For the better part of a decade, I practiced inpatient hospital medicine at a large academic center (the name isn’t important, but it rhymes with Afghanistan…ford).
I used to play a game with the med students and housestaff: let’s estimate how many of our inpatients actually didn’t need hospitalization, had they simply received effective outpatient preventative care. Over the years, our totals were almost never less than 50%.
For my fellow math-challenged Americans: that’s ONE HALF! Clearly, if there were actually were any incentives to prevent disease, they sure as heck weren’t working.
In a country whose care pyramid is upside down—more specialists than primary care docs, really?—we’re squandering our physical, emotional, and economic health while spending more per capita than anyone else. Four percent of our healthcare dollars go towards primary care, with much of the remaining 95% paying for the failure of primary care. (The missing 1%? Doritos.)
Worse still, the oppressive weight of our non-system’s dysfunction falls disproportionately on the shoulders of our primary care providers—the very instruments of our potential salvation. To them, there’s little solace (and plenty of administrative intrusion) in the top-down reform efforts of accountable care organizations and “certified” patient-centered medical homes.
But what about a bottom-up, more organic effort to reboot healthcare? A focus on restoring the primacy of human relationships to medicine, empowering patients and providers alike to become potent, positive levers on a 2.8 trillion dollar economy? What if we could spend twice as much on effective, preventative primary care and still pull off a net savings in overall costs, improvements in quality, and increased patient satisfaction?
What if George Lucas had just quit after the original Star Wars series? Wouldn’t the world have been better without Jar Jar Binks?
While the latter question is truly speculative, the former ones aren’t. We’re trying to answer them in Las Vegas (hey now, I’m being serious) at Turntable Health, where we’ve partnered with Dr. Rushika Fernandopulle and Cambridge, MA based Iora Health.
We aim to get primary care right by doing the following:
Continue reading “Rebooting Primary Care From the Bottom Up”
Filed Under: Physicians, THCB
Tagged: academic medical centers, culture of health, FutureMed, Incentives, Iora Health, primary care, Turntable Health, Zubin Damania
Apr 16, 2014
In ancient Athens, the philosopher Diogenes wandered the daylight markets holding a lantern, looking for what he termed, “an honest man.”
It seems since the dawn of the consumer economy that customers and buyers have traded most heavily on a single currency – trust.
Three millennia later, our financial system still hinges on the basic premise that the game is not rigged and any trusted intermediary is defined by a practitioner who puts his client’s interests ahead of his own.
Anyone responsible for procurement of healthcare may feel like a modern-day Diogenes as they wander an increasingly complex market in search of transparent partners and aligned interests. The art of managing medical costs will continue to be a zero-sum game where higher profit margins are achieved at the expense of uninformed purchasers.
It’s often in the shadowed areas of rules-based regulation and in between the fine print of complex financial arrangements that higher profits are made.
Are employers too disengaged and outmatched to manage their healthcare expenditures?
Are the myriad intermediaries that serve as their sentinels, administrators and care managers benefiting or getting hurt by our current system’s lack of transparency and its deficit of information?
Continue reading “ACA 101: An Employer’s Search for Objective Advice”
Filed Under: THCB, The Business of Health Care
Tagged: Benefits, brokers, consultants, Corporate America, Costs, Employers, Hospitals, Human Resources, Incentives, Insurers, Michael Turpin, purchasers, The ACA, the business of health care, Uwe Reinhardt
Apr 10, 2014
Amid the rancorous debates over the Affordable Care Act, one provision deserves to be getting serious discussion.
It’s a provision that allows employers to increase the amount that they may fine their employees for “lifestyle” conditions, such as being overweight or having high blood pressure or high cholesterol.
Almost 37% of Americans are overweight or obese. The supposed goal is to use financial penalties to reduce obesity, the health costs of which exceed $200 billion per year. But this idea, while well intended, will not help Americans suffering from obesity, a medically defined disease and disability. In fact, it will likely make their situation worse.
For years, the country’s “wellness” industry has offered health-enhancement and obesity-reduction programs to corporations, from gym memberships to dietary counseling. For obesity, this approach has not worked. Research on these programs shows that they have not significantly reduced weight or cholesterol levels, or improved any other health outcomes.
Even the most successful programs, such as Weight Watchers, achieve an average two-year weight loss of only about 3% for their members— and even that tiny weight loss often returns later.
Continue reading “An Obamacare Fine on Overweight Americans: Discriminatory and Ineffective”
Filed Under: THCB
Tagged: High blood pressure, High cholesterol, Incentives, Obesity, Pre-Existing Condition, Stephen Soumerai, Wellness
Mar 25, 2014
Through a series of small grants, we’re is exploring the utility of applying behavioral economic principles to perplexing health and health care problems—everything from getting seniors to walk more to forgoing low-value health care.
At a recent meeting in Philadelphia we challenged grantees to compete in an Innovation Tournament. The goal was to identify testable ideas that leverage behavioral economic principles to help make people healthier by working with commercial entities. Participants were assigned to groups and made their best pitches to their colleagues. And of course we used a behavioral economics principle (financial incentives) to increase participation: Each member of the first, second and third place teams received Amazon gift cards.
Eight teams made the finals:
1. Love Lock: This team addressed the issue of driving and texting by proposing an app that could be installed on your cell phone that would send reminders not to text while driving. This team would work with car insurance and mobile phone carrier companies and provide discounts to those who get it installed. The behavioral economics principles being tested are default choice and opt-out.
2. McQuick & Fit: Too many people eat unhealthy food. This team’s idea was to have a rewards card that can only be used to purchase healthy food. With each purchase, the customer would earn points toward free, healthy foods. Online orders would be placed through a website that would feature salient labeling and allow for defaults to order healthy meals. The behavioral economics principles at play include pre-commitment, default choice, labeling, and incentives.
3. Just Bring Me Water: The problem tackled by this team is “regrettable” calories—mindlessly consuming whatever is put in front of you, such as free bread at a restaurant, or soda on a plane. The innovation: when booking a table online or calling for a reservation, you could ask to “opt-out” of the complimentary bread or chips that are offered. This would reduce the consumption of regrettable calories.
4. Lunch Club: This group looked at addressing gluttony through a partnership with a chain restaurant. When going out for a meal, portions are typically bigger and diners consume more. But what if you had the option of doggy-bagging one third of the meal for another meal—framed as “buy dinner and get lunch free”? And, if you took this option, you would get a scratch off as an enhanced incentive and immediate reward. The behavioral economic principles being tested here include loss aversion, active choice, and incentives.
5. Snooze, But Don’t Lose: People don’t get enough good sleep, which leads to poor executive functioning and safety issues. To increase safety, productivity, and efficiency, this group proposed using a Fitbit to build in reminders to go to bed earlier and provide feedback on good sleep. The behavioral economic principles at play are pre-commitment and loss aversion.
Continue reading “Eight Bright New Ideas From Behavioral Economists That Could Help You Get Healthy.”
Filed Under: THCB
Tagged: behavioral economics, Deborah Bae, Incentives, RWJF Pioneer, Wellness
Dec 4, 2013
The shortcomings of the Fee For Service (FFS) model are widely known.
During the 1800s, the British empire shipped prisoners to newly formed penal colonies in Australia (technically, these were British prisoners, but that doesn’t make a catchy title). Ship captains were compensated for each prisoner who boarded the ship. The financial incentive ruled over decency, each captain stuffed as many prisoners on to the ship as it could handle. Of course, the prisoner survival rate lingered at a precarious 50%, while those who managed to survive the journey often arrived beaten, sick or starving.
Attempts were made to improve the survival rates, through what might be considered early wellness programs. Captains were mandated to bring citrus to combat scurvy, a 19th century wellness program. Doctors were required on each ship carrying prisoners, improved access ala concierge medicine. I’m sure someone may have proposed it’s the prisoners responsibility to survive the trip and they ought to engage in their own survival. Nevertheless, requiring lemons and limes and placing physicians on the ships proved equally ineffective.
In 1862, economist Edwin Chadwick suggested a change to the incentive structure. Ship captains were no longer compensated for each prisoner who boarded in England, but, instead, received payment for every living prisoner who got off the ship in Australia. The first pay for outcomes program in healthcare. The survival rate on ensuing trips jumped from 50% to 98%.
The moral of the story is that incentives matter.
- Primary care physicians are the ship captains of the 21st century.
- American patients are prisoners of the US healthcare system.
- Misaligned incentives are the root cause for what ails the system.
Christopher DeNoia is the Vice President of Business Development at Amplify Health, where this post originally appeared.
Filed Under: Physicians, THCB
Tagged: Chris Denoia, Fee-for-service, Incentives, Physicians, Value
Oct 10, 2013
Three juicy lemons came through my inbox this week. The NY Times published an expose of why hip replacement surgery costs 5-10 times as much in the US as in Belgium even though it’s the same implant. JAMA published research and a superb editorial on the Views of US Physicians About Controlling Health Care Costs and CMS put out a request for public comment on whether physicians’ Medicare pay should be made public. Bear with me while I try to make lemonade, locally, from these three sour economic perspectives.
Here’s a super-concentrated summary of the three articles: The hip surgery is more expensive because, in the US, as many as 10 intermediaries mark-up the price of that same hip prosthesis. Then, Tilburt et al said in JAMA that “physicians report that almost everyone but physicians bears responsibility for controlling health care costs.” The physicians reported that lawyers (60%), insurance companies (59%), drug and device manufacturers (56%), even hospitals (56%) and patients (52%) bear a major responsibility to control health care costs. Finally, CMS is trying to balance the privacy interests of physicians with the market failure that my other two lemons illustrate.
Can we apply local movement principles to health reform? How much of our money can we keep with our neighbors? What policies and technologies would enable the health care locavore? The locavore health system couldn’t possibly be more expensive than what we have now and, as with food and crafts, more of the money we spend would benefit our neighbors and improve our community.
Continue reading “Enabling the Health Care Locavore”
Filed Under: OP-ED, THCB
Tagged: Adrian Gropper, CMS, Costs, Health Care Reform, Home Health Care, Incentives, Insurance, JAMA, local movements, locavore health system
Aug 11, 2013
For all of those out there anticipating the 2014 official role out of Obamacare, also known as the ACA (Affordable Care Act), here is a cautionary tale.
Many years ago, as I was growing my cardiology practice, it became evident that diagnostic services for my specialty, like stress tests, echocardiograms, etc., were done less efficiently and cost more at the local hospital, then in the office. This stimulated many groups in the 1980s and 90s to install their own “ancillary” diagnostic services. Patients loved not having to deal with the long waits and higher copay prices at the hospitals. And yes, the cardiologists did increase their revenues with these tests. However, lower costs to patients, insurance companies, Medicare, and improved patient satisfaction were just as powerful a stimulus to the explosive growth of these diagnostic tests, and later even cardiac catheterization labs, when integrated into the physicians’ offices.
As the growth in testing spiraled upward, the hospital industry saw their slice of the outpatient revenue pie nosedive. Hospital lobbyists and policy-makers cried foul and complained of greed and self-referral, which they said was spiking the rapid rise in healthcare costs.
Studies laying blame on self-referrals being the major culprit for escalating healthcare costs, have been inconclusive. However, after years of lobbying and the passage of ACA, the hospital industry finally had the weight of the Federal government on their side. It did not take long for Medicare to start dialing back the reimbursements for in-office ancillary tests and procedures, and outpatient cardiac catheterization labs were one of their main targets. Hospitals had lost millions of dollars to the burgeoning growth of these labs inside the cardiologist’s office.
Our twelve-man group had a safe and successful lab for about ten years. Then after the ACA was passed, Medicare began to cut the reimbursements for global and technical fees in this area. The cuts were so Draconian that it became impossible financially to continue the service. Never mind that we could provide the same service as the hospital more efficiently, with better patient satisfaction, and at a third of the cost.
Continue reading “How Misplaced Reimbursement Incentives Drive Healthcare Costs Up”
Filed Under: Physicians
Tagged: cardiology, David Mokotoff, Hospitals, Incentives, Medicare, Reimbursement, The ACA
Jun 21, 2013
There’s a high-profile and important paper in JAMA this week by Sunil Eappen and colleagues. The study looked at surgical discharges during 2010 from a single 12-hospital system and came to the conclusion that admissions that include a surgical complication were associated with a higher profit (defined as the contribution margin) than admissions without complications. The authors conclude that this creates a disincentive for hospitals preventing surgical complications since they might see reduced profits as a result. This is a very provocative finding and it’s getting a lot of well-placed media attention, as you might expect. There is an important caveat with the study that I would like to highlight.
In the study, the authors report that admissions with surgical complications result in $39,000 higher “profits” if the care is reimbursed via a private payer and $1800 if Medicare is the payer. However, as Dr. Reinhardt correctly noted in the editorial,
“Allocating profit and loss is exquisitely sensitive to the many assumptions made in economic modeling and must be performed carefully to provide useful evidence about the financial ramifications of surgical complications and other services.“
His concern dealt mostly with how the authors allocated fixed costs in their calculations. My concern has to do with what the authors assumed happens to an empty bed once a patient is discharged in a US hospital.
Continue reading “Why Surgical Complications May Actually Hurt Profits Despite What You’ve Just Read”
Filed Under: OP-ED
Tagged: Eli Perencevich, hospital-acquired infections, Hospitals, Incentives, JAMA, Patient Safety, surgery complications, Surgical Practice, the business of healthcare
Apr 17, 2013
Every day, millions of health care workers wake up and get ready to offer one of the noblest of services – to try and heal and bring comfort to the sick. They do valiant work, day in and day out, even as they confront extrinsic incentives that chip away at their mission and souls.
What are “extrinsic incentives?”
Consider this scenario. You’re driving a year-old car, and the engine light pops on. The car is under full warranty, so you bring it into the dealer. The problem is fixed quickly at no charge. This simple interaction between the buyer and provider of a service illustrates the broader and essential role of extrinsic (external) and intrinsic (internal) incentives.
Intrinsically, most of us want to do the right thing for ourselves, personally and professionally. You want to maintain the car well, so it retains its value and gets you safely from one place to another. The dealer wants to do the best possible job to keep you happy, so you’ll buy from him again. If the car is serviced well and doesn’t need extra repairs, he does well and so do you.
Continue reading “Building a Better Health Care System: The Incentive Cure”
Filed Under: Uncategorized
Tagged: Costs, extrinsic incentives, Francois de Brantes, HCI3, Health Care Incentives Improvement Institute, Hospitals, Incentives
Apr 15, 2013
Wang Li is a 48-year-old farmer from Dalian, China. After a two-day trip to the major provincial hospital, he’s heading home to his village to die. Wang has lung cancer, and even with insurance, his surgery will cost him 20,000 RMB — $3,000, which is twice his annual salary. The surgery would be curative, but it doesn’t matter. “I cannot burden my family,” he said.
I am a Chinese-born, American physician who just returned from a two-month research trip spanning twelve cities and nine provinces in China, where many of the health care reforms in contention in the U.S. have already been tried. As Americans contemplate the decisions ahead, consider China’s cautionary tale.
Today’s China is one of great disparity. The wealthy minority receives top-notch care, while the poor majority suffers from little access to care and no way to pay for it. Stories abound of patients like Wang Li who sign out of hospitals when they run out of savings, knowing they will die without treatment.
Continue reading “What the US Can Learn From China’s Health Care Reform”
Filed Under: OP-ED, THCB
Tagged: barefoot doctors, China, Costs, doctor shortage, health care access, Health Care Reform, Hospitals, Incentives, Leana Wen, primary care, The ACA, universal health insurance
Mar 18, 2013