I’m going to tell you something that Barack Obama doesn’t understand.
And because he doesn’t understand it, our country is wasting hundreds of millions of dollars at a time when we cannot afford to waste hundreds of millions of dollars.
Time and again President Obama has told us how he intends to solve our health care problems: spend money on pilot programs and other experiments; find out what works and then go copy it. He’s also repeatedly said the same thing about education. The only difference: in education we’ve already been following this approach with no success for 25 years.
Still, if the president were right about health and education, why wouldn’t the same idea apply to every other field? Why couldn’t we study the best way to make a computer, or invest in the stock market and do any number of other things — and then copy it?
I want to propose a principle that covers all of this: entrepreneurship cannot be replicated. Put differently, there is no such thing as a cookbook entrepreneur.
Let’s suppose for a moment that I am wrong. Suppose we could study the behavior of successful entrepreneurs and write down the keys to their success in a book that everyone could read and copy.
Consider Bill Gates, Warren Buffett and Sam Walton. If we could discover what they did right, and everyone copied their behavior, then we could all become billionaires. Right? Well, not quite.
Here’s the problem: In order for each of us to be a billionaire, we have to each be doing something that produces a billion dollars’ worth of goods and services. But if all we’re doing is copying action items out of a book, then we are not doing anything special. And if we’re not doing anything special, we are definitely not producing a billions dollars of value added.
In mathematics, Gödel’s Theorem says that no complex, axiomatic system can be both consistent and complete. What I am proposing is something similar for social science. Although there are some habits of highly successful people that can be identified and copied, there are not enough of them for each of us to become highly successful ourselves through copycat behavior alone.
I think I will call this Goodman’s Nonreplicability Theorem.
In health care, it’s already been borne out.
Scholars associated with the Brookings Institution identified 10 of the best hospital regions in the country and then tried to identify common characteristics that could be replicated. There were almost none. Some regions had doctors on staff. Others paid fee-for-service. Some had electronic medical records. Others did not.
A separate study of physicians’ practices found much the same thing. There were simply not enough objective characteristics that the practices had in common to allow an independent party to set up a successful practice by copycat alone.
By the way, this is not bad news. It is good news. How much fun would life be if we all went around copying what we read in a book?
John C. Goodman, PhD, is president and CEO of the National Center for Policy Analysis. He is also the Kellye Wright Fellow in health care. His Health Policy Blog is considered among the top conservative health care blogs where health care problems are discussed by top health policy experts from all sides of the political spectrum.
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Wow! This post is over two weeks old and I’m just getting to it. To much stuff on Google Reader, I guess…
“Can Everyone Become a Billionaire?”
A truly curious question for a place tagged for health care. But maybe not. I don’t think there are many billionaires working as physicians but I could be wrong. People who accrue that level of wealth don’t do it by working in the old-fashioned sense of the word. It helps to get started with generational wealth transfers, but if one starts from scratch about the only way to get that rich is having a really smart and timely idea and making sure all the ways it can generate income are handled exactly right in before the money starts rolling in. (Waiting til it starts is too late. Copycats will split the market, whether goods or services. Even with a head start competitors will still give one a run for the money, often succeeding.) I guess the place to start might be a patent on yet another device.
But the question is beside the point, isn’t it? Beginning with the first sentence this is a thinly-veiled hit piece about healthcare reform. aiming to illustrate how if two or three decades of efforts to improve education have not resulted in measurable improvements, why should anyone think changes in the delivery of health care be any different? A somewhat bizarre analogy.
Try this: If after many years of trying to discover a cure for (name a disease) why keep going?
When I was very young I thought tatting and crocheting were impossible but my Mom showed me how it could be done. I also knew that Wyoming was one of the states, but I heard someone say once that it was really a fictional place because he never knew anybody from there or who had been there. Sure enough, it took me a long time to come across somebody from Wyoming, which is very thinly populated.
This healthcare reform business is not a new challenge. Presidents from both parties have struggled with it since long before Barack Obama was elected. During the Bush administration there was a serious suggestion that healthcare insurance and employment be uncoupled altogether but that administration never got around to following through with it.
http://www.aei.org/outlook/21921
But that’s beside the point, too.
The point is that all over the country there are scattered a duke’s mixture of delivery systems getting all kinds of results, some excellent, others shitty, and the expected range in between. Places like Mayo, Kaiser, Geisinger and others typically get really good outcomes at a thrifty cost per patient (Remember, it’s money and results we’re discussing, getting the most bang for the buck) and even within the Medicare system some places perform dramatically better than others. Anyone who has not read Dr. Gawande’s stuff in the New Yorker has some homework to do.
Despite the combined assaults of the insurance industry lobbies, elected representatives looking out for their respective home turfs and doctrinaire extremists from the Austrian school of economics who care little or nothing for health care — the ACA came out of the sausage grinder with insurance reforms and an outline for “nudging” professionals into performance levels delivering better outcomes at better prices. Easy to say. Damn hard to do. Like herding cats.
So let a thousand concierge practices bloom. And let the billionaires who patronize them keep themselves and their families on cryogenic suspension for decades or as long as their money permits. Let them have cosmetic surgery, endless dental care, and bionic limbs as well.
But those of us sharing a finite amount of tax money are gonna have to make some hard choices. And trying to figure out how to become billionaires isn’t on the list of challenges we face.
It is not about copying billionaires. Probably it should be learning from what they have done. Of course, it doesnt mean everyone will be successful just by emulating them.
You must look outside of where you are to discover new possibilities. The people inside the box can only see the walls and contents not the overall possibilities. Great breakthroughs come from people who do not know they are doing the “impossible”. The system must have incentives to produce rewards. There needs to be a system where you pay when you are well and pain free then stop when you get sick. The present system would not reward such a person and could easily punish them for attempting a medical process without a license. The mind must expand and grow to accept the “new” idea that you can live a healthy pain free life without outside intervention. As more and more of the population became involved and responsible for their own wellness I predict you would see less and less healthcare utilization which is the real solution. If you had a group of super healthy people within the population how would you know? If someone cracked the philosophers stone and could heal with one treatment in one visit who would use it? I think if you keep doing the same things, even if you call them something else, you will not have success. Real reform would deal with the obvious problems to stabilize things today but then look beyond them for better more complete answers.
if the person that created the problem is still at the table demanding we do more of what created the problem how is working with them going to accomplish anything?
Bad ideas are always bad ideas and should be treated as such
This is actually not the right time to point fingers. The damage has been done but it doesn’t mean the United States can no longer recover from the failure. It’s just a matter of working together for a common good.
An argument seems to have erupted, interchanging the terms “innovation”, “entrepreneurship”, “best practices”, “technical progress” and “standardization” — as if they mean the same thing. And there are business consultants and professional writers in the argument, and they are not drunk.
Another great example that illustrates the inefficiencies of the government. The reason the private sector can do so well is because they have an obligation to succeed for the benefit of the company. On the other hand, what does the government do when things aren’t going well? They just throw more money at it. The government doesn’t have to worry about losing business or going under, and so the effort they put forth pales in comparison to the private sector.
I believe this is the biggest problem with education, as well. Public education has no system to reward the best teachers and punish the worst, and the teachers unions make it impossible to change anything for the benefit of the system as a whole. Just think, why do charter schools outperform their public school counterparts almost every time?
Net production would have to rise A LOT but even then its all relative and some would probably have more than others
Health care management does not follow the laws of physics. Each invention builds on the work (and education) of previous researchers. Where would Bill Gates be without IBM and their failed negotiations with Digital Research? http://en.wikipedia.org/wiki/Bill_Gates
Where would Warren Buffet be without the influences on his life?
http://en.wikipedia.org/wiki/Warren_Buffett
Why do other industrialized nations do health care for about half the cost and by and large get just as good results? Do they use entrepreneurs and get out of the way or do they use government controls to balance the ambitions of investors, providers and entrepreneurs?
Is the U.S. waiting for the one great magic discovery that will solve our cost/utilization problems with no pain for everyone?
Barry, the calculator business in the 1970s was certainly disrupted by rapid advances in integrated circuits, but not by the microprocessor. The idea of building a calculator using a microprocessor turned out to be uneconomical as it could not compete with ICs that were custom build for calculator functions. The Intel customer that built calculators using this approach went out of business. The microprocessor did not find its mass market until the IBM PC was invented.
Paolo, thanks for the clarification about the microprocessor team. However, the fact that Intel had no idea how the microprocessor might develop when they developed and launched it and that microprocessors were only a small part of Intel’s business for a number of years thereafter are text book characteristics of a disruptive innovation.
A disruptive innovation by definition doesn’t require that you invent a technology, product or service that no one has invented or discovered before such as the wheel or fire. It means that you have developed something, probably using existing technology or practices, that meets a heretofore unmet need. That’s precisely what Hoff did at Intel. And the fact that others adopt it and incorporate it in totally new products that they design is also a text book description of a disruptive innovation.
I don’t know if you have read Clay Christensen’s book, Innovators Dilemma, but that is where he introduced the concept, parameters and definition of a disruptive technology. The term has since morphed into disruptive innovation but it retains all the meaning he originally defined.
I should add that there is one characteristic of a disruptive innovation that no one has mentioned about the microprocessor but I suspect it played a role in its successful development. They typically have a different business model.
Paolo –
You seem to know a heck of a lot about the development of integrated circuits and computer chips. I don’t. What I do know is that when I started my career in the financial industry in 1971, we used large, clunky mechanical calculators. It literally took the better part of 10 seconds to do one division calculation and made a lot of noise in the process. When I worked the prior summer at IBM, they had an early electronic calculator that cost $1,500. By the early 1970’s, electronic calculators were relatively cheap and widely available. I bought one for $100 in 1972 that lacked a floating decimal and an identical one two years later for $50 which I still have on my desk at home to this day! Hewlett Packard introduced the HP-22 financial calculator in 1976, I believe. It sold for $175. While not nearly as large as the PC business later became, electronic technology certainly disrupted the mechanical calculator business by the early 1970’s. Calculators were a nice business niche for both Hewlett Packard and Texas Instruments in the 1970’s.
Actually, there are about half a dozen fathers of the first microprocessor. Hoff contributed only to the CPU architecture and never led nor participated in the design team. Faggin was the guy who figured out how to make a CPU fit in a single chip using new MOS technology. Faggin could have used any other CPU architecture available at the time. Both borrowed heavily on what they learned from previous generations of CPUs and integrated circuits.
And in 1971, there was nothing disruptive about this technology. It was only a small part of Intel’s business and a tiny part of the overall semiconductor market. The business breakthrough did not come until 1981 when another team working at another company had the brilliant idea to build a computer using a microprocessor. That’s when the microprocessor business actually took off. Neither Faggin nor Hoff nor Noyce had any idea in 1971 of what would become of their baby.
Paolo, have to differ with you. A team didn’t conceive of the microprocessor. One man did. Then, as happens with most innovations, others helped develop it.
According to what I read, like most disruptive inventions, the microprocessor resulted from one man, an engineer named Ted Hoff at then-fledgling Intel, coming up with a new way to meet a need. Intel’s CEO, Robert Noyce, created the environment that nurtured and funded new ideas. Hoff seized an opportunity to develop a new approach to chip design and led a team that executed his design concept. Royce and a customer funded it.
According to author Mary Bellis, “In late 1969, a potential client from Japan called Busicom, asked to have twelve custom chips designed. Separate chips for keyboard scanning, display control, printer control and other functions for a Busicom-manufactured calculator.
“Intel did not have the manpower for the job but they did have the brainpower to come up with a solution. Intel engineer, Ted Hoff decided that Intel could build one chip to do the work of twelve. Intel and Busicom agreed and funded the new programmable, general-purpose logic chip.
“Federico Faggin headed the design team along with Ted Hoff and Stanley Mazor, who wrote the software for the new chip. Nine months later, a revolution was born.”
also if you go thjrough the data when plans had a 1 million max very few people ever meet it, once they moved it up to 2 million then 5 million all of a sudden 1 million plus claims became common
how long ago was this? 5-10 years ago this was true, today not at all. 1 million max cost 3-13% less then unlimited depending on the reinsurer, no carrier of the 50 I work with offer it at the same price.
Set a maximum of $2,000 annual deductible for a plan covering a single individual or $4,000 annual deductible for any other plan (see 111HR3590ENR, section 1302). These limits can be increased under rules set in section 1302.
Did they change this? Everything I have seen said you can’t buy a deductible over 2K come 2014
While the article makes some correct points, I agree with Steve’s original post, and would add my favorite example to it: the US commercial airline system, every bit as complex as healthcare delivery, but going on 5 years with no fatal crashes. Gawande’s book describes these things in some detail. Standardization is the only way forward if we want to cut costs and improve quality…both essential elements to making US healthcare sustainable – which it is not now. Obamacare may indeed not be perfect; but it did move us in the right general direction. Our role now is not to repeal and start over; rather, it is to fine-tune in a truly bipartisan approach.
Not that much. Very, very few people go above $1 million. I had a long talk about this with our insurer when we converted to unlimited coverage. It cost about the same as the $1 million limit insurance because so few go above it. The size of deductibles and co-pays mattered more.
Steve
http://www.kff.org/pullingittogether/What-Conservatives-Won-In-Health-Reform.cfm
A bronze plan limits out of pocket for a family to about $12,500. Deductibles will probably run about $5,000-$12,000. The silver, gold and platinum versions vary.
Steve
Nope. There was no single individual or business decision responsible for the birth of the microprocessor. Lots of creative engineers, lots of good business managers, and a few accidents made a little toy with almost no business use developed in 1971 into a $50+ billion market today.
Paolo, a team may have developed the computer chip but someone had to have the initial idea and organize the team.
yet no links or reference to said substantive empirical evidence which is so plain. I would think you could actually produce some instead of asking us toi trust you as to its plainess
benefit design doesn’t effect delivery system? You don’t think it matters to hospitals if someone has a $1,000,000 lifetime benefit versus unlimited?
You don’t think providers will respond to preventive care being paid at 100%?
John, you’ve got it wrong. There are serial entrepreneurs all over this country so it isn’t a closed fraternity and the opportunity to be the next one is all around each of us.
By trying to find common characteristics among successful people and then copy them, you are looking at the wrong things. Successful people in any walk of life see the world differently than the average person, and they have the courage and drive to pursue their vision.
You and I see something funny and laugh but forget about it; a successful comic regales audiences about it. An artist looks at the same things you and I look at but he/she creates a masterpiece. Most surgeons follow prescribed procedures and use conventional instruments; others develop new ones. Most people are content working nine to five; others see unmet needs and organize businesses to satisfy them. Most posters to this blog are content to comment on our healthcare system; others try to change it.
The key is not the mechanics of what you do. It’s seeing the opportunity and then running with it. If you want to become a billionaire, there’s one other requirement. The need you meet has to be big enough to generate billions in revenue and profits. Meeting an important need that has a small, limited market won’t get you there.
Exactly.
The substantive empirical evidence of “benefits design” efficacy (uh. lack thereof, absent any quantifiable link to outcomes improvement) are are by now pretty plain.
Nice.
So many false dichotomies, so little time.
I believe Mr. Goodman was is discussing the delivery system, not benefit design.
“The first person to make a computer chip who did they study?”
It wasn’t a person. It was a team. They studied how computers were built using discrete components and COPIED it into a single IC. It was the Intel 4004. Technology is evolutionary.
“PPACA doesn’t allow for variations.”
___
That is simply not true.
SEC. 1332. WAIVER FOR STATE INNOVATION.
SEC. 3021. ESTABLISHMENT OF CENTER FOR MEDICARE
AND MEDICAID INNOVATION WITHIN CMS.
‘‘(1) IN GENERAL.—There is created within the Centers for Medicare & Medicaid Services a Center for Medicare and Medicaid Innovation (in this section referred to as the ‘CMI’) to carry out the duties described in this section. The purpose of the CMI is to test innovative payment and service delivery mod- els to reduce program expenditures under the applicable titles while preserving or enhancing the quality of care furnished to individuals under such titles. In selecting such models, the Secretary shall give preference to models that also improve the coordination, quality, and efficiency of health care services furnished to applicable individuals …
Subtitle D—Support for Prevention and Public Health Innovation
Subtitle B—Innovations in the Health Care Workforce
errata…
Page 1626
‘‘(D) TAKING INTO ACCOUNT POTENTIAL DIFFERENCES.—Research shall be designed, as appropriate, to take into account the potential for differences in the effectiveness of health care treatments, services, and items as used with various subpopulations, such as racial and ethnic minorities, women, age, and groups of individuals with different comorbidities, genetic and molecular sub-types, or quality of life preferences and include members of such subpopulations as subjects in the research as feasible and appropriate.
‘‘(E) DIFFERENCES IN TREATMENT MODALITIES.—Research shall be designed, as appropriate, to take into account different characteristics of treatment modalities that may affect research outcomes, such as the phase of the treatment modality in the innovation cycle and the impact of the skill of the operator of the treatment modality…
___
etc. I could go on.
Now, of course YOU can (and surely will) summarily declare in advance that none of it will work, but spare us your misstatements of what the Act advocates.
“When the President allows for variations ”
Margalit what bill are you talking about? PPACA doesn’t allow for variations. Every plan has to cover wellness, can’t have annual or lifetime caps, can’t have a deductible over $2500, on and on. The only variation allowed is what shade of crap do you want. He eliminated all flexibility to design and price health plans.
I think your also dismissing the likely culprit, he just makes the wrong decisions. Sometimes you need to allow varations, in plan design, and sometimes you need to be more open and flexible, ACOs. Notice in both cases Obama chose wrong. Its not that he was one or the other he just makes the wrong decisions.
‘In mathematics, Gödel’s Theorem says that no complex, axiomatic system can be both consistent and complete.”
I think the theorem applies best to the axiomatic system defining President Obama in certain circles.
If the President would have devised one health care solution and decreed that it should be applied everywhere, folks would be screaming that the bureaucrats in Washington have no understanding of geographical and cultural variations and never worked a day in the field and no government committee should decide on a one-size-fits-all solution.
When the President allows for variations and acknowledges that expertise is greater in the field and commissions research to find optimal solutions (plural) and best practices, the same people are up in arms that there is nothing to learn from independent innovation on a local basis, and success is basically dependent on the roll of the dice, which implies mostly failure.
Some folks insist on evaluating the President in very much the same way as one would evaluate the following statement: “this sentence is a lie”. Can’t be true and can’t be a lie either. Damn if you do and damn if you don’t. The only question is why. Can’t be just a propensity for tea now, can it?
On a different note, Gödel’s Theorems apply to axiomatic systems only (and not all of those either), and I would challenge any random two people, in any random room, to come up with an agreed upon set of axioms for describing a functional health care system.
“Consider Bill Gates, Warren Buffett and Sam Walton. If we could discover what they did right, and everyone copied their behavior, then we could all become billionaires.”
In addition to a new idea that has the potential to disrupt an existing product or business model, successful entrepreneurs generally have both a strong appetite for risk and the courage of their convictions in the face of conventional wisdom that insists that their idea can’t work or that they’re just plain nuts. Most people don’t have that brain wiring or emotional makeup. Those characteristics just can’t be copied.
Nate mentioned that Kaiser works in CA, especially Northern CA, but not in OH. This suggests that people’s preferences for how they want to access healthcare – limited network vs. broad network differs by region. It’s also extremely expensive to replicate the critical mass of doctors and hospitals that Kaiser has in Northern CA. You can’t just hire independent contractors and apply the Kaiser brand name to them.
By contrast, a medical procedure or approach like a checklist of a series of steps to be performed when inserting a central line can be replicated anywhere easily. Once doctors see and accept that it works, there is no reason why they shouldn’t adopt it and plenty of reasons why they should especially as payment models move toward paying for value rather than volume. Wellpoint noted on its most recent conference call that its new value based contracts with hospitals base 55% of the performance score on medical outcomes metrics (presumably risk adjusted), 35% on patient safety and 10% on patient satisfaction. As new more effective techniques are discovered and proven, the challenge in medicine is to diffuse them faster into everyday practice.
Taxpayer-funded DARPA invented the medium wherein we now post comments.
Medicine first. The central line protocol worked to prevent infections. We are all adapting it as a best practice. Antibiotics before incision was found to prevent infections. It was a best practice now copied everywhere. O2Sat monitors were found to decrease mortality and morbidity in PACUs. As a best practice, they were adopted everywhere. Inderal worked, then we got dozens of other B-blockers. One could go on for pages about how best practices have been adapted in medicine.
Outside of medicine. MacDonalds worked, then we got Burger King and Wendy’s. Circuit City worked, then we got Best Buy, or was it the other way around? Free miles worked for one airline, then they all did it. Customers liked have a radio in the car, soon all the car companies put one in. This too could go on for pages.
In government. Someone realized that democracy worked better than a monarchy. Soon, lots of other countries followed.
Seems to me that there has been a lot of successful adoption of best practices.
Steve
Agreed. Obvious Straw Man. NO ONE seriously argues the possibility of an All-Millionaire society. A Winner-Take-All society, however, is not the axiomatic alternative conclusion.
“The first person to make a computer chip who did they study?”
You tell me. I’m sure their CVs are online, along with the giant list of influences and contributions by various team members in dozens of universities. Hold your hat… funded publicly.
“Depending on circumstances” means different solutions depending on different needs. No one is promising a panacea, but a smart, incremental, targeted approach will make a significant difference. You don’t need everything to work as well as the top 0.0000001%. We’re not reinventing the wheel here, we are optimizing.
The first person to make a computer chip who did they study?
“What we learn by testing different ways of doing things isn’t proprietary and can be replicated on a wider scale depending on circumstances.”
Isn’t that exactly what we he said? We can’t all be billionaires is the same as your “depending on circumstances” qualifer. Why can’t all schools replicate what works at one school? Becuase we can’t all be billionaires.
Specific to healthcare lets look at kaiser, Kaiser works in CA, Kaiser does not work in OH. How does studying Kaiser in CA when we know it doesn’t work in OH move things along? Same with Intermountain, Mayo, etc.
In a torpid attempt at a straw man, Mr. Goodman proves he misunderstands policy and business.
The fundamental premise of this article is wrong. Everyone becoming a billionaire has nothing to do with optimizing health care and education.
Obama’s plan is the equivalent of an R&D department any world class corporation employs. Yes, we do study the best way to make a computer chip. Yes, we do study best practices, as evidenced by the billion dollar management consulting industry.
In case of government and experimental health systems or education, it is not a zero-sum game. What we learn by testing different ways of doing things isn’t proprietary and can be replicated on a wider scale depending on circumstances.
Nice try invoking a complex theorem, but please make sure to fully grasp it before fumbling to extrapolate it in a politically motivated attack.
The reasoning is illogical. Just because we can’t always copy good practices it does not follow that we should never even try to copy good practices.
According to Goodman’s Nonreplicability “theorem,” Dr. Goodman should have never gone to school.
I think Obama it’s not doing what he promised in his campaign and that is one of the reasons of the default in the USA.