Is Healthcare Exploitative And Extractive?

I've had this post sitting around in draft form for far too long and it's time to get it off my chest.

Several years ago, MSNBC commentator Dylan Ratigan interviewed Umair Haque, author of The New Capitalist Manifesto: Building a Disruptively Better Business, founder of Bubblegeneration, Director of the Havas Media Lab and blogger at the Harvard Business Review. Though the topic wasn't healthcare, there was much for healthcare leaders to ponder.

Haque draws a clear contrast between productive wealth and destructive wealth.  Both count toward Gross Domestic Product (GDP) but only the former really contributes.

Says Umair,

"It’s easier to make money in the short-term through exploitation and the extraction and much more labor intensive with a higher failure rate and a much greater degree of challenge to actually advance and create something that is new and different and differentiates in its creation of value. “So to me, this is a crisis that is about failing to create real value, but it is a crisis of our institutions. And it’s a crisis that is of things like GDP and corporate profits, and the ways in which we measure and conceive of income. And so to really get to grips with this crisis, I think we have to begin by taking a cold hard look at those things,”

A 'cold hard look' at income and value-creation in health care is likely to be all of that AND a little bit uncomfortable. The short-term thinking. The fee for service-driven decision making.  The inward-looking, edifice-focused ways we define terms like 'health' and 'success.'

Maybe you don't think of health care as "exploitative" or "extractive?"  What else would you call a willingness to amputate a diabetic's foot while letting the underlying disease process continue apace?

Yeah I know, we're really, finally, truly getting serious about fixing stuff like that.  And though it's been part of every community needs assessment and strategic plan and QI/QA/PI target since, oh, 1965, things have changed. No more business as usual. This time it's different. We mean it. Really.

Or at least we mean it so long as Medicare guarantees us extra payment for meaning it.  Or the payers give us part of their risk pools for doing it. Ahhh, the sweet smell of success.

12:13 PM

"...I was fully planning to quit in protest. I’d even started writing op-ed articles. I was going to resign pretty noisily, I’m afraid."

 Richard S. Foster is retiring this week after 18 years as the chief actuary for the Centers for Medicare and Medicaid Services. From an interview in KaiserHealthNews.org:

Q: How do we control health care costs in Medicare, Medicaid and the private sector?

A: Years ago, we thought that converting from cost-based reimbursement to prospective payment systems (a set payment that covers the entire cost of the admission) was the magic answer, and it helped a lot. Then, back in the early 1990s, everybody thought managed care was the magic answer. And that helped some, too, although most of their success was in negotiating lower payment rates, which you can only take so far.

We’ve had other instances -- pay-for-performance and consumer-driven health care -- that people had hoped would be the magic answer. Right now, there’s a great deal of hope that further integration of care, greater bundling of payments and other innovations like that will be the answer. I’m not optimistic that these things will, in fact, be any more successful than the best ideas of the past. I think they can all help.

All the insurers and payers tend to adopt and pay for just about any new technology that comes along -- even in instances where the value of the new technology is nowhere near its higher cost. So we could be a lot more prudent in how we adopt new technology. But that’s controversial. We saw in the Affordable Care Act the pushback on comparative effectiveness. If you do comparative effectiveness right, I think it could be very helpful.

Q: How would you adopt technology more prudently?

A: If you have something that is 10 times as expensive as the technology it would replace, and it really is not any more effective, why should we bother adopting that? And yet we do it all the time.

9:09 AM

An Industry Bankrupting Its Own Customers Cannot Thrive

Wonder why you haven't gotten a raise recently?  Does it seem your income goes less far than in years past?  Blame healthcare inflation.  Or, as one economist said recently, "...healthcare stole your raise."

 Brian Klepper, PhD, blogging at KevinMD.com predicts that healthcare is in for a new organizational structure.

At our first meeting years ago, Tom Emerick, Walmart’s then VP of Global Benefits, told me, “No industry can grow continuously at a multiple of general inflation. It will eventually become so expensive that purchasers will simply abandon it.”

He said it casually, as though it was obvious and indisputable.

Health care is playing out this way. From 1999 to 2011, health care premium inflation grew steadily at 4 times the general inflation rate. During that same period, the percentage of non-elderly Americans with employer-sponsored health coverage fell from 69.2 to 58.6 percent, a 15.3 percent erosion rate.

Health care’s boosters like to argue that it has buttressed the economy, and that it means more jobs and economic prosperity within a community. A February 2011 Altarum Institute report estimated that private sector health care jobs now account for nearly 11 percent of total employment. Since the recession began in December 2007, health care employment has risen by 6.3 percent while employment in other industry sectors fell by 6.8 percent.

[I love this next paragraph...]

But there’s a darker side. Health care’s ever-increasing revenue growth has come at the expense of individuals and firms that pay its bills, directly, through health plan premiums and through taxes, often instead of buying other goods and services. It transfers wealth to health care from everyone else. Like the finance services industry, health care has become a disproportionate “taker” industry, sapping economic vitality of America’s communities.

[Yep.  And it's time for state hospital associations everywhere to change the basis for their "economic benefit" calculations - calculations that still trumpet employment and purchasing data when it's clear the marginal benefit is negative.  Locally and nationally, we'd be better off spending more on education, infrastructure and innovation than on more health care.]

And it is also clear that a sizable part of health care cost is inappropriate and unjustified. It is related to procedures that are done unnecessarily, markups that are hidden, and a thousand ruses to make it cost more. The prestigious National Academy of Sciences Institute of Medicine recently estimated this waste at 30 percent of total health care expenditures, or about $765 billion/year. But any number of health care professionals I’ve spoken with agree that, based on their experience, the number must be significantly higher. Other estimates have suggested this. In 2008, the consulting firm PwC issued The Price of Excess, which calculated that about 54.5 percent of health care cost, or nearly $1.5 trillion annually, focused in every sector – supply chain, health information technology, care delivery and finance – provides no value.

Read the whole thing, here.

2:12 PM

David Leonhardt writing in the NY Times: "Health care is far larger, with the United States spending at least 50 percent more per person on medical care than any other country, without getting vastly better results. (Some aspects of our care, like certain cancer treatments, are better, while others, like medical error rates, are worse.) The contrast suggests that a significant portion of medical spending is wasted, be it on approaches that do not make people healthier or on insurance-company bureaucracy."

8:21 AM

Have Cancer Treatment Costs Grown Beyond 'Sustainability?'

Many factors drive the increasing cost of cancer care.  Sophisticated, targeted drugs are expensive to develop, test and market.  Desperate patients demand them.  Other therapies - proton beam accelerators, e.g., though engineering marvels, are capital and labor intensive.  To the mix, add a healthcare system that very rarely measures costs against benefits and says 'No. We're not doing that.'

Chicago Tribune:  "Cancer cost "becoming unsustainable" in rich nations."

"...a radical shift in thinking is needed to ensure fairer access to medicines and address tricky questions like balancing extra months of life for patients against costs of a new drug, technology or care plan, (oncology experts) said."

"The cancer community needs to take responsibility and not accept a sub-standard evidence base and an ethos of very small benefit at whatever cost," said a report commissioned by the Lancet Oncology medical journal on the costs of cancer care."

[Read more from the Chicago Tribune...]

[Read TheLancet.com's Executive Summary...]

10:30 AM

Poor Warren Buffet

Words you don’t often see juxtaposed – ‘poor’ and ‘Warren Buffet.’ But perhaps some sympathy is in order.

Omaha’s Oracle has had a few misfires recently, first offering some patently stupid tax  advice to the White House’s current occupant. You know of whom I speak - the leader of a clique believing any tax rates short of 100% are an opportunity-in-waiting.

Next he invests $5 billion in Bank of America. With the check’s ink barely dry, BofA says ‘See ya!’ to 30,000 jobs. Isn’t it swell being an Oracle?

He should’ve allocated that $5 billion among several dozen innovative startups, staying far away from the old-money banking triumvirate of fat, dumb and clueless. Some startups would have crapped out (just ask the White House…cough…Solyndra…cough.) but there’s no way the ensuing wreckage would’ve cost 30,000 jobs.

Now THAT’S change we can ALL believe in.

3:03 PM