W(h)ither health insurers?

The talk around the country among health insurance companies is that their insurance business is dying.

What is happening? First, the consolidations in other industries, resulting in large, multistate corporations, already mean that many companies self insure their employees. Even many local firms have large enough work forces that they can be self-contained risk pools. (One source I found says that in 2008, 89 percent of workers employed in firms with 5000 or more employees were in self-insured plans.) There is no sense compensating insurance companies for actuarial risk when your employee base is that large. Instead, the insurance companies or other firms are hired solely to administer the benefit plans.

For those insurance markets that still exist, the provisions for transparency under the national health care reform law, and the insurance exchanges that will be set up, will result in the commoditization of insurance products. That commoditization will drive down the profit margins that would otherwise exist in this market segment.

The result is that health insurance companies will become financial services organizations more than insurance entities. Think of them as another form of banking, where minimizing transaction costs becomes imperative, and where the use of derivatives and other hedges makes the difference in who makes money and who doesn't.

This, in turn, also implies that scale matters. Like banks and credit card companies, the larger ones incur a lower cost for each transaction. Several years ago, I was told that the minimum size needed to be a successful insurance company was two million subscribers. That was before the national health reform bill passed.

What does all of this mean for the relatively small insurance companies that serve Massachusetts? The same trends apply, but they have been aggravated by recent state action that limits premium increases for small business and individual policies. That action has explicitly made that business line unprofitable.

What can Massachusetts firms do to maintain their profit margins? (Yes, I know they are non-profits, but even non-profits need a positive bottom line.) There are two basic approaches: One is to grow in size to reduce transaction costs. On that front, is it reasonable to expect some consolidation of companies in this state? (See chart with membership, courtesy of figures reported by Rob Weisman at the Boston Globe.)

The other approach is to find new lines of business. The large national companies are already exploring that. What valued-added services could Massachusetts insurers bring to the marketplace?

Unanswered questions on payment reform

Here is a story by Robert Gavin in the Boston Globe about the deteriorating financial condition of Massachusetts hospitals. This is another in the now all-too-familiar type of story about layoffs of health care workers in our state, something some of us predicted several months ago.

While there are some who suggest that a move from fee-for-service to global, or capitated,* payments is the key element in solving rising health care costs, some questions need to be answered as part of the payment reform movement in Massachusetts. If the wrong answers are given, the movement will result in a simple transfer of risk and finances between and among insurers and hospitals, and between and among hospitals. This will aggravate the problem noted above and, with the creation of Accountable Care Organizations, may also lead to greater market concentration in the state.

1) Given the underpayment to hospitals and doctors by Medicare and Medicaid, what margin would private payers need to pay to provide hospitals with an operating margin consistent with maintaining and renewing physical plant and equipment and with providing proper levels of clinical staffing? (Medicare is the largest single payer for most hospitals, and the percentage of patients it covers in hospitals is growing as the baby boomers age.)

2) How is that needed margin consistent with the current actions by the state's insurers to impose rate increases on hospitals and doctors below the rate of inflation -- actions that are based in part on the decision by the state to require insurers to undercharge for small business and individual premiums?

3) As insurers move to capitated rates, do they have any intention of equalizing rates among provider groups in the state to reflect population-based characteristics as opposed to the relative market power of providers? If so, what is their timetable for doing so?

4) As insurers move to capitated rates, shifting actuarial risk to providers, will there be a commensurate reduction in capitalization requirements for those companies? Will there be a reduction in the remarkably constant 10% of premiums that goes to paying administrative costs for those companies? How and when will those savings be passed along to consumers?

5) How will the body politic deal with the inconsistency in payment models between capitated-limited network plans offered by private payers and the open choice (i.e., PPO) model offered by Medicare?

As an economist, I recognize the merits of capitation. But, if it is done with incomplete consideration of these questions, we will have traded one set of problems for another.

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* On the more humorous front, the main semantic difference between "global" and "capitated" seems to be that "global" is a softer term, implying inclusiveness; whereas "capitated" brings up memories of the guillotine!

I hate it when I have to give this kind of news

Sometimes an expression that would be appropriate and kind in normal circumstances can add pain or anxiety in a clinical setting.

A friend recently went to the Emergency Room because of some bad symptoms. After a few tests, the attending returned to give the diagnosis. He started out by saying, "I hate it when I have to give this kind of news" and then proceeded to summarize the test results and finally to tell my friend that she likely had a very serious, probably terminal form of cancer.

I think what happened here was that the doctor thought that his introductory clause displayed empathy. But what this patient and her spouse heard was that the doctor was more concerned about what he was feeling than what the patient was feeling. Especially after they found out that, no matter how badly he felt, it was the patient who was likely to suffer and die.

Further, in the extended minutes of explanation before he actually delivered the diagnosis, his introductory comment caused a heightened level of stress. He felt the explanation was important to provide a context for the conclusion, but it mainly served to create suspense.

They would have preferred a more direct, "I am sorry to have to give you some bad news. We believe you have ** cancer. Let me explain why we think so." In their minds, the slight change in wording would still have presented empathy but would have made clear that the doctor's concern was about them and not about how badly he felt. The direct delivery of the diagnosis at the start of the explanation would have relieved suspense.

Some reading this might feel that my friend and her spouse were overly sensitive and were misinterpreting common courtesy. I can only respond that these folks' reaction was immediate and negative. I conclude from this that common courtesy does not always feel like such in a difficult clinical setting.

I claim no expertise in how bad news should best be delivered by doctors. But I have told this story to other people with serious diseases, and they have resonated with the feelings of this couple, often remembering their own moments of diagnoses in a similar fashion.

I would love to get reactions and wisdom from both clinicians and patients on this matter. Please comment.

More on the blue whale

Apparently, this is a very rare event. See here. An excerpt:

“It has happened in this country before, but not in recent decades”.

Blue whales are the biggest creatures to have ever lived on Earth. They can grow up to 30 metres and weigh up to 150 tonnes.

What I didn't see in Iceland

Missed this on my recent trip to Iceland. From my friend Jacob, dressed in orange. He explains:

A blue whale died and washed ashore. We don't know how it died. It has been dead for awhile...meat rotten and most of the skin was gone. It is on the beach about 30km from Skagaströnd (where I live). The whale will likely be dragged onto the land (the farm is mostly abandoned) and left to nature. It will feed many, many animals for a long time.

The whale is the property of the land owner. In the old days the fat would have been used for fuel.

He is a marine biologist, and therefore adds:

I had to measure it. Cutting into it was even more "fun".

Science is the topography of ignorance

Here is a statement* that Oliver Wendell Holmes, Sr., as dean of Harvard Medical School, gave in an introductory lecture to the medical class on November 6, 1861:

Science is the topography of ignorance. From a few elevated points, we triangulate vast spaces enclosing unknown details. We cast the lead and draw up a little sand from the abyss we may never reach with our dredges.

And from Jules Verne, Journey to the Center of the Earth:

Science, my boy, is composed of errors, but errors that it is right to make, for they lead step by step to the truth.

I think you would be hard-pressed to find recent graduates from medical schools who would not understand these quotes and find them inspirational. After all, medical students are steeped in the scientific method. Those who go on to academic hospitals apply that method in their scientific research.

Then they enter the clinical setting, and many put aside that method. They rely on judgment, memory, expertise, instinct, creativity, and anecdote in treating their patients.

Brent James has put it this way:

We continue to rely on the "craft of medicine," in which each physician practices as an independent expert -- in the face of huge clinical uncertainty (lack of clinical knowledge; rapidly increasing amount of medical knowledge; continued reliance on subjective judgment; and limitations of the expert mind when making complex decisions.)

The scientific method relies on establishing a base case against which hypotheses are tested. The base case often does not exist in the clinical setting because there is a large degree of variation in clinical practice. How can a hospital or group of doctors test new approaches of care delivery for efficacy relative to a base case where the base case does not exist?

"These things happen" is often the result. A certain number of cases of harm to patients are viewed as an irreducible statistical percentage. There is no scientific validation that that number is, in fact, an irreducible number. By anecdote, it becomes the standard of care.

In this way, our finest doctors betray their own training as scientists. Perhaps it is not their fault, in that the medical schools do not explain that the same method that is used in basic science research can be applied to clinical process improvement. As the Lucien Leape Institute notes: "[M]edical schools and teaching hospitals have not trained physicians to follow safe practices, analyze bad outcomes, and work collaboratively in teams to redesign care processes to make them safer.

The "bad outcomes" are the errors that Jules Verne urged us to make and learn from. For two years, the IHI Open School has been taking comments about the wrong-side surgery that took place here at BIDMC and about our decision to broadly publicize that surgery to our entire staff. My colleague Deepa posed the following question: "What do you think of the way the hospital responded to the error?"

I have been watching the replies over the last two years, and I have been pleased by the near unanimity and enthusiasm for the transparency with which we dealt with this issue.

Here are three recent comments:

Disciplining may work in some cultures, but we as a society learn from our mistakes. The culture that is developing may seem new to some people who have been in the profession for many years and have become accustomed to doing things a certain way. To change that view and have them realize that making a mistake and holding their hands up to it is not a punishable act. It is something that we can learn from, and by taking the steps that have been laid out for them with new patient safety protocols they can lower mistakes.

My work culture is changing, but I can remember times when we were afraid to make mistakes because we didn't want to be "the example." Now we are looking into errors from a systems approach and are creating a more transparent culture. We are trying to create an information board . . . which we hope will show staff and guests that safety and quality are our priority and that mistakes do happen. From all the changes we have made so far, I do see a difference in morale.

When an error is shared everyone benefits by knowing what not to do. The patient and patient's family also feels as if the institution was not trying provide a cover-up for the error. This approach allows all to learn valuable lessons, while admitting to the patient that there was an error and trying to make the wrong right.

Dr. Ernest Codman propounded this approach in the early 1900s. An article in 2008 noted:

...A century later, the medical profession is still struggling with the same issues as though they were new. Dr. Codman was right then, and he is right now. Fundamental to the quality movement and American medicine in the 21st century are the same peer review, standardization, systems engineering, and outcome measurement issues. Publishing results for public scrutiny remains a controversial topic. We should embrace transparency as a component of our tipping point strategy to ignite the change we all need to transform our organizations and our profession.

The path is clear: Reduce variation, admit errors, test out new approaches to clinical processes, measure and publish the results. Repeat until done.

P.S. You are never done.

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*With thanks to HMS Dean Jeffrey Flier, who reminded me of these quotes in a recent testimonial to one of his predecessors, Dan Tosteson.

College student cleans up

Continuing our short series about summer student projects, here you see Aviva Hamavid, a college student intern, participating in our freecycling program. This is based on the idea of a swap shop. You bring in office materials you don't need, and other people take them.

“The idea is to take existing supplies which, for one reason or another, are not being used and give them a new life where they can be used,” says Aviva's supervisor, BIDMC’s Sustainability Coordinator Amy Lipman. “Sharing these items keeps them out of landfills and helps save money throughout the medical center.” We do this twice a year, and the events have made paper, hanging folders, file folders, binders, unused toner cartridges, envelopes, labels, desk organizers and other useful office items available for free to all staff. (Regular readers will remember that I also ran my own version of this last year.)

You see Aviva and Amy in action in the video below, where they have set up the freecycle station in a corner of our cafeteria.

If you cannot view the video, click here.

First crops at Bowdoin Street

A few weeks ago, I wrote about our staff members helping to organize a farmers' market in the neighborhood of our Bowdoin Street Health Center. Now, the first crops have been harvested by the Healthy Champions at the Center. Check out the video below.

If you can't see the video, click here.

What I learned as a summer high school intern

We had our farewell ceremony yesterday for three dozen or so high school students who had spent the summer with us as interns. They were assigned to clinical and administrative settings throughout the hospital.

We asked them to summarize what they did and what they had learned from the experience. I've excerpted the latter portions of their remarks to present to you in this video. I hope you enjoy their comments as much as we all did.

If you cannot view the video, click here.

ACO + global payments --> Market dominance?

Is the move towards accountable care organizations and capitated (aka, global) payments likely to reduce health care costs and insurance premiums, or will it do the opposite? Being an economist, my answer will be, "On the one hand . . . On the other hand . . ."

On the one hand, ACOs offer the potential for a better integration of care across the spectrum of primary care, hospitalization, skilled nursing, rehabilitation, and hospice. If the ACO faces an annual budget per patient under a capitated payment scheme, there is an incentive to avoid unnecessary tests and procedures and also to help direct patients to the most cost-effective component of the health care continuum.

On the other hand, if an ACO becomes the dominant provider in a region and especially if it has a electronic health record that is not interoperable with others in the region, that ACO will have substantial market power and will negotiate a higher global payment than would occur in a more competitive marketplace.

As noted here:

The federal Patient Protection and Affordable Care Act is looking for $500 billion in savings over the next decade to help pay for extending coverage to 32 million uninsured Americans. Yet it doesn’t address the problem of market concentration -- and may make it worse, said Robert Berenson, a physician and policy analyst at the Urban Institute in Washington D.C.

I suspect that the tools used by the Federal Trade Commission will be ineffectual in most regions. For one thing, ACOs will not always be created by corporate consolidation, the usual vehicle for FTC review. For another, the usual metrics used to study market dominance, like the Herfindahl-Hirschman Index, are not particularly effective in evaluating a market characterized by many discrete lines of business. Medicine is not one service. It has multiple pathways for patient entry and egress, covering a huge number of clinical conditions.

Here in Massachusetts, we have a dominant provider that has been able to demand high reimbursement rates because even the dominant insurer has been unable to withstand its market power. We have seen little political will on the part of the government, or commercial interest on the part of insurers, to attack that source or use of market power.

How much stronger will the dominant firm be allowed to become once insurers and the government encourage it to be an ACO? What if it enters into a referral relationship with the second largest provider network, combining the market power of the two largest groups? What will stand in the way of that dominant provider, alone or with its new affiliate, from demanding a global payment in excess of other market participants?

On the other hand, maybe everything will turn out fine.

Being autistic compared to being neurotypical

I heard a wonderful interview last night on National Public Radio with Lisa Daxer, an autistic biomedical engineering student. It is worth listening to, here.

But Lisa also has a blog, Reports from a Resident Alien, which is also worth reading. Here's a lovely excerpt:

Most neurotypicals (who aren't artists or children) will probably never notice the beauty in the patterns on a cracked sidewalk, or the gorgeous way the sun reflects off an oil slick after the rain. They'll probably never know what it's like to immerse yourself in a subject and learn everything about it, and the beauty of having all those facts lined up. They'll probably never know what it's like to flap their hands in happiness, or lose yourself in the feel of a cat's fur. There are lovely things about being autistic, too, just as there must be about being neurotypical. Oh, make no bones about it: It's difficult. The world's not set up to operate with autistic people in mind; and autistic people and their families face prejudice every day. But being a happy autistic person isn't "being brave" or "making the best of it". It's quite simply being happy. You don't have to be normal to be happy.

Blog rally about CHD

Stefenie Jacks has created a blog rally to present stories about congenital heart disease. It runs through August 30. She says,

This is a blog event I am hosting on my blog to allow everyone to share their story on life with CHD, connect with other heart families and chat live on my blog. Check out my blog for all the details and spread the word!

You can go to her site, "When life hands you a broken heart," and see a compendium of stories from lots of people on this topic. She provides simple instructions as to how to link your story to her page.

Thanks to Mary Ellen Mannix for giving me the heads up about this event.

A heart-starting app

Thanks to ePatient Dave for sending me this link on Bodyshock The Future, containing the following story about AED4.eu. The video follows:

Radboud University Medical Center in Nijmegen has built an emergency Augmented Reality display that allows you to look through your mobile phone's camera view and locate the nearest automatic external defibrillators (AEDs) located in a public place. It's the first independent database of AEDs in the world operated by an Academic Hospital. Data is collected by crowdsourcing and validated on-site by The Dutch Red Cross. Besides augmented reality also iPhone, Android and iPad apps are provided free. Focus is now Netherlands, soon broadened to Europe and then Global. Also, as an academic hospital, research is part of it of course. Coverage, usage, outcome etc.

Click here if you cannot view the video.

Overview AED for you English version from UMC St Radboud on Vimeo.

I'm not the best sister

Cynthia MacKenzie, a locksmith at Dana Farber Cancer Institute, published this story early in August, as she was preparing to ride in the Pan Mass Challenge. This is a bike ride that many of us have joined to support cancer research at DFCI. Although this year's ride is over, you can still contribute to it in Cynthia's name here.

When you grow up in a large family the responsibilities that come with each age are very specific. Rule number one: You always watch out for the ones younger than you. If my two younger brothers got into something on my watch, it was pretty much my fault. There once was a time that we rolled my younger brother Rob down a hill while packed inside a 50 gallon drum. To this day I can still hear my mother’s voice when she discovered he was a little bit unconscious after his ride: “You should have been watching more closely!” (I was the one who pushed it.)

Then there was the time we tickled him until he stopped breathing. I thought for sure we were bound to be goners if she found out we ended his life by tickling, but my mother just gave me a good tongue lashing: “You lead by example! If you do it your brothers are going to want to do it.” If he was to follow my example my younger brother would have loved women, but it didn’t work out that way. The children in my family turned out 2 for 7. That is 2 GLBT children and 5 "Straight" children. Where were our role models?

When Robert came out I wasn’t paying attention. He didn’t come out to me or to his best friend or to the rest of his family. He turned to men, looking for answers he had no one else to ask. It was the 1970s, and, in those days any gay social life came from the bar scene—hence the reason I know that disco is the music of my people. Imagine if bars and clubs were your only social circle. Is it any wonder, then, that gay people of my generation have a history of substance abuse and risky behavior?

My brother was found to be HIV positive in 1999, the year of my first PMC. I still hear my mother’s voice telling me to look out for him. In my memory I hear her at the end of her life, calling from the nursing home demanding that I fix the impossible. I can fix your door or change your locks or hang shutters, but I still cannot divert a hurricane.

In my mother’s last days we discovered among other things, that she had lymphoma. Cancer had metastasized to all her major organs. She was 75, an age that somehow no longer seems old to me. She wasn’t a sick a day in her life, nor did she ever see the point in yearly check ups. Not if she was well. She didn’t want to be a “burden on society” a tax on the system that she had contributed to her entire life through children and labor. And herein lies the rub. Had she had regular check ups, had she had a primary care doctor who advised her to have the most basic of cancer screenings, we might have intercepted and reversed the cancers that killed her.

I am not a very good sister. Nor am I very good daughter for that matter. How could it be that I work in one of the top three cancer hospitals in the world and yet my own mother escapes basic screenings? When I walk by the Blum van I could kick myself. Such a basic and elemental thing, the DFCI Blum van. Going into underserved communities and giving basic screenings—or at least raising awareness that it is a good idea to have check ups.

As my mother was dying, the last thing she said to me was that she loved my house. If you had said to me in 1975 that I would grow up someday, have a job where it is less of an issue to be out, have a house and a wife, and even a child, I would have thought you were crazy. Yet here it all is. A sequence of little miracles spanning the years.

My brother has zero T cells this month and I still cannot help him. I cannot ride like Lance Armstrong. Nor can I ride like Greg LeMond whose name is emblazoned on my shiny red bike. You can’t make me want to go to France, though my wife would be gone in a flash if (and when) given the opportunity. What I can do is work here. Fix the doors, make sure they close and open. I can participate in the ride knowing that maybe, just maybe the little that I can do adds to the greater of the whole. Research and clinical trials will continue. The Blum van will pull out of 44 Binney Street. We all might live longer and be healthy and happy while we are at it.

New blog: A hospitalist talks

Doctor Irfan Ali, Director of Hospital Medicine at a Florida hospital, has started a new blog with lots of interesting observations about that field of medicine and the interaction with others in his hospital and beyond. Check it out at Human Factor in Medicine and Life.

My bad idea

A couple of years ago, I suggested:

Why don't the insurers in Massachusetts require the hospitals here to report their HSMRs (hospital standardized mortality rates) -- in private, with no publicity -- to them, the insurers, as a condition of being in the payers' networks?... [I]f the results are out of whack with industry norms, or otherwise indicate quality or safety problems, the insurers could then require remediation plans to remain in good standing.

Dumb idea, it turns out. As Liz Kowalczyk reports in the Boston Globe, an expert panel that has been studying the measurement of hospital mortality rates has found that the "current methodology for calculating hospital-wide mortality rates is so flawed that officials do not believe it would be useful to hospitals and patients."

Researchers evaluated software of four companies for measuring hospital mortality. "The problem was that researchers came out with vastly different results when they used the various methodologies to calculate hospital mortality between 2004 and 2007 in Massachusetts, and they could not tell which company's results -- or if any -- were accurate."

Our hospital's head of health care quality, Dr. Ken Sands, was on the panel. He is quoted in the story as saying:

"In every year there were at least a couple of hospitals ranked as having low mortality with one vendor, and high mortality with another. That hospital could either be eviscerated or rewarded depending on which vendor you choose."

Fortunately, there are other metrics that can reliably measure aspects of the quality and safety of hospitals. Death will just have to wait.

Please don't do this!

An article by Melena Ryzik in today’s New York Times, “Turn on (MP3s), Tune In and Ride,” presents the concept of expanding the “communal understanding about the pleasures of navigating the urban landscape” by having a “group bike ride with a shared route and a common soundtrack. . . . Riders equipped with MP3 players set off from the same point, pushing “play” simultaneously.”

Regular readers know that I am a biking aficionado. I will tell you, in no uncertain terms, that a bike rider with earphones is oblivious to the sounds of the road and is a hazard to himself and to others. It is hard to imagine a more dangerous way to ride, except for riding blindfolded.

I have presented, in other posts, data on the dangers of driving while on a cellphone. The neurological issue behind that danger is that human beings are not really that good at multi-tasking. I am not contending that such is the issue here. The issue here is that you simply do not hear things in the ambient environment when you are wearing earplugs.

While biking, I have approached people on the road and have called out the expected, “On your left,” as I prepare to pass them. People listening to music do not hear me. Then, as I pass, many of them swerve from the surprise. When I see those earbuds, I give extra berth because I know they might swerve into me. But sometimes, they swerve towards the curb where there can be road grates or other hazards. I have passed couples riding and listening together, who have almost collided with each other as I passed them.

Ok, so my voice is not very loud, but I have also witnessed bike riders who do not hear approaching trucks and buses as they listen to their iPods.

I am not talking here of people who blast the music at high volumes, like the ones you can hear across the aisle in a subway car. I am talking about normal music volumes.

So, please ride your bike with both ears open. Listen to music in another setting.

Happy birthday from Don Berwick

A friend closer to my age writes:

So my brother's 67th birthday is tomorrow and he just received a Happy Birthday email from -- Medicare! No kidding!

After they wish him happy birthday they tell him to check on his eligibility for screening for:

Prostate
PSA (which, recall, is now not recommended in all guidelines)
Cardiovascular
Colorectal
Abdominal aortic aneurysm

Zowie, look what we have to look forward to! My mind is blown!

Rise of the Mamils

As I prepare for this weekend's exercise, I take note of this article, knowing for sure that it is not about me at all. Really. For sure.

(Thanks to Dr. Honora Englander for the link, I think.)

Excellent pick at BCBS

At the risk of appearing to curry favor with our largest insurer, I want to congratulate the Blue Cross Blue Shield board for appointing Andrew Dreyfus to be the company's new CEO. Andrew brings a wealth of experience and judgment to the job. The work he did several years ago as head of the BCBS Foundation provided the data and policy impetus for the MA health care reform act in 2006 that expanded insurance coverage to virtually the entire population. Beyond that, his record in the state government and at the MA Hospital Association demonstrates the kind of knowledge and astuteness that will serve BCBS and its subscribers well. This is a hard time to be in the insurance business, and we all wish Andrew well.