Confusing charge-ineffective with cost-ineffective

3 Mar
2008

DrRich provides us with an interesting counterpoint to my post about screening athletes with echocardiograms.  Why we can’t do cardiac screening in athletes

DrRich always has interesting thoughts on rationing and health policy.  In this case he has fallen into the classic trap of confusing costs with charges.

As he does his back of the envelope assessment of the cost to save a life he uses echocardiography charges!  But charges are almost always significantly greater than costs.  Proper cost-effectiveness analyses must use costs rather than charges.

Of course, he makes great points about the likely absurdity of the charges for echocardiograms.

This is most assuredly the case. Making the very conservative assumption that 1 million young Americans participate in athletic competition each year, and that (as the Times reports) the average cost of screening is $1000, then screening would cost us $8 million to save one life. That’s pretty a steep cost-effectiveness challenge by any standards.

Here he only worries about trying to save lives.  As the original article points out, we would find more problems than just causes of sudden death if we did the echocardiograms.

A proper cost effectiveness analysis would have to look at all the costs and all the benefits of screening.  Unless we had data from several schools, we will not have good estimates of the problems found and the potential benefits.

Should we invest resources to find heart disease in adolescents and young adults?  What would be the true cost?

This question has many more layers than either my original post or DrRich’s post addressed.   Despite having published cost-effectiveness analyses, I am not sure how we would develop this question as such an analysis.  Sometimes we should approach a clinical problem in a different manner than pure cost.  Perhaps this is such a situation.

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10 Responses to Confusing charge-ineffective with cost-ineffective

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TerryS

March 3rd, 2008 at 2:39 pm

THere are weekend/weeklong ECHO courses that primary care docs could take. NPs could be trained to read ECHOs. Costs can be greatly reduced by not sending the procedure to an organologist except for confirmation. Could probably get the cost down to $100 for a screening ECHO.

I doubt the parents who have lost a child at an athletic event would agree that it is cost-ineffective

Avatar

DrRich

March 3rd, 2008 at 4:00 pm

DB,

You are correct in saying that I did not differentiate in my commentary between costs and charges, and that cost is by far the more appropriate value to use in computing the economic efficiency of a medical service such as echocardiography. I failed to make this distinction because a) while “charges” are entirely aribitrary, true “costs” for many medical procedures in many modern medical institutions are unknown and apparently unknowable – so both values in my view are largely fictions; b) I wanted to keep it simple, and $1000 per procedure was not only a nice round figure, but was also the figure the NY Times used (and we all know the NYT is never seriously off base about anything); c) the actual value I chose for “cost” is largely irrelevant to the point I was trying to make.

The point I was trying to make, however ineptly, was that when it comes to preventing bad events that have an extremely low incidence but an extremely high impact (such as 125 sudden deaths among 2.5 million amateur athletes each year), it will almost NEVER be economically efficient for society to pay for the preventative measures that would be necessary to significantly impact that low incidence (whether you use cost or charge in the calculation). This is why the AHA guidelines, re-released last year, recommend against screening young athletes for heart disease.

Furthermore, if you make the preventative measure reasonably cheap (say, within the range of an individual’s typical everyday expenses, such as is the case for smoke alarms), the cost-effectiveness calculus for individuals begins to look favorable. This is because the value of an individual’s life, to that individual, is high enough that spending a modest amount of one’s own money to prevent an extremely-low-incidence, extremely-high-impact event becomes entirely reasonable and logical. The technology to make echocardiographic screening (at least for HCM) sufficiently cheap and easy exists today – there’s just no business model to justify its development.

And finally, as long as the screening of athletes remains a medical service and not a consumer service, echo screening for HCM will remain an expensive, complex process, wrapped in regulatory and bureaucratic demands, which can only be performed by members in good standing of the cardiology guild. (I submit that athletes don’t need a full echo. Ruling out HCM by simple echo and doing a simple ECG at WalMart will probably pre-identify at least 123 of the 125 annual sudden deaths. I am cynical enough to believe that this, actually, is a big reason why the AHA recommends against screening the 2.5 million amateur athletes – to do so would REQUIRE breaking the cardiologist’s monopoly on defining what an echocardiographic examination must entail, and in performing them.)

A last observation – If paying for smoke alarms were the responsibility of the healthcare system, these devices would no longer be elegantly simple and cheap, but instead would be driven by the medical bureaucracy, threats of litigation, FDA and CRM regulations, documentation requirements, etc., to become devices of great cost and complexity, the installation of which would require the certified presence of at least one physician with a nuclear license.

The less stuff we medicalize, the better off we all are.

DrRich
http://CovertRationingBlog.com

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SteveSC

March 3rd, 2008 at 6:27 pm

Dr. Rich: Excellent post!

Let’s see if we can gin up a business model:

Assumption #1: American litigiousness can produce a $1 million lawsuit over an amateur athlete’s death.

Assumption #2: American technical ingenuity can produce a $20,000 box than can identify the thickness of the myocardium at one point, and, at the same time, acquire an electrocardiographic signal from the same point on the chest.

Assumption #3: Computer analysis of these two data streams can reliably (at 90% accuracy) rule in or out HCM. (Note: I am VERY confident of the first two assumptions; not being a cardiologist, I think #3 is possible, but I don’t know.)

Business case:

Market: If we take Dr. Rich’s 1 million athletes, and assume about 100 per sponsoring organization (e.g., school, club, soccer league, etc.), there would be about 10,000 organizations with potential liability. With about 100 deaths per year, the rate is 1% of organizations per year. With $1 million in liability, the annual insurance would be $10,000 (plus profit, risk assumption, etc. for the insurance company).

But this would equal $100 per athlete per year, which would basically cause organizations to close up, or go bare and hope to avoid the suit. However, if the risk (as per Dr. Rich) drops to 2 per year with screening, then the annual risk drops to 0.02% and the raw insurance cost would be about $200 per organization, or $2 per athlete. Clearly in the range or insurability. Insurance companies will only insure organizations where everyone is screened, though, but this provides a very strong incentive for organizations to require screening.

At $1000, or even $100 a pop, though, the number of athletes would drop precipitously, and the market would dry up. Let’s assume the parents would be willing to put up $25, since, in my experience, this is about 10% of what one spends on gear. Total market: $25 million per year (yes, there may be less than annual need, but let’s not make it too complicated for now).

Operations: Clearly, the key to screening at $25 per athlete is rapid, batched processes, with non-physician personnel. Conveniently, athletes are in geographic proximity on a regular basis, e.g., practice, so a mobile lab model could work. Let’s assume 100 vans could cover 80+% of the need from a geographic perspective, so each van would need to screen 8,000 athletes per year. One FTE is 2,000 hours, so the average will have to be one screening every 15 minutes, but since at least 1/3 will probably be travel time, and 1/3 wasted time, our little device will need to be able to screen in about 5 minutes. This will require electronic data capture (e.g., parents would have to fill out ‘bubble cards’) so the tech would not have to spend time entering ID data, etc. All analysis would be done centrally after uploading data at the end of the day. (Back check: tech needs to screen average of 32 athletes per day… seems reasonable).

Financials: Let’s assume a fully loaded full time tech averages $60,000 per year and total van operating expenses are $40,000 per year (40,000 miles at $1 per mile), then each van runs about $100,000 per year; 100 vans would be $10 million per year. One hundred diagnostic devices would be $2 million (one year payback); assume non-field personnel at 20 people at an average of $100,000 fully loaded ($2 million), and assorted other headquarters/computer/etc. expenses are another $2 million. Total first year costs are $16 million; 80% of market is $20 million. Theoretical profit is $4 million (possibly more in out years, because less device expense, or less, because of smaller market with already screened athletes).

Considerations: Niche small business, not going to make anyone rich, but probably both financially and socially satisfying (how many jobs can say you save 100 lives per year!). Not likely to be VC funded, probably best for angel funding. Biggest hurdles are likely to be device development (probably will need some grants, help from an engineering and medical schools), tech training (state support unlikely because of geographically diffuse jobs, but may be attractive to non-profit support since it is a two-fer… benefits both technicians and kids), and penetration (insurance industry cooperation critical). All in all, it seems doable, although it would require the right team with technical skills and both non-profit and insurance industry contacts. Anyone out there up for it?

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pcb

March 3rd, 2008 at 7:53 pm

I bet if we did echos on every young athlete, we would soon realize we don’t know what the heck to tell people with borderline or even technically positive findings. Must they stop all athletic perfomance? Are they really going to do that if they’ve always felt fine? Destroy their athletic dreams due to something that may never cause them trouble?

Seriously, do we know enough about what certain echo findings mean for long term prognosis of sudden death in young athletes? Anyone know?

Maybe the extreme cases will be easy, but those will be the minority of positive findings. Then we have to figure out what to do with the rest.

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DrRich

March 4th, 2008 at 11:39 am

In reply to SteveSC and pcb:

SteveSC,

I’m thinking more along the lines of a classically disruptive technology rather than an actual business model: a $5,000 hand-held (or laptop-based) machine that does ECG and echo-based HCM screening, that can be used by any family doc or by any of the walk-in clinics now springing up in drug stores across the land. For 40 – 50 bucks, you can get your kid screened for HCM. It doesn’t require vans or anything else. The distribution channels already exist, entirely outside of the current cardiology-echocardiography corridor, and consist of low-end users who just want to be able to do one thing quickly and cheaply. (The current high-end users, following their classic role, would have absolutely no use for this technology, the idea of which will cause them apoplexy.)

pcb:

You make a very good point, which I have chosen to ignore here, because the point I’ve been trying to make has more to do with our dysfunctional healthcare system than the issue of how useful it would actually be to screen healthy young athletes. However, I have written about it elsewhere ( see http://heartdisease.about.com/od/exerciseandheartdisease/a/athlete_screen.htm), and I agree with you. This kind of screening would probably identify relatively large numbers of young athletes who, despite abnormalities on screening sufficient to deny them permission to play sports, are probably in fact at very low risk for sudden death.

While individuals who have HCM and also have symptoms (or a family member with symptomatic HCM) are at a relatively high level of risk, the risk is unknown for athletes without any symptoms and with no family history, whose HCM is discovered on routine screening. Are we to deny these young people the opportunity to compete? The answer is: if we screen them and find them, you’re damned right we will. That’s the whole point of screening, isn’t it?

As DB has pointed out, there are actually many, many layers to the question of whether we ought to screen for things like this. I have intentionally kept my comments to the “easier” part of the question, coward that I am.

DrRich

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SteveSC

March 4th, 2008 at 1:19 pm

Dr. Rich,
The problem with a $5,000 device in drugstores and family doc’s offices is that business model is unworkable. To pay for a $5,000 device, the location would need to provide at least 200 screens per year ($50 per screen, 50% overhead). This is assuming no additional staff, a best case scenario. If evenly distributed across 1 million athletes, this works out to 5,000 locations. More realistically, since the 200 screens is a floor requirement, not an average, the number of locations that could be economically supported is around 2,000 to 3,000.

Now there are almost 60,000 retail pharmacies, so the average location serves about 17 athletes. With around 20,000 family physician practices (based on 94,000 members of AAFP, minus medical students, assuming around 4 physicians per location), on average each practice serves about 50 athletes. And since the pharmacies will compete with the family practices, the number of potential customers is smaller for each. If you go only into family docs, you lose convenience, which will reduce the number of athletes screened, and make it economically unfeasible for all except a few practices. If you go only into pharmacies, you run into the problem that the average expected return is way too small to justify the investment.

I agree that it has to be targeted to practitioners outside of the ‘high-end users’ but I don’t see a business case that can support widespread ‘retail’ use.

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Richard Fogoros

March 4th, 2008 at 3:23 pm

SteveSC,

This is probably why I went into medicine (where one’s pay is determined by Acts of Congress) instead of business, where the big bucks are.

So: WalMart will buy these screening devices (at a loss if necessary, and with smiles on their faces) in order to draw young athletes and their families into the store, where lots of sporting goods, etc. are sold. WalMart (and some of the drug stores launching these mini-clinics) aren’t planning to make much direct profit, if any, from these clinics anyhow. It’s all about attracting more feet into the aisles, which I think explains why the clinics are usually in the back.

But if you’ve read my response to pcb, you’ll understand why the biggest impediment to any business like this may turn out to be the athletes themselves, who tend to get very angry when they’re told they can’t play football/basketball/soccer any more. Most, if given the choice, would rather just take the odds that they’re not among the 125 in 2.5 million. Since taking odds like that is not irrational, it’s a tough stance to counter with simple logic. We’d probably need regulations to force the screening, which takes us where I for one would not want to go (paying lobbyists, applying for earmarks, cozying up to the ABA, pretending to admire lawmakers, etc.)

Making this into a successful business would require predicting complex, and many layered, human behavior. I would feel safer starting a business that relies on more predictable human behavior such as, say, liking ice cream.

DrRich

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albatross

March 6th, 2008 at 8:11 am

I think your calculation for the cost of the automated test also needs to include the cost of additional screening by a cardiologist for false positives and marginal cases–since deaths from this cause are so rare, I’d expect (with no knowledge–I’m not a doctor) there to be far more false positives than people with a problem so grave that their lives were threatened by it. Just to make up some numbers, suppose 5% of people who take the test are told “go see a cardiologist.” Several thousand dollars later (prices, not costs) they’re cleared to play high school football. Assuming the whole sequence of exams and tests by the cardiologist costs $2,000, the average cost per person taking the test is $50 for the original test + .05(2000) = $150.

I suppose a really thorough analysis would also work out risks from the tests, costs and risks from any medicine given, and worry and lost opportunities for kids with false positives, but I have no idea how to even estimate those.

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Richard Fogoros

March 6th, 2008 at 9:11 am

Albatross,

You have discovered one of the Dirty Little Secrets of medicine, to wit, every variety of cheap screening test (invariably heralded as a way of reducing cost and saving lives) always leads to false positives; which always leads to MORE (not fewer) aggressive workups, which always leads to more expense, and often to more morbidity if not mortality. Cardiology, my chosen profession, makes its living on this Axiom. What you have not discovered – and which I now graciously point out to you now in order that you may avoid embarrassment in the future – is that this is something we just don’t talk about in polite society. To suggest that widespread screening for hidden medical conditions could ever have negative consequences is simply too politically and medically incorrect for words.

Since you are not a doctor you get one free pass. Just don’t let it happen again.

No need to thank me.

DrRich

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km

April 15th, 2008 at 1:51 pm

Hi, I am an Echo tech with a new business that is targeting your subject. The cost for Echocardiograms is outrageous, especially to those who don’t have insurance. I am working with a Cardiologist to get the cost down to around $150.00 for a complete Echo and $50 for a screening Echo. There’s no reason other than greed that these can’t be done for these prices. Wish me luck!

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