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8 Kaiser Perrnanente's New Technology Committee: Coverage Decisionmaking in a Group Mode! Health Maintenance Organization PAUL D. LAIRSON A few years ago Alain Enthoven asked me to give a presentation to one of his classes at Stanford University on how the Kaiser Permanente Program made decisions related to the coverage of emerging new medical technologies. Alain knew that I was chairman of the program's New Technologies Committee, and I believe that he expected a discussion of a sophisticated decisionmaking process that carried a heavy dosage of cost-effectiveness analysis. I am not totally sure that Dr. Enthoven has fully recovered from my presentation related to how deci- sions are made in the complicated, multifactorial world of medical care delivery, and I believe that the presentation shook his rational view of the world. Howev- er, he has been kind enough to invite me back every year since to give a view of the "real" world to his graduate students. In this chapter, I plan to discuss that process and attempt to describe the complex arena in which group and staff model health maintenance organizations (lIMOs) make coverage decisions. Most of the things that I will cover apply to most of us who provide or insure medical services, although there are some differences. To understand the decisionmaking process that Kaiser Permanente uses, I believe that it would be useful to understand the structure of the organiza- tion in which these decisions are made. THE KAISER PERMANENTE PROGRAM The Kaiser Permanente Program comprises 12 regions that have a large degree of autonomy, held together by a common history and a centralized corpo- rate office in Oakland, California, where many functions that are of mutual bene 101

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102 PAUL D. LAIRSON fit to the overall program are carried out. Much of the autonomy of the 12 regions is driven by the 12 independent Permanente Medical Groups, which have in common their contracts with the Kaiser Foundation Health Plan in their re- gion, the name Permanente, and the fact that they are group practices. The medical groups also have a commonly funded central office, The Permanente Medical Groups Interregional Services, which I direct. The largest of our regions has about 2.5 million members, and the smallest has about 50,000 members. The degree of independence and the ability to per- form functions internal to the region vary with the size of the region. The larger regions greatly support the activities of the Interregional New Technologies Com- mittee, which I will describe. They support the activities of the committee by using committees of physicians and nonphysician personnel in their region; those people track and review in detail technologies related to their areas of expertise. An example would be the Bone Marrow Transplantation Committee in our North- ern California region, which tracks and advises the Interregional Committee on bone marrow transplant indications. THE NEW TECHNOLOGY COMMITTEE In 1984, because of the explosion in emerging new technologies and be- cause government and large national employers looked upon Kaiser Perma- nente as one nationwide program and not 12 independent plans, the New Tech- nologies Committee was created to recommend to the 12 regions when and how emerging new medical technologies should be covered. We had begun to find ourselves in the position in which one of our regions covered a particular tech- nology and another region denied coverage of the same technology- some- times in the same state. Under the HMO Act of 1973, all "medically necessary services" must be provided by a qualified HMO except in two situations when the service is experimental or when the service is not medically necessary, such as cosmetic surgery. The HMO Act does not define "experimental." The New Technologies Committee was established in the offices of the Per- manente Medical Groups, but from the beginning it was viewed as a committee for the Kaiser Permanente Program and not solely for the physicians. Although some members of the committee have changed over the past eight years, the representation of the membership has remained stable. Currently, there are 16 members representing physicians (internists, surgeons, oncologists, and pediatri- cians), health plan administrators, hospital officers, attorneys, and the director of quality assurance. In addition, there are two members of the committee who represent interests outside of the program a physician and an ethicist. In our offices one full-time employee staffs the committee, represents the committee directly to the 12 regions and to committees in the individual regions, tracks the technologies brought to that person's attention, and maintains a com

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KAISER PERMANENTE'S NEW TECHNOLOGY COMMITTEE 103 puterized database that contains all discussions of technologies, all decisions of the committee, any issue that has been brought to that person's or the commit- tee's attention and, in fact, any inquiry made of any technology from any source. This database is of great value in that it can give a quick status report to any Inquiry. Inquiries relating to a technology come from multiple sources. Often a service involving a new technology will be provided by an outside provider with whom we have a contractual relationship, such as a medical school or an individ- ual physician or group of physicians. The first time that we are aware of these services may be when we are presented with a bill to cover the service and a region tither the benefits office or an individual physician will ask our office if the program has ever covered or considered covering the particular procedure or treatment. If it is a first-time inquiry, most of the regions are polled to see if they have encountered the procedure and what was done and, in all cases, the inquiry becomes a part of our ongoing data bank. CATEGORIES OF NEW TECHNOLOGIES For convenience, we divide the procedures and technologies addressed by the New Technologies Committee into four broad categories. The first category includes new procedures that involve new and often expensive equipment. An example of this would be lithotripsy. In these cases, some guidelines must be followed, such as Food and Drug Administration (FDA) approval of the new equipment. The second category is a new procedure that does not involve new equipment or drugs. An example of this is in vitro fertilization. In these cases, there are few guidelines that must be followed as to when a procedure moves from being experimental to being an acceptable medical practice of proven effi- cacy and safety. The risks, benefits, and costs are often more difficult to docu- ment, and there is no FDA approval process to follow, as there is with new drugs and new equipment that needs FDA approval. In other words, it is often difficult to identify a discrete moment in time when a procedure moves from being exper- imental to being nonexperimental. Because innovation in clinical practice often occurs in an incremental fashion, the benefits and risks are moving targets, which complicate decisionmaking. The third category is new drugs. These occupy more and more of our atten- tion as genetically engineered drugs and drugs that are extremely expensive, such as Ceridase, are developed under the Orphan Drug Act. We usually, but not always, follow FDA approval; the exceptions are likely to occur because, al- though FDA looks at safety and efficacy, it doesn't look at relative efficacy. We have, at times, covered medications prior to full FDA approval. As an example, we covered zidovudine (AZT) years before it had full FDA approval. The con- verse is also true. We have discouraged the use of finasteride, an antineoplastic agent, because of questions related to its efficacy in comparison to alternative

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104 PAUL D. LAIRSON technologies. The last category is of those new technologies that have been developed for life-threatening diseases, such as organ transplantation.~ These categories are of some benefit to us because of the information base from which we can make decisions and because the ethical considerations are different for life-threatening diseases with no available treatment alternatives. COSTS OF NEW TECHNOLOGIES The cost of a technology is not a prominent part of the discussions and deliberations of the New Technologies Committee, although it is clear that many of the agenda items would not be selected if it were not for the costs involved in providing the technology. We use safety, efficacy, and proven benefit of the procedure, device, or drug to guide our decisions. One exception to the use of cost data is when we are looking at a new technology when a well-established, equally effective, alternative therapy or diagnostic test exists. If the old technol- ogy costs less and is of equal value, we will not provide the new modality. Rarely, however, do we as an organization have good information on the actual costs of the procedure. In looking at the costs of a new technology, one must have good information on whether a technology substitutes for other types of technologies, or whether other types of technologies will need to be employed in association with the new technology in question. Sufficient and reliable data does not exist in which to make these types of assessments. It is also not always practical to look at the cost- effectiveness~ of a technology in making decisions. The cost and benefit to whom are societal questions that are impossible for a single organization to answer. Research Done by the Committee Before a decision is made to bring a technology to the New Technologies Committee, research is undertaken. In fact, the research begins at the first inqui- ry, and the research may determine when an issue will be discussed at the com- mittee level or, better stated, when we think there is enough information on which to make a decision. Committee members are also kept aware of- emerging technologies that may be coming to the committee in the future. In gathering information, a particular technology or drug will often be as- signed to one of our regional committees, such as the Bone Marrow Transplanta- tion Committee or the chiefs of a particular department, to be discussed at their regional or interregional meetings. The Kaiser Permanente Program has over 9,000 physicians representing essentially all specialties. We gather information from individuals inside and outside of the program with expertise in the appropri- ate area. We obviously look at the published literature; however, we often rely more on unpublished information, for example, information presented at scientif

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KAISER PERMANENTE'S NEW TECHNOLOGY COMMITTEE 105 ic meetings prior to publication, than on actual publications. By the time infor- mation is published, it is often beyond the time we had to make a decision~related to a particular patient about whether coverage is indicated. We directly contact research centers involved in the development of a technology to gather their expertise. We also have numerous telephone conversations with researchers to determine the long-range potential of the technology for improving health out comes. We rely relatively little on published technology assessments. Again, we usually must make coverage decisions related to a new technology before such studies have been performed and published. These technology assessments, in my opinion, are of much greater value for reviewing established technologies and making decisions as to whether or not they should continue to be covered as benefits to our members. Is the technology more or less outmoded and replaced by newer, safer, and less costly technologies? We do not do this assessment of "old" or existing technologies at the present time on a program-wide basis at Kaiser Permanente, but rather, these decisions are made by the individual regions and are driven mostly by the practice prefer- ences of individual medical groups and their evaluations of existing technologies. We have had numerous discussions of a centralized review of existing technolo- gies, and we may, like the Blue Cross and Blue Shield Association, move in that direction. The Interregional New Technologies Committee also does not recommend which type of equipment or device the program should use. This review and decisionmaking is done in a different arena. For example, the New Technologies Committee might recommend that we cover artificial hip joint replacements, but the actual type of artificial joint to be used would be decided by regional commit- tees, often through department chief meetings. FACTORS AFFECTING DECISIONMAKING As I indicated earlier, our decisions are guided by our definition of experi- mental which encompasses safety and efficacy. We always try to keep a balance between our responsibilities to individual members and the benefit to our entire enrolled population. It is the enrolled population whose money we have in trust to provide the greatest benefit to the population that we serve. These decisions are not and cannot be made on a cost-effectiveness basis by any single health care provider in the United States. There must be better societal guidelines that we can follow. Decisions about the use of health care resources and the application of tech- nologies is a social issue. Some guidance must come from the greater society as to what is and is not acceptable and what society is willing to spend on health care. Other forces that are outside of any organization have an impact on deci

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106 PAUL D. LAIRSON sionmaking. Our decisions are strongly influenced by three factors not directly related to the technology itself. The first factor can be found in the current legal environment. In recent years many individuals have resorted to lawsuits when their insurance companies have refused to provide a medical service under the experimental exclusion. In the past these verdicts by the courts meant only that the insurer would have to pay for the medical service or new technology that was in dispute. At times, however, the courts have ordered the coverage of the technology and sometimes awarded punitive damages to the individual, which may amount to millions of dollars. The risk of ending up defending a decision in court an unpredictable decisionmaking body-and the subsequent costs must be factored into any analy- sis of whether to cover a new technology. Although these decisions may offer some protection to the individual being insured, they also result in individuals receiving expensive, often painful, and useless treatments. The second factor is the role of the mass media. If a patient is refused coverage of a procedure or treatment by any insurer, the individual may resort to the press to pressure the organization to provide the intervention. The cost of bad publicity to the organization or insurer cannot be calculated; however, it must also be considered in any decisionmaking process. The mass media generally supports the individual in any dispute between an individual and an organization. The third factor to be taken into account is the dynamics of employer deci- sionmaking. Employers, looking for ways to insulate themselves from the costs of their health benefits, have developed multiple ways to attack costs. Emerging technologies have largely been ignored by most employers, despite their signifi- cant impact. Although employers have pushed for reduced premiums they often, through employee assistance programs, push insurers to provide technologies of questionable benefit and technologies that are clearly experimental. When an employee is refused a procedure or treatment they often seek help from their employee assistance program, which becomes a strong patient advocate, pressur- ing insurers to provide services that will ultimately increase the costs of provid- ing insurance for their employees. The New Technologies Committee makes broad policy decisions for the Kaiser Permanente Program related to whether or not to cover an emerging new technology, or at what point in time the technology is of proven value and safety. Over time, the committee has been asked for assistance in making coverage decisions for individual patients that did not fit within specific guidelines or that could be considered as exceptions to the broad policy that the New Technology Committee had established. Because of the number of requests from within the program to consider individuals and individual decisions, the Kaiser Permanente Program established a separate but interrelated committee, the Situation Manage- ment Committee, in each region to make recommendations related to how a coverage policy should be applied to an individual patient. If a region had a question related, for example, to a specific patient and a specific organ transplan

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KAISER PERMANENTE'S NEW TECHNOLOGY COMMITTEE 107 ration, the Situation Management Committee would manage the process related to the individual patient. These cases might relate to a patient who did not~specifi- cally fit existing criteria or for whom there were extenuating circumstances. Experimental Exclusions On the basis of the experiences of both the New Technologies Committee and the Situation Management Committee, we have begun to question the value of the "experimental" exclusion. As indicated earlier, the experimental exclusion is a part of the HMO Act of 1973. We find that if we inform one of our members that we will not provide coverage of a particular technology, an adversarial rela- tionship often develops immediately. These adversarial relationships always seem to involve an inordinate number of attorneys, and true patient-provider communication comes to a grinding halt. Although we still use the experimental exclusion, and will continue to do so in some form to keep out truly charlatanic practices, we are considering and have used a more participatory format. This means that we approach our member in the following manner: "Coverage of this particular technology may not be the issue. Instead, let us decide together what the best course of treatment for you is in your current condition and explain the risks versus the potential benefits (and the pain, if any) involved in the use of this technology." This allows for much more participation in the decision by the patient and family. In those cases in which we have used this approach it has worked well, for it clearly puts the physician, the organization, and the patient on the same side. We as an organiza- tion are moving in that direction as it relates to the experimental exclusion. We also are moving toward having more member representatives on committees such as the New Technologies Committee. Finally, we also use medical ethicists to focus on issues related to coverage and the rights of the individual versus the rights of our collective membership. CONCLUSION The issues related to the adoption and use of emerging medical technologies are obviously complex. Who will develop new technologies, who will pay for them, and who will receive them are critical societal issues. Decisions cannot continue to be made by individual insurers trying to manage a process in which the players often have conflicting goals and society, represented by government, will not step forth to give some direction. A complicating factor related to emerging technologies is who will benefit (or not benefit, as the case may be) from the technical advancement. Many of the costs of the application of technological advances are related to the inappropriate use of the technology. As we make a decision on whether to cover a medical advance, we are also beginning to develop protocols and guidelines for their use.

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108 PAUL D. LAIRSON When, for whom, and under what conditions is the technology appropriate? I believe that this offers great hope, if done properly, for controlling the expenses associated with advances in technology and appropriately applying technology. Appropriate use of technology also requires giving everyone involved the pa- tient, the physician, the family, and the hospital the appropriate incentives to use the technology for those who will indeed benefit from the therapy. Improper- ly applied technologies are costly, are a waste of resources, are often painful, and represent poor quality of care. Clearly, the increase in the overall expenditures on health care are related to the way in which the U.S. health care system uses technology. Until there are some clearer guidelines of how society wishes to manage the costs of care and the resources it is willing to devote to health care, individual providers and insur- ers must continue to struggle with the questions that arise from the application of and economic costs of new medical technologies.