Our Purpose Today

1. Opportunities to Improve Health Care for WashingtoniansLife Sciences Discovery Fund Meeting ~ March 17, 2009

2. Our Purpose Today • Discuss key issues and trends in Washington’s health care system today • Discuss potential research opportunities to improve outcomes

3. Focus on improving quality of care • In our view, the cost and access • problem is a quality problem: • Rising cost of health care – impact on business, on the uninsured • Quality improves affordability, and greater affordability improves access

4. Quality problems and variability in care are driving health care costs • State revenue growth is 4%, health care growth trends are 10% • Health care cost increases take away from education and other priorities • Rising health care costs are negatively impacting jobs, wages and employer provided coverage • As we pay more for health care, cuts hurt safety nets like community clinics We’re spending more on health care, but the population is less healthy • Children born today face a lower life expectancy than you or I • Increases in diabetes, obesity, heart disease Significant quality issues drive increased costs • RAND: Americans get evidence-based care only 55% of the time • IOM: up to 98,000 Americans die each year due to avoidable medical errors • NCQA: up to 79,000 Americans die each year due to quality gaps • CDC: 2 million patients acquire infections in the hospital each year => 90,000 die

5. Trends in Washington State Cost Services being provided

6. What are we spending our money on (state budget)? Growth in Costs versusGrowth in General Fund-State Revenue 2.30 2.10 Medical Assistance Admin. Employee & K-12 Health Benefits 1.90 Note: MAA growth is a combination of medical cost (avg. 6%) and caseload All Health-Related Expenditures growth (avg. 4%) 1.70 Dept. of Health 1.50 1.30 K-12 Education GF-State Revenues Health Care Authority: Basic Health 1.10 0.90 0.70 2000 2001 2002 2003 2004 2005 2006 2007 DSHS Medical Assistance Department of Health HCA - Basic Health Employee Health Benefits & K-12 Subsidy K-12 Education GF-State Revenues All Health-Related Expenditures Source: State of Washington Office of Financial Management (July 2005)

7. In what health care settings? • Top Medical Assistance Expenditures – SFY 2007 Expenditure data from the November 2008 HRSA Medical Assistance Forecast * - Mandatory Services

8. By which health care professionals & facilities? Top Provider Type PCP $258M Other $209M Dental $113M Specialist $73M Top Venues Community Provider $102M FQHC $90M Indian Health Center $30M Family Planning Clinic $23M Rural Health Center $12M Public Health Dept $0.5M Top Facilities (% paid) Other PPS 77% CPE 15% CAH 5% Children’s 13% Harborview 7% Sacred Heart 7% Swedish 6% Tacoma General 6% Medical Assistance Data

9. For which services & clients? Top Procedures E&M $21M Diagnostic Radiology $33M Office Rx $18M Path/Lab $17M CV $8M Top Client Types Ventilator Chronic and Acute Chronic Mental Health Re-hospitalizations Traumatic Brain Transplant and Bone Marrow Top 10 Diagnostic Cancer $21M OB/GYN $17M Musculoskeletal $16M GI $18M Injury $14M Other $12M Respiratory $10M Cardiac $9M GU $8M Dental $6M Inpatient Payments - By Eligibility CN Blind/Disabled 51% CN Other Kids 11% CN Pregnant Alien Women 9% CN TANF 8% MN Blind/Disabled 6% CN Pregnant Women 4% Medical Assistance Data

10. For which services / clients (cont)? Medical Assistance Data

11. On what type of drugs? Top Client Types Hemophilia $0.5-1M per user Chemo $100 ->$10K/mon Mental Health Monthly Rx $500 Poly-pharmacy Avg. 7 drugs per user Top Drugs (specific) Seroquel $21.4M Abilify $16.3M Novoseven $15.4M Risperdal $15.1M Zyprexa $13.7M Top Drugs Types Brand 80% Generic 20% Generic Fill Rate 63%* Mental Health 40% Antipsychotics 25% * WA plans at 80% Medical Assistance Data

12. A final perspective on costs  chronic care Five percent of the clients have chronicmedical, mental health and substance-abuse issues that are responsible for 50% of FFS expenditures Source: Agency Financial Reporting System (AFRS); OFM Eligibility File; State FY 2008

13. Health care spend by client? 5% of clients drive 50% of costs Top Venue -- Hospital, Rx Top Issues -- CV, MH, GI, Cancer, Infections Top Rx -- Narcotic, CV, MHD Source: Agency Financial Reporting System (AFRS); OFM Eligibility File Figures in total dollars (All State, Local, and Federal fund sources); State FY 2008

14. Trends in Washington State Quality of care Variation, defects, waste

15. The Cost of Variability Proportion of Medicare spending attributed to each category of unwarranted variation 12% 25% 63% Source: The Dartmouth Institute for Health Policy & Clinical Practice

16. Spending and QualitySupply-sensitive services and the paradox of plenty Medicare spendingper beneficiary 2003 Green - US HRRs Blue - FL HRRs Red - WA, OR HRRs

17. Variations in practice, spending, and across America’s Best Hospitals (USN&WR + Cedars) 120,000 Spending per Medicare beneficiary with severe chronic disease (Last 2 years of life, 2000-2003) 100,000 Cedars-Sinai 76,934 UCLA Medical Center 72,793 New York-Presbyterian 69,962 Johns Hopkins 60,653 UCSF Medical Center 56,859 Univ. of Washington 50,716 Mass. General 47,880 Barnes-Jewish 44,463 Duke University Hosp. 37,765 Mayo Clinic (St. Mary's) 37,271 Cleveland Clinic 35,455 80,000 Inpatient + Part B spending per decedent 60,000 40,000 20,000 How can the best medical care in the world cost twice asmuch as the best medical care in the world? – Uwe Reinhardt

18. Transurethral Prostatectomy for Benign Prostatic Hyperplasia per 1,000 Male Medicare Enrollees (2002-03) 12.0 11.0 10.0 Port Angeles 9.1 9.0 8.0 Spokane 7.2 7.0 6.0 Everett 5.1 Tacoma 4.9 5.0 4.0 Seattle 3.5 Olympia 3.1 Yakima 2.6 3.0 2.0 1.0

19. Coronary Artery Bypass Grafting per 1,000 Medicare Enrollees (2002-03) 10.0 8.0 Spokane 5.4 Yakima 4.9 Kirkland 4.9 Tacoma 4.7 Olympia 4.5 Everett 4.2 Seattle 3.9 Bellevue 3.5 6.0 4.0 2.0

20. Percutaneous Coronary Interventions per 1,000 Medicare Enrollees (2002-03) 39.0 33.0 27.0 21.0 Bellevue 12.3 Kirkland 11.5 Olympia 11.2 Yakima 9.9 Tacoma 8.7 Everett 7.6 Spokane 6.9 Seattle 6.6 15.0 9.0 3.0

21. Back Surgery per 1,000 Medicare Enrollees (2002-03) 10.0 9.0 8.0 7.0 Spokane 6.2 Tacoma 5.7 Olympia 5.3 Yakima 4.5 Seattle 4.2 Everett 4.1 6.0 5.0 4.0 3.0 Port Angeles 2.8 2.0 1.0

22. Anti-Psychotic Medication in Children Maximal doses of anti-psychotics in kids vary between 0.5-3.8%

23. What does all this tell us about variation in performance overall?

24. 1 (69%) 2 (31%) 3 (7%) 4 (.6%) 5 (.002%) 6 (.00003%) Health care quality defects occur at alarming rates IRS Phone-in Tax Advice Recommended well-child visits (WA) Treatment of Bronchitis (WA) Breast cancer Screening (WA) Hospital acquired infections Adverse drug events U.S. birth defects Detection & treatment of depression Hospitalized patients injured through negligence Overall Health Care Quality in U.S.(Rand Study 2003) Defects per million Airline baggage handling U.S Airline flight fatalities/ U.S. Industry Best of Class NBA Free-throws ∑ level (% Defects) Sources: modified from C. Buck, GE; Dr. Sam Nussbaum, Wellpoint; Premera 2004 Quality Score Card; March of Dimes

25. Unnecessary procedures contribute to waste

26. Potential Research Opportunities Connecting these trends to the work of the LSDF

27. Research Opportunities • How do we reduce variability in health care? • How do we achieve more population health for the same or fewer dollars? • How do we actually change people’s behavior? • Some examples (brainstorming)….

28. High risk pregnancy is larger cause of low birth weight and NICY admissions How about a low-cost, highly reliable and portable uterine monitor for high risk moms?

29. High tech old idea: You cannot manage what you do not measure C-Section Rates Vary 14-48%

30. Environmental triggers cause asthma to worsen How about an Air Sampler that tells you good or bad air and what’s wrong?

31. Only 40% of people take their medications regularly How about a $2 medication bottle that lights up red/yellow/greenbased on compliance? $200 $75 $20

32. New Generics Total Class $ Brand vs. Generic Spend ($ diff) Risperidal (AAP) $86.7M $81M vs. $4M ($121) Venlifexine(AD) $16M $12M vs. $4M ($185) Protonix (PPI) $16.4M $14.9M vs. $1.6M ($58) Altace (ACE) $0.49M $ 0.45M vs. $0.045M ($51) Norvasc (CCB) $0.94M $0.06M vs. $0.88M ($66) Oxycontin (LAO) $10M $5.6M vs. $4.5M ($280) Zocor (Statins) $7.7M $ 7.1M vs. $0.6M ($87) Lipitor (2012) Imitrex (2010)$6.5M Allegra Zertex $0.48M $0.1M vs. $0.3M ($34) Generics are less expensive and often equally effective For each new generic a new “me too” brand emerges in the class. Often “me too” drugs show little difference in efficacy or are only more effective in special populations. Only two PDL classes have generic > brand costs.

33. If not good science: what else?

34. Changing behavior • Washington Wellness handout

35. Putting it all together - research & policy • Research can help guide state policy to: • Put health care on a budget • Increase access by lowering cost and improving quality • Significantly increase public health spending on nutrition, obesity, smoking, and exercise • Change reimbursement system • Change definition of medical necessity to reflect national standards and remove decision making from those who have an economic interest • Significantly increase transparency of practice patterns, pricing, and payments to providers • Reduce unwarranted variation • Defend the state’s position in Medicare as a relatively efficient and higher quality state

36. Additional Questions / Discussion