Synthesis, systems, and relationships

Recently I have been pondering whether my daughter should try to become a physician.  She’s expressed some interest, but remains undecided.  I am ambivalent about the prospect.


We overestimate things that have produced benefit in the past, and underestimate things that will produce benefit in the future.  I think that often, as I am coming to understand more and more that we are the product of emotional decision-making, and not rational decision-making. 


When I was growing up, there was no question that becoming a physician was a good thing to do.  I think that our parents were absolutely convinced that education was the way to a better financial living, and therefore of a happier life.  And indeed, I got a degree in medicine, and that improved my standard of living over theirs.  Whether that makes me happier or not, it’s hard to say.  I look at my 86 year old mother, and think that she looks pretty happy.   And indeed, she has lived a life that allows her to appreciate the relative economic security she now enjoys.  She has been dirt poor, living in New York’s Chinatown, next to the Bowery.  She experienced living with a rich physician uncle in her childhood, on a large estate.   And she experienced living in the middle class, as a draftsperson in the suburbs of Chicago.  She has seen the gamut, and I think it helps her be grateful for where she is today.


The research on wealth and happiness says that my mother did a lot for her happiness once she advanced from living hand to mouth in Chinatown to a lower middle class existence.  This happened for my family when my father took a job with a cousin in his laundry in Fort Wayne, Indiana.   The data say that once worrying about food, shelter, and clothing is no longer the prime concern, we rise in happiness.   But becoming more wealthy after that doesn’t seem to add much to our happiness.  


What does seem to make us happier is relationships and experiences.  This seems to be especially true when you combine the two, experiences that create and deepen relationships.  


Against this backdrop, I see my daughters’ generation as struggling to find the kinds of jobs that would allow them to exceed my standard of living, to enjoy an economic security comparable to my own, just as my parents invested in my education to better my economic security. 


But it seems that our economy is plateauing, from the booming growth that characterized the half century following World War II, to the Internet boom and bust, to the relative stagnation of the last ten years.  It is not surprising that this era of relative stagnation followed the Internet boom.  One of the major consequences of the increased productivity that came with computerization is the elimination of jobs that could be done by computers, faster and with near zero errors.  A whole class of jobs that dealt with the classification, storage, and recall of information was eliminated.  In the beginning, these jobs were obvious: filing clerks, typists, newspaper writers and editors.  Remember what my mother did in Chicago?  She was a draftsperson.  Ask anyone under 30 what that is, and you’ll get blank stares.  That job was obliterated by computer-added drafting (CAD).


But increasingly, other jobs that involve knowledge management are finding the same fate.  These include what we call professions now, ones that took advantage of knowledge scarcity and obscurity.   This includes attorneys, physicians, architects, professors, consultants, and others.  Any field that relied on years of training to store masses of information in the imperfect repository we call human memory is now under fire for the cost of that process and the imperfection of its recall.  Remember an obscure court decision that could bear on the current situation and bring it to bear in a lawsuit?  Google will do that in a millisecond, and recall it more perfectly than any human brain.   Cost to do that search?  Even calculating in a contribution to fixed cost, it’s pretty close to zero.  (This is why search is such a lucrative business: once you set up the infrastructure, marginal cost is almost zero, making marginal profit almost 100%.  It’s a highly scalable business.)  Search and recall is cheap.


Which brings me back to my daughters’ generation.  In my college days, most of the smart kids aspired to be doctors, lawyers, and professors.  But these days, the business advantage of acquiring the body of knowledge to enter any of these professions is eroding at a steady rate.  Watson, the IBM computer that became Jeopardy champion a few years ago, is now being purposed to practicing medicine.  While Martin Kohn, the scientist who is responsible for its development reassures us that it will simply be a tool that humans use to deliver better care, it seems highly likely that it will suggest better decisions than the unaided human doctor will be able to render alone.  So what is the marginal value of the human in this equation? 


 I think the answer to this may be in the emotional decision-making I talked about at the beginning of this piece.  Recent neuroscience tells us that our default mode is social.  From mirror neurons to the ventrolateral prefrontal cortex, we are hardwired to detect and react to other humans in our environment.  First we assess whether they are an outright threat, but then we do more subtle calculi, estimating what their motives are, and how we might either harmonize with or oppose those motives.  


This means that the professional roles I’ve talked about that rely on information storage will likely transition into information interpretation and counseling.  The first part of this is the incorporation of right-brain subtleties that might not be easily conveyable through data (although this domain may be shrinking because of Big Data); the second part is the building and maintenance of trust channels to through which the data flows.  In medicine we term this “the doctor-patient relationship”.   This is archaic as this dyad doesn’t begin to describe the complexity of this interaction, based in the future on terabytes of information.  


What are the implications of this for my daughters and their friends?


  1. Professions as the royal road to prosperity will probably underperform.  If professions were a stock, we would probably be rating them as “underperform”, or likely to be worth less in the future relative to the broader market of jobs that currently exist.  The barriers to entry remain high and are getting higher (Google “average medical student debt”), and the marginal benefit of their certifications is diminishing (Google “percent of law graduates who get jobs requiring bar passage”).   Cost/benefit ratio is getting worse steadily.
  2. Many of the middle class jobs that remain will require tech literacy.  I actually think that tech is the new English, a knowledge domain that underlies all other areas.  The ability to understand how tech makes your ideas known and your effort valuable to the market will be critical in this generation.  Even jobs that we think of as blue collar, like truck driving and heavy machinery operation, are now requiring some understanding of the computers that are increasingly built into those jobs.
  3. Schumpeter’s creative destruction will require them to reinvent their value proposition every few years.  You say to-may-to, I say to-mah-to.   What you call proprietary knowledge, I call a market inefficiency waiting to be commoditized.  Remember when the iPhone was the “It Girl” of gadgets?  Now Apple’s stock is flattening out because of Google’s Android platform and the various manufacturers who are producing hardware to exploit it.  They in turn will be disrupted by someone else with a better mousetrap, say a neural interface device that will make touching icons just so first-decade-of-the-twenty-first-century.  The point here is that the cycle time of the destruction of perfectly good knowledge caches is shortening, so that obsolescence that used to take a generation takes a few years now.  So what makes us think that the ideas that we base our livings on are somehow so special that they won’t be disrupted in the same way?
  4. If teamwork skills were a stock, it would be a “buy”.  The skills that come from a well-developed social brain will be increasingly important.  This is because being able to work in teams that match the complexity of the task/service experience required by purchasers will be more and more prized.  The machines have linked together vast amounts of left brain inputs, to draw inferences about very complex systems.  Now the challenge is to match that complexity in our social systems to improve outcomes.  Content knowledge?  Sure, still valuable.  But relative to relational skills that allow teams to perform at a high level, that latter are appreciating in value. 
  5. If search and synthesis were a stock, it would also be a “buy”.  The ability to find the right dirt cheap content knowledge on the Web and then reassemble it in ways that bear on specific circumstances someone with money will pay you to understand, this will be big.  Recently I read a book that says that some people see numbers as colors, and have other unusual sensory experiences.  This is because they have connections in their brains the rest of us don’t have.  This variant is overrepresented in creative professions by a factor of eight.  Synthesis is the essence of creativity and innovation, and as translating ideas into reality becomes easier, the thinking of the ideas gets relatively more important.   


So how should this inform how we shape society going forward?  What it says to me is that the following skills are going to drive the next phase of our development: information recall and restructure, rather than information storage; teamwork skills vs. solitary production; and synthesis/creativity vs. static mental model care and maintenance. 


See the pattern?  All of the obsolete characteristics above are present in our current mental models of professions.  Think about the small group family medicine doc, hopelessly trying to keep up his knowledge with the unaided human brain, and working detached from a system of knowledge management.  That person works according to obsolete protocols, engages in little continuous learning, and uses a largely static knowledge base.  While they may work in teams, most of the time those teams aren’t about generating new and improved management systems continuously, they’re more likely unidirectional vehicles for physician knowledge implementation, knowledge that can be decades old. 


Medicine, law, and other professions based on information storage are in the process of changing to recognize the value they actually produce.  A good deal of that value has been eroded by the massive power of computing to make information storage and recall amazingly cheap.  What’s left will be about synthesis, systems, and relationships.  And if my daughter can be good at those things, then she can probably make any profession work for her.


February 17, 2014 at 12:09 PM Leave a comment

CVS stops selling cigarettes


CVS/Caremark announced last week that it will no longer sell cigarettes in its drugstores, which has been widely hailed as progress in the war against tobacco.  Many now expect its competitors to follow suit, and potentially make it less convenient to buy cigarettes overall.  This remains to be seen, as cigarettes remain widely available through other very convenient outlets, like grocery stores and gas stations.  So why is this a big deal?


First, this represents a real amount of revenue for CVS, about $2 billion annually.  With that amount of money on the line, you know they didn’t make this decision lightly.  Ultimately deciding to stop selling something with such a reliable stream of customers has to have a real purpose behind it. 


At first glance, that purpose might be to be/appear to be more moral than its competitors.  While this might be the case, the more revealing reason might be this: the public feels health care companies shouldn’t create their own business.  Imagine what people would say if the Cleveland Clinic had cigarette machines in its lobby, or a bar in its cafeteria.  You get the picture: it wouldn’t go over well.


What this reveals about CVS is its intent.  CVS is trying to morph from a provider of drugs to a provider of care.  CVS has nearly 7,500 drugstores, but more importantly, owns Minute Clinic, the largest walk-in chain of clinics in the U.S., with 570 locations inside its drugstores.  In a classic disruptive innovation, Minute Clinic is providing basic primary care an aisle over from the ibuprofen and cough syrup.  Staffed by nurse practitioners, this care can be provided more cheaply and conveniently than its status quo competitors can, the primary care physicians.  Think about it: which did you visit last, your PCP or your drugstore?  How many visits do you make to your PCP a year?  How many to the drugstore?  For availability and convenience, its hard to beat something that close to where you live and work, and that’s in some cases open 24/7.


I’ve had this conversation many times with PCPs, many of whom continue to poo-poo Minute Clinic and its peers as “a flash in the pan”, or “inferior care”.  They can do that, but they should also be nervous.  The 40th largest company in the world just gave up $2 billion in revenue annually, because it’s betting that Minute Clinic is the future, and that unless traditional primary care changes radically in the next few years, it’s the past.  And CVS is polishing its image to accomplish just that.

February 10, 2014 at 3:46 PM Leave a comment

Debt, data, and deciders

A version of the following first appeared in Colorado Medicine earlier this month.  It was directed at the physicians of Colorado, but I think has wider applicability:

It’s a privilege as a representative of the Center for Improving Value in Health Care (CIVHC) to write this article about the changing landscape in American health care, and how it affects us here in Colorado.  Just for anyone who still doubts that health and health care in Colorado will be different in the future versus the past, a few facts, from a recent article in JAMA1:


-In 2000, 53% of physicians practiced independently, and 18% were hospital-affiliated.  In 2010, the proportions had almost completely reversed: 23% independents, 48% hospital-affiliated.  The macro trends favor further vertical and horizontal integration, for reasons I’ll go into later in this piece. 


-The trend toward consolidation affected many health care sectors in the last decade, including insurers, pharmacies, and office-based physicians.  The proportion of office-based physicians practicing in groups of six or larger rose from a third to nearly half. 


-Nearly three-quarters (72%) of physicians today practice on an EHR, as do nearly seven hospitals out of eight (87%), as of 2012.  Contrast that with earlier in the last decade when less than half of both groups were on an EHR.


The big question is: why is this happening?  And how should physicians in general adapt?


At CIVHC we talk about three major trends in American health care, three tsunamis of change that are affecting every aspect of American life, not just health care.  These are debt, data, and deciders.  Let’s look at each of them.



Debt is at every level of our society today.  As a generation, we Baby Boomers were raised in an environment where we could always count on future growth to bail us out of unreasonable debt obligations today.  Big mortgage?  Don’t worry, you’ll get raises later on that will make it affordable.  Student loans?  No problem, good jobs available upon graduation. 


But then the Great Recession hit, and the Big Reset is taking place.  People in my daughters’ generation are working at Starbucks while looking for work in the field of their choice, often to no avail.  We’ve gone through a series of asset bubbles, from technology to banking to housing.  Credit, which fueled the illusion of Infinite Growth That Hides All Sins, is only now starting to become available again, this time on more disciplined terms.


Debt, and particularly debt that prevents further borrowing, drives a search for value.  As long as you think you have infinite resources, you care little about value, or more specifically, you are insensitive to the cost of things in order to get the benefits you want. 


But once we perceive resources to be limited, it’s a whole different ballgame.  Now suddenly, we are looking at price tags, and ratings by other consumers, others like ourselves.  I notice this difference when I travel.  If someone else is paying my expenses, I tend not to shop for my hotel, but to stay at the conference hotel for convenience.  If I am paying with my own money (which I perceive correctly to be limited), I go to TripAdvisor and try to find a lower price for a similar hotel, close to the meeting.  I read carefully about the pros and cons of that particular hotel, to predict whether I’ll like it.


What’s this got to do with health care?  Before, nothing. Now, everything.  Because of insurance, before we acted like the traveler with the expense account.  We didn’t have to pay more to stay in the conference hotel, someone else did.  We didn’t comparison shop for medical services, because it didn’t make a difference to us financially.  We didn’t experience costs (much), only benefits.  So why wouldn’t we metaphorically try to stay at the Ritz vs. La Quinta?  If we stayed at La Quinta, we’d be saving money for someone we don’t like (the insurance company) and in doing so, worry that we shorted ourselves.  Who does that?


I like to say jokingly that being out of money has an amazing clarifying effect on thinking, but there is truth in that.  And being out of money on so many levels as Americans is clarifying our thinking about health care costs.  It’s making us ask for the first time, “What are we actually getting for $2.7 trillion, and 17% of our economy?”  And it is our debt, personally, corporately, and nationally, that is compelling us to do so.



Remember what I did when shopping with my own money for a hotel?  I went to TripAdvisor.  Why?  Sociologic studies show that the aggregated opinions of others in the same situation more strongly predict my satisfaction with a product or experience than I can alone.  But that’s only possible because I can read their ratings and opinions online.  In essence, massive computing power has allowed people to compile data about many experiences they have daily, and to make choices about those that involve giving other people money.  Which brings me to a guy named Gordon Moore.


Moore was an engineer at a company called Fairchild Semiconductor, a strange name in the 1950s when people we just discovering uses for transistors.  He figured out something cool working there, and it was this: Moore’s job involved making microchips, and cramming more and more transistors onto chips as fast as he could.  He noted that he could double the number of transistors on a chip about every 18 months, effectively halving the cost of computing power.  This became Moore’s Law, and the exponential trend he noted then continues today, half a century later.  Moore also went on to found another little company with a funny name: Intel.


Why should you care?  Think about how you picked a hotel in a strange city before TripAdvisor.  You asked around at work, or got a recommendation from your spouse’s cousin who lived there ten years ago.  Pretty hit or miss.  But now, with TripAdvisor, finding a hotel in your price range that people love is a snap.  Technology, and in particular, Moore’s Law, makes this information cheap, nearly free in fact, and cheaper every year from now until forever.  Data makes shopping effectively really, really cheap.  Which brings me to deciders.



Okay, now we’ve got the average American family of four deeply in debt, with no additional help from their employers or governments coming any time soon, and massive and growing amounts of data available to them on their smartphones.  Their employers are providing health plans to them that have $10,000 deductibles, so they’re spending their own money for anything beyond preventive care.  Some health plans have reference pricing as a feature, in which when the plan does pay, it only pays the lowest price offered by a good quality provider, and you the patient get to pay the difference between that amount and what your chosen provider charges. 


Remember TripAdvisor?  There are companies that are starting to do the same thing in health care.  Sometimes employers are giving their employees subscriptions to these companies so the best value in knee replacement shows up on their smartphone when they click the search button.  So what will the average consumer think?  “I’m spending a lot of my own dollars and I have access to information to choose the best bang for the buck.  While I still worry about making good choices, I can read online what people just like me think of the doctor and hospital I’m about to choose.  Hey, remember when I used to have to ask my spouse’s cousin who he chose when he had the same operation ten years ago?  That was so twentieth century.”


There’s more to this story, but these three trends, debt, data, and deciders are bringing to health care what already existed in most other sectors of our economy: functional markets.  Markets are places where consumers can compare prices and benefits, and choose for themselves where to spend their money.  And for arcane reasons, they’re just now catching on in health care, because of these three forces.


And consumers these days don’t buy products so much as experiences, complete experiences where they can.  That means they don’t like buying the parts of the car and assembling them themselves; they like buying the fully assembled car off the lot, and expect to be able to drive it without a lot of training.  So the thought they’d have to pay for and assemble a surgeon, a hospital, a rehab center, physical therapist, etc., and manage them because they don’t really talk to one another?  And get separate bills for what seems like the same thing?  That’s not how people will shop for this stuff in the future.



Now we’re to how this plays out for you.  Despite a massive trend over the last half century toward equating specialization and segmentation with expertise, increasingly consumers are going to recognize that this segmentation makes them buy pistons and catalytic converters separately, and hope the parts fit together in a way that makes the car run in a predictable way.  Because teams that communicate and coordinate action well can create coherence for patients and consumers, they have a definite advantage over depending on, say, the random chance that all the players in a care plan will all do the right thing at the right time in the right way.  I pointed out at the beginning of this article a growing trend toward doctors working for hospitals.  This is because hospitals believe they need to control every phase of a patient’s experience to be successful in the future.  They believe this because people who buy their stuff are starting to tell them that.  While for many physicians this is anathema, and there is no rule that says hospitals have to be in control of the combined enterprise, there is no question in my mind that any entity that can actually create whole, coherent, and successful experiences for patients at a competitive price will be winners in the next decade.  Personally I hope those entities are provider-led, but the hard truth is that value-driven consumers with good information will buy the better car at the better price, no matter who built it. 


At CIVHC we are helping people get their teams together, measure their performance, and then improve it so they can sell a higher value experience.  Currently my colleagues there are working on helping people construct bundles of care; increasing discharge reliability and thereby reducing readmissions; creating reports out of the All Payer Claims Database to inform providers of the cost and the quality of the experiences they create for patients; and many other things that we hope will enable providers to create greater value.  And that will be good for everyone–except those who insist that delivering care in a disorganized way is the best we can do.


This, therefore, is the choice before you.  You can either continue to contend that disorganized care is best, or you can acknowledge that you and others will do a much better job for people as teams that communicate well.  You can continue to see only your piece of someone’s care, or you can try to understand how you fit into that patient’s total experience, from their perspective.  And you can continue to imagine that we as a state get to spend from someone else’s infinite health care expense account, or you can acknowledge that in this area as in all others, the money is limited, and we need to find ever increasing value to make health care sustainable again.


At CIVHC we hope that Colorado’s providers will choose to find their place in teams dedicated to better clinical and financial outcomes for patients; to understand their own performance though others’ eyes; and to work in those teams to deliver value for people who have not a dime more to spend on care, and who increasingly know what they’re getting when they check into the health care system.


1The Anatomy of Health Care in the United States, JAMA, 2013; 310(18):1947-1963.

February 10, 2014 at 2:21 PM Leave a comment

Insurance, cash, and moral hazard

I was speaking at a conference, and someone raised a question from the audience.  “Health care reform seems to be driven from the top down.  What can you say about driving change from the bottom up?  Specifically, why not have people buy things with their own money, and give them an incentive to bargain with providers instead of just accepting prices set by insurance companies?”  I said I believed in giving consumers incentives to shop wisely, like reference pricing and coinsurance rather than copays.  “But I don’t think any of us want to give up our own insurance as a practical matter,” I said.


This gentleman came up afterwards, and followed up.  He was serious about this.  “You dodged the question, by saying no one wants to give up his own insurance.  If we just had people shopping for their own health care services instead of through insurance, the prices would come down a lot.  Look at Lasik eye surgery.  Even poor people could buy some things for cash once prices became competitive again.”


I told him that I was actually for people spending their own money more than they do right now, that moral hazard (the lack of price sensitivity when others pay for a service you receive) is real and should be mitigated as much as we can without bankrupting people.  But I doubted that a purely cash economy in health care would work.


It dawned on me after that conversation that what he was opposed to was insurance itself.  Interestingly he advocated catastrophic insurance for everyone, including the poor, and was for having government pay for the poor’s coverage.  Where we differed, I think, was where to draw the lines.  How poor do you need to be to get government subsidies for your insurance?  What constitutes “catastrophic” thresholds for insurance to kick in?  Should policy limits be different for rich people vs. middle class, given that it takes a lot less for the latter to spend down resources?


I actually think that he is in theory correct.  Much of the lack of selectivity we have in choosing medical interventions is that the cost of them to us personally is often very close to zero at the point of purchase.  The differences between treatment options is also often literally zero; one drug and another cost us the same at the pharmacy, even though the list price of one can be half that of another.  Indeed, in this setting, we often maximize our perceived value by getting the most expensive option, since we perceive we are getting more for our money, or more accurately, more for someone else’s money.  When paying zero or $10, who wouldn’t want to get $100 of drugs vs. $50 of drugs?  Surely there’s something about the $100 drug that justifies its cost to the insurer, and therefore is getting us more value for our same copay? 


Whether you subscribe to the libertarian view or not, though, the tricky part is where you draw the lines.  Notice that he wasn’t for doing away with insurance altogether, just doing away with insurance for things you could afford to buy yourself.  He still accepted the thought of catastrophic insurance, in which moral hazard would still obliterate any price sensitivity.  


This line of thought is influencing plan design and cost containment efforts more and more.  Philosophically it is appealing because it is in line with the values of individual choice and individual responsibility (both very American).


Nonetheless, it is a hard sell because we process risk emotionally, not intellectually.  For example, psychological studies show that we fear loss to a much greater degree than we desire gain.  Therefore, things (like insurance) that mitigate risk are valuable to us, perhaps beyond rationality.  “De-insurancing”, therefore, goes against our primitive brain, and is likely to be resisted viscerally by most, despite its intellectual appeal.

November 26, 2013 at 10:13 AM Leave a comment

Portrait of American Health Care

There are several articles to commend in the November 13th issue of JAMA, a special issue devoted to “Critical Issues in US Health Care”.  But perhaps the most important one, by Moses et al, is a wonderfully detailed snapshot of the American health care system over the past three decades, and how it has evolved over that time.  Some interesting observations:


  • We all know that health care inflation has exceeded general inflation over that time.  But there are a few ways that can happen: we can use more stuff per person, we can have older people who on average therefore need more care as they age, or we can raise prices for the same services.  Which one is the biggest factor?  The surprising answer is that the increases have come mostly from increased prices, and not increased intensity of service or older average population.  So if that’s where the increase has come from, perhaps our prices have been allowed to rise through us not knowing how much medical stuff costs?
  • Is insurance paying more or less of the bill now than in 1980?  Despite the general impression that purchasers are pushing more of the bill onto individuals, the answer is that out of pocket spending for health care is declining as a percentage of the total bill.  Most of the compensatory increase has been picked up by government in the form of increased Medicare and Medicaid spending.  So we shouldn’t conclude that we aren’t spending more on health care as individuals.  We are.  We’re just spending an unfathomable amount more as governments and employers, more money than most nations’ GDP.
  • True or false: most of the money we spend on health care is for the care of the elderly?  False.  80% of total national HC expenditure is on individuals younger than 65.  As with those over 65, most of that money is spent on chronic disease care.  So the thought that simply reforming Medicare will get us back to sanity is wrong.


The article goes on to identify three big factors that the authors think produced these results: industry consolidation, information technology, and consumerism.  (At CIVHC we talk about the three tsunamis: debt, information, and the empowered consumer.  More on that later.)  The sectors that are consolidating fastest are insurers, pharmacy benefit managers, and physician groups.  The consolidation of these sectors as well as with others like hospitals, affords the resulting organizations the market leverage to raise prices.


IT, including the installation of EHRs and the infancy of the use of Big Data, is beginning to reduce the fragmentation that is the hallmark of American health care inefficiency.  But we are in a phase in which that massive investment, public and private, has added to cost, but the returns from reduced fragmentation are just beginning to accrue. 


Finally, after a long tradition of paternalistic relationships in medicine, consumers are demanding that the industry begin to produce products they want to buy, not simply what the industry thinks is best for them.  But as anyone who has used the system lately knows, health care has a long way to go be as customer centric as the average online retailer who remembers what you’ve bought before and offers you similar items when you return to the site.


I speak on these topics often, and it strikes me that the changes we are watching are not simply roiling health care, but the structure of American society.  The same factors that are driving change in health care are changing other industries, and challenging them to make a better product or experience, with more stuff at lower cost and delivered exactly as we need and want it.  As I type this, I am listening to Pandora, where I’ve customized the station to my musical tastes.  I did that for the cost of having to listen to an ad every half hour or so.  Now why did I buy albums in the past?  I can’t remember.


The first shift is from a society in which people assumed that everything could be bought on credit, and that debt could be accumulated indefinitely without consequences.  While this is still hotly debated among economists, it doesn’t make sense to the average person that you can get something for nothing; eventually, you have to pay your debts, or someone else does.  In health care, the someone else is the next two generations, on whom we’ve loaded several trillion dollars’ worth of debt, much of which was incurred for that increased Medicare and Medicaid spending we mentioned previously.  The mental shift from thinking that the Internet driven stock market would pay for a multitude of sins, to the horrible realization that we might have to pay up ourselves, is sobering indeed. 


The second shift is the explosion of information technology.  We aren’t using it well or effectively for the most part yet, but we’ll get the hang of it, and when we do, we’ll use it individually and collectively to drive services to value, the way it works in other industries.  There are a bunch of interesting experiments out there currently, including Centers of Excellence networks, mobile apps that identify value providers for those paying their own bills (like people with high deductibles, which will eventually be most of us), reference pricing, and the emergence of all-inclusive bundles for elective services.  Two factors kept us from shopping for medical services the way we shop for cars and dishwashers: first, almost no one cares about price when spending other people’s money (think expense accounts), and second, if your customers don’t care about the money, then who bothers to put out a price list?  But benefit designs that make patients into consumers again, e.g., reference pricing, will awaken all of our inner shoppers, and when that happens often enough, the price list will become de rigeur among providers.  Why will we go to all this trouble?  See the section on debt above.  Remember, it’s looking grimly like we’ll have to settle our own bills, within our own lifetimes.


The final shift happens when you get people spending their own money and information technology gives them Ebay pricing and rankings for providers.  There are large employers who are already doing this for their employees, and part of the appeal for private exchanges will be these kinds of shopping tools. 


There will still be problems, no doubt.  Emergency care is still a problem, in that when you fear dying, you’re not very price-sensitive.  In that circumstance, “trust me” from an ED doc sounds like a mandate, not an offer to purchase.    But I think the era of blind purchasing in health care is over.  And that will make the kind of article Moses et al produced all the more interesting when we look at our current decade in retrospect.

November 22, 2013 at 4:07 PM Leave a comment

Why medicine is changing

I just submitted this piece for the Colorado Medical Society magazine:

Dear Colorado Physician,
Hi.  It’s Jay, the guy from down the hall.  I am writing to you today to talk to you about how our world is changing, and why I think it is doing so.

First, none of this is going to make any sense until we face up to the fact that what we have viewed as “the normal course of business” in medicine is anything but normal.  In the history of the world, never have so many spent so much of other people’s money with so little accountability for how it was spent.  Never.  It’s been the biggest bonanza of unsupervised money in the history of the planet.  You and I, hospitals, drug companies, insurance companies, and many others have made incredible livings based on this lack of adult supervision of our spending patterns.  While we like to excuse ourselves from that list, as Walt Kelly said in Pogo, “We have met the enemy, and they is us.”  At least, partly us.

How did this happen?  Well, remember that in 1950, the sum total of the data about our practice patterns could fit into a cocktail party conversation.   With loud music on.  In the absence of the ability to judge who was doing better and who was doing worse at our gig, society did a number of things to try to help itself sleep at night.

First, they invented the malpractice suit.  By more or less randomly punishing anecdotally bad behavior, they sent the message, “We can’t tell if you’re doing a good job, but we’ll rely on your fear and guilt to regulate your behavior.  Sorry to resort to that, but it’s the best we can do right now.”  We learned to fear and loath trial attorneys.

To try to regulate our spending, the spending with no natural brake on it, they invented prospective review in insurance companies.  This was to send the message, “We can’t tell if you’re doing a good job, but we’ll rely on you giving in to hassle factor for things you don’t really want all that much, to distinguish what’s medically necessary from what’s not.  Sorry to resort to that, but it’s the best we can do right now.”  We learned to fear and loath insurance companies.

To try to regulate our quality, the quality no one could define with any specificity, they created hospital peer review and credentialing.  Good, we thought, because we control those, and so while we do punish egregious error, for the most part we go through the motions and excuse anything we can imagine having done ourselves on a bad day.  We do no root cause analysis, no systems improvement, and we wait for the same thing to happen again.  We shake our heads when it does, and wonder why so many of our peers are having bad days.

But in 2013, we are learning to tell who does a good job.


In 1965, Gordon Moore working at Fairchild Semiconductor, observed that the number of transistors on a chip was doubling every 18 months, and the cost was halving at the same time.  This meant that computing power, and therefore information, was getting cheaper at an exponential rate.   Today in 2013, Moore’s Law is still true, and information is cheaper than zero.

The cheapness of information fundamentally changes the properties of modern society.   It means that everybody’s performance can be measured, including yours, with increasing precision and accuracy.   It means data will be increasingly available to do systems analysis, and improve the safety, reliability, and efficacy of treatments and procedures.  It means that very complicated things will be modeled predictively, including things that are way more complicated than a hip replacement.  So the chances this computing power isn’t being applied to your performance as a doc?  Zero.  All the major health plans have already invested a lot of money to do exactly that.

So we have a couple of options here.   We could try to ignore this trend, and hope everyone who pays for our stuff will, too.  We can spend our time and effort trying to discredit the data that’s being used, even though similar techniques are being used to send coupons to women who are pregnant before they’ve told anyone, through their buying patterns.  Big Data is here, and it cannot be lobbied or wished away.

Or, we can use the information that health plans and others can provide to get better, and to accelerate our quest for error-free, high value care.  We can humbly accept that the smartest doc alone has no chance to do her best work without the data and analysis enabled by Moore’s Law.  And we can begin to use these data to get better at what we do at a rate unimaginable in the days before powerful computing.

I’m not here to make that choice for you, even if that were possible.  I’m here to tell you that whether you voted for this or not, it’s where we are.  The profession will never be the same, and like all loss, that is sad.  But we should recognize that the old system and its imperfect quid pro quo were driven by society’s inability to judge what it was buying from us; its need to feel safe through fear and guilt-based mechanisms; and comforting delusions about our infallibility that we secretly wanted to believe ourselves.  Today in 2013, I am confident that none of those things produced what is best for us, our patients, and our society at large.

What will you choose?  You won’t have to tell anyone.  They’ll know from the data.

April 30, 2013 at 4:44 PM Leave a comment

The kitchen table conversation about what we can afford

An elderly couple I know had a division of labor at their house many years ago: Ed was responsible for financial planning, saving for retirement, etc.  Marge was responsible for day-to-day bill paying.  One day, when times were tough and the bank account thin, they received a notice that they were overdrawn. 

            “How did this happen?” Ed asked Marge.

            “Well, it could be those checks I wrote to charity,” Marge said sheepishly.

            “But did you check to see if we had money in the account?” Ed asked.

            “No, I assumed we did—because we still had checks,” she replied.  “Ed, you should have seen those people—they needed coats, and groceries.”

            The reason I bring this up is that I think our country’s finances currently work a lot like this.  We continue to write checks, because there are checks left in the checkbook, not because there are sufficient funds to pay them. 

And, we are doing it for the best of reasons: because we are trying to assure our neighbors get things we feel are human rights, namely health care for the elderly, the disabled, and the poor.  We are scrimping on repainting the house, fixing the water heater, and funding the kids’ college accounts, all to write checks for more health care.  It is borne out of compassion, and many of us feel pretty noble about that.  We’re not going into debt for ourselves, but for the benefit of the sick and the needy.

But compassion or not, there is a day of reckoning when we realize that we can’t continue to spend what we don’t have and aren’t likely to earn in the future.  Many of us think that day is today.  Or maybe yesterday.  In any event, with the debt we’ve incurred, the interest payments alone would be enough to worry Ed and Marge that they’d never catch up.  They’d know that they just didn’t have that many raises left in their working lives. 

The sequester, taking effect at midnight absent a miracle, is an attempt to deal with something like Ed and Marge’s predicament.  While we as a nation made pledges to charity (and bought a big house) based on the thought that we would have ever increasing incomes, the reality is not so rosy in a tough world economy.  Generous people that we Americans are, we’ve taken no raises in the aggregate for ourselves in this last decade; all of our raises have gone to paying interest on our past generosity and increasing that generosity through more health care spending.  The president’s Council of Economic Advisers projects that on our current trajectory, that trend will continue through at least 2040.  As a result, our standard of living has stagnated and will continue to do so in the next quarter century.

Ironically, the sequester makes cuts to almost everything but the main thing that is putting us deeper in debt: Medicare and Medicaid.  If we are ever to stabilize our debt, we’re going to have sit down at the kitchen table, and figure out what proportion of our income will go to health care to reflect the compassion we feel for our neighbors.  But what’s left must still allow us to fix the water heater, paint the house, and start putting money into the college fund again.  We can figure out that number, just like Ed and Marge did.

March 1, 2013 at 11:40 AM Leave a comment

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