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Tuesday, May 31, 2011

ACOs, markets, and coordinating human activities

I have been reviewing various discussions of the draft ACO rules. I am all for the overall goals of ACOs. To improve patient care it is absolutely essential to improve information sharing and provide appropriate incentives to reward activities which actually provide value to patients. I think it may be very enlightening to look at the proposed ACO approach and compare it to its alternatives.

The ACO mechanism has been proposed in order to more efficiently allocate scarce resources and to coordinate the activities of people and entities involved in delivery of health care. What other validated mechanisms exist to allocate scarce resources and coordinate human activities? The list is not very long, containing only one.. markets. Within markets, information is transmitted via the price mechanism. The price mechanism incorporates risk adjustment and value placed by consumers, and puts it into a dynamic tools which responds rapidly to available resources and value within specific contexts. It requires very simple rules. If you own a particular resource, it is your decision as to whether you want to enter into exchange. If you desire a particular resource, it will require that you be willing to give up something you own to acquire it.

In the attempt to substitute ACO rules for market rules to accomplish resource allocation and coordination of efforts, the first thing that becomes painfully apparent is we are required to substitute mind boggling complexity for the simplicity of markets. We propose to move from a complex system governed by simple rules to a complex system governed by rules that are almost  inconceivably complex. There is simply no precedent in all of human history to suggest that this can work while there are countless precedents which unambiguously demonstrate that such approaches consistently fail. The second half of the 20th century was a remarkable testimony to the consistent failure of non-market based allocation schemes.

The present discussion focuses on the minutia of how ACOs will be structured. It is as if we have abdicated on the discussion regarding whether the fundamental assumption  of their inherent workability. We have been asked to comment on the rules and not on the underlying question of whether such entities can be viewed as substitutes for markets in terms of their basic functions; allocating scarce resources and coordinating human activities. The questions were are debating are irrelevant. ACOs cannot fulfill the missions they were conceived to do and no amount of tinkering can change this. They cannot substitute for markets.

Monday, May 30, 2011

Expert skepticism

Dr. Rich is at it again with a post looking at use of statins.

Q: What’s the difference between a public health expert and an ax murderer?
A: Actually, there are two differences. The public health expert usually means well. And the public health expert has only metaphorical blood on his hands.

This blog piece reminds me of an Atlantic Monthly article entitled "The Cholesterol Myth" written in 1989 by Thomas J. Moore. In this piece Mr. Moore dissected the data supporting dietary interventions for the prevention of death from atherosclerotic heart disease. This article was one of my earliest introductions to a contrarian view of medicine.  I was an avid reader of the Atlantic for more than twenty years, attracted by articles which questioned the common wisdom. We need to be skeptical when it comes to recommending interventions for healthy people.

Saturday, May 21, 2011

Pricing and Value: When will lessons be learned

I was stumbling around the blogosphere today and came upon a piece published on the ACP Advocate Blog:

It provided a great, succinct summary of the the various attempts to reform the health care payment system over the past thirty years. They key insight and questions identified are:

The challenge, then, for those of us who believe that change is necessary and even inevitable, is to show that the PCMHs, ACOs, and other ideas for reforming payment and delivery systems can really work for the doctors in the trenches. Articles in prestigious journals, white papers from policy conferences, and well-meaning policy papers from organizations like ACP won’t hack it. We will instead need to demonstrate that the new models really, really, really can result in better payment, more time with patients, and fewer hassles for real doctors in real practices. We will have to fight to make sure that what seems like good ideas aren’t hijacked by insurance companies and other special interests into something entirely else, like we saw with gatekeepers and the resource-based relative value scale.

Like the legendary refrain from the legendary rock band, The Who, primary care doctors are screaming that they won’t be fooled again, and policy advocates would have to be deaf, dumb and blind not to hear them.

Today’s questions: What do you think the history of other failed policies tell us about the latest ideas for saving primary care?

This is easy. The history of these particular failed policies tell us that attempts to create command and control economies of any sort do not work...ever. They tell us that attempts to use administrative and non-market based approach to assign value via administrative pricing mechanisms don't work....ever.  Centralizing how prices are set and putting this power in the hands of a limited number of people simply sets the stage for the entire process to be hijacked by those most interested in money.

If I had an hour to save the world I would spend 59 minutes defining the problem and one minute finding solutions - Einstein
A problem well defined is a problem half-solved. – John Dewey

When the previous attempts to align the activities of health care providers with activities  which delivered value to patients and control costs were deployed, they simply failed miserably. Costs ran out of control and we created a system that did things to patients and only inconsistently served their needs. The fixes deployed served the immediate needs of the those involved in the deployment. In the short term, costs associated with particular books of business were reigned in but the cost control mechanisms simply was not match for the literally millions of system gamers probing for easy money.

In each case the diagnosis of the problem was wrong. In each case there was a belief that value could be defined independent of the party receiving the service. Furthermore, the ever expanding insurance model upon which each reform was built increasingly attempted to insulate the insured from the cost of whatever they received. It created the false impression among patients of unlimited resources which drove increasing and uncontrolled demand.  The most recent iteration of this in the form of ACO's explicitly rewards health care providers and health care organizations for stinting on care as the preferred approach to reign in demand. Seems odd to say the least and perhaps ethically dubious.

For the most part, health care is much like any other good or service. It involves people and resources and scarcity. To identify why we have such a mess, perhaps it would be useful to look at other activities which involve human effort and other scarce resources. There is no contesting that in the entire history of the human race, no human institution has proven more effective at the deployment of scarce resources and the motivation of humans to serve each other than markets.
While markets are imperfect, they virtually guarantee that value will be defined, not by the few, but by the many outside of the political realm, unless we are foolish enough to move the value assignment into the political realm (which we have).

The fee for service system is not flawed inherently. That private parties enter into agreements where one party is paid to deliver services to another party is fundamental to human exchange and complex economies. The inherent flaw in the present health care fee for service system is how value is determined.

The most important element of the health care system for any given individual who seeks care is that the services they desire need to be available. That things that people desire and need will be available is not a given.  Again while markets and price coordinated economies are not perfect, they do a better job of making a variety of goods and services available than any other approach. The perversion of pricing has made primary care increasingly unavailable. It has been administratively priced below where it should be in order to preserve supply.

How primary care will respond is unclear. There are those who believe that solutions will be found in the political realm. Primary care beware! This type of thinking is like Charlie Brown trying to kick the football held by Lucy. Don't be fooled again.

The alternative is to decrease your reliance on politics and third party payers. Other models such as SimpleCare and Retainer based medicine are much better approaches to fix the price problem than another politically based price fixing scheme. They have the best potential to restore your relationship with patients and have the prospect of beginning to change the culture to where patients have financial skin in the game.

Friday, May 20, 2011

Certainty and the testing culture

In today's NY Times Health Blog, Lisa Sanders writes:
The Limits of Medical Testing:
Guillain-Barré was a diagnosis that had been considered by the team, but which had been set aside when the spinal tap was normal. An elevated protein level in the spinal fluid is seen in 90 percent of cases after one week. This test was done just a couple of days after the patient became ill. Had it been done a few days later, it might have been positive.
No test is perfect; they all have limitations. And yet when we get a result, our temptation is to believe it and use that result to either diagnose or rule out a disease process. In medicine, there is often tremendous tension between the urgent need for diagnosis and treatment of a seriously ill patient and the uncertainty of the data we have available to help us make that diagnosis and choose that treatment.

The patient — sick, tired and often distracted by her illness — must provide the basic who-what-and-where of the disease. The physical exam, an indirect assessment of the problems inside the body from inspecting, percussing and palpating the outside of the body, is often uninformative. Those tests doctors and patients alike turn to for certainty have their own rate of error and built-in limitations. And often, data must be obtained and interpreted under the most literal of deadlines.
It’s a messy process, filled with red herrings and dead ends, and yet it’s all we’ve got — at least for now.
As I practice longer, I realize that uncertainty dominates certainty in the practice of medicine. How is the concept of uncertainty integrated into the training of the next generation of physicians?
I am engaged in the training of medical students and residents, but I am not particularly engaged in formal classroom teaching. However, do I give a few formal lectures each year to the medical students and I have done so for years. Only recently has the lecture evaluation process been robust. I like the idea of feedback but I have to admit that I have been somewhat taken aback by some of the critiques and have found at least some of the comments rather strange. After my initial annoyance, I realize that it is important to step back from my immediate response to criticism and think about the mindset of those who are listening to the lectures.

One particular comment, stating their desire for me to include fewer references to original basic scientific studies (e.g - PCR references) and just tell them what they need, was especially enlightening. I had to ask ... What are their needs? Do I know their needs or do they know their needs? Do they need to understand where the information which we base our clinical judgment comes from and learn to place data they garner in context?

The reality is the only thing they know for certain are their immediate needs and their immediate needs do not include learning things which will ultimately benefit the patients which they ultimately chose to care for.  Their immediate need is to get good grades on the test. They want the facts and only the facts which they will be tested on. Their tests are filled with questions which have "right" answers, something which is actually a rarity within clinical medicine. We train students in an artificial world with right answers for a world filled with uncertainty and ambiguity.

These are smart young men and women who are very focused on the task at hand, that is to get good grades and do well on standardized tests in order to match in highly competitive residencies. Appreciation of uncertainty and ambiguities is the road to becoming unfocused.

Medical educators have created a trap for themselves and their students.  Using the classic information acquisition and testing model, success can only be assessed by measuring how many testable morsels can regurgitated. Many if not most of these morsels are either wholly irrelevant or simply untrue (although widely embraced). The right/wrong format embraced by the testing culture reinforces the obliviousness to ambiguity and uncertainty which then serves as a barrier to the development of real judgement and wisdom in the practice of health care. The appreciation of subtlety is not something cultivated by multiple choice exams.

Sunday, May 15, 2011

The Health Care Endgame

Spending on health care has consistently grown at about 2% greater than the overall economy over the past 40 years. There may be little there is consensus about in the health care realm, but one thing which garners consensus is that the growth rate which exceeds the growth of the overall economy is simply not sustainable. This issue has been recognized for almost as long as Medicare and Medicaid has been in place, but no effective solution has been put into place. Why?

Obviously the problem s complex, but there is a convergence of factors, none of which are unique to the health care realm, which are conspiring to sink our ship. The first is optimism. We humans are hard wired to be optimists. Optimist live longer and are motivated to act. When people become depressed, early on their illness they often have better reality testing that when they are "normal". That is at least one reason they get depressed, because they see their prospects as they really are.

The downside to optimism is it tends to blind us to reality. We are convinced that we will do fine in our retirement and therefore there is no reason to start saving now. We will extend ourselves to buy that house based upon the assumption that our financial circumstances will improve and anyway, housing prices will rise forever. We will cut that deal with our employees making promises for pensions and benefits which can only be supported if the stock market grows at 10% annually, forever.

In the same sense, the actuarial data on Medicare, Medicaid, and private health insurance all says one thing. We cannot do this forever. We have been hearing this for over 30 years, prompting most locked into the present business model to eek just a few more years of banner earnings. When Kodak faced the prospect of digital photography in the late 1980's, they knew their core business would ultimately be decimated. However, a move to the digital world and leaving the film business model meant moving to a lower margin product. Why would a company develop a new product which would have a lower margin than their pre-existing core business? Never if the optimist in you sways you you to believe that film will last...somehow.

The second factor is what I call the "health care is different" mentality. In many respect this mentality feeds into the optimistic delusional mentality. If health care is different, then the predictions of the actuaries will not hold because of the special relationship the public has with health care and their providers. No matter how one views the unique (or not so unique) missions of the health care industry, one aspect of them is they run on money. People who provide all types of services vital for the deliver of health care, from those who provide point of service care to those who provide support services which are absolutely indispensable, all require financial compensation. The companies that provide the IV tubing, drugs, software, hardware, heating, cooling, HR management, billing, all require payment. While the health care services may be viewed as different from other services (and I would take issue with this assumption, but that is for another piece) , their financial drivers still have the potential to bankrupt us like any investment which is poorly conceived.

One of the products of the health care is different mentality is the idea that investment within the health care realm is different from investments elsewhere. We all make decisions with our personal resources which reflect trade offs. With the exception of very few in the super rich category, we all elect at times to deploy our resources and buy a good or service which is less expensive and lower quality than some other good or service. We elect to be somewhat under served because we conclude that a lower quality product serves our needs well enough.

Within health care, we routinely deliver products which over serve the public. The insured portion of the public, which is the segment that the health care industry cares most about, cares little if they are over served. While they might ultimately pay for being over served, they generally are not called upon to pay for specific services immediately. That their premium rises is not linked in their mind to the CAT scan they had for chronic headaches, the brand name doxycycline prices at $750/month their dematologist prescribed, or the $35K defibrillator implanted when the a less expensive model would suffice. No investment in a human life can be viewed as excessive, particularly when it is someone else's money. 

There is vague understanding at what can best be described at a 20,000 foot level that we will soon enter a realm where things will be different. We are implored to ultimately embrace the concept of shared sacrifices. However, no one wants to be first. The lesson of the previous generation of medicine is that those who were the first to be conscious of costs were the first to be impaled. Adjustments to payments were rarely targeted to those at the extremes. Payments were adjusted with a blunt instrument, downward for everyone, including those who resisted the temptation to gorge on the health carer payment gluttony. They ended being screwed when their practices which operated on modest margins became financially unworkable. Those most focused on the financial aspects of medicine found themselves on the panels which rigged the prices. Those of us who have been around to see how this has played out know that only noble fools get into the front of the line of shared sacrifices. The gamers will end up eating such folks alive and the gamers will always outnumber the noble fools.

Finally, the health care economics problem has been moved solidly into the political realm where workable solutions are political suicide. Successful politicians are ones that can get re-elected. Their first priority is to understand politics and use that understanding in order to leverage resources at their disposal into garnering votes when needed. Truth and a long time line are extraneous. To move any problem, which is difficult to understand and solutions are almost impossible to implement, into a political realm is crazy. It essentially guarantees the problem will be addressed with short term political goals in mind. Evidence for this relating to health care is everywhere. To discuss touching the entitlements of Medicare and Medicaid is almost universally viewed as political suicide.

President Obama's most recent attempt to use a bipartisan commission to take the political heat basically failed. The recommended approaches were immediately recognized as being incompatible with political goals and they are. Both groups are actually completely correct in that the only way to fix the problems with the budget is to fundamentally alter health care entitlements and any attempt to do so is incompatible with political survival.  The lesson to be learned is that it is foolish to attempt to fix problems which have no political solutions within the political realm. It is not a Republican or Democrat problem, it is a fundamental problem with the political process. Those involved simply don't have the tools to fix this problem.

There will be a point where the problem will be taken out of their hands. It some respects, this is playing out at the state level where states and localities are being forced to make hard choices. As painful as this might be, it may also have the effect of tempering some of the unrealistic optimism and spurring the development of alternative models which can deliver health care via models which are more cost effective. When people are having to make hard choices, they can spot where their resources are being wasted by being over served. How this will affect Medicare and Medicaid is unclear. I simply cannot envision how the transition will take place, but it will because those who are floating our debt will refuse to lend money. They will recognize that unless we can figure out how to stop this runaway train, investment in our activities is a bad idea.

Monday, May 9, 2011


We all know the current world in health care, do more and get paid more. Productivity of physicians is measured by billings and RVUs. Activity is key, value is believed to follow. What is unquestionable is this is a model to generate volume, particularly if there are no brakes on demand or supply. Volume it has generated and it does not take superior intellect to see where all this volume is leading. The health care business will bankrupt us.

There is also consensus that the basic volume business model must change. The devil is in the details. In order to transform the current system into the future system, we just need to make the system work when everything which is part of the current profit centers becomes a cost center.  How will that happen? How do you rewire the house when you can't turn off the juice?

Clayton Christensen's work would suggest that this cannot develop though evolution of the current business model. He describes how IBM has reinvented itself repeatedly. During the 1970s, IBM dominated the mainframe computer industry, but by the end of the 1980s, the mainframe industry was on the ropes. However, IBM morphed itself into a desktop computer company, creating a completely separate operating unit and business plan. Other mainframe computer manufacturers tried to get into the desktop computer business but they tried to squeeze it into their mainframe business model. They failed.

The lesson is simple. Any attempts to implement a "not by the click" business model within the current volume based model will be co-opted and fail to deliver. The new model will develop piece by piece outside of the current model. It will develop as an amalgam of minute clinics, concierge practices, and countless other innovations which we cannot yet envision. This creole simply cannot develop within the command and control ACO model or other commanding heights approach to health care innovation.

Diversifying promises

While we tend not to want to dwell upon it, the reality is that human existence is rather tenuous. Take away our things, including our food pantries, our shelters, and our water supplies, we will last less than a week. However, for the most part in the "civilized" world, most (but not all) of us remain relatively oblivious to this reality. We live in a world of plenty where obesity is more of a problem than hunger.

I have been in the working world for more than 40 years and I live comfortably. Not only do I have consistent access to meals and a climate controlled environment, but I have also made plans to retire some day to a world where I no longer am required to generate additional earning through work. I have delayed immediate gratification from current earnings based upon the assumption that I can delay them and collect later. How exactly does that work?

It is all about promises. Once we moved from each of us toiling to provide each and everything we need individually to an increasingly complex system marked by division of labor, sharing, and exchange, it became all about making and keeping promises. Early in the process, the exchanges were all personal, but as complexity reached dizzying levels, exchanges moved into the legal and contractual realm.

We are now surrounded by abstract promises. The US dollar... a promise. Social Security and Medicare... promises. Your pension .. a promise. Anything that you currently toil for but defer immediate gratification is somehow based upon the assumption that you will be able stake claim on something later. Someone or something must be committed to honoring this promise.

The reality is our existence in the modern world requires promises, that we need to deliver on them and that we are also dependent upon them. We need to ask, who can we rely on the keep their promises? A good rule of thumb is not to place all your eggs in one basket. Diversify your promise portfolio. All agents and entities capable of fulfilling promises are also capable of failing to do so.

The question is how involved can and should the state be involved in making this system of promises work? I think there is little contention that the state must be involved in the maintaining the legal framework under which exchange can happen. Furthermore, some sort of exchange medium is also required and states have played a central role in currency creation, although not always handling this responsibility responsibly.

Beyond creation of currency and the legal framework, what other promises should we trust the state with? How many promises should we place in the state basket?  What risks are inherent with political promises? These questions are essential to ask when the system of promises which back our health care economy is increasingly captured by the state. 

My own biases are obvious if you have read any number of my blogs. I think it is a bad idea to rely on the state to honor too many promises. The Federal government has already made so many promises that we simply cannot afford to keep all the promises they have made. If they do so, they will violate the basic and critical promises that all other promises depend upon; the legal structure and financial structures which underpin all other promises, public and private. Then we are in real trouble.