Overview. To be brief about it, spending for healthcare now crowds toward the end of life, mostly after age 65, while the money to pay for it is generated well before 65. Disregarding the complicated history of how we got here, in effect, we borrow from an interest-free account at Medicare to pay Medicare for Medicare, without earning interest on the money idled in the meantime, sometimes for as long as forty years. Potentially, the two age groups could unify their finances and get more or less dual savings. That's the dream advanced by the single-payer advocates, but on examination, the cost, politics, and complexities of actually unifying entire delivery systems would soon overwhelm total- merger enthusiasts. Unfortunately, the revenue has fallen too far behind the costs to make this completely possible. It is nevertheless contended here, only the financial transfers need to be unified, using Health Savings Accounts as a transfer vehicle, and allowing compound interest to extend beyond the boundaries of insurance programs. Such simplification, while not easy, would achieve most of the savings of unifying whole insurance programs, particularly the incentive to keep what you don't use, for your retirement. Among other things, it would solve most of the Constitutional problems, and avoids most of the delivery system obstacles. Indeed, a financial network is about all we could manage, but it is adequate for the need. Because of its towering cost components, even integrating the financial transfers might take longer than we anticipate.
But massive numbers are only part of the health financing problem. At the beginning of life, medical expenses concentrate forward, toward the very first day, leaving absolutely no way for the child's own income to pre-pay his expenses. No matter how it is rearranged, someone must give children some money. Indeed, this second issue seems so unsolvable, everyone has stopped trying to notice it. It only makes people uncomfortable to suggest that adding children to a new HSA system might add twenty-some years to the compound interest in Health Savings Accounts if they only had some money. They don't, so be quiet.
But on the contrary, if someone always gives children the money for their healthcare, why not acknowledge it? Frank acknowledgment seems pre-destined if you aspire to serve lifetime financing. You require two systems, roughly the opposite of each other. One delivery system faces toward the beginning and the other faces toward the end of life. (Even this conception finds the working class in the middle, largely funded by employers who change frequently and have other concerns foremost in their minds.) If the realities of life will never change, then it is the payment system which must adjust, with the finances of each system facing in opposite ways. The reader is therefore urged to toy with the eventual outline of a circular system, far down the line. For now, existing programs would alter their interface to accommodate a new funds flow, while changing their program as little as possible. There's still a big gap left unfilled: Those working people aged 25-65 who largely support the whole system, unfortunately already have so many constraints on their financing it is not feasible even to discuss their needs until the politics subside a little. Connecting, yes; unifying, only as much as you can. Therefore, this book passes over single payer as fundamentally over-reaching and concentrates on lower-hanging fruit.
Essentially, it is proposed: The Health Savings Account to expand to be a unifying financial bridge between programs, one account per individual lifetime, serving many disparate programs. Designed to be implemented in phased-in pieces, it continues to aspire to minimize changes in the delivery system itself. The reader will probably be surprised at how simple some dilemmas are likely to become, once it is conceded the individual patient ought to decide what others now decide for him.
Extended retirement costs are a predictable outcome cost of Medicare.
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Prepare yourself for one big rearrangement of thinking, however. Extended retirement costs are a direct consequence of superior healthcare. They could become five times as expensive as healthcare itself, and still be fairly described as a predictable outcome cost of Medicare. The only way budget shifts could be avoided is if science cures a few expensive diseases, quickly. That's not impossible, but it's unwise to depend on. It's also conceivable Medicare beneficiaries could be persuaded to allow HSAs to borrow from Medicare, but only after a titanic struggle, and only after Medicare revenues improve appreciably. New revenues for retirement must nevertheless be found, sooner rather than later, because of the ever-growing retirement crunch. It's a devastating realization, but the seed of solving the problem is contained in it. Where are the new revenues to come from?
At first, currency and healthcare appear to be unrelated. However, after composing four books about Health Savings Accounts, currency-backing and health-financing now seem to have much more in common. In particular, interconnections and ideas appear along the way, and new ideas emerge as extensions of the original one. This slender volume uses that quality of composition to explore what it might be like if three concepts (backing the national currency, preventing currency manipulation, and total-market index funds) were combined.
The basic idea turned out to have considerable coherence, with index funds well suited as universal "standards of exchange" (instantaneous indicators of market value). That was especially valuable when the trade becomes injured by out-of-control inflation. Index funds, however, are less satisfactory as long-term "stores of value", when nations resort to currency price manipulation, which they can use to resist the afore-mentioned commodity price stabilization. Therefore, a common standard is required at two levels, not just one. In the Bretton Woods system, the supra-national level is the Special Drawing Rights of the International Monetary Fund.
It is here suggested stock index funds be the price standard which substitutes for both currencies and SDRs, thus removing both levels from political control, but in different ways. In all this, they somewhat resemble Health Savings Accounts, where the price of healthcare could be stabilized by market-basing its finance on passive (i.e. total stock index) investing, a concept which was never envisioned at their beginning.
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Health Savings Accounts were created in 1981 by John McClaughry of Vermont and me when John was Senior Policy Advisor in the Reagan White House. The underlying idea was patterned on the tax-exempt IRA (Individual Retirement Account) devised by the late Senator Bill Roth of Delaware. Its three revenue-enhancers were the tax exemption, compound interest magnification, and the incentive to save for yourself rather than for demographic groups of strangers. Almost any financial institution might handle the straightforward mechanics, with policy decisions shifted toward the customer who owned them. Fitting for a medical emphasis, HSA tax-exemption was confined to medical expenses, with unexpected big medical events covered by inexpensive high-deductible health insurance. But switching from favoring health issues to favoring more trade and more economic growth was less a revenue issue, and more a hindrance-removal one. So when the focus changed to international balances, it then needed international features to channel it, while purely medical features could be downplayed. The thing they had in common was a large and dependable funding pool. The effective size was not how much was deposited into them, but how much could be withdrawn when it was really needed. Only later was it realized that a substantial amount might be left over at age 65, where it could be used to fund the extended retirement of those with superior health. Not only did that extend the period of compound interest, but it also provided an incentive for younger people to save even though they felt no threat of illness. The emphasis shifted somewhat from the threat of sickness expense to that of a lifetime reserve fund.
The idea of a nation state, on the other hand, was established for the Western World in 1648 by the Treaty of Westphalia, after the Thirty Years War over Religion. It took years of squabble and deep thinking to arrive at a simple formula allowing for multiple religions in Western Europe: a nation was to be inflexibly defined by its boundaries, and within those boundaries, the nation's religion was defined by the religion of the King they happened to have chosen by their own methods. Everything else could move across borders. The nature of the currency posed a slightly different problem from religion. Kings were regularly observed to cheat on the currency, mostly to finance wars about boundaries. National sovereignty was both enhanced and subordinated to accommodate religious problems. Everything else was negotiated between kings, mostly by fighting wars as it turned out. Three hundred years later, religion was of reduced importance, kings were nearly irrelevant, but the issue of an international currency continued to fragment European harmony.
The quantity of gold within a nation roughly matched its economic prosperity, and ways had been devised to inhibit it from migrating while the trade it symbolized was encouraged to move around. The King controlled paper money (or any other surrogates for gold serving as public-owned instruments of trade), within and between nations. Meanwhile, the quantity of gold remained fixed and "owned by the King" until some form of "squaring up" took place. There were two disadvantages: prices were suppressed by the fixed value of gold, as before. But periodically new gold was discovered in the ground or conquered in wars in a haphazard (non-trade, non-economic) way. In particular, two Twentieth century world wars disrupted the roughly fixed relationship between the King's possession of gold and the public's economic health. The United States eventually found itself with practically all the world's gold in 1945, so nobody else could buy anything from us. That was carrying theory to the point of paralysis.
The Bretton Woods Conference did supposedly devise a patchwork substitute, but the seeds were sown for eliminating the gold standard. In its place was put a system of national central banks, trading through the International Monetary Fund, which used a super currency called International Trading Receipts to square up national accounts. Freed of the gold restraint, there might emerge a gradually enlarging currency pool as the populations grew and supposedly shrink during international recessions. This arrangement supposedly solved the inflexibility of gold. However, without a metallic currency standard, nations found various ways to cheat, just as kings had historically found ways to cheat on gold. Inflation resulted, the power of treaties was always less than the political power of the state, the independence of central banks was eroded, and small, steady but relentless inflation resulted. That brings us to the present: we have no gold standard, but the various world economies are periodically on the edge of war about international trade. Inflation seems less threatening than war, so the balance between inflation and war calls the tune in the monetary trade dance hall. The public does not understand, but is restless about the future, as it well might be. At the moment, a huge proportion of the world in the third world have become economic factors, while retaining pre-1648 tribal patterns rather than becoming nations of boundaries. "Floating" currencies address this problem, somewhat at the expense of dependable trade relationships, and possibly the third world.
We now propose to interpose the Health Savings Account concept into this precarious arrangement. To do so, we minimize medical features and expand currency ones. Background features like index investing and individual ownership become vitally prominent, while health yields importance to demographics. But the ideas of tax exemption and equity investing are expanded to meet the changed focus on trade. Eventually, the evolution from a Health Savings Account to a monetary standard becomes obscured. But it is substantially based on the same approach. There are two alternative approaches available. Either substitute the index funds backing HSAs for metallic monetary standard or else substitute the same sort of paper for the International Trading Receipts now used for trading between nations at the International Monetary Fund. One would replace the Federal Reserve's system of adjusting the paper value of a nation's currency, relative to its nation's economy. That would center the nation's money supply on the size and health of its economy, and work better as a medium of exchange.
The other would substitute the same paper for the International Monetary Fund's (IMF's) Special Drawing Rights, hoping to regulate the long-term store of value function by having long-term money come closer to representing real underlying values, as assessed by its trading partners. Both such changes would involve a change of power, and so would be opposed by successfully constructed power centers. Even in a crisis, these centers would attempt to maintain their control. So they must be described as anticipating a crisis, possibly one which might never occur. They would serve notice on both incumbent power centers that alternatives have been prepared in case they fail, and perhaps improve their performance to prevent failure.
Health Savings Accounts, HSA, have so many hidden features it's hard to imagine anyone without one. It's a Savings Account, but it is also an insurance policy. It's a high-deductible insurance policy with an attached savings account. The more you describe it, the more complicated it sounds, but it's really very simple. Instead of regarding its two components as opposites, it combines them, but it can be treated as two separate ideas if you prefer. A nice Quaker lady seemed to grasp the idea all at once, after a period of puzzlement. "Why," she exclaimed, "That's nothing but a Christmas Saving Plan for Healthcare." Yes, you could say that.
Banks and casualty insurance companies have been in competition for savings dollars for so long, that an amazing number of people have grown to thinking they were enemies, or against the law, or something. When in fact they are two different savings vehicles with separate advantages which most people will eventually find useful. It's an example of specializing in one or the other until you forget they both have their place, and for everyone. Remember, insurance has its place. A hospital bill can run into thousands of dollars. It doesn't happen often, but someone would be foolish not to have some fail-safe insurance. The higher the deductible, the saying goes, the lower the premium. If you have both features you don't lose anything, and in fact neither the local bank nor the local insurance broker need care one whit whether you have both of them at once.They are governed by different regulatory agencies, but I can't see any harm in combining them, and considerable advantage to doing so.
Let's start with health insurance. Just about anyone can see it's cumbersome to insure small health problems, because the resulting administrative costs make it too expensive to bother; any health problem which covers less than a thousand dollars of "losses" is too cumbersome to use, so long ago insurance began to have a "front end" deductible of at least a thousand dollars, and nowadays five thousand is more likely. At least half of health insurance is given to employees as a group policy by the employer for tax reasons, and the employers regard the whole thing as a distraction from their own central activity. They just do it because everyone else does it if he can, and employees would be angry if they didn't. But a few years ago someone spent an awful lot of money experimentally proving what should be obvious--front end deductibles are cheaper. Well, wouldn't you know. But it required a President to make deductibles compulsory before they became standard. Right then and there, it should have been made compulsory to link them to a savings account, but no one cared enough to do it. Besides, the employer pays the bill, savings accounts are something banks do, and health care is left to the company union and the management to work out. But let's just examine the matter for a moment.
In the first place, placing the deductible in a Health Savings Account gives it three tax exemptions. It is tax deductible when you deposit the money, it is invested without taxation while you leave it there, and there is no tax when you withdraw it. So it just has to be cheaper than paying money to the HSA company instead of the bank, regardless of whether you use it to pay for health. In fact, if you have some other money somewhere, it is foolish to withdraw this medical money for health, or for anything else when it is such a good investment without it.
Secondly, when you have deposited the amount of your health insurance deductible, you have "first dollar coverage" in effect if not in name. If the insurance company raises the deductible, you still have first dollar coverage, but the insurance premium doesn't go up. With a $3800 annual deposit limit, it takes about two years to fill it all up, but after that, you have first dollar coverage for high-deductible prices. In fact, you have another option of putting in the full limit of your annual deposit at about 20% less cost. Show me another investment which practically guarantees 20% annual investment returns. It really doesn't matter whether you are rich or poor, this is a good deal for anyone. In fact, it is such a good deal that some vendors just don't pay very much investment income at all, in spite of the fact that the stock market has gone up 12% per year for the past century, wars, depressions, elections, notwithstanding. Surely it could give the customer 7% return, after inflation and taxes have been taken into account, but many customers are so content with 20% they don't feel like fighting for 27%. If you don't feel like quibbling, you could "take delivery" of the index fund certificate and put it in your own safe deposit box for custodial purposes. Remember, money at 7% will double in value in ten years. Believe me, this is a really good deal, and we haven't even started to talk about its value in health care.
The feature which has been slipped into it, is what happens when you turn 65. Never mind quibbling about the rising age threshold for Medicare, or the lowered age limit for 9 million disabled persons. For all practical purposes, the designers of Health Savings Accounts in 1981 regarded Medicare as the end of all your health worries. We'll deal with that fallacy at another time, because as things now stand, every HSA turns into an IRA when you get Medicare. It's our belief the whole medical system could be paid for by extending the option to convert at any time up to death, but right now it's the only healthcare payment system which lets you have the surplus for retirement.
The population is rapidly aging, because longevity has increased thirty years to age 84, in the past century. Unless old folks find some remunerative occupation, most of them won't be able to afford to retire. Thirty or forty years is a long time to play golf or tennis, or to go fishing, watch TV or whittle. That isn't the central issue at the moment, but at least we can redesign our health insurance to redirect surplus healthcare money, into helping to pay for retirement. Meanwhile, there's an even simpler thing to do: run don't walk to a place which sells HSAs, and pays you a dividend around 7%. They can be found, but they aren't exactly running after you, as long as so many people will accept lower income returns.
OBSERVATIONS AT THE FOUNDING OF THE AMERICAN MEDICAL PEER REVIEW RESEARCH CENTER
George Ross Fisher, M.D.
Congress and the Business Community want someone to define high-quality medical care, presumably, so someone can report it is provided by the health insurance programs which Congress and Business claim to pay for. Since a snappy definition has not yet been recited, we are beginning to hear growls that quality medical care may be a myth; Uwe Reinhardt just said it was a mystical concept. Lest Congress and the Business Community be tempted to act on the assumption no one can prove their policies are harmful to the nation's health, let me give a try at defining medical quality.
My theme is non-Platonic. Plato, as you recall, was the ancient Greek who had us all searching for the Good, the Beautiful and the True. Absolutes. Plato was a far more skillful proponent of absolutism that I am an attacker of it, and Platonism resurfaces in ideas like high-quality care. Take the illustration which occurs to me every time the matter is raised. Albert Schweitzer was a surgeon who won a Nobel Prize for his work in Africa, where he devoted his life. Now, a Nobel Prize should certainly satisfy Uwe's idea of the elevated social plane of European medical care. But I have been told by surgeons who visited his shop that Schweitzer was a perfectly terrible surgeon. As one put it, he would not have been permitted on the staff of even a Veterans Administration hospital. Whether that assessment is accurate and fair is less important than recognizing that it might well have been true that a perfectly terrible surgeon could go to the heart of darkness and greatly improve the quality of medical care. Quality of medical care consists of making the most of the resources available.
Dr. Pierson, the president of AMRRC, can undoubtedly tell similar stories about China, just as most doctors my age can tell stories about making do with little under wartime conditions. I doubt if anyone seriously denies that you c\ut your suit to fit the cloth, so I wish now to extend the idea by describing peer review in three historical contexts of available community resources. In other words: Yesterday, Today, and Tomorrow.
All through the fifteen years I worked in utilization and PSRO peer review, the context was cost-based reimbursement. Hospitals were given a blank check and urged to give unlimited access to the very best medical care. There were no financial excuses for an institution failing to have the latest equipment, hiring adequate numbers of the best-trained personnel, and organizing effective management. If in spite of having a blank check, a hospital nevertheless had substandard buildings, equipment or personnel, or if in spite of having everyone still made a bad job of it, we peer reviewers felt justified in assuming that hospital must be lazy, ignorant or hopelessly incompetent. Some such idea crept into the malpractice courtroom, too.
With the advent of prospective pricing at the beginning of 1985, the environment has suddenly seemed to change. Hospitals are now paid a fixed price per case, and reimbursement is no longer unlimited. Some of us imagined that peer review would be forced to make some allowance for limited resources under the new system; you can't criticize people for not using a machine they don't have and can't get. Since the waste under the old system was fairly obvious even to those who didn't want to see it, it was welcome that cost/ effectiveness should replace money-no-object as the environment within which to assess reasonableness. The money tree had attracted a number of carpetbaggers which it might be beneficial to be rid of. Merit is less important in a system which rewards everyone regardless of merit. So peer review is greatly changed by the new DRG payment system, right? Sadly, no.
For one thing, we still have mostly the same people with the same mindset doing the reviewing. Nowhere is paralysis of imagination more evident than in the bureaucrats controlling the money for peer review. Furthermore, no one has as yet completed the sacrament of carrying a snappy definition of medical quality to the staffers of relevant congressional subcommittee chairmen, to be duly transmitted to The Department for regulations, which will then be duly held in abeyance by OMB, until somebody who has dinner with the President finds a chance to whisper in his ear. Mundane obstacles are indeed present, but the main problem with changing the posture of peer review lies in the fact that the resource environment hasn't changed much, DRGs and prospective pricing, notwithstanding.
Hospitals as a group enjoyed a 6% margin of profit on their costs during 1985, instead of the hardship and losses originally predicted for a prospective pricing system. Therefore, the context within which peer review took place is essentially unchanged from the days of cost reimbursement. "Shame on you for shabby work when you are making a pile of money" is not greatly different from "shame on you for a shabby job when your resources are unlimited". From the physician's point of view, breakeven would be no tragedy for a nonprofit hospital, particularly when physicians so far have felt so little fiscal constraint.
Physician organizations have a glint in their eye, just waiting for some unlucky administrator to propose reductions of medically needed resources, without prior elimination of medically unneeded resources. Competition between physician and administrator for limited resources is likely to come some day, possibly some day quite soon. But at the moment, most of the economies have been derived from reducing the stimulated expenses which took place during 1984. When it became known that prospective pricing was coming and that it would be based on costs during 1984, to magnify that base year, it became very sensible to incur every imaginable cost during 1984, to magnify that base year. Hospitals put on fat for the coming winter, and most of the surplus employees fired so far can be regarded in an accounting sense as temporaries hired in 1983-84 for the purpose.
Well, what of tomorrow? There is little doubt that the idea is in some minds to handle the prospective pricing system by the business-school prescription, as follows: Cut the budget until something bad happens; if nothing bad happens, cut it again. Eventually, something bad will happen, so then pull back a little; optimum expenditure for the line item has been bracketed. Under this classic formula for managing something you don't understand, one problem is to avoid a total wreck. Therefore, the main job of peer review organizations is to maintain credibility, carefully identifying how much or little shabbiness existed when resources were unlimited, and remorselessly showing how with limited resources there is probably more shabbiness. But we must also remember that we will be carrying unwelcome news, which Government and Business will wish to suppress. It is not useful, Uwe, to announce in advance what you would consider being shabbiness because it alone might be spared, while budget cuts remorselessly destroy services more difficult to quantify. With bureaucrats, you have to hit hard and unexpectedly with evidence that they have palpably done wrong; you need a scandal. The higher they rise in the bureaucracy, the less they fear failure and the more they hate criticism. Let's hope we can be shrewd and alert peer reviewer guerrillas, so the scalps we then display scornfully to the public will be early sentinel effects, comparatively non-damaging to the public while still devastating as trophies. on the other hand, if we prove to be indolent and docile peer reviewers, constriction of medical resources will only be halted by shoddiness which is past denying.
If it seems almost inevitable that we will have to play out this guerrilla warfare, there is still a chance that loss of will by Congress and the Business Community may make the worst features of it unnecessary. Perhaps they will see their efforts were misguided in two main ways. First, like Platonists, they misapprehend that medical quality is independent of the cost when in fact it is largely defined by it. Secondly, they have come to believe their own rhetoric that the cost of medical care is their problem; they may come to recognize that it really isn't their money, anyway. Congress is merely dispensing the public's tax dollars, and Business is merely administering a tax dodge in fringe benefits. When it isn't your own money, and you don't really know what you are talking about anyway, a few lurid scandals can sometimes convince you that some other dabblings would be more useful.
Stimulated mainly by the passage of PL-92-603 and the data requirements of the PSRO's established by that law, a lively debate has developed as to how health care data will be collected and processed. The three main topics around which the debate revolves are:
1.) Accuracy of the data
2.) Confidentiality and access
3.) Cost.
Recent passage of PL 93-641 has increased the urgency of this debate, as it would seem logical for the HSA's established by this law to work closely with the corresponding PSRO's and to use data provided by the latter. It is apparent that they will not be able to become effective until such data is available.
Therefore, it seems appropriate at this time to develop a general scheme for data management which would:
1) Meet the requirement of accuracy, confidentiality/access and cost effectiveness
2) Provide a minimum data set necessary for a uniform national system of peer review.
3) Be flexible enough to adapt to specific local needs and to unforeseen future needs.
PRESENT SITUATION
It is apparent that there is a considerable investment (both private and public) in data systems at present of the order of magnitude of billions in hardware and annual expenditures of approximately billions in EDP operations, related to healthcare. Among the larger data processors is the National Center for Health Statistics, the Bureau of Health Insurance, SRS, State Medicaid programs, Blue Cross / Blue Shield, and private health insurance companies. In addition, the considerable data-collection capability exists in private monitoring systems (such as the Commission on Professional and Hospital Activities) as well as within individual hospitals. Because of the substantial existing investment, legitimate concern has been expressed that PSRO's might simply add "another layer of data-gathering" and further increase cost and confusion. This concern must be addressed.
In spite of the significant capacity in existing systems, there are several glaring defects. One is compartmentation. Data collected by one organization is not available to other organizations that need it. The corollary to this is duplication, organizations have set up duplicating systems because of ignorances of data available elsewhere or inability to get it. Both of these problems tend to increase the total cost of data collection. Related to the problems of compartmentation and duplication is the significant problem of harassmentof the provider. Hospitals have increased administrative costs simply to provide the information required by federal state and local agencies of government as well as third-party payers, and physicians and clinics are likewise struggling under an increasing load of paperwork which threatens to impede their ability to deliver the medical services which are urgently needed.
In spite of the complexity and extent of existing data-gathering apparatus, there are areas in which gross inaccuracies occur. In Hospitals the crucial point of data-gathering is usually in the hospital record rooms, and the causes of inaccurate data fall into two main categories;
1) Insufficient, inaccurate or illegible recording of diagnoses and procedures by the attending physician.
2) Deliberate distortion of information to accommodate third-party payment mechanisms.
3) Inadequate or inaccurate identification data due to lack of uniformity of hospital discharge data sets and lack of uniformity of training and supervision of personnel abstracting the data.
The problem of confidentiality and access to data are magnified considerably by the present uncoordinated system not only are there flagrant breaches of confidentiality because of the multitude of people handling this data without overall supervision, but conversely, when a public party has legitimate need to know certain information, it is often nowhere readily available in an aggregated format.
These defects in the present system relate mainly to data concerning institutional care. When it becomes necessary to collect ambulatory care data, all these problems will be multiplied manyfold. Additionally, present data collection systems are seldom demographically oriented so that what actually happens within a given geographic area or within a defined population is difficult to determine.
PROPOSAL
A. Structure.
In an attempt to bring more order into the presently fragmented system and to address the three basic issues of accuracy, confidentially/ access, and cost, we would propose the following scheme diagrammed in Figures 1 and 2: (see diagrams following)
These figures are based o the concept of a "data brokerage" (Ref.), and a common pathway for all health care data, with management of the system at the PSRO/HSA level by a Data Sub-Committee of the PSRO, and at the State Support Center or State PSRC level by a similar data sub-committee of that body. Both sub-committee would, of course, be responsible to their Boards.
A key feature of the system is the data-processing contractor at both levels. This organization would be chosen after competitive bidding in response to an RFP put out by the data management sub-committee. Organizations which might bid for such contracts would be either existing data processing firms, specializing in health care data, such as EDS, like wood.
Optimum Systems, Health Application System, etc..., or they could be spin-offs of existing third-party payers, either the Blues or commercial health insurance companies. In the latter case, the EDP organization, handling data under the integrated PSRO system, would have to be managerially divorced from the parent corporation in order to avoid conflict of interest. Existing organizations such as BHI, the Blues, commercial carriers, etc., would continue to maintain data systems for their own internal needs, but common needs would be met by the PSRO network.
A second key feature of the system is that management information, quality assurance data, and claims payment data would all flow over a common pathway. The compelling reasons for this are
1) Economy of operation
2) Minimal harassment of providers
3) Effectiveness of managerial control.
Economy and minimal provider-harassment would be accomplished by the necessity for submission of only one abstract containing the necessary data elements for each service rendered, whether in hospital, nursing home, doctor's office, or patient's home. This could be submitted to a local PSRO data center, generally by direct terminals located in community hospitals. When ambulatory care review becomes required, doctors and clinics or medical office buildings may find it expedient to have entry terminals primary for ambulatory care data in their own facilities. Doctors in solo practice or in more rural communities could submit abstracts by mail to their OSRO data centers or to the entry \terminals in their community hospitals. Large hospitals having their own computer systems at present would only need to make arrangements for linkage from their computers to the PSRO data center for transmission of essential data elements.
B. Management
Managerial responsibility at the PSRO/HSA level would be invested in the PSRO Board and delegated to the Data Management Sub-Committee. Although the Board membership is restricted to M.D. or D.O. members of the local PSRO, the sub-committee could, and should, include non-M.D. members. Certainly a member of the corresponding HSA should sit on this committee, and if the PSRO is statewide, each of the main users of this system should be represented; namely, BC/BS, HIAA, State Hospital Association, Inc.
At the level of the state or regional support center (of which 12 exist at present), the Data Management Sub-Committee would be even more broadly representative, with representation from the appropriate state health agencies, medical schools, regional HEW offices, and responsible consumer organizations, etc.
Confidentiality/access issues would be settled by the Data Management Sub-Committees at the appropriate levels. A uniform policy would be established, and there would be no question as to where to fix responsibility for the release or retention of information.
Although not shown in the second diagram, there is a third, or nation, level of data-handling represented by such organizations as the National Center for Health Statistics, Bureau of Health Insurance, SRS and, When some national health insurance plan is voted by Congress, whatever federal agency will be given authority to manage this program. These organizations should be concerned mainly with aggregated data and only when necessary for eligibility determination or payment of claims with individually identified data.. Much of the argument on this subject at present seems pointless if it is recognized that disciplinary control of both patients and providers should be delegated to the PSRO level and at higher levels. Management should be concerned with managing the systems, not with the disciplining of individuals.
On this subject, it might be pertinent to observe that, as the data system becomes operational, the present tendency of BQA to try to control process in each PSRO should be drastically curtailed, and the role off BQA should be mainly to monitor the outcome of the efforts of each PSRO actually relying on the support centers to provide most of the data that will be necessary to do this.
C. Funding.
Funding of the PSRO Data System is a part of the general problem of funding PSRO operations, which is an issue at present. We will not go into this question in detail in this paper, other than to observe that we feel strongly that PSRO's should receive their income mainly from those institutions for which they provide services so that all purchasers of data from the PSRO would pay an appropriate amount for it. It should be remembered that in addition to providing data, the PSRO also providers certification of the necessity, quality, and the appropriateness of the service, upon which payment will be based. The cost of EDP and certification must be recognized as reimbursable costs, and provision made to pay for these functions through the same reimbursement mechanism which pays for the health care services themselves. At present the total cost of PSRO review of institutional care including administrative, EDP, and certification costs is between $10 and $35.00 per hospital admission (Ref.).
It would appear that, as PSRO's become more efficient, this cost will settle down to between $10-$15 for a total of $110-$165 million dollars for present 11 million Medicare and Medicaid admissions annually. Reimbursement for review of nursing home care and ambulatory care will require slightly different arrangements, but the principles should be the same.
Funding for the State-Support Centers and the data libraries, which would be used primarily for medical care evaluation studies and other retrospective research, might come directly from BQA and research grants from medical schools or schools of public health.
DISCUSSION
Questions which have been raised in regard to the feasibility of such a common data system are;
1) The possibility of requiring a significant investment in "new hardware" by duplicating existing capacity. We anticipate that the successful bidders for the data-processing contracts would use existing hardware to a large extent and only invest in new hardware as technologic advances in the industry require it. Certainly, new software systems would be required and the stimulus of competitive bidding on some 200 individual PSRO contracts, plus the stimulus of minimal data requirements, established, presumably by the Professional Standards Review Council would, we feel, be a healthy influence to continued improvements in the system.
2) A single, nationwide data system would be another example of "Big Brother is watching you", and a further breach of individuals privacy in a particularly sensitive area.
As we have mentioned above, there are numerous possible "leaks" in the present, uncoordinated system, and essentially no control of confidentiality by any responsible public party. The proposed system clearly fixes responsibility for release or retention of information with data management sub-committees of the PSRO at the local level and the corresponding committee of the support center at the state or regional level. All requests for access to data would be channeled through these committees, and such request would have to be supported by documented "need-to-know".
The converse problem of access to health care information by consumer groups and public parties with a legitimate interest in health care data would be much more readily solved in our proposed scheme than at present. With regard to individual data relating to a particular patient-doctor relationship, confidentiality is the predominant issue, and professional control should be maximal at this level, with only enough non-professional input to keep the professionals honest. At the state, regional and federal levels, access to aggregated data, in order to assess the elements of the healthcare delivery system becomes the dominant concern, and at this level non-professional control becomes important, with a small component of professional input, principally to safeguard privacy and to ensure accuracy. This relationship is shown in Figure 3, taken from a report of the Institute of Medicine, entitled, "Advancing the Quality of Health Care".
Confidentiality of "business" information is a legitimate concern to many providers. For instance, how many beneficiaries Mutual of Omaha or the Blues have in a given area, or the total benefit payments for a given group of beneficiaries, or the retention rate for administrative costs and reserves, are generally regarded as business information, which should not be released to competitors. We are satisfied that the technology exists to build into a "common pathway" system adequate safeguards to secure the privacy of this information.
It should be noted in our scheme that the repositories of "old" data (as opposed to "online" data needed for day-to-day operation) are the "data libraries" controlled by the state / regional support centers. Such data would be used for retrospective MCE studies comparing the performance of different PSRO's, hospitals, clinics, HMO's and other provider groups. Since, as a result of such comparison, someone is always going to come off second best, strict control of such studies and release of information only to those with a legitimate need for the information will be important. The conduct of such studies and the monitoring of the coordinated data system for accuracy and efficiency are two reasons why we feel the support centers should continue to exist and not be phased out (as is present HEW policy).
3) . A large amount of data which would have to pass over a common pathway would "jam the system" and slow the speed of transportation of information, particularly that required by third-party payers for payment of claims
We have reason to believe that, conversely, the transmission of such information would be accelerated rather than delayed, and the efficiency of claim payment would be increased. How to claim payment request comes from a variety of providers (hospital, doctor, pharmacy, VHA, etc.) . and to a variety of payers (Medicare, Medicaid, the Blues, commercial health insurance companies, and the patient himself). Attempts to coordinates the payments of benefits are still clumsy, resulting in duplicate payments, incorrect payments, retroactive denial of payments, and a tremendous volume of correspondence phone calls, etc., trying to rectify these errors.
The "common pathway" scheme would afford an opportunity to gather together the claims of all providers pertaining . to a given case, and to compute accurately the deductibles, co-insurance and coordinated payment of benefits by various payers. At the same time, the PSRO certification (required at present only for payment under federally-funded programs, but eventually in all probability for payment under all health insurance program) would be added to the claim. In approximately 85% of cases based upon present experience, the claim would pass through the screens built into the local and regional computer systems without delay, arriving essentially instantaneously at the office of the third-party payer. The third-party payer would then only check eligibility and conformance to the scope of benefits provided by his contract, and issue checks or payment credits to the appropriate providers.
For approximately 15% of cases requiring review at the PSRO level, the review process would be accelerated by the gathering of all information regarding a particular case in one locus, and the development of online accessible data systems for review of much of this data. We visualize a BSRO room in each community hospital where the paramedical and professional personnel would review questioned cases, using a CRT terminal to access the PSRO data bank (for details of such a system,). Experience to date indicates that of the approximately 15% of cases "kicked out" by computer screens, all but 2-5% can be certified after paramedical review and promptly returned to the payment mechanism. The 2-5% requiring professional review would be reviewed by doctors at their community hospitals (where they are usually available on a daily basis), and certification would have to wait for weekly or monthly meetings of peer review committees only in rare instances. The virtually total abolition of delayed, retroactive review of claims and denial of payment, which is a source of considerable irritation to all providers at present, should be achievable under our proposed scheme.
4). Such a scheme would be exorbitantly expensive.
We have previously mentioned that the system would not require significant capital investment in new equipment nor in the training and employment of large numbers of personnel as these already exist and need only to be organized in a different management structure. It is even possible that by eliminating some presently duplicative systems, there may be a net saving. There is reliable evidence that the review of institutional care can be done at present for approximately $10-15, per admission. With the costs per hospital admission of Medicare and Medicaid patients averaging $750-$1,000, this amounts to 1-2% of the total cost of care. Experience in the costs of ambulatory care review indicates that it can be done at present for approximately 3-5% of the cost of providing that care and as volume increases that figure can be reduced.
It might be pointed out that when such a scheme becomes operational for both ambulatory and in-patient care, we will have available for the first time reliable data on the costs of an entire spam of illness, from the first patient contact to eventual recovery or death. Such information will give us much more useful information with regard to the cost-effectiveness of different elements of the healthcare system that is available at present.
The question as to how much effect the PSRO review system will have on total costs of healthcare in the nation has been widely debated, and it does not seem wise to make any sweeping generalizations on this point. It seems apparent that initially some unnecessary services will be eliminated, and the length of stay in expensive institutions will be reduced, and there will be an opportunity for better control of provider charges.
On the other hand, insistence on a higher quality of care will, in some instances, increase costs and the inevitable pressure of inflation in the national economy and the continuing introduction of high-cost technology into the healthcare field may offset any potential savings resulting from the PSRO review system.
5). A "common pathway" system might multiply errors in data-gathering and information-handling.
On the contrary, we believe that the proposed scheme affords opportunities for control of the accuracy of data which do not exist in the present "patchwork" system. One important feature is the initial control of data input. We have mentioned that institutional data at present is subject to several causes for the error. In our scheme, all institutional data would be gathered initially by trained nurse-coordinators and transferred from their abstracts to the computer terminal by another specially trained individual. These individuals should preferably e on the payroll of and supervised by, the local PSRO, although in some cases they may be on the hospital payroll and supervised by the PSRO.
When ambulator review is added, we recommend the adoption of the minimum data set for ambulatory care review, which is similar to the UHDDS, which is becoming standardized for institutional care review. We also recommend the adoption of a simple encounter-reporting form for ambulatory care, adapted to individual practices, similar to that developed by H. Philip Hampton of Tampa, Fla. This will provide all information necessary for both claims payment and quality review, reducing the "harassment factor" to a minimum. Information from these encounter forms would be entered likewise by trained data entry personnel in either the local PSRO office or at computer terminals located in community hospitals, clinics, and doctors' office buildings.
One of the important functions of the Bureau of Quality Assurance, working cooperatively with state regional support centers, would be to monitor the accuracy of data system and to continue to develop and introduce into the system improved techniques to ensure accuracy. Such control is impossible at present.
SUMMARY
In this paper we have attempted to demonstrate the need for, and the feasibility of an integrated PSRO data system, addressing the three main issues of accuracy, confidential/access, and cost. A proposed scheme is described in general outline. Some frequently voiced questions regarding such an integrated data system are posed and answered.
Originally the "lower counties" of Pennsylvania, and thus one of three Quaker colonies founded by William Penn, Delaware has developed its own set of traditions and history.
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In 1751, the Pennsylvania Hospital at 8th and Spruce was 'way out in the country. Now it is in the center of a city, but the area still remains dominated by medical institutions.
Grievances provoking the American Revolutionary War left many Philadelphians unprovoked. Loyalists often fled to Canada, especially Kingston, Ontario. Decades later the flow of dissidents reversed, Canadian anti-royalists taking refuge south of the border.