Spike's Place

Real Change in Healthcare

I met with the advisor to a local University's Health Administration Program yesterday to explore Grad School options. One thing from the conversation stood out in particular.

During the initial phase of the discussion, I gave him a brief summary of my background in the healthcare industry and my career goals. I have one main goal for my career: Figuring out how to get rid of some of the waste in our country's healthcare "system". There are two main paths through which I can see myself accomplishing that.

1. Lean Sigma or other process improvement methodologies. One of the biggest problems in heatlhcare is the inefficiency in care delivery. Changing nothing else to the system but more efficient process would have a huge impact on our healthcare costs. I've blogged about this previously, citing Virginia Mason in Seattle, Washington.
2. Changes to reimbursement methodology that reward value-added services and eliminate incentives for non-value-added services. The Medicare Payment Advisory Council is currently the most powerful organization in the country at dealing with this aspect of improving efficiency in our healthcare "system".

When I mentioned this to the man I was meeting with he said "We already know the most efficient reimbursement methodologies. We already know what works and what doesn't, it's a political problem at this point." In other words, you can come up with the most brilliant research in the world that says "this is how we pay for this, this is how we pay for that" and it can be the most elegant solution that eliminates waste left and right, but if nobody can sell it to the American people or break through the hold powerful entrenched players have on the political system, it's not going to matter.

He's probably right. Or more accurately, he's right. But does that mean that everything's already been figured out? Maybe MedPac doesn't really know everything yet and the research is just as big a part of the equation as the political side. Because once the political side does win out, the methodology for reimbursement better be damn good or the political battle will be that much harder the next time around.

Luckily, the discussion put me on a path towards a degree that purports to address both tracks 1 and 2 towards healthcare reform. So... I'm going back to school!     

Fox Guarding the Henhouse

One of the most common responses to a call for greater government involvement in health care is that the government's susceptibility to fraud makes it unfit for a larger role. They say that because government employees gain nothing when a government payer spends less, they have no incentive or motivation to root out fraud and stop it. Therefore, the argument goes, it makes much more sense for private companies to administrate health care, because they would do a better job of eliminating fraud.

One problem with fraud is it's impossible to knw exactly how much successful fraud is taking place. So it's impossible to konw whether privatization has reduced fraud coming from the provider community in the form of over-treatment, improper billing practices, or billing for services that were never rendered. But thanks to the Kaiser Network and their reporting on a Wall Street Journal article from last week, we know one thing: fraud from Managed Care companies has increased:

The Wall Street Journal on Wednesday examined how as the private sector is increasingly providing more Medicare and Medicaid services, new types of fraud are "cropping up that are harder to spot, more complicated to prosecute and potentially more harmful to patients," prompting the federal government to increase scrutiny of managed care.

The state governments sending business to private companies decided that as long as the virtuous private companies were stewards of taxpayer dollars, they could scale down their own fraud prevention teams and let the Managed Care companies take care of it. Big mistake. All that happened was Managed Care companies began defrauding Medicaid instead of the providers. And hand it to the Managed Care companies, it turns out their fraud is more sophisticated than the fraud the provider community could pull off.

So now the governments are going back to the drawing board to find ways to detect the new forms of fraud. What's the lesson in all of this? The government will always need to have a strong role as a regulator of private industry. If you believe the argument that government can't detect fraud because they don't have the incentive to (if that were true, why would there be a new story practically daily detailing another fraud bust by CMS, but that's another story), then you also have to believe the corollary: private companies will always attempt fraud because that is where their incentive lies.

There needs to be a balance between privatization and rigorous government oversight. This is just one more example making the case.

Charity Porn

Watching pieces of ABC's Sunday Night Lineup last night, I was again struck by how revolting their "give back" shows are.

The script for Extreme Makeover Home Edition is simple. Find a pathetic family with a giving spirit, glorify their suffering for 20 minutes, then heap conspicuous consumption on them to make all their problems go away. From the 15 mintues of Oprah's Big Give I saw last night, they're just elaborating on the theme by turning it into an Apprentice-style format where people compete to see who can "give" in the most significant or effective way.

I'd like to coin a new term to describe shows like these: Charity Porn. To me, these shows resemble regular porn in three key ways:

1. They provide a simulated voyeuristic experience that allows the viewer to approximate but not duplicate the feelings exerpienced by those engaging in the act itself.
2. These shows almost always involve the exploitation of those being put on tape.
3. Worst of all, they delude the viewer into thinking something significant has happened, thereby reducing their motivation to take steps to accomplish a significant and authentic experience of the same.

Let's take the similarities in order. First, watching these shows does make us feel good inside, we get the warm fuzzies, and on some level, we actually feel like we are making a difference in people's lives just by watching. Our eyeballs drive revenue to one of the "good" shows on TV. We feel like watching is a charitable act in itself. Of course it isn't real charity, so there is a small feeling of hollowness when we're done. Why would that be?

Because of the second point. In order for these shows to be as effective as possible, the show producers have to find the most pathetic, down-on-their luck families to give to so that the emotional payoff at the end is as rewarding as possible. In order to pull that off, those "lucky" enough to make it on the show have to sacrifice their pride and dignity and allow themselves to be seen as pathetic people desperately in need of "help". We're basically watching people allow themselves to be exploited on TV so they can get a nice new house, new big-screen TVs, and maybe some cash. Or playground equipment in the case of last night's Oprah's Big Give. Cue the darkened film, the slow motion, and the voiceover describing how poor, disadvantaged, and miserable these kids are. All they have to do is agree to be shown on TV looking desperate, and they get a new basketball hoop. How is this different from a woman allowing herself to be sexually exploited for money? Both involve an exchange of dignity for material goods. Sounds like porn to me.

And that brings me to my last point. The most insidious effect of these shows is to reassure us into complacency regarding the plight of those around us. We don't feel inspired to "give back" to the community like so many of the shows' subjects do. We think "Isn't that nice that this show is taking care of these people so I don't have to?" Instead of wondering why our country has no social safety net, why "lottery ticket" winning like these are so essential to so many American families, and then challenging us to address that inequality, the show makes us feel like we're meeting our "good deed quote" for the week simply by watching.

Last night on Oprah's Big Give, they went to an elementary school in Houston that had no playground equipment. The basketball hoops had no backboards and were really just bent poles sticking out of the ground. There was no playscape, no playground at all, really, just a small pipe barrier about 9 inches off the ground to mark off the playground from the adjoining parking lot. These poor kids, they have it so rough. But the tone is more "how unfortunate for these poor kids, let's change their lives, because we're such good people", rather than "wow, our distorted social policy has made decrepit schools like this the norm rather than the exception." We have the power to change this on a grand scale, not just one school or one family at a time with millions in TV dollars subsidizing the charity.

That's why these shows are Charity Porn. They give the illusion of delivering the real thing, but in reality, all they do is exploit people and keep the viewer even further from getting close to the real thing.

What is the loving thing?

I wrote last week about our mission on earth to love each other. No question perplexes me more as to what "the loving response" is than homelessness. A commentary published at the San Francisco Chronicle highlights the complexities.

In it, C.W. Nevius writes of a homeless man, James Allen Hill, who died in a public library restroom of an apparent overdose. Of course it's a tragedy, another life snuffed out by drugs and despair. Nevius says the very homeless advocates trying to "help" Hill allowed his death.

There will be those who will see Hill's death as a failure of the system, another example of how the city neglects its poorest residents.

That's not the story here. The city did anything but neglect Hill. But his case does show a flaw, all right: Chronic and incorrigible offenders avoid the consequences of their actions - aggressive panhandling, public urinating or drunkenness - often through the help of well-intentioned attorneys for homeless advocates.

And instead of being placed in treatment, the offender goes back on the street and continues his destructive behavior.

San Francisco is the same city that gave its homeless population monthly stipends. One of the things you often hear from advocates for the homeless is "the right to be homeless", i.e. that it's unfair for charitable programs dedicated to serving the homeless to have putting that person "back into society" as one of their goals. What if they don't want to be a part of society?

I have to admit this is a question I've struggled with from the time I first started learning about homelessness and in the brief time I did homeless outreach. I still don't feel like I know what the answer is. Perhaps there are hundreds of different answers. There's no question that the pro bono attorneys who kept Mr. Hill out of prison or treatment programs thought they were doing the right thing and were taking care of him by giving him a voice against the legal system, but what if he would have been better served by being put in an addiction treatment program, a housing program, and put on the track to a stable life with a home and a job? And at what point do we deem someone irredeemable?

One day, when I have the courage, I am going to find out the answer to this question:

What do homeless people want?

Of course there are going to be people who want to have a stable life and a stable housing situation. But what of the people who don't want that? How best help them? And is it condescending to even be asking these questions? Do they want to be helped? Do they want to be left alone? I feel like we as a society still don't understand the answers to these questions and it's leading to paternalistic approaches that may be counterproductive. As previous posts indicate, I feel that we are on this Earth to serve each other, but what about when what's "helpful" is so unclear? I'm still at a loss.

For myself, I don't give cash to panhandlers, and I donate to organizations with a charitable mission. That's going to have to do for now.

Lottery Stupidity

When you work in Medicaid policy as I do, you learn that one of the main goals motivating state governments is trying to maximize the money they receive from the federal government and minimize the money they send to the federal government. States have to balance their budgets every year, the feds don't, so states view the feds as a bottomless pit of money and spend countless hours devising new ways to feed at the trough. Books could be written (and I'm sure many have) about how states creatively "steal" money from the federal government through legal loopholes.

Which got me thinking about the lottery. According to USA.gov, 41 states, the Disctrict of Columbia, and Puerto Rico run lotteries, generally to raise funds for education. Some have referred to the lottery as a tax on people who can't do math, but whatever you call it, it is basically a voluntary tax levied on people who choose to take on very poor odds in an attempt to supplement their income. The states like it because it's an easy way to raise cash and doesn't piss off the electorate too much. But should the electorate like it? I think state's should increase income taxes rather than support lotteries to raise extra funds, and I'll show you why.

For an example of how much money state's are losingLet's look at New York State's lottery financial budget. In 2007, New York's lottery grossed $7.175 Billion Dollars. Of that revenue, $3.971 Billion of it went to prize money. According to most sources found throughout the web, the Federal Tax Rate on lottery winnings is about 35%, meaning that of the money won by prize-winners, $1.390 Billion of it was immediately sent to the Federal Government in the form of income taxes. That's 19.3% of the total revenue raised by the lottery, shipped to the feds! That's money lost by the states, they can't get it back. Beyond that, let's look at how much money they're spending in the form of advertising and marketing. In 2007, that total was $97 Million. Other expenses that come from running the lottery, like licenses, commissions, and other expenses that must accompany running a lottery totalled $737 Million, bringing the total expense from a lottery, above what would be required for a simple increase in the income tax, to $834 Million. Combined with the money lost in the form of Federal Income Taxes, that brings the total amount of state money wasted by having a lottery to $2.22 Billion. All this, just to raise $2.35 Billion for education.

In 2007, New York State raised $34 Billion through the Personal Income Tax. To raise an additional $2.35 Billion, the State Income Tax rate would have to be raised by 7% from 6.85% on income between $20K and $100K per year to 7.3%. That may sound like a lot, but that increase in the income tax gets you the money for education without sending $1.4 Billion to the feds in the form of income tax and without wasting another $834 Million on administrative and marketing expenses. Best yet, funds paid as state income taxes are tax deductible for federal income taxes, thus keeping even more money for the state and allowing the state's citizens to send less to the feds, making the actual cost of this tax even less than the $2.35 Billion being raised for education. Finally, because the people woudn't be spending the wasted $4.81 Billion in lottery revenues that DON'T go to education, they can be spending that money on things that help drive the state economy, or even, *gasp*, start saving.

We know politician would be crazy enough to propose this. One of the key things keeping America together is the illusion that success can happen to anybody, even if that success happens in the form of a lottery ticket. The weird thing, and the thing I really want to point out here, is that the lottery actually violates every instinct states have, in that it funnels money from states to the federal government and they get nothing in return for it.

Republican Pharisees

Another thought occurred to me as I was considering the passage in the Bible from my last post. It's been so well-documented around the web that it feels pointless to post links, so I won't, but the parallels between today's Christian Right and the Bible's Pharisees are unending.

For just one more example... in the passage I quoted in my last post, the apostles ask Jesus if the man was born blind because of his sin or because the sin of his parents. Jesus responds that it is not sin at all that has caused the blindness. Biblical scholars note that one of the dominant arguments of the day among Pharisees was exactly whose fault it was that people were born into poverty or with disabilities. Was it their sin or their parents' sin that caused this suffering. They were foreign to the idea that random chance might have made some more fortunate than others. This philsophy is comforting to those in power, because it gives them license to ignore the downtrodden, disabled, and poverty-stricken. It absolves them of the responsibility to take care of those less fortunate. They can just tell themselves that the blind, sick, and poor are that way because either they or their parents sinned in some way and thus deserved their fate.

Aren't these the same arguments Republicans make today as they erode the social safety net and relentlessly pursue an "everyone for himself" social contract? The poor are poor because they're lazy and don't want to better themselves. The disabled are weak and are probably making it up and if they're not, they probably did something stupid and thus deserve it. There's no room in their calculus for bad luck (or worse, structural problems within society their policies have created) and thus they feel absolved from taking care of those in need. But like true Pharisees, nothing riles these hypocrites more than questioning their devotion to their professed philosophies. Of course they're good Christians, they just have no idea what Christ was actually talking about and don't appear to have any desire to find out.

Of course Republicans are one step worse than the actual Pharisees. The Pharisees didn't have as their model a person who died to oppose their policies.

"He was born blind so that God's works might be revealed in him"

John

9:1 As he walked along, he saw a man blind from birth.

9:2 His disciples asked him, "Rabbi, who sinned, this man or his parents, that he was born blind?"

9:3 Jesus answered, "Neither this man nor his parents sinned; he was born blind so that God's works might be revealed in him."

As mass-attending Catholics know, the above text is the opening lines from the Gospel passage on March 2nd. As I sat in church listening to the reading, I was struck by a new meaning to these words I've heard so many times before in my life. The typical interpretation of the phrase "he was born blind so that God's works might be revealed in him" is that God made this person blind so that Jesus would heal him and we would all see how wonderful God is as a result. It's passages like these that have always turned me off from the Church and from God. God caused this man to suffer for 30 years so that Jesus would have a prop for his show.

It seems to me that Jesus and the Christian God would ascribe to themselves the Kantian view of moral philosophy which is that you are not to use others as a means to an end and that you have a categorical imperative to do the right thing in each instance, regardless of the downstream consequences. Certainly the anti-abortion crowd uses several arguments from this viewpoint and actively discourages utilitarian considerations in most contexts.

But the common interpretation of this text violates that philosophy. Putting this person on Earth so he could be part of Jesus's show is using this person as a means to an end. In that interpretation, the true end is that everyone sees how glorious and wonderful God is and the blind man is supposed to feel blessed he was allowed to be part of the show. This has always been repugnant to me. The idea that God needs anything from us, like our worship or our praise, doesn't make sense. And the idea that we're all here as pieces in God's play is even more upsetting.

For some reason, I was struck by an alternate interpretation to the text. To me, God's works are loving works because God = Love. I believe that what Jesus meant was that the reason people are created with challenges or disabilities is because those disabilities give us a chance to love that person and give that person a chance to be loved in a special way. But everybody has their own disabilities and imperfections, even if they're not the kind of thing that gets you special protection through the Americans with Disabilities Act.

I began to see the brilliance in God's plan. If we were all perfect and had no defects, there would be no opportunity to love one another. It is through these imperfections we all must suffer through that we have the opportunity to experience love. I have a much greater level of respect for human life now. Though I'm still pro-choice, I think I can finally understand why people are pro-life. They view every human life as precious, because we are all facing defects and though they may differ in degree or kind, we all need love to get through the day. And without the potential suffering there can be no love. It is only because we have failed to love each other enough that pointless suffering exists.

I'm sure this isn't coming across as being as profound as it was to me when this all occurred to me. But there are so many policy implications to my realization, to me it's the kind of thing you could build a political career on. Unfortunately, even to many of the most devout Christians, charity will continue to be seen as the means used toward the end of glorifying God rather than as the end itself. God doesn't need our glory, He needs us to live out the plan He envisioned when he decided to create each of us with our own imperfections.

Lean Healthcare, Virginia Mason wrap-up

After thinking about Virginia Mason's experience with lean process improvement, it's become even clearer to me that the simplest, most a-political solution to the healthcare mess in America is a reworking of the reimbursement model to encourage value-add services and discourage wasteful services. This, of course, is still a highly political issue and would be very difficult to implement. Any time you make a change to 1/6 of the largest economy in the world in a way that creates many winners and losers, it's a political solution, there is no avoiding it. But, reworking the reimbursement models in America would be the least ideologically-driven move we can make in health care right now. Eliminating wasteful procedures that don't add value should appeal to the liberal and conservative alike. It should appeal to everybody except for the doctors and hospitals who have been getting rich performing unnecessary services, but that's one group that can not be appeased by any solution that actually solves anything. And it's possible that a health care system that consistently delivers value instead of waste will allow providers to make as much as they were making before, but will simply result in a much healthier populace.

I know there's a lot of talk about this around the web right now. Brian Klepper, who posts from time to time at the Health Care Blog and at Bob Laszewski's Health Policy Blog, has been beating this drum for years, as has Maggie Mahar. Consider me fully in that camp.

Oh, and incidentally... one of the mysteries around the web was why Virginia Mason seemed so comfortable with their situation, even thought their Lean initiative was eliminating some of their highest margin procedures, presumably hurting their bottom line. I was tooling around the web researching general lean healthcare trends and found this:

Virginia Mason applied the principles of VMPS (Virginia Mason Production System) when designing its new Center for Hyperbaric Medicine. Originally, staff felt that larger hyperbaric chambers would require the construction of a new building. But careful analysis proved otherwise. The team not only found they were able to build the new Center in an existing hospital space, which saved $2 million in construction costs, but they were also able to design the Center so that more patients can receive treatment simultaneously, eliminating waiting time. The new Center can also accommodate emergency cases without interrupting regularly scheduled patient care. 

The Center’s location within the hospital also eliminates the need for patients to be transported via ambulance to a separate campus site for care, saving approximately $55,000 annually in ambulance expenses alone. 

When you do things efficiently, you find you're saving money in ways you didn't even think of.

Lean Hospitals - Provider reimbursement

I have at least one more post in my about the Virginia Mason lean experiment.

So far, we've talked about how reporting near misses and medical errors is a key missing piece of hospital process improvement. We've also discussed how the current reimbursement model leads to higher-than-necessary medical expenses.

The next foul piece of the American health care delivery system exposed by the Virginia Mason lean experiment is the way providers are reimbursed. One thing Virginia Mason CEO Gary Kaplan mentioned as a key reason for their ability to implement these sweeping changes is that their physicians are salaried. Meaning their individual payment is not tied to the amount or kind of services they are providing to patients. Kaplan says that they try to hire the right kind of provider who wants to improve and blah blah blah, but what really helped drive their improvements were providing the right incentives to their salaried physicians to help them want to order fewer unnecessary tests. There's a telling quote in the Health Affairs article... "It remains to be seen how VM’s cardiologists will respond to the projected margin losses from less frequent cardiac testing." Yes it does.

Along the same lines as my previous post about hospital reimbursement, non-salaried doctors tend to make more money when they perform more surgeries, order more tests and perform more services. Doctors aren't going to respond well to a lean process that eliminates unneeded services if it winds up cutting into their pay.

In sum, we need to redo reimbursement to give doctors incentive to practice medicine with less waste and more value. An improved system that truly puts the patient first and eliminates waste doesn't have to result in lower provider reimbursement if the model is corrected. Yes, there will be winners and losers in this new system. Maybe primary care doctors will see their reimbursement go up while oncologists or surgeons see their pay go down, but rewarding the true "value centers" in health care like primary care can bring us to the more efficient system we all want.

Lean Hospitals, continued

Last week, I began what I hope will be a series of posts on Virginia Mason's experience with lean process improvement and the effects it has had on their care delivery and their financial bottom line.

Most of the commentary around the web about Virginia Mason's initiative has been about the prospective profitability of their move. Many reports I read claimed that, while their outcomes improved along with the quality of care, their bottom line was taking a hit. The main reason for that is also the main reason why our health care system is hemorrhaging cash and medical expenses are spiraling out of control. If you want to look at exactly why our health care system is so broken and backwards, Virginia Mason's experience will tell you.

One of the key discoveries Virginia Mason was able to make while performing a "lean analysis" of their operations, was that many of the high-tech diagnostic procedures they were performing weren't adding any value. So they actively discouraged their providers from asking for those tests, thereby stream-lining the process, reducing the times patients had to come to the hospital, and saving money for the payers along the way. The only problem is that those unnecessary diagnostic procedures are one of the best sources of revenue hospitals have. This is because Medicare reimburses hospitals and physicians based on their view of what the cost of providing those services is. They don't reimburse hospitals based on how much value the procedure creates. Add the fact that most private insurance companies simply follow Medicare's reimbursement model, with a small increase in reimbursement levels and you have a situation where almost all of the payers in our market pay little attention to the value of the services when determining how much they're going to pay for them.

Any diagnostic tool that involves a huge piece of expensive machinery (like MRIs and CT scans), is therefore compensated very well by Medicare, because Medicare views the tool as very expensive to operate (which it is). But Virginia Mason found that those tools often don't add value to the process, so they drastically reduced the number of MRIs and other "high-capital" tests they were performing. Which led to a dramatic drop in their revenue. Ever wonder why American hospitals have more MRI machines than found in practically every other country on Earth? Because Medicare (and thus all insurance companies, too) pays a lot for MRIs. Other countries don't have as many because MRIs often don't add a lot of value.

Luckily for Virginia Mason, they have hopes that they'll be able to renegotiate insurance company contracts that reward them for the savings they'll be able to deliver to payers by not performing as many expensive low-value tests. And, they think that their stream-lined process is going to increase their throughput enough so that even if they don't make money off MRIs anymore, they'll make so much money by treating more and more patients more and more effectively, that they won't miss the lost revenue.

But.... the big elephant in the room is that Medicare makes up 30% of their revenue and renegotiating a contract with them is next to impossible. As long as Medicare's reimbursement methodology stays as inflexible and as backwards as it is, it's going to be very difficult to provide incentive to hospitals to move to leaner processes that cut waste. In the current environment, hospitals make all their money off that waste!

The First Sign

(I just realized I never actually posted this, but I think it's interesting, even if it is old news).

The first sign that the party may soon be over for health insurance companies came in the form of a recent article in the Wall Street Journal. As California Healthline reports, health insurers may be unable to continue raising premiums the way they have been for the past decade.

A little history is in order. In the early '90s, as HMOs began to dominate the market, cost was the single biggest factor driving health care decisions. This was a good thing in a way, because our country was in a mild recession and there just wasn't the money available to give everybody the healthcare they needed. Tough choices had to be made, and often that tough choice was to deny care. Sometimes, the choice was to deny needed care. So.... we had a public backlash against managed care. People still tell jokes about HMOs and how draconian they were, even though reality hasn't reflected that in at least ten years. Now, instead of denying care and restricting choice, insurance companies expand choice and approve almost everything. They don't want another story on the news talking about how they're denying needed care (that happens to cost $300,000) to a sick 10 year old.

Unfortunately, while this was going on, the government payors have a role as well. In the early to mid 1990s, the government was a very reliable payor for healthcare providers. Often they were overpaying for services, which meant hospitals could charge insurance companies a fair, and low, price. Then Congress passed the Balanced Budget Act of 1997 in an attempt to rein in Medicare spending. The result was hospitals started shifting more of their expenses to commercial payors to make up for the losses they were now incurring on services provided to government-covered patients.

So, health insurers were suddenly footing more of the bill for all heatlhcare services thanks to Congress's attempts to limit Medicare spending, while also being unable to limit spending by managing care more closely thanks to a blowout loss in their PR battles of the early '90s. How did they make money? By raising their premiums at absurd rates (and underwriting the hell out of their contracts to make sure they didn't cover people who had the temerity to be sick). Often over 10% per year. Inexplicably, most employers continued to pay these rates, mainly because they had no choice if they wanted to cover their employees.

And now comes the bad news from the Wall Street Journal:

59% of employers with fewer than 200 employers currently provide health insurance for employees, compared with 68% in 2000. The trend might prompt health insurers to consider reductions in price increases, but, "if they restrain price increases, or appear to, they get hammered by Wall Street," the Journal reports.

In other words, health insurers are stuck. They can't raise rates without forcing employers to drop out of the market. But they can't control spending because hospitals and patients have done such a better job in PR, that they're almost literally not allowed to say no. This is how the healthcare implosion will happen. This trend is just now becoming a serious problem, and it's only going to get worse. At this point, health insurers best bet may be to get on board with a Universal Healthcare program and hope they're one of the few payors the government picks to administrate it. And that's a good thing.

Lean Hospitals

I've been reading a lot about lean production process improvement over the past couple months. The lean model got its start in Japan where the geniuses at Toyota created the Toyota Production Process. A process is "lean" when it has no or very few steps that do not deliver value to the customer. A typical lean process improvement will look at every step in a process, determine which steps add value and which don't, and find ways to get rid of the steps that don't add value.

Since I learned about how lean can reduce costs while improving quality, it seemed to me like a natural idea to try to apply it to health care delivery. The leaders of Virginia Mason Medical Center in Seattle, Washington have done just that. Health Affairs recently published a Web Exclusive by Pham, Ginsburg, McKenzie, and Millstein analyzing Virginia Mason's results with lean. Their analysis has so many implications for the health care delivery system, I think you could devote an entire blog to "lean health care", but I'll try to touch on as many as I can.

To summarize, Virginia Mason looked at four main diagnostic groupings to try to lower the treatment costs and improve quality: 1) low back pain; 2) cardiac arrhythmias; 3) gastroesophageal reflux disease; and 4) migraine headaches. They did so many "revolutionary" things (i.e. things that would make sense in any production process but which are practically unheard of in health care), it's hard to list them all.

This post will be about just one of their improvements, with more posts to follow about others.

The article barely mentions it, but what struck me as the most innovative change they made was a "stop the line" mechanism ...in which staff immediately report instances of medical errors or near-misses."

Not to make too big a deal out of it, but this has been a main goal of malpractice reform for years and Virginia Mason just decided to do it and got all of their physicians and other clinicians on board to do it. Usually, hospitals are reluctant to have error reporting mechanisms like this because they don't want a paper trail documenting "negligence" which might come back to haunt them should there ever be a medical malpractice suit associated with the error. Documenting the error might be taken as admission of fault, so many hospitals take the approach that it's better not to document the error or admit a mistake at all.

Virginia Mason realized that this approach was hurting their quality and causing them to make more errors. Without this step, there's no opportunity to learn from mistakes and prevent them in the future. Imagine a production process without a feedback loop to deal with production errors! It would be madness, but it happens in health care everywhere.

So, good for Virginia Mason for treating errors the right way and even better for their doctors for swallowing their pride a little bit and admitting when they made a mistake or had a near-miss.

The next post will deal with why Virginia Mason might lose money with all of their improvements and why they might not.

Pharmaceutical Value

I had a little argument with a friend of mine about the role of pharmaceuticals in the current health care crisis. She works for a prominent investment research firm investigating and making recommendations on pharmaceutical companies. My contention was that pharmaceutical companies are driving up total health care spending and profiting far too much for their efforts. That only energy companies have had higher profit margins over the past half decade goes to show just how much these companies are profiting off the system. Not only that, drug companies make more money in America where our unregulated system basically allows them to set their own rates and exploit intellectual property protections to keep bringing in huge dollars.

But there's evidence to support her contention as well. A recent study showed that increasing copays for the drugs the chronically ill need to stay healthy wound increasing total health care costs for that population. When you charge people for their drugs, they take fewer of them, become less healthy, and wind up going in for expensive Emergency and Inpatient treatments. Some (like Joe Paduda) took this study as an example of a potential pitfall of Consumer Directed Health Plans, which it clearly is. But in light of that discussion I'd had with my friend, it also reminded me of how essential drugs can be to reducing overall health spending. If raising copays a little bit on drugs increases overall health spending, taking those drugs away entirely will do even worse things for our health expenses. Who knows what the next "statin" discovery will be? Improved insulin delivery mechanisms are already showing promise of reducing spending on diabetics by making it easier for them to comply with their complicated treatment regiments.

In the end, while I maintain that it's important to sensibly regulate big pharma to limit price gouging and excessive profits, we do have to be careful not to over-regulate which could prevent the next blockbuster discovery from bringing cost savings through the entire care delivery system.

Spend-down reform

Tucked in the end of John Holahan and Alan Weil's piece on Medicaid reform in Health Affairs (subscription required), they include this gem:

The current spend-down provisions for acute care in Medicaid require people to potentially spend a considerable amount of their income and assets before becoming eligible for Medicaid. Medicaid operates as a catastrophic plan with a potentially huge deductible, essentially requiring people to deplete virtually all of their resources. We believe that this should be reformed by requiring people to spend down to the income eligibility standard (100 or 150 percent of poverty) or to spend 15 percent of their income, whichever is less.

What a great idea. Spend-down is one of those random Medicaid policies known only by policy geeks and those cursed to work with Medicaid on daily basis. The way it works is this: The state determines the income levels people must be at in order to qualify for Medicaid. For example, in the Western region of Connecticut, if you are single, you can earn up to $574.86 a month and still qualify for Medicaid. But what about the people who earn $700 a month? Obviously they're still poor, but they're too "wealthy" to qualify for Medicaid. The spend-down program was created for those people. In spend-down, you have to accrue Medical bills up to the difference between your income and the Medicaid-eligible income level and THEN you qualify for Medicaid.

So let's look at our person making $700 a month in a six month spend-down program. We take their $700 monthly income and subtract the $574.86 poverty limit to arrive at the person's monthly "spend-down amount" of $125.14. You then multiply that $125.14 times 6 - because they've been awarded 6 months of eligibility - to arrive at the total spend-down amount of $750.84. This person, making only $700 a month has to pay for $750.84 in medical services before the state will pay a dime.

Granted, you generally don't have to pay those bills to qualify, but you do have to incur them and then you'll have those unpaid bills following you around. Spend-down works great if a person visits the hospital and uses $10,000 worth of services. The hospital will write off the first $750 of the claim and bill the remaining $9,250 to Medicaid. But what if they don't incur such high expenses? Will the hospital write off the first $750 of an $800 claim? And in some states, hospitals are required to hold patients responsible for those incurred charges and are not allowed to write them off.

For people who earn twice the poverty limit, they're being asked to accept liability on half their income before they're eligible for Medicaid. With spend-down, Medicaid is saying "sure we'll help you out, but you have to be good and poor before we do." It's almost punitive in nature, a bizarre form of torture in which the government is dangling services in front of the poor and daring them to use them, combined with the perverse incentive that if they're going to use services, they better use a lot to give the hospital incentive to write off their spend-down amount. Brilliant.

The author's suggestion to move to having a maximum spend-down amount of 15% of income is a much more just solution. In that case, a person making $1,000 a month would "only" have to pay $750 (15% of $1,000 times 6) over the six month period instead of the current $2,550.84. It's a simple, relatively cheap (the authors estimate the cost at $6 billion nationwide) solution that would improve the lives of tens of thousands of people. Which is probably why it will never seriously be considered.

Outsourcing your billing work... to your patients

I had the displeasure of dealing with a local HCA facility over the past several months. I only went there once, but their billing practices were the gift that kept on giving.

I had to go to their ER after a particularly nasty allergic reaction to an antibiotic was causing me shortness of breath, and swelling throughout my face and throat. The service at the facility was great, but the billing process was the opposite. Apparently as a matter of policy, HCA doesn't call insurance companies to follow up on claims. They call their patients. I received no less than 4 phone calls and one letter asking me to follow up on my claim and in every case, a call to the insurer would have been far more productive than a call to me. They called me 3 times on one issue but I blew off the first two calls, assuming they couldn't actually be asking me to do their jobs for them. When the second issue came up, I knew better than to think they were competent and followed up right away.

The first time, I discovered that they'd mailed the claim to the wrong address. Why were they submitting paper anyway? What decade is this? The second time, it turned out the claim had already paid, but the payment was in the mail. They contacted me to resolve both issues. But what's my incentive to make sure a claim is paid quickly? I know eventually my insurer is going to pay, why would I care if it takes HCA 10 days or 10 months to get their payment? It did take about 8 months for them to get paid because they decided to make me do their work for them.

Initially I was going to swear off HCA facilities all together. But the service I received was actually pretty good. Maybe instead, I'll go there the next time I need hospital services and give them a variety of false addresses so they keep submitting claims that get lost in the mail. Maybe eventually they'll figure out that a call to the insurer will give them better information and won't piss off the people who decide whether they'll get paid or not, the patients.