Starting With Curious

Health care costs are now an estimated 17.9% of GDP in the US, far higher than the next highest country (the Netherlands, at 12.0%), and projected to top 20% in the next 5 years.  You’ve all heard the outrage expressed in various media.  But what if health care spending were over 60% of GDP?  This is what economist William Baumol predicts will happen by 2105.  But the more shocking point he makes, in his book “The Cost Disease: Why Computers Get Cheaper and Health Care Doesn’t,” is that it is OK if the share of our national spending devoted to health care rises to that level – that it is to be expected, and is not at all a problem.  [I must admit that while the concept is fascinating, the book is overly repetitious, and a bit sloppily written and edited; it could easily have a been a Harvard Business Review or New Yorker article – in fact, it was a New Yorker article back in 2003.  That said, it’s fairly quick and easy reading, if the discussion below leads you to want to know more.]

The central concept, the “cost disease,” was first described by Baumol and William Bowen in the 1960s, in the context of higher education costs.  Here are the main points:

• Productivity increases over time.  We learn more efficient ways of doing things – assembly lines replace artisanal shops; robots replace humans.  (I’m talking strictly about economic efficiency, not quality, human dignity, etc.)  As overall productivity in the economy rises, it leads to higher wages, since more productive workers can command greater pay.
• With higher productivity, a business can create more with less.  Even after rewarding workers with higher pay, costs may remain stable or even decline.  So overall, an increasingly productive economy leads to a more prosperous society.
• Productivity rises unevenly.  Some sectors of the economy, such as manufacturing, agriculture, telecommunications, retail (scanners and self checkout lines at the grocery store), and finance (ATM’s, on-line banking), are more amenable to mechanization and outsourcing.   Others, such as health care, education, police and other public services, and entertainment, rely more on a handicraft, or human, element that is harder to replace.  The former will have above average productivity increases; the latter, below average.
• Because those productivity increases are unequal across parts of the economy, prices in the higher productivity sectors will tend to decline, or go up relatively slower than those in the areas where productivity gains are more stagnant.  Hence, computers and cell phones get cheaper, while education and health care get more expensive.

One of his important points is that the relative rise in health care costs is not primarily because of the usual suspects: rising demand (there has been an even greater increase in demand for computers than for health care), lack of competitiveness in the health care sector (there is probably even less in big agriculture or telecom), or malpractice costs.  It is a consequence of the inherently human dimension of health care.   Thanks to technological advances, productivity in the computer industry rises about 60% per year.  Can you imagine a physician or nurse seeing 60% more patients each year?

But here’s where the argument gets interesting.  Over time, on average, wages will go up faster than prices, and people will be able to buy more of everything .  The standard of living for a middle class American in 2012 is substantially greater than in 1960, and he or she has lots more stuff.  Because of the cost disease, the goods and services that have a greater need for personal contact with real people – what Baumol calls the “stagnant” sectors of the economy – will be relatively more expensive, and therefore consume a greater proportion of all spending.  So health care goes from almost 18% of all spending now to 20% in 5 years to 63% in another 90.  But at the same time, we can easily fit all the rest of the stuff we need and want – and more – into the other 37%, because we’ll benefit from the awesome productivity changes in  those other sectors, leading to higher wages and crazy low prices on tablets and phones and food and so on.  In other words, spending almost 2/3 of all of our money on health care is not a problem.

Baumol argues that there are important policy implications:

• We should stop trying to control health care costs by decreasing demand for services, or by cutting per unit costs (i.e., payments to providers).   This will only lead to shortages and poor quality, especially for those of limited means, as has happened to public services of many types.
• While it is reasonable to be as efficient as possible – following evidence-based practice, developing personalized medicine, leveraging information systems, and investing in prevention and wellness – politicians and voters need to understand that this will only shift the cost curve, but not bend it.  The rate of increase will continue to outpace other areas because the human-centric basics of health care delivery will always be subject to the cost disease.
• The focus needs to be on redistribution – making sure that either wages for all continue to keep up with the cost of essential services, or that there is some subsidization for those whose earning power is slipping.

All quite provocative, and in some ways reassuring.  What health care crisis?  But there are a few crucial questions we need to ask ourselves before we get too complacent. (What, me worry?)

• How little room for productivity increase is there really?  More and more health care interventions are becoming automated (from self-service blood pressure screenings and medical Web sites as sources of information instead of physicians, to remote sensing and electronic ICU capacity that allows one intensivist to staff several ICUs), and outsourced (teleradiology in India, medical tourism).  The centrality of the face-to-face human contact is diminishing.
• How much does the increasing income disparity in the US undermine the “on average this is logical and a good thing” argument?  For example, it is precisely in those parts of the economy where productivity has been growing the fastest that wages have been most stagnant and ability to afford health care has declined.  And the concept of income redistribution has never been an easy sell in this country.  What makes sense in the economic abstract does not always translate into political reality.
• How willing are politicians and the public to engage in the sort of sophisticated analysis required to move our public policy in this direction?  It’s a whole lot easier to complain about overuse, waste, and fraud than to ask philosophical questions about the allocation of benefits in society.
• At a certain point, isn’t sticker shock going to set in and people are going to freak out?  It’s all well and good  to rationalize that we can afford, as a society, to spend 63% of our income on health care, but come on, it’s 63% of our income!

 In this last point, Baumol may be onto something.  Let’s look at music – specifically, recorded (technology-driven, fast productivity growth) vs. live (human-centered, stagnant productivity).  In 1980, the average price of a record album* was $8, and now an equivalent CD goes for around $16.  On the other hand, a ticket to a Springsteen concert was $9.50 in 1980, but averages around $95 today.  And nobody seems to flinch at paying that cost to see the Boss.

*an ancient sound recording technology similar to a CD but harder to fit into the dashboard of a car

Last week, millions of people rushed to stores on “Black Friday,” in search of “value.”  In that context, value simply means how much do I get, for how much money?  Sometimes the calculation is straightforward: a video game for $75 is a better value than the exact same game for $100.  Then there might be a simple trade-off.  A mixer with 10 attachments for $200 vs. one with 7 attachments for $180.  Hmm, the per-attachment cost is certainly lower with the 10 attachments, so the extra $20 is probably worth it.  Unless I’m never going to use the additional 3.  So it’s a better value for some people, but not others.  Going one level deeper in complexity: I know I want the 10 attachment version, and I can get it for $180 if I go to the store at their “early bird” opening at 6 am.  Is it worth it for me to get up early to save the $20.  Not if I’ve been working 12 hour shifts all week and this is my one day to sleep in, but it might be if I have to be up anyway.  And so on.

The point of all of this is that value can be a deceptively simple concept.  We’ve all started talking about it, and many people can blithely define it as quality÷cost, as we see on some of the ID lanyards on campus.  But when we start to dig it becomes more complex.  We’ll explore this all in future posts.

But for now, I want to ask – did my discussion of buying video games and blenders cause an instinctive “what can this possibly have to do with health care response”?  Be honest – I’m sure it did for many.  Yes, we’ve started to talk about value in health care, but it’s been a rather hollow, rote discussion, almost as if we hope that by saying the words we won’t have to embrace the concept, much less deliver on it.  We’ve been mostly talk, little action.

We physicians and other providers take care of patients, with all of the professional obligations that entails under the Hippocratic Oath and various laws and customs.  But we also deliver a service, health care, to customers.  There, I said it.  Many of us have an almost visceral reaction to that word, or the equally obnoxious “client.”  Now, I want to be clear – I do not mean to suggest that there is nothing different between being a consumer of health care and any other product or service.   There are absolutely many unique things about being a patient (and for that matter, between being a health care provider and being a chef or a financial planner or any other kind of service provider).  I do suggest that there are also commonalities, and if we do not start to acknowledge those commonalities – the fact that we serve both patients and customers – our ability to serve our patients will be significantly diminished, because we will lose them.

Here are a few brief illustrations.  Until a few years ago, a not uncommon cause of complaints in the ER was from parents saying we did not perform a test or provide a treatment they thought was necessary – why didn’t they do a CT on my child with abdominal pain, for example.  I NEVER saw one complaint that we had done too much.  Yet in the past few years, those complaints have become common – if a CT is done to rule out appendicitis and it turns out to be negative, the parent complains that it was “unnecessary.”  What has changed?  Mainly co-pays.  Families are now beginning to ask if what they are paying is worth it: what is the value?  We also hear from primary care providers within our own system that families ask to be referred to outside providers, because they receive much higher cost sharing from our hospital-based clinic structure.  It’s not that they don’t think many of our specialists are outstanding, they just aren’t sure they are getting anything more, or enough more to be worth the extra cost.  Similarly, the family of the child getting the CT is undoubtedly thrilled that their son or daughter does not have appendicitis, and they may be very grateful for the care received, but wonder if it could have been done some other way at lower cost.

We also need to keep in mind that our customers may not be our patients.  Increasingly, choices to families are being limited by narrow network plans and other types of arrangements.  It’s the one buying the service who is the customer.  Having great quality doesn’t help anyone if they can’t access it because an employer decides our services do not provide enough value, and they steer their employees to other systems.

(Perhaps we just need to get over our linguistic sensitivities.  Patient comes from the Latin patientem, “one who suffers.”  That describes some of the people we care for, but not necessarily all of them.  Children seeking well or preventive care are probably not suffering.  Moreover, if a child comes in with a condition and we treat it, I hope they’ve stopped suffering even if they remain our patient.   Customer has an interesting etymology, from the Latin consuetudinem, meaning “usual, or ordinary.”  In English, the word customer was first used to describe someone who collected “customs”, which referred to a usual, or routine, fee on goods.  It later came to be broadened to mean anyone with whom one had dealings.  But the Latin root itself is derived from com- (“with”) and  sui, meaning “self”.  That doesn’t seem too threatening to the special relationship between health care providers and those they care for.  And client comes from the Latin clinare, “to incline or bend” – one who leans on another for protection.  In the Latin it referred to someone under the protection of another.  That seems suitable, too.

Enough digression.  My point is this: we take care of patients and serve clients or customers at the same time.  In the actual provision of care, I will always be thinking about the patient in front of me and his or her medical needs.  But I also recognize that they are not just looking for quality care, they are looking for value.  If our care is going to cost more, the difference in quality has to be worth it to them, or those people will go somewhere else.  We will have lost both a customer and a patient.  And I think in that case, both they and we will suffer.

As you can tell from the fact that ads for Menard’s and Peter Francis Geraci have replaced those for Romney and Obama, the 2012 election is over.  Pundits will continue to debate the effect on the political landscape and the so-called “fiscal cliff,” but one thing seems pretty clear: the Patient Protection and Affordable Care Act – PPACA, aka “Obamacare” (a term now embraced by supporters as well as opponents) – will continue to be enacted essentially as planned.  It seems like a good time to recall what effect the law will have on pediatrics, and particularly pediatric specialty care.

Coverage:  The law already prohibits exclusion of children under 19 years of age for pre-existing conditions (this prohibition will expand to include all people in 2014).  Additionally, children up to 26 may be included on their parents’ family policy, even if they are married and otherwise independent.

Also beginning in 2014, all people must have health insurance or pay a penalty (this is the hotly contested mandate that was upheld by the Supreme Court this summer).  Achieving this expanded coverage occurs through 3 primary mechanisms.  First, all employers with more than 50 employees must offer insurance, with subsidies for those for whom their share of the cost would exceed a certain percentage of their income.  Second, each state will have a health insurance exchange – essentially an on-line insurance market – where individuals not otherwise provided with insurance can purchase it.  The idea is that individuals, by working through the exchange, will be able to have access to the lower costs usually associated with group purchasing.  Moreover, there are subsidies for individual purchasers who earn up to 400% of the poverty level.  Finally, there is a provision to expand Medicaid to cover all individuals up to 133% of the poverty level, with the federal government paying the full cost of expansion (at least initially).  There are also provisions to continue the CHIP program and streamline Medicaid enrollment.

Exactly what the impact will be for children here in Wisconsin is unclear.  We already have the second lowest rate of uninsured children (after Massachusetts, which as you know already has a state-level version of this law).  While Gov. Walker has not yet made a decision about whether Wisconsin will participate in the Medicaid expansion, children up to 133% of poverty level are already covered by WI Medicaid.  There is some speculation that some people may lose their employer-provided coverage (since some employers may find it preferable and less expensive to pay the penalty than to provide the coverage); this could lead to at least some of those children shifting to Medicaid, but given the already broad Medicaid coverage here, the magnitude seems likely to be small.  Similarly, Wisconsin has not announced whether it will create its own exchange or allow the federal government to do it; the deadline for a decision is Friday.  One way or another, though, we will have an exchange, and the benefit levels are likely to be similar regardless, so I doubt it will matter a whole lot to us providers.

Benefits:  Annual and lifetime caps on “essential health benefits” have already been removed.  This has been helpful to the practice, as patients with high cost conditions (e.g., cardiac surgery, medically-complex special needs) who previously had move onto Medicaid when they exhausted their benefits can now remain on commercial insurance.

PPACA also calls for preventive care, including periodic health maintenance visits and vaccines, to be covered with zero cost-sharing.

Payments:  The direct impact of PPACA on payments to providers is modestly positive.  There is a 2 year provision for Medicaid payments (including those made through Medicaid managed care) for certain primary care services to be covered at a rate at least 100% of the Medicare rate.  Among the services are Evaluation and Management CPT codes 99201-99499, which includes not only outpatient but inpatient and emergency E&M codes.  Interestingly, pediatric subspecialists are among those classified a primary care providers for this purpose.  However, the states are not necessarily required to increase capitation payments to HMOs to cover this, leading to the possibility that an increase in the payment rate for some codes may lead to pressure to reduce the rates for others.  Also, in many cases our payment rates are already at 100% of Medicare.

Workforce:  There are several provisions that promote the “medical home,” which provides us with interesting opportunities to partner with primary care.  Also, the law creates a new loan repayment program, with $50 million in annual funding, providing up to $35,000 per year for 3 years for people going into pediatric medical, surgical,  and mental health subspecialties.

Research: PPACA created the Patient Centered Outcomes Research Institute (PCORI), which offers opportunity for funding of clinical effectiveness studies, an area of active interest here, and important in advancing the quality of care.  Not only does PCORI remain, but so does its funding, which comes from a per-enrollee fee paid by insurers into the PCORI Foundation.

Those are the highlights.  If you are interested in more details, a summary from the AAP, and another from Foley and Lardner, are good starting points.  Overall, the impact on our practice – and our patients – is likely to be positive.  But as is often the case, the legislation is only a starting point; regulations implementing the legislation will determine much of what actually happens.  Now that the fight over the law itself is over, the fight over the regulations can begin.

Saturday (aka D-Day, Epic go-live).  Biking in at 7 on a beautiful if chilly fall morning, it felt like the first day of school.  (Admittedly I was a bit of a nerd, and always looked forward to the start of school.)  And indeed, the mood was a lot like that: excitement mixed with anxiety, a high level of energy in part from having lots of people around that maybe you hadn’t seen in a while (ASCs seemed to be coming out of the woodwork) and in part from all the food lying about.  And of course, a new toy: Epic.

Overall I have to say, a fantastic day.  Personally, I saw that my modest investment in personalization and practicing in the playground paid off; it took me far less time to get up to speed than I had feared, and Epic wasn’t so scary after all.  Sure there were lots of small things, of varying impact ranging from minor annoyance to potential lost revenue, but some of these were fixed literally as I watched.  From the larger perspective, I couldn’t have been prouder to be a part of this.  A few observations:

• An enormous number of dedicated people high on the mood elevator.  People were almost giddy about how well things seemed to be going.  Even those who came in for atypical weekend clinics and elective OR cases, willing volunteers to be in the first wave assault
• Providers and staff remained focused on the thing that matters most – providing the best care and experience for patients and their families
• Huge leadership shadow – Peggy and her direct reports in the hospital in the middle of the night, going around checking on everyone; Mike Naumann, Stephanie Lenzner, and their legions of people demonstrating calmness and optimism despite what must have been anxiety of the pants-wetting variety
• An incredibly well-planned support system, one that has to be among the best practices anywhere
• Families were patient and understanding about delays and hiccups.  Some shared with me that they had their own experience with an EHR at their providers and were excited to see Children’s embracing it. 

Monday.  Hmm, this was supposed to be stabilization, but it felt more like destabilization.  Everyone knows the story – unplanned downtime for 6 hours just when we had hoped to be ramping up and building on the great weekend experience, then persistent access and stability problems, all on top of the expected relatively minor but nonetheless troublesome glitches.  The mood elevator seemed destined to go into negative territory.  And yet….

• Once again, there was an abundance of goodwill among all of the providers and staff – assuming good intent – despite the enormous strain of switching to paper, downtime recovery, lost work and set-backs, and the uncertainty of “is this going to happen again tomorrow?”  The ED handled a higher than average census, the OR dealt with a full load including a Berlin Heart case, Oncology clinic managed a number of sicker than usual patients – but everyone I saw as I went around said “We’re doing fine – we’re figuring it out.”
• We had a few things to learn about how to handle system downtime and the best ways to communicate, but by and large that support system was perhaps even more effective than over the weekend.  A new support area for downtime was set up literally in minutes.  Communication up and down the chain was smooth and effective.  Work arounds were being developed and shared.
• As always, we did what we always do – we put patients and families first.

Tuesday.  So far so good.  Perhaps we can just forget about yesterday and call a do-over.  But I hope not, because I want to remember the resilience and determination I saw, the fact that despite everything the mood elevator never went below “curious.”  Which is always the best place to start.

Please feel free to share your comments about how your experience has been so far.

Michel de Montaigne (1533-1592), arguably the world’s first blogger, wrote of his monumental Essays, “I am myself the matter of my book.” A tad egotistical, perhaps, but also disingenuous. In reality, his writings were about everything under the sun. (If he had had the benefit of hyperlinks, we might not need Wikipedia or any other written works.)

My goals in starting this blog are both more modest and, I hope, less self-centered. Unlike some bloggers, I’m not particularly looking for an opportunity to talk about myself, or to vent or rant (not that a bit of that could creep in occasionally). I’m looking for another way to share information that I think is important for CSG and its members – information about the practice and our partners, and about the larger health care environment. Ideally, this will not only enlighten but stimulate thought and curiosity about what we are doing, where we are heading, and how we can all contribute. Curiosity, as we have learned in our work on Culture, is the starting point for constructive thinking, healthy interactions, and ultimately excellent results. And this is meant to be an interactive, multi-way conversation; please use the Comments feature liberally.

While you may see entries on a wide range of topics, I’ll try to concentrate on what I see as our “blue chips” – those things that are vitally important to our success, the things we need to maintain our focus on. Each of us has our own blue chips, but the blue chips for the practice are:

•  iStrategy, especially Epic implementation, stabilization, and optimization
• Leadership transition in the Department of Pediatrics and leadership development and succession planning across the practice
• Adapting our business and care models to meet the rapidly evolving health care environment

-Marc Gorelick, MD, mgorelick@chw.org