Thesis Thursday: Wenjia Zhu

On the third Thursday of every month, we speak to a recent graduate about their thesis and their studies. This month’s guest is Dr Wenjia Zhu who has a PhD from Boston University. If you would like to suggest a candidate for an upcoming Thesis Thursday, get in touch.

Title
Health plan innovations and health care costs in the commercial health insurance market
Supervisors
Randall P. Ellis, Thomas G. McGuire, Keith M. Ericson
Repository link
https://hdl.handle.net/2144/27355

What kinds of ‘innovations’ did you want to look at in your research, and why?

My dissertation investigated health plan “innovations” for cost containment, in which certain features are designed into health insurance contracts to influence how health care is delivered and utilized. While specifics may vary considerably across health plans, recent “innovations” feature two main strategies for constraining health spending. One is a demand-side strategy, which aims to reduce health care utilization through high cost-sharing on the consumer side. Plans using this strategy include “high-deductible” or “consumer-driven” health plans. The other is a supply-side strategy, in which insurers selectively contract with low-cost providers whom consumers have access to, thereby directing consumers to those low-cost providers. Plans employing this strategy include “narrow network” health plans.

Despite an ongoing debate about whether the demand-side or supply-side strategy is more effective at reducing costs, there is little work to guide this debate due to challenges in causal inference, estimation, and measurement. As a result, the question of cost containment through insurance benefit designs remains largely unresolved. To shed light on this debate, I investigated these two strategies using a large, multiple-employer, multiple-insurer panel dataset which allowed me to address various methodological challenges through the use of modern econometrics tools and novel estimation methods.

How easy was it to access the data that you needed to answer your research questions?

The main data for my dissertation research come from the Truven Analytic’s MarketScan® Commercial Claims and Encounters Database, which contains administrative claims of a quarter of the U.S. population insured through their employment. I was fortunate to access this database through the data supplier’s existing contract with Boston University, and the entire process of accessing the data involved low effort overall.

Occasionally I needed to refine my research questions or find alternative approaches because certain pieces of information were not available in this database and were hard to access elsewhere. For example, in Chapter 1, we did not further examine heterogeneity of plan coverage within plan types because detailed premiums or benefit features of health plans were not observed (Ellis and Zhu 2016). In Chapter 3, I sought out an alternative approach in lieu of the maximum likelihood (ML) method when estimating provider network breadth because provider identifiers were not coded consistently across health plans in my data, precluding the reliable construction of one key element in the ML method.

Your PhD research tackled several methodological challenges. Which was the most difficult to overcome?

In the course of my research, I found myself in constant need of estimating models that require controlling for multiple fixed effects, each of high dimension (something we called “high-dimensional fixed effects”). One example is health care utilization models that control for provider, patient, and county fixed effects. In these models, however, estimation often became computationally infeasible in the presence of large sample sizes and unbalanced panel datasets. Traditional approaches to absorbing fixed effects no longer worked, and the models with billions of data points could barely be handled in Stata even though it provides some convenient user-written commands (e.g. REGHDFE).

This motivated me and my coauthors to devote an entire chapter in my dissertation to looking into this issue. In Chapter 2, we developed a new algorithm that estimates models with multiple high-dimensional fixed effects while accommodating such features as unbalanced panels, instrumental variables, and cluster-robust variance estimation. The key to our approach is an iterative process of sequentially absorbing fixed effects based on the Frisch-Waugh-Lovell Theorem. By writing up our algorithm into a SAS macro that does not require all data to reside in core memory, we can handle datasets of essentially any size.

Did you identify any health plan designs that reduced health care costs?

Certainly. My dissertation shows that health plans that manage care – imposing cost-sharing, requiring gatekeepers, or restricting consumer choice of providers – spent much less (on procedures) compared to comprehensive insurance plans that do not have any of these “care management” elements, even after controlling for patient selection into plan types.

On the other hand, we did not find evidence that either of the new health plan “innovations” – high cost-sharing or narrow networks – particularly saved health care costs compared to Preferred Provider Organizations (PPOs) (Ellis and Zhu 2016). One possibility is that incentives to control one aspect of spending create compensating effects in other aspects. For example, although high-deductible/consumer-driven health plans shift cost responsibility from employers to enrollees, they did not reduce health care spending due to higher provider prices and higher coding intensity. Similarly, while narrow network plans reduced treatment utilization, they did so mostly for the less severely ill, creating the offsetting incentive of up-coding by providers on the remaining sicker patients.

Based on your findings, what would be your first recommendation to policymakers?

To improve the effectiveness of health care cost containment, my first recommendation to policymakers would be to design mechanisms to more effectively monitor and reduce service prices.

My dissertation shows that while tremendous efforts have been made by health plans to design mechanisms to manage health care utilization (e.g., through imposing a higher cost-sharing on consumers) and to direct patients to certain providers (e.g., through selective contracting), overall cost containment, if any, has been rather modest due to insufficient price reductions. For example, we found that high-deductible/consumer-driven health plans had significantly higher average procedure prices than PPOs (Ellis and Zhu 2016). Even for narrow network plans in which insurers selectively contract with providers, we did not find evidence that these plans were successful in keeping low-cost providers. Difficulties of keeping prices down may reflect unbalanced bargaining power between insurers and providers, as well as special challenges in consumers price-shopping in the presence of complex insurance contract designs (Brot-Goldberg et al. 2017).

Thesis Thursday: Sarah Zheng

On the third Thursday of every month, we speak to a recent graduate about their thesis and their studies. This month’s guest is Dr Sarah Zheng who has a PhD from Boston University. If you would like to suggest a candidate for an upcoming Thesis Thursday, get in touch.

Title
Design for performance: studies on cost and quality in U.S. health care
Supervisors
Z. Justin Ren, Kimberley H. Geissler, Janelle Heineke, Anita Tucker
Repository link
https://open.bu.edu/handle/2144/23312

In the context of your PhD research, what does ‘design for performance’ mean?

“Design for performance” is a further step in managing healthcare from “pay for performance”, on which there has been decades of attention paid among practitioners and academics. Despite the long effort on “pay for performance”, the core challenge remains how to properly incentivize patients, clinicians and staff to align their behaviors with optimal, safe and cost-effective, patient-centric care. This dissertation suggests an important set of issues to consider around “design for performance” at the system and process levels.

At the system level, under what conditions does cost-sharing lead to lower total costs without reducing quality of care? Previous literature has studied contract theory and mechanism design in varied industry settings (Guajardo et al. 2012), yet very few are studied in the healthcare domain where insurance plans are offered to patients under different contract arrangements. It remains unclear whether certain contract design at such settings may lead to desired outcomes (e.g., low healthcare spending). At the process level, under what conditions and to what extent does excellent internal supply operations result in superior hospital performance? Industrial studies suggest that reliable, efficient internal supply chains that are integrated with production yield better financial and quality performance for manufacturing companies (Droge et al. 2004, Flynn et al. 2010). However, there is scant quantitative research on the impact of support departments in hospitals (Tucker et al. 2008, Fredendall et al. 2009). Studies are needed to understand the extent to which support departments impact patient care outcomes, such as adverse events.

How was quality captured in the data that you used in your analyses?

In Chapter 3 of my thesis, I studied the impact of internal service quality on one particular quality performance metric: adverse events. Specifically, it is a rate variable that is calculated by the sum of adverse events (i.e., patient falls with injury and pressure ulcers) on the unit that month divided by the number of patient days on the unit that month, which is then multiplied by 1,000. The hospital collects these data monthly. The adverse event data come from both patient record reviews and incident reports in the hospital’s safety reporting system, as is typical of this type of data (Lake and Cheung 2006). The error event data are audited internally as well as reported to CMS (Zheng et al. 2017).

This is a unique opportunity to study quality as most healthcare operations research has relied on publicly available, hospital-level quality data, such as patient mortality (e.g., Senot et al. 2015, KC and Terwiesch 2011)—which is a blunt measure of quality—or process of care measures (e.g., Boyer et al. 2012, Gardner et al. 2015, Senot et al. 2015), which have been criticized in the healthcare literature for their weak connection to clinical outcomes (Patterson et al. 2010).

You complemented your quantitative analysis with some qualitative interviews – was this a valuable exercise?

Yes, definitely. To understand further the role patients (and the patient-physician dyad) play in deciding the usage of imaging studies, I conducted in-depth conversations with both physicians and patients. Specifically, I interviewed three physicians (i.e., hospitalist, primary care provider) and one imaging technician with the average conversation time of 70 mins. I also interviewed six patients with the average conversation time of 20 mins.

I found that patients did play a role in deciding the usage of imaging studies in the way that high-deductible health plan (HDHP) patients are less likely to demand imaging studies than non-HDHP patients. However, as patients cannot distinguish low-value care from high-value care, HDHP patients avoid patient care in general. This is consistent with previous literature on patient cost-sharing and HDHPs where patients indiscriminately reduce medical care (Hibbard et al. 2008, Lohr et al. 1986). It further suggests that HDHP may be a blunt instrument, reducing all diagnostic imaging, rather than helping physicians and patients choose high-value imaging.

Did any of your findings about high-deductible health plans stand out as different from previous studies?

I wouldn’t say different but more like complementary. Previous studies found HDHPs have different impacts depending on the site and type of care (Haviland et al. 2015, Wharam et al. 2013, Bundorf 2012, Nair et al. 2009, Waters et al. 2011, Hibbard et al. 2008, Busch et al. 2006, Rowe et al. 2008, Parente et al. 2004). By explicitly testing associations between HDHP enrollment and diagnostic imaging, we provide a more complete picture for policymakers in making guidelines related to HDHP plans. Our results suggest that increases in HDHP enrollment may contribute to a slow in the growth of diagnostic imaging utilization. However, increased cost-sharing may not allow patients to differentiate between high-value and low-value utilization, and better patient awareness and education should be a crucial part of any reductions in diagnostic imaging utilization (Zheng et al. 2016).

‘Internal service quality’ is a term that doesn’t often appear in health economics journals – should researchers be dedicating more attention to this?

Yes. In our study we find improved internal service quality to be a particularly novel driver of reduced adverse events because it is not obvious a priori that support departments—most of which are not clinical in nature—could have a significant impact on clinical outcomes. In particular, we find that improving the overall average internal service quality received by a nursing unit by 0.1 on a 5-point scale is associated with a 38% reduction in adverse events per nursing unit, which has roughly the same benefit for reducing adverse events as increasing staffing on that unit by nearly one full-time equivalent nurse. In the hospital that we study, the average salary of a support service technician is lower than the average salary of a nurse. Thus, hospitals might be able to improve quality of care at a lower cost by increasing support staff to relieve the burden on nurses (Zheng et al. 2017). More studies are needed in this area to explore further internal service quality as a viable and cost-effective means to improve clinical performance.