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Saturday, October 10, 2015

It's the payment system, stupid

It have taken a long hiatus from writing. I am not sure why. Part of the reason may be I have been so busy with work. Part of the reason has also been the world is so confusing that I did not believe I could say anything useful or coherent. Finally, writing required that I sit in front of a computer for even more time. My Fitbit has prompted me to get up and move. When I move, I don't write. Perhaps I need to buy a walking computer desk. Sounds dangerous...

I had a conversation with one of my colleagues at work this week which got me to thinking. He was a former ENT physicians who rose to leadership positions. He remarked that when he ran his department, there were always patients with particular diseases whom no one wanted to care for. For ENT these were the dizzy patients. No one wanted to see the dizzy patients. There was no shortage of calls for help. There are lots of dizzy people who are simply miserable with their disorder (the 12 month prevalence may be as high as 5%), but a limited to non-existent workforce who want to treat these afflicted individuals.

This is not specific to ENT and dizzy patients. For dermatologists, there are the itchy patients; for the rheumatologists the fibromylagia patients; for the gastroenterologists it is the irritable bowel syndrome patients; for the neurologists it is patients with headaches; for the hemologists/oncologists it is anyone who does not have cancer; for the orthopedists it is patients who have back pain who are not operative candidates. There are common and awful conditions which may be terribly debilitating. Yet it is common knowledge that the care community view these entities as one might view the old maid card in the card game. One is best served by passing this off to someone else.

What all of these things have in common is that they are common entities, rarely life threatening, may be difficult to treat, and most importantly, their value in the medical payment lottery has been arbitrarily set below where it provides incentives for health care professionals offer care to patient afflicted. The payment system has created huge disincentives for physicians and health systems to offer services to patients with these common and debilitating (but non-lethal) conditions.

In virtually all other sphere of human endeavors, unmet human needs and wants create opportunities for people and businesses to grow wealthy by stepping to meet human needs. This is not so much true within health care. The convergence of top down administrative pricing schemes and restrictive and punitive participation rules has created a sorry state which has basically orphaned huge segments of care needs. Let's say I am a neurologist who might have an interest in the care of patients with chronic headaches. The estimates are that this symptom affects about 50% of the population in any given year and 3% have chronic disease (meaning > 15 days per month - about 10 million people!).  If I follow evidence based guidelines, I will find managing these patients a financially losing proposition because the payment system (E&M codes primarily) arbitrarily assigns payments below the level of cost of delivery of service. As a rational person, I leave this business.

In other businesses, the shortage of supply allows remaining players to adjust the price of service to the point where continued delivery of services can be maintained or grown to meet needed demand. In health care, prices are fixed and almost impossible to respond to unmet demand. Yes, one could consider pulling out from Medicare or private contracts but it is much lower risk to simply offer other services which pay much better.

For the patients who have headaches, non-specific GI discomfort, itching, dizziness, fibromylagia, or similar states who get through the filters into your office, they will not likely come back if the level of service is sufficiently dismal. Whether intentional of not, there are benefits from the deployment of strategic clinical incompetence. Thus, there has been a wholesale exodus from providing care to patients with a host of very troubling, uncomfortable, debilitating and remarkably common conditions. No wonder the alternative medicine industry has moved in to fill this void.

Leadership within the conventional health care ranks are blind to much of this. To keep your health care delivery teams happy and financially healthy, it is essential to keep these patients out of your system as much as possible. One is best served not to give much thought to the origins of this issue.

Look at virtually any medical office or system's website and you will see various offerings of what that group is marketing to the public.  I reviewed the Mayo clinic site and typed in a series of symptoms or conditions. When I typed in chest pain, joint replacement,  or cancer, I got an informational site which had a "request appointment" button. When I typed in headache, itching, or dizziness, I got information but no opportunity to request an appointment. How interesting....

However, the movement toward consumer driven care may unmask this problem. I think it is only a matter of time before the public becomes aware of the disconnect between what we are incentivized to do and want to do currently and what unmet needs exist. My concern is that the response will be heavy handed, top down, and will double down on the current dysfunctional payment system. It will create just a new set of winners and losers based upon political games.

Sunday, May 10, 2015

Proliferating Rules and Diminishing Returns

A good friend of mine forwarded a link to Charles Murray's piece in the WSJ yesterday titled "Regulation Run Amok- And How to Fight Back" (Rules Run Amok).  He knew that the article would pique my interest and he was right.  It is a preview of part of a larger work which is to be published shortly, a book called "By the People: Rebuilding Liberty Without Permission". I will need to read this. However, I suspect I may have some basic disagreements with the author.

The premise of the article is that the regulatory state is out of control, a contention that I wholeheartedly agree with. However, he goes on to suggest that the regulated have an inherent advantage over the regulators, given sheer numbers. He contends that the regulatory state is analogous to a regulatory Wizard of Oz, appearing all powerful but in reality being relatively weak, like the old man behind the curtain. I think he has got this all wrong.

The proliferation of rules backed up by the regulatory power of the state is a set up for use of arbitrary power, which can and will be wielded by the worst of humanity. This sort of environment will and does serve as a magnet for those with the worst of intentions, who see the potential for power and control. Yes,, there might not be sufficient resources to enforce rules effectively and consistently. However, that will not longer be the purpose of any of this. Rules will be enforced to yield the maximum of power to a different end; personal gain for those who have placed themselves in strategic positions to benefit from selective application of rules. This is a story as old as mankind.

In my opinion, the regulatory state run amok has its origins in acceptance of a set of assumptions which now goes increasingly unchallenged. We see challenges in how people fare in our world and we look for solutions. People are poor. People get sick. People treat other people poorly. People foul their environments. We have a host of tools to address these situations, either as individuals or as groups. We can use persuasion or we can use coercion to nudge or shove other people or groups to behave in such a way to improve their own lots or the lots of others.

Our current situation has grown out of the mistaken belief that when a problem arises, the best and increasingly only way to address any and all problems is via state politics. See a problem and pass a law. However, not all problems are amenable to legal redress. The law is a blunt instrument based upon the assumption that the best way to get people to do something is to hold a gun to their heads, using the coercive power of the state to force them to behave in particular ways.

Almost 20 years ago, Richard Epstein wrote an incredibly insightful book "Simple Rules for a Complex World". I have cited this book many times in this blog. It was perhaps the book which has influenced my thinking more than any other book I have ever read. What he presents in this book are a compelling set of arguments for why we should not default to increasingly complex rules, especially legal rules, to optimize a world dependent upon humans working together. The concepts are actually relatively simple. Not all problems require action, particularly legal action. Isolated bad outcomes are compatible with good systems. Not all additional legal interventions result in better outcomes.

Once one starts down the road where every single undesirable outcome serves as the basis of some additional intervention in the form of increasingly complex rules, it leads to a cascade of creation of new rules which create worse outcomes which then serves as the basis of even more rules. While ignoring the rules may seem like a workable solution, I am VERY skeptical that this will yield anything more than individual short term gains at the cost of the creation of contempt for all rules, both functional and non-functional. That sounds like a strategy to optimize one's circumstances immediately before the onset of chaos.

Sunday, April 19, 2015

Who coordinates the coordinators?

This is the first line of an article written by Paula Span and published this week in the New York Times (the-tangle-of-coordinated-health-care). It is good news that there is a recognition that coordination of care is an important and up to now under recognized element(s) of the delivery of care.  However, it should come as no surprise that the simple recognition and allocation of modest sums of funds should not solve the coordination problem.

Second to and perhaps equal to the development of technology, the ability of humans to work together to address problems and delivery of human wants and needs is one of the greatest achievement of humankind. I am reminded of the first chapter of the book, Microeconomics by Samuel Bowles where he describes traveling into a rural area of southern India to the village of Palanpur. He wrote:

Like the overnight train that left me in an empty field some distance from the settlement, the process of economic development has for the most part bypassed the two hundred or so families that make up the village of Palanpur. They have remained poor, even by Indian standards: less than a third of the adults are literate, and most have endured the loss of a child to malnutrition or to illnesses that are long forgotten in other parts of the world. But for the occasional wristwatch, bicycle, or irrigation pump, Palanpur appears to be a timeless backwater, untouched by India’s cutting edge software industry and booming agricultural regions. Seeking to understand why, I approached a sharecropper and his three daughters weeding a small plot. The conversation eventually turned to the fact that Palanpur farmers sow their winter crops several weeks after the date at which yields would be maximized. The farmers do not doubt that earlier planting would give them larger harvests, but no one the farmer explained, is willing to be the first to plant, as the seeds on any lone plot would be quickly eaten by birds. I asked if a large group of farmers, perhaps relatives, had ever agreed to sow earlier, all planting on the same day to minimize losses. “If we knew how to do that,” he said, looking up from his hoe at me, “we would not be poor.”
--Samuel Bowles, Microeconomics: Behavior, Institutions, and Evolution, pp. 24-25

The time, money and effort allocated to health care delivery has basically exploded within our economy over the past 70 years. The amount of money which has been invested in systems to coordinate care has been vastly outstripped by the investment to simply do more things, whether that be delivery of drugs, surgery, or other discrete interventions. The primary purpose of the payment mechanisms deployed to deliver these services has been to insulate the consumers from the cost of those services, not to assure that interventions are effective or wise.

Furthermore, this system underwent extraordinary expansion at the very time where a concurrent expansion in wealth and productivity was also experienced. Thus, this allocation and investment in health care services was not held to the same standards used to assess the wisdom of investment. By insulating the public of the cost, at least in the short term, they were not sensitive to whether this investment was a good investment in their needs and wants. They received a product(s) which appeared to be worth their investment, the size and scope of which they were blissfully unaware.

The lack of investment in coordination of services virtually guarantees that there are huge elements of waste. Because we experienced such dramatic economic growth, the magnitude of that waste could be masked, at least for a while. We are now reaching the point to where that waste cannot be hidden and business as usual cannot go on. However, how does one create effective coordination within a business which has undergone extraordinary growth in both size and scope when so little investment was made in coordination infrastructure?

The issue is not so unique, as noted by Dr. Bowles above. It is foundational to the effective development of any system which delivers basically any product or service to large numbers of people and is integral to any system with depends upon the specialization of labor. This is not a problem, the details of which will yield to proscriptive human efforts and planning, working off some master human plan. The track record of this approach has a perfect batting average, that being perfectly awful and uniform failure.

The title of the subheading immediately prior to the paragraph above in Dr. Bowles book is labeled simply "Getting the rules right". What are those rules which create the correct incentives which allow for complex systems which effectively coordinate human activities? Note that the rules to achieve this are not likely unique to health care environments and we just as likely to gain insights from circumstances divorced from health care delivery than from within.

Given  this historical context, the thought that Medicare or some other insurer could fix this problem by creation of a handful of billing codes to pay for "care coordination" is essentially laughable. The fact that a host of disconnected delivery entities has created new coordination issues in their attempts to fix care coordination problems should come not as a surprise.

Saturday, April 11, 2015

Gaming payments and price transparency

The WSJ published an article in February touching upon the timing of hospital discharges and optimal payments (Health Care Gaming). It should come as no surprise that hospitals know how to extract optimal payments for services they deliver. Their survival as durable entities depends upon this. It is not limited to hospitals in the health care realms. What they do is not against the law although the optics may be disturbing. Essentially every individual whose health care job depends upon supporting themselves financially through the labor they do is in the same boat and they do the same thing to some degree. One cannot help but become aware of what one does that produces margins for oneself or one's employer and what does not. If you are not bringing in more resources than one is consuming, you are not long to the business you are in. Health care is a business, whether one labels your specific entity as for-profit or non-profit. Not for profit entities still maintain their margins and are assessed for financial viability by the same metrics as for profit entities.

The price transparency movement in health care is gaining traction and this movement as currently focused tends to highlight where specific people or care delivery entities appear to extracting more value out of the system than they appear to be adding to patients. The data as currently released tends to highlight specific high billing physicians. This sort of information highlights people and entities which are probably not breaking the law, just exploiting quirks of the current billing and payment system. Many might be embarrassed by the data but only a few will be at risk for indictment. They deliver the services billed for. Whether the services are needed or add real value to patients is another question. Those questions can be raised for a large percentage of health care services delivered in general. Then there is a whole other layer of outright fraud which is layered on top of this where services not delivered are billed.

Health systems market services which generate margins. They have no choice if they are to survive. All business are based upon this.  Even the most minimally astute businessman in health care knows what services are lucrative to deliver.  They can not and do not market goods and services which lose them money, even if these services are in great demand and add value to consumers unless they have a philanthropic benefactor which allows them to operate at a loss. Even that cannot go on forever.

What health care services generate substantial margins? That depends upon what can be collected for the service and the cost of delivery. Cost reduction is all of the rage at this point since those who deliver health care services cannot control prices. That is because for most prices for individual services in health care are administratively derived and not subject to market forces.  The CPT coding lottery is completely arbitrary and has basically no self correcting capabilities. The price transparency movement is now identifying activities where prices are set too high, resulting in inappropriately extracting value from consumers and payers. However, there is of yet no mechanism for this movement to identify where prices have been set to low and the services are is short supply, have disappeared, or have been so resource starved that the quality of the services has degraded.

The loss of market pricing systems in health care has removed a key mechanism for when prices are too low and shortages ensue. Markets in health care can drive down prices but there is no mechanisms for them to correct upward if that is what is desirable. This results in interruptions of access to services which patients may need or want. Services artificially priced below levels to provide sufficient incentives to generate a consistent supply will be in short supply or simply cease to exist. When scarcity develops in true market based systems, the price signal informs relevant parties that a scarcity exists and prices adjust accordingly to prompt new suppliers to enter into the market. In the realm of administratively set prices in health care, no such mechanisms exist. No self regulating mechanisms can operate since prices are essentially fixed. Access to key services are lost because no one wants deliver them at the arbitrarily low prices which some person or agency has decided is the right value.

There is a certain irony here since the current mantra within health systems is to develop pathways for access as a key principle to capture market share. The problem here is there is little effort to define what the access is to. From those who see this from a macro level and have little understanding of the nuances of clinical care delivery, they are confused as to what the actual deliverables are in health care. The deliverables are not the appointment any more than the essential deliverables is having health insurance. Both insurance and appointments are means to an end, and that end is for the health care delivery system to act at the behest of patients to fix their problems and add value to their lives. The ability to get patients scheduled for an appointment is simply a potential first step in accomplishing those goals. In reality, ready access to the current model may not be the optimal way to address their needs.

As it currently stands, basically the only way for producers to monetize their expertise is to plug patients into inefficient legacy delivery systems which are more geared to extract value from patients than add value. Plug them into a hurried appointment. Work off some checklist of actions defined by PQRS. Collect their copay and bill a third party for the remainder. Maybe listen for a few scant seconds to their complaints. However, whether you meet their needs or not likely has little bearing on getting paid. They got access to something in a timely fashion, not necessarily what they needed or wanted.

Doctors who tinker with different models of payment under the label of concierge practices are often accused of unethical behavior. The reality is they provide services which do not exist in the current system because the price are arbitrarily set below a minimum level of support. There is nothing unethical about offering additional options to patients in a financially transparent way, especially when it creates availability of something of value which would not exist otherwise,  that being access to something they really want and/or need.

The real ethical problem comes from a flawed pricing system which creates opportunities to exploit financial arbitrage while adding little value to patients. Imperfect prices set by administrative means will always create these opportunities and humans, being humans, we always exploit them. This is not an approach that can be refined and fixed. Administratively set prices are perhaps useful accounting tools, but they do not and can not transmit essential information about real human needs and priorities. There is no real learning curve here. Any system which depends upon setting prices for goods and services by administrative means can not succeed and will ultimately hugely misallocate resources because flawed human agents will find ways to game the system better and faster than any set of humans can figure out how to stop them.

The simplicity of binaries

Complex human societies have developed over the past 10,000 years. The developments have been gradual but accelerating, especially over the past 500 years. The ability of humans to work together in complex organizations depends upon the existence of complex rules, some legal, but mostly non-legal. These rules evolved and continue to evolve. They are far from perfect. Any framework of rules must get buy in from those who follow them. Rules create boundaries for behavior and those who follow them by definition agree to give up some degrees of freedom of action. The assumption is that whatever is given up must be less than the perceived gains. Otherwise, the rules will not be followed.

The other aspect of rules is their complexity or simplicity. Complex rules require more effort to enforce and apply. Rules tend to become more complex over time as recognition of failure rates of simpler rules becomes evident.The assumption behind this trend is that additional complexity will result in correcting less than optimal outcomes and the tradeoffs involved will not out as a positive. That is not always the case.

The ideal rule depends upon clear distinctions between when actions are required and when they are not. The rule is either activated or it is not. This principle is not limited to scenarios where questions of legal or not legal come into play. Rules are used to govern all sorts of decisions. Where things get complicated is when what has long been appreciated to be governed by rules with unambiguous thresholds are found to be not so clear.

Perhaps my perceptions are not correct, but it appears to me  that we are moving to a more complex set of rules over time. I understand that my perceptions are biased and that my reconstructions of the past are likely biased toward a simplicity which never really was there. However, there are some many examples where the choices of the past appear to be some much simpler than they currently are.

When I was a child, we had trash. If something was viewed as something to be disposed, we threw it in a trash can. The big challenge we faced was to change behaviors such that people did not drop trash where they stood or tosh it out of their moving vehicles. We did not have a proliferation choices of where to put materials we wanted to dispose of. We just threw stuff in trash cans and we proud of the fact we did not litter.

Now I am thoroughly confused when I am faced with the proliferation of receptacles. I suffer from disposables anxiety. Am I throwing this in the wrong bin? Do they just get combined and end up in a land fill anyway? Is this some sort of huge scam?

The proliferation of choices is not limited to trash. Perhaps one of the most fundamental changes which has transpired (and continues to transpire) is the proliferation of choices associated with sex, marriage, civil unions, and partnering. It used to be that you had men and women, and some of those men and women chose to pair up with each other to form families and have children. Some men and women did not pair up and those did not have families. There were some odd circumstances where some men took on multiple wives but this was frowned on and was done only on the fringes of society or in countries where the assumption was they would outgrow this sort of behavior.

This simple binary state is gone. There are men who marry men and women who marry women. There are men who end not not wanting to be men and similarly women who decide they do not want to be women, and health care interventions which intervene to create some other state approximating the other sex. These individuals can go on to pair up with other individuals whose sexual orientation or state which can fall somewhere into some continuum, no longer representing the male or female binary  (Nature- Sex spectrum).

There are many other examples of where we moved form simple states with few choices to states with multiple choices. Europe had one church for a millenium until the Reformation. The Cold War was about us and them (Soviets). We saw the world in stark terms of good and evil. Now we have a world fragmented into various parties with interlocking and conflicting interests, lead by people who qualify as neither as saints or complete sinners. We confuse legal constraints with the only boundaries defining good and evil.  

We can long for some earlier state of the world  which was simpler but the reality is it was never so simple. The variations were not appreciated until relatively recently. Perhaps we did not have the  time or resources to make much of these distinctions. People in general were too busy simply trying to stay alive. Our predecessors defaulted to simpler constructs, not because they were evil but because they did not have the resources or reserves to accommodate a more nuanced view of the world.

It ultimately goes back to the curse(s) of sedentism. With the passage of time, we have tended to be better at harnessing resources which has created more opportunities to create social and legal complexities which previously could not exist. These complexities allow for the needs and wants of people to differentiate but this differentiation requires more resources and energy and drive us to work harder. They make our lives better but in many senses create a world that is more fragile and structures that are harder to maintain. No single change appears daunting by itself but layered on one another the complexities grow geometrically. Can we understand where additional complexities in social and  legal structures go beyond the point(s) of diminishing returns?

Sunday, March 1, 2015

The Complacency-Over-reaction Cycle

We had a another series of potential bad snow storms last week. The weather patterns looked eerily similar to last year when we had our famous snowmaggedon. This event resulted in scores of people being marooned on highways for hours, including school children trapped on school buses. This year we were prepared with many school systems closing in anticipation of inclement weather, health systems cancelling patients, and government offices sending people home. What happened was basically nothing. No one complained, yet. The memory of last years debacle was still reasonably fresh in our minds. However, I can confidently predict that this memory will fade and when it fades, we will again become complacent.

I came to realize that this sort of cycle, between over-reaction and complacency is characteristic of virtually all human endeavors. When faced with preparing for the future, do we err on the side of doing too much or too little? It depends upon the circumstances we find ourselves in and the memories we have of recent events. No matter how we act at any given time we run the risk, or perhaps the certainty that we are destined to over- or under reaction at some point and we will be wrong. Furthermore, in retrospect we will look stupid, either preparing for some unlikely eventuality or something which  happened and appeared to be something we should have anticipated. We will be pilloried by the professional Monday morning quarterbacks.

This phenomena courses through basically every aspect of human existence. Look at the news at the recent vaccination controversy. When I was growing up, vaccinations were not questioned. There were not many of them and those which were available targeted diseases where people had actual memory can contact with. Not take the polio vaccine? You had to be absolutely crazy since there were actual people who were you neighbors who were in iron lungs at some recent point in the past. Fast forward 60 years and we are at the top of the curve, with some parents wondering why we would inflict so many shots on our kids for diseases that NEVER happen. Oh, they do happen....

In foreign affairs, we had the greatest generation which navigated us through WWII and the aggression of Nazi Germany. They witnessed the folly of appeasement and the world war that followed. They also witnessed the over-reaction which resulted in deployment of US troops throughout the world over the next 50 years with less definitive and optimal results. Why did we do all this? What were we thinking? We were thinking that the greatest risk was associated with doing too little but experience has informed us that you perhaps can err in either direction. In the near term, what do we do about the local aggressions of Russia and Putin? Is he the next Hitler or a desperate leader of a marginalized and shrinking country?

We will never get it perfectly right. It is not possible. Furthermore, defining whether we got it right or wrong cannot be defined simply by whether the outcome obtained at any given point in time was what we viewed as ideal. The future has yet to happen and when it arrives we can discern whether we have undershot or overshot our desired goals.

Telling graphic

And this:

The reality is we are all feeding at the trough....