve health outcomes. Many other socio-economic and environmental factors also play a role there.

In leading a brief discussion with Fuchs, Mark Cullen, a SIEPR Senior Fellow and professor of medicine, asked what makes him think the federal government would work to control costs under a single-payer system — when it has thus far chosen to exert little buying power under the current structure.

“I have not discussed the political feasibility of this, deliberately,” Fuchs quipped.

You can learn more about Fuchs’ viewpoint in The Journal of the American Medical Association.

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