Adventures in Health Care Cost Cutting

Expect to keep hearing more talk about health care cost cutting, despite charts like this. It’s an idee fixe of the Wall Street/Washington corridor, and will only be implemented more vigorously over time.  So perhaps we should take stock of a few cost cutting initiatives. Medicare Part D, it seems, is coming way under its projected budget.  But maybe that’s because of ”a sharp fall in the number of breakthrough drugs,” a sign that innovation in pharma is stalling.  Cost cutting triumph, or logical outgrowth of a system that fails to reward actual contributions to health?

There’s also been a lot of pressure on skilled nursing facilities to hold the line on costs.  What are we getting in return? Here’s a summary from OIG:

Skilled nursing facilities (SNF) are required to develop a care plan for each beneficiary and provide services in accordance with the care plan, as well as to plan for each beneficiary’s discharge. . . For 37 percent of stays, SNFs did not develop care plans that met requirements or did not provide services in accordance with care plans. For 31 percent of stays, SNFs did not meet discharge planning requirements. . . . [R]eviewers found examples of poor quality care related to wound care, medication management, and therapy. These findings raise concerns about what Medicare is paying for. They also demonstrate that SNF oversight needs to be strengthened to ensure that SNFs perform appropriate care planning and discharge planning.

I’m sure the health care cost cutters will use this evidence to demand the SNFs be paid even less–rather than, say, investing real funding in proper training and pay in this vital service sector.  At some point, though, costs get cut so much that Medicaid will become little more than a meaningless plastic card, and “SNF” will stand for “Scarce Nursing Forever.”

This post first appeared on HealthLawProf Blog.

RUC-rolled

A few years ago, I noted that the American Medical Association/Specialty Society Relative Value Scale Update Committee (RUC) has a dominant role in suggesting payment levels to CMS.  It raises hard questions about price-setting in the health care sector, many of which cannot be answered because its processes are opaque.  Now we know that judicial relief will not improve things any time soon.  As Brian Klepper reports, “On January 7, a federal appeals court rejected six Georgia primary care physicians’ (PCPs) challenge to the Centers for Medicare and Medicaid Services’ (CMS) 20-year, sole-source relationship with the secretive, specialist-dominated federal advisory committee that determines the relative value of medical services.”  What was the complaint?

The core of the … physicians’ legal challenge was that the RUC is a “de facto Federal Advisory Committee,” and therefore subject to the stringent accountability requirements of the Federal Advisory Committee Act (FACA). This law ensures that federal bodies have panel compositions that are numerically representative of their constituencies, that their proceedings are open, and that methodologies are scientifically credible. In other words, FACA ensures that advisory practices are aligned with the public interest.

The RUC adheres to none of these and is an object lesson in how special interests can be insinuated into and capture regulatory processes, displacing the public interest. For example, when the legal challenge was first filed, only 3 of 29 RUC panelists (10 percent) represented primary care, even though some 30 percent of US physicians practice primary care. RUC meetings are closed to the public, unless an invitation is extended by the Chair, and admission is tied to the guest signing a nondisclosure agreement. Determination of a procedure’s value has been based on as few as 30 survey responses by physicians who know that their reimbursement will be linked to how they have answered the questions.

This is a sad example of opacity in health pricing. In ordinary markets, publicity would tend to narrow the price differential between similar quality services.  In health care, however, there is a triple layer of agency between care and patients whose physicians’ recommendations are often constrained by an insurer that is chosen by the patient’s employer or government. Even if we assume away the agency problems in such an arrangement, it is difficult for buyers and sellers to truly understand “market” dynamics, or even the governmental processes that underlie them.

Originally posted at Health LawProf Blog.

Seton Hall Law Review Issue on Accountable Care Organizations

Just a quick note to commend this issue to readers of HRW. As I note in an introduction to the volume, the articles are uniformly insightful contributions to very topical issues in health law and policy.

Sunder on Patents and Access to Medicine

Last week, the blog Concurring Opinions featured a symposium on Madhavi Sunder’s new book, From Goods to a Good Life: Intellectual Property and Global Justice. A chapter relevant to health law scholars is available online, here.  The chapter focuses on access to drugs in less developed countries (LDCs), and makes the following case:

Not too long ago, an HIV-positive diagnosis was tantamount to a death sentence — for people in the East and the West, in the South and the North. The drug companies that perfected the antiretroviral therapies invested princely sums to find these miracle cures. To justify their investment, they rely on the promise of a patent . . . . Thus patents have saved countless lives. But this structure has its limits. Indeed, the evidence is mounting that in crucial ways patents fail to promote the health of people in the developing world, and in some cases in the developed world as well.

The chapter begins by telling the moving story of Thembisa Mkhosana, one of thousands of South Africans who cannot afford the third-line antiretroviral treatments needed to survive AIDS.   “My blood test results have worsened dramatically,” Mkhosana told a reporter, “And now I suddenly have fever and am in pain. I’m really worried.”  ”I know that I’m going to die,” she said, but “who is going to look after my children?”  Her story appears in this video.

Mkhosana’s plight raises difficult interpretive issues.  Is she “collateral damage” from a patent system that depends on the strict rules that deny her access to the medicine she needs? Or is this an entirely avoidable tragedy, a consequence of misapplied and misinterpreted laws?  Sunder makes the case for the latter view very convincingly, while providing a compact and accessible account of the development of international patent policy over the past 20 years.

Sunder acknowledges the importance of patent law to incentivizing the development of new drugs. However, as she wisely notes, one can’t squeeze blood from a stone, however important the “skin in the game” ideology has become to advocates of “free-market” healthcare.  According to Sunder, “creation of generic drug markets for the poor ought not significantly impact the bottom line of Big Pharma, which derives only 5 to 7 percent of its profits from this part of the world.”  It may well be possible to make up for some of that figure by cutting back on promotional budgets in the developed world. It’s also a rather trivial figure compared to tax avoided or evaded on the tens of trillions now hidden away in tax havens.

On the other hand, Big Pharma has a number of justifications and excuses for aggressive assertion of their patents. Spokesmen aver that they are only concerned about what would happen to their profit margins if drugs circulated in an uncontrolled manner. They claim that, if poor countries are permitted to manufacture vast quantities of their drugs, those countries may sell them on the black or grey markets. That, in turn, would reduce the return on such drugs in the developed world, leaving less money for research in the future. Sunder responds that, “The grey-markets concern is a valid one—but . . .the World Trade Organization has begun to craft creative solutions to this problem (requiring generic drugs made for developing world markets to be distinctively labeled, for example).”  As surveillance of both people and goods is better perfected by state security apparatuses and RFID technology, the grey market concern should also become more technologically manageable, enabling finer-grained and more effective price discrimination.

Access to drugs is a key area where ordinary markets simply can’t be expected to achieve humane and rational results.  In 2008, the purchasing power of the average American dog was higher than that of forty percent of the world’s population. Given the extensive extant involvement of the U.S. government both in the domestic pharmaceutical industry and in the international negotiations determining its powers and duties abroad, there is a special moral obligation for U.S. citizens and politicians to assure the widespread and equitable distribution of lifesaving drugs. As Sunder states:

Economists call the millions of people who need a drug but cannot afford it “dead weight loss.” But the millions who die needlessly because of the patent system—a number that some scholars calculate as nine million in the developing world annually—are more than an inefficiency in the system. . . . We must both adopt alternative mechanisms for developing and distributing medicines to the poor (including prizes), and fully support the use of compulsory licenses by developing countries to treat their sick poor. Patent law cannot draw the line at rectifying market failure. Our law must contend with moral failure as well.

Sunder’s eloquent case for access to drugs commends respect and admiration for the Health Impact Fund, Knowledge Ecology International, Medecins sans Frontieres, and other groups for trying to close this gap.

X-Posted at Bill of Health.

Finance vs. Financialization in Health Care

I’ve noted the issues raised by financialization in nursing homes, billing & payment systems, and hospital chains before on blogs.  I wanted to present a few paragraphs from a recent book review (of Robert Shiller’s Finance and the Good Society), which explore the problems raised by the finance sector’s interaction with pharma:

A Ph.D. cancer researcher with ten years of experience tends to make about $110,000 to $160,000 annually; a banker specializing in mergers and acquisitions, about $2 million. Top hedge fund managers make billions of dollars annually. The disparity fails to rankle Shiller, since the “scientists are mostly living comfortably doing what they really want to do.”

Unless, of course, they’re among the thousands of drug developers laid off by pharmaceutical firms, which have been pressured by Wall Street to focus on “core competencies” and cut R&D. Last year, investment managers punished Merck for investing in research, while rewarding Pfizer for cutting it dramatically. Investors and analysts also questioned R&D levels at Lilly and Amgen. The constant pressure for quarterly earnings makes each cut to scientific investment seem rational when it occurs, but its consequences are devastating in the long run.

Shiller is eager to praise financiers for funding innovation, but barely mentions the asset-stripping and short-term thinking that have devastated many industries over the past two decades. A study from the New Economics Foundation recently estimated that leading London bankers “destroy £7 of social value for every pound in value they generate.” In the United States, the Kauffman Foundation concluded that an “expanding financial sector” is “depleting [the] pool of potential high growth company founders.” Why go to the trouble of developing a new product or service when you can take on much less risk (and probably net a far bigger return) as a financier deciding which company merits investment? Whatever one thinks of their methods, at least the NEF and Kauffman are asking tough questions about finance’s role vis-à-vis the real economy of goods and services.

Whether we are contemplating drug shortages or lack of innovation in antibiotics, we should always complement critiques of policy failures with critical examination of the financial methods of those at the commanding heights of the economy.  Contemporary financialization is agnostic to human outcomes. We should not be surprised if it generates some troubling ones in health care.

The last thirty years have witnessed an exponential rise in financialization, the reduction of exchanged value in an economy (past or present, tangible or intangible) into financial instruments. Monetary promises that once seemed like fanciful bets were rationalized into derivatives (contracts that derived their value based on other price levels).   As these contracts and other forms of betting interact with advanced computing and telecommunications technology, they can cause volatility, instability, and a short-termist mindset that is inimical to the long-term planning necessary to rational public health and pharmaceutical policy.

On the other hand, there are some aspects of health care reform that will require financial skills.   Consider, for instance, risk adjustment among insurers, which can only be done well given complex modeling. There is a very good brief on the topic now available at Health Affairs.  The brief notes that, “Health insurance plans having costs at least 3 percent more than target projections will receive payments that have been assessed from plans having costs at least 3 percent less than projections.” As they explain,

Insurance market reforms under the Affordable Care Act are designed to . . . shed the current system in which health plans have an incentive to enroll healthier people while avoiding the sick. One of the arrangements that will make the new system workable is risk adjustment—-a process by which health insurance plans will be compensated based on the underlying health status of the people they enroll, and therefore protected against losing money by covering people with highcost conditions.

But implementing risk adjustment could prove challenging. The statistical methods used in risk adjustment are technically complex. There are questions about the ability of the states, which have to carry out the risk adjustment, to collect accurate data and implement methodologies that result in fair payments to plans.

Perhaps redundant Wall Street quants could step into these roles?  As Crotty has noted, the main negative consequences of financialization for some companies in the US are that “1) they cut wages and benefits to workers;  2) they engaged in fraud and deception to increase apparent profits and 3) they moved into financial operations to increase profits.”  Moving finance workers out of financialization, and into the workaday realities of risk adjustment in health, may be a way to direct those with quantitative skills toward more constructive ends. Risk adjustment is one more step toward a utility model for insurers–a welcome change that should be considered throughout the financial sector.

Post-Federalism Medicaid?

Legal blogs have covered the Medicaid expansion in great detail. Now the law review scholarship is starting to emerge. Here’s one piece sure to make an impact: Nicole Huberfeld, Elizabeth Weeks Leonard, and Kevin Outterson on “Medicaid and Coercion in the Healthcare Cases.” From the abstract:

For the first time in its history, the Court held federal legislation based upon the spending power to be unconstitutionally coercive. Chief Justice Roberts’ plurality (joined for future voting purposes by the joint dissent) decided that the Medicaid expansion created by the ACA was a “new” program to which Congress could not attach the penalty of losing all Medicaid funding for refusing to participate. NFIB signals the Roberts Court’s interest in continuing the Federalism Revolution.

The Court relied on, seemingly modified, and strengthened at least two existing elements of the test for conditional spending articulated in South Dakota v. Dole. Clear notice and germaneness now appear to be folded into the newly fashioned yet undefined coercion doctrine, which relied on quantitative as well as qualitative analysis to determine that the Medicaid expansion was unconstitutionally coercive. The Court is now actively enforcing the Tenth Amendment to protect states from federal spending legislation. NFIB raises many questions regarding implementation of the Medicaid expansion as well as the ACA. The dockets will experience the reverberations of these open questions, as well as the Court’s invitation to explore the coercion doctrine.

For the near future, at least, the authors believe we are “plunged into Justice Cardozo’s ‘endless difficulties.’” For the long term, policymakers may want to take the advice of political science professor Andrea Louise Campbell:

[States are] ill suited to redistributive policy because they [have] an incentive to provide the lowest possible means-tested benefits in order to repel poor people and retain affluent taxpayers. The Great Recession also laid bare the devastating costs of the inability of nearly all states to run budget deficits and to engage in countercyclical spending during economic downturns. For many years, governors have urged the federal government to take on the portion of Medicaid that pays for nursing home stays for the disabled elderly.

Maybe now the time has come to federalize Medicaid altogether. Doing so would remove an enormous burden from state budgets and put an end to variations in state policy toward the poor that can have near-barbaric results. For example, in Texas, one of the states whose government plans to opt out, the working parents of Medicaid-eligible children can only get coverage for themselves if their income is below 26 percent of the federal poverty level. For a family of three, that’s $4,900 in annual income. Constitutionality is no barrier to federalization of Medicaid. The only question is whether it is politically feasible.

Huberfeld comes to a similar conclusion in another paper, arguing that “medicine generally and Medicaid specifically are already on the path to nationalization” and “Medicaid should be nationalized because federalism ideals are generally not served by the current structure.”

Exiling the Poor from the Insurance Market

John Roberts’ jurisprudential wizardry in NFIB has been compared with the artistic genius of pro wrestlers and rappers. Poor Americans in states newly empowered to resist the ACA’s Medicaid expansion may need even more ingenuity to get themselves insured. Both Kevin Outterson and my colleague John Jacobi have observed the perplexing predicament imposed on the poor in states that keep Medicaid 1.0, and resist Medicaid 2.0. From Jacobi’s post:

The reform provides insurance subsidies through tax credits. The credits are calculated on a sliding scale, according to household level, for people with income up to 400% of FPL [the federal poverty line] — subsidizing more generously someone earning 200% of FPL, for example, than someone earning 350% of FPL. But, under 26 USC 36B(c)(1), credits will not be distributed to those with incomes below 100% of the FPL. Why? Because Congress assumed states would take up the Medicaid expansion, obviating the need for exchange-based subsidies for the very poor. . . .Bottom line: states rejecting Medicaid 2.0 will not only forego about 93% federal funding for the program between 2014 and 2022, but they could also be depriving the poorest of the uninsured from any shot at coverage — potentially affecting millions nation-wide.

Georgia hospitals are already worried about the “unexpected prospect of lower reimbursements without the expanded pool of patients” to be covered by the Medicaid expansion:

Last year, Georgia hospitals lost an estimated $1.5 billion caring for people without insurance. The promise of fewer uninsured is what led the national hospital industry to agree to the health law’s $155 billion in Medicare and Medicaid cuts over a 10 year period. The Medicaid curveball comes at a time when Georgia hospitals are already in the throes of a massive industry transformation to improve quality and efficiency driven by market forces as well as the new law. Hospitals face lower payments from insurers and pressures to consolidate. One in three Georgia hospitals lose money. All are busy preparing for new standards under the law that, if not met, could mean millions of dollars in penalties.

It’s hard to imagine how hospitals like Grady can continue to act as a safety net in that environment. The article notes that “Georgians already pay for the cost of care provided to people without insurance through higher hospital bills and inflated insurance premiums.” If that trend continues, all the states refusing Medicaid 2.0 may end up doing is shifting the cost of the Medicaid expansion population from national taxpayers to Georgians with insurance. The superwealthy Americans of Marin County and Manhattan ought to send Georgia Governor Nathan Deal a thank you note for keeping Georgians’ problems for Georgians themselves to solve.

Silver Linings for the Losers in the PPACA Rulings

There are many excellent commentaries on the Supreme Court’s rulings today. Pam Karlan offers a great summary of the opinions:
There were two issues– two big issues and then two minor issues– before the court . . . . The two big issues were: was the individual mandate constitutional, and was the expansion of Medicaid to cover a great deal many more people who are near the poverty line constitutional?

The two minor issues were: could the court hear the case at all at this point, and if there was any provision of the act that was unconstitutional, what happened to the rest of the act?

The bottom line was that the individual mandate is constitutional and the expansion of Medicaid to cover more people is constitutional, but–and this is an important but–states cannot have their existing Medicaid funds cut off if they decline to participate in the expansion of Medicaid to millions of additional people.

Here are some counterintuitive perspectives on those results, focusing on the “silver linings” for today’s losers:

1) Silver Linings for Mandate Opponents

Reviewing Roberts’ ruling, Gerard Magliocca has said, “The Chief Justice gave a pretty speech about federalism, but ultimately he did nothing about it.” Other commentators worry that the long term implications are more menacing for federal initiatives. Ezra Klein calls Roberts a “political genius:”

[T]he legal reasoning in his decision went far beyond the role of umpire. He made it a point to affirm the once-radical arguments that animated the conservative challenge to the legislation. But then he upheld it on a technicality. It’s as if an umpire tweaked the rules to favor his team in the future, but obscured the changes by calling a particular contest for the other side. “John Roberts is playing at a different game than the rest of us,” wrote Red State’s Erick Erickson. “We’re on poker. He’s on chess.”

On the other hand, games of chess may not come up very often in the future. Is a Democratic syzygy like that of 2008 likely to happen again in the next decade or so? If not, we’re unlikely to see another piece of social legislation with the scope and ambition of the ACA. As I mentioned to my health care finance class back in 2009-2010, legislative environments like that one were only around in the mid-1930s and mid-1960s (and perhaps evident in Nixon-era environmental lawmaking). Post-Citizens United, we may never see one again (barring constitution-level upheaval). But prediction need not be that portentous. As Tim Jost states:

Chief Justice Roberts’ ruling on the Commerce Clause argument is clear and decisive and entirely adopts the argument of the states and of legal scholars who have opposed the ACA. It lays down a principle that Congress cannot compel Americans to engage in commerce against their will. Millions of Americans will go to bed tonight safe in the knowledge that Congress will never make them eat broccoli. But it is hard to think of any other examples where Congress would ever assert its Commerce clause authority to require the purchase of a private product. This is really a unique situation.

So the mandate’s opponents have achieved a new “gestalt,” but it’s unclear where the energy generated by such a shift will be directed.

2) Silver Linings for Medicaid Expanders

Andrew Koppelman is worried that red states will effectively cut off their nose to spite their face by turning down Medicaid expansion money:

From 2014 to 2016, the federal government will pay 100 percent of the costs. Then its share decreases, to 90 percent after 2020. Because the ACA also gives states assistance with their new administrative costs, overall state spending will actually be lowered. In the litigation, however, 26 states claimed — and Roberts agreed — that this conditional spending unconstitutionally coerced them. But let’s be clear: This is not about the states wanting to conserve their own money. It is about the states refusing to spend federal money, to help people that they do not want to help. (Paul Clement, the attorney for the challenging states, declared in oral argument that his position would not change if the federal government permanently paid 100 percent of the costs.)

It is likely that many of these 26 states . . . will now accept Roberts’ invitation to refuse the additional Medicaid funds. The people in those states who do all the menial jobs on which everyone else depends won’t get the medical care they need after all, because the temptation to trash Obamacare will be irresistible.

I’ve had a few reporters ask me about that possibility today, and the complementary worry that only insurance purchases at state exchanges (which are unlikely to be set up by red states) can be supported by premium tax credits. It’s possible that double-whammy will leave many of the uninsured just as badly off as they were before the ACA. But other commentators disagree about how red states will respond when the rubber hits the road. One of the leading national experts on health care federalism, Nicole Huberfeld, has said that she “would be surprised if many, if any, states opt out.” Tim Greaney offers these insights:

Should those states calling most loudly for repeal/overrule of the ACA now be true to their convictions and walk away from Medicaid expansion? To do so would be a remarkable triumph of ideology over their constituents’ public interest and economic interest. They would be abandoning a large segment of their most needy citizens AND leaving a lot of money on the table . . . All in all its a nice way of putting the ball in the court of the critics and framing the issue pretty starkly: do you want to participate in the shared national responsibility to take care of the less fortunate or is your State willing to leave a sizable segment of its citizens exposed to the dire consequences of being uninsured?

Astonishingly enough, it appears that four justices are committed to exactly that cruel course. But for today at least, the “rhetoric of reaction” did not carry the day.

originally posted on Concurring Opinions; photo credit, Kjetil Ree.

ACA Upheld as Tax

1) A good rundown of “what it means for you” is here.

2) A critical part of the Roberts opinion:

The Federal Government does not have the power to order people to buy health insurance. Section 5000A would therefore be unconstitutional if read as a command. The Federal Government does have the power to impose atax on those without health insurance. Section 5000A is therefore constitutional, because it can reasonably be read as a tax.

n. 11: Of course, individuals do not have a lawful choice not to pay a tax due, and may sometimes face prosecution for failing to do so (although not for declining to make the shared responsibility payment, see 26 U. S. C. §5000A(g)(2)). But that does not show that the tax restricts the lawful choice whether to undertake or forgo the activity on which the taxis predicated. Those subject to the individual mandate may lawfully forgo health insurance and pay higher taxes, or buy health insurance and pay lower taxes. The only thing they may not lawfully do is not buy health insurance and not pay the resulting tax.

3) Sara Rosenbaum of GW predicts “overwhelming number of states” to adopt the Medicaid expansion.

Also, Congrats to Jack Balkin for authoring “The Health-Care Mandate Is Clearly a Tax–and Therefore Constitutional,” back in May. From his lips to Justice Roberts’s ears.

I would also like to congratulate “individuals exposed to asbestos from a mine in Libby, Montana,” for keeping the Medicare coverage PPACA granted them. The joint dissent would have stripped that away, along with other parts of the Act they deem “minor provisions,” in a blanket repeal of PPACA they would characterize as “caution” and “minimalism.” I’m sure the tens of millions of Americans who will now enjoy insurance define “caution” quite differently.

Finally, a tip of the hat to Tim Jost, who has carefully and comprehensively blogged about key steps toward PPACA implementation, even with the “constitution in exile’s” Sword of Damocles hanging over it. If you want to learn more about the “Premium Tax Credit Final Rule,” essential health benefits, or minimum loss ratios, he’s the go-to person.

This post originally appeared, variously,  on Balkinization and on Concurring Opinions.

The Emerging IP Law of Health Information

I have hinted at problems with uniform trade secrecy laws in this volume and a law review article. I plan to continue that line of research in a co-authored work with Dave Levine, exploring the costs of trade secrecy in the finance, energy, and communications sectors. When it comes to “solutions,” I’m increasingly inclined to frame the issue as: how do we operationalize the insights of Michael Carroll’s “Uniformity Costs” concept? In other words, how do we shape doctrine so that it respects the unique economic conditions (and moral imperatives) related to specific industries?

One way to do so is to insist on the autonomy of a subject matter defined legal field (versus the trans-substantive aspirations of, say, contract, property, or intellectual property law). The “law of the horse crowd” usually assails that autonomy by warning about the distortionary affects of applying different laws to different sectors. Health law professors shared that worry for a while, debating whether health care law is a “coherent field.” But that anxiety seems to have faded as a distinct arena of health care economics develops and lawyers set to work implementing the massive HITECH and PPACA legislation passed in 2009 and 2010. The stage is now set for a distinctive law of “health information” to emerge, as third party payers and government use their leverage in the sector to tamp down counterproductive IP- and contract-based corporate strategies.

The law of health information is neither more “open” nor more “closed” than information law generally. Free access should be dictated in areas of extreme personal or societal need; in other cases, it may be right to force high payments, either ex ante via taxes, or ex post via high prices, from those with the ability to pay. Privacy should play a far more important role here than it does in the usual Wild West of internet data collection and processing. But once data is truly anonymized, the research imperative for access is perhaps more pressing than in any other area of law (except, perhaps, national security.).

For a recent controversy where laws of copyright seem inappropriate in a medical setting, check out this story:

According to the New England Journal of Medicine, after thirty years of silence, authors of a standard clinical psychiatric bedside test have issued take down orders of new medical research. Doctors who use copies of the bedside test which will have been printed in some of their oldest medical textbooks are liable to be sued for up to $150,000. . . . [E]ven the ghosts of positively ancient abandoned copyrights for the very simplest of ideas can be used to block new medical work through legal bullying.

The “thirty years” of silence part makes me want to look into a laches claim. The simplicity of the test also seems to invite a merger defense. On the other hand, perhaps the best answer is compulsory licensing, which should have gotten more attention during the SOPA/PIPA flap. Whatever solution is optimal, the implication of the NEJM piece is clear: health professionals believe their field deserves some autonomy from the normal laws of intellectual property. Popular reaction against secret prices of medical devices and hospital procedures also reflects that view.

In many areas, such rebellions against pricing the priceless have translated into general skepticism about intellectual property. In health care, they may lead to something different: a health information law distinct from the IP and privacy laws of general application.

An eminence grise of cyberlaw once told me that he got into the field in the 1980s because it was one of the few areas where things were “up for grabs” enough that a creative scholar could still have an influence. An elder statesman of the IP field told me that it had gone into “normal science” mode as of 2004 or so. Perhaps those who still want “paradigm shifts” need to work heavily regulated fields like health information law, where government policymakers are more regulators for (rather than instruments of) vendors and providers.

War on Disclosure: Recent Fronts in Health Care

Corporations are at war with disclosure in many important fields.  Two notable fronts have recently opened in health care:

1) Fracking processes have become highly controversial because secret chemicals may end up compromising water supplies.  Pennsylvania has now limited doctors’ ability to speak about their concerns:

Under a new law, doctors in Pennsylvania can access information about chemicals used in natural gas extraction—but they won’t be able to share it with their patients. . . .Pennsylvania law states that companies must disclose the identity and amount of any chemicals used in fracking fluids to any health professional that requests that information in order to diagnosis or treat a patient that may have been exposed to a hazardous chemical. But the provision in the new bill requires those health professionals to sign a confidentiality agreement stating that they will not disclose that information to anyone else—not even the person they’re trying to treat.

Protection of property rights uber alles appears to be the guiding principle here.  If only the doctors wanted to market drugs, maybe their free speech rights would trump the frackers’ trade secrecy privileges.

2) FDA User-Fee Bills recently approved by the House and Senate could seriously limit access to data about drugs.  The House bill is particularly worrisome:

The Food and Drug Administration Reform Act of 2012, H.R.5651 . . . would keep potentially important health and safety information away from the public. Section 812 would, according to a letter to leaders of the House Oversight and Government Reform Committee penned by several [advocacy] groups, deny the public access to information relating to drugs obtained by the U.S. Food and Drug Administration (FDA) from any government agency — local, state, federal, or foreign — if that agency has requested that the information be kept confidential.

If that House provision survives the conference committee, there will be troubling implications for US patients and research subjects abroad.

Health Information, Privacy, and Innovation

Health information law is a very exciting field.  Lawyers, doctors, and start-ups are re-thinking health care as an information industry.   I’ll be speaking on privacy and fair data practices at an upcoming conference.  The relationships between privacy, “big data,” and trade secrecy will bear a great deal of attention in coming years.

Software-based automation has raised living standards dramatically.  It makes factories more efficient, renders vast amounts of information accessible, and daily improves quality of life in barely noticed ways.  To realize these types of advances in health care, government and NGOs have begun to catalyze better data collection, retention, and analysis.  Life sciences companies need to report more data on drugs and devices. Hospitals and doctors are incentivized to use electronic health records via stimulus funding and rulemaking based on the HITECH Act’s meaningful use and certification requirements.

How will traditional intellectual property laws interact with these initiatives?  Will the increasing need for cooperation and sharing of information alter the landscape of trade secrecy and other IP protections that have often siloed health data?  Will providers find alternative funding sources for the collection, retention, and analysis of data, as some traditional IP protections appear increasingly outdated in a world of “big data” and market-driven transparency?

Medical privacy law has focused on assuring the privacy, security, and accuracy of medical data. The post-ACA landscape will include more concern about balancing privacy, innovation, access, and cost-control.  Advanced information technology has raised a number of new questions.  Beyond HIPAA and HITECH regulation, consumer protection law plays an important role in these fields.  (For example, the FTC recently required firms that “score” the health status of individuals based on their pharmacy records to disclose these records to scored individuals.)

Patients are opting to personalize their health records with the help of cloud computing firms; what law governs this digital migration? There is increasing concern about the role of “incidental findings” in medical research and practice; how will regulators and professional groups address them?   When employers demand access to employee health records, in what ways can they use them to profile the employee?

We also need to examine the legal aspects of data portability, integrity, and accuracy.  When two health records conflict, which takes priority?  What is “meaningful use” of an electronic health records system, and how will regulators and vendors assure interoperability between systems?  The course will also cover innovators’ efforts to protect their health data systems using contracts, technology, trade secrecy, patents, and copyright, and “improvers’” efforts to circumvent those legal and technological barriers to openness.

Finally, what are pharmaceutical companies’ past and present strategies regarding the disclosure of their research, including non-publication of adverse results and ghostwriting of positive outcomes? Will a “reproducible research” movement, popular in the hard sciences, reach pharmaceutical firms?  Insurer data will also be a target of reformers (including trade-secret protection of prices paid to hospitals, conflicts over the interpretation of disclosure requirements in the ACA, and state regulation of insurer-run doctor-rating sites).   Quality improvement and pilot programs will need good provider and insurer data–how we will ensure they have them?

Models of Patient Safety

If one jumbo jet crashed in the US each day for a week, we’d expect the FAA to shut down the industry until the problem was figured out. But in our health care system, roughly 250 people die each day due to preventable error. A vice president at a health care quality company says that “If we could focus our efforts on just four key areas — failure to rescue, bed sores, postoperative sepsis, and postoperative pulmonary embolism — and reduce these incidents by just 20 percent, we could save 39,000 people from dying every year.” The aviation analogy has caught on in the system, as patient safety advocate Lucian Leape noted in his classic 1994 JAMA article, Error in Medicine. Leape notes that airlines have become far safer by adopting redundant system designs, standardized procedures, checklists, rigid and frequently reinforced certification and testing of pilots, and extensive reporting systems. Advocates like Leape and Peter Provonost have been advocating for adoption of similar methods in health care for some time, and have scored some remarkable successes.

But the aviation model has its critics. The very thoughtful finance blogger Ashwin Parameswaran argues that, “by protecting system performance against single faults, redundancies allow the latent buildup of multiple faults.” While human expertise depends on an intuitive grasp, or mapping, of a situation, perhaps built up over decades of experience, technologized control systems privilege algorithms that are supposed to aggregate the best that has been thought and calculated. The technology is supposed to be the distilled essence of the insights of thousands, fixed in software. But the persons operating in the midst of it are denied the feedback that is a cornerstone of intuitive learning. Parameswaram offers several passages from James Reason’s book Human Error to document the resulting tension between our ability to accurately model systems and an intuitive understanding of them. Reason states:

[C]omplex, tightly-coupled and highly defended systems have become increasingly opaque to the people who manage, maintain and operate them. This opacity has two aspects: not knowing what is happening and not understanding what the system can do. As we have seen, automation has wrought a fundamental change in the roles people play within certain high-risk technologies. Instead of having ‘hands on’ contact with the process, people have been promoted “to higher-level supervisory tasks and to long-term maintenance and planning tasks.” In all cases, these are far removed from the immediate processing. What direct information they have is filtered through the computer-based interface. And, as many accidents have demonstrated, they often cannot find what they need to know while, at the same time, being deluged with information they do not want nor know how to interpret.

A stark choice emerges. We can either double down on redundant, tech-driven systems, or we can try to restore smaller scale scenarios where human judgment actually stands a chance of comprehending the situation. We will need to begin to recognize this regulatory apparatus as a “process of integrating human intelligence with artificial intelligence.” (For more on that front, the recent “We, Robot” conference at U. Miami is also of great interest.)

Another recent story emphasized the importance of filters in an era of information overload, and the need to develop better ways of processing complex information. Kerry Grens’s article “Data Diving” emphasizes that “what lies untapped beneath the surface of published clinical trial analyses could rock the world of independent review.”

[F]or the most part, [analysts] rely simply on publications in peer-reviewed journals. Such reviews are valuable to clinicians and health agencies for recommending treatment. But as several recent studies illustrate, they can be grossly limited and misleading. . . . [There is] an entire world of data that never sees the light of publication. “I have an evidence crisis,” [says Tom Jefferson of the Cochrane Collaboration]. “I’m not sure what to make of what I see in journals.” He offers an example: one publication of a Tamiflu trial was seven pages long. The corresponding clinical study report was 8,545 pages. . . .

Clinical study reports . . . are the most comprehensive descriptions of trials’ methodology and results . . . . They include details that might not make it into a published paper, such as the composition of the placebo used, the original protocol and any deviations from it, and descriptions of all the measures that were collected.  But even clinical study reports include some level of synthesis. At the finest level of resolution are the raw, unabridged, patient-level data. Getting access to either set of results, outside of being trial sponsors or drug regulators, is a rarity. Robert Gibbons, the director of the Center for Health Statistics at the University of Chicago, had never seen a reanalysis of raw data by an independent team until a few years ago, when he himself was staring at the full results from Eli Lilly’s clinical trials of the blockbuster antidepressant Prozac.

There will be a growing imperative to open up all of the data as concerns about the reliability of publications continue to grow.

EMTALA and the Free Rider Problem

This tragic case may interest those who teach EMTALA:

[Anna Brown] yelled from a wheelchair at St. Mary’s Health Center security personnel and Richmond Heights police officers that her legs hurt so badly she couldn’t stand. She had already been to two other hospitals that week in September, complaining of leg pain after spraining her ankle. This time, she refused to leave.

A police officer arrested Brown for trespassing. He wheeled her out in handcuffs after a doctor said she was healthy enough to be locked up. . . . She told officers she couldn’t get out of the police car, so they dragged her by her arms into the station. They left her lying on the concrete floor of a jail cell, moaning and struggling to breathe. Just 15 minutes later, a jail worker found her cold to the touch.

For some context, here is an excerpt from a column from Steven Pearlstein on a far more notable battle last week:

[T]he solicitor general and several justices tried to make the obvious point that one reason so many Americans lack health insurance is that the market is inherently unlike any other in that we don’t deny medical care to sick people who can’t pay for it. It is from this anomaly that springs the “individual mandate,” a requirement that all citizens buy health insurance, to prevent them from becoming free-riders on a system paid for by others.

Rather than wrestling with this obvious anomaly, however, Scalia and Alito simply [blamed] the government for creating the problem in the first place by obligating hospitals to treat the sick even if they are uninsured and cannot pay for the care.

As the case of Anna Brown shows, there are many ways to “solve” the free rider problem.

Must-Read Articles on Drug Shortages

In February, Health Affairs featured Duff Wilson’s article on “Deepening Drug Shortages.”  As Wilson notes, “the number of reported drug shortages in the United States nearly tripled between 2005 and 2010, increasing from 61 to178 and emerging as a systemic problem in the US health care system.”  Sharona Hoffman has recently written on the topic:

How could such shortages plague premier hospitals in the twenty-first century in the wealthiest country in the world? How could even patients with comprehensive health insurance and abundant financial resources be denied adequate care because the medications they require are simply not available in the marketplace?

The Article posits that public health policies and standards must serve multiple roles. They should deter both carelessness that leads to product contamination and strategic decisions to discontinue or suspend manufacturing when such decisions will cause shortages. At the same time, governmental rules should encourage production of vulnerable drugs. Accordingly, the Article proposes a blend of legislative, regulatory, and private-sector interventions that should realign manufacturers’ incentives and significantly diminish the drug shortage phenomenon.

Hoffman’s article is well worth reading in full, and I hope it guides policymakers.  As I noted last year, a plutonomy will not reliably generate even the products that its most powerful consumers may occasionally need.

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