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BUDGET CREEP. An unrecognized cause of health care malfunction. Maurice McGregor Cardiovascular Division and Technology Assessment Unit, McGill University Health Centre CADTH Symposium Ottawa. April 2009.

Maurice McGregor - Budget CREEP. An Unrecognized Cause … · BUDGET CREEP. An unrecognized cause of health care malfunction. Maurice McGregor Cardiovascular Division and Technology

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BUDGET CREEP. An unrecognized cause of health

care malfunction.Maurice McGregor

Cardiovascular Division andTechnology Assessment Unit,

McGill University Health Centre

CADTH SymposiumOttawa. April 2009.

BACKGROUND

Health costs keep going up. Everywhere.

More than governments (insurance companies) want to spend.

Everywhere demand for health services exceeds supply. Result, rationing.

In USA, through Underinsurance,In Canada, through Wait times.

So why do health costs keep rising?

The largest driver is acquisition of new technologies .

How much of the increase in spending is caused by expansion of technology?

US, 1998………………….....39% [Mohr 2001]

UK, 1977- 2000……………..50% [Wanless 2001]

US & Canada,1975-2000…..66% [Di Matteo 2005]

So where are these decisions to acquire new technologies being made?

Question: Who are the deciders?

• Big ticket items (eg: a screening programme,or MRI unit), mostly decided by governments.

• Items of lower unit cost (apart from drugs) decided by hospitals or regions.

Problem : the cost of these decisions is often not reimbursed by government.

And this leads to “ Budget creep.”

A bad name. Not really a creep of the budgetbut a progressive change in use of budget.

A progressive diversion of operating funds to pay for new technologiesat the expense of other services .

The process is largely unrecognized .Not reflected in budgets.

It is progressively eroding the capacity and quality of hospitals’ services .

ANALOGYConsider a household in which income is fixed .

There is one recurring uncontrollable expenditure, say the hydro bill, which increases 5% each year.

To avoid deficit, cuts must be made elsewhere.At first, on restaurants, movies, books,

later, on holidays, clothes, food ,maintenance.

None of this shows in the overall budget.BUTyear by year quality of household deteriorates .

BUDGET CREEPIn the health care system the equivalent

of the household is the hospital.

and the equivalent of the hydro bill is the cost of technology.

Budget creep is the process by which funds allocated to operate hospitals are progressively diverted to buy new technologies at the expense of existing items

How does this happen?New items are paid for from the global budget.

Often hospitals are not reimbursed by government.

Every time an expenditure is not reimbursed theinstitutional budget shifts into deficit.

And deficits are not permitted .

So how to balance their budgets? By cuts : Extend hospital holidays, close beds, reduce numbers of nurses, technologists, cleaners.

Results: Increased wait times.Congested ERs. Poor hygiene.

All this without any effect on the size of budgets.

Is this really a problem? How big is it?

Difficult . A good answer would require line by line study of departmental expenditure in a large sample of Canadian institutions. Not feasible.

Instead, we have carried out a “back of the envelope” study, in one institution.The Royal Victoria and Montreal Generaldivisions of the McGill University Health Centre.

METHOD.Administrators in 5 cost centres identified new

technologies that have not been reimbursedby government.

Definition. “New” defined as technologies • introduced within the last 5 years, or• use more than doubled in the last 5 years(expanded indications).

Inclusion. Only expendable single use items.Exclusion. No consoles. No capital equipment.

No operating costs, eg: nursing

Offset SavingsSometimes a new technology results in savings. When they are in the same department , they can be realized. We then add the net costs.

But when the savings in a different department They usually cannot be realized.( Eg: trans-catheter heart surgery).

SO when offset savings cannot be realised,the gross cost of the technology was added.

Expenditure(2007-08) on Unreimbursed New Technologies.Item Cost $

Heart Cath IMPELLA Cardiac Assist Device 157,500 Percutaneous aortic valve 204,000 Pacemakers (ICD excluded) 604,087 Percutaneous pulmonary valve* 198,000 Percutaneous closure PFO* 92,800 Percutaneous closure ASD/PDA* 288,000

OR Cardioblate (Atrial Fibrillation) 96,666 Talon sternal closure device 90,000 Heart valves. 1,224,000Mitral Rings. 180,000 Mechanical Hearts. 603,000Pulsatile Renal Perfusion. 22,500Knee arthroplasty. Navitrack. 26,325Mechanical Sutures 1,600,000

Ward Therapeutic mattresses 754,035VAC Wound therapy 404,832

ICU Continuous Renal Replacement. 878,480Imaging Biliary stents* 200,000

Embolic device coils 140,017Vena cava filters 229,447Transjug. Intrahep. Porto-Syst. Shunt 48,319Permanent tunneled catheters 18,451Periph. Inserted Central Caths. 55,461 Radiofrequency ablation (RFA) 74,980Biopsies 30,101Stents 267,795

TOTAL New expenditure since 2003 8,488,796

.

.

DISCUSSIONHow important is "budget creep" ? • $8.5 million represents only 7% of the total

budget of these cost centres. • It could finance 80 medical beds.

• The $8.5 million was found by rapid reviewof convenience sample of 5 cost centres.

A more systematic review, with inclusion of operating costs would be larger.

DISCUSSION

More important, this is a continuous process$8.5 million reflects only the past 5 years

At the same rate of acquisition,in 5 years $17 million,in 10 years $34 million,

will be spent on new technologies at the expense of competing items.

DISCUSSION

• The extent of this process elsewhere in Canada is unknown.

If it occurs at a comparable level in many Canadian hospitals, it must be a major contributor to

poor hygiene, congested emergency rooms, and prolonged waiting times

DISCUSSIONThese findings are not a criticism of the

institutions or of the governments that fund them, but of the process .

Hospitals have to try to achieve maximum health gain from their budget.They have to provide up-to-date treatment or be criticised, sometimes sued.

Governments have to depend on the hospitals to make the best use of their budgets. Not micromanage hospital decisions.

Can we improve the process?

DISCUSSIONYes, the process can be controlled. Absolutely.

But first, we have to accept a principle:We must never authorise a new expenditure

without first identifing the source of funds.(offset savings, or provision of new funding ).

This is not impractical. Not even original.

In Israel, by law, technologies cannot be acquired without the addition of appropriate funds to the heath budget.[ Rabinovich 2007]

DISCUSSIONAt this time in Quebec we are considering our own version of NICE, L’Institut national d’excellence en santé et services sociaux. INESSS. [Castonguay 09]

How will this influence budget creep?

NICE’S “recommendations” are binding.Trusts are given 3 months to supply approved items.INESSS will also make recommendations.Once accepted , institutions will be induced to use Them by administrative and fiscal means.

There is no mention of reimbursement of costs. If there is no reimbursement

budget creep will become budget gallop .

CONCLUSION• Our healthcare system is in trouble.• Before we start fixing it we should find out why . • One major reason is ignoring opportunity costs .

(what we have to give up in order to buy a new technology).

For HTA agencies or governments, opportunity costsare a theoretical concept. Consequences remote.

But in a hospital with fixed budget, opportunity costsare real.

We are selling the chairs to pay for the new flatscreen TV.Our home is getting uncomfortable.

REFERENCES

Mohr E, Mueller C, Neumann P,Franko S, Milet M, Silver L, Wilensky G. The Impact of Medical Technology on Future Health Costs. 2001. Project HOPE, Centre for Health Affairs, 7500 Old Georgetown Road, Suite 600, Bethesda, Maryland 20814-6133, USA.

Wanless, D. Securing our future health. Taking a long-term view. Chapter 10. London: HM Treasury : 2001.

Di Matteo, L. The macro determinants of health expenditure in the United States and Canada: Assessing the impact of income, age distribution and time".Health Policy, 2005; 71: (1):23-42.

Rabinovich M, Wood F, Shemer J. Impact of new medical technologies on health expenditures in Israel 2000-07. Internat J Tech Assess in Health Care 2007; 23:443-448.

Castonguay C, et le Comité d’implantation. L’institut national d’excellence en santé et services sociaux du Québec. www.msss.gouv.qc.ca

Admission of Bias

I have paid a lot of taxes during my life.

I admit to having a strong bias against having them wasted.

Health Technology

The “ techniques, drugs, equipment,and procedures used by healthcare professionals in delivering medical care to individuals, and the systemswithin which such care is delivered”.

OTA, U S Congress . Banta and Behney.1981

Health Expenditure % GDP

9%

11%

Slope: 0.1% per year

There are no Canadian estimates .

But drug costs are identified.

In 2005 health care spending rose 4%.

Approximately 39% of the increase wasdue to increased drug costs alone.

The cost of all new technologies wouldbe more.

So new technology is a substantial driver of health costs.

Problem:Most are effective, but few save money.Hips and pacemakers increase the quality

and the length of life.

But they all cost money. The longer people live the more

technologies they use.

For cost containment we should all die at 65. Preferably suddenly.