November 2011, Vol 8

Message From An Actuary
Tim Luedtke, FSA, CFA

I just returned from the 8th Annual Columbia Healthcare Conference. Keynote speakers included Aetna's Chairman, CEO, and President, Mr. Mark Bertolini; Johnson & Johnson's Vice Chairman, Executive Chairman, Ms. Sheri McCoy; and Roche's Chairman, Dr. Franz B. Humer. COLLABORATION AND CONVERGENCE: Connecting the Healthcare Ecosystem attracted Columbia University's largest conference attendance ever with over six hundred industry leaders. This month's Actuarial View focuses on some thought-provoking comments from the conference. Should you wish to learn more about the conference please contact Tim.

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Tim Luedtke, FSA, MAAA, CFA
Principal & Consulting Actuary

Diane Luedtke, FSA
Principal & Consulting Actuary

Collaboration - Nominated for Word of the Year

Tim Luedtke, FSA, CFA

The word Collaboration has a shot at becoming 2011's 'Word of the Year'. I looked up Collaboration's popularity on and the word is currently ranked in the top 1% for 2011 at 113th. With the warm reception the final ACO rules received, the year-end push could well see Collaboration top the charts by December 31, 2011. And with accountable care organizations, Patient-Centered Medical Homes, the Medicare Shared Savings Program, and the PIONEER Program all preaching Collaboration, Columbia's 8th Annual Healthcare Conference focus on COLLABORATION AND CONVERGENCE: Connecting the Healthcare Ecosystem is very timely.

Here are, but a few comments received during hallway conversations which may suggest such Collaboration may be difficult to achieve, yet I believe the economic opportunity for Collaboration far exceeds pursuing business as usual.

      #1 - Regarding today's shortages in and rationing of oncology drugs: "We have rationing because those bidding to supply oncology drugs were not required to show sufficient supply capacity; and with lower prices manufacturers closed plants and slowed development of new ones."

      #2 - Regarding pricing distribution within the health care system: "The problem is not too little money in the system, rather we have a distribution problem. Some health care industry participants are receiving more than their share and we need to figure out how to redistribute the overage to those needing it most."

      #3 - Regarding patient understanding: "What we have today is a problem of health literacy."

Whether one agrees or disagrees with these comments they do represent challenges to improving quality through Collaboration.

The first comment suggests the focus on competitive bidding to lower prices may have a negative effect and limit supply. Economists would argue that such an outcome is elementary economics: higher prices lead to greater supply, while lower prices lead to lower supply. The current cancer drug shortages are hurting patients today. Let's pray that the drive to lower health care costs does not hurt Collaboration's efforts to improve quality as well. If Collaboration between patients, physicians, surgeons, hospitals, and suppliers determines that the best oncology course of treatment is to use a cancer drug therapy and supply is limited, quality will suffer.1

The second comment could develop into a protectionist mentality, pitting one group against another. It is not very hard to see that such thinking presents limited opportunity for Collaboration and the benefits which can arise with open mutually beneficial sharing of information to improve quality and eliminate wasteful mistakes.

The final comment is an interesting one. We, as individuals, have more information communicated to us and at our fingertips than ever before in human history. Yet, our ability to process the information within a framework for personal understanding has not kept pace. As such, overall studies indicate that patients recall only half of what is said at a doctor's visit2 and for information that is recalled, about half is remembered incorrectly.3,4 This need for health literacy demonstrates that Collaboration requires improvements which go well beyond the medical profession to reengineering ourselves, our connections with others, and our environment.

1The Shortage of Essential Chemotherapy Drugs in the United StatesMandy L. Gatesman, Pharm.D., and Thomas J. Smith, M.D.; N Engl J Med 2011; 365:1653-1655; November 3, 2011
2Shapiro DE, Boggs SR, Melamed BG, Graham-Pole J (1992). The effect of varied physician affect on recall, anxiety, and perceptions in women at risk for breast cancer: an analogue study. Health Psychol 11:61-66.
3Anderson JL, Dodman S, Kopelman M, Fleming A (1979). Patient information recall in a rheumatology clinic. Rheumatol Rehabil 18:18-22.
4Kessels RPC (2003). Patients' memory for medical information. J Roy Soc Med 96:219-222.

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