Evidence-Based Purchasing

1. Evidence-Based Purchasing Presentation by Michael Bailit to the Special Commission on Payment Reform, February 24, 2009

2. Evidence-Based Purchasing • Specified in statute as a model to be considered by the Commission. • It is not a payment model, but can work in support of a payment model to reduce costs for unnecessary or less valuable services.

3. Evidence-Based Purchasing: The Context for Today’s Discussion • Experts estimate that between 25% and 50% of health care expenditures in the U.S. produce no benefit to the patient – and all too often create harm. • “There is a massive amount of spending on things that really don’t help patients, and even put them at greater risk.” • Gerard Anderson, Johns Hopkins University • Elliot Fisher and colleagues at Dartmouth have shown that in Medicare there is an inverse relationship between health care spending and health care quality.

4. Evidence-Based Purchasing is a Coverage Strategy That Derives From Evidence-Based Medicine • “Evidence-based Medicine is a set of principles and methods intended to ensure that to the greatest extent possible, medical decisions, guidelines, and other types of policies are based on and consistent with good evidence of effectiveness and benefit.” • David Eddy. “Evidence-Based Medicine: A Unified Approach,” Health Affairs, January/February 2005.

5. Defining Evidence-Based Purchasing • Evidence-Based Purchasing attempts to minimize misuse and overuse and decrease costs, by applying rigorous scientific evidence of effectiveness to coverage policy in a more comprehensive manner than has been traditional practice.

6. Defining Evidence-Based Purchasing • It is not the case that states and health plans don’t use evidence at all today when deciding what to cover but… • It is the case that the application is not sufficient to prevent the high prevalence of overuse and misuse

7. Current coverage policies are not always supported by evidence • Vytorin and Zetia “may not work and should be used only as a last resort.” “The drugs “racked up $5 billion in sales despite limited proof of benefit.” • Alex Berenson, New York Times, April 2008 • “Popular Heart Test Questioned; Critics see CT risks, with profits trumping science” • The Baltimore Sun, February 28, 2008

8. Barriers to using evidence • Financial incentives • Supply-induced demand • Patient advocacy • Professional mission • Lack of information

9. Effectiveness Research in the U.S. • AHRQ Evidence-Based Practice Centers • 5-year contracts, since 1997 • Develop evidence reports and technology assessments on clinical, social science/behavioral, economic, and other health care organization and delivery issues • High cost, high volume, Medicare and Medicaid • State initiatives • Drug Effectiveness Review Project • Medicaid Evidence-based Decision (MED) Project • Health Care Technology Assessment Vendors • ECRI, Hayes, BCBSA Technology Evaluation Center

10. 2009 Economic Stimulus Package: Comparative Effectiveness • 2009 economic stimulus package includes $1.1B in federal funding to investigate how different treatments compare in effectiveness. • Work will be directed by a 15-member council to coordinate research by federal agencies • Lobbyists pressed to include language in the bill’s conference report saying Congress doesn’t intend for Medicare or other “public or private payers” to use the research to make coverage decisions.

11. Effectiveness Research in the U.S. • Other countries already do comparative effectiveness research. • In the UK the National Institute for Health and Clinical Effectiveness (NICE) evaluate the cost and effectiveness of treatments and guide coverage policy for England's National Health Service. It's been criticized for recommending against the use of drugs for certain patients. • Similar organizations exist in France, Denmark and Germany. • The UK’s Cochrane Collaboration is a private effort, that serves a similar function but does not advise the government.

12. How to apply effectiveness research? • Coverage policy (five options): • Exclude coverage of services of no value. • Exclude coverage of services of low priority/low value (Oregon). • Limit coverage of services to only those clinical applications were evidence of effectiveness exists. • Limit coverage to services that produce the highest value when considering both clinical effectiveness and cost. • Limit coverage of services so that higher value options are attempted before lower value options.

13. How to apply effectiveness research? • Benefit design: • Value-Based Insurance (Benefit) Design: Vary cost-sharing to provide incentives for patients to use a) high value services (e.g., medication for persons with heart disease), and/or b) providers with demonstrated superior effectiveness.

14. The Experience of Other States: Washington • WA Department of Social and Health Services implemented evidence-based coverage by grading services based on the quality of the evidence supporting their effectiveness. • Statutory requirement to apply an evidence-based approach to coverage policy (WAC 388-501-0165). • Evidence is categorized, with meta-analysis of multiple, well-designed controlled studies being the best possible evidence. • One of four grades is then assigned based on the assessed evidence (method from Hayes).

15. The Experience of Other States: Washington • A = Randomized controlled clinical trials • B = Consistent and well-done observational studies • C = Inconsistent studies • D = Studies show no evidence, raise safety concerns, or no support by expert opinion • WA generally approves “A” and “B” services for coverage. “C” and “D” services are approved only upon special case-specific review.

16. The Experience of Other States: Washington • Financial Impact – three examples: • reduction in bariatric surgery spending from $970K in 2003 to $56K in 2006 (94% reduction) • reduction in enteral nutrition spending ($10M savings) • reduction in attention deficit disorder drug spending for children through required second opinions, resulting in a 3:1 ROI

17. General Conclusions • Evidence is not used in purchasing to the extent that it could. • There are real challenges to the application of evidence. • Evidence-based purchasing, as a coverage policy or benefit design strategy, can serve to complement payment reform.