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Medicine’s Missing Foundation for Health Care Reform: Part 3 – Economy of Knowledge in Decision Making

         A. The domain of commerce

   Commercial enterprises, more so than research enterprises, must cope with the ongoing costs of gaining information resources and engaging in decision processes.  Although often overlooked, the economic importance of these costs, as Thomas Sowell observes, is fundamental:  

In reality, knowledge can be enormously costly, and is often scattered in uneven fragments, too small to be individually usable in decision making.  The communication and coordination of these scattered fragments of knowledge is one of the basic problems—perhaps the basic problem—of any society, as well as its constituent institutions and relationships.30

This basic problem is more difficult to solve in medical decision making than in settings (such as execution of decisions, or factory production) where the goal is to achieve uniformity of outputs by eliminating variation of inputs.   The goal of medical decision making is just the opposite, because the most important inputs come from patients.  Thus the goal is to individualize care by taking variation among patients into account.  A central difficulty in achieving this goal is that medical knowledge is usually expressed as generalizations that fit unique patients imperfectly.  Those generalizations are essential to take into account, because they capture medically important elements that different patients have in common.  Yet, these generalizations cannot properly be applied without also taking into account detailed, patient-specific data and individual preferences. 

   These disparate elements must be combined for individualized decisions, but those involved in medical decisions are not positioned to do so on their own. Caregivers cannot judge how patients’ personal preferences or values should be applied.  Nor are either patients or caregivers able to efficiently mobilize relevant general knowledge and couple that knowledge with detailed data.  Enabling them to do so should be a central task of health reform.

   A similar dilemma exists and is resolved to varying degrees in many economic contexts.  To understand how it is resolved, recall Whitehead’s principle—”civilization advances by extending the number of important operations which we can perform without thinking about them.”  F. A. Hayek observed that Whitehead’s principle has “profound significance in the social field.”  The significance is that social practices and institutions have evolved for avoiding dependence on limited personal knowledge and intellect:

We make constant use of formulas, symbols and rules whose meaning we do not understand and through the use of which we avail ourselves of the assistance of knowledge which individually we do not possess.  We have developed these practices and institutions by building upon habits and institutions which have proved successful in their own sphere and which have in turn become the foundation of the civilization we have built up.31

   Hayek’s concern was “the price system as a mechanism for communicating information.”  He critiqued formal equilibrium analysis in economics, which assumes away the need for such a mechanism:  “there is something fundamentally wrong with an approach which habitually disregards an essential part of the phenomena with which we have to deal: the unavoidable imperfection of man’s knowledge and the consequent need for a process by which knowledge is constantly communicated and acquired” (emphasis added). He also critiqued central planning as inadequate for this purpose. The price system provides a superior alternative.  In contrast to centrally planned systems,   

the most significant fact about this [price] system is the economy of knowledge with which it operates, or how little the individual participants need to know in order to be able to take the right action.  In abbreviated form, by a kind of symbol, only the most essential information is passed on and passed on only to those concerned.32

   The planners of a command and control economy are unable to apply their knowledge (statistical information) effectively, Hayek argues, because they are too isolated from practical knowledge of “the particular circumstances of time and place.”  This practical knowledge “by its nature cannot enter into statistics and therefore cannot be conveyed to any central authority in statistical form. The statistics which such a central authority would have to use would have to be arrived at precisely by abstracting from minor differences between the things, … which may be very significant for the specific decision” (emphasis added).  That practical knowledge of “minor differences” is only available to the “man on the spot” who is closest to the subject matter of the decision.  “But the ‘man on the spot’ cannot decide solely on the basis of his limited but intimate knowledge of the facts of his immediate surroundings.  There still remains the problem of communicating to him such further information as he needs to fit his decisions into the whole pattern of changes in the larger economic system.”33   The pricing system communicates information in the form of prices and quantities, which all interested parties can easily translate into personalized conclusions about affordability and availability.

   Hayek characterizes the pricing system as part of “the foundation of the civilization that we have built up.”  Such a foundation is missing from medicine.  Rather than building upon practices and institutions that have proved successful in science and commerce, medicine has remained mired in dependence on the physician intellect.  In Karl Popper’s terms, medicine has failed to move from World 2 to World 3, from the world of subjective knowledge to the world of the objective knowledge embodied in external tools.

         B. Comparing commerce and medicine

   Just as market economies need a price system to efficiently communicate basic information in terms meaningful to interested parties, so patients and caregivers need an efficient system for accessing and processing the limited, personalized information relevant to solving individual patient problems.  The difficulty presented by medicine is that personalized information is a needle in the haystack of medical knowledge and data.  Patients thus face enormous uncertainty unless and until they can access the limited information relevant to their individual problems.  Resolving this uncertainty for patients is the traditional role of physician experts.34  But this role is misconceived, for four reasons.  First, physicians lack the cognitive capacity to play this role.  Second, consumer dependence on physician experts imposes high costs in money and time.  Third, transferring inherently personal medical decisions from patients to third party agents inevitably degrades the quality of those decisions.  Fourth, traditional decision making by physician experts is not susceptible to organized improvement, because clinical judgment is opaque—its cognitive inputs are undefined. 

   In many economic contexts other than health care, we take for granted that personal consumption decisions do not require costly expert advice.  In transportation, for example, one need not hire an engineer to advise on buying a car, nor an expert to drive it, nor a guide to
navigate it.  Market and regulatory forces have developed systems enabling consumers to use cars autonomously.   In medicine, however, the systems necessary for consumer autonomy are absent.  As a result, consumers are expected to rely on decisions by physician agents acting on their behalf.  But this approach is unworkable, for the four reasons just stated.  The current response to this situation among policy makers is evidence-based medicine.  But this response is futile. To paraphrase Hayek, evidence-based medicine takes the form of statistical, generalizations, isolated from practical knowledge of each patient’s particular circumstances and characteristics.  That practical knowledge is only available to those who are closest to the subject matter of the decision—the patient and caregiver.  But those parties cannot decide solely on the basis of their personal knowledge.  They also need to access broader scientific knowledge, couple that knowledge with patient-specific data, and organize the entire process over time.35  In no other way can they make informed, individualized decisions.

   Regina Herzlinger makes a related point in her critique of managed care.  Managed care is a form of group purchasing.  “The Achilles heel of group purchasing,” Herzlinger observes, “is that it inhibits product differentiation.  The fundamental tenet of a market-based economy is that competition among differentiated products is much more effective in controlling costs than the clout of group purchases.”36  In medicine, the power of competition among differentiated products for consumer choice has been illustrated with Medicare Part D, where costs for the first several years turned out to be 40% below projections.  This outcome appears to have resulted from Web-based software enabling consumers to enter their personal medication profiles and thus efficiently differentiate among competing drug plans in a highly individualized way, finding the most precise and cost-effective matches between their personal needs and available plan offerings of generic and brand-name drugs.  This example illustrates how tools and systems external to the mind (World 3) provide an essential foundation for a market of autonomous consumers in which producers compete effectively.  Moreover, the lack of this foundation distorts the development of differentiated products and services generated by medical science.

         3. The need for simple rules to manage complex information

   Not only consumers but caregivers are unable to cope with complexity when left to their own devices.  Both caregivers and consumers need to rely on external systems to manage information for decision making.  Moreover, they need to use these systems jointly.  These systems must therefore be simple to use for everyone involved.  Indeed, simplicity at the consumer level is characteristic of much economic activity outside of health care.  “The growing complexity of science, technology and organization does not imply either a growing knowledge or a growing need for knowledge in the general population,” as Thomas Sowell has written.  “On the contrary, the increasingly complex processes tend to lead to increasingly simple and easily understood products.  … Organizational progress parallels that in science and technology, permitting ultimate simplicity through intermediate complexity.”37  From this point of view, the health care system’s impenetrable complexity is anomalous.

   Analysis by the Institute of Medicine (IOM) points in the same direction—simplicity must be built into the health care system for patients and caregivers.  The IOM points to a theoretical basis for this conclusion in scientific study of “complex adaptive systems.” Occurring in various social and natural contexts, complex adaptive systems are not built according to external, pre-conceived designs.  Rather, complex systems “can emerge from a few simple rules that are locally applied” by individual participants in the system (emphasis added).   “It is liberating to realize that the task of complex system design does not itself need to be complex.” To design an effective complex system means to “create the conditions for self-organization through simple rules under which massive and diverse experimentation can happen.”38  Based on these scientific insights, the IOM has concluded that “important lessons about simple rules for complex adaptive systems can be applied to health care systems as well.   In redesigning health care, the building blocks are the simple processes that make up the work of small systems of care and their interconnections.”39  The IOM proceeds to formulate “Ten Simple Rules for the 21st Century Health Care System” (pp. 70-88), but these are in reality general goals, not specific, operational rules for achieving the goals.

   What are the “simple rules” needed by the health care system?  A basic reality of health care is its information-intensive nature.  That reality suggests that simple rules for managing complex clinical information are pivotal.  Consider an analogy from the domain of commerce:  accounting rules for managing complex financial information.

   At first glance, accounting rules may seem like an unfortunate analogy.  Complexity, not simplicity, is what most of us associate with financial accounting.   Moreover, accounting rules have been powerless to prevent either the financial scandals that occurred at the beginning of this decade in cases like Enron and Worldcom, or the financial crisis occurring now near the end of the decade.  Yet, the analogy with accounting reveals much about the health care system.

   Accounting rules are indeed complex.  But that complexity exists only at the margin.  The core concepts of double-entry bookkeeping are so simple that they are taken for granted.  They apply universally, and yet allow for enormous diversity.  They help to organize the economic relationships among individuals who may or may not have any awareness of them.  First codified in Renaissance Italy 500 years ago, the core concepts of double-entry bookkeeping still provide a foundation for commerce.40  On this foundation have been built “generally accepted accounting principles” (GAAP) in the U.S. and similar standards in other countries.  Accounting principles are generally accepted for internal use, not simply imposed as an external compliance obligation.  This general acceptance results from the order, transparency, feedback and accountability they make possible.  To secure these benefits, private sector organizations codify and refine accounting standards, governments incorporate them in regulation, and the accounting profession is employed to enforce them with periodic audits.

   The profound social and economic importance of accounting standards became obvious in cases like Enron and Worldcom, where egregious accounting violations occurred.  In the current financial crisis, financial risks have been magnified, concentrated and obscured in unprecedented ways.  Financial accounting standards then could not be relied upon to maintain order and transparency.  Thus, the scandal was that generally accepted accounting standards were violated or allowed to become ineffective.  By comparison, in health care the scandal is that generally accepted standards for managing clinical information are absent.

   If health care needs standards of care for managing clinical information, what would those standards look like?  And given the infinite variety of patients, medical problems and practice settings, how could a single set of simple standards be universally ap
plicable and useful?

   All medical care involves two problems in managing information: (1) applying general knowledge to patient-specific data (information processing), and (2) organizing the flood of data generated by complex processes of patient care over time.  Two corresponding standards of care can and should govern these activities:

  • First, a combinatorial approach (as opposed to judgmental, algorithmic and probabilistic approaches) must be employed for using medical knowledge to inform selection and analysis of detailed patient data.  A combinatorial approach systematically combines multiple items of knowledge and data to identify medically significant linkages (for example, the linkage between a set of findings on the patient and a set of diagnostic or treatment possibilities).  This is a simple matching process that external tools can perform, before the exercise of judgment.41
  • Second, providers and patients must jointly use external tools (medical records with a problem-oriented structure) to organize patient data over time.  The organizing principle is to rigorously follow the basic steps of orderly problem-solving:  gathering information, defining problems, formulating plans of action for each problem, executing the plans, obtaining feedback on the results, and taking corrective action in response to feedback.42

   These two simple standards of care are not technical or obscure.  Instead, they embody common-sense principles of thoroughness and organization.  These are principles that everyone grasps, that minimize dependence on unstructured, subjective judgments, and that apply in all medical contexts.  That simplicity, order and unity are essential to making the health care system transparent, usable and affordable for all. 

         D. The effects of unmanageable complexity

   To reiterate, the manifold failures of quality and economy in health care arise from failure to bridge the gap between the mind’s limited capacities and the complexity of ordinary medical practice. Consider the problem of managing the use of expensive new technologies and procedures. For these advances to be used cost-effectively, two issues must be addressed.  First, they should be used only when superior to other options—which requires taking into account all available options, their applicability to the individual patient and their pros and cons for that patient.  Second, once an expensive technology or procedure is determined to be the superior option for a given patient’s circumstances, using the technology effectively may itself require taking additional detailed information into account.

   In short, managing the use of expensive technologies is fundamentally a problem of managing information—of applying extensive medical knowledge to detailed patient data.  This reality means that judging the effectiveness of imaging technologies, drugs and other costly medical interventions is context-specific.  Generalized “comparative effectiveness” studies are virtually useless.  To be useful, judgments of effectiveness must take into account all relevant factors (and filter out the irrelevant) on a case-by-case basis.  This can only occur in Popper’s World 3, using external tools to organize detailed patient data and integrate that data with comprehensive medical knowledge.

   An example is clinical imaging technologies.  Ordinarily, these technologies should not be used until first eliciting the information available from a carefully designed initial workup (history, physical and basic laboratory tests).  The initial workup for a given presenting problem can and should be designed in advance of the patient encounter.  Habitually conducting this pre-defined initial workup will sometimes elicit the information needed to solve the problem presented, or else point to further inexpensive, readily available data.43 When this is not the case, when costly imaging technologies prove necessary, their effective use requires taking into account a bewildering array of factors in judging alternative tests, test protocols, test limitations and the significance of test results.  In particular, the initial workup often contains elements relevant to formulating inquiries and interpreting results.44  The complexity is such that effective use of imaging technologies demands external guidance, which should be in electronic form, continuously updated and integrated with other information tools.45  Caregivers need information tools to use clinical imaging tools cost-effectively no less than they need the imaging tools themselves to reveal internal organs.  In both contexts, ignoring modern technology is unacceptable.

   Another example is decisions about drug therapies.  Pharmaceutical use is fraught with complexity and peril:

 Our pharmaceutical habits today might actually make pharmacotherapy more risky than it was when all we had were herbal remedies and liquefied tree bark…. doctors today use an increasing number of drugs in combinations, and more drugs are being used more often by older people, a group that is likely to recognize fewer of the benefits of some medicines and more of their side effects. All of these trends are likely to continue to make adverse drug reactions more prevalent and profound and our efforts to mitigate them even more difficult.46

The difficulties make it critical to weigh drug therapies against other therapeutic alternatives, to keep track of the drugs patients are already taking, to take into account the patient’s medical problems other than the problem for which the drug is prescribed, to anticipate side effects and interactions with other medical interventions, to carefully select physiological parameters for monitoring, and to meticulously collect and analyze the relevant data, including the patient’s subjective responses.  

   One would hope that economic pressures (not to mention concern for patient safety) induce practitioners to use costly technologies and risky procedures in a careful, highly selective manner.  But precisely the opposite has occurred.  Dr. Ami Schattner writes of clinical imaging technologies:  “physicians have become ‘fascinated’, ‘preoccupied’ and ‘obsessed’ with their new instruments,” which “are vigorously promoted by the large companies that supply them.”  This state of affairs is destructive at many levels:

With the increasing availability of powerful diagnostic instruments, physicians have become distanced from both their patients and the basic clinical data.  Today, tests and procedures are considered infallible and ordered in increasing numbers—often almost blindly, repeatedly and sometimes even without examining the patient.  Thus, many are redundant, inconclusive or misleading, in addition to being unnecessarily expensive.  Uncertainty, false positive findings and fear of lawsuits often beget more tests or procedures and may trigger dangerous cascades. This testing-dominated approach undermines the value of clinical skills, which tend to become underestimated, underused and finally lost.47

   The key “clinical skills” at issue are those involved in conducting the initial workup—that is, taking a history, performing a physical exam and selecting basic laboratory tests.  The specific elements that these components should include depend on the patient’s presenting problem.  No practitioner will know what clinical observations are needed for each problem that patients might present.  Equally difficult is comprehending all the data generated by a thorough workup.

   These realities lead Dr. Schattner to argue that fully exploiting information from the patient history “mandates a closely linked and thoughtful use of large, preferably electronic, databases.”  But Dr. Schattner does not address the core issues of how and when external databases are to be used.  In traditional medical practice, the physician’s unaided mind largely determines the content of the initial patient history during the patient encounter; afterwards the physician may go to medical libraries and electronic databases for external guidance, if time permits.  This sequence is backwards.   What should happen is that before the initial workup guidance should be captured in external tools for use during the workup. In contrast to the unaided mind (Karl Popper’s World 2), the external tools (World 3) can perform rapid combinatorial analysis to select relevant data and reveal the data’s implications based on medical knowledge.  Then the practitioner and patient may supplement this objective process with additional observations suggested by their personal knowledge, experience and judgment of the practitioner who may have seen many other similar patients, and that of the patient whose intimate personal knowledge and experience of his or her own condition may reveal crucial variations from what the practitioner expects.

   The tool-driven, combinatorial approach just described contrasts sharply with the judgmental a
pproach that now prevails in medicine.  Without the necessary tools, a combinatorial approach is not practical for either provider or patient.  The patient will thus continue to rely on the apparently expert judgment of practitioners.  In turn,

practitioners might just as well continue to rely on their own creative intuition, experience, and random and informal contacts with other concerned people. Without the routine use of powerful knowledge coupling tools to generate specific linkages of the knowledge base to practical decision-making for unique individuals, scientific medicine affects practice primarily through new procedures and associated technologies, while the application of such procedures and technologies is left to a sort of cottage industry or folk art based on something approaching oral tradition.”48

    By default, practitioners act in accordance with their own interests, which may be driven by financial concerns, intellectual bias or simply convenience.  Vendors thus encounter little resistance as they market new technologies aggressively.  Reinforcing this effect are practitioner relationships:  “the current culture of medicine fosters lucrative networks of referrals and procedures but discourages critical examination of their value.”49  Further reinforcing this effect are patients, influenced by vendor advertising, who demand the latest innovations.  Physicians are powerless to resist this pressure, because their patients will simply find other physicians who accede to patient demands.  These elements have led analysts to conclude that technological advances are a root cause of excess cost growth in health care.50

   Technological innovation might have exactly the opposite effect if an objective, transparent, combinatorial approach to data collection and analysis were employed.  Patients and caregivers would be equipped to critically examine the value of new technologies and use them only when superior to existing alternatives in quality and cost, based on each patient’s individual needs in specific problem situations.  In that environment, innovation could be become a source of cost decreases—which is the role that technological innovation often plays in other sectors of the economy.

   For this to occur in health care, medical knowledge must be reconceived, and the patient must play a central role in the use of knowledge.  Those issues are the subject of the next two sections.

> Part 4 – Harvesting Medical Knowledge from Patient Care

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