Monday, July 1, 2013
Health care, we are told, is way too expensive. We are also told that this is really our fault because it is our job as consumers to police markets, and health care is a market. The original sin occurred in 1965 when we allowed government and subsequently third party payers to insert themselves into a well-functioning market, which relieved us from the need to exercise stewardship of our finite resources, and induced us to engage in reckless binge consumption of health care resources fueled by opportunistic greed of health care providers. The party, with its smorgasbord buffet and open bar, is over, we are told, because the institutions sponsoring this, decades long, shindig are going broke and cannot sustain our health care debauchery any longer. The obvious solution is that we resume our duties as consumers and actively engage in shopping for health care on our own dime, and at the same time our sponsoring benefactors will endeavor to restructure the wild array of colorful and inefficient sellers into a lean health care machine better suited for modern day mass consumption.
Mass consumption requires mass production, which in turn requires proper division of labor, machines and networked computer software. Mass production increases the value and convenience of services for consumers. Pay attention to the terminology. We are talking about value, as in “how much car for the dollar”, not about absolute quality. A high enough value attribute allows cheap, low quality products and services to be presented as high value bargains for savvy consumers. The term convenience is a lot simpler to parse, since it is really an inverse measure of calories expended for the purpose of obtaining a particular service. You can buy anything today with half a dozen taps on your iPad, while sitting on the toilet, benefiting from the aggregate advice of thousands of similarly situated consumers. Nothing should prevent a modern day consumer from obtaining health care advice from the same locale.
Seriously now, the transition to mass produced health care, or any other product or service, involves the consolidation of physical plants and also consolidation of financial transactions over the supply (or delivery) chain. These administrative simplifications are at the root of so called economies of scale. For example, let’s look at the beef industry, which is much more advanced than health care. First, you consolidate all small ranchers into large operators, and as large as feasible feed lots. Some businesses are vertically integrated and do process their own meat, while others act as subcontractors to meat processing companies. Either way, whether for internal accounting or payments to contractors, the pricing calculations are per head. Nobody bills or gets paid for individual services to cows (e.g. food for cow 1, antibiotics for cow 2, transportation for cow 3, etc.). Obviously some cows eat more than others, or maybe cause more trouble than others, but these differences are averaged out to calculate a capitated cost, which is paid in bulk through contractual supply agreements. In fully integrated businesses, feed lot operators are of course paid fixed salaries and perhaps even productivity bonuses if all the cows can ambulate from the truck to the bolt gun without incident.
Paying per head instead of fee for service has other competitive advantages, since it incentivizes service providers to innovate and manage costs down without micro interference from the purchaser. Obviously some quality assurance and spot checks are in place to make sure that those who pay for health care (or cows) get their money’s worth, and educated consumers get valuable service (or steak). For example, if a broken and fragmented primary care practice with say 5 physicians takes care of say, 10,000 people in a fee for service environment, once the per head model is adopted, the practice is free to fire 3 costly doctors and replace them with a couple of NPs and three or four RNs (i.e. proper division of labor), and save the cost of at least 1 physician FTE. May not be much, but aggregating over large scale operations, the new owners of this once fragmented practice, can realize significant economies. The trick of course is to keep the cows calm and blissfully ignorant while these transitions take place. To that end, satisfaction and experience are religiously measured frequently and all personnel, including any remaining physicians, are trained in soothing bovine communication skills, such as “DON'T SAY THIS: They are making me use this laptop with all my patients, and I can't find anything on it! SAY THIS: Our practice is using a new computer system, so I will be typing what you tell me as we talk. Please let me know if I fail to answer one of your questions.” Openness, honesty and candor, may be important for human relationships, but have no beneficial effects on large scale operations, and may even cause costly disruptions to standard work flows.
Another innovation made possible when purchasers stop paying for actual work or materials and start paying a fixed sum per head, is the ability to empower people to do some of the work by themselves. Computers that are quickly becoming ubiquitous in medical facilities and thousands of consumer facing mobile health (mHealth) apps are aiming at doing just that. Remember the days when you had to call the operator for a phone number, or the store to find out how late they’re open? In the not so distant future, calling a doctor’s office for advice on simple things will be just as anachronistic. So if you are still tinkering with your iPad on the toilet and are getting really annoyed by the mosquito bite on your driving finger, scoot over to your favorite triage app and they’ll tell you what to do.
Holy Mary Mother of God! Louise!!! I have to go to the ER… the computer says no treatment is necessary but the ER thing is right on top… maybe there’s something going around… and there’s no waiting… I’m making an appointment… go start the car honey… what… you arguing with the computer now?
Wait a second…. What just happened here? Every symptom you punch into this app, no matter how minor, brings up the ER at the top of the list for appropriate choices for this condition, and a list of all ERs in the area with some “more fortunate” ones sporting a button for you to fill out a form letting them know you’re on your way. Perhaps the new mHealth app developers are much more concerned with people’s health than their legacy EMR predecessors, or maybe we are overlooking something.
We are. Although health care expenditures are bankrupting the nation, they seem to have an opposite effect on some stakeholders. Health insurance companies are thriving. Large health systems are awash in cash. Pharma and device stocks seem to be doing just fine. Health IT vendors are growing by leaps and bounds and private capital is pouring into mobile health app development. Employers on the other hand are the only ones putting money into the system, other than us of course, and they simply can’t afford it anymore, which is the main reason workers’ wages are stagnating. For example if you are single and you made say $50,000 at the turn of the new millennium, and your employer paid for all your health care, and you managed to keep your job to this day, and like your wages, health care costs did not go up faster than inflation, you could be looking at a whopping $71,000 instead of your measly $68,000 due to escalating health care costs. Somehow the inability to pay you this extra bounty is driving your employer to bankruptcy, not to mention despair. And although the Dow Jones Industrial Average is hovering at an all-time high, hardly indicative of any corporate hardships, the difficulty associated with leaving $3,000 on the table for those who never leave anything behind, is understandable.
So why are we transforming health care, considering that the needs and wants and “rights” of individuals in this country are of no concern to anyone but the individuals themselves? We are transforming health care because $3,000 is a lot of money for those who moved their entire operations offshore for a lot less than that. And we are transforming health care because, as strange as it may sound, there is still some more money to be made from herding people into mass produced health care, as the innovative slaughterhouse pioneers have clearly demonstrated. It’s just good for business, and this is America.
Posted at 9:30 AM