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Healthcare Reform Begins with Comparative Cost Effectiveness: A Revolution in Healthcare Management

Josh Feldstein from the Center for Applied Value Analysis came to speak in my class today, and provided a fascinating view of the future for healthcare.

CAVA started off as a spinoff of Josh’s medical education firm.  He could clearly see that the industry was changing, and healthcare clients managing large hospitals were asking for value-based pharmaceutical solutions.   As we’ve noted in prior blogs, physician preference is often the single most important determinant of supplier selection, and there was a need to adopt a more analytical model for making healthcare supply chain sourcing decisions.

Some early engagements with clients led to the evolution of a unique online platform for healthcare analytics.  In effect, this became a comparative cost effectiveness platform  to drive predictive modeling for biopharma and hospitals.  The idea was that managers could take their product and demonstrate their relative value to comparators for any class of medical or surgical process, and identify the value or lack thereof associated with that procedure/drug/operation, but through an objective third party.  Josh noted in class that “We are in the midst of this entire paradigm shift to provide these analytical services – and industry is freaking out.”

Moreover, manufacturers of pharmaceutical and medical devices are losing control of traditional physician control channels because supply chain and c-suite exeuctives, being pushed by insurance companies, are  demanding objective third party analytics.  For example, results of clinical trials studies will always look good – for a small subset of the population!    But when field tested in larger populations, all sorts of unpleasant side effects may pop out!

With the Healthcare Reform Act and Affordable Care Act, US Healthcare is unprepared for the deluge of comparative effectiveness analysis that is coming down the pike.   Somehow, hospitals must find ways to reduce the cost of patient care by 30%.  But they don’t know how to do it.  What they do have is lots and lots of information, but don’t know what to do with it.  This includes surgery outcomes, patients served, cost of care, days of recovery, etc. etc. but they have never analyzed all of their data.  A person is admitted for bypass surgery and needs stents and labwork… post op medication, pre-op medication, and post-op procedures, etc.  Hospitals have all of these buckets of data – but it is not synthesized and no one is looking at it!

Comparative effectiveness focuses on differences between products or technologies WITHOUT regard for cost.  Comparative Cost Effectiveness encompasses total cost (value) by answering the following questions:

–       Does a product provide bottom-line value to a hospital and its patients?

–       What does it cost for this clinical improvement?

The data sources required for making this determination are very deep and include the following:


– Full FDA drug prescribing and PMA introduction

– Clinical trials

– Global clinical and economic literature reviews.

Adjunctive Science

–       Pharmaceutical and med-surg firm study data, AMCP dossier data,

–       GPO actual use data (retro DV analyses)

–       Medicare Provider Analysis Reviews (MedPAR), Meicare Hospital System daa (OPPS)

–       Healthcare Cost reporting systems

– Government data, AHA Data

– Pharmaceutical Benefits Manager data, NICE (UK) and IQWG (Germany) data, IMS Data

Proprietary “Gap Fill” Research Data

–       Chart reviews, data warehouse extractions, change master data, hCP interviews

–       Payer strategic alliance claims data

–       Time and Motion studies

–       Lifecode ICD data analytics

CAVA has found a way to uniquely pull together data that isn’t able to fit together through “data synthesis”, using econometrics.  This is  a fancy way of saying – we take lots of information and finding a way to communicate and fit together in a way that is defensible and repeatable.  In the end, making the data “speak” to the business case is the essence of what CAVA is doing.  And there will be more of this to come in the NC State supply chain program in the near future….