Berwick’s Advice: Cost-Effectiveness Is Here to Stay

4/30/12

Dr. Donald Berwick, the former administrator of the Center for Medicare and Medicaid Services, held his post from July 2010 until December 2011 (about 18 months if you’re counting), before resigning in the face of sustained Senate opposition to confirmation.

He has kept a fairly low profile since his departure from the agency, but he spoke last week in California at an invitation-only conference of healthcare executives and investors sponsored by the private equity firm Health Evolution Partners. Perhaps not the most sympathetic audience for this liberal lion of health care reform, but the erudite professor and policy maven still has a lot to say about our health care system and he did not shy away from saying it.

He remains passionately committed to the goal of providing cost effective, quality care to every American. Indeed, I overheard one attendee respectfully remark after the session that he clearly is “a man with a dream,” as if this was the only conceivable explanation as to why an otherwise intelligent and influential Harvard professor would stoop to take the reins of an apparently unmanageable bureaucracy with an impossible mission amidst unrelenting political crossfire.

Dr. Berwick opined that it would be a tragedy for America should the Supreme Court strike down the Obama Administration’s Affordable Care Act; no surprise there. He also says that Americans have a sufficient stake in their own health to be vested in the system, even if the costs of health care are not shifted so that we bear a larger portion of them directly. Others openly disagreed with this sentiment.

Yet his primary theme was that it was getting very, very late in the game to slow the aggregate cost of health care as the baby boomers come into retirement. Citing his recent article in the Journal of the American Medical Association co-written with Andrew Hackbarth, Berwick noted that by surveying the lowest estimates of waste identified by other researchers in six broad categories — overtreatment, failures of care coordination, failures in execution of care processes, administrative complexity, pricing failures, and fraud and abuse—the sum of the lowest available estimates exceeds 20 percent of total health care expenditures. In fact, Berwick suspects we are wasting one of every three dollars that we spend, and this seems consistent with the oft-cited disparity between total health care spending and outcomes in this country.

The urgency of cost control is now such that, he said, there will be big reductions. The only question is whether we will do it in a good way or a bad way. The implication seems that “the good way” will involve rational government action consistent with the Affordable Care Act. I am reminded of the Cold War era debates over the Pentagon budget that targeted the euphemistic $1,000 toilet seat. The point being that, when you are spending billions and billions (or more), there will invariably be a percentage of it subject to waste, fraud and abuse that we all must implicitly accept as part of the program mission and scale.

That said, I agree that we should aspire to do better. How to do so? The Congress may continue to be dysfunctional, but its division surely reflects our own discord. Since most voters don’t read JAMA as they doze off, how can we expect to develop the kind of sophisticated policy consensus that is necessary to provoke the Congress and the regulatory agencies to act rationally so that we better control costs and improve quality of care?

Berwick did not address this question directly, but the implication of his remarks seems to be that unless we are prepared to have draconian, across the board reductions in healthcare spending and services, we need to look to the private sector to advance the cause. This could mean more subtle, consistent cost reductions driven by private payers, and quality improvements facilitated by enhanced information and other technological advances.

There is another path forward, one that reflects the time worn adage that “necessity is the mother of invention.” As The New York Times just reported, some of us apparently already have embraced cost cutting with fervor, driving down the rate of health care spending in 2009 and 2010. We don’t yet know what is behind these trends, or if it is indeed a trend. However, based on my experience with US Oncology, by 2010 there were disturbing anecdotal reports of cancer patients deferring or abandoning essential treatment. Some patients were ignoring pain to the point that they showed up at their healthcare provider with metastasized tumors, while others declined post-operative radiation therapy.

As to the future impact of all this on innovative life sciences companies, Berwick sounded an unmistakable warning. “If your products are expensive, it will be challenging; if yours is a firm focused on controlling costs, then your time has come.” In other words, biotech and medical device companies had better develop their case for cost effectiveness as their products enter into clinical development, because mere efficacy and safety may not get you paid in this brave new world.

John E. Osborn has been a senior executive with Cephalon, Dendreon and US Oncology, and has held academic appointments at Oxford, Princeton and the University of Washington. Follow @

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