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Sunday, March 30, 2014

Taking oaths of poverty...Not!

Those who deliver health care often express a very conflicted view of money in their profession. No one admits to being in it for the money. Yet,  I have yet to hear of any of my colleagues commit to an oath of poverty. There is a desire to live well enough, but what is enough is open to interpretation. That figure has different anchors from which various parties base their perception of what is good but not greedy.

What creates almost constant tension is the concern that the sources of the money, which drives the engines that are health care, make a difference. There are assumptions and perceptions about these sources which tend to go unquestioned, which I question. They include:

1. Money from commercial sources is unclean and corrupting.
2. Money from grants from non-profits or the state are not corrupting
3. Revenues from clinical practice are OK, unless somehow corrupted by funds from for profit entities

We have gone through various cycles of self reflection, accepting and rejecting funding partnerships with for profit entities, particularly pharmaceutical companies. In my opinion, the tensions arise because we make assumptions which simply are not true and can never be true. Institutions which deliver key services to people will always be less than perfect. The most important piece to recall is that the void left behind when key institutions fail is almost always worse than when they exist but function imperfectly.

I experience and try to direct a modestly sized operating unit which provides service to patients, training to various learners, and drives scholarly and performance improvement work. All of these endeavors require fuel, that is money. That is because those participating in these activities are almost exclusively "coin operated". Missions which provide their own margins are the easiest to sustain. Those which don't are at risk of going away, despite perceptions that they are important. Money is not everything but for activities which require the commitment of parties who require financial incentives to come to work, the economics become very uncompromising in a hurry.

Thus, what is the impact when we start to be picky about the sources of funds to support missions. I call into question the hierarchy of sanctity of fund sources as noted above. Wherever the money comes from will cloud our judgement. Yes, taking funds from commercial sources has its risks. I would argue that these risks can be mitigated by explicit transparency as to where the money comes from, how much was transferred, and where the funds went. I have seen the effects of the virtual complete cessation of industry money into medical training programs. We primarily used these funds to buy books and support small research projects. The hit occurred at the very time our other funding options became more limited. Our goals and missions are at times aligned with commercial entities such as drug companies. We should recognize this and use this alignment to maintain a differentiated source of funding.

The health delivery system and particularly academic health systems, have seen the federalization of their funding sources. I recently asked on of our finance heads what percentage of our revenues come from the federal government. They remarked that this was a very good question but they did not know off hand. I am fairly sure it is a large and growing percentage. Whether it be research grants, Medicare funds, Medicaid dollars passed through state middle men, or tuition backed by federal loans, a large percentage of key funds comes from a single source. Not such a good business model for long term sustainability in my opinion.

Furthermore, the assumption that federal or other state monies do not influence our thinking or behavior is to be questioned. These monies are by definition monies disbursed with primarily political considerations in mind. With money, there is always an underlying quid pro quo and with political monies, the payback must be something which has political value. In my opinion, the political leanings of academic health centers reflects the influence of federalization of the funding process. We have created an insular culture with few dissenting voices, which drives the expansion of state power in health care. It is unfortunate that the entire model based upon a narrowing source of funding becoming more and more sole source based is likely to prove unsustainable.

Finally, we derive huge sums of revenue from clinical activities. I am always annoyed when I read articles in clinical journals where authors claim they have not financial conflicts, yet the articles center around clinical activities which serve as their major source of revenue. Are we blind? If the intervention described in the paper focuses on a procedure which creates substantial margins to support you and your operating unit, is this not a fundamental financial COI, even you work for a non-profit entity?

If we are driven to a great degree by financial concerns (and we are), it really does not matter where the money comes from. Each source of money will create biases and blind spots, and influence our behaviors in both subtle and not so subtle ways. The effects will vary depending upon the sources but all sources provide incentives for both desirable and not so desirable behaviors. The beliefs that certain sources of funds are always substantially more corrupting than others is mistaken. Wherever the funds come from to support important missions, the rules in place with always drive certain parties to behave in less than virtuous ways, whether the monies derive from commercial or political activities. We cannot meet our missions without the financial resources unless we get buy in regarding oaths of poverty from those involved. That is not going to happen. We might as well be realistic and tap into robust and differentiated funding sources which includes both commercial and non-commercial sources to create a sustainable model.

Saturday, March 15, 2014

The struggle to provide value - Why health care is not so different

Health care delivery is complicated and expensive; increasingly even more expensive. Perhaps the biggest impact of anything change we are now seeing in the health care industry is being driven by cost and the movement of cost on to those who are directly receiving the services. Predictably, the effect of this cost transfer, primarily through increasing deductibles, is that those paying these bills are ever more acutely aware of the value proposition. Nothing will be more disruptive to volume driven health care delivery than patients pulling the emergency cord during the office visit and asking, "Do I really need this?"

What made health care delivery behave differently for many years was that these questions rarely arose because it was simply easier for all parties to avoid them. Doctors got paid more when they did more and as long as egregious harm was avoided and the perception of value delivered to patients was held, most everyone was happy. It was pretty easy to meet the bar on the latter since those needing to perceive value set the bar pretty low since they bore little of the actual financial cost.

We are now regularly seeing sticker shock. It is hard for those delivering health care to reconcile since from our perspective little has changed. Why should the perception be now that we are not delivering sufficient value to justify what we are charging since little has changed from our end. If what we are doing now does not hold up in terms of the value equation, how does that reflect on what we have been doing in the past?

This is really not so different from what has happened in a host of other industries. New goods and services in health care and other industries follow similar patterns. Expensive and new goods and services are developed and reach a small sliver of the market, generally the high end of the market. In the rest of the commercial world there are huge incentives to be the first to figure out how to take such new things and learn to deploy them widely but in order to do this, entrepreneurs must figure out how to do this at vastly lower cost. Unless they can succeed in doing this, they will fail since there are not sufficient financial resources for everyone to afford high end goods and services.

In health care, the insurance model until very recently provided little incentive to figure out how to deliver at lower cost. This is a disaster waiting to happen and not sustainable. It is quickly coming to a halt since many of the costs associated with services in health care are coming down full bore on to people with modest resources. In the short term this will take a terrible toll but in the longer term it is absolutely essential to inject the value imperative into health care delivery. The longer we insulate the broader public from the inflated prices and suboptimal resource allocation in health care, the longer it will go on and the worse the wake up call will ultimately be.

The health care industry must deliver value to the public. Otherwise, it will squander resources, serve as a barrier to the wealth creation which allows it to thrive, and impoverish those who are the most vulnerable.

Sunday, March 2, 2014

The burden of competing missions

I work at an academic medical center (AMC) and involved the classic tripartite missions of clinical service, education, and research. As noted in my recent blogs, I have become increasingly aware of the divergence between what our missions might be in an academic health center and the goals of our patients and their families. Specifically, our patient's priorities revolve around cost and convenience. It appears that these goals are at odds, particularly with our educational goals.

Our educational model is a legacy model which is not compatible with the increasingly rules based and focused factory based approaches begin adopted to increase efficiency and decrease cost. Furthermore, training requires exposure to a broad range of illness and therapeutics, which is not compatible with efficiency. In particular, health systems modeling of successful finances require they attract and cater to the least sick populations, in order to keep them happy and paying their premiums. While being of great financial values, these patients are of limited educational value.

Historically, GME and IME funds have attempted to close this funding gap, allowing for academic centers to have the resources to train and care for the sickest patient populations. The system worked reasonably well for a while. However like any subsidy, the money did not go where it might have more impact. It was all hospital based and tended to underwrite hospital functions. As the health care world moves more and more outside of the inpatient environment, how can training functions continue to exist, what should they look like, and who will pay for them?

Nothing lasts forever and there is no reason to believe that a program conceived about 50 years ago will continue in perpetuity. The question is not whether it will last forever but instead what will replace it and when, and what will the transition look like? It is unfortunate that no entity in the current system seems to want to address this issue. Existing oversight organizations such as the ACCME, LCME, and the ACGME seem to be most interested in extending their reach and operate on the assumption that the current funding structure can accommodate increasing regulatory burdens forever. They will have a scary wake up call when they discover that disruption of the current Federalized funding system will represent and existential threat to them as well as the programs they oversee.

Within academic health systems, there appear to be three distinct books of business. First, there are service lines centered around cutting edge technologies and approaches which do not exist as of yet in the community and serve as a robust training resource and source of revenue for these centers. While these used to be a major characteristic of academic health centers, these are remarkably rare. Technology which can be leveraged to generate income now diffuses into the community practices at light speed.

Second, there are services which generate healthy financial margins where AMC's must compete with the community practices. However, AMC's have difficulty competing because their structure and culture may not allow them to readily address patient desires for convenience and cost. Historically, many successful AMC's have been able to extract premium payments from commercial insurers which help offset their disadvantages. Increases in co-pays associated with commercial insurance and price transparency are undermining this revenue stream very rapidly.

Finally, academic health systems provide expertise and care for patients with very complicated disease where the relevant expertise simply does not exist in community practices. These patient populations are also necessary for fulfilling training missions and maintenance of a concentration of specialized competencies within AMC's. These concentrations serve a repositories of expertise and fulfill essential functions. They are why the sickest patients end up at AMC's for their care. Unfortunately, there is no present mechanism for AMC's to monetize these capabilities which serve both essential educational functions and meet otherwise unmet clinical needs in their communities. Those functions, no matter how essential, will disappear over time if they do not provide economic value to those delivering them.

What happens when the traditional subsidies which have underwritten training are eroded while at the same time cost pressures are increased on AMC's? Stein's Law is "If something cannot go on forever, it will stop". One f the worst aspects of our current system is that the way it is structured creates all sorts of barriers to testing new approaches to training. Regulations controlling Medicare based funding are notorious for forcing those participating into an all in or out structure. The various oversight entities such as the ACGME follow a similar model where innovative funding approaches are viewed with great prejudice. All seem to be blind to the reality that we have created increasingly complex cost structures while simultaneously creating increasingly constrained and de-differentiated funding streams. This is a very dysfunctional business model.

The end results are predictable even if the timetable of events is not. When the current funding mechanisms are disrupted, many training programs will quickly disappear. They live hand to mouth now. What will come up to replace them is an open question and will depend a great deal on what barriers will be created by current regulatory elements. What unmet needs will be created may become apparent only after a long time. Smart people will figure out how to meet human needs and profit from this, as long as they are not too constrained.

Saturday, March 1, 2014

Why should we aspire to efficiency?

I came across the 3M's health information  systems blog and a piece titled "Healthcare's Efficiency Challenge"(Link). The author reviewed a book by  William Baumol called The Cost Disease which tries to understand why we have not been able to garner much in terms of efficiency gains in the health care industry. The author posed the question: 
 How do we make the healthcare system more efficient, to improve the output while lowering the costs?
I would suggest until very recently that there has been little incentive or desire to improve efficiency. The payment system has rewarded quite the opposite of value and participants have taken them where the incentives have directed them. Do more, use more complex and expensive approaches, and any marginal level of improvement garnered, even at huge cost, was justified and compensated. The results are predictable and will become increasingly difficult to defend.

Two hundred years ago, 95%+ of the population was engaged in agriculture. We required the overwhelming part of the population to participate in this workforce in order to feed ourselves.  It represented a fundamental change in human social organization which in fact dated back perhaps 10,000 years. A transition occurred, particularly accelerated in the 20th century where a way of life on the farm was destroyed.  The net effect was we now have a remarkable abundance of food at markedly reduced prices. What this transition desirable or would it have been better to
have preserved a way of life, even if had meant food would not have become more abundant?

This sort of transition is not unique. Automation of manufacturing has made countless products better and cheaper and in each case has met with tremendous resistance from specific groups who power or status have been disrupted. The Luddites sought to burn the looms that revolutionized cloth making. Various guilds fought the industrialization of craft trade. In each case they desired to maintain a certain way of life and this may be romanticized. However, the preservation of the way of life for a selected group needs to be understood within a larger context of the even more substantial  improvements which would be garnered by an even larger populations. Call it progress if you will and some might want to disparage. However, the lot of people remarkably better. Who wants to go back to infant mortality and average life span of 40 years of age.

In many respects, medicine is facing just this issue. The historical model for care delivery is archaic and simply not scale able. Wecould be aspiring to deliver care to more for much, much less money, but that is not our priority quite yet. Will it ever be a priority for organized medicine? Would the AMA come out with the statement that we don't need so many expensive physicians. I doubt this. It is simply too disruptive and not realistic to expect that the disruption will be driven from within the industry. It never is.