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TECH: JD Kleinke–the Arianna Huffington of health care

JD Kleinke has a great article in this months Health Affairs in which he gets into the meat of why our bastardized health systems multiple contradictory incentives prevent the kind of open standards developments that brought ATMs to banking and bar-coding to retail.  The answer, he says is a public works program akin to the Moonshot.

I have lots of positive things to say, but as this is me reviewing, first a few minor quibbles. JD says that:

The insurer WellPoint experimented with this problem by controlling the direct cost, offering 25,000 of its high-volume physicians an e-prescribing device free of charge. The popular press did its usual glass-half-empty health care reporting: An Associated Press reporter noted that one-quarter of physicians did not accept the systems, rather than the more quantitatively relevant fact that three-quarters did.

Actually the news is worse. Wellpoint offered either a free computer (allegedly with an eRx product on it) or a handheld eRx system. They didn’t insist that doctors signed up with the eRx service they were touting. Now doctors not being dumb. most of them took the free computer, which if it’s not a replacement for the 286 on their office clerk’s desk, they are now using for stock trading and their kids homework. Very, very few signed up for the handheld or started the eRx service. Wellpoint offered a good example of how to do this wrong.

JD also says:

Similarly, it was only under the threat of reimportation that the drug companies became willing, reluctantly, to publish drug prices, which they began to do in 2004. Their stock prices have yet to recover for this and numerous other reasons, most of which relate directly to pricing transparency, delivered via the Internet.

Again not quite all true, as it was the decay in the  pipelines of the major companies that cause their stock prices to tumble. But for sure they’d rather you didn’t understand their pricing intricacies– and you don’t! And that of course goes for the PBMs too.

But apart from my minor quibbles with his analysis (and George Halvorson thinks that insurers are doing better than JD gives them credit for in terms of data interoperability — although I doubt George has ever used the same customer service line at a local Blues that I have to!), JD’s conclusion about what’s wrong with health care IT is  spot-on.

All of these health system actors are allowed to indulge in this economically self-serving behavior because, aside from two exceptions noted momentarily, there is no unifying economic stakeholder in the health status of any individual American. The persistence of job-based insurance—combined with the constant movement of the insured person across jobs, insurance plans, and care settings—galvanizes the fragmentation, economic conflict, and persistence of FFS reimbursement. Lack of information, gross inefficiency, and shoddy quality generate more money for providers, and health insurers who should be motivated to do something about this are captive to conflicting business agendas that compel them to block access to information, slow down transactions, and hold onto money in the short run, even at the expense of persistently gross inefficiency and shoddy quality over the long run. Viewed through this lens of "realeconomik," it is easy to see that health care’s IT problems are not IT problems at all; they are health care system problems.

And of course the logical extension of this is not that IT will save the day — on its own it can’t, but that we need all incentives and payments in a single insurance pool, or multiple pools that have risk adjusted between them. This is of course what the single-payer crowd and Alain Enthoven have been saying for nigh on three decades.

The remarkable thing about all this is just how easily fooled JD was back in the 1990s when he wrote a book called Bleeding Edge extolling the virtues of the market solution, and was one of the fellow travelers in the Reggie Herzingler pack.  He even wrote a remarkable article in Health Affairs that claimed that Columbia HCA was creating a whole new infrastructure for the way health care worked because it was supposedly selling some share in its hospitals to local doctors. Indeed Columbia’s ads at the time said that "health care had never worked like that before". Several rather more seasoned health care policy luminaries like Uwe Reinhardt, Jeff Goldsmith and Bruce Vladek took turns in their commentaries in the same Health Affairs edition ripping JD to shreds, and within a few months the Federal investigation of Columbia/HCA proved that health care never had worked liked that before, at least not to the extent to which Medicare was systematically defrauded by one organization.

The good news (and it is good news) is that rather than seeking solace by reinterpreting his analysis, Kleinke pretty quickly realized that the free-market ju-ju juice he’d been drinking didn’t work for health care. His book Oxymorons (for which I attended rather a fun launch party in San Francisco) came out only two years later, basically showing JD saying that everything he’d thought about market driven health care was wrong. Not only am I not criticizing him for changing his mind, I applaud him for it. Another great commentator, Arianna Huffington, made a similar journey from free-market zealot to born again progressive at about the same time.  Even I was a teenage Libertarian who voted for Maggie Thatcher. So there is hope for those of you who still won’t face the facts.

Of course the implications of Kleinke’s piece are less fun. It all goes back to basic Marxism and structural-functionalism — those with the power will control the outcome just as long as they can. I saw David Brailer speak and agree with Kleinke last year. He said that there was no business reason for interoperability.  Kleinke lays out why there aren’t in most sectors of health care. However, Brailer then went on to claim that the US would soon have an fully functional interoperable health care IT system that was to be better than any other nations (including of course those nations which are a) both investing money and b) already have that single incentive system thing sorted out.  Perhaps Brailer knows something about the likelihood of single payer that the rest of us don’t, but I somehow think that he blows smoke.

So given that there won’t be serious incentive (i.e. insurance) reform, the best hope remains that we do discover the mythical ROI in health care IT. I am slightly less pessimistic than Kleinke about this. Yesterday I saw a talk by the CEO of a medical group in Utah that has had a very successful implementation of an EMR system, and has managed to eliminate costs from its operating budget, and take on more doctors without adding support staff. It’s even now making money by "leasing" its EMR system to other docs in the community. Similarly my recent analysis of the ePrescribing market (coming out soon to a web site near you) shows that in several cases the adoption of an ePrescribing system reduced overtime costs and improved patient flow in small physician practices. So on a organizational level there can be an ROI from systems like EMRs and ePrescribing. That is the best that we can hope for absent a legislative miracle.

Kleinke has the right solution to actually fix the overall problem — a return to the days of FDR (and Eisenhower too).

So too with the building of a national, ubiquitous, interoperable HIT system. The federal government can and should write the huge check and be done with it. Even with the inevitable graft and corruption that would ensue, this massive public investment would pay for itself many times over. Walker and colleagues have shown that the direct cost of building a national HIT system is $276 billion (in today’s dollars) over ten years but that the investment would generate direct savings of $613 billion during those same years and $94 billion per year thereafter.These savings do not include any of the ancillary benefits, such as massive reductions in endless administrative rework or the vast savings gained through better management of chronic disease.As Walker and colleagues point out, "The clinical payoff in improved patient safety and quality of care could dwarf the financial benefits projected from our model."

Of course Kleinke then notices the real world.

Back in the real world, the suggestion that the federal government fix this intractable problem by writing a check for a quarter of a trillion dollars is pure political fantasy. It makes economic and technical sense, and it is not without political precedent; however, no one in today’s Washington with the political power to say so would keep that power after saying so. The very idea of a public works project (at least within our own borders) sounds like an artifact from an era eclipsed by nearly three decades of hostility toward government-based solutions to domestic problems, combined with a seemingly religious belief in marketplace solutions for all of them.

But hang on a minute, what just happened last week? We decided as a nation to spend $200 billion rebuilding New Orleans. And not three years ago we apparently decided to spend double that on invading Iraq. And, unlike Iraq, at least with a health care infrastructure we know there’s some chance of getting a return on the "investment".

And even better is that we’re already spending the money, or at least it’s there buried in the $750 billion each year that the Federal and state governments shell out for Medicare, Medicaid, the VA, DOD, county hospitals, et al.  So a redirection of that money coupled with a mandate about getting payments on one platform and everyone using EMRs may well work. All we have to do is convince Congress that it matters. Can we somehow get this on the agenda of the loony Christian right? Perhaps we can tell them that Terry Schiavo was killed by an IT failure!

But the bigger problem always gets back to those incentives–and while JD tells the Feds to spend all that money, he never says the obvious, which is that creating the Federal health IT payer system wont a) cure the ability of insurers to game the system, b) will still leave providers the incentive of doing more and more, which in turn will (combined with the insurers’ cherry picking c) price more and more people out of insurance. JD bases his optimism in part on the fact that a hysterical (in both senses of the word) Regina Herzlinger thinks that pay-for-performance will make health care worse by suppressing new innovative treatments, and that the market driven system that Kleinke skewers so effectively will cure all ills. While it’s good that JD’s come over from the dark side, and clear that Reggie’s too far gone for any hope, I fear that her opposition alone is not quite enough to ensure that JD’s plan is a complete success.

So we need to go the whole hog.  We need a regulated, mandated IT infrastructure for health care, and we need a regulated, mandated universal insurance pool which is forced to use the correct incentives (either structureal or Enthoven’s quasi market-based ones), that will get the IT system to point its light at the right things.

Blackford Middleton gets this close to right in his commentary…oh you’ll just all have to subscribe to Health Affairs.

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Matthew HoltJoe C.Eric Novack Recent comment authors
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Matthew Holt
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Eric–let’s assume that there was a universal insurance “managed competition” solution in place in which as I said in my earlier comment “the private insurer was on the hook to provide necessary medical care including emergency care via contract to its members (and every person would be a member of one such plan).” Then just as they would for any type of care, the insurer would via contract (presumably with ED med groups) be on the hook to organize ED coverage, including covering all the short term working conditions that you describe. So there’s a perfectly acceptable “market” solution that… Read more »

Eric Novack
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Manpower issues, which is not where this post began, is closely related. You base a portion of your plan on “the properly regulated market”. Will you regulate how many doctors get trained, in which specialties, how many hours they work, what kinds of conditions they are allowed to treat and not treat, how much they can charge, how much paperwork they must fill out, where they can work, how many patients per hour they can see, how much time off, how many xray machines, ct scans etc.? Who will make those decisions? If you create this bureaucracy with one party… Read more »

Matthew Holt
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Eric. You can use what anecdotes you like, but the crystal meth empidemic is not reflected in the data. See this post and its links. http://matthewholt.typepad.com/the_health_care_blog/2005/08/policy_debunkin.html Anyway, legalizing and regulating drug use is a far more effective way of decreasing its bad health effects, and improving the condition of the communities that it effects….but I digress. As for emergency care, the fix is easy, it just can’t be done in the voluntary insurance system that we now have. Either make it a universal tax-supported government-provided system (as in the UK, New Zealand and most of the rest of the world)… Read more »

Eric Novack
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Matthew- with regard to crystal meth, I would gladly welcome you to spend a few evenings following around the doctor on-call for ob at some of local hospitals. And you do realize, that it only takes a few events like I mentioned (epidemic or not) before the doctors no longer want to participate. I really want you to expand on your comment about “doctors copping out”. If, as the federation of American Hospitals (FAH- org. representing for profit hospitals) wants, that as a condition for participating in Medicare and having hospital privileges- doctors must participate in the call schedule– the… Read more »

Matthew Holt
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Eric, leaving aside you joining the crystal meth hysteria which is basically a myth (google you fellow libertarians Tierney and Balko on that one) you exactly prove my point. EMTALA doesnt work because it doesnt approach the problem globally, and gives two parties (the docs and the patients) a cop out. It’s the same reason that Ron and his buds only want healthy people in their insurance pools. If everyone in the system had to contribute and there was some type of a global budget, either created centrally by the government, or by a managed competition market a la Enthoven,… Read more »

Joe C.
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Joe C.

Matthew,
Just when it appears that you were coming around to an idea, you fall off the edge. You got to aligning incentives (free-mkt!), gov’t project for HIT infrastructure (as I’ve said many times), but then somehow you get IT = single-payer, praising Marxism, Iraq, Katrina, and then I quit reading.

Eric Novack
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Matthew- “We decided as a nation to spend $200 billion rebuilding New Orleans.” You are actually saying that President Bush made good decisions? I generally believed that a basic tenet of today’s progressive philosophy was that this administration is incapable of good choices. We agree that “correct incentives” are necessary. If you think that a massive government bureaucracy is capable of providing them- you are mistaken… On my show yesterday, I discussed EMTALA with a member of the technical advisory group formed by Congress to make adjustments. EMTALA legislation, a tiny piece of the omnibus budget bill of 1986, was… Read more »