Perhaps more than 10 years ago I heard Don Coffey speak. I do not remember the specific topic but he introduced the talk with a aerial picture of the island of Manhattan. He pointed out that there were somewhere in the neighborhood of five million people on this island and there was three days of food. He posed the question "How do all these people remain fed?"
His point was that there was no master feeding plan, no food czar, no ultimate authority. However, there was an abundance and a variety of foods which rivaled any place on earth. How could that be? Something as important as food, which is essential to the lives of all those millions of people, could not be left to chance. Who could have designed such a system?
The system was not designed, but it evolved over time... a long, long time. The rules were basically simple. If I have or create something I own, I can trade it for something else someone else is willing to give up voluntarily in trade. Voluntary exchange which occurs in an environment respectful of the rule of law, if the rules are right is an amazing facilitator of spontaneous order and complexity. Ultimately that complexity was manifested by amazing density, complexity, and abundance which is now the island of Manhattan.
The present state was not intentionally designed or engineered by men. Devoutly religious people are ridiculed for believing in deity based intelligent design. Some devoutly secular people also worship at this same altar blindly, embracing an equally implausible notion that mortal men can achieve god like powers associated with intelligent design of complex systems. It is what Freidrich von Hayek termed the fatal conceit.
Complex and durable systems are systems that can respond to change. It is very difficult to design the ability to respond to change into complex systems. Complex and durable systems come as a consequence of iterative processes. These systems can adapt if they can place lots of little bets and can take many small losses in order to find innovation and adaptation to an always changing world.
In the present health care environment, we are tied to systems that are cumbersome and almost impossible to change. In every domain imaginable we are constrained, whether financially or via regulatory shackles. Our financing models could not be more flawed. When I think of our almost complete dependence on federal funding for our research and teaching missions I cannot help but think of Koala bears and eating only eucalyptus leaves. Cute and quaint, but not a particularly viable strategy for thriving. The clinical domain is not far behind in moving to a eucalyptus leaf only diet.
The regulatory chaos is beyond crazy. We have licensing bodies, non-state regulatory bodies, regulations relating to state payers, agencies which regulate insurance mandates, private/public partnerships to set prices of services, and the general direction of these activities is toward increasing the layer upon layer of rules and regulations. Each new program is conceived in broad terms in documents which rival War and Peace in length, yet these serve only as a framework for the actual regulations which are subsequently written. The regulations are written by agents who cannot help but be insulated from the real world unintended consequences of their ramblings. It is the untended consequences which will have much more lasting effects than anything initially planned.
It all comes back to how we conceptualize the formation of complex networks of human interaction. How do all those people on Manhattan get their food? Intelligent design by humans invariably results in not so intelligent constructs. A bill in Congress to create a universal food care program with a public option for the island of Manhattan would lead to out of control costs, reduced choices, and many hungry people.
Tuesday, November 17, 2009
Thursday, November 12, 2009
They just can't make this stuff up!
A colleague of mine is dilligently reading the entirety of both House and Senate health care reform bills. He sent me the following amendment to the Senate Bill:
Value-Based Modifier for Physician Payment Formula: The Secretary of
Health and Human Services would be required to apply a separate,
budget-neutral payment modifier to the fee-for-service physician
payment formula. This separate modifier will not be used to replace
any portion of the Geographic Adjustment Factor. The separate payment
modifier will, in a budget-neutral manner, pay physicians or groups of
physicians differentially based upon the relative quality of care they
achieve for Medicare beneficiaries relative to cost. Costs shall be
based upon a composite of appropriate measures of cost that take into
account justifiable differences in input practice costs, as well as
the demographic characteristics and baseline health status of the
Medicare beneficiaries served by physicians or groups of physicians.
Quality shall be based upon a composite of appropriate, risk-based
measures of quality that reflect the health outcomes and health status
of Medicare beneficiaries served by physicians or groups of
physicians. In establishing appropriate quality measures the Secretary
would be required to seek the endorsement of the entity with a
contract with the Secretary under section 1890(a) of the Social
Security Act. The Secretary would also be required to take into
account the special conditions of providers in rural and other
underserved communities.
By 2017, all physician payments must be subject to this payment modifier.
I don't even know where to begin to think about this. To believe that this could be implemented in any time frame and result in a positive experience for anyone involved with Medicare (and likely all other insurance that the Feds touch) should be a test for loss of reality testing.
What will be measured as a surrogate for quality?
Who does the measuring?
How will any of these measures be assessed for actual validity?
Who makes decisions as to weighting?
Given this is by definition a zero sum game (budget neutral fashion), who decides the winners and losers?
There are over 1 billion encounters with doctors alone in the US each year. How many hours will it take to develop the appropriate quality metrics that will be applicable to even a fraction of these encounters? By 2017 all payments need to be subject to this payment modifier?
Value-Based Modifier for Physician Payment Formula: The Secretary of
Health and Human Services would be required to apply a separate,
budget-neutral payment modifier to the fee-for-service physician
payment formula. This separate modifier will not be used to replace
any portion of the Geographic Adjustment Factor. The separate payment
modifier will, in a budget-neutral manner, pay physicians or groups of
physicians differentially based upon the relative quality of care they
achieve for Medicare beneficiaries relative to cost. Costs shall be
based upon a composite of appropriate measures of cost that take into
account justifiable differences in input practice costs, as well as
the demographic characteristics and baseline health status of the
Medicare beneficiaries served by physicians or groups of physicians.
Quality shall be based upon a composite of appropriate, risk-based
measures of quality that reflect the health outcomes and health status
of Medicare beneficiaries served by physicians or groups of
physicians. In establishing appropriate quality measures the Secretary
would be required to seek the endorsement of the entity with a
contract with the Secretary under section 1890(a) of the Social
Security Act. The Secretary would also be required to take into
account the special conditions of providers in rural and other
underserved communities.
By 2017, all physician payments must be subject to this payment modifier.
I don't even know where to begin to think about this. To believe that this could be implemented in any time frame and result in a positive experience for anyone involved with Medicare (and likely all other insurance that the Feds touch) should be a test for loss of reality testing.
What will be measured as a surrogate for quality?
Who does the measuring?
How will any of these measures be assessed for actual validity?
Who makes decisions as to weighting?
Given this is by definition a zero sum game (budget neutral fashion), who decides the winners and losers?
There are over 1 billion encounters with doctors alone in the US each year. How many hours will it take to develop the appropriate quality metrics that will be applicable to even a fraction of these encounters? By 2017 all payments need to be subject to this payment modifier?
Sunday, November 8, 2009
Standardization, modularity, and the changing world
Much has been made for the merits of standardization of process within health care environments as a vehicle to improve outcomes and safety. The real power of standardization is when it can be deployed with modular design. Combining these two characteristics allow for safety, efficiency, and the ability to adapt to change.
Modular design allows engineers to tinker with one component without altering the function of a different component. While this is well appreciated within the engineering and software domains, it is not well appreciated within complex human systems. However, when thinking about it within the context of software design, it is easy to see how complex human systems share many of the same characteristics.
When building new software, it is very common to build upon the foundation of old code. Likewise, human institutions are rarely created de novo. They are generally created using older structures and forms and are frequently created using social groups derived from pre-existing structures. When creating new software, the operating units or files may operate in a self contained fashion, may require the function of other programs, or may be required by other programs for their functions. These represent interdependencies.
Modifying operating files which are dependent upon or required by other files creates added complexities. Their interdependencies must be defined if possible and unintended consequences identified. These complications of changing parts of software have uncanny parallels to manipulations of complex human systems. The more modular the software, the fewer interdependencies that exist, and the easier it is to manipulate and change any given component.
Within complex human systems there are a host of interdependencies which exist. Whenever there is a "change order" issued, it is best to understand just how modular your system is. Before you can begin to understand what might happen as a consequence of such a change order, you need to at least begin to understand simply the nature of interdependencies which are likely to come into play. In the health care environment we are only beginning to appreciate what we are up against.
Our present architecture is not standardized nor modular. Our interdependencies are extensive and only minimally defined. Perhaps our greatest interdependencies are financial. Within large integrated health care entities the function of many financially non-viable units is dependent upon financial resources generated by other units. Since interdependencies create non-modularity, it only follows that financial interdependency creates inflexibility. You can't alter one piece without altering the function of other units. This does not bode well for entities engineered this way since the only thing which we can predictably anticipate is a changing world and survival of the most adaptable entities.
Modular design allows engineers to tinker with one component without altering the function of a different component. While this is well appreciated within the engineering and software domains, it is not well appreciated within complex human systems. However, when thinking about it within the context of software design, it is easy to see how complex human systems share many of the same characteristics.
When building new software, it is very common to build upon the foundation of old code. Likewise, human institutions are rarely created de novo. They are generally created using older structures and forms and are frequently created using social groups derived from pre-existing structures. When creating new software, the operating units or files may operate in a self contained fashion, may require the function of other programs, or may be required by other programs for their functions. These represent interdependencies.
Modifying operating files which are dependent upon or required by other files creates added complexities. Their interdependencies must be defined if possible and unintended consequences identified. These complications of changing parts of software have uncanny parallels to manipulations of complex human systems. The more modular the software, the fewer interdependencies that exist, and the easier it is to manipulate and change any given component.
Within complex human systems there are a host of interdependencies which exist. Whenever there is a "change order" issued, it is best to understand just how modular your system is. Before you can begin to understand what might happen as a consequence of such a change order, you need to at least begin to understand simply the nature of interdependencies which are likely to come into play. In the health care environment we are only beginning to appreciate what we are up against.
Our present architecture is not standardized nor modular. Our interdependencies are extensive and only minimally defined. Perhaps our greatest interdependencies are financial. Within large integrated health care entities the function of many financially non-viable units is dependent upon financial resources generated by other units. Since interdependencies create non-modularity, it only follows that financial interdependency creates inflexibility. You can't alter one piece without altering the function of other units. This does not bode well for entities engineered this way since the only thing which we can predictably anticipate is a changing world and survival of the most adaptable entities.
Saturday, November 7, 2009
Plans and innovation
I am a product of the western world. There are a number of assumptions which go with growing up in such an environment. One of those assumptions is that of progress. We are raised to believe there is some sort of directionality in human development, moving toward some end which is more desirable than the present. Recent history by in large reinforces such a belief system, although there and many people who contest the assumption that what we have experienced represents an improvement over how people lived in the past. I for one think they are crazy and would not for a minute want to roll back time to a point where most children died in childhood and people eked out a day to day existence.
Given our circumstances as people have improved immensely over the past 300 years (see Steven Landsburg - http://online.wsj.com/article/SB118134633403829656.html#articleTabs%3Darticle), it poses a fundamental question. What portion of that improvement was the consequence of specific and intentional human plans and what part was due to unintended consequences of activities committed to for other completely unrelated reasons. For example, did the industrial revolution develop because of a strategic plan put forth by English merchants? Did the German pharmaceutical industry develop because of some master plan devised by the German chemical industry? Obviously the answer to these question is no. Whether it be technological, legal, or social innovations which made quantum leaps possible, the really big ones happened more because the random juxtaposition of events rather than anything planned.
There is no question that certain outcomes clearly benefit from having a well defined plan and defined end points. However, if the game changing breakthroughs are almost always unplanned and linked more to serendipity than planning, what are the ideal rules to implement that fosters both prudent planning and flexibility sufficient to permit disruptive innovation?
I think the key factor is the nature of the challenge one is approaching. There are really three types of problems which we can address. There are simple problems or tasks where the outcomes are clearly definable and the resources and expertise needed to solve them are readily and widely available. An example of this might be the building of a house. It might be expensive and take many months but building a house is a task which has been done literally millions of times.
There are complex and difficult tasks which require coordination of many people and resources over an extended length of time. Some of the challenges may not be fully defined at the time the task is taken on. However, the full scope of the problem can ultimately be defined and resources needed to address the problem identified or created. An example of this was sending a man to the moon. There were initially a number of initially undefined elements but in the end, it was a complex but definable and solvable problem, based upon Newtonian physics, 20th century material science, and for the most part definable variables.
Finally, there are wicked problems (http://cognexus.org/id42.htm). These are problems which we cannot even come close to defining all the variables where the only certainty is the presence of unknown unknowns. Approaching one element of a wicked problem will virtually always have unintended consequences.
Improving the human condition in the long run is a wicked problem. Any intervention is likely to have both planned desirable outcomes as well as unintended undesirable ones. How do we continue to act and not be paralyzed with the fear that our actions will bring disastrous and unintended consequences?
I believe the key to success (as measured continued innovation and progress) is to continue to plan on a relatively small and local scale and to hedge our bets. Provide incentives for people and groups to plan for and gain from small incremental improvements. History would suggest that small wins are like lottery tickets. Acquire enough of them and you will get a game changer. Plan to do too much and attempts to control too much over a time frame beyond which you cannot reliably predict outcomes will generally result only in unintended consequences.
Given our circumstances as people have improved immensely over the past 300 years (see Steven Landsburg - http://online.wsj.com/article/SB118134633403829656.html#articleTabs%3Darticle), it poses a fundamental question. What portion of that improvement was the consequence of specific and intentional human plans and what part was due to unintended consequences of activities committed to for other completely unrelated reasons. For example, did the industrial revolution develop because of a strategic plan put forth by English merchants? Did the German pharmaceutical industry develop because of some master plan devised by the German chemical industry? Obviously the answer to these question is no. Whether it be technological, legal, or social innovations which made quantum leaps possible, the really big ones happened more because the random juxtaposition of events rather than anything planned.
There is no question that certain outcomes clearly benefit from having a well defined plan and defined end points. However, if the game changing breakthroughs are almost always unplanned and linked more to serendipity than planning, what are the ideal rules to implement that fosters both prudent planning and flexibility sufficient to permit disruptive innovation?
I think the key factor is the nature of the challenge one is approaching. There are really three types of problems which we can address. There are simple problems or tasks where the outcomes are clearly definable and the resources and expertise needed to solve them are readily and widely available. An example of this might be the building of a house. It might be expensive and take many months but building a house is a task which has been done literally millions of times.
There are complex and difficult tasks which require coordination of many people and resources over an extended length of time. Some of the challenges may not be fully defined at the time the task is taken on. However, the full scope of the problem can ultimately be defined and resources needed to address the problem identified or created. An example of this was sending a man to the moon. There were initially a number of initially undefined elements but in the end, it was a complex but definable and solvable problem, based upon Newtonian physics, 20th century material science, and for the most part definable variables.
Finally, there are wicked problems (http://cognexus.org/id42.htm). These are problems which we cannot even come close to defining all the variables where the only certainty is the presence of unknown unknowns. Approaching one element of a wicked problem will virtually always have unintended consequences.
Improving the human condition in the long run is a wicked problem. Any intervention is likely to have both planned desirable outcomes as well as unintended undesirable ones. How do we continue to act and not be paralyzed with the fear that our actions will bring disastrous and unintended consequences?
I believe the key to success (as measured continued innovation and progress) is to continue to plan on a relatively small and local scale and to hedge our bets. Provide incentives for people and groups to plan for and gain from small incremental improvements. History would suggest that small wins are like lottery tickets. Acquire enough of them and you will get a game changer. Plan to do too much and attempts to control too much over a time frame beyond which you cannot reliably predict outcomes will generally result only in unintended consequences.
Takeover of the amatuers
In a world in which people's activity is becoming ever more hyper-specialized, our ideas of what we do and how we support ourselves changes rapidly. This trend has tremendous implications within medicine and there is no reason to believe that this trend will impact medicine any more or less than other realms. Ultimately, in an ideal world what any given person does and is rewarded for should have some value to the recipient of that good or service. How this translates to medicine is that patients should be as good or better off after their encounters with us than before.
The question arises "What can I (or anyone) do which is of value to other people and why?" Presumably, the other people I am referring to are those who I am directing my service to. In the realm of medicine it is presumably patients. What is the nature of those value adding activities and what specific expertise or talents do I have which allow me to provide these services better or exclusively?
As I see this, physicians historically have held central positions in health care because they had access to unique information which allowed them make predictions and solve problems, they controlled access to specific diagnostic and therapeutic tools, and they were in a unique position to coordinate human activity to facilitate the care of patients. In order to function in these roles they required substantial training on the background of particular innate talents. The net result of these requirements is that medical management talent was a scarce resource.
This combination of characteristics is not unique in history and is a narrative which describes the existence and evolution of virtually every professional class whether it be priests, scribes, journalists, or professional photographers. In each of these cases, barriers to entry and need for unique tools or expertise limited access to the profession and created a scarcity. However, technological change created rapid displacements. Ultimately, technological change allowed for massive entry of "amateurs" into these respective fields and undermined the role of the professionals.
Much of this historical information is is well described in Clay Shirky's book "Here comes everybody" but some specific observations are well worth repeating. He describes the role of the scribe in the middle ages when the ability to read and write were rare skills and that the scribe was an essential and scarce resource and a key cog in the ability to pass on knowledge from generation to generation. The potential loss of intellectual material which would not occur between generations without the scribe was immense. However, the introduction of the printing press changed all these assumptions and opened the business of replication of the printed word to a much larger number of non-scribe amateurs. Much was actually written lamenting the loss of the scribe profession but interestingly these writings were disseminated using the printing press technology.
In our contemporary world, there are similar trends happening in the world of journalism. Until recently, entry into the world of publishing was limited by the ability to print and disseminate writings. That is not longer the case. A word processor and an internet connection conceivably make everyone into a one man publishing company and this capability is moving toward the loss of the journalist as a professional class. The scarcity associated with previous business model (that is few publishing outlets and few journalists)has vanished. The amateurs have taken over. There is no clear distinction between the professional class and everyone else.
So, what does all this have to do with medicine and health care delivery? The "amateurs" are coming to health care, facilitated by a variety of technological changes, particularly those impacting dissemination of information. Over 45 years ago Kenneth Arrow identified what he believed to be a key and unique element to the health care industry which made it different; information asymmetry between patient and provider. It is remarkable that this concept is still emphasized, as if nothing has changed in the past 45 years.
It is not as if the information asymmetry as evaporated but the calculus as morphed remarkably. As information relating to health care has exploded, physicians have become less and less dependent upon their own brains and rely more and more on information tools which they can access on demand. However, these tools are generally not proprietary and are accessible to patients and other non-physicians. Thus the justification of professional class on the basis of access to and control of information is going away.
Specific technical skills may also serve as a justification for the physician professional class. However, best outcomes in this realm are generally linked to practice, process, and narrow focus. This appears to hardly be a justification for for the broad, extended, and expensive training model now used to train physicians. We perhaps can get better outcomes by focusing on specific technical skills required to do very specific focused tasks.
Finally, the professional class distinction for physicians may be justified on the basis of their ability to synthesize information and coordinate the activities of many people. This skill set is always prized but is not unique to medicine. Entry into the realm may be from many different educational and experience paths. It could be argued that since current medical education has no particular focus on these specific skills and that the current set of financial incentives with traditional medicine has created a culture which is indifferent to this particular need, that these functions should be moved elsewhere.
Where does this leave the medical profession and what is its fate in the future? Perhaps the more important question is how will technological and social change alter our ability to serve the medical needs of our patients? There is little question in my mind that we will cede control to the amateurs in many realms that were traditionally our realms. Innovation brings disruption and our profession will be disrupted. In the end our measure should not be how it affects our particular guild but instead how it affects our patients. It will be a hard pill to swallow.
The question arises "What can I (or anyone) do which is of value to other people and why?" Presumably, the other people I am referring to are those who I am directing my service to. In the realm of medicine it is presumably patients. What is the nature of those value adding activities and what specific expertise or talents do I have which allow me to provide these services better or exclusively?
As I see this, physicians historically have held central positions in health care because they had access to unique information which allowed them make predictions and solve problems, they controlled access to specific diagnostic and therapeutic tools, and they were in a unique position to coordinate human activity to facilitate the care of patients. In order to function in these roles they required substantial training on the background of particular innate talents. The net result of these requirements is that medical management talent was a scarce resource.
This combination of characteristics is not unique in history and is a narrative which describes the existence and evolution of virtually every professional class whether it be priests, scribes, journalists, or professional photographers. In each of these cases, barriers to entry and need for unique tools or expertise limited access to the profession and created a scarcity. However, technological change created rapid displacements. Ultimately, technological change allowed for massive entry of "amateurs" into these respective fields and undermined the role of the professionals.
Much of this historical information is is well described in Clay Shirky's book "Here comes everybody" but some specific observations are well worth repeating. He describes the role of the scribe in the middle ages when the ability to read and write were rare skills and that the scribe was an essential and scarce resource and a key cog in the ability to pass on knowledge from generation to generation. The potential loss of intellectual material which would not occur between generations without the scribe was immense. However, the introduction of the printing press changed all these assumptions and opened the business of replication of the printed word to a much larger number of non-scribe amateurs. Much was actually written lamenting the loss of the scribe profession but interestingly these writings were disseminated using the printing press technology.
In our contemporary world, there are similar trends happening in the world of journalism. Until recently, entry into the world of publishing was limited by the ability to print and disseminate writings. That is not longer the case. A word processor and an internet connection conceivably make everyone into a one man publishing company and this capability is moving toward the loss of the journalist as a professional class. The scarcity associated with previous business model (that is few publishing outlets and few journalists)has vanished. The amateurs have taken over. There is no clear distinction between the professional class and everyone else.
So, what does all this have to do with medicine and health care delivery? The "amateurs" are coming to health care, facilitated by a variety of technological changes, particularly those impacting dissemination of information. Over 45 years ago Kenneth Arrow identified what he believed to be a key and unique element to the health care industry which made it different; information asymmetry between patient and provider. It is remarkable that this concept is still emphasized, as if nothing has changed in the past 45 years.
It is not as if the information asymmetry as evaporated but the calculus as morphed remarkably. As information relating to health care has exploded, physicians have become less and less dependent upon their own brains and rely more and more on information tools which they can access on demand. However, these tools are generally not proprietary and are accessible to patients and other non-physicians. Thus the justification of professional class on the basis of access to and control of information is going away.
Specific technical skills may also serve as a justification for the physician professional class. However, best outcomes in this realm are generally linked to practice, process, and narrow focus. This appears to hardly be a justification for for the broad, extended, and expensive training model now used to train physicians. We perhaps can get better outcomes by focusing on specific technical skills required to do very specific focused tasks.
Finally, the professional class distinction for physicians may be justified on the basis of their ability to synthesize information and coordinate the activities of many people. This skill set is always prized but is not unique to medicine. Entry into the realm may be from many different educational and experience paths. It could be argued that since current medical education has no particular focus on these specific skills and that the current set of financial incentives with traditional medicine has created a culture which is indifferent to this particular need, that these functions should be moved elsewhere.
Where does this leave the medical profession and what is its fate in the future? Perhaps the more important question is how will technological and social change alter our ability to serve the medical needs of our patients? There is little question in my mind that we will cede control to the amateurs in many realms that were traditionally our realms. Innovation brings disruption and our profession will be disrupted. In the end our measure should not be how it affects our particular guild but instead how it affects our patients. It will be a hard pill to swallow.
Monday, November 2, 2009
Financial Innovation in Health Care
After reading Clayton Christensen's book, "The Innovator's Prescription", I began to think about how our current payment structure has stifled needed innovation in medicine. When we think of innovation, we tend to focus on technological change. However, dramatic and beneficial change in any industry requires the simultaneous implementation of technological and financial pieces. When Sony entered into the the US television market, they benefited from access to marketing channels via the upstart Kmart whose business model was not dependent upon service revenues. The lesson of this story was that the technological innovation needed a financial innovation to be viable.
The automobile was simply an expensive toy of the wealthy until Henry Ford created a disruptive manufacturing process which included putting more money in the hands of his workers. The telecommunication revolution was driven by both technology and new business models which were allowed by the dismantling of ATT and novel approaches to bundling telecommunication services. Expansion of home ownership was made possible by both advances in building materials as well as development of mortgage products which expanded the power of credit to persons who previously did not have that option.
How are these observations relevant to health care? I believe that the financial innovation piece is as important as any other innovation in the creation of an improved health care system. The object of any change is that it should move us toward expanding what is available and affordable to more and more people. We have naively assumed that whatever technological advancement is developed at whatever cost can be deployed by declaring it a human right and insisting it be made available by some sort of redistributive magic. That will not work.
Current plans for reform provide no blueprint for the type of financial innovation which is requisite for moving toward a world were better care is available to more people for less cost. To meet those ends we need to put in place mechanisms which facilitate the development of payment schemes which support real disruptive innovation. Whether everyone is "covered" is ultimately meaningless if coverage is for legacy services offered under legacy conditions by legacy providers. Using legacy payment schemes will guarantee modest variations on the status quo, overspending on overpriced services, predictable shortages of underpriced services, and no real change or innovation.
The automobile was simply an expensive toy of the wealthy until Henry Ford created a disruptive manufacturing process which included putting more money in the hands of his workers. The telecommunication revolution was driven by both technology and new business models which were allowed by the dismantling of ATT and novel approaches to bundling telecommunication services. Expansion of home ownership was made possible by both advances in building materials as well as development of mortgage products which expanded the power of credit to persons who previously did not have that option.
How are these observations relevant to health care? I believe that the financial innovation piece is as important as any other innovation in the creation of an improved health care system. The object of any change is that it should move us toward expanding what is available and affordable to more and more people. We have naively assumed that whatever technological advancement is developed at whatever cost can be deployed by declaring it a human right and insisting it be made available by some sort of redistributive magic. That will not work.
Current plans for reform provide no blueprint for the type of financial innovation which is requisite for moving toward a world were better care is available to more people for less cost. To meet those ends we need to put in place mechanisms which facilitate the development of payment schemes which support real disruptive innovation. Whether everyone is "covered" is ultimately meaningless if coverage is for legacy services offered under legacy conditions by legacy providers. Using legacy payment schemes will guarantee modest variations on the status quo, overspending on overpriced services, predictable shortages of underpriced services, and no real change or innovation.
What does the fee actually cover?
Yes I am going to bash the payment system yet again. I can't help it. The more I think about this the more that I realize that undesirable outcomes can be directly attributable to how doctors are paid.
When I see a patient, I am paid for the specific encounter, that is the actual face to face time I spend with the patient. However, there is a series of post visit obligations which which I encumber as well. There are four characteristics of these post visit obligations that are worth noting. First, the actual obligations are poorly defined. Second these obligations are essentially uncompensated. Third, delegation of these obligations, even to those with little or no training generally has little downside to physicians. Lastly, the extent of these post visit obligations can be managed most efficiently by selecting a subspecialty whose workflow generates few and well defined post encounter obligations.
Historically the practice of most specialties and subspecialties of medicine generated sufficient revenues from the encounter to support the activities which were not directly compensated. However, as the margins decreased, physicians responded by focusing more and more on activities that generated direct payments. For activities which generated few downstream unfunded obligations, the higher throughput created few problems. When you were done with the face to face encounter your were done. For specialties like primary care, each encounter predictably created an additional post encounter unfunded obligation. Ramping up billable activity in this context created an unsustainable workload to support non-compensated activities. One approach was simply to stint on what is not paid for. For the most part this approach had positive financial outcomes at the cost of practicing medicine in such a way that was more in the physician's best interest than the patients.
The current approach to the presence of perverse incentives is to mount a campaign which aims to influence physician practice behavior by appealing to their professionalism. Such an approach, appealing to physician conscience based upon the assumption that physicians can be durably influenced to respond to incentives other than those directed at self interest, may sound appealing. We should feel obligated to do what is right if we were correctly socialized. However there is little in history to suggest that it is at all functional. It is more likely an exercise in wishful thinking. The product of lecturing medical student on professionalism will quickly wither in the face of real life economics in a world which financially punishes those who model the desired but not rewarded behavior. Bad incentives trump good intentions in the long run.
Humans are driven by self interest. To deny this is a non-starter as an entry point into any social problem solving activity. In creating a system in which lack of rewards for specific activities is baked in, we basically guarantee these activities will go away. We lament that physicians fail to engage in activities where they receive no compensation, but this should come as no surprise. In order to treat a patient with a given disease, you need a correct diagnosis. To fix a pathological health care system, we also need the correct diagnosis. What is broke? It is the payment system stupid!
When I see a patient, I am paid for the specific encounter, that is the actual face to face time I spend with the patient. However, there is a series of post visit obligations which which I encumber as well. There are four characteristics of these post visit obligations that are worth noting. First, the actual obligations are poorly defined. Second these obligations are essentially uncompensated. Third, delegation of these obligations, even to those with little or no training generally has little downside to physicians. Lastly, the extent of these post visit obligations can be managed most efficiently by selecting a subspecialty whose workflow generates few and well defined post encounter obligations.
Historically the practice of most specialties and subspecialties of medicine generated sufficient revenues from the encounter to support the activities which were not directly compensated. However, as the margins decreased, physicians responded by focusing more and more on activities that generated direct payments. For activities which generated few downstream unfunded obligations, the higher throughput created few problems. When you were done with the face to face encounter your were done. For specialties like primary care, each encounter predictably created an additional post encounter unfunded obligation. Ramping up billable activity in this context created an unsustainable workload to support non-compensated activities. One approach was simply to stint on what is not paid for. For the most part this approach had positive financial outcomes at the cost of practicing medicine in such a way that was more in the physician's best interest than the patients.
The current approach to the presence of perverse incentives is to mount a campaign which aims to influence physician practice behavior by appealing to their professionalism. Such an approach, appealing to physician conscience based upon the assumption that physicians can be durably influenced to respond to incentives other than those directed at self interest, may sound appealing. We should feel obligated to do what is right if we were correctly socialized. However there is little in history to suggest that it is at all functional. It is more likely an exercise in wishful thinking. The product of lecturing medical student on professionalism will quickly wither in the face of real life economics in a world which financially punishes those who model the desired but not rewarded behavior. Bad incentives trump good intentions in the long run.
Humans are driven by self interest. To deny this is a non-starter as an entry point into any social problem solving activity. In creating a system in which lack of rewards for specific activities is baked in, we basically guarantee these activities will go away. We lament that physicians fail to engage in activities where they receive no compensation, but this should come as no surprise. In order to treat a patient with a given disease, you need a correct diagnosis. To fix a pathological health care system, we also need the correct diagnosis. What is broke? It is the payment system stupid!
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