Decreased need for blood transfusions: bad for business but good for people

The New York Times of August 23, 2014, contains a front-page story by Matthew L. Wald with good news. The use of blood in the US has gone down, because the need has gone down significantly: a decline of almost one-third over the last five years. One big reason is that new surgical techniques, such as laparoscopy and other �minimally-invasive� methods, have replaced many of the traditional �cut someone open� surgeries, so there is thus less blood loss and less need for transfusion. The other reason is that guidelines for blood transfusion have been more standardized and made more stringent, so that only people who really need blood get it rather than it being administered �routinely� to people after certain kinds of surgery. Certainly, in my institution, the physician who is director of our blood bank keeps a close eye on transfusions being ordered for people whose blood counts are above the generally-recommended cut-offs (provided of course, that they are not actively hemorrhaging). Since blood transfusion, like any other treatment, can have negative effects (the transmission of viral diseases like Hepatitis B and C, and HIV are not very significant any more now that we can test for them, but transfusion reactions still occur, especially in those who have multiple transfusions), it is obviously a good idea to limit them to only when they are really needed. Wald notes other reasons:

�new guidelines emphasize treating patients for anemia [my note: not with transfusions but with treatments that encourage the body to make more of its own blood, such as iron] in the weeks before surgery to minimize the need for transfusions. Cancer therapies have also changed in a way that reduces transfusion needs. So has surgery: In a total hip replacement, loss of 750 milliliters of blood, about 1.5 pints, was considered standard; now it is just 200 milliliters.

So it is a little surprising that the title of the article is in the negative: �Blood industry hurt by surplus� in the print edition (a little less negative, �Blood industry shrinks as transfusions decline� in the on-line version), and much of its thrust is about how this decreased need for blood and associated pressure from its purchasers (mostly hospitals) for lower prices is leading to decreased profits, industry consolidation, and worker layoffs. I assume that (based on the fact that the on-line version is part of �Business Day�) that this is in part because it is a business article and that Mr. Wald is a business reporter, not a health reporter. I guess it is indeed too bad for the owners of the for-profit blood banks (as opposed to the non-profit American Red Cross), and it is really bad for the workers, many of whom seem to be represented by the Communication Workers of America, who are losing their jobs. But from a health point of view, the fact that people are only getting blood transfusions when they really need them, and that the frequency of that need is declining, is a very positive development.

One of the more interesting points that Wald makes is the cost of blood products:

Nonprofit organizations collect whole blood from unpaid donors, but hospitals may pay $225 to $240 a unit, according to executives in the business, which covers a variety of costs, including testing. If the unit is billed to the patient, the price can be $1,000 or more.

That�s quite the markup. The markup from unpaid donors to the cost to hospitals is in part explained by the cost ��for storage, management and inventory losses; around a million units a year are discarded, mostly because they are not used soon enough.� Fair enough; these are real costs that must be covered, and the blood banks are bearing them, and hospitals want to pay less for the blood. Less justifiable is the markup by the hospitals, from less than $250 to over $1,000 per unit of blood, although as I have often discussed, this is not atypical for hospital charges. Once again, this is an example of business interest (maximizing profit, even in non-profit hospitals) diverges from the health interest of people (to get their care at a reasonable cost).

The treatment of positive health developments as negative business developments is not new, or unique to blood banking. If more care can be safely and effectively delivered in the outpatient setting, so that hospital admissions decrease, it may be bad for hospital business but it is good for people. If cheap drugs are effective for preventing or treating serious medical conditions (like aspirin to prevent heart attack in men or stroke in women, or folic acid � a vitamin � given to pregnant women to prevent neurologic defects in babies), it may be bad for companies making more expensive drugs to do the same thing, but it is good for people. Conversely, when a previously generic and cheap drug is allowed by a glitch in federal law to be patented, it is good for business but bad for patients (this actually happened in the case of the anti-gout drug colchicine; see the April 16, 2010 guest blog by R. Steven Griffith, VISA and colchicine: maybe the banks and Pharma really ARE in it for the money!). If we have duplication (or triplication, or quadruplication, or whatever) of expensive health care services so that there are more cancer centers, or MRI machines, or transplant centers than a community needs, it may be perceived as necessary for that individual hospital to �compete� but it costs our health system (that is, us all) more money.

What is interesting about this article is the difference in how the cost of health care services are treated by a business reporter (good or bad for business) and how they are treated by a health reporter such as Elisabeth Rosenthal, whose series of NY Times articles (e.g., �The $2.7 Trillion medical bill�) extensively document the high costs and markups in health care. The question for the rest of us is what we feel is more important, business profits or quality cost-effective health care, without unnecessary markups or excessive redundancy in capacity. It is sad when jobs are eliminated because certainly our people need jobs, but that is another question.

I think I am pretty clear on where I stand.

How can a health care system lead not to ruin but to, actually, health?

After a year of reporting in a series of articles in the New York Times (several of which I have commented on in this blog) on the crisis in health care, Elisabeth Rosenthal summarized her conclusions in a Times piece on December 22, 2013, �Health Care�s Road to Ruin�. As the title makes clear, those conclusions are not positive. She summarizes highlights from her investigations that look at the extremely high cost of health care in the US compared to other countries, the extreme variability in pricing depending upon where you are in the US, and the opaque and incomprehensible methods of coming up with pricing and the regulatory incentives that are continually gamed by providers. On the other end of the spectrum, she summarizes both the poor health outcomes at a population level in the US compared to other countries, and the more personal, poignant and dispiriting stories of individuals who die, are bankrupted, or both by our health �system�.

As Ms. Rosenthal notes, the stories that she tells could be �Extreme anecdotes, perhaps. But the series has prompted more than 10,000 comments of outrage and frustration � from patients, doctors, politicians, even hospital and insurance executives.�  She goes on to discuss the potential solutions that those commenters, and others, have suggested, including regulating prices, making medical schools cheaper or free, not paying fee-for-service that rewards volume rather than quality. But, she says, �the nation is fundamentally handicapped in its quest for cheaper health care: All other developed countries rely on a large degree of direct government intervention, negotiation or rate-setting to achieve lower-priced medical treatment for all citizens. That is not politically acceptable here.�

In reality, however, the idea that the health industry is somehow, before or after the ACA (�Obamacare�) an exemplar of the free market and the success (or not) of private enterprise, is entirely a myth, a facile construct that is used by those making lots of money on the current system to block change. Medicare, as I have discussed (e.g., Outing the RUC: Medicare reimbursement and Primary Care, February 2, 2011), sets the rates that they will pay for Medicare patients, and private insurers pay multiples of Medicare rates. Services as mostly fee-for-service, except in HMOs, and integrated health systems (such as Kaiser), and for Medicare inpatient admissions which are paid at set fees based on the diagnosis (through a system called Diagnosis-Related Groups, or DRGs). The entire system of what is profitable for a health care provider (meaning a hospital or other health care facility or a doctor or group) is based on this policy; it is profitable to provide cancer care because Medicare (and thus other health insurers) pay an enormous amount to administer chemotherapy drugs. Cardiac care, orthopedics and neurosurgical interventions are also very profitable. (Oh! Is that why my hospital chooses to focus on these areas instead of psychiatry, obstetrics and pediatrics?!) The doctors who do all these things want you to think (and think themselves) that it is because what they do is so hard or that they work so hard; it is in fact a regulatory policy glitch. In addition, a majority of the money spent on �health care� is public funds, not private, if you add Medicare, Medicaid, federal, state and local government employees and retirees, and add in the tax break for employer contributions to health insurance (i.e., taxes forgone because this employee reimbursement is not counted as regular income).

So the majority of the money being spent on health care is public money, and the system is already highly government influenced with government policies setting reimbursement rates. The only thing �private� about it is the ownership and profit, both by providers and insurance companies. In other words, it is a parallel to our financial services industry: private enterprise is given a license to make money from everyone, and the government finances it. The only difference is that for financial services, the government steps in to bail them out only after they have already stolen all our money, while in health services the profit margin is built in from the start. Thus, Rosenthal�s comments, and quotations from others such as Dr. Steven Schroeder of the University of California at San Francisco: �People in fee-for-service are very clever � they stay one step ahead of the formulas to maximize revenue.� But, of course, we the people, through our elected representatives and regulators, allow them to do so. And, therefore, the arcane network of incentives and disincentives built into the ACA to try to get reasonable results at reasonable cost � and still ensure insurance companies make lots of profit.

The solution is very simple; emulating one or the other systems in place in every other Western democracy. The simplest is closest to us is Canada, and a single-payer system, essentially putting everyone into Medicare. Voil�! We are all covered by the same system, providers can provide care to people based upon their disease, not their insurance status, and rates can be set at the level that we as a people are able to tolerate, or willing to pay, for the health care we want and need. The clout of the empowered will bring along benefit for everyone. There will be no more gaming the system, trying to attract certain patients with certain insurance rather than other. Or, in a more complex fashion, we could follow the example of other countries; Switzerland, for example, has multiple private insurance companies rather than a single payer, but they are highly regulated and non-profit; they are told by the government what they can charge and what they must cover.

The argument that Americans will not accept major government involvement and regulation is pretty flawed, both because of the involvement of the government in regulating the health system already (mostly to ensure profit for providers and insurers) and because regular people see the advantage of universal health care. Rosenthal writes that �All other developed countries rely on a large degree of direct government intervention, negotiation or rate-setting to achieve lower-priced medical treatment for all citizens. That is not politically acceptable here.� Study after study has shown strong support for a universal health care system from the American people; however, certain very powerful vested interests would likely lose out:  ��A lot of the complexity of the Affordable Care Act arises from the political need in the U.S. to rely on the private market to provide health care access,� said Dr. David Blumenthal, a former adviser to President Obama and president of the Commonwealth Fund, a New York-based foundation that focuses on health care.�

The political need is for the wealthy and powerful. This is why ACA ensured that insurance companies would get their cut. Elisabeth Rosenthal does not say so in so many words, but she does say that ��after a year spent hearing from hundreds of patients like Mr. Abrahams, Mr. Landman and Mr. Miller, I know, too, that reforming the nation�s $2.9 trillion health system is urgent, and will not be accomplished with delicate maneuvers at the margins. There are many further interventions that we know will help contain costs and rein in prices. And we�d better start making choices fast.�

A universal health care program, Medicare for all, in which everyone was automatically enrolled just as current Medicare recipients are now, would be just fine.