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Big Data in Healthcare: Good or Evil? Depends on the Dollars

flying cadeuciiAn organization’s “business model” means: How does it make a living? What revenue streams sustain it? How it does that makes all the difference in the world.

Saturday, Natasha Singer wrote in the New York Times about health plans and healthcare providers using “big data,” including your shopping patterns, car ownership and Internet usage, to segment their markets.

The beginning of the article featured the University of Pittsburgh Medical Center (UPMC) using “predictive health analytics” to target people who would benefit the most from intervention so that they would not need expensive emergency services and surgery. The later part of the article mentioned organizations that used big data to find their best customers among the worried well and get them in for more tests and procedures. The article quoted experts fretting that this would just lead to more unnecessary and unhelpful care just to fatten the providers’ bottom lines.

The article missed the real news here: Why is one organization (UPMC) using big data so that people end up using fewer expensive healthcare resources, while others use it to get people to use more healthcare, even if they don’t really need it?

Because they are paid differently. They have different business models.

UPMC is an integrated system with its own insurance arm covering 2.4 million people. As a system it has largely found a way out of the fee-for-service model. It has a healthier bottom line if its customers are healthier and so need fewer acute and emergency services. The other organizations are fee-for-service. Getting people in for more tests and biopsies is a revenue stream. For UPMC it would just be a cost.

The evil here is not using predictive modeling to segment the market. The evil here is the fee-for-service system that rewards waste and profiteering in medicine.

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Granpappy YokumPerrySaurabh JhaCynthiaBarry Carol Recent comment authors
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Joe Flower
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This discussion (or at least my part of it) is not about capitation. It is about direct fee-for-service to the doctor (in which the doctor gets paid more for doing more and more complex things) and all the other ways of paying for healthcare, among which are the various forms of capitation. The economic incentives vary tremendously among all these different ways. Bundled payments for cases from out of the region, for instance, is fee-for-service. The patient and the patient’s insurer pay a fee for the service. But they don’t pay each doctor a fee for each service. So the… Read more »

allan
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allan

“This discussion (or at least my part of it) is not about capitation. It is about direct fee-for-service to the doctor” … ” among which are the various forms of capitation.” …and previously you said “The evil here is the fee-for-service system…” Joe, I know you think otherwise, but you certainly did make your discussion include capitation and fee for service. Look at what you are promoting. Look at what you are demonizing. In the process you totally skip over incentives and third party payer that change the behaviors of all systems of payment. Economic incentives might vary, but one… Read more »

Granpappy Yokum
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Granpappy Yokum

Does FFS really incentivize over- treatment by physicians paid based on E&M codes/cognitive services? Or does it only incentivize over-treatment by physicians who are paid based on procedures that are grotesquely over-valued by the RUC and CMS?

Joe Flower
Guest

Both, really. Do more stuff, do more complex stuff, do more over-valued stuff. That’s the “volume” side of things.

Granpappy Yokum
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Granpappy Yokum

“Do more stuff, do more complex stuff, do more over-valued stuff.”

I was thinking about primary care docs and others who essentially bill only for office visits (i.e., E&M codes). I don’t see how FFS incentivizes them to over-treat.

Joe Flower
Guest

I wouldn’t say that all the incentives are exactly the same in anything labeled “HMO” or “ACO.” Roughly speaking, a FFS payment system incentivizes over treatment while a risk situation incentivizes under treatment. But the behavior of a particular medical group can depend on what they are truly at risk for. For instance, the Alternative Quality Contracts under BCBS Massachusetts put primary care providers at risk for the costs of ED visits, hospitalizations and surgeries without giving them any “gatekeeper” power to keep patients from accessing those services. The only way they can make more money/do better is by providing… Read more »

allan
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allan

Joe, of course incentives change if the method of payment changes, but if two things are capitated in the same way, they will have very similar incentives. The discussion was about capitation. But I also touched on hybrids so I am not sure what you are trying to demonstrate. Reputation is very important, but in a third party payer system, which you have yet to mention, reputation becomes much less important. Do you see what happens when you attempt to control the marketplace? Reputation is very important to most physicians no matter what type of practice they have. It isn’t… Read more »

Joe Flower
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Interesting, Allan. I certainly agree that no one model is a panacea, and certainly not the rather heterogenous group lumped under labels such as “HMO” or “ACO.” Do you have a cite or an exact title for either the GAO study or the Ware study so that I can look at them and add them to my database? I would imagine the 30% overpayment estimate might also include the fact that Medicare Advantage plans, after being established on a claim that they would save money, have in fact been paid 15% or so more than FFS plans. One of the… Read more »

allan
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allan

Joe, this study is not one done today. It was done awhile back, but the important things, THE INCENTIVES, haven’t changed. When one burns themselves with boiling water from an old Tea maker one doesn’t try the experiment again with a new Tea maker under a different name unless the problem has been solved. Unless one deals with the incentives one will fall into the identical trap. The incentives of HMO’s and ACO’s remain essentially the same except the present day ACO can have more power and has been aided by the change in some laws protecting the ACO from… Read more »

allan
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allan

Big data can be very poorly used by all types of payment methods. The one payment method with the worst record for those that are sick and need care is the capitation model. HMO’s (same incentives as ACO’s) typically used all sorts of methods to cherry pick the healthy. The GAO finally released a report many years ago demonstrating that based upon risk HMO’s of the past were paid about ~30% more than the per capita rate would have been if risk were included in the payment plan proving that cherry picking existed as a basic method of making a… Read more »

Perry
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Perry

Saurabh,

This is precisely the question to be answered when we look at performance issues. Who wants to take care of the sickest patients when the outcomes are going to be loaded against a good recovery? We do need the cowboy types because that’s how we learn to do miraculous things with shattered bodies, but who will want to if you’re going to be penalized for a bad outcome?

Saurabh Jha
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Saurabh Jha

Perry, I see no solution to this. All systems have trade offs.

The vilification of FFS, largely justified IMO, has not been accompanied by an honest assessment of its benefits in the taking on of risky patients.

Which would be fine if the culture of the country was one where the shepherd was praised for ignoring the lost sheep & attending to the flock of 99.

It’s not. Except in the Gaussian distributions produced by academia.

Saurabh Jha
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Saurabh Jha

I used to work for a surgeon who was highly astute at predicting the operative risk of patients. Another was a cowboy. He took all the train wrecks. They had differing mortality rates. The former would be delighted to hear that we are moving to pay for performance. His numbers performed. But it was the cowboy who truly performed. Predictive analytics can predict the low risk for skimming profits and the high risk to avoid for “achieving bonuses by better outcomes.” Insurers do this all the time. We call it risk classification. It’s frowned upon and rightly so. Predictive analytics… Read more »

Cynthia
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Cynthia

Maybe hospitals and other healthcare providers can improve patient outcomes by having access to patient daily spending habits. But I think another reason they are doing this, and a more important reason at that in turns of saving their bottom line, is to find evidence against patients in cases involving readmission penalties. That way if a hospital has concrete evidence that one of their heart failure patients bought a Big Mac, Biggie fries and a super-sized soft drink at McDonald’s prior to showing up at the ER in need of being readmitted for CHF exacerbation, the hospital can ask Medicare… Read more »

Joe Flower
Guest

According to HHS, re-admission rates and rates of hospital-acquired infections have dropped considerably since they instituted these new rules. The report is available here:

http://innovation.cms.gov/Files/reports/patient-safety-results.pdf

Joe Flower
Guest

Thanks for putting a little more meat on the bones of my little 300-word post, Barry. Clearly we are talking about two different ways to use market segmentation — giving more care to those who would benefit the most, and giving more care to those who don’t necessarily need it, but who have the most comprehensive insurance. The NYTimes article discusses UPMC’s market segmentation only in terms of its insurance members, as a method of keeping its clinical costs down on those insured members. How it acts in its market for other insurers is a different question. Its prices will… Read more »

Granpappy Yokum
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Granpappy Yokum

“One area you mention which Kaiser has done well at is convincing their patients that more is not always better”

And isn’t that a way of encouraging the sickest patients to go elsewhere? Glad to hear that they’re increasingly vulnerable.

Joe Flower
Guest

No, it’s not a way of encouraging the sickest patients to go elsewhere. Because we are not talking about the sickest patients who really need help. I know more than my share of people who went through the Kaiser system with cancer and have high praise for the care they received. No we are talking about, for instance, me and my arthritic knees. I went in demanding a new knee some time back. They never said no, but put me through a series of tests and discussed my alternatives and their likely outcomes — which convinced me that I was… Read more »

Granpappy Yokum
Guest
Granpappy Yokum

I was thinking more along the lines that, if they have a reputation for carefully monitoring care for meeting their internal standards of appropriateness (not necessarily something I disagree with), would patients who know they will need lots of expensive care choose another insurer when presented with a choice? Not that they’re run away, but that they avoid KP to begin with. I guess big data would give us some insight into this.

Joe Flower
Guest

Big data might give us some insight into that, though it is hard to tell people’s intentions from, for instance, sales data. My own guess would be more along the lines of this: These days you can sign up for any insurance you want, no matter what pre-existing condition you may have. If you knew you had some kind of cancer and had not signed up for insurance yet, would you be likely to sign up with Kaiser, which would want to care for you within their system, or would you see what health plan might give you access to… Read more »

Barry Carol
Guest
Barry Carol

My impression is that for UPMC, the largest healthcare provider in its region, its own insured members account for a comparatively small percentage of its patient base and due to its high profile name and its significant regional market power, it’s the most expensive provider in the area for other insurers. I don’t know whether it charges less for health insurance than Highmark Blue Cross and other insurers in the market or how extensive its network is beyond UPMC owned facilities. As for getting people in for testing to prevent expensive hospitalizations down the road, we don’t know how many… Read more »

allan
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allan

Your conclusions far exceed your data and the level of proof you provide which is nil.

(Take note I am not talking about the potentialialities of predictive modeling nor UPMC’s role in healthcare.)

Additionally you made the statement ” it has largely found a way out of the fee-for-service model.” Tell us how and give us some numbers.

Ceci Connolly
Guest

Joe really gets at the problem of misaligned financial incentives in our current health system. We need to pay our caregivers to keep us healthy, active and out of the hospital. Let’s reward value.
More on predictive analytics in healthcare here: http://www.pwc.com/us/en/health-industries/health-research-institute/assets/pwc-hri-himss-report.pdf

Joe Flower
Guest

Thanks for the reference to the report, Ceci. We really can’t say anything helpful or insightful about how healthcare uses these new technologies without reference to what organizations are trying to do with them, which will be dictated by how they make their money.