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Optical Illusions of Healthcare ‘Reality’

I spend a great deal of time studying healthcare issues, giving balanced attention to both the ‘delivery’ and ‘payment’ of medical care. Admittedly, I have my own biases. How healthcare is delivered in our country is largely dependent on the incentives and disincentives that come from the payment side of our healthcare infrastructure. As a result, the fallout from the misalignment of these incentives cause a great deal of unintentional consequences.

It is true there are positive stories about exceptional doctors and medical staff who shine brightly when caring for patients. In fact, their work can be awe-inspiring, as most people performing this work are honorable and want to do the right thing for patients. However, these well-intentioned professionals are relegated to work in systems ill-equipped for them to consistently succeed. This too-often causes morale problems that can eventually lead to job burnout for medical professionals – which adversely impacts all of us.

For me, cynicism about our healthcare ‘system’ has become a way of life. Key healthcare players are legally allowed to operate within their own myopic sphere to justify their ‘value’ within increasingly complex – yet profitable – inter-related sectors that suck oxygen from our economy. What escalating costs are doing to our families and to our economy, to put it mildly, remains deeply disturbing. Healthcare’s inability to control costs continues to shortchange other sectors of our economy. Opaqueness and creating illusions are important tools to ensuring the status quo will not go away soon.

Within the span of two hours one recent morning, I perused the following topics that fed my skepticism about the true intent of the healthcare sector:

Axios – Executive Pay Packages

This article analyzed the pay of CEOs from 70 of the largest U.S. healthcare companies, who have, on a cumulative basis, earned $9.8 BILLION during the seven years following the passage of the Affordable Care Act (ACA). Why does this matter? Because the pay packages rarely, if ever, incentivize CEOs to control healthcare spending, eliminate unnecessary procedures, tests or devices and coordinate care. Instead, CEOs are motivated to sell more prescription drugs, perform more tests and procedures, purchase another practice/competitor and create new medical therapies that may not add value to one’s life. In short, CEOs are paid to “do anything to create higher earnings per share” for their shareholders.

My Takeaway: Developing an organizational infrastructure to ensure “value-based healthcare” is evidently dependent on someone else’s pay-scale.

Modern Healthcare – Other Revenue Streams are the Priority

Ninety percent of surveyed hospital and health-system executives have an “urgent priority” to find new revenue streams in the next three years due to downward revenue pressure causing massive financial headwinds to their profitability goals. In healthcare, it is all about revenue growth.

My Takeaway: Too bad the revenue streams derived from patient-centric and safety programs are paltry when compared to other appealing opportunities being pursued by these executives.

A transcript of the most recent ‘Fixing Healthcare’ podcast – Perverse Incentives

Dr. Robert Pearl and Jeremy Corr interviewed Dr. Elisabeth Rosenthal, Editor-in-Chief at Kaiser Health News. Dr. Rosenthal does not mince words within this podcast, or in her bestselling book, An American Sickness, as well as other articles she has carefully researched and written. Within this nearly one-hour interview, Rosenthal pointed out many perverse bugaboos found in U.S. healthcare – many of which I have previously written about over the years. But one particular comment she made was screaming at me. Largely unnoticed in mainstream media is the perverse incentive for insurance companies to have little motivation to keep costs down. Yes, you heard me right.

Under the ACA, a well-intentioned, but flawed regulation was directed at insurance companies to spend 80 to 85 percent of premiums on medical care – a much larger chunk than what was spent by some insurers in the pre-ACA era. Put another way, insurers are bound by this rule to not spend more than 20 percent of individual and 15 percent of small-group premium revenue on administration, marketing and profit. On the surface, this seems to make sense. Insurance companies must spend a higher proportion of premiums on medical care, rather than retain as profit. However, insurers can skirt around this issue by paying inflated medical bills so that they can retain a larger piece of the cost pie. This certainly benefits the medical providers, as well. To be sure, this is seldom (if ever) admitted by industry insiders – and is also very difficult to prove this is intentionally done.

My Takeaway: No wonder why larger employers and states are looking to bypass the inflated appearance of negotiated ‘discounts’ arranged by insurance companies, and instead, directly negotiate payment arrangements with providers based on methods tied to lower Medicare costs. But when this happens, using the state of North Carolina as an example, hospitals and insurers balk at this approach.

Health Affairs Blog – Health Costs Major Concern for Americans

This blog is a direct result of the previous behaviors briefly described earlier. Cost-shifting fatigue is taking its toll on the payers. One quarter of surveyed U.S. adults reported that cost was the nation’s most pressing healthcare issue, while 61 percent indicated that paying higher premiums (or a greater portion of medical expenses) was a “major concern.” About one-half of U.S. adults worry they will not have enough money to afford care.

My Takeaway: The ‘optics’ in healthcare are alive – indeed thriving.  The hypnotic messages you hear and see from many key stakeholders may not be the reality we wish and hope to have. The desire to ‘reform’ our healthcare infrastructure to become more affordable with better outcomes runs contrary with how major stakeholders are being incentivized and motivated to act. Re-engineering appropriate incentives (and disincentives) is necessary before we can obtain meaningful progress. Until this happens, the chairs are on the Titanic are merely being rearranged for appearance purposes only.

Skepticism, especially in healthcare, can be a virtue. Accepting the truth that this is happening is the first step of recovery.

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Electronic Health Records – The Bane of Medical Progress?

For years, indeed decades, Americans have reluctantly confronted the traditional ritual of having to manually complete paperwork before seeing a healthcare provider. Recollection of dates, medical conditions, and other important and critical medical details are challenging to put on paper prior to meeting with a new provider unfamiliar with our past medical history. Additionally, obtaining access to personal health records from one health provider to another has been a test of endurance for patients and caregivers alike.

With these and countless other challenges of providing accurate, up-to-date, and complete information about patients at the point of care, it is no wonder that a push to overlay medical records with sophisticated technology was long overdue. Electronic health record (EHR) goals are widely accepted to be the rocket fuel that helps ignite a very complex and grossly underperforming U.S. healthcare system:

  • Enable quick access to patient records for more coordinated, efficient care
  • Securely share electronic information with patients and other clinicians
  • Help providers to more effectively diagnose patients, reduce medical errors, and provider safer care
  • Improve patient and provider communication and enable health care ‘convenience’
  • Enable safer, more reliable prescribing
  • Promote legible, complete documentation and accurate coding and billing
  • Enhance privacy and security of patient data
  • Help providers improve productivity and work-life balance
  • Enable provider to improve efficiency and meet their business goals
  • Reduce costs by having decreased paperwork, improved safety, reduced duplication of testing and improved health

Yet, this belief that EHRs will enhance efficiency and promote safe and effective care may not be hitting its intended bull’s-eye – at least for the present time. A recent joint article, “Death By 1,000 Clicks: Where Electronic Health Records Went Wrong,” researched and written by Kaiser Health News and Fortune Magazine reveals that EHRs have grossly underperformed on many key fronts.  In fact, EHRs are proving to have more unintentional consequences that cause patient harm and accentuate job burnout for many providers using them.

Applying shovel-ready financial stimulus money to jump start the economy during the Great Recession, which began in 2007, the federal government, thanks to legislators passing the HITECH Act in February of 2009, infused a huge chunk of change ($36+ billion) to incentivize hospitals and physicians to embrace health information technology into their practices.

How many other industries are given ‘free’ government money to motivate the use of information technology? Off the top of my head, very few – if any. Usually, due to market forces dictating improved efficiencies, most business sectors allocate their own financial resources to reinvest in information technologies. I realize there are tax incentives for doing this, but having manna fall from the sky – much like HITECH – is truly a gift that should have paid great dividends to all – including U.S. taxpayers.

In fairness to healthcare providers and software vendors, the HITECH approach was much too optimistic and ambitious to succeed during a relative short period of time. As this story indicates, there were too many cooks in the kitchen, in addition to the crazy requirements that software vendors required of their healthcare clients, including gag-clauses on flawed software.

Since implementation of the HITECH Act, there have been thousands of reports of deaths, injuries and near misses linked to the shortcomings of digital systems. Equally frustrating is that many patients continue to report difficulties on receiving copies of their complete electronic files. Take heart, however, proposed federal rules by the Department of Health and Human Service should, according to Sen. Lamar Alexander (R-Tenn.), “make it easier for patients to more quickly access, use and understand their personal medical information.”

Because the U.S. has many different software manufacturers in the healthcare space, each attempting to maintain their own ‘proprietary’ domain for exclusivity purposes, the EHRs are similar to the existence of diverse human languages that occurred in Genesis 11 when many different languages were spoken during the construction of the Tower of Babel.

With new scrutiny of the current EHRs, it is time to re-calibrate the existing cocktail of EHR-systems and determine what makes the most sense to patients, providers – and taxpayers. Singing from the same sheet of music would be a great start.

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By 2025, 38 Percent of State & Local Budgets will be Consumed by Healthcare

Do you ever wonder why so many of my blogs are about healthcare? It’s actually quite simple. The healthcare ‘problem’ is constant, unbridled, unsustainable, frustrating and largely because it is covered in green – money green.

The cost of healthcare has been, and continues to be, the bane of existence in our lives. It has become the new ‘weather’ in our discussions, as most everyone talks about it, but very little has been done to change it.

Another example of just how dangerous healthcare costs have become was recently reported by Fitch Ratings, a financial information services organization with operations in more than 30 countries. Their analysis states (suggests) that rising health insurance costs and retirement rates will increase budgetary pressure on U.S. state and local governments – which will adversely impact their financial ratings.

Developing their own 10-year scenario analysis for state and local budget allocations, Fitch assumed that healthcare and pension expenses would continue to grow rapidly while no policies would be implemented to offset this growth. From this, Fitch found that healthcare and social services would increase from annual budgets of 27.6 percent in 2005 to an estimated 38.3 percent by 2025. Consequently, budgets for state and local spending for education, transportation/public safety/environmental and housing would each decrease, largely due to being crowded-out by growing healthcare costs.

Inaction during this time (2018-2025) by local and state policymakers and administrators will only cause this problem to fester – the proverbial “can being kicked down the road” for later generations to tackle. State and local budgets cannot afford this to happen, not now, and certainly not in the future.

One need look no further than what is happening in our public-school systems here in Iowa and around the country. Paychecks for teachers have become skimpier, causing school teachers, students and supporters to strike. A recent story by Kaiser Health paints a very realistic picture of what Fitch’s findings reveal for our state and local communities in the months and years to come.

On top of the Fitch analysis, a PricewaterhouseCoopers report on employer-sponsored healthcare projects a six percent medical-cost growth in 2019. Although this growth rate is similar to the past five-year trend in medical cost growth, it nonetheless continues to exceed the annual consumer price index (CPI). This presents the “unsustainable” cost paradigm for consumers and employers who foot the majority of the medical bills through higher premiums, deductibles and charges. Having access to healthcare remains important, but so too, are controlling the cost of the care received. Healthcare prices are largely opaque, requiring a persistent push for price and outcome transparencies that have so far eluded the healthcare industry.

As far back as 442 B.C., Sophocles expressed the message don’t blame the person who brings bad news. With that said, hey, I’m only the messenger – don’t shoot me!

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