Category Archives: Medical Economics

What Does “Medically Necessary” Mean?

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Let’s say one of my jail patients has a moderate-sized inguinal hernia.  I want to schedule surgery to have the hernia fixed, but to do so, I have to get authorization.  This is not unusual.  Just like the outside, before I can do medical procedures or order non-formulary drugs, I must get the approval of the entity that will pay the bill.  By contract, my jails house inmates from a variety of jurisdictions, such as the Federal Marshals, ICE, the State Department of Corrections and other counties.  This process of “Utilization Management” is very similar to getting pre-authorization from an insurance company or Medicaid in the free world, probably because Corrections simply copied the outside pre-authorization process.

Having done this process hundreds of times over the years, both in the free world and in Correctional Medicine, I am struck by a phrase that keeps coming up: “medically necessary.”  When authorization for a procedure is denied, the reason often given is that it is “not medically necessary.”  I then have to argue that what I am requesting is, indeed, medically necessary.  The problem is that there are many possible definitions of “medically necessary,” and I believe many disagreements arise because two parties understand “medical necessity” differently.

Continue reading →

Utilization Management is Different in Corrections

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This is an important fact that I have learned from many years working in prisons and jails: Most correctional practitioners do not understand how Utilization Management in a prison system works. They misunderstand what the goal of the UM process is. They misunderstand the process of submitting requests. And they misunderstand how decisions are made. It took me a full three years of working in a prison system before I wrapped my head around how UM was supposed to function. This is because UM within a correctional system is fundamentally different than UM in the outside world and also new incoming correctional practitioners are not taught how prison Utilization Management works or how to make UM requests properly.

To show how a prison is different than Utilization Management in a typical Health Maintenance Organization (HMO) in the outside world, let’s say that I am a primary care practitioner in the community who wants to order an MRI on one of my patients. As we all know from long experience, I can’t just order the MRI. I have to get it pre-authorized. To do that, I have to submit paperwork to the patient’s insurance company explaining why I want to do the procedure. Someone will review my request, but I will have no idea who this person is or what their qualifications are. The reviewer could be a physician, or it could be a nurse referring to UM guidelines.  I just don’t know and never will. Whoever that person is, they will either approve payment for the procedure or deny it.

Notice several important things about this interaction: Continue reading →

Bad Medicine is Expensive!

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In the last JailMedicine post, I introduced the subject of Utilization Management (UM) in Corrections. To some, Utilization Management has earned the reputation of being too focused on money and not enough focused on patients. But after I had been doing UM for awhile, I had an important insight that changed the way I thought about Utilization Management and (I believe) made my own efforts at UM much more effective.

That key insight is this: That which is expensive in medical practice is bad medicine. The way to control costs in medicine is to reduce or eliminate bad medical practice. Cost containment is simply a happy byproduct of this endeavor. When UM physician advisors work with primary care practitioners, the conversation should center around best medical practice, not money.

It is this simple: Good medicine is cost effective. Bad medicine is expensive. Continue reading →

Controlling Health Care Costs: Utilization Management

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Consider two people standing outside of a grocery store.

Person one is told: “Here is $200.00 for groceries for one month. You may buy any food you wish—but you may not spend more than this $200.00. So, make your purchases wisely. We are going to watch carefully to make sure that you do not exceed $200.00.”

The second person is told: “There is no limit on how much you spend on groceries in the next month. You may spend as much as you wish! And you may come back as often as you like. There are no limits. In fact, no one is even going to pay attention to what you buy!”

Which person do you think is more likely to walk out of the store with the most expensive cut of steak?
Which person is more likely to pay attention to prices and sales?
Which one do you think is more likely to buy food that they will never eat?

This scenario is very like the difference in health care spending within your average state prison system and the medical community at large. Continue reading →

Correctional Medicine is a Great Job! Who Knew?

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I have a confession to make.  Before I knew anything about Correctional Medicine, I had a bad opinion about it.  I’m not proud of this.  I even turned down my first opportunity to get into Correctional Medicine because of my preconceived prejudice. Thank goodness I got a second opportunity, because Correctional Medicine changed my life! Who knew that Correctional Medicine was such a great job and a great career?

Certainly not my colleagues.  Back when I made the mid-life career change to jail medicine, my physician friends asked me, bewildered, “Why in the world would you want to work in a jail?”  Without knowing anything about it, they had a preconceived notion of Correctional Medicine as being low skill and basically without redeeming features.

What a difference 15 years makes! careersprisondoctor Continue reading →

Hepatitis C: Between a Rock and a Hard Place

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As you probably know, Sovaldi (sofosbuvir) is an important new treatment for Hepatitis C infection that was released this last December and has been aggressively marketed by its maker, Gilead, ever since. The problem is that Gilead is charging an unheard of, jaw-dropping, $1,000.00 per pill for Sovaldi. This translates into a MINIMUM of $84,000.00 for Sovaldi alone for the simplest course of Hep C treatment. Add on the other necessary drugs and take into consideration more complicated cases, and a single course of therapy for Hepatitis C will cost between $100,000.00 and $250,000.00.

This price has placed prison systems in a no-win situation–and not just prisons, but also Medicaid, insurance companies, and HMOs. On one hand, Sovaldi is a good drug that, in fact, represents a significant advance in Hepatitis C treatment. Lots of Hepatitis C patients could potentially benefit from Sovaldi. On the other hand, no one can afford Sovaldi. Treating every potential Hep C patient using Sovaldi would bankrupt everyone. There is no good way out of this dilemma. 20120321 Continue reading →

Price Check! Genital Herpes. How Much is Nursing Time Worth?

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It is worthwhile to check drug prices now and then (once a quarter seems about right) to see what is happening in the pharmaceutical world.  When you do this, you will find some drugs that have inexplicably shot up in price.  One recent example was doxycycline, which went from around ten cents a tablet to over two dollars a tablet in a couple of months.

On the other hand, drugs that we think of as expensive in the back of our minds sometimes are no longer expensive.  Olanzapine (Zyprexa) is now cheaper than haloperidol.  Risperidone is cheaper still.

And sometimes, a drug that is a bit more expensive than its alternative is still the most cost-effective treatment based on “the hassle factor,” meaning frequency of dosing, ease of administration, potential for diversion–that sort of thing. Drugs prescribed for outbreaks of genital herpes are like that, in my opinion.  Valacyclovir can be more cost-effective than acyclovir for the treatment of recurrent genital herpes.herpes1 Continue reading →

Price Check! Estrogens.

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I don’t have a lot of women in my jails who take estrogen.  The post-menopausal women I see usually are not prescribed replacement hormones by their outside doctors very often.  mareThe main reason for this is the momentum generated by the landmark study Risks and benefits of estrogen plus progestin in healthy postmenopausal women: principal results from the Women’s Health Initiative randomized controlled trial published ten years ago in JAMA which said that the risks of hormone therapy following menopause outweighed the benefits.  Most of the major women’s groups  (here is one example) have backed off a little from this, saying now that for some women, post-menopausal hormones are OK, but should be done for as short of a time as possible.

Nevertheless, most of the women who are taking replacement estrogen are younger women who have had a total hysterectomy.  Since these women are young, it is appropriate for them to take replacement estrogen.  Since they do not have a uterus (for the most part), they do not need to take progestin.  But which estrogen should be on our “Preferred Drug List” (otherwise known as a Formulary)?

In many drug categories, ACE inhibitors, say, there are several options that are equally effective and equally priced.  I don’t care if a patient is taking lisinopril or enalopril.  They are equivalent.

That is not the case with estrogens.  It turns out that in the estrogen department, there is a clear winner.

Here is the price-per-pill breakdown.  The doses listed are the typical standard doses for adult women.

Estrogen Dose Price Per Tablet
Esterified Estrogen (Menest) 0.625mg $1.11
Estradiol (Estrace) 1 mg $0.04
Synthetic conjugated estrogens (Cenestin, Enjuvia) 0.625mg $3.27
Conjugated equine estrogen (Premarin) 0.625mg $3.09
Estropipate (Ogen) 1.5mg $0.24

Premarin has been around since 1942 and for many years, was the only available estrogen product, to the point that  “Premarin” became almost synonymous for all estrogens in the same way that people say “Kleenex” for all nose-blowing tissues.  Premarin continues to be the most prescribed replacement estrogen.

In fact, however, all of the estrogens are therapeutically equivalent.  The only differences are these:

1.  Premarin (conjugated equine estrogen or CEE) is derived from pregnant horse urine.  That is the only thing (except price) that sets it apart from the others.

2.  All the others, including synthetic conjugated estrogen, are made from plant proteins.

3.  17-beta-estradiol (usually just called estradiol, brand name Estrace) is the only formulation that is “bio-identical” to human estrogen.

So there you have it.  By curious happenstance, the one estrogen that is bio-equivalent to human estrogen happens to be the one that costs 4 cents a tablet.

Estradiol should be the preferred estrogen in your facility.

Do you still use Premarin in your facility?  Why or why not?  Please comment!

 

 

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Nurses and Chronic Care Clinics. What Do You Think?

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TaserCamIn my last post, I discussed the differences between how nurses are used in Acute Care Clinics in the community versus how they are used in corrections.  Today, I would like to discuss the differences between the community and corrections on how nurses are used in Chronic Care Clinics.

Again, these remarks are based on a talk that Dr. Marc Stern gave at the Essentials of Correctional Medicine conference last year.  It was quite a thought-provoking talk.

First, let’s define the difference between an Acute Care Clinic and a Chronic Care Clinic.  An Acute Care Clinic is one where the patient has asked to be seen because of some problem or complaint.  Examples would be “I have a rash,”  “I have chest pain,” or “I am having a hard time breathing.”  The patient is asking for a diagnosis (“What is causing this?”) or for relief of symptoms (“I want pain medication for this headache!”) or both.  The key is that the clinical encounter is patient driven—the patient has asked to be seen—due to some acute symptom.

Visits to a Chronic Care Clinic, on the other hand, are scheduled by the medical provider to assess progress made in treating some chronic medical problem.  These are scheduled months in advance and occur even if the patient is doing well.  One example is a patient on blood pressure medications who is scheduled for a follow-up visit to see how the blood pressure is doing.  Another example is a patient with hypothyroidism who is scheduled for a thyroid panel blood test to see if she is on the correct levothyroxine dose.  Patients taking warfarin come to an anti-coagulation clinic to have their INRs checked.  Each chronic disease, from COPD to rheumatoid arthritis, has a different set of monitoring tasks which are routinely done in a Chronic Care Clinic.

The key difference here is that chronic care visits are scheduled by the clinic, not the patient, and are expected to occur even if the patient is feeling well and has no complaints. Also, what will occur at the clinic visit is known beforehand.  Usually, there is a checklist of tasks that are scheduled to be done each visit.

However, nurses once again tend to be used differently in Correctional Chronic Care Clinics than they are in the Community.  But interestingly, the situation is exactly reversed from the Acute Care Clinic situation!

Community Chronic Care Clinics

In the Community, Chronic Care Clinics are most commonly run by nurses.  The patient may not see a practitioner every time.  Take the case of a Type 2 diabetic in the community.  Three or four times a year, this patient is scheduled to come to the diabetes clinic for a Chronic Care visit.  At that time, routine blood work (a Hemoglobin A1C, for example) is drawn, the patient is screened for diabetic complications (a foot exam, say, and blood pressure) and the patient receives counseling and teaching (for example, about the importance of the diabetic diet).  All of these tasks are typically done by a community nurse.  The patient may not see the doctor unless the nurse identifies a problem or unless the Chronic Care protocol specifies a practitioner visit.  Otherwise, if the patient is doing well, the practitioner may only see them once a year.  This is the community standard.

Correctional Chronic Care Clinics

However, as pointed out by Dr. Stern in his lecture, this is not how Chronic Care Clinics are typically done in corrections.  In jails and prisons, Chronic Care Clinics tend to be run exclusively by practitioners. And using practitioners to do work done by nurses in the community tends to be inefficient for a couple of reasons (these are my opinions, not necessarily Dr. Stern’s).

  1. Practitioners tend not to do as good of a job with Chronic Care Clinic tasks as nurses do.  Chronic Care, properly done, is a time intensive process that includes meticulously going through a checklist, answering questions and teaching.  Practitioners (and I am including myself here) tend to go too fast.  Nurses do a better job.
  2. Every minute a physician spends doing Chronic Care Clinic tasks typically done in the community by a nurse is a minute she cannot spend doing acute care evaluations and diagnostics she is better trained to do.  This is a time management issue.  The nurses will let the practitioner know if they find something during the chronic care visit that needs acute attention.

The practitioner, of course, should review the work done by the nurse in the Chronic Care clinic.  The easiest way to do this is to use a Chronic Care Flow Sheet filled out by the nurses at the chronic care visit and signed off by the practitioner at review.  And the practitioner should still be scheduled to see each chronic care patient periodically, say once a year.  But other than that, the system will run more efficiently if nurses run chronic care clinics as is done in the community.

Interesting Article of the Week

Right in line with the theme of who should run Chronic Care Clinics is this interesting article:

Delegating responsibility from clinicians to nonprofessional personnel: the example of hypertension control.  Margolius, et. al. J Am Board Fam Med. 2012 Mar-Apr;25(2):209-15. doi: 10.3122/jabfm.2012.02.100279.

In this study, the researchers delegated responsibility for Chronic Hypertension Follow-up to non-medically trained “Health Coaches.” These lay Health Coaches spoke to patients in the study frequently and counseled them on hypertension control and answered questions.  These untrained Health Coaches were even authorized to titrate patient blood pressure medications according to a written protocol!  Whoa! This was a “Mikey-Likes-It” type of study–after 6 months, the clinicians involved were asked how they liked the program–and most did, though some disagreed with the medication titration aspect.

I personally do not see those of us in corrections delegating responsibility for chronic care visits to a non-medically trained deputy.  However, if practitioners are running your facility’s Chronic Care Clinics exclusively, I agree with Dr. Stern that it is perfectly appropriate to delegate that responsibility to nurses, as is done in the community.

Who runs the Chronic Care Clinics at your facility?  Nurses, practitioners or a combination of the two? Please comment!

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Understanding Pharmacy Prices. Can It Be Done?

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20130206There are several good reasons to know what your pharmacy is charging you for each of the drugs you order. You need to know actual prices in order to assess the value of similar drugs, like two different first generation cephalosporins. In fact, you will have to know this in order to be able to set up a Pre-Approved Drug List. You need to know when a particular drug has a sudden price decrease or increase so you can switch to the most cost effective drug. Finally, you want to know that you are being charged fairly. If a pharmacy sells you a drug for 5% more than the price they paid to the wholesaler to obtain it; that seems fair. But if they jack up the price literally by 46 times, well, that does not go down so well. (See story below)!

Unfortunately, pharmaceutical prices are among the most convoluted and hard to understand of all drug prices. They are kind of like airline ticket prices. Have you ever heard of the game in which passengers on a commercial airline flight compare what each of them paid for their ticket with the lowest price being crowned the winner? (Their reward is the deep satisfaction that comes from knowing that everyone else is jealous of them). Airline tickets are kind of a unique item in the economy in that the price varies depending on many factors like when you book, how you book, how often you fly, how many bags you check and on and on.

Who Can Understand Pharmacy Industry Jargon?

Pharmacy prices are similar to this. What you pay per pill for drug X at your facility may be far different than what the facility down the street pays. The system is so convoluted, in fact, that it sometimes can be hard to even find out what your pharmacy is charging you and how they derive this price.

Pharmacies have their own professional jargon that can be hard for outsiders to understand—just like us! We say, for example, that a patient has an “erythematous urticaria” when we mean “itchy red rash.” Pharmacists say “I’m charging you the Average Wholesale Price minus 12%.” What the heck does that mean?

It turns out that there are many pricing systems in the pharmaceutical industry. You only really have to know about two of them, but it is worthwhile to peruse a list of the others:

Average Wholesale Price (AWP)
Actual Average Acquisition Cost (AAC)
Wholesale Acquisition Cost (WAC)
Average Manufacturer’s Price (AMP)
Maximum Allowable Cost (MAC)
Federal Supply Schedule (FSS)
Federal Upper Limit (FUL)
Estimated Acquisition Cost (EAC)
Average Sale Price (ASP)
Usual and Customary Charge (UCC)

And that is not all of them! The problem is that each of these pricing systems can give amazingly different prices for the exact same medication.

Fortunately, you only have to know about two of these pricing schemes; one that you don’t want to use and one that you do want to use. Forget about all of the others.

Average Wholesale Price (AWP)

The one that you don’t want to use is the Average Wholesale Price (AWP). Historically, this is the most common price system used by pharmacies. The problem is that it is a misleading term. You would think that the “Average Wholesale Price” would be the average price that the wholesalers charge for a drug. Well, you would be wrong. AWP is not a wholesale price and it is not an average. It is just a price set by the pharmaceutical industry. It is debatable exactly where that price comes from. However, AWP is, on average, 20% higher than the true wholesale price. But can be as much as 120% higher!  That means if a pharmacy says to you “I’m going to charge you AWP less 12%,” that means that they will be making somewhere between 8% and120% profit on these sales.  (They were probably smiling when they said it).  And that is in addition to their “Fill fee,” which I will discuss in a future post.

In addition to being an inaccurate representation of wholesale costs, AWP is quite hard for the typical consumer, like you and me, to find. You can’t just look up AWP online. AWP are listed in certain pharmacy trade publications like The Red Book, but access to the Red Book is quite expensive. And even if you get one, you will find that a certain medication, say ranitidine 150mg, has not just one AWP like you would expect, but a bewildering array of AWPs that range in price from one cent a tablet to well over one dollar a tablet. Some AWPs apply only to hospitals, some to huge bulk purchases like Wal-mart would make. It is often almost impossible to decipher what would apply to your situation. I know. I have tried.
Some pharmacies really like to use AWP and I can see why. It has many advantages for them. AWP overestimates wholesale costs to the advantage of the pharmacy. The pharmacy understands it, but you don’t. In essence, AWP is what the pharmacy says it is! How are you going to know differently? If possible, do not deal with the AWP!

Average Actual Acquisition Cost (AAC)

The price that you want to use instead is the Average Actual Acquisition Cost (AAC). AAC is an estimate of the actual wholesale cost your pharmacy pays for medications. Instead of being head-scratchingly hard to understand, AAC is easy to understand. It is the true wholesale price. And instead of being almost impossible to find out, you can find out the AAC in one of two easy ways. First, you can ask your pharmacy for the AAC of medications you commonly order. Some pharmacies will give this information to you, no problem. If you have a pharmacy like this, consider yourself blessed. Other pharmacies can be quite loathe parting with this information.

Fortunately, there is a second way to find AAC prices: You can look them up online. Most state’s Medicaid programs utilize AAC to set Medicaid drug prices and publish the AAC on their website. If your state does not offer online access to AAC, feel free to use Idaho Medicaid’s AAC website, found here.

How Much Difference Does It Really Make?

Is the difference between AAC and AWP really that important? Here is a true story that illustrates the difference.

Like many doctors, I have a little black bag with some doctor tools and medications that I can use in urgent situations. One such “stat” medication that I keep in my black bag is ondansetron (Zofran), which is, of course, used to treat nausea. A couple of weeks ago, I went to a local chain pharmacy to get some new ondansetron for my black bag. I had looked up the AAC online before I went to the pharmacy and found that the AAC of generic ondansetron 8mg tabs was 15 cents apiece. For 30 of them, the total AAC would be approximately $4.50. Figure in a percentage markup and a fill fee and I thought I would be charged approximately $10.00-$15.00 for this prescription.
Instead, the pharm tech looked me in the eye and said “That’ll be $235.43.” The pharmacy had calculated the price using AWP!

$10.00 vs. $235.43. Now that is the difference between AWP and AAC in a nutshell. What would your facility have done had it been charged $235.43 for this prescription? Paid it without question, I suspect.

So getting back to the original question: Is it possible to understand pharmacy prices? The answer is Yes! As long as you use the Actual Average Acquisition Price. You can understand the numerous other pharmacy pricing schemes only if you understand their relationship to AAC.

Do you have a good relationship with your pharmacy? What do you pay for your pharmaceuticals?  Please Comment!

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