Who are they going to blame?

Once the dust settles, or the flood water recedes (in this case), someone will conduct a root cause analysis to figure out why the emergency generator at NYU Langone Medical Center failed to operate during Hurricane Sandy when the Con Edison power supply was disrupted.  Given that this investigation will involve two sectors of society (politics and health care) most characterized by a need to find someone to blame, some poor person at the hospital will be deemed to be the culprit.  It will not be a person too low in the organization, as that would generate sympathy and make it look like a cover-up of higher wrongdoing.  Nor will it be the CEO.  I am guessing it will be the vice president for facilities.  It has to be high enough in the organization to make it look a person of certain authority failed at his or her job.  Being a good soldier, he will gracefully fall on his sword and issue apologies. That will do the trick to produce a fine newspaper story.

The real story will likely be more complicated.  It will involve the difficult choices that have to be made by hospitals regarding how to allocate scarce resources in the operating and capital budgets.  It will involve the matrix used in these decisions, weighing the need for upgrades of clinical equipment and that of infrastructure.  Or, of adding staff on the clinical floors versus staff in the infrastructure areas.  The problem will reside in the priorities established by the administration and the hospital's board of trustees.  It will have been aggravated by insufficient state funding for Medicaid patients and concerns about future federal cuts in Medicare.

And, it will not be that the administrative and board judgments were necessarily wrong or suffered from a lack of rigorous analysis. It will just be that they turned out to be unlucky.  There but for the grace of God goes almost any hospital in the country, starved for resources to maintain basic infrastructure.

That, though, won't be in the newspaper story.  The personal tragedy of the guy who falls on his sword will result from the hospital's need to blame somebody to expiate its perceived sin in the public arena.

Evacuation practice can help

A friend on Facebook posted this picture of her niece, a resident in Pediatrics at NYU hospital. A few months ago the niece had lightheartedly posted the picture with the caption "In case of emergency, stuff a baby in each pocket and run like hell!"

And, guess what they had to do at NYU hospital this week? For real. They had to evacuate 20 babies from their NICU. (Here's one report, with this picture excerpted from the ABC News video.)

This reminded me of a post I put up two years ago showing an evacuation drill of our neonatal intensive care unit, which included this video.  It has since become one of my most-viewed blog posts, and I include it again.  You can never do too much emergency planning.  (If you cannot see the video, click here.)

Capital flows to private equity

An MD friend and colleague is intrigued by the financial machinations beyond private equity investment in hospitals.  At heart, I think he agrees with this columnist on Kevin, MD, who wonders whether there is a place for this kind of investment.  But in the meantime, he mulls this quote from a New York Times story about the growing popularity of junk bonds:

Then there are the bonds issued to pay dividends to a company’s private equity owners. The hospital company HCA borrowed $2.5 billion on Oct. 16, in part to make payments to its three private equity owners — Kohlberg Kravis Roberts, Bain Capital and Merrill Lynch Global Private Equity. Mr. Penniman said that deals like this, in isolation, increase a company’s debt and make it harder to fulfill its obligations to bondholders. A spokesman for HCA, Ed Fishbough, said: “We’re pleased with the response to our offering” from investors, and also with the company’s debt levels. 

I explain that this growing popularity is a reaction to the low-yield environment in the marketplace, where there is a tremendous amount of cash looking for a home.

He replies:

As I am learning about private equity, I am puzzled by what passes as "normal."  I am not saying ethical.  Does HCA sell bonds to pay its private equity owners because they have to, or is there something else going on that story does not discuss?

I answer:

They have capital commitments to their owners.  It is part of the deal, extracting $ along the way for the PE investors.  Of course, it is by no means arm's length.  So it is just a way of giving the investors an early reward for taking the "risk."  But, in truth, it is a low risk because the cash extraction is part of the pro forma in the first place.

It is all legal?  Yes.  Is it normal? Yes.  Is it all ethical?  As they define the word, yes.

Playing wii while the winds swirl and tide rises

Read the last line from today's New York Times live hurricane updates:

Monday-Morning Non-Evacuators

 

The police have been going door to door in the evacuation zone. No one is going to drag you out of your house if you refuse to leave.

But the National Weather Service issued a rather blunt warning on Sunday to those considering defying an evacuation order:

THINK ABOUT YOUR LOVED ONES, THINK ABOUT THE EMERGENCY RESPONDERS WHO WILL BE UNABLE TO REACH YOU WHEN YOU MAKE THE PANICKED PHONE CALL TO BE RESCUED, THINK ABOUT THE RESCUE/RECOVERY TEAMS WHO WILL RESCUE YOU IF YOU ARE INJURED OR RECOVER YOUR REMAINS IF YOU DO NOT SURVIVE.

Those in New York City who refuse to evacuate will also earn the wrath of Mayor Michael R. Bloomberg, as well as the wrath of Hurricane Sandy herself, as Cara Buckley reported Sunday night.

But in the Rockaways, where rain has begun to fall, there were plenty of people around. “Don’t leave the castle,” a father of four told WINS-1010 radio. “I don’t think my safety’s at risk. We’re gonna tough it out and play Wii all day until the power goes out.”

Please help Fred

@Fredtrotter, health hacktivist extraordinaire, has posted a fascinating project on MedStartr.  Read it and then, if you are moved, please commit some money.  He explains:

This data set, which we got from a carefully formed FOIA request against the Medicare claims database, shows how hospitals, doctors and other organizations work together.  This conglomeration of data set shows everything — from the connections between doctors who refer their patients to each other to any other data collected by state and national databases. It displays real names and and will eventually show every city.

This data set could be the best source of public information about the quality of doctors ever. More importantly, it should help doctors to encourage other doctors to improve their skills — for example, by seeking board certification. This data set will allow patients and administrators to evaluate the health system on both micro and macro scales and give them the tools to take steps towards addressing inefficiencies.

How could it be used?

It is very difficult to fairly evaluate the quality of doctors in this country. Our State Medical Boards only go after the most outrageous doctors. The doctor review websites are generally popularity contests. Doctors with a good bedside manner do well. Doctors without strong social skills can do poorly, even if they are good doctors. It is difficult to evaluate doctors fairly. Using this data set, it should be possible to build software that evaluates doctors by viewing referrals as “votes” for each other.

Our goal is to empower the patient, make the system transparent and accountable, and release this data to the people who can use it to revitalize our health system.

Why does he need some money?

This data set can be made substantially more valuable by merging it with other “openish” data sources on the performance of doctors and hospitals. We want to turn this into the ultimate source for open doctor and hospital data.

Almost every State Medical Board in the US releases a report about the doctors in that state. This usually includes information on the doctors medical school, information about board certification and information on disciplinary actions against the doctor.

All of these state-level data sources believe that it is a appropriate to charge $50 to $1000 for copies of this data. Frequently, the states release data that is not yet linked to the NPI data. Sometimes some data is only available in PDFs etc etc. In short this data is currently available, but it is either messy, confusing and disconnected… or it is organized but expensive.

As a result it is not possible to get a full profile for a particular doctor, as they potentially move between states, without paying for expensive data aggregation services. These services charge as much as $150 to data on a single doctor. At those kinds of prices, there is simply no way that a data scientist can afford to really do any significant work on doctor data.

This crowd funded project will enable us to purchase all of this data from the various public sources that sell it, and then to perform the conversion required to merge this data with the core NPI database. Our calculations indicate that for $15k we can comfortably get the state medical board data from every state in the union.

At the Aquarium of the Pacific

I'm giving a book talk at the Aquarium of the Pacific in Long Beach, CA, on Monday night, so I went over today for a look around.  What a great place!  Some samples here.  That's a grunt sculpin, above.  Check out jellyfish below:

The Waiting Room comes to Boston

The Waiting Room, @petenicks compelling documentary about an Oakland hospital, is coming to Boston as part of its nationwide roll-out.  December 1 at Kendall Square Cinema.  Tickets here.  There will be a discussion with the producer/director after the 6:45 show.

The spider that is eating Oakland

A dangerous neighborhood for Halloween!  Best to keep an eye on small, tasty children....

How to stop a future cancer epidemic

The theory of preventative care, including inoculations, is that we spend a little money now to offset big expenses later in life.  But sometimes behavioral friction keeps this from happening, even when the technologies and approaches are proven.  We are witnessing such a failure right now with regard to Human Papilloma Virus (HPV).

Here's the story, from MGH's James Michaelson, PH.D., arguably one of the most thoughtful, trustworthy, and sensible researchers in the field of analysis of cancer survival.  Jim and his team develop sophisticated mathematical methods for predicting the risk of local, regional, and distant recurrence.  He says:

There are a couple of good papers about Human Papilloma Virus (HPV), and the coming epidemic (yes, an overused term, but truly applicable here) of head and neck cancer. As Chaturvedi et al say in a recent paper: "If recent incidence trends continue, the annual number of HPV-positive oropharyngeal cancers is expected to surpass the annual number of cervical cancers by the year 2020."

I get to see this problem from two angles: From my work as the the manager of the MGH/MEEI Head and Neck Cancer Database, and  from my experiments in using computer telephone messages to get patients in for preventive health services, such as the fabulous HPV Vaccines: Cervarix (from GlaxoSmithKline) and Gardasil (from Merck). The vaccines are incredibly underutilized. Only about 1% of eligible boys and only 50% of eligible girls get one shot.  Only about 25% of girls get all three shots.

Beyond the misplaced reluctance of parents to have their children inoculated--or the lack of understanding of the importance of this for boys as well as girls--I wonder if part of the problem here is that insurance companies see no real payback in helping to promote this.  After all, what is the chance that a child I am covering today with insurance is likely to be my subscriber by the time he or she gets cancer?  Unlike polio, measles, and mumps, which show up during childhood, the head and neck cancers are not likely to show up until adulthood.  While the cost per delivered dosage would be remarkably small, especially measured against the societal savings, there is currently no way to internalize that cost-benefit equation into insurance practice.

Two remedies come to mind:

1) As being explored by Jim, use voice-recognition telephone calls and other media to spread the word to parents.  Funding for this could logically come from the pharma companies producing the drugs, or from chains like CVS or Walgreen's. Maybe, also, some multi-specialty practices will choose out of a sense of responsibility to take it on as part of their regular family medicine practices. 

2)  Less likely, especially given the sensitive politics, make this inoculation a legal requirement like polio and other vaccines.  As an economist would say, this would internalize the externalities by government fiat.

Merge. Be happy. Go under.

How many times have we seen this: An industry goes through a structural transformation, often as a result of disruptive technologies that cause it to lose its prior economic prominence.  The next stage is that two large players in the sector decide to merge, convinced that they will somehow obtain economies of scale that will enable their future well-being.  Government regulators, applying old standards of market dominance, fret but then allow the merger to proceed, for fear that the incumbents might go out of business otherwise.  The merger takes place.  It is only then that the world of finance discovers that the newly created company is composed of two leaky lifeboats strapped together, with no greater chance of success than the two antecedent firms.

Health care.  Well, maybe.  But right now I am talking about the proposed merger of Random House and Penguin.  As reported in the New York Times:

A merger of Random House and Penguin could help the publishing houses cut costs by combining resources, and it would give them more heft in negotiations with Amazon and Apple as readers increasingly abandon print for cheaper e-books.

But for authors and their representatives, news of the merger discussions . . . came as another potential blow in an already challenging profession.

Several literary agents said a merger would lead to a consolidation of publishing imprints, thus reducing the number of bidders vying for titles. They also said that combining editing and marketing resources would likely lead to layoffs and potentially put added pressure on authors, especially those who do not churn out mass-market hits.

All this folderol justifying a merger and expressing concern about it overlooks what is happening in this field.  Putting aside the really big authors and their agents, no one needs publishers any more.  To use the technical term, publishers have now been disintermediated.  Any author can self-publish a book.  There are several user-friendly platforms that not only walk you through the process of publishing but also handle distribution and get you in the marketplace within hours or days of completing your book.  For example, I wrote my book Goal Play! and self-published it on Createspace, an Amazon subsidiary.  I had no need for an agent to find me a publisher, but I did hire an editor to help me with the book, a designer to craft the cover, and an experienced typesetter to deal with formatting issues. 

But what about marketing and publicity? Again, you don't need publishers for that (not that they really help the majority of authors anyway.)  Once published, I started marketing the book using my various social media platforms:  This widely read blog, Facebook, Twitter, LinkedIn.  Friends and contacts using those media helped me “go viral” by re-tweeting or sharing.  Several bloggers kindly published their own reviews.  Other readers posted reviews on Amazon.  Several print and electronic newspapers published reviews.  I began a tour with speaking engagements across the country and in Canada and Europe.  Within a few weeks, I had documented well over 3 million “eyes” who had the potential to read about my book, and thousands of people who had heard about it directly from me.

About two months after I published my book, a business book publishing company contacted me to offer to republish it under its name.  They had read it and liked it a lot.  They asked how many I had sold.  I said that things went a bit slowly at first but were picking up, with almost 4000 copies sold.  They were stunned.  I learned that business books, on average, sell fewer than 3000 copies over their lifetimes.

Here's the funny part.  Notwithstanding my success to that date, the publisher immediately made it clear that they would want to change the emphasis of the book, employ a new title, redesign the cover, and re-set the interior.  In return for that, they would offer me royalties that were more than 80% lower than those I could receive on my own.  Also, they said that I would still have to do the bulk of marketing and publicity.  I demurred.

Any author today can do what I did.  The idea that publishers add value to the process is simply untrue for the vast majority of authors.  Let this merger go ahead.  It means nothing.

Bad Lean training is not Lean

A friend writes:

I spent the last 3 days immersed in Lean training. It was not fun. Important knowledge taught by good people using lousy slides and a rigid format.  And the chairs were terrible so my body aches as much as my head.

I responded:

There is nothing worse than bad Lean training.  It violates the Lean philosophy.

A new branch from Pro Publica

Pro Publica has started a new "branch" based on the topic of the top patient safety challenges faced by medical providers.  The article describing it is here.  The actual branch--an extended Twitter-like format--is here.

This could get interesting, as several experts in the field have signed up for the branch.  Let's see if they stand by and watch or if they engage in discourse and friendly disagreement.

Is the nurse incompetent?

The case below is prompting a lot of comments, some of them taking issue with the concept of systemic failures and instead asserting that the young nurse was clearly incompetent, in that her error was inexplicable.  So, let's turn from a clinic in Brazil to a recent case in a hospital in the US, cited in this article on AHRQ's Web M&M.  A summary:

The order was written correctly in the electronic medical record (EMR) for phenytoin, 800 mg IV. The drug-dispensing machines stocked phenytoin in 250 mg/1 mL vials. The correct dose therefore would require 4 vials and be equal to 3.2 mL to be added to a small IV bag. The nurse misread the order as 8000 mg (8 g) and proceeded to administer that dose to the patient, which was a 10-fold overdose and 2 to 3 times the lethal dose. The patient died several minutes after the infusion.

This nurse had to work hard to make the error:

An audit of the pharmacy system revealed that the nurse had taken 32 vials out of 3 different pharmacy dispensing machines to accumulate 8 g of IV phenytoin. Moreover, the nurse had to use two IV bags and a piggyback line to give that large a dose. 

And all this had to go unnoticed by people nearby:

Within 100 feet of the ED nurses' station were several ED doctors, a number of nurses, and a pharmacy with a PhD pharmacist on duty. The nurse did not ask anyone to check her calculations, nor did anyone notice or comment when she was moving around the unit amassing the vials needed for the dose.

What do we conclude? Elizabeth Manias writes:

In this case, the nurse made a series of cognitive errors that contributed to a 10-fold overdose of phenytoin. The nurse did not recognize that it was unusual to use 32 vials of phenytoin to obtain the required dose. She did not acknowledge that it was uncommon to need two intravenous (IV) fluid bags to administer the single dose of phenytoin. The nurse also did not double-check the IV medication with another clinician. Most important, she appeared not to know the toxic dose of the medication she was administering.

Incompetent?  No necessarily:

Every day, well-intentioned clinicians carry out their medication activities in environments that are set up to fail them. Mistakes with medications occur not because a clinician has been incompetent by making an error, but rather because this single act is the final link in a chain of failures.

Indeed, some of the worse mistakes come from good intentions:

In this case, one can imagine a well-meaning nurse trying to do everything she could to collect the medication for her allocated patient. Although her persistence is laudable, it is probably also an example of anchoring bias. When the order is so difficult to complete and so unusual, it is far more likely to be in error than to reflect an idiosyncrasy of the prescribing physician or the patient. While the nurse was undoubtedly trying to be helpful, the instinct of all clinicians has to change from one of "this is unusual, but I'll just get it done" to "this is unusual, I wonder whether it is correct."

So back to the nurse in Brazil.   I don't know if she was incompetent.  I do know that variations of the kind of error she made happen thousands of times, even by highly trained folks.  Manias concludes with these take-home points: 

• Good communication between clinicians is a key factor to minimizing the risk of producing a medication error.
• Clinicians can train themselves to recognize warnings associated with medication errors.
• Medication errors generally occur as a result of system failures rather than faults produced by particular people.

 

"Bad apples" don't fall far from the tree

A distinguished and thoughtful colleague asks, "Now, what do you do with this bad apple?"  The story on Medical Daily is "Nurse Who Injected Elderly Patient With a Lethal Dose of Coffee and Milk Says 'Anyone Can Get Confused.'"  An excerpt:

A student nurse who accidentally injected coffee into the veins of an 80-year-old female patient who died hours later has defended herself on broadcast television by saying that "anyone can get confused."

Rejane Moreira Telles said that she had just three days of work experience in a Rio de Janeiro clinic when she botched up administering a drip to Palmerina Pires Ribeiro, who died hours after she had coffee mixed with milk injected straight into her body.

The 23-year-old appeared on Brazilian TV Globo's Fantastico where she told reporters that she was aware of the risk of administering an intravenous feed. However, the novice nurse added that "anyone can get confused."

"As they [the feed and blood drips] were next to each other, anyone can get confused. I injected the coffee and I put it in the wrong place," Telles told the TV station.

I replied:

"Ask this question:  Could it have happened to anybody in that situation?  From the description of her lack of training, plus the adjacency of substances, I would guess the answer is yes."

So, to turn again to my colleague, I have also to ask. "Who's the bad apple? The nurse, or the people who were supposed to make sure she was trained."  As a great basketball coach, John Wooden, once said, "You haven't taught them if they haven't learned."

Telles has now been indicted for involuntary manslaughter.  Should her life be ruined now?  Should it instead be the head of training for nurses in that facility?  The CEO?

Or should everyone there get a lesson in how to detect systemic problems and fix them?  Apportioning blame is generally a useless path.  Better to be hard on the problem and soft on the people.

Follow-up at BCBS of Rhode Island

You might remember my post in August, with Nancy Thomas, President of Tapestry Communications, reporting some unpleasant customer experiences at Blue Cross Blue Shield of Rhode Island.  Well, I am pleased to post this follow-up from Nancy, and I join in appreciation to her and to the folks in the company who made a difference:

Paul,

My mother liked to write down quotes and post them - on the mirror, on the door of my room, inside a book, etc.  Her two favorites, which have stayed with me a lifetime, were:

"Your brain is a muscle.  If you don't use it, you lose it." 

And...

"The squeaky wheel gets the grease."

My own children have benefitted by the first one many times, but the 2nd one always seemed to need explanation.  Needed example. 

While its origins are not known for certain, according to Wikipedia, the phrase is most often attributed to Josh Billings, an American humorist in 1870, from his poem, "The Kicker":

I hate to be a kicker,

I always long for peace,

But the wheel that does the squeaking,

Is the one that gets the grease.

In any case, you will remember my "squeakiness" about my visit to brand new Blue Cross skyscraper in Providence.  We affectionately call it Xanadu.  I wrote about it and actually was annoyingly squeaked enough to take photos showing the disregard for those of us who have to visit the building to make a payment, or deal with an incorrect bill or charge.  You'll recall that you cannot "go upstairs for an appointment" so you stand in groups waiting the availability of the two customer service reps, who will try to rectify our problems once we reach their counter.  Before that time, upwards of an hour or more, we would be standing in wait - no chairs, no tables to write on....with thoughts about our cars being towed in the downtown or parking charges accruing. We shifted from one foot to the other - young, old, parents with children, children with elderly parents.

The other day, yes, there I was again!  Thank you to Obamacare for keeping my college student daughter on my policy, but she had obtained her very own now and we needed to remove her, so back for a visit I would go. 

I walked in and something seemed oddly different.  I heard what sounded like a radio behind me. I turned and saw a mounted flat screen television with CNN news echoing in the austere lobby.  I saw chairs and every one of them had someone in it.  I started to smile.  Another turn and now, directly in front of me was a long work table with four or five chairs on one side of it and people seated and writing....I guessed they were letters of appeal which beforehand you would write out on a legal pad using the wall or one's bent leg for a hard surface. 

Another smile.  Then, an audible chuckle.  I actually experienced a moment of squeaky wheel glee!  I left the lobby with uncharacteristic cheer, vowing to come back with "secret" camera in hand. 

I've included photos for you to see - taken at the beginning of the month...alas, the long writing table is gone, but now there is valet parking!  And - with Blue Cross BLUE cones marking the way! Love that branding!

Do you think the blog entry made a difference?  Were 'we' the grease?  Yes, I squeaked and you replied, then twitter chimed in, then Facebook, then a few other blogs commented on it, and then a Blue Cross "anonymous" showed up to respond, too.  Anonymous took this to heart.  Anonymous probably was pretty powerful.  Anonymous didn't grind it his/her heels but created change.  And pretty quickly, too....

So, for my daughter and for others who think change just can't happen, or their voice just isn't being heard, try a little squeak.  Use your blog (or someone else's), tweet a little tweet, write a meandering post, or two.  Make a little noise. 

With kudos to BCBS's "anonymous" and a nostalgic tip of the hat to my mom, who was wise, indeed, let me say, there is power in your voice, in your words. Sometimes people listen and sometimes corporate walls hear the reasonable squeak and respond. And I have an example for my children that in this large world of megasystems, do not be afraid to gently nudge that wheel, even if it seems up hill all the way....

Residency training on WIHI

October 25, 2012: Gaining Ground — Quality Improvement
and US Medical Residency

2:00 to 3:00 PM Eastern Time

Featuring:
Donald Goldmann, MD, Senior Vice President, Institute for Healthcare Improvement (IHI)
Kedar Mate, MD, Assistant Professor, Department of Medicine, Weill Cornell Medical College; Clinical Lead for Research and Development, IHI
James Moses, MD, MPH, Pediatric Director of Quality and Safety, Boston Medical Center; Academic Advisor, IHI Open School for Health Professions

Residency training in the US has long had the reputation of a rite of passage — a period when grueling hours on busy hospital floors are spent converting four years of medical school, and some clinical exposure, into real-time accountability for real patients who have sometimes serious and life-threatening medical conditions.

However, a changing health care system now demands that residents develop the skills not just to diagnose and treat patients who are ill, but to protect them from harm and to reduce their chances of being readmitted. Residents need to know about managing chronic conditions and how to help patients lead healthier lives. These new goals present newly minted MDs, and those who train them, with new challenges — among them, the need to work in teams and communicate with everyone, including patients and families, more effectively; the need to sleep after long hours on the job and to honor the requirement to take the time (and time off) to do so; the need to engage in effective handoffs to other providers, and to help coordinate care across multiple health care settings.

It’s a tall order for the nation’s complex system of training doctors, and aligning what happens in residency programs with the ambitions of quality improvement is at an early stage. What are the challenges? What can be done to accelerate reforms? Where are promising new models starting to emerge?

WIHI will take up these questions and more in the October 25th program Gaining Ground — Quality Improvement and US Medical Residency, with three outstanding guests who are helping to hasten the transformation of residency training in the US.

Drs. Don Goldmann, Kedar Mate, and James Moses are working with multiple organizations, including the Accreditation Council for Graduate Medical Education (ACGME), to better identify what’s needed, including building greater capacity among faculty in residency programs to teach and model improvement skills. Dr. Goldmann has a strong understanding of the structural barriers that must be addressed to make this possible. Dr. Mate has a unique and important view on the intersection between residency training and the growing field of hospital medicine, as well as innovations emerging from primary care practices on their way to becoming patient-centered medical homes. Dr. Moses has been instrumental in shaping the offerings of IHI’s Open School for Health Professions to ensure they’re relevant and accessible to today’s residents.

WIHI host Madge Kaplan invites you to this timely discussion on October 25th. Bring your questions and your knowledge and several of your colleagues to the program!

To enroll, please click here.

A compensation scheme masquerading as an asset class

Since leaving my job in the hospital, I've had many chances to advise new start-ups on their strategies and business prospects.  I've met thoughtful and interesting people with ideas and technologies that have the potential to improve patient care, assist in managing data in the health care arena, empower individuals, bend the health care cost curve, and the like.  Some, though, are just flying in outer space, unguided, with a clever idea that has no commercial potential.

I've also had a chance to view the interaction between those folks and potential venture capital investors and to meet a number of the VC folks.  Again, many are thoughtful and intelligent, with a clear sense of investment strategy, managerial and governance skills, and excellent due diligence capabilities.  Some, though, are also flying in outer space, unguided, with poor commercial acumen and not likely to serve their investors well.

Back in May, my observations about the latter groups of entrepreneurs and venture capitalists were confirmed by a report prepared by the the Ewing Marion Kauffman Foundation.  Entitled, "We Have Met the Enemy … And He is Us," it is based on a comprehensive analysis of the Kauffman Foundation's more than 20 years of experience investing in nearly 100 VC funds. The summary:  Over 60% of the firms failed to receive returns that were available from public markets; 78% did not achieve returns "sufficient to reward us for patient, expensive, long term investing;" only 20% generated returns that beat a public-market equivalent by more than 3 percent annually; and "only four of thirty venture capital funds with committed capital of more than $400 million delivered returns better than those available from a publicly traded small cap common stock index."

In this article, the Foundation lays out other conclusions and offers advice to the institutional investors that serve as the major source of funds for VCs.

The authors call upon institutional investment committees to require deeper due diligence of VC investments and more rigorous data analysis of VC portfolio performance relative to the public markets. The authors also urge limited partner investors to charge more for providing capital to risk assets by insisting on preferred investment returns before sharing profits with general partners – as is often the practice with buyout and growth investment firms. 

"Investments in venture capital funds should be measured against the naïve alternative investment – publicly traded small company stocks," said Diane Mulcahy, director of private equity at the Kauffman Foundation and the paper's lead author.

So where is the money going?  To compensate the VC managers!

The Foundation found that the most significant excess returns earned from venture capital occurred in funds raised prior to 1996, and those funds averaged $96 million in committed capital. Many of those successful funds led managers to raise successively larger funds; which significantly eroded returns and maximized general partner profits through fee-based income at the expense of limited partner success.

"The result is that institutional investors end up paying general partners – who typically commit only 1 percent of partner dollars to a new fund while LPs commit the remaining 99 percent – quite handsomely to build funds, not build companies," said Mulcahy. 

As the report notes:

The most significant misalignment occurs because LPs don’t pay VCs to do what they say they will—generate returns that exceed the public market. Instead, VCs typically are paid a 2 percent management fee on committed capital and a 20 percent profit-sharing structure (known as “2 and 20”). This pays VCs more for raising bigger funds, and in many cases allows them to lock in high levels of fee-based personal income even when the general partner fails to return investor capital.

This prompted a colleague to say to me, "So this is really a compensation scheme masquerading as an asset class."

Health care is now viewed as the "live" investment arena, and in a low-yield environment, there is a lot of cash sloshing around looking for a better return.  Portfolio managers should understand risk-reward tradeoffs, but they should also look at the underlying investment strategy, cost structure, and incentive structure of specific VCs.  What appears to be a particular risk-reward profile of investments may be offset by internal structural agreements that shift risk away from the VC firm and onto the investor.  What appears to be a particular risk-reward investment profile may also be offset by a tendency to place easily available money in firms that really offer very little potential for commercial success.

It does the health care world no good to have gobs of money go to intermediaries and new ventures that have no real potential.  There are some great entrepreneurs and great VC firms out there.  It is worth taking the time to find them.

iPhone knocks out need for ISDN

I just encountered a new use for the iPhone.  A radio reporter wanted to do an interview with me but didn't want to use the regular phone line because the fidelity is not very good.  Instead, he asked questions on my landline.  I then answered using the voice memo function on the iPhone.  Every 5 minutes, I would send an email of my (m4a format) answers to him for editing later at the radio station.  Apparently the quality is equivalent to being in the studio!

Think of it.  The iPhone has now disintermediated the use of ISDN phone lines.

Isn't Pennsylvania a commonwealth, too?

Watching hospitals and health plans in West Pennsylvania from all the way in Boston can be confusing.  After reading this article in Pittsburgh Post-Gazette, "Commentary says Highmark-West Penn deal not breached", I asked a knowledgeable colleague to summarize the recent events in easy-to-follow term.  Here goes:

What a ruckus! Ok, let me try to lay out Highmark/West Penn 101:

Highmark wants to form a $1 billion integrated delivery system to compete with UPMC (imagine Partners with a big health plan). On 10/31/2011, signs affiliation agreement with West Penn.

UPMC refuses to renew 10 year contract with Highmark (end date June 2012) because Highmark is now a competitor.

Long story, they make nice and renew thru Dec 2014, albeit at higher prices paid to UPMC by Highmark.

West Penn continues to lose $, even with Alvarez & Marsal running it. Highmark CEO gets himself fired. New CEO takes harder look at proposed investment. Either suggests or demands (depending on which side is telling it) that West Penn restructure its debt through Chapter 11.

West Penn takes this as breach of affiliation agreement by Highmark, says it is free to look elsewhere for partner.

Highmark says, "No you don't!" and sues. Hearing is Oct 25 & 26.

That is basically *what* happened. The Why is a whole other ball game, ditto the What Next.

View near misses as a gift

Gina Pugliese, @gpugliese, vice president of Premier's Safety Institute, offers thoughtful advice to improve the collaboration and quality of care in operating rooms on Becker's Clinical Quality and Infection Control .  Here is the one I like best, unfortunately a rule more often broken than observed.

View "near misses" as a gift. Ms. Pugliese says hospitals need to eliminate the "culture of blame" that pervades our society. When something goes wrong, she says the natural tendency is to look for a culprit: Whose fault was it? Who didn't do what they were supposed to do? She says while an individual may be responsible for a mistake, usually it can be tied to a "systems breakdown," where the lack of a checklist or a system of checks and balances allows tasks to fall through the cracks.

She says hospitals should instead step back and view "near misses" — situations where something almost went wrong, but didn't — as a gift. It gives the OR team a chance to assess what happened during the surgery and determine what went wrong to allow the near-miss to occur. She says it's important to include front-line workers in these discussions, because often they can identify systemic problems that frequently cause issues with patient safety. "Maybe the staff doesn't have enough IV pumps that have programmable ways to prevent medication errors, so they have to use the other ones," she says. "You want to know what keeps staff up at night, what bothers them."

MD annual appraisals: Is it Pass-Fail?

The BBC reports:

The UK's 220,000 doctors will have annual appraisals, with a decision taken every five years on whether they are fit to continue working.

Worth it?  Probably, although I wonder what this reappraisal will look like.  It seems to be directed at the 0.7% of doctors whose skills have become substandard.  It must be hard to design a system that will be able to detect those defects that could be harmful.  It's even harder to design an appraisal system that remediates previous defects in medical training, you know, the ones that lead to excessive levels of patient harm in hospitals.

This made me wonder what we do in the US.  Here's a summary from a few years ago from an internist who suggested that the US system is not very useful.

I’m due to recertify in Internal Medicine soon, so a recent perspective from the New England Journal of Medicine caught my eye. Of the many criticisms of the Maintenance of Certification Exam, one that stands out is whether the format and questions were relevant to modern clinical practice.

It’s not.

Two contrasting opinions were written, and I’m inclined to agree with the dissenting commentary. There is little data correlating those who recertify and improved medical outcomes. The major reason is that the format of the exam is antiquated, consisting of hundreds of multiple choice questions that relies on a physician’s recall of obscure facts, largely irrelevant to clinical practice.

When we think about the holes in medical education the first time through, it is any wonder that the recertification curriculum would also be inadequate?  Remember this summary?

The Lucian Leape Institute at the National Patient Safety Foundation released today a report that finds that U.S. “medical schools are not doing an adequate job of facilitating student understanding of basic knowledge and the development of skills required for the provision of safe patient care.”

One myth destroyed, two added.

I have been amused by the misdirection of both parties that Partners Healthcare System views Steward Health Care System as competitor. I have often pointed out that such is not the case.  Maybe, finally, the media will drop this mantra.  In today's Boston Globe, we learn:

Expanding ties between the state’s two largest medical care providers, fast-growing Steward Health Care System has struck a deal with Partners HealthCare System to send its most severely injured patients from emergency rooms at Steward’s 10 community hospitals to Partners-owned Massachusetts General and Brigham and Women’s hospitals in Boston.

But another myth persists, even in this story:

The alliance isn’t the first between Partners hospitals — which have been cited by state Attorney General Martha Coakley as among the most expensive in Massachusetts — and two-year-old Steward, which many in the state health care industry welcomed as a lower-cost alternative.

I don't know who the "many" are, but the evidence collected by the state's Attorney General showed that the Steward (then Caritas Christi) hospitals are actually not lower cost providers than their community competitors.

And yet another myth is created.  A Partners' spokesperson says:

“This provides us an opportunity to be altruistic in sharing our knowledge about treating some of the most critically sick and injured patients. . . .  She noted that critical emergency care is usually labor- and technology-intensive, and that many patients don’t have commercial insurance.“Trauma is not a profit center for either the Brigham or the Mass. General.  We’re not doing this for economic gain.”

Right.  We could spend time parsing this, but let's keep it simple.  First, incremental volume like this does not have to cover fully allocated cost to be profitable.  Any contribution above direct marginal costs is profitable in this circumstance. Second, trauma patients tend to stick around for a while beyond the original diagnosis and treatment and become regular in-patients, who are profitable on both incremental and fully-allocated cost bases.

How Kiwis deal with medical error

Robin Youngson, an anaesthetist, reports:

Here in New Zealand we have a national, tax-payer funded, no-fault compensation system for healthcare error. The average time between making a claim and getting a decision on compensation is FIFTEEN DAYS (yes, you read right). There is no need to even name an individual practitioner because system failure is recognized. Also, all hospital treatment is free to all residents of NZ so there is no worry about the cost of treatment needed to put right the effects of healthcare error. It doesn't entirely eliminate defensive medicine but you can't sue a doctor. An independent commission assesses all patient complaints and can lead to sanctions against both individual practitioners and hospitals. There is mandatory reporting of all sentinel events nationally and a much more open culture of addressing patient safety issues.

Dr. Youngson was intimately involved in helping establish Compassion in Healthcare, and organization analogous to the Kenneth B. Schwartz Center in the U.S.  Here's more:

In 2006 Dr Youngson with several like-minded people set up the Compassion in Healthcare Trust in New Zealand. Trustees came from a diverse range of backgrounds and are all passionate about making a difference. Compassion in Healthcare was not a place to take our patients in for care but was a virtual meeting place for those who seek to connect with others striving to strengthen compassion in healthcare.  The Trust raised charitable funds and gathered resources to support programmes in our hospitals that begin to put the heart back into caring.

Pioneers in a number of countries are starting to connect and there is a powerful sense of a growing movement in many parts of the world. We believe the leaders we need are already in place to support this change in many different places. If we align our efforts we can transform healthcare from within.

Binder reviews

This is a hysterical use of the web.  People have gone onto Amazon and picked up a standard review for an office supply item and have transformed it into political comedy and satire.

I tried to pick out my favorite, but there were just too many good ones!

Schwartz Center helps achieve compassion

It's time again for the annual Schwartz Center Compassionate Healthcare Dinner.  Watch this for a sense of how moving the event can be.

Here are the details:

Thursday, November 8, 2012
5:00 pm Reception and Drawing, 7:00 pm Dinner
Boston Convention and Exhibition Center
415 Summer Street, Boston

View and print the invitation or contact Elizabeth Hickman for sponsorship information. 

Thanks to volunteer gardeners!

I've always been impressed with the devotion of volunteer gardeners, people who already work full time on their own plots but who also donate hours to taking care of public spaces.  We have such a group in our town who maintain the All-America Selection Display Garden in our town center.  (This is one of only four such gardens in Massachusetts.)

I saw them out again today, tidying things up for the fall and winter.  Let's thank them and their cohorts around the country who help beautify our community!

The Stockholm Syndrome and EMRs

First the definition:

Stockholm syndrome, or capture-bonding, is a psychological phenomenon in which hostages express empathy and have positive feelings towards their captors, sometimes to the point of defending them. These feelings are generally considered irrational in light of the danger or risk endured by the victims, who essentially mistake a lack of abuse from their captors for an act of kindness.

Now, the health care connection.  As a result of the billions of dollars allocated by Congress to health information systems as part of the stimulus program, those companies who had a head start in implementing electronic medical records quickly found themselves in demand.  Of all those companies, Epic is the most successful. Forbes notes, "By next year 40% of the U.S. population--127 million patients--will have their medical information stored in an Epic digital record."  (Here in Massachusetts, the biggest convert was Partners Healthcare System:  "System development and implementation will occur over a 10-year period and represent a capital investment of approximately $600 - 700 million."  Elsewhere, notes Forbes: "The biggest win: a $4 billion project to digitize medical records for health care giant Kaiser Permanente."

What is striking about this company is the degree to which the CEO has made it clear that she is not interested in providing the capability for her system to be integrated into other medical record systems.  The company also "owns" its clients in that it determines when system upgrades are necessary and when changes in functionality will be introduced.  And yet, large hospitals sign up for the system, rationalizing that it is the best.  For example, Partners said, “The new health care landscape will challenge us to engage in population health management, improve the coordination of health care, and accept financial risk for the care of our patients. This new system will enable us to meet those challenges.”

But it can hurt to go down this path.  In another article, Forbes notes:

Customers, such as New Hampshire’s Dartmouth-Hitchcock Medical Center are feeling the pinch. DHMC which implemented Epic last year at a cost of $80 million, expects a weak operating performance in 2012, partly because of expenses related to Epic.

Now, re-read the definition of the Stockholm syndrome and see if it isn't apt.  But it doesn't have to be this way, as I have noted in quoting an article by Kenneth Mandl and Zak Kohane in the New England Journal of Medicine:

It is a widely accepted myth that medicine requires complex, highly specialized information-technology (IT) systems. This myth continues to justify soaring IT costs, burdensome physician workloads, and stagnation in innovation — while doctors become increasingly bound to documentation and communication products that are functionally decades behind those they use in their “civilian” life.

We believe that EHR vendors propagate the myth that health IT is qualitatively different from industrial and consumer products in order to protect their prices and market share and block new entrants. In reality, diverse functionality needn't reside within single EHR systems, and there's a clear path toward better, safer, cheaper, and nimbler tools for managing health care's complex tasks.

Here's the ultimate corporate risk for Epic.  Now that it controls this big a piece of the American market--paid for by federal appropriations--if something ever goes wrong (e.g., a coding or decision support error that results in harm to patients), you can expect a bunch of Congressional committees to come down on the firm like a ton of bricks.  It doesn't matter which political party is in the majority.  People will ask:  "Isn't an EMR as much of a medical device as the ones regulated by the FDA?  Isn't the handling of prescription drugs by EMRs as much a part of drug dispensing as the drugs themselves?  Shouldn't EMRs be regulated by the federal government for that reason, too?  How did this firm get such a big share of such a critical market with no government review?"

Uneven Strings

There is a lot of talent out there among young artists, and I wish we could support them all.  Here's a Kickstarter project for which I'd like to ask your help.  (No, it is not for a relative of mine!)  Three friends who recently graduated college have created a short film, and they need some financial help to get it through post-production.  This would allow them to complete the film this fall and enter it into film festivals in the US, Canada, and France.

But don't listen to me.  Listen to the mother of the producer, Joseph Serra:

At Boyden Elementary School, Joseph was involved in a Shakespearean play (Julius Caesar) at age 10.  From there, it was Bird Middle School and his participation as part of the Technical Crew.   Joseph truly loved to see the finished product, not just the performance on the stage with the actors, but the cohesion of the behind-the-scenes work, and how important that aspect of a production could really be the key to a successful show.  He continued his theatrical interest at Xaverian Brothers High School with videoing, editing, sound engineering or whatever needed to be done for 16 performances -- the many, long hours of "takes, retakes, rehearsing" and finally "the performance."  His college years as a Communications/Film Studies major at Suffolk University solidified his favorite past-time of movie-making.  After many short films, and one receiving Honorable Mention, he could not wait to put his dreams to the true test--a professionally written, directed and produced short film.....UNEVEN STRINGS....

Come on.  How can you turn down his mother? Please throw some coinage their way on Kickstarter.

Thanks.

What's past may be prologue

Michael Millenson wrote this satirical piece back in 2006.  Given the health care "free market" positions taken by certain people running for high elective office today, it appears more relevant than ever.  An excerpt:

When you fly coach, Mr. McClellan, do you still expect the airline to provide you with a lavish meal? Our hospital will never compromise on your safety, but surely you cannot expect that in today’s competitive environment we will subsidize your comfort. I apologize for even mentioning it. How much does anesthesia cost? That depends on how long you would like to be sedated. We have very reasonable prices on “deep-sleep” packages that come in 15-minute units. You the empowered consumer decide how long you want to be sedated. We also offer the “all you can sleep” option, where we keep you sedated from just before the procedure starts until your doctor is totally finished. We think of this as being analogous to buying the full tank of gas at the car rental counter. 

By the way, how long does a colonoscopy take? It varies, but with Dr. Hoover, about forty-five minutes. Dr. Hoover? Dr. Hoover comes standard with the colonoscopy package you selected. Quite frankly, since he retired from full-time practice a couple of years ago, the other physicians have found it close to impossible to match his fee. Naturally, at this price we can’t allow any substitutions.

$7.5 billion. My sympathies.

A recent story in the Boston Globe discusses the difficulties faced by Partners Healthcare System in managing its $7.5 billion in assets.  It offers a description of the problems faced by the CFO and others in managing "the tail that wags the dog," assets whose rise or fall in value can swamp the operating income of this corporation.  I feel their pain, but this story has no context.

What would it take to have the editors include a correlation with their Spotlight Series published several years ago about the immense market power of this business?  As I noted in yesterday's post, those headlines and the ones that followed are indicative of the dominance of this system and its impact of health care costs:  A healthcare system out of balance; Healthcare giant takes aim at the suburbs; A force behind rising healthcare costs; Partners' deal with Blue Cross under scrutiny by AG"s office; State panel to examine payments to Partners.  The stories show the earlier willingness of the state's largest newspaper to take on this issue.

All of that has now faded away.  Here's some perspective.  The $7.5 billion in assets held by Partners is larger than the following universities in this city, combined: Boston College, Boston University, Northeastern University, Tufts University, and Wellesley College.  It is more than ten times larger that of the Museum of Fine Arts and 80 times larger than that of the Museum of Science. 

I don't have a summary of investment assets of the other hospitals in the state, but a reasonable estimate is that the Partners' number exceeds all the others' put together. Without denying the business acumen of the PHS folks, it is reasonable to assume that this accumulation of wealth derives more from the excessive payment rates the system has received over the years more than from investment decisions and philanthropy.  As I have said before, we can't blame Partners for executing a brilliant business and political strategy, but it would be reassuring if someone in the media felt a responsibility to report on these matters in a manner that reminded the public and body politic of the behemoth that has been created in their midst and the consequences of that market dominance.

We were surprised

I'm trying to know how to react to a point made by Atul Gawande in a recent talk he gave.  As reported by Maggie Mahar on Health Beat:

In the past, doctors rarely focused on the cost of medical treatments. Their mandate was to do the best they could for the patient in front of them. How much that might cost society was not their concern. They were not economists. They were not politicians. They were physicians.

So when Massachusetts’ Attorney General released reports in 2010 and again in 2011, revealing enormous disparities in how much the state’s hospitals charge even for simple procedures “we were surprised,” Gawande told his breakfast audience. Gawande and his colleagues knew little about hospital pricing. They had no idea that insurers were paying their hospital far more than other, less well known hospitals, simply because Brigham had a brand name, and thus, enjoyed market clout.

Wow.  Atul is as honest as anyone I know, but could it be that the sophisticated MDs at the Brigham were unaware of what everyone else in town knew? 

The Boston Globe published a Spotlight series on this topic in the fall of 2008.  Here are the opening paragraphs of one story:

As his patient lies waiting in an adjacent exam room, Dr. James D. Alderman watches while an assistant reaches into a white envelope and pulls out a piece of paper that will determine where the man will be treated. Big money is on the line.

If the white slip of paper directs him to do the procedure in Framingham, the insurance company will pay the hospital about $17,000, not counting the physician's fee. If Alderman is sent to Brigham and Women's Hospital in Boston, that hospital will get about $24,500 - 44 percent more - even though the patient's care will be the same in both places.

"It's the exact same doctor doing the procedure," said Andrei Soran, MetroWest's chief executive. "But the cost? It's unjustifiably higher."

Call it the best-kept secret in Massachusetts medicine: Health insurance companies pay a handful of hospitals far more for the same work even when there is no evidence that the higher-priced care produces healthier patients. 

Today, the Brigham and Mass. General are paid an average of 30 percent more than similar nonpediatric hospitals statewide for each procedure, based on payment rates of Blue Cross obtained by the Spotlight Team. 

Altogether, those higher rates add up to at least $800 million more for Partners hospitals and doctors than if they were paid at rates similar to competitors, based on Partners' insurance income.

Partners' favorable insurance contracts have helped the company to reap $1.7 billion in profits since 2004, reflecting a profit rate that is average compared with the nationally known hospitals the company considers its peers. But it's high by Massachusetts standards: Partners collected 35 percent of statewide hospital profits last year, even though it owns only 16 percent of the beds.

Another question:  Did the Brigham doctors also not know that they, as physicians, were getting paid substantially more than physicians at the non-Partners academic medical centers in Boston?  (This was in addition to the hospital payments.)  Every other doctor in Massachusetts knew it.

Which poll do you believe?

I went to a timely seminar the other day given by Adam Berinksy, Professor Political Science at MIT.  His topic was "Opinion Polls and American Politics."  Offered by MIT Hillel, the subtitles of the event were, "How are polls conducted in America? How do you tell a good poll from a bad poll? And what should you pay attention to as the 2012 election draws near?"

Demonstrating the issue of sampling error, Adam hearkened back to one of the most notorious inaccurate polls, that conducted in 1936 by The Literary Digest.  Ten million "ballots" were sent out to people, and about 2.4 million were returned.  These demonstrated that Franklin Roosevelt would get 41 percent of the popular vote. When the election occurred, he received 63 percent.  The problem:  A non-random sample.

Sampling, though, has gotten more difficult, as seen in this summary by the Pew Center, with a smaller percentage of people being contacted, and fewer still cooperating and responding.

I asked Adam about a theory that I had heard several weeks ago, that presidential elections turn on the rate of consumer confidence in the summer before the November election.  Below a certain number, and the incumbent loses. Above that number, he wins.  Adam replied that this hypothesis is based on a very small sample of elections, 12 in all, and therefore should not be considered dispositive of the issue.

So, this is either bad news or good news for Mr. Obama.  And it is either good news or bad news for Mr. Romney.  That is a sure thing!