The Medical Contrarian

Innovation and Medicare - Fundamentally Conflicted

2012-01-22T14:39:00.000-05:00

The CBO just issued a report on Medicare Demonstration Projects: (http://www.cbo.gov/ftpdocs/126xx/doc12663/01-18-12-MedicareDemoBrief.pdf)

The idea behind these projects is to deliver better care for less money. It is a noble and essential goal since health care spending stands to undermine our entire economy within the next 10-20 years (and perhaps sooner). The results can be characterized as mixed at best with roughly equivalent numbers of pilots costing more money as opposed to less money. Granted the time frames had short time horizons and we have to take as a given that most innovative approaches will fail.

My problem with the whole idea of Medicare Innovation projects is that the idea of top down driven innovation is really a non-starter and that meaningful innovation of Medicare the third party payment system it is embedded in are ones that will result in something entirely different. That will not happen if the innovations are embedded in the Medicare/Third party payment system we now use. They will co-opt any real change.

I believe that Clayton Christensen's book the Innovators Prescription has an analysis of this problem which is spot on. He identifies various strategies which companies can use to address disruptive innovation in their industry. The disruptions almost always are related to some new product or service which comes in at the low end of the market and ultimately moves up market to disrupt the market leader.

One example he uses was IBM, which was a leader in the mainframe computer industry. During the early 1980's, technological innovation allowed for the development of desktop computers which had a much larger market than the mainframe business. The first desktops were no match for the computing power of the mainframes. Multiple mainframe and mini-computer companies saw the change coming but none except IBM actually adapted to their impact on the market. Companies like DEC and Wang went out of business but IBM did not. Why?

IBM leadership had the insight to understand that their attempts to grow a desktop computer business would require creation of a separate entity (IBM Entry Systems Division in Boca Raton, Florida - 1981). They understood that otherwise their innovations would be co-opted by the very business model (mainframe and mini-computer) which successful deployment of the desktop computer will displace.

From my perspective, successful innovation in health care payment and delivery means undermining third party payment systems, including Medicare. Given how Medicare is organized and administered, that will not happen. Markets allow for tremendous flexibility and do so by allowing participants to tweak from the bottom up. Medicare demonstration projects are a top down endeavor. The ideas may come from a variety of parties but they must percolate through the Medicare bureaucracy before they can be test or implemented. As it stands now, Medicare and other third party payers will always co-opt any attempts to change the system in any meaningful way and are now in positions to insure they are always in a position to co-opt any attempt using their control of the payment system.

The most constraining part of the Medicare and third party payment system is executed through the lack of the ability of health care providers and delivery systems to experiment with re-bundling of services. Medicare constrains providers through legal constraints. You either participate in Medicare with all its restrictions or you opt out. Similarly, other third party payers use the Medicare template to force providers to be either all in or not in at all.

I see the concierge movement is simply an effort to repackage and bundle services. In my estimation, it is exactly the right thing to do. It is viewed by critics as allowing the camel's nose in the tent, the first step in disrupting a payment system which should be used to guarantee health care access to all. I also see it as a first step in disrupting a payment system which needs disruption. Once physicians and other providers of health care services are empowered to bundle services differently from what is allowed by Medicare and private insurance, innovation in those realms will explode. The public will benefit the most.

Finally, our perspective on the nature of desirable innovation needs to change. Hearkening back to Christensen's work again, the largest impact comes from innovations that enter at the low end of markets. Generally, these innovations have impact by delivering a product which is inferior to what was previously available but they do so at prices hugely less. While a mainframe computer may have costed millions of dollars or a mini-computer hundreds of thousands, the desktops cost $5-10K. They could do much less than their more expensive alternatives, but they could do infinitely more than nothing.

True innovation in health care which can save money to the degree that will be required to prevent financial calamity will require deployment of innovations which can cut costs, not in small and inconsistent increments, but in huge chunks. The trade offs required will be modest compromise on the deliverables. We put computers in a huge percentage of homes in 2012 not by promising million dollar mainframes but by initially deploying crappy desktop machines.

Furthermore, we succeed in deploying sophisticated technology by initially targeting the affluent few after which markets relentlessly drive costs down to make them available to the many at a fraction of the costs. High end whistles and bells in cars such as ABS braking systems and high end electronics were first available only in the top end luxury cars. They are now standard equipment at a fraction of the initial cost. Why has this not happened in health care? Non-market based, administratively controlled payment systems have served as a brake on this type of innovation. Medicare demonstration projects will not disrupt these systems and without that type of disruption, no meaningful change can occur.

I have a simple plan for innovation. Allow us to get a waiver from Medicare which allows us to continue our participation in Medicare while we experiment with alternative payment systems. We need no grant monies, just additional autonomy and the ability to bundle and price our services in novel ways.

He who sets the prices controls healthcare

2012-01-18T19:42:00.003-05:00

http://reason.com/archives/2011/12/13/medicare-whac-a-mole

Reflections on my old home town

2012-01-16T09:34:00.002-05:00

Steve Malanaga wrote an Op-Ed piece in the WSJ which took me back to my childhood. I grew up in Buffalo, New York. Oddly enough my recollections were almost Shangri La like. It was a wonderful place to grow up, particularly if you had nothing to compare it to from the perspective of climate. I thought everyone played pick up basketball outdoors at -20F wearing a parka and mittens. There was also a certain appeal of women whose natural curves were augmented by down filler.

http://online.wsj.com/article/SB10001424052970204409004577156603296740624.html?mod=WSJ_article_comments#articleTabs%3Darticle

However years have past (many) and the shine has worn off. While I grew up there, Buffalo was clearly off its peak but there were many other less affluent and less thriving communities in the US. That has changed and if it were not for places like Detroit, Buffalo could take the prize as the most fallen from economic grace.

I had not ventured back to visit for many years until 2001 when I was invited to give a seminar at the University by a colleague who had moved to Buffalo to run a training program. I thought it would it would be great to wander around my old haunts and visit the few old family friends who still remained. It turned out to be an odd trip at many levels.

The visit was planned for around September 18, 2001. It almost did not happen because of 9/11. However, I took one of the first flights after airline travel was restored. On the way to the airport, I listened to a lecture from the Teaching Company. I am a TC freak. The lecture series was on the history of the United States and the specific lecture was focused on the US at the turn of the last century..1900. It centered on what was then arguably the richest city in the country. You guessed it... Buffalo, NY. The lecturer spoke of the confluence of transportation systems, the steel mills belching smoke, and the vistas of grain elevators.

I recall flying into Buffalo after listening to this lecture and our approach to the airport actually took us over the sites of those previous thriving industrial sites. How things had changed. What I saw were the rusted hulks of those majestic enterprises and the land was well into reclaiming them. The good news is Lake was much cleaner than I recall. No longer is the small boat harbour water stained orange from the slag from the Bethlehem Steel plant. The bad news is, Buffalo has joined the ranks of a number of more pristine but very poor places on this earth. Both the pollution and the jobs left.

Which brings me back to Steve Malanga's Op-Ed piece. What takes a place like Buffalo from richest to poorest in slightly more than 100 years? Is that a rapid transition or a gradual one? Is it surprising or predictable? Are transitions like this consistently preventable or inevitable? Will we be looking back at Silicon Valley in 100 years and have witnessed the same thing? Will Buffalo undergo a revival and become a destination location?

What makes some places rich and other places not so much so? The answer is wealth as as one of my favorite authors P.J. O'Rourke has written in his hilariously funny books "Eat the Rich" we tend to have little understanding of this process. Creating wealth and the entities that create wealth is not like baking a cake. Even under the best of circumstances we can and should expect failures. In addition, we should expect radical change. Entities which support the enduring generation of wealth are entities that are prepared to reinvent themselves, even if it means their reinvented selves look little like their own selves.

Places like Buffalo die because they tried to hold on to what they were and failed to empower those who might create a new and different Buffalo. Large infusion of political dollars do what they do best; preserve their political bases. They do not create wealth because that tends to upset the political status quo. What will bring back Buffalo? I don't know and I would venture to guess that no single person knows. However the decisions in the political realm which can help can best be described as permissive. At best they can allow them to happen. In the present state the default is to prevent them.

You'll shoot your eye out!

2012-01-15T17:36:00.001-05:00

A favorite ploy of health care economists who are market deniers is to channel through the spirit of Kenneth Arrow, whose sentinal work on health care economics in 1963 still shapes the debate today. In Uwe Rheinhardt's piece today in the NYTs, there is such an example:
(http://economix.blogs.nytimes.com/2010/08/13/health-care-uncertainty-and-morality/)

In a recent interview with Conor Clarke in The Atlantic, Professor Arrow was asked how much of his 1963 paper “is still an accurate representation of the problems the health market faces.”
He responded:

I think the basic analysis hasn’t changed. There are wars over the details, but the basic analysis is accepted. Some specifics have changed. If you look closely at my argument there is a sociological structure. There is a kind of sociological thesis. The market won’t work – it doesn’t work well in the health context. But something else supplements the market, and the thing I put stress on in the paper are the elements that put a non-economic influence on the market: professional commitments to provide a service, to engage in services that aren’t self-serving. Standards of caring decided by non-economic actors. And one problem we have now is an erosion of professional standards. In a way there is more emphasis on markets and self-aggrandizement in the context of health care, and that has led to some of the problems we have today.

The emphasis is mine. Whenever market based solutions to health care economy problems arise, the response is predictable. A firm and confident declaration is made that the market does not work in health care. End of story. Debate is closed. Justification or empiric support is not required. A Nobel Laureate has spoken. It reminds me of one of my favorite movies, A Christmas Story where the main character Ralphie desires a Red Ryder bee bee gun for Christmas. When he expresses his desire, he consistently gets the same response:

Ralphie: I want an official Red Ryder, carbine action, two-hundred shot range model air rifle! Mrs. Parker: No, you'll shoot your eye out.

He gets his courage up to ask a departmental store Santa and he gets the same response. Why would you want that...you'll shoot your eye out!!! No argument. No response. Ralphie's desires are trumped by a statement for which he has no response. He cannot ask whether this claim is supported by any sort of empiric evidence. He is not at liberty to ask whether the risk of eye injury is different in Red Ryder air gun users. It is the gospel truth and should not be questioned.

So tell me why markets won't work in health care? I don't want to be shown that market solutions will not be perfect. I take that as a given. I do not want to be shown anecdotes of imperfect outcomes. Bad outcomes will happen even with even good systems and should not be used as a basis to scrap market approaches. The center piece of Arrow's argument was the existence of information asymetries which he comments on further..

Such has changed since the early 1960s. In particular, the unimaginable advances in information technology have revolutionized many sectors of the economy. In health care, this electronic revolution has made it possible for patients to be much better informed about the efficacy of alternative medical treatments. That, by itself, should have reduced the problem of information asymmetry.

On the other hand, as medical science and practice advance rapidly, the information gap between physicians and their patients increases. Many transactions in the market for health care therefore still proceed on the basis of trust in the expertise and integrity of physicians and other health workers, rather than on the countervailing power of equally well-informed buyers and sellers, each looking out only for their own self-interest.

Is this really any different from other segments of the economy? I do not understand how to fix the brakes on my care and I suspect that a faulty brake job more likely puts me in harms way than most interactions with my physician. I have to trust that my mechanic installed the shoes correctly. I have to trust that the mechanic who maintains the engines on the planes I fly is not cutting to may corners. I need to trust the cooks who prepare my food are not adulterating their fare. Our entire economy is based upon trust and skepticism. You need both.

Again there are times where those who are ill at inherently at an insurmountable disadvantage but not always. In the same vein automobile repairs do not always have to happen within the context of being broken down in a desolate place with a tight time table. However, if your car breaks down in the boonies where you know no one you are more likely to be fleeced by someone who can and will take advantage of you. That does not mean we should eliminate the market to deal with automotive repairs.

The fundamental tenants of my belief in markets in health care are simple. First, it is basically incontrovertible that markets are the best tools yet developed to optimally allocate scarce resources. Second, it is impossible to make any consistent distinction between what is inside and outside of the health care economy at the margins. Almost any good or service which enhances human life could arguably fall within the health care realm. Between health care cost inflation and ongoing redefinition of what entails health care, the health care economy will basically absorb the rest of the economy. If the health care economy is divorced from market allocation schemes, it means that the world of the future will be a throwback to the pre-market allocated world. Unless there is some other resource allocation mechanism which miraculously develops to replace market mechanisms in the near future, we will commit our descendants to wealth destroying race to the bottom.

It is not as if it needs to be all or nothing immediately. For each health care entity, give us the flexibility to move parts of our business to outside the third party system. As it stands now, you are either all in or all out. That is no way to structure a system that needs innovation. No one wants to make that big bet. Which portions of the health care business that can move to market and consumer driven models will be decided by many little bets. Many will lose. Some will win. A few will win big and winning big I mean the consumer will end up getting much more for much less. That is what markets do. Yes, someone may shoot their eye out. I am willing to take that chance.

Shedding light on misaligned incentives

2012-01-15T09:09:00.003-05:00

Sometimes I read a story which appears to be unconnected to health care which sheds light on the health care payment quandary. Today is such a day, In today's WSJ Kate Linebaugh wrote a piece on the challenges facing municipalities which are trying to deploy light emitting diode (LED) streetlights. While LED streetlights are still more expensive than high pressure sodium lights, the cost of such streetlights has reportedly dropped bhttp://www.boogordoctor.com/wp-content/uploads/2010/10/CT-Imaging-Series.pngy half in the past three years. Furthermore, the frequency of replacement is substantially less and municipalities are generally willing to absorb the up front costs in order to garner ongoing lower energy costs.

The economics of this share certain similarities to health care in that there are three parties involved. Here there is the supplier of the service (electric utility), the direct payer (municipal government), and the actual recipient of the service (the public receiving street lighting). Here you have a technology which is disruptive in that it is less expensive in terms of power needs. However, it often can only be deployed by the very entity which relies on selling power to remain viable (electrical utilitieshttp://www.boogordoctor.com/wp-content/uploads/2010/10/CT-Imaging-Series.png).

From the perspective of many light-owning utilities, LED streetlights are too expensive and present a host of uncertainties—from light quality to how they would handle violent storms, extreme heat and cold and vandalism. LED lighting today "is nowhere near cost effective," Xcel Energy's Mr. Romero says.

Plus, utilities that have the capacity to power cities during the day have little incentive to try to reduce use at night, when power usage is low. "If you are an investor-owned utility and your profit is based on your revenue, what possible motivation do you have to conserve off-peak energy?" said Dan Howe, assistant city manager in Raleigh.

Why should they adopt a technology which undercuts their ability to make money even if it benefits the other two parties involved. Utilities might encourage customers to cut power use during peak demand times but why adopt a new technology which save power during off hours? Utilities claim that the risks associated with adoption of this new technology rests heavily on them. They are not inclined to take such a risk when it is coupled to a less robust revenue stream.

Similarly, medicine has triangles like this one. Provider organizations behave like regulated utilities. Payers are like municipalities. Individual people are recipients of services. Less expensive interventions may be available but will not be widely adopted if they have lower profit margins. Why push to use a cheap chest x-ray when you have a higher margin CAT scanner available for use? In addition, there is risk associated with newer and less expensive approaches to care. More expensive is almost always associated with increased sophistication and sensitivity, whether additional patient benefit can be demonstrated or not. What if the CXR fails to reveal something the CAT might reveal. Liability in medicine is open ended. This is similar to the arguments put forth by the electrical utilities:

"When a utility makes a decision, for instance about lighting, it ends up becoming a permanent decision because once you put a light up in the air, you have to maintain that light for the rest of its life," said Rick Larsen, Progress's director of market and energy services. "There are a lot of risks."

There are initiatives which change how these decisions are made. Municipalities who own their own light fixtures are heavily incentivized to adopt the LED technology. They rapidly see return on their investment in terms of lowered power and maintenance costs. They are all too willing to take on the costs and risks of installment when they also see the savings. In some sense we have seen changes in payment which change how health systems use resources. The DRG bundled payment system for hospital payment did succeed in moving to shorter hospital stays and drove for cost controls for hospitals to a point. When hospitals were placed at financial risk and could reap the financial benefits from limiting resource use, they became very effective at this while simultaneously demonstrating better outcomes.
Can we (or should we) coerce industries to adopt technologies which undermine their business model? The problem with this is no matter what you try to accomplish, if it places entities at financial risk, it will not work.

"It all comes down to money," said Gabriel Romero, a spokesman for Xcel in Colorado. "It doesn't save us any money. It saves them money. We pay for the installation when they receive all the cost savings."

If the financial incentives are not aligned, even the most obvious desirable outcomes will not happen. Furthermore, consistently aligning incentives with complex triangular financial architectures is essentially impossible. This is why simple and adaptable (read limited regulation) markets work so well. Parties who have goods or services to sell can offer them on their terms. If their terms are unattractive to those who might be around to purchase them, the sellers will either adapt or disappear. If the buyers are unreasonable in their demands, they will go without goods or services they might benefit from. In each case the impact of bad decisions tends to fall upon those who make the bad decisions. There are limited gaming opportunities. It is much easier to get the incentives aligned because there are simply fewer incentives to align.

Healthcare in the US (and perhaps around the world) will not get incentives in better alignment until the transaction architecture evolves into a simpler one. The ACO movement and its concept of gain sharing is a perfect example of this flawed approach. Hidden behind the copious verbiage in the documents defining its missions and structure is a simple focus... to save money. The gain sharing is a sharing of gains between providers and insurers. Whether it is at the patient's expense is arguable and will boil down to perception rather than fact. It will always appear to be at the patient's expense.

The problem goes away with a simpler architecture. While the triangular architecture of health care paid for by their parties will always be with us for realms of health care expense associated with the catastrophic and unpredictable, there will be a benefit from the conversion of the more mundane portion of the health care economy to move to the simpler market model. This is not the current state where the incentives are almost always to provide the most expensive (and high margin) service possible, whether it adds additional value to patients or not. Patients generally have limited awareness of the differences in cost, but because of the marketing efforts are attracted to the higher end services. Average people can obtain these services because third parties insulate from the cost. Average people can gain above average resources to pay for goods and services in only the health care economy. We do this by borrowing from the future and we can do this for only so long.

Ultimately, those who offer goods and services in the health care economy need to figure out how to provide them at prices attractive to average people with average resources. As opposed to rewarding those who find more and more expensive ways to deliver something, the incentives need to reward providers of services who can do this at every decreasing costs and deliver more. This is how markets work. I can buy a flat screen TV now at a fraction of the cost three years ago and it will be bigger and sharper. That will never happen in health care if we push for a structure where insurers and providers are in cahoots to split the proceeds from stinting on patient care.

What is our job?

2011-12-17T11:11:00.001-05:00

Every physician, medical student, and resident should read a commentary piece in this week's NEJM:

Dealing with Uncertainty in a Time of Plenty

Ranjana Srivastava, F.R.A.C.P.

N Engl J Med 2011; 365:2252-2253December 15, 2011

http://www.nejm.org.proxy.library.emory.edu/doi/full/10.1056/NEJMp1109456

The author captures the quandary we and our patients face when we attempt to make decisions in a world with many option, strong beliefs, and imperfect data. This is such a good piece, I think it warrants an almost complete recapitulation and detailed analysis. The author opens with:

It's the newest trend in medicine: “patient-centered care.” Cynically, I think, “Isn't that what being a doctor has always been about?” But my curiosity brings me to a workshop, where two patients describe their experience of illness insightfully. One discusses her lymphoma diagnosis followed by breast cancer. She draws a picture in which she places herself at the center of a wheel with many spokes: internist, oncologist, hematologist, radiotherapist, psychologist, cardiologist, physiotherapist, social worker, nurse, pharmacist. “And the patient-centered bit?” she intones. “Well, I am in the center of the confusion. No one talks to each other; they all do their own thing and expect me to be the go-between.” She holds up her voluminous medical diary. We clinicians nod knowingly, wanting to believe that we'd never be one of those doctors.

I read this and I have to ask, what is our job(s) as physicians? I know what we might think we are hired to do, or at least what we are paid to do. However, this patient perspective raises the issue of whether our perspective on this question is completely disconnected from what patients actually need from us or at least someone. I sit on various credentialing entities and look through various detailed credentialing documents. Nowhere do I see physicians who are credentialed to to be an integrator, a synthesizer of data, a translator, an interpreter. I have heard it explained that this function is simply implied as part of our job and that we should it naturally, understand it is our responsibility, and that it should be done whether we receive financial compensation for this or not. We are professionals and it is not about the money.

Let's get real. It is no accident that the very functions which patients so crave, which are not formally addressed in training, not compensated financially, and arguably not modeled consistently, are not consistently available. Declaring that it should be and trying to create an ethical mandate as a driver for consistent delivery will be an ineffective strategy. The deliverables won't be delivered.

Later in the essay, the author goes on to note (please not that I have removed parts for the sake of brevity):

An audience member springs up. An oncologist in his late 50s, he speaks with the kind of authority that can silence a room: “But your doctors don't agree because the data are not clear. It isn't their fault — do you understand that?”

The patient nods. “I do understand, actually, but there are ways of framing an answer so that the patient doesn't feel alone. I came out of many appointments feeling there was no one like me and that there wouldn't ever be an answer to suit me.”

“That's my point,” the oncologist presses. “When the data are poor, how can your oncologist truthfully tell what is best?”

“I understand that you can't make up an answer where there is none,” the patient responds, “but it's the way you say it that counts. I think you'd find that a lot of patients can deal with uncertainty, provided it's explained properly.”

”But I can't give you reassurance if I'm not reassured myself!” protests the oncologist. “If PubMed can't inform me, how can I educate you?........

So how can doctors deal with uncertainty in a time when knowledge is plentiful? How do we educate our patients well about what we know but avoid displaying hopelessness when we don't know?

The authors goes on the outline how to begin to address this thorny problem. However, I believe it is important to note that while there may be a plenitude of knowledge, there is almost always a paucity of time to synthesize and explain it. One cannot examine these issues without recognizing that we are increasingly constrained by time. Some of the time constraints are self imposed, or at least imposed by an archaic encounter-based payment model. Whatever the cause, time constraints prompt physicians to employ various shortcuts which almost invariably abbreviate information exchange in an attempt to eliminate any form of nuance and frame questions in such a way of facilitate decision making with the goal that it happen quickly and predictably. We call it efficiency. It serves our needs as providers of care. .

All this may look good when viewed from our individual provider perspective. However, when arrayed around an individual patient, it looks chaotic and it is. Using our present model we simply are not capable of learning the preferences, fears, risk tolerances, individual goals and priorities, and decision making style of each individual patient. Our present encounter based model precludes this. Our present payment system does not financially value obtaining this information. It is not at all surprising it does not happen. We obtain the information we need in order to get paid to do stuff to people and we engineer our environment to optimize getting them to agree to us doing the stuff that financially rewards us most consistently.

The authors go on to write:

If we're uncertain about a complex diagnosis, decision, or therapy, we're probably not alone. But it's easier to disguise our realization that we don't have all the answers than to accept it and feel like fledgling physicians again. If you've been anointed an expert, how can you safely say you're not sure? ......... We shouldn't stop asking experts, but we must let patients know that many opinions do not erase uncertainty: they may attenuate it, even exacerbate it. “I don't know” is not a shameful admission; add “but I'll work on it,” and it can signal the beginning of a meaningful engagement. Our patients say this is what they hanker for.

......... we need to teach ourselves how to communicate with our patients about uncertainty. Contrary to doctors' common belief, we frequently fail to demystify diagnosis and management for patients. We lapse into jargon and sidestep detailed conversations, especially when the evidence is thin and there doesn't seem to be much to say. ..........Ultimately, managing uncertainty comes down to managing one's own angst..... Good communication is about giving patients the confidence that their doctor is an advocate who won't abandon them. That requires self-knowledge, perspective, and patience for ourselves. If patient-centered care is to fulfill its promise, we need to start redefining how doctors think.

We also need to rethink when this all happens and reward physicians who do this well. Otherwise good intentions alone will not make it happen.

"Irrational" personal fears and impact on others

2011-12-10T09:34:00.001-05:00

I read about many things; economics, history, psychology, medicine and politics to name but a few. I also interact with a variety of people, including patients, within multiple contexts. From my reading and personal experiences, I am beginning to see common themes which cut across my own experiences and narratives of others relating to fears and risks, the decisions which come as a consequence of the impact of these perceptions, and the consequences of those decisions.

Matt Ridley wrote a piece in today's WSJ entitles "Why deny biotech to hungry Africa? The gist of the piece was that there is a disconnect between the immediate food needs of hungry African populations and the concerns of generally well fed environmentalists about the possible long-term ramifications of introduction of genetically modified (GM) crops. I find it nothing short of amazing (and frankly indefensible) that we have not deployed the available tools to increase crop yields in places where people are starving (not to mention mandating turning foodstuffs into fuel). The question is what are the elites who are controlling these decisions afraid of?

I think the answer is they are more afraid of something that might happen in the future than they are of the immediate and more definable consequences of their decisions in the present. For the most part, those making these decisions are not eking out an existence and their decisions, which affect millions of hungry people living on the edge of subsistence, and driven by their anxiety of some future events, politics, and self interest. Is it really a decision that is in the best interest of those who are most vulnerable? Would they make the same decision if they and their families were hungry?

What should be their priorities? I should not totally discount their anxieties about the future. However, weighing the present vs. the future should always be examined through the lens of the magnitude of present problems, the likelihood that immediate action with provide relief, how likely unintended consequences from the action might be, and the likelihood that other trends outside of human control will dwarf any human driven effects. In the case of GM modified crops, the recent track record is consistent. Where they have been deployed, their effects on the human condition are positive. Food is more abundant and cheaper. I see this in nothing but a positive light.

How likely are catastrophic consequences? No one knows, not even within orders of magnitude. However, mankind has been manipulating animals and crops for thousands of years. As man moves into areas and exploits the environments, they evolve. We carry both GM and non-GM entities into places where they did not exists before. This included kudzu into the South, lampreys and tiger mussels into the Great Lakes, wild pigs into North America to name but a few. Yes, the world was altered. No, it did not come to an end. This all happens on a long term background of continents moving, climate changing, and occasional asteroid impacts.

I look at this scenario and I see similar themes in the delivery of health care. We are faced with the health needs of patients and have limited resources to deploy to address those needs. Like the hungry people of Africa who have immediate needs, we have no shortage of people who are suffering directly from the effects of illness. They are in pain, are short of breath, have limited mobility, are depressed, or are limited in some way by their illness in the here and now.

Simultaneously we have those entrusted to make sure that tools we deploy in the present do not have some major unintended consequences in the future. This can exist on both the macro level and the micro level. On the macro level we have entities such as the FDA, which is rarely rewarded when they have facilitated access to drugs and are absolutely hammered when small numbers of patients are harmed, even when the events are completely unforeseeable. Much like the divergent goals of affluent environmentalists and poor African farmers, the goals of the FDA and of patients suffering with disease are poorly aligned. They are influenced by different circumstances and different fears that create different incentives.

At the micro level, the same scenarios play out when patients and physicians interact. My own experience as a physician is that we often are not able to distinguish our personal goals and fears from the actual patient goals and fears. We avoid taking personal risks, even when it means we become ineffective at addressing immediate suffering of patients. We discount patient fears when they are not our own fears. We fail to acknowledge that some of our own fears are irrational and patients should discount them. We end up depriving needy patients of interventions that can effectively deal with their immediate needs because of our own fears (often irrational) and our own self interest disguised at best as paternalistic protection of the world in general.

There is a very fundamental issue beneath all of this. Where should our primary focus lie as healers? Should we be primarily focused on immediate suffering or should we be more focused on attempting to influence events well in the future? My own bias is we should be more focused on the former. There is no shortage of people who have immediate medical needs and the success or failure of our interventions can be more readily determined. When our actions are driven by possible events well into the future, it becomes more and more difficult to assess whether any of our activities have any value whatsoever, except for the immediate financial consequences. Grandiose schemes to change the future world make us feel good about ourselves and great marketing copy. I prefer to deal with the immediate needs of individual patients (even if it means some taking personal risks) and leverage my activities by being involved in the training of students and residents who hopefully will model only the best of my behaviors.

Calling Miss Manners! Help with the rules for the game of Medical It.

2011-12-04T08:43:00.001-05:00

As we have moved from hospital based medicine, an environment where direct personal interactions between various providers of care were the norm, to distributed care networks where care team embers are connected in an ad hoc manner, we have failed to develop the next generation of effective tools for communication. In addition, we have also failed to develop any standard etiquette to deal with the complexities of shared care responsibilities.

I have a referral practice, both in the ambulatory environment and in the hospital. When the care environments and the volumes of patients were smaller, I encountered colleagues who referred patients directly. We frequently occupied the same spaces. The etiquette was simple. I met them, We talked. They asked for my help. I asked for the specifics and addressed whether I thought I could add value. We both received immediate feedback.

I remember learning a great lesson from one such encounter when I was an intern. I was involved in working up a man with an abnormal chest x-ray in whom I detected an large subraclavicular lymph node. I wrote and order in the chart asking for a surgery consult with the terse request, please biopsy. A fellow intern on the surgical service who I saw on a daily basis pulled me aside and asked me to change the order, requesting instead that the Surgery Service evaluate the patient. He explained that his attending did not take well to being viewed as a biopsy technician and that we ask for our colleagues opinions and expertise, not simply their technical skills. I thought it was wise advice at the time.

I live and and work in a different world. The pace is much faster. The problems are more complex. Many of my colleagues have adapted their practices to be more focused. There is substantially less direct contact. The medical record has become entirely worthless beyond functioning as a billing compliance tool. The requests for help keep coming in except they are generally cryptic. One of my colleagues now describes the phenomena as a game of "medical It", harkening back to the days in childhood when we used to chase each other around, trying to unload the status of being "it" by tagging someone slower than you.

Every week, I get reams of records sent to me. Some physicians are very good about sending a cover letter explaining the purpose of the ask. That is the exception rather than the rule. Many of the records are hand written, unreadable, and I cannot determine who actually sent them. More recently I have been receiving copies of electronic records where I must play the "Where's Waldo" game. Somewhere in there is something relevant.

What I would like is a a very brief summary with the key points:

1. Who is making the referral?
2. What specific questions are you asking?
3. Is this a referral for diagnostic or treatment reasons?
4. Do you want me to manage the patient?
5. What time frame does this need to occur in? Is this medical or personal urgency?
6. Is there any other information that you believe to be crucial for me to know? Logistical, social or financial issues?

I have had discussions with some of my colleagues who believe that the most important element is to pick up the phone and call. While I think this is a nice gesture, it cannot replace an actual written communication. The telephone call tends to result in an unstructured communication which amounts to sending the message that "I need help" and "Can you see this patient?" After the call is over the specifics are often lost and if there are records to review, they often completely fail to communicate the specific issues above.

Taking the time to write something structured tends to require one to reflect, at least for a minute as to what the goals of the referral are? Unless we are simply engaged in the game of "medical It", we can and should stop to think for a moment as to who we are calling for help, specifically why we are calling, and what the care structure might look like after we have enlisted their help. However, if the purpose of the activities is to find another physician to unload care responsibilities, using the consult carpet bombing technique is likely effective to find a target, any target who might say yes. Furthermore ,if you appear sufficiently incompetent to the patient they are not likely to want to return to your care once they have found some other alternative.

This is not rocket science or medical science. It is simply communication etiquette. Etiquette is defined as "conventional requirements as to social behavior; proprieties of conduct as established in any class or community or for any occasion." It is simply not the case of being nice to peers or treating patients and peers with respect. This is important but it is not enough. Communication etiquette in medicine needs to be functional in that it fosters clear and unambiguous information exchange. We are not there. We have assumed as we moved the face to face communication environment to a virtual communication environment that the pieces would automatically fall into place. Wishful thinking at best. More likely delusional.

One reason this has not happened is that this represents a non-billable activity. From the perspective of getting someone else to be it, it is simplest to delegate the task of referring out to someone else no matter how poorly the task is performed. Call and get an appointment. My job is done. Often the task is delegated to the patient whose level of understanding of the problem might be essentially non-existent. Why are you here? My other doctor wanted me to see you.Why? I am not sure?

We must all to realize this is simply not acceptable and that it is part of our job to at least think about the above questions before we attempt to refer a patient to one of our colleagues. This are basic elements of professional etiquette which should be hammered into medical students and residents and under ideal circumstances reinforced by behavior modeled by teaching physicians. Again, we are not there yet. Perhaps I need to get together with Miss Manners and write a book.

A downside to moving toward standardization of medicine and rules based practice

2011-12-03T14:38:00.001-05:00

We are moving the practice of medicine toward standardization of practice and rules based systems. I do not contest that this is a healthy movement and much can be garnered in terms of efficiency and creation of systems where specific practices can be assessed for their ability to deliver what the public needs.

However, creating rules and standard practices need to be viewed simply as starting points, not actual goals. The experience of the financial system over the past decade represents a cautionary tale and this is described in a WSJ piece "How regulators herded banks into trouble", written by Peter Wallison and published in this morning's paper.
http://online.wsj.com/article/SB10001424052970203833104577069911633739768.html?mod=WSJ_Opinion_LEFTTopOpinion&_nocache=1322941623984&user=welcome&mg=id-wsj

Like standard medical protocols, the regulatory framework within the financial sector has been put into place to reduce error and reduce the risk of bad outcomes. Like rules deployed in medicine, the rules in the financial sector attempted to encourage particular behaviors which were thought to lower both individual and systemic risks. The cautionary part of this tale centers on two flaws, neither one being unique to the financial sector.

First, what is viewed as being safe bets at one point in time turn out to be risky and tragically bad bets at a different point in time. At the time the Basel Accords were adopted in 1988, mortgage based securities were viewed as the lowest risk investments banks could hold. The rules put in place at the time strongly encouraged commercial banks to hold these securities through capital rules, specifically allowing much greater leveraging when holding these debts (>50 fold) than with corporate loans (<20 fold).

The consequences of this huge miscalculation are described by Wallison:

Although these rules are intended to match capital requirements with the risk associated with each of these asset types, the match is very rough. Thus, financial institutions subject to the rules had substantially lower capital requirements for holding mortgage-backed securities than for holding corporate debt, even though we now know that the risks of MBS were greater, in some cases, than loans to companies. In other words, the U.S. financial crisis was made substantially worse because banks and other financial institutions were encouraged by the Basel rules to hold the very assets—mortgage-backed securities—that collapsed in value when the U.S. housing bubble deflated in 2007.

Today's European crisis illustrates the problem even more dramatically. Under the Basel rules, sovereign debt—even the debt of countries with weak economies such as Greece and Italy—is accorded a zero risk-weight. Holding sovereign debt provides banks with interest-earning investments that do not require them to raise any additional capital.

Accordingly, when banks in Europe and elsewhere were pressured by supervisors to raise their capital positions, many chose to sell other assets and increase their commitments to sovereign debt, especially the debt of weak governments offering high yields. If one of those countries should now default, a common shock like what happened in the U.S. in 2008 could well follow. But this time the European banks will be the ones most affected.

Rules were created which were thought to match capital requirements with risk. They did not and because they were so successful in standardizing behavior before the rules were validated, they ended up magnifying the very events which they were deployed to prevent. Compliance with rules substituted for actually thinking about actual risk.

In the same vein, rules-based medical practice runs similar risks. The mantra for diabetes control has been tighter is always better. However, the ACCORD study of tight glucose control demonstrated that targeting Hgb A1c levels below the current of 7 was associated with increased risk of death in patients affected with type 2 disease. It is fortunate that the infrastructure was actually in pace to test this practice, providing some cautionary feedback. We did not end up with the universe of primary care physicians who pushed the tight glucose control thing to the point of injury their patients.

Throughout much of medicine there is a healthy push for standardization of practice and development of tools to assess aggregate success or failure. The problem we face is in the absence of a known superior standard, what standard practices do we push for before we have determined the best ones available? For the financial industry, they had a similar situation which resulted in both good news and bad news. The good news is they did figure out how to get banks to comply with a standard set of rules. The bad news is they were the wrong rules.

More on risk

2011-11-26T16:45:00.001-05:00

I found that Megan McArdle presents yet another view on attempts to domesticate risk...
http://www.theatlantic.com/business/archive/2011/11/the-limits-of-risk-engineering/248357/

Trying to plug innovative ideas into legacy structures

2011-11-24T11:52:00.001-05:00

We are in the midst of reworking our processes associated with the flow of patients in ambulatory practice. We have the laudable goal of making the process more functional and better at actually meeting patient goals. It is unquestionably the right thing to do. However, the devil is always in the details.

We have examined how we interface with patients, what information we need to collect for financial reasons and what information we need to collect for compliance reasons. The key driver of this is the Federally mandated meaningful use of EeMR. As an afterthought, we are also considering what information we need to collect for diagnostic and management issues particular to specific encounters.

When assessed prospectively, the amount of information that needs to be collected and inputed in a structured way in the ideal world is mind boggling. The question is whether this task actually be accomplished in the very brief scheduled encounter times which are part of outpatient practice? However, perhaps the more relevant question is why we would even try to do this in the first place.

Within the context of re-examining our work flows, we seem to be examining virtually all assumptions except one; the encounter based model where everything must and should be done within a ridiculously brief encounter. While I may have major disagreements with our soon to be former CMS Chief, I completely agree with Don Berwick in that our encounter based model of delivering medical care is a problem.

There is absolutely no reason that virtually all information which is now extracted by asking patients in the office could not be done prior to the visit, and I am not talking about five minutes ahead of time. Who knows better than the patient what medications they are actually taking and what better place for them to address this question than at home in front of the very pill bottles that their medications come from? Why should we wait for them to come to the office, charge costly personnel with the task of trying to sort this out until severe time constraints, and then input what could have been inputed by the patient, more accurately, and at lower cost?

The same goes for virtually any piece of information where the ultimately source of the information is the patient. New complaint? Old complaint with ongoing symptoms? In each case, relying on a member of the medical team to ask the right questions, listen effectively, remember what is important, and record this accurately, all within severe time constraints is simply a formula for error generation. For most patients and their needs, off loading these tasks and information collection to a time where the tasks can be done with fewer time constraints and by someone more vested in getting the right information loaded simply makes sense.

Until we re-examine the utility of using brief encounters as the underlying architecture of ambulatory care delivery, all the problems of information collection, data entry, and ultimately effective problem solving will remain sub-optimally addressed.

The downside of socializing risks

2011-11-20T17:51:00.001-05:00

Much has been made of governmental interventions with socialized financial risks while the gains of these same interventions appear to have been garnered by specific private parties (Wall Street vs. Main Street). However, state interventions which result in socializing risks are not limited to the financial sector. They essential permeate every state activity and create moral hazards at each turn.

There are two elements to life which are invariant and unchanging. First, everything changes. Second, risk is everywhere. Despite all of our technological progress, human existence is precarious and touched by risk constantly. Basically, every human institution has developed as a consequence of attempts to blunt and mitigate risk. Initial efforts required were to mitigate the risks of injury by the elements (freezing in winter), starving, being devoured by wild animals, or killed by enemies. In order to address risk, people can make efforts as single individuals, organize into groups voluntarily, or form organizations where membership and participation are compulsory. The latter essentially represent state or governmental entities which have the power to compel activity.

Fast forward to our modern era and the modern state. The modern era has brought us unprecedented private and state initiatives which were put in place to basically to mitigate personal risk. The development o the modern insurance industry was an essential innovation which was required for expansion of the modern economy. Many different strategies and products were deployed. However, innovations by private entities are always imperfect.and history is punctuated by repeated individual and institutional failures, often within financial institutions but certainly not limited to this domain.

Enter the state. The state has always play a role in socializing certain risks. There is a reasonable consensus that the risk of invasion should be socialized in the form a common defense organized by the state. The specifics may be problematic. The state's role in socializing risk has basically exploded in the 20th century with the creation of entities to protect against a host of risks; the risk of surviving into advances age, the risk of illness, the risk of disability, and the risk of unemployment, the risk of making bad investments, and the risk of making unwise decisions in general.

The idea to increasingly move risk mitigation to states is seductive. It is simple. Why charge many different entities with risk mitigation when you can put all responsibility in one place? While it might appear attractive and simple, nothing could be farther from the truth. One entity means a singular approach which has as much chance of being the wrong approach as it does the right approach. In addition, placing risk mitigation in the hands of the state consistently results in application of actuarial models which are biased toward under funding with the knowledge that states are back stopped by what appears to be the unlimited deep pockets of the taxpayer. Once you get people hooked on the promise it is easier to hike taxes and borrow from future generations.

What could be more seductive than a promise to mitigate the risk of the cost of illness or the risk of outliving your savings? The lessons of these entitlement programs are very stark. Every actuarial estimate regarding the cost of these programs (Medicare, Medicaid, and Social Security) were off, not subtly but off by orders of magnitude. Private entities who make such bad bets (for example in pensions) go broke. The same may be true of states but the displacements that result are so much more tragic.

One product of all this activity is the creation of the belief that states are the most effective entities which can mitigate risk. There is little empiric evidence that this is the case. Perhaps the worst hazards associated with this belief system are the moral hazards where embracing the idea that state risk mitigation activities insulate people and entities from risky behaviors, thus influencing behaviors in such a way which increase the likelihood of the very things we all want to avoid. Risks will always be with us and the greatest tool to mitigate risks is personal awareness that our activities can either put us at or mitigate risk. If we believe that state programs can insulate from our own stupidity, we tend to act stupidly.

Meaningful insights from OWS are like French military victories

2011-11-19T18:10:00.001-05:00

I do not know where to start in terms of this video from the John Stewart Program. It is absolutely a must watch and chock full of all sorts of ironies.

http://www.thedailyshow.com/watch/wed-november-16-2011/occupy-wall-street-divided

If there was ever any question regarding the complete lack of coherent message of the OWS, this video puts that question to rest. I particularly thought the man who attempted to make a distinction between private property (other people's stuff) and personal property (his iPad2) was particularly incoherent and devoid of insight.

When there are no more options

2011-11-17T18:43:00.001-05:00

If there was ever hard evidence that people are the drivers of wealth generation, current day Detroit is it. It also provides evidence that manana faith based economics paves a road to financial catastrophe. Detroit is showing where Greece will end up down the road.
http://www.freep.com/article/20111116/COL33/111160318/Stephen-Henderson-Detroit-s-clock-striking-midnight

Stephen Henderson's article in the the Detroit Free Press "Detroit's clock is striking midnight" is a sobering account of the end game for a city which has failed to come to grips with a culture which made promises it could not keep. Detroit now finds itself incapable to funding the most basic of services and even if they completely stopped delivering services to current residents and succeeded in maintaining their tax base (not a likely proposition), they could not meet their pension and health care obligations to their retirees.

Detroit represents a microcosm of where we are heading nationally. Private entities recognized long ago that their financial survival depended upon moving their employees to defined contribution retirement programs. Those entities that failed to act are not longer around. State entities have been insulated thus far from these pressures but governmental entities that make bad bets can also fail. These failures have been isolated and have been small cities (with the exception of NYC near failure in the 1980's). That is about to change. It would make sense for the state of Michigan to intervene, but the state does not have the resources to step in and guarantee all the entities that will line up if that window is opened.

The federal government has been trying through a variety of mechanisms to take the pressure of states such as California, Illinois, and New York using underwriting of bonds to forestall the inevitable. If states used this backstopping to to create a window of opportunity to get their respective houses in order, it might have dampened the blow. However, all this has accomplished is to allow states to avoid having to come to grips with their pension and entitlement pathology.

The lesson is clear from Detroit. Promises that you cannot afford + no growth environment + changing demographics smaller workforce = financial calamity.

Another blog highlighting the problems with command and control pricing

2011-11-15T19:46:00.001-05:00

http://healthaffairs.org/blog/2011/11/15/a-better-way-to-approach-medicares-impossible-task/

Untended consequences of administrative payment schemes: A tale of two specialities

2011-11-13T12:41:00.001-05:00

Rheumatologists and Orthopedists both deal with human muscles, bones, and joints. That is where all similarities end. One specialty has huge margins, is highly lucrative, and has become hyper-specialized. The other has negative margins, is financially a mess, remains the realm of the generalist, taking on whatever is thrown at them, generally whatever other physicians do not want to deal with. How did this happen? It is a simple answer (but not so simple solution) - administratively set prices which value one specialties activities much differently than another.

For orthopedics, lucrative reimbursement for focused, value-added interventions combined with strategic incompetence in assuming any long term responsibility for caring for chronically ill people is a winner for building empires. This model has allowed for hyper-specialization. Orthopedic surgeons tend to focus on one joint or segment of an extremity (wrist, ankle, elbow) making it relatively easy to deflect unwanted business. Payments and business models may be so lucrative that you have the margins to underwrite the hiring of non-proceduralists who can screen a larger patient population and cull those who can be shunted to the operative engine, being careful to not to assume care for anyone who requires any high risk drugs such as immunosuppressives or biological agents such as TNF blockers.

In contrast, Rheumatology is the realm of the chronically ill and medically managed. a low margin activity because of the random financial violence created by administrative pricing. Rheumatologists are called upon to care for everything ranging from gout, to fibromyalgia, vasculitis, myositis, RA, Behcet's syndrome, systemic lupus, or chronic depression. Rheumatologists are called upon to treat any inflammatory disorder of any organ system where focused and procedural specialists have perfected the art of strategic incompetence, unwilling to cultivate and maintain particular, but low margin expertise, required to care for patients who have organ specific disease affecting the organ of their interest. Better to simply dump this responsibility on the unfortunate Rheumatologist. Also be sure to berate your local rheumatologist when they fail to willingly accept all the low margin work dumped on them.

Without sufficient margins, there are insufficient funds to build an infrastructure with any semblance to the infrastructure that supports orthopedics. This includes sufficient incentives for physicians to enter the field in the first place. Thus, shortages of Rheumatologists prevents the development of specialization and the inefficiencies that may come with this, aggravating the financial stresses even more. Why is it acceptable for one set of specialists to have focused expertise and deflect difficult to manage (and coincidentally low margin activities) to a more poorly paid specialist who are financially punished for maintaining remarkably broad expertise? It is justified on the basis of the financial rewards, created through an entirely artificial world of administratively set value.

Where it might make sense for leaders in medicine to take this on, recognizing the dysfunctional and unjust nature of how value is arbitrarily assigned. Such a road is a highly risky road. Why take on such a difficult, long run challenge (to fundamentally change the rules of the game) with only possible returns. It has been much easier and less risky to figure out how to exploit the rules in the short term, even though it has created bizarre and indefensible holes in the health care delivery system. No wonder why it is increasingly difficult to find Rheumatology expertise? Rheumatology is not alone in this fate. Where we find insured patients with medical needs and no one to deliver them, you have likely found the mischief created by administratively set prices, sending misinformation about what patients actually need and where value to patients lies.

Administrative prices and economic triangles as creators of new information asymmetries

2011-11-06T12:00:00.003-05:00

Much has been made of Kenneth Arrow's famous critique of health care economics and his observation that information asymmetry made the delivery of health care different from other information. While I cannot disagree with Arrow that information asymmetries create challenges for consumers of health care, I believe there are elements of the payment system which actually worsen this situation.

Within a market system, the role of prices is to convey information. Pricing is a remarkable information system which merges both conscious and unconscious individual and group preferences. Prices derived from market mechanisms are amazing in terms of the information they reveal. While each of us may consciously believe we have certain preferences, our cognitive unconscious may play an even more important role is the expression of our actual preferences and value trade-offs. The expression "Put your money where your mouth is" is a commonly accepted understanding of this. Money is a synthesizer of conscious and unconscious preferences. Thus market price information is valuable in that it tends to reveal real preferences in a format that virtually everyone understands.

When Arrow wrote his analysis, the world of medicine in the US was very different from what the current state is. Most medical encounters involved people who were acutely ill whose questions were rather straight forward. Why am I sick, will I get better, and can you do something for me? The time frame was measured in days or weeks, not years or decades. The resources available to patients was vanishing small (Merck Manual) and the way that physicians practiced invoked the mantle of more the magician than scientist.

Furthermore, in the early 1960's medicine still focused around the two way exchange of physician and patient and the role of third party payers was nowhere near what it is today. Physicians knew more than patients but in reality they did not know too much and for the most part, health care encounters consumed a trivial amount of overall household resources. There were exceptions but there are outlier circumstances in all realms of life where events result in huge and unexpected financial impact. That is why we have insurance.

There are information asymmetries which occur is all elements of exchange. Frank Knight highlighted this in the early portion of the 20th Century when he viewed that risk and uncertainty were drivers of all sorts of transactions, where parties contract with other parties in order to manage risk and uncertainty. I beleive that there is no reason to believe that health care information asymmetries are inherently any more than exists in the interactions of humans in other realms.

Yes, medicine has made incredible strides in the past 100 years, perhaps temporarily outstripping the capacity of the general public to fully comprehend the impact on them and their options when dealing with illness and health business. It was Arthur C. Clark who said "Any sufficiently advanced technology is indistinguishable from magic". Ultimately, the magic trick becomes common knowledge and few are impressed or baffled. The microwave was magical when first available. Now it is used without a moments thought and units can be purchased for less than a tank of gas.

As a practicing physician, I am constantly amazed how little we can predict reproducibly and how little we actually know. There may be a perceived asymmetry of knowledge but the differential of what is known between physician and patient is likely less than one might believe. Generally, physicians (and other health care providers) know substantially less about what is really important to patients their patients and patients, particularly educated ones with chronic problems, know immeasurably more of what is important than any of their treating agents.

The information asymmetry still exists, but in an entirely different form. Instead of a two-way transaction, we now have a three way transaction. Each of the parties has information that is not shared with the other parties, sometimes intentionally but often quite by accident. Each party has different goals and different priorities. In a situation where market prices were actual information tools and could convey information regarding preferences of the various parties involved, perhaps they could serve to work toward shared goals and efficient allocation of scarce resources. However, administratively set prices in health care are simply accounting tools and not information tools.

Thus, we lose the use of perhaps the most important information tool available in a price coordinated economy. We no longer just have information asymmetries. We end up with information voids. Physicians have little or no idea of what patients really value since patients are for the most part not asked to value their preferences in the format which we all understand.

Marketers of health care services game the system and are driven to respond to a payment system devoid of real patient preferences. They move to where the margins are, whether what they do delivers the most value to patients. Payers are driven by pressures from their biggest customers and those who can exert political pressure. Without a dynamic pricing system, the feedback loop which operates in other vibrant elements of the economy is not present. Without information that comes from market based prices, resources are allocated poorly, productivity fails to increase (or falls), and scarcities are worsened.

Our present circumstances are all too predictable based upon what we have done to the pricing mechanism in health care and its impact on information exchange.

The ongoing saga in Europe

2011-11-04T22:09:00.000-04:00

I simply do not get what is going on in Europe. I get that the Greeks are broke and I understand that there is no easy way for them to dig themselves out of the hole they have dug. From what I can glean from the the many pieces written on the situation is that someone is going to take a haircut. The initial plans were that bondholders, including many banks as well as small investors, were going to take a modest haircut but as things unwound, the losses they were to face were much greater than what was first imagined.

The latest deal proposes that bondholders will lose about half of their investment, with questions still being whether this is still not sufficient to make the deal work. Even at this substantial discount, the long term outcome is workable only if the Greece imposes an austerity program which will be onerous and long in duration.

Here lies the rub. If the Greeks agree to this (which they may or may not), how can any agreement be binding an the next government which may come to power in the coming years (or months)? While there is a great desire to come to some sort of agreement because there is a belief that this will bring some sort of closure, nothing could be farther from the truth. Greece will require ongoing infusions of capital and with each agreement comes only the opening of the next round of negotiations and posturing.

This is like budget negotiations in the US. The sequence is negotiation, agreement, money transfer, and then failure to meet negotiated goals, followed by the cycle all over again. The only way this can work is if the sequence is altered to negotiation, agreement, meet negotiated goals, and then money transfer. It will never happen.

Drugs and markets: A tale of two stories

2011-11-01T21:55:00.002-04:00

Health care delivery in the US is experiencing yet another mismatch of supply and demand. This time it has happened within the realm of cancer treatment. As noted in this week's NEJM:

For the first time in the United States, some essential chemotherapy drugs are in short supply. Most are generic drugs that have been used for years in childhood leukemia and curable cancers — vincristine, methotrexate, leucovorin, cytarabine, doxorubicin, bleomycin, and paclitaxel.1 The shortages have caused serious concerns about safety, cost, and availability of lifesaving treatments. In a survey from the Institute for Safe Medication Practices, 25% of clinicians indicated that an error had occurred at their site because of drug shortages. (http://www.nejm.org/doi/full/10.1056/NEJMp1109772?query=O).

The reason for this shortage is not hard to determine.The authors go one to draw a simple conclusion.

The main cause of drug shortages is economic. If manufacturers don't make enough profit, they won't make generic drugs.........The second economic cause of shortages is that oncologists have less incentive to administer generics than brand-name drugs.

The regulated medical marketplace is heavily weighted to the regulated aspects and very light on the market aspects. Price fixing, particularly fixing margins to 6% for chemo drugs administered created a perverse incentive to administer the most expensive drugs one can practically get away with. A 6% mark up of an expensive drug yields more income that the same percentage mark up of an inexpensive one. With the such substantial incentives for physicians to administer expensive drugs, what in the upside for pharmaceutical firm to continue manufacturing low or no margin drugs when they can invest their resources to produce a better return on their investments.

Before the medical community cries foul, indicting the pharmaceutical industry for failing to produce drugs because of limited margins, we should first look at ourselves. The medical community also directs resources primarily to generate financial returns. It is an existential thing. Those entities that fail to do so also fail to exist in the long term. Survival is not required. Entities whose business is based upon not making money have short life spans.

In contrast to the non-market for chemotherapy drugs where there are profound shortages, there is a separate universe where there are no drug shortages. The CDC reported that the number of deaths from overdose involving prescription opiates has reached record levels. (http://cdc.gov/mmwr/preview/mmwrhtml/mm60e1101a1.htm?s_cid=mm60e1101a1) Here is a world where major efforts have been undertaken to limit use the use of these agents and yet there is no evidence of drug shortages. It is quite the contrary. One of many things that the state cannot control is the price of street drugs. This should not be taken as an endorsement of drug culture or illicit drug use. However, it is evidence of the power of markets and market pricing.

When shortages are present, it is more often the mark of dysfunctional regulatory states. If we want to make sure that cancer patients have access to affordable life saving drugs, we need to stop tinkering, stop making more rules, and let the power of markets fix the problems wrought by regulatory demons.

Oh no...Not again!

2011-09-10T17:34:00.001-04:00

As the financial calamity is unfolding in Europe, I see remarkable parallels similarities between every budget crisis which has unfolded in the past 20 years. The present crisis involving Greece and the EU, has been punctuated by specific episodes where Greece faces a liquidity crisis prompting it to make an urgent request to the EU (primarily Germany) to provide access to emergency loans. The loans are made technically made contingent upon financial reform in Greece. However, once the loans are made, the leverage to hold the Greeks to their promises evaporates. With each additional cycle, those loaning the money become more and more vested in avoiding a Greek default, thus perpetuating the cycle of profligate spending, emergency bailout, followed by additional spending which outstrips economic productivity.

The problem is the asymmetry of power based on the chronology of required action. Those providing the funds for bailout are required to take action up front while those who as ostensibly bound to to respond afterwards with financial reform and spending cuts are able to renege on whatever agreement that was hammered out initially. The may be because the agreement was made in bad faith but even more likely because whomever made the agreement in the first place is no longer in power when austerity actions are required to be put in place.

The same dynamic is operational in budget negotiations in the US. Almost invariably, tax hikes are implemented immediately, sometimes retroactively. Business planning for 2011 is based upon a tax environment which may be in place as much as 12-24 months prior to 2011. However, tax rates for 2011 can be hiked basically anytime prior to when 2011 taxes are due. This can be as late as April 2012. On the other hand, spending cuts tend to be most heavily focused on out years, particularly years well after upcoming elections, after which elected officials may have little or no incentive to be held to promises which they did not make.

This dynamic is acutely relevant to our present state in the finance of health care. I found a very interesting in Greg Mankiw's blog where he calls attention to a 1967 quote from Paul Samuelson from Newsweek magazine.

The beauty of social insurance is that it is actuarially unsound. Everyone who reaches retirement age is given benefit privileges that far exceed anything he has paid in -- exceed his payments by more than ten times (or five times counting employer payments)!

How is it possible? It stems from the fact that the national product is growing at a compound interest rate and can be expected to do so for as far ahead as the eye cannot see. Always there are more youths than old folks in a growing population.

More important, with real income going up at 3% per year, the taxable base on which benefits rest is always much greater than the taxes paid historically by the generation now retired.

Social Security is squarely based on what has been called the eighth wonder of the world -- compound interest. A growing nation is the greatest Ponzi game ever contrived.

While we were at the helm of a growing wealth generating engine which used to the the US economy, making such promises as Social Security, Medicare, and Medicaid could be done without fear that the chickens would come home to roost in any near term time frame. The asymmetry of time frame allowed for implementation (the glory) without immediate impact the wealth engine making things possible (the pain). Those Jeremiahs who could see the crisis coming and made attempts to inject fiscal discipline may have temporarily appeared to be successful. Agreements generally involved immediate revenue enhancements coupled with spending cuts in the longer term, agreements which fail to materialize well after tax increases were set in stone. They have been much like Charlie Brown, forever the optimist, committing to kick that ball, firmly believing that Lucy will not snatch the football away.

It is unfortunate but it appears that the process continues until one or more of the parties is incapable of continuing because they broke and flat out of money. Ponzi schemes always end and generally not well. In the case of the US economy, when the growth rates drop and the demographics of the US population turn less than favorable, the game is over unless we learn from the events unfolding in Europe.

The Price, Cost, Reimbursement, and Value quandary

2011-09-03T11:32:00.000-04:00

Michael Porter and Robert Kaplan have written a piece on the Harvard Business Review entitled "How to solve the cost crisis in health care". http://hbr.org/2011/09/how-to-solve-the-cost-crisis-in-health-care/ar/1 The concepts cut to the basics of economics; scarce resources, optimal allocation, and incentives. One of the most basic tenants of business management is knowing what it costs to deliver a product or service. The health care is not equipped with the tools needed to really understand the costs of health care delivery.

Porter and Kaplan outline multiple reasons why this is the case, the major one being that health care accounting confounds charges with actual costs. While this approach worked OK when margins were huge and there was enough money in the system to allow for massive cross subsidies, we are no longer in a position to run such an increasingly expensive endeavor without knowing what it costs to deliver any given service. Furthermore, any real attempts to actually measure value must take into consider actual costs of service delivery. It is easier for low cost interventions to meet the value bar than high cost ones. When you don't know the cost figures, any attempt to assess value is doomed from the start.

It seems remarkable that such an industry consuming more than 15% of GDP of the US can operate with such a rudimentary understanding of cost. From my perspective, this is a product of a mindset which permeates medicine which I can best term Medical or Health Care Exceptionalism. What I mean by this exceptionalism in health care is that it has been viewed as an industry that can and should operate outside of basic economic principles. This perspective is deeply flawed. While the great wealth generating engine could spin off so much wealth in the US in the second half of the 20th century, we could live under this delusion. We now are faced with reality. Scarcity matters in all human endeavors, including health care. The health care industry, like all industries, requires resources, including people, who have choices and need to be given appropriate incentives to utilize scarce resources prudently.

Porter and Kaplan's analysis also reminded me of the analysis of another Harvard Professor, Dr. Hsaio, developer of the resource based relative value scale (RBRVS). Both use a system of measuring inputs in order to accomplish some end in health care delivery. However, there is a huge difference in how they seek to deploy their information. Hsaio developed the RBRVS as a tool to set payments to physicians. He conflated costs of inputs with actual value to patients. Porter and Kaplan promote cost analysis as an essential tool to define resources used, not value delivered. They look to use cost information to better utilize scarce resources, not administratively set prices.

Whether cost analysis is an essential step in defining value depends upon who pays for the services and what they are trying to achieve. In my opinion, value always needs to be defined by those purchasing the services. In the health care three way transactions, it will always be fuzzy as to who is the customer and who will be most pressed to measure value and deliver value. However, we should be in agreement that actual cost to deliver a service does not equal price of that service which does not equal the value delivered to the patient. If we can get past this confusion, we can get our bearings and start to move in a direction away from the financial abyss.

Decision making and the upside to junk food

2011-08-28T13:08:00.002-04:00

A colleague of mine sent me a link to an article in the NYT Sunday magazine from last week http://mobile.nytimes.com/2011/08/21/magazine/do-you-suffer-from-decision-fatigue.xml. It is based upon a soon to be release book entitled: Willpower: Rediscovering the Greatest Human Strength by Roy F. Baumeister and John Tierney. I have not had a chance to read the book but I will order it as soon as it is release. However, the summary from the article resonated with my own experiences, particularly in my practice.

The basic premise of the article is that decisions we make are highly influenced by the environment the decision maker is placed in and the volume of decisions they are called upon to make. People called upon to make many decisions suffer from what the authors refer to as decision fatigue. Those who suffer from decision fatigue generally end up making sub-optimal decisions where only the most basic data is considered.

Surprisingly, decision fatigue can be obviated to a great extent by the simplest of interventions; feeding the decision maker. Glucose appears to have a huge impact. Intuitively, I understand this. Some of the worst decisions I make are immediately before lunch when I am hungry. Additionally, the most intensive cognitive work decision making activities make me ravenously hungry and from personal experience, I find that sweets fuel my own productivity.

In my own patient care work environment, one thing which is almost universally frowned upon is any sort of food or drink. There were likely good reasons for such rules based upon hygiene and a clean work environment. However, these, like all rules, are likely to have unexpected and negative impacts. In a fast paced ambulatory patient care environment, caretakers are at high risk for decision fatigue and prohibitions against food and drink apparently removes the most important possible intervention to alleviate decision fatigue.

This underscores two likely problems with how we structure our work environments .First, those who make the rules are almost always unaware of the impact of rules on how people do their jobs because those who make the rules rarely have even the slightest appreciation for how those at point of service do their jobs. Electronic medical records are pushed out without analysis of their effects on workflow. Mandates are created about communication with patients without understanding what tools are required to meet the mandates. Outcomes are mandated with the tools to collect, validate, or analyze the data required.

Furthermore, those who do the actual work at point of service are likely not so reflective as to how they do their work. After reading this article, I realized that many of the actions of my colleagues in how they structure their offices and practices may be driven in part by their desire to avoid making decisions. Movement to specialist and procedure driven healthcare limits the range of decisions required. In particular, procedure focused medicine removes the requirements to make decision based upon incomplete information. Movement to checklists may be used to remove even more decisions from the workday and although I do not know whether anyone has compared fatigue from decision making to manual tasks, my own experience suggests that doing work with one's hands is more of an escape than a drain. I recall my experience in the Emergency department as an intern where we all craved the opportunity to sew up lacerations and escape the frantic bubble of ER demands.

The observations regarding the impact of decision fatigue on various decisions was made possible by the ability to measure outcomes. These studies were done under controlled and artificial conditions and it will be a challenge to deploy these types of studies in a healthcare delivery environment. The effects of poor decisions will rarely result in such easy things to measure as life or death. We can be aware of studies of human decision making which yield data likely relevant to decision making in health care environments and make reasonable modifications to how we do our work. Maybe the first thing to do is to allow snacks and antidote to decision fatigue. However, Diet Cokes will simply not do.

Data collection vs. relation building activities

2011-08-21T19:33:00.000-04:00

Yet again dealing with my mother has provided me with insights into my interactions with patients and how we attempt to deal with patient needs in general. The particular scenario has little to do with medicine at first blush. My sister and I bought my mother a Kindle. She loves to read but was beginning to have problems with chronic eye strain after limited times reading. We thought the Kindle format, the non-back lit format, and the ability scale font size would be helpful, which it was. However, she ran into a problem with the billing to her credit card which she needed to address. When she went to the Amazon Website, there was no number to call. As it turned out, you could go to the Amazon site and follow a detailed series of screens to take you to a final screen where you enter your number and they will call you. This was simply not acceptable to my mother. She wanted a number to call so she could talk to a person.

I found this very enlightening for a number of reasons, many of which are quite relevant to the practice of medicine. The scenario above is similar to a patient who has a medical problem and wants to call a telephone number, based upon the assumption that if they talk to a person, they will improve the likelihood that they will solve their problem. From my perspective as a physician who runs a large clinical operation, I see phone calls as a challenge. The universe of possible problems which can be fielded by our phone banks is unimaginably large and it has always made sense to me that any ability to collect some data before a human is assigned to solve a problem makes tremendous sense. Amazon understands this issue and they applied a new approach to dealing with their calls. Collect the data first and assign the task of solving the problem to someone who is equipped with the tools and information required. However, from a patient perspective, they frequently see their situation like my mother and her Kindle. The most efficient way to get their problem fixed is if they coudl talk to a person.

I am a problem solver. It is my world view and the perspective as a problem solver creates a lens which focuses (or perhaps distorts) how I see the world in general and what others want from both me and the world in general. As a physician, I see my encounters with patient first as an opportunity to solve problems and only secondary as an opportunity to build relationships. For others, problem solving and relationship building are inextricably linked. Where I see the face to face doctor patient encounter and the phone as a terrible tools to collect data, people like my mother see asynchronous communication tools as missing elements of human interaction which are essential to solve their particular problems. Their problems, no matter what their nature, cannot be solved without the element of human contact. I think at least part of this perspective may be tied to the idea that having a specific point of contact up front creates a personal contact and from that a personal obligation. Someone you have spoken to can he held personally accountable. In a simple world where the potential number of possible responsible parties was orders of magnitude less, that may have held true.

I suspect that letters and telephones were viewed in a similar light when they were deployed. Over time, appropriate spheres of use for communication were accepted. Certain things are best left for face to face communication; other things were recognized as being suitable circumstances for alternative communication approaches, be that letters or telephone calls. The electronic communication realm has thrown this world into chaos and the rules for appropriate use of emails, texting, instant messaging, Facebook and whatever are incompletely defined. Where these tools are deployed in social circumstances where they are not suited to supplant the nuanced communication of actual direct human contact is a problem.

I am a social animal and enjoy personal interactions. However, in my professional sphere I focus very much on what data I need in order to make recommendations directed toward solving specific problems. I see the great potential of separating the data collection functions from the social elements of medical practice. The new communication tools are likely superior to older tools in terms of data collection, particularly if we can move essential data collection outside of the valuable face to face time of the office visit. If deployed correctly, non-traditional communication tools hold the potential for actually freeing time to cultivate relationships between patients and physicians.

Short order medical care

2011-08-14T10:29:00.000-04:00

I have been away on vacation this week, spending time in the cool mountains. It has been a pleasure to hike through the woods taking in beautiful vistas and listening to the music of mountain streams.
We have a cabin the woods equipped with all the comforts of home including a kitchen where we prepare some of our meals. However, vacation is not vacation if it did not include dining out as well. We are isolated but are within a 30 minute drive of multiple small quaint towns, each of which has multiple dining options.

Last night we exercised the option to indulge at a local Italian restaurant. It was really hopping with a full parking lot, a full bar of waiting patrons, and people spilling out into the parking lot. The wait staff was really hustling, clearing tables and seating customers as fast as possible. In watching this complex ballet of activity, it occurred to me what this reminded me of; my office. The parallels were striking. Most people had called ahead and had reservations (an appointment). The restaurant had a basic idea of the nature of their problem (they were hungry). In contrast to my office, the restaurant has an explicit and defined menu of options and it is pretty much agreed upon that the customer selects from those menu options. We have a list of options which are opaque to my customers which I select to bill for after the fact. The more the patient has ordered, the more the items are discounted. This has all sorts of implications in terms of incentives to consume.

In each case there is a frantic pace to get people in an out. In both cases, the rooms (in MD offices) and tables (in restaurants) are where revenue is generated. As long as we are financially locked into the short order model of ambulatory care, we will be stuck with the short order health care delivery system. The restaurant industry has certain advantages. The restaurant model has take out, a concept that perhaps the health care industry can create. The restaurant industry has long recognized that they deliver both what clients need and what they want. People need food but they can want much more. Their needs can be satisfied by the most basic foods but their wants can be virtually infinite and the restaurant industry responds to this by offering a mix of offerings, ranging from the most basic fast food to the most indulgent (and pricey) experiences.

Retail medicine is responding, albeit slowly. Regulatory barriers and legacy payment arrangements have served as brakes on real innovation. Acute ambulatory clinics have moved to a menu driven service model. Patients seem to accept that if it is not on the menu, they will not ask for it. There will always be a few people, like those who want to order a hamburger at Taco Bell, who will be indignant. Concierge practices try to make explicit the difference between what patients need and what they want. These efforts are in their infancy. There is much more to come and the pressures to develop models which create clear distinctions between needs and wants will become acute as the payment from insurance (both public and private) will become more and more focused on paying only for needs, not wants.

We should be view this as both as threat and an opportunity to escape the medical short order delivery model.

The upside of being unsatisfied

2011-08-11T18:22:00.000-04:00

Earlier this year I went to a patient safety conference sponsored by the IHI conference. It was a very interesting conference. In contrast to the usual medical conferences I attend, the population of attendees was very heterogeneous, made up of a small fraction of physicians and an admixture of nurses, PAs, NPs, PhDs., administrators, counselors, health techs, and a host of others involved in some form in the delivery of health care services. The focus was mostly on primary care s opposed to specialty care, although it was interesting that it appeared to require many different specialists to delivery primary care (although not MD specialists). Common to all of these participants in the delivery of primary care was the recognition that their future was completely linked to the need to change. No one I met was at all married to keeping the present delivery system.

Here I was in what could be best described as a supercharged atmosphere literally where it was a given that everything would change and everyone thought... "Bring it on!". Ditch the fee for service payment system... what are you waiting for? So what if we have been operating using a particular set of models before. They don't work for us or our patients.

It was such a stark contrast to the crowds that I generally run with who are as a rule vested in as little change as possible. Why such a contrast? The major reason is that primary care providers are not at all happy with their current lot. What they generally do to bring value to patients is arbitrarily not valued as much financially as what many other medical specialty activities. In contrast, those involved in specialty care, particularly those who are proceduralists who are highly paid, like their practices just the way they have been.

Outside of the internal struggles within medicine as to who is valued or not, there is a larger process which will likely satisfy those who want change for the simple reason that change is inevitable. When the super committee appointed by Congress gets back to work, they will look at the task ahead of them. Whatever their partisan bent, champions of expensive health care will not likely find many allies. They will be charged with one major task... cut spending. On the Democrat side of the aisle, there will be huge pressures to "save" Medicare and Medicaid as we know it. On the Republican side of the aisle, the goal might be different in that there will be huge pressures to re-conceive how Medicare and Medicaid are structured, moving perhaps to more market based principles. However, both parties will measure a key element of success with one common metric; spending less money and curbing the rate of growth of health care spending.

When the revenue streams are cut with the prospects of further cuts into the indefinite future, this will turn everything upside down. Expensive hospital based medicine will be a business no one will want to be in. Present profit centers will become cost centers and top billers in the present will be viewed as consumers of expensive resources. Everything will be turned on its ear, if you remain in the world where your income sources are strictly linked to third party payers, particularly ones whose mandates will be to spend less because they are broke. Fee for service might not be dead, but lucrative fee for service paid for by government entitlement programs will be a thing of the past. The drive to cut costs will overwhelm all other priorities.

Remember that happiness = results - expectations. Those who expectations are the continuation of an unsustainable payment system which rewards them arbitrarily but handsomely will be disappointed. Those who expectations have already been dashed, this sea of change and disruption of the present system is viewed with great glee. It is the upside of not being happy with their present circumstances. Whether they will fare any better in the future is an open question. We can hope that we will be left with a health care delivery system that serves patients better for less money. That is the real measure of success.