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“Comparisons Are Toxic.” True or False?

by MIKE MAGEE

THCB is back from its end of year break, but we are starting with a little catchup from December from Mike Magee.

As my wife often reminds me, “Comparisons are toxic.” And, in general, I agree and try to respect this cardinal rule. But these are extraordinary times. So grant me this exception.

On December 9, 2024, in my early morning survey of the news, two articles demanded my attention. The first was an editorial in the New York Times with the self-explanatory title, “My Last Column: Finding Hope in an Age of Resentment” by Paul Krugman. The second was an article published that morning in Nature titled “Quantum error correction below the surface code threshold” authored by “Google Quantum AI and Collaborators,” a blanket label for a team of 300+ engineers led by Founder and Leader, Hartmut Neven. More on him in a moment.

As a loyal reader of Krugman, I read his “last column” carefully – twice. Over 25 years I’ve admired this specialist’s (global economics) willingness and interest to wander often into generalist, cross-sector, liberal arts territory. No match for his Nobel winning intellect or pure-bred education at MIT, Yale and Princeton, I do share a history of common geography (upstate New York in our early years, and the New York metropolitan area later on); an upbringing in religious households (Jewish and Catholic); and more than two uninterrupted decades of weekly published columns.

Though I have not always agreed with his take on every issue, I count myself as an admirer. The issues that have interested him, both pro and con, over the years, are more often than not the same issues that have troubled or encouraged me. So I was not surprised that he chose, in his “last column,” to reflect on the recent election, and the current levels of anger, violence and resentment in our society. And while I agree with the findings in his examination of the body politic, we arrived at a different diagnosis.

Krugman writes, “What strikes me, looking back, is how optimistic many people, both here and in much of the Western world, were back then (25 years ago) and the extent to which that optimism has been replaced by anger and resentment. . . some of the angriest, most resentful people in America right now . . . are billionaires who don’t feel sufficiently admired.”

As for the diagnosis, in response to the question he himself raises (“Why did this optimism curdle?”), he answers, “As I see it, we’ve had a collapse of trust in elites.” And the treatment for this disease? “if we stand up to the kakistocracy — rule by the worst — that’s emerging as we speak, we may eventually find our way back to a better world.”

Now that sent me back to Hartmut and the Nature article for a reality check.  Were American oligarchs and technocrats, with wild wealth and even wilder ideas, the cause of every day people jumping aboard the Trump cult train?

Nevin is 9 years younger than Krugman. He is a German-trained PhD physicist who came to the University of Southern California as an entrepreneurial research professor in computer science in 1998. His several start-ups which were focused on “face recognition technology and real-time facial feature analysis for avatar animation” helped make him famous and rich when they were purchased by Google in 2006. But his fantastical dream was to create a “quantum chip” that would outperform anything that currently existed.

Six years later, he launched the Quantum Artificial Intelligence Laboratory, and by 2016, he had come up with an experiment (still ongoing) to prove “quantum supremacy.” Starting his own chip fabrication factory in Santa Barbara, his dream became concrete. He took a world view in 2020, stating:  “It’s not one company versus another, but rather, humankind versus nature — or humankind with nature.”

Nevin believes he is in the right place at the right time. The AI Arms Race is full on and relies on ever increasing data consumption to support generative self-learning. That demands enormous consuming power. In his words, “Both (quantum computing and AI) will prove to be the most transformational technologies of our time, but advanced AI will significantly benefit from access to quantum computing. This is why I named our lab Quantum AI.”

Quantum computing is measured in “qubits” (which are the size of a single atom) versus the binary digit measure of standard computers, called the “bit.” As the New York Times explained, “Quantum bits, or ‘qubits,’ behave very differently from normal bits. A single object can behave like two separate objects at the same time when it is either extremely small or extremely cold.” The test using exotic metals cooled to 460 degrees below zero, reported out on October 9th that Hartmut’s quantum chip “performed a computation in under 5 minutes that would take one of today’s fastest supercomputers 10,000,000,000,000,000,000,000,000 (10 septillion) years to compute.”

But that’s not the amazing part. In past experiments, the device was error prone, and the more qubits, the less reliable the computations. But now, for the first time, this group was able to demonstrate the more qubits in play, the more accurate the outcome. As Nevin explained, “This historic accomplishment is known in the field as ‘below threshold’ — being able to drive errors down while scaling up the number of qubits.” How big was that? According to Javad Shaman, director of the Center for Quantum Information Physics at NYU, “one of the highlights of the recent decade.”

Nevin doesn’t seem to “worry about being admired.” In his blog this week he tied his qubit “below threshold” accomplishment to “helping us discover new medicines, designing more efficient batteries for electric cars, and accelerating progress in fusion and new energy alternatives.” That seems a far cry from Paul Krugman’s highlighting of “the pettiness of plutocrats who used to bask in public approval and are now discovering that all the money in the world can’t buy you love.”

Gallup has been conducting an annual survey of “Americans Satisfaction With The Way Things Are Going In The U.S.” for roughly a half century. Currently only 22% say they are satisfied. Back in 1986, that number peaked at 70%. That was the year that Robert Fulcrum wrote a little book that remained on the New York Times Best Seller list for nearly two years. Some criticized the book as “trite and saccharine,” but 17 million copies of his books remain in circulation.

The 1986 book was titled, “All I Really Need To Know I Learned in Kindergarten.”  Here are his top ten learnings:

  1. Share everything.
  2. Play fair.
  3. Don’t hit people.
  4. Put things back where you found them.
  5. Clean up your own mess.
  6. Don’t take things that aren’t yours.
  7. Say you’re sorry when you hurt somebody.
  8. Wash your hands before you eat.
  9. Flush.
  10. Warm cookies and cold milk are good for you.

I was trying to figure how members of my own family could vote for a man to lead our nation who routinely and deliberately breaks most of these rules. I’ve come up with two reasons:

  1. Greed. They simply don’t want to share any of their wealth or good fortune with others.
  2. Religious certainty. They do not believe in separation of Church and State, and do not respect individual self-determination and free will. And yet values can not be enforced on human beings. They must be freely embraced to become permanently embedded.

Comparisons may be toxic, but Hartmut and Paul point us toward the truth. We (not our leaders regardless of their human deficits) are responsible. And we as citizens of America need to get our act together. As Nevin the information scientist teaches, optimism flows from purpose and the promise of service. And Krugman, the Nobel economist, teaches that money alone can not buy you love – or peace, or lasting joy, or contentment.

Mike Magee MD is a Medical Historian and regular contributor to THCB. He is the author of CODE BLUE: Inside America’s Health Industrial Complex. (Grove/2020)

John Zutter, Lantern

John Zutter is the CEO of Lantern which is a company managing specialty care. It has evolved from a centers of excellence model, and changed its name from Employer Direct Healthcare earlier this year. The trick is product expansion into the expensive stuff, especially cancer care, infusion and specialty surgery. John has thought a lot about where there is money to be saved–and how health care can be structured, and how cost and quality can be managed. This is a fascinating and in-depth conversation about how employers can save money, and how that might make the overall market evolve–Matthew Holt

Brad Kittredge, Brightside Health

Brad Kittredge is CEO of Brightside Health, which he co-founded with CMO Mimi Winsberg. They are a large online mental health group that aims a providing more access with higher quality. They have built their own technology stack and medical group, and are in network for about 135m lives. They also take patients from the emergency departments of health systems–as well as direct patient outreach for “standard” mental health conditions. Brad talked to me about measurement, quality and care improvement, including how they are using their algorithms to improve their clinicians’ prescribing accuracy. I also asked him where Brightside were in the process to, err, return at least some of the $150m they’ve raised back to their investors. Matthew Holt

PatientsUseAI: Hugo, Gilles and e-Patient Dave on the race to patient autonomy — THCB Gang Special Episode 149, Thursday December 19

Joining Matthew Holt on #THCBGang on Thursday December 19 at 1pm PST 4pm EST are three leaders in the patient movement Hugo Campos (@HugoCampos); Gilles Frydman (@GillesFrydman); and ePatient Dave deBronkart (@DavedeBronkart). They will be bring us up to speed on the very latest in patients using AI.

You can see the video below live (and later archived) & if you’d rather listen than watch, the audio is preserved as a weekly podcast available on our iTunes & Spotify channels.

Danielle Vaeth, Qbtech

Danielle Vaeth is Head of Growth and Strategic Development at Qbtech, a company that helps diagnose ADHD, working mostly with virtual providers. They use facial recognition and tracking to do this. Qbtech can diagnose 50% more patients than self-reporting and has approval from a big NHS study, the FDA and many peer-reviewed studies. They raised $6.8m in 2022 & have just tested their millionth patient. Plenty more to go!–Matthew Holt

Managed Care History Part III: The Rise of Machine-Driven Managed Care

This is part 3 of Jeff Goldsmith’s history of managed care. If you missed it read Part 1 & Part 2

By JEFF GOLDSMITH

Two major changes in health insurance ensued as the US health system entered the 21st century- a strategic shift of health cost risk from providers to patients and the emergence of machine driven managed care.

Insurers Shift Strategy from Sharing Risk with Hospitals and Doctors to Markedly Implicating their “Patients’.

After the 2008 recession, employers and their health plans shifted strategy from putting physicians and hospitals at risk through delegated risk capitation to putting patients at risk through higher patient cost sharing. In the wake of the recession, the number of patients with high deductible health plans nearly quintupled–to over sixty million lives. By 2024, 32% of the lives in employer-based plans (50% among small employers’) were in high deductible plans regardless of patient economic circumstances.   

The stated intention of the High Deductible Health Plan movement was to encourage patients to “shop” for care. In real care situations, however, patients found it difficult or impossible to determine exactly what their share of the cost would be or which providers did the best job of taking care of them. For an extensive review of the literature on how healthcare “consumers” struggle to manage their financial risk, read Peter Ubel’s 2019 Sick to Debt: How Smarter Markets Lead to Better Care.

Employers and insurers,  working together to “empower consumers”,  rapidly shifted “self-pay”  bad debts onto their provider networks. Some 60% of hospital bad debts are now from patients with insurance. Instead of “shopping for care”, consumers found themselves saddled with almost $200 billion in medical bills they could not pay, and hospitals and physicians ended up eating most of it.    

This escalating “insured bad debt” problem forced providers to hire revenue cycle management (RCM) consultants to revise and strengthen their policies regarding patient financial responsibility, “revenue integrity” (meaning crossing all the “t’s” and dotting all the “I’s” in each medical claim and making sure care is coded properly) and rigorously monitoring the flow of claims to and from their major insurance carriers. As a result many providers found themselves spending 10-15% of their total operating expenses on RCM! 

Medicare Advantage Enables Insurer Market Dominance

The movement from Ellwood’s vision of regionally-based provider sponsored health plans to market dominance by huge national carriers was cemented by the emergence of Medicare Advantage as the most significant and profitable health insurance market segment. In 2013, Medicare Advantage accounted for 29% of total Medicare spending. A decade later, in 2024, it was 54% (of roughly a trillion dollar program). And until a federal crackdown on MA coding and payment policies by the carriers, it was a 5% margin business, significantly more profitable than commercial insurance, ObamaCare Exchange or managed Medicaid businesses.

As Medicare Advantage emerged as the largest health insurance market, it was dominated by a cartel of large publicly traded carriers. 

Continue reading…

Managed Care History Part II- HMOs Give Way to Managed Care “Lite”

This is part 2 of Jeff Goldsmith’s history of managed care. If you missed it read Part 1

By JEFF GOLDSMITH

The late 1990s crash of HMOs opened the door to a major consolidation of the health insurance market controlled largely by national and super-regional health plans. While HMOs by no means disappeared post-backlash, the “movement” begun by Ellwood and Nixon fell far short of national reach. HMOs never established a meaningful presence in the most rapidly growing parts of the US- the Southwest, South and Mid-Atlantic regions, as well as the Northeast.

The exemplar, Kaiser Permanente, damaged its financial position with an ill-considered 1990’s (McKinsey-inspired) push to become a “national brand”. Today, over 80% of Kaiser’s 13 million enrollment is still in the West Coast markets where it began 80 years ago! 

HMOs Go Public and Roll Up

Two little noticed developments accelerated the shift in power from providers to payers. One was the movement of provider sponsored health plans into the public markets. PacifiCare, the most significant hospital sponsored health plan owned by the Lutheran Hospital Society of Southern California, was taken public in 1995. A subsequent merger with FHP health plan destabilized the newly public company. 

After PacifiCare crashed post the 1998 Balanced Budget Act cuts, and struggled to refinance its debt, it was acquired by United Healthcare in 2005, bringing with it a huge sophisticated, delegated risk contracting network. United then bought Sierra Health Plan based in Nevada in 2007, including its large captive medical group, its first medical group acquisition. Following these acquisitions, United rolled up PacifiCare’s southern California based at-risk physician groups in the late 00’s, and then capped off with its purchase of HealthCare Partners, the largest of all, 2017 from DaVita in forming the backbone of today’s $110 billion Optum Health.    

United’s buying BOTH sides of the delegated risk networks-plan and docs-in high penetration managed care markets is not fully appreciated by most analysts even today. 

It has meant that as much as 40% of Optum Health’s revenues, including almost $24 billion in capitated health insurance premiums, come from competitors of United’s health insurance business.  

However, of greater strategic significance was Humana’s decision in 1993 to exit the hospital business by spinning its 90 hospitals off as Galen. 

Continue reading…

Sara Ratner, Nomi Health

Sara Ratner is President of integrated Programs at Nomi Health. They work with employers and health plans to connect them to a network of providers (both telehealth and physical) who accept steep discounts in return for immediate payment. The employees in turn get no co-pay/no coinsurance. In addition they have an analytics company called Artemis which recommends care paths and a PBM to lower drug prices. Sara is trying hard to integrate mental health into their program too. Nomi raised $110m in 2022 and also made a decent amount in covid testing earlier in its life before pivoting.

Managed Care History: From HMOs to AI Assisted Claims Management Part 1

By JEFF GOLDSMITH

Healthcare payment in the US has evolved in decades-long sweeps over the past fifty years, as both public programs and employers attempted to contain the rise in health costs. Managed care in the United States has gone through three distinct phases in that time- from physician- and hospital-led HMOs to PPOs and “shadow” capitation via virtual networks like ACOs to machine-governed payment systems, where intelligent agents (AI) using machine learning are managing the flow of  healthcare dollars.  This series will explore the evolution of managed care in 3 phases.  

Phase I- Health Maintenance Organizations and Delegated Risk Capitation

In response to a long run of double-digit health cost inflation following the passage of Medicare in 1965, the Nixon administration launched a bold health policy initiative- the HMO Act of 1973- to attempt to tame health costs. The Nixon Administration intended this Act to provide an alternative to nationalizing healthcare provision under a single payer system, as supported by Senator Ted Kennedy and other Democrats. 

 The goal of this legislation was to restructure healthcare financing in the US into risk-bearing entities modeled on the Kaiser Foundation Health plans- a successful group-model “pre-paid”  health plan founded in the 1940s and based on the Pacific Coast. These plans would accept and manage fixed payments for a defined population of subscribers, and offer an alternative to what was perceived as an inflationary, open-ended fee for service payment system. In varying forms, this has been the central objective of “progressive” health policy for the succeeding fifty years. 

The HMO Act of 1973 provided federal start-up loans and grants for HMOs, much of which went to community-based healthcare organizations and multi-hospital systems. It also compelled employers to offer HMOs as an alternative to Blue Cross and indemnity insurance. While a few HMOs either employed physicians directly on salary (staff models like the Group Health Co-Operatives), or contracted on an exclusive basis with an affiliated physician group (like Kaiser’s Permanente Medical Groups), many more delegated capitated risk to special purpose physician networks- Independent Practice Associations (IPAs)- whose physicians continued in private medical practice. 

By 1996, according to the Kaiser/HRET Employee Benefits Survey, HMOs covered 31% of the employer market (roughly 160 million employees and dependents), and the federal government had begun experimenting with opening the Medicare program to HMO coverage. The impact of HMO growth on overall US health spending remains uncertain, because health spending as a percentage of US GDP continued growing aggressively during the next fifteen years,  before levelling off during the mid-1990’s around the Clinton Health Reform debate.

Two things brought the HMO movement to a crashing halt in the late 1990’s. 

Continue reading…

THCB Gang Episode 148, Monday December 16

Joining Matthew Holt on #THCBGang on Monday December 16 at 1pm PST 4pm EST are patient safety expert Michael Millenson, physician, entrepreneur and technologist Shantanu Nundy; and Digital Health and Emerging Med-Tech Practice Co-Founder at Marsh & McLennan, Beracah Stortvedt.

You can see the video below live (and later archived) & if you’d rather listen than watch, the audio is preserved as a weekly podcast available on our iTunes & Spotify channels.

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