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If Bernie Madoff Ran Health Care

Saturday, August 8th, 2009

We have had a lot of talk about reliable, sustainable reductions in health care costs. “Bend the trend” has become the new mantra. So I joked to a friend that we need someone like Bernie Madoff in health care to pull off the seemingly impossible: consistent performance that “bend the trend” requires.

Convinced that someone else probably had the same idea, I went to the mother of all plagiarism prevention tools (Google) to see if someone else had used the metaphor. Well, of course someone had. Christopher Hayes of The Nation wrote a great piece saying that listening to Rick Scott (the once disgraced and now resurrected ex-CEO of Columbia/HCA, recently turned Obama health care reform opponent) was the equivalent of putting Bernie Madoff in charge of securities regulation. Funny.

But this column is not about Rick Scott spending big money to discredit health reform (maybe next time?). It addresses the more serious question (okay, not so serious): What if Bernie Madoff ran health care? What would health care look like?

Health care would grow every year, in good years and bad. Bernie Madoff was able to consistently grow in good years and bad. His investors got close to double-digit growth every single year for the last 20 years. Yet, health care has grown absolutely consistently since records began in the late 1920s at a rate about 2.5 percent above the GDP per capita. This makes Bernie look like a putz.

Clients would be very happy. People loved Bernie; they were very happy. Few complained about the service or the performance. My colleagues at Harris Interactive and the Harvard School of Public Health and I have been in partnership for over 20 years measuring public opinion and trying to make sense of it. Harris Interactive polls for 2009 show that 81 percent of American are very or somewhat satisfied with their ability to see a doctor whenever needed (compared with 79 percent in 1990); 81 percent are very or somewhat satisfied with their insurance benefits (up from 71 percent in 1990); and 58 percent are very or somewhat satisfied with their out-of-pocket costs for health care services (compared with 54 percent in 1990).

In addition, only 26 percent of Americans agree that “the health care system has so much wrong it that we need to completely rebuild it,” compared with 41 percent back in 1991, and down from its more recent peak of 37 percent in 2006. Bernie and health care were doing a good job, so why do we need all this change?

It would be hard to get in. “I know Bernie, I can get you in” was the mantra of the Upper Eastside elite. You had to wait to get in. So too for health care. A Harris Interactive poll, conducted for the Commonwealth Fund in 2005 among sicker adults, showed that 23 percent of Americans waited six days or longer for a doctor appointment the last time they were sick or needed medical attention, compared with only 3 percent in New Zealand, 10 percent in Australia, 13 percent in Germany, and 15 percent in the United Kingdom. Only Canada with 36 percent had a worse performance than the United States. Bernie would appreciate the barriers to entry.

Make the European jet set think that Americans have the best system in the world. Bernie had all the rich and famous of Europe, the Middle East and Russia convinced that he had the best system in the world. Bernie’s better off in jail than being pursued by the Russian mob around Manhattan, but they used to look up to him. So too for health care. Fox News is full of experts, like expatriate Canadians, telling tales of rationing and restriction in every health care system but the good ole USA.

Make sure rich and influential people think you are good. Bernie had all the rich and influential people infatuated with his success. In health care, every hospital I know is at the 99th percentile of consumer satisfaction, and most of the 4,000-plus U.S. hospitals are in the top 100. Even though studies show there is no correlation among all the rating and ranking measures, we see a lot of affluent, well-insured Americans believing that their local hospital is superior, and rarely do they check if there are any data to support this.

Poor people would subsidize rich people. Bernie took money from poor people’s pension funds to pay for reliable returns for the rich. Health care (as I explored in my last column) actually tends to subsidize the over-consumption of health insurance and health services by the rich at the expense of the poor and middle income folks, because of the regressive way we pay for health care and the tax deductibility of health benefits.

The people on the 19th floor would never know what the people on the 17th floor were doing. Bernie never let even his closest associates go from the main office on the 19th floor of the Lipstick building to the 17th floor, where all the shenanigans were going on. No one got to see the real books.

In health care, the folks at Dartmouth (with a little help from Atul Gawande) have emerged as the intellectual foundation of health reform. It is well deserved: They are national treasures. Based on their analysis of the threefold variation in the utilization of services amongst Medicare recipients across the country, Dartmouth researchers estimate we could spend 30 percent less on healthcare for the same or even better outcomes. Obama and Orszag are all about the Dartmouth Atlas. But, even with all this great research, we don’t know the full story because we are relying on lessons learned from Medicare data.

I constantly come across paradoxes in my travels. For example, why does a prominent hospital system in Northern California show up as so cost-effective based on Medicare data when so many of the health plans it deals with believe it is price gouging on commercial patients? Or why do the very-high-performance Medicare states, such as Wisconsin, have hospitals charging three times the Medicare rates to commercial insurers? Or why do Rand studies that show all-payer inpatient data on cost and quality show little or no correlation between costs and quality either way, except for the finding that for-profit hospitals tend to be cheaper and worse? (Bring back Rick Scott?) Health care providers love to obfuscate, so we need to know the whole story. Let’s do Dartmouth-style analysis with all the data and let the chips fall where they may.

There would be pay for referrals. Bernie would pay the feeder funds commission to bring him business. Atul Gawande’s brilliant New Yorker article “The Cost Conundrum” exposed McAllen, Texas, where south Texas rancher/surgeons were screwing the federal government to boost the local economy by paying for referrals.

There would be self-dealing. Bernie kept it all close doing his own fake trades and dealing with his feeder-fund partners who were on the take. Self-referral is rife in American health care, fueled by frustrated doctors in search of new income streams in imaging, oncology drug administration and routine testing.

Oversight and accountability would be brushed off as meddling. Bernie had his skeptics who went to the SEC and complained, but he brushed the critics and the regulators aside as meddlers in a marketplace that was benefiting people. Many in health care are resistant to more oversight, transparency, accountability and public reporting. We avoid this at our collective peril.

Hide behind community benefit and philanthropy. Bernie was loved not just for his returns but for his good work. He was the doyen of the Jewish philanthropy circuit in New York and Palm Beach; he was adored for his compassion. Hospitals have done a good job of leading with their community benefit face. Although, I have to say I still struggle with the notion that the gap between the chargemaster and what a payer actually negotiates is community benefit. I would relabel it as “the margin we would have gotten in a world of unlimited resources paid by people so stupid or rich that they didn’t bother to negotiate.” Doesn’t sound so good, though.

Don’t have really big accounting firms as auditors. Bernie used a solo guy in a strip mall to keep his books; no Big 4 here. Who does the books in health care? Are we sure we really know what’s going on? Where were the auditors in McAllen, Texas? Where were the board finance committees? How many physician corporations get properly audited? I don’t know, but given that health care is larger than the entire Chinese economy, there may be some interesting stuff going on.

Finally, you’d get found out, and it would leave your customers bankrupt. Bernie got caught. Many of his investors were wiped out. Innocent people were devastated, worthy philanthropies were annihilated and lives were destroyed. In some ways, too, health care is being found out. It is certainly no Ponzi scheme, but it is unsustainable. It will bankrupt the country. It already is bankrupting individual households: 62 percent of bankruptcies were related to medical costs in 2007, according to Harvard researchers.

If something seems too good to be true, it probably is. We need to reform the health care system, and we may need to make some hard choices and some sacrifices. After all, we don’t want to end up like Bernie and his clients.

Ian Morrison is an author, consultant and futurist based in Menlo Park, Calif. He is also a regular contributor to H&HN Weekly and a member of Health Forum’s Forum Faculty Speaker Service.


Tuesday, May 5th, 2009

Charles Darwin turned 200 recently. By all accounts he nailed evolutionary biology first time around, in his The Origin of Species, showing how species evolve to survive in their unique environment. His work is still widely accepted (except for a few people here and there) as the blueprint for how evolution works. The core of his research stemmed from a visit to the Galapagos Islands, where he observed strange and unusual creatures, perfectly adapted to the unique environment in which they evolved. How would Darwin react to visiting American health care? He would surely feel his theory was vindicated, because health care is full of weird species perfectly evolved for a strange environment.

Here are a few examples of weird health care species that are thriving in their niche:


Cardiac catheterization with balloon angioplasty is a procedure that saves a lot of lives, if done quickly after a heart attack, but there seems to be no benefit to a prophylactic balloon angioplasty done in patients who have no symptoms. Yet the catheterizers busily do these procedures all day long, even though they read the medical journals and go to the scientific meetings where all the evidence is laid out that the procedures they are doing don’t make much sense. They keep doing the procedures because they can, they are in the cath lab anyway, it doesn’t do much harm and they get paid for it.

Revenue Cycle Managers

Armies of consultants optimize revenues for hospitals and other large providers. They scour for opportunities to code, capture and charge more. By diligently pursuing every last dollar, they can justify their own fees and still boost the revenue of their clients. Doctors, too, find that the single best financial outcome from putting in an electronic medical record is increasing revenue capture. This is how we are going to use electronic health records to save money: by helping providers find more revenue. Say what?

By the way, the really smart consultants actually work for the providers and show them clever ways to increase revenue, then they apply the same skills to helping the health plans (which pay the bill) by teaching the health plans how to find ways to minimize the newly inflated invoices they receive. This species is thriving.

Medicaid Enrollment Form Fillers

About 150,000 of these creatures work in American health care. They fill out forms for prospective Medicaid enrollees and have a union-mandated productivity target of filling out two forms a day. To be fair, the forms are long and complex and require a lot of documentation. Until the recent market meltdown, it was easier to get a sub-prime mortgage than to get Medicaid.

Some would argue that the forms are long and complex to discourage people from applying, because if they apply successfully then taxpayers have to pay for the Medicaid benefit. The strategy seems to be working: About a third of the uninsured in many states are people who are eligible for public programs but who for a variety of reasons don’t apply. Yet we have a thriving number of people who administer the program and who are reluctant to embrace the automation that would make their jobs redundant. With the recent massive injections to Medicaid and the rising unemployment rolls, this species should do well.

Octuplet Manufacturers

There is a small group of multiple embryo in-vitro fertilizers, who despite professional guidelines and scientific evidence to the contrary, implant five, six, seven, eight embryos in “want to be” mothers, even when those mothers already have five, six, seven or eight children. The most highly developed of this species do the IVF work on a private, cash only, fee-for-service basis then send the impregnated mother back to Kaiser to have the babies and run up a large cost in the neonatal intensive care unit.

Repeat Testers

This species replicates the work done by fellow species members. It all seems like wasted motion, but actually it works really well. Doctors order tests that have already been done by other doctors on the same patients because they don’t know the tests were done, can’t access the results, don’t ask the patient, don’t agree with the tests that were ordered, don’t want to be sued for missing something, or are really eager for the ancillary revenue. This enables the species to thrive when their normal forage habitat (visit fees) are inadequate to meet income expectations.

Clinic Closers

Some children’s hospitals that have outpatient clinics with Medicaid reimbursement find it better to send patients to an affiliated federally qualified community clinic. Instead of getting paltry Medicaid reimbursement, the federally qualified clinic gets a fee that is three or four or five times more than the Medicaid fee.

NICU Runners

Prenatal care and normal deliveries are often not viable economically for hospitals. Many people in the baby business have to make it up on having a thriving neonatal intensive care unit that can bill a lot for very intensive care of low-birth-weight infants. Lack of investment in comprehensive prenatal care; rising numbers of births among teenage mothers, older mothers and obese mothers; and impressive and expensive neonatal care techniques creates continued demand for NICU services. Just make sure the NICU babies have some form of public or private insurance.

Large Molecule Makers

Pharmaceutical companies battered by generic substitution, growing cost-sharing for brand name drugs and blockbusters coming off patent are all in pursuit of a new environmental niche called biologicals or specialty pharmaceuticals that are developed through the tools of modern molecular biology rather than old-fashioned chemistry. Companies develop these large molecule drugs that are targeted at small populations and provide new therapeutic options for patients with previously untreatable diseases and symptoms, mostly in the cancer area.

Manufacturers have figured out a new pricing structure: They charge by the atom. Therapy for a year can cost tens of thousands if not hundreds of thousands of dollars per year. Because their drugs have large molecules, and they are promising improvements in treatment, they have set the price as high as the sky; no one wants to say no to improvements in care for dread diseases, no matter what the cost. Until now. The niche may be less viable as new policies encourage scientific studies comparing the comparative effectiveness of new technology against existing treatment, and as a new administration zeroes in on affordability of health care.

The combination of toxic incentives, Byzantine regulation, questionable ethics, lack of evidence and organizational dysfunction creates a rich series of environmental niches in which weird species can thrive. No one would design creatures like this, but they have evolved to survive in their unique environment. Left alone, like the Galapagos, these creatures will continue to prosper, but if the health care environment changes, particularly the reimbursement system, then all these creatures will have to evolve to survive.

Ian Morrison is an author, consultant and futurist based in Menlo Park, Calif. He is also a regular contributor to H&HN Weekly.

Obama’s Re-Election

Tuesday, March 3rd, 2009

President Obama will be re-elected in 2012.  All he has to do is restore faith in capitalism; reposition America in the world; reboot the American Dream; rebuild our entire infrastructure; redirect the economy to sustainability; reverse global warming; resolve the Middle-East, Iraq and Afghanistan; remain steadfast in the defense of the American Homeland; and reduce the trillion dollar deficit.  Do that and he is a shoo-in for  re-election in 2012.  Oh yeah, there is healthcare. He needs to reform that too.

The challenges are overwhelming, the starting slate of issues is daunting, and the expectations of his presidency are enormous.  Yet, somehow the new President has to lead us through this mess and fix healthcare too.  Political analysts point to the fact that Obama must deliver on the promise to reform healthcare, because the system is broken, and the voters who carried him to victory expect something big.

If he can help avoid a global depression, then the normal business cycle should kick in during his first term, and so he may have progress to report on the economic front by 2012.  The stimulus packages aimed at infrastructure and green technologies should make measurable progress by 2012 on climate change and infrastructure decay.  Iraq seems to be winding down, although Afghanistan may be a thorn in the side of his presidency for some considerable time.  And, although terrorists may test him early in his term, it is unlikely that Obama would go it alone in response without support in the broader international community.

Healthcare may be harder.  Not because there isn’t a consensus that something needs to be done, but because there are so many competing interests in the $2 trillion industry.  Policy analysts (myself included) are currently debating “big play” versus more incremental options available to the New Administration.  But if we take the longer view, what would constitute success for an Obama administration with regard to healthcare?

Real progress can be made, and if by 2012 the Obama administration can point to five big steps forward on healthcare, then reform will be deemed a big success.

Coverage Expansion. Without legislative changes, the number of uninsured will skyrocket early in Obama’s term, because of the economic meltdown.  This will make coverage expansion a very steep uphill climb.  Universality may be even more elusive, but there is a growing belief that piecemeal solutions will unravel without a commitment to some broad end game where everyone has access to healthcare.  The New Administration can set the path toward universal care and make progress toward it, even through early incremental steps such as SCHIP expansion and Medicaid support.

Affordability. President Obama and his advisors have pledged to make healthcare more affordable.  But, as Stanford health economist Victor Fuchs and others have pointed out there are a series of conundrums in the affordability debate.  First of all, the voters define affordability not by how much healthcare costs as a share of GNP but how much they pay for it out of the household budget.  (When health insurance is paid for mostly by their employers, most employees don’t really feel they are paying for it out of their budget, but every economist will tell you they are).  Comprehensive health insurance is unaffordable: a typical family policy with decent coverage can cost $15,000 per annum, an amount greater than the annual minimum wage in some states, and an amount that would swamp the household budgets of most families.   The only way employers have found to reduce the cost of health insurance premiums is to jack up co-payments, deductibles and premium-sharing.  We make health insurance more affordable to employers by making it less affordable to employees.  So the first conundrum is that the tools to make health insurance premiums more affordable are the every tools that consumers and voters complain about.

The second conundrum is that health insurance is expensive because the delivery system is expensive.  It is a convenient fiction that the greed of health insurers and/or pharmaceutical companies is at the root of expensive healthcare insurance.  The truth is that healthcare delivery system is expensive partly because of our collective greed: the providers of care, the consumers of care, and the suppliers of goods and services all want more.  We consumers demand cutting edge and often unnecessary or marginally expensive services and sue when we don’t get them.  Providers want higher incomes and tend to over-serve profitable procedures in order to attain those incomes. And suppliers of goods and services charge exorbitant prices for the same good or service performed in different industries or different countries (everything from high tech screws to software and accounting).  We tend to use overly expensive tools, in the hands of overly expensive people, with underwhelming and overly expensive results.  The core of the conundrum is that everyone wants more affordable healthcare but they fail to see their part in the excessive cost.

The third conundrum, is that the tools being proposed to reduce costs such as health information technology, improved disease management and care coordination, and strengthening of primary care, while laudable, will require major investment up-front before any cost-saving can be realized.

Affordability is the stated goal of the Obama administration, but these three policy conundrums need to be resolved before progress can be made. The key is in the next three benchmarks of success:  delivery reform, payment reform, and administrative simplicity.

Delivery Reform. Advocates for organized systems of care will push hard for the Obama Administration to favor integrated care systems in the policy process.  Mayo, Kaiser, and other organized delivery systems will be looked at to provide leadership, but the real challenge will be for those providers in parts of the country with little history or experience in integration of care.  A key benchmark for delivery reform success will be whether the administration and the congress enact policies that can create meaningful delivery reform in all the disparate markets across America not just in Minnesota and California.

Payment Reform. At the root of the transformation in delivery system is a change in reimbursement to encourage high-performance.  There is near unanimity in Wonkworld that payment reform is needed and many agree on its shape.  There is strong policy consensus to move toward episodic payment that rewards conservative, high quality, coordinated care and away from “payment for procedures” in a fragmented delivery model.  Making this all work and turning it into both legislation and private market action, may be the key challenge of the Obama administration’s health policy.  Without payment reform, delivery reform won’t happen, without delivery reform, affordability will suffer, and without affordability, coverage expansion becomes more difficult.

Administrative Simplicity. Healthcare is mind-bogglingly complex and there is real danger that all the necessary changes talked about here will make it even more complicated.  Common-sense solutions that reduce complexity, and can be communicated clearly, will be hard to find, but are badly needed.   For example, building on existing and familiar administrative frameworks such as the Federal Employees Health Benefits Program (FEHBP) may be easier to administer and sell politically than the creation of new and unfamiliar agencies and initiatives that add further layers of bureaucracy, both public and private.

President Obama has a lot on his plate.  I wish him well.  But if he can successfully address the issues on this list he will have earned re-election, and the opportunity to serve again in 2012 when the baby boom hits 65 and becomes eligible for Medicare.  If you thought your first term was challenging Mr. President…………….

Ian Morrison is an author, consultant and futurist based in Menlo Park, Calif. He is also a regular contributor to H&HN OnLine.


Thursday, January 1st, 2009

The recent market meltdown is fundamentally reshaping the planet. As I write this, the Dow is bumping along at 8500, world markets are shaken, and American families have lost trillions in net worth as home values tumble, as retirement accounts plunge (wiping out all the gains of the last decade), and as unemployment and job insecurity rise. Yet, health care seems like a safe haven to some of the investment pundits. In my view, health care will not remain unscathed by the economic collapse. Here are a few observations on the long-term effects of the recent market meltdown.

Reduction in the ability to pay. The current economic crisis is being felt by business, government and households alike, severely constraining their ability to pay for health care. The payers’ ability to pay is constrained in any recession, but in an environment of high government deficits, high household debt, shrinking corporate profits and tight credit markets, the problems with ability to pay are aggravated considerably.

Pitting out of pocket health care costs against other household budget items. As recessionary pressures build and consumer purchasing power gets eroded, the rising co-pays and deductibles that patients face become even more onerous, leading to patients’ foregoing treatment and visits. Anecdotal evidence shows slowing consumer demand for prescription drugs, routine office visits and elective procedures.

Searching for the Value Menu. In an economic slowdown we move to the value menu at McDonald’s, but in health care we have few such options. With the exception of Wal-Mart’s $4 generics, and the retail clinics’ very limited scope of service at affordable prices, there are not that many value choices in health care. Patients simply don’t get the care, or they cut their medications in half or postpone the check-up or the procedure.

Supplier-induced demand. At the same time as consumers cut back, providers need to make up the shortfall. The classic health economics view of supplier-induced demand might rear its ugly head as providers try to promote more activity among the better insured and more affluent patients. Revenue cycle enhancement can become a cover for up-coding as well as for unnecessary tests and procedures for the affluent.

Rising number of uninsured and underinsured. Unemployment and rising unaffordability of care both raise the number of uninsured, and those employers who want to provide health benefits often stay in the game by increasing cost-sharing. As the number of uninsured and underinsured swell, providers will face increased costs of uncompensated care.

Rising cost of capital and credit. Health care is a huge employer and has a big payroll to meet. At the same time, hospitals and many other providers have enormous capital budgets for new construction, expensive new clinical technology and electronic health records. The market meltdown is causing dramatic short-term spikes in the cost of credit, which foreshadow a longer-term challenge with the rising costs of capital.

The steep rise in short-term borrowing and the potentially tougher and more expensive capital lending requirements of the future could put a severe damper on the hospital construction boom, the rollout of electronic health records and the pace of medical technology deployment. If operating income severely declines because of reduction in consumer demand and growing uncompensated care, the capital crunch will only worsen.

The NASDAQ Dependent.  I have always believed that American hospitals fall into three financial buckets.  A third are doing just fine financially because of a favorable payer mix (which is code for we don’t see a lot of poor people) and sound management.  At the other extreme, a third of hospitals are basket cases with unfavorable mix and/or poor management.  In the middle are what I call the NASDAQ dependent:  they can’t make money on patient care and they rely on investment income to balance the books.   The NASDAQ dependent are being hit hard financially by this economic downturn even if patient volume remains strong.

…..And Kaiser, Too.  It is not only hospitals that have a large dependence on investment income.  In the most recently reported quarter Kaiser made $400 million on health care but lost $700 million in investment income, for a net $300 million overall loss for the quarter.  It could happen to anyone with big portfolios that support ongoing operations.

Bringing Medicare trust fund insolvency closer. The Medicare Trust Fund is projected to reach insolvency by 2017. Some have speculated that the economic meltdown will bring that forecast closer as budget projections shift.

The enormous Medicare unfunded liability of $35 trillion did not get much attention from the presidential candidates in the run up to the election, primarily because any possible response would have involved painful and unpopular prescriptions, such as benefit cuts, payroll tax increases, raises in eligibility age or clinical rationing—none of which have a feel-good ring to them. But if the economic meltdown brings the trust insolvency closer, it will inevitably grab the attention of the new president and Congress.

Retirement…forget it. I wrote long ago that the baby boomers will eventually have an epiphany and discover that they can never afford to retire, ever, largely because of the out-of-pocket costs of post-retirement health benefits. We are all going to be limo drivers in Boca Raton, working forever to pay the bills.

The recent meltdown underscores and turbo-charges the precarious position of retiree health benefits. Benefit consultants say we need $250,000 or more at retirement to pay for our expected lifetime out-of-pocket medical costs. Those lucky enough to have healthy 401(k) plans saw that amount evaporate from their retirement accounts in a matter of days in October. Boomers will be forced to work longer, and they will want to work for employers willing and able to provide health benefits until Medicare eligibility and beyond. Good luck to us all.

Effects of recession on government (particularly state and local government). Recession typically hits hardest at state budget coffers. With limited ability to run deficits, states face the double whammy of increased Medicaid and welfare rolls as revenues decline. Since states’ finances typically lag behind a broader recovery, the budget hole could be deep and long, putting huge pressure on state and local government–funded safety nets for years to come.

Effect of the bailout on future spending. The federal government bailout, the wars in Iraq and Afghanistan, and the huge number of budget priorities at the federal level may have sucked all the available oxygen out of substantial health reform. The ability of the federal government to cover the growing ranks of uninsured will be limited by close to a trillion dollars tied up in economic recovery plans. No matter how popular or pressing, any large-scale health care reform proposals may have to be tailored to an austere time and may have to be phased in, postponed or piecemealed to accommodate the economic realities.

However, instead, the New Obama Administration may take the “opportunity” that the economic meltdown presents and make massive changes in the economy including health care.  It will all depend on whether the new President can sell and the country can accept, massive short-term deficits in the name of long-run reform.  Hey, we are in this for a trillion what’s another trillion.

I believe in the ability of Americans to respond to crisis, to change, to innovate and to make money. While we are in a tough economic place right now, we should not bet against the American system. With smart leadership, sacrifice and innovation, we might actually take this opportunity to build a sustainable future for the economy and for health care.

Ian Morrison is an author, consultant and futurist based in Menlo Park, Calif. He is also a regular contributor to H&HN OnLine.

25 Percent

Tuesday, November 11th, 2008

I was watching Pastor Rick Warren interview Obama and McCain in a conversation that seemed to do more for Rick Warren’s book sales than for the candidates’ prospects.  (McCain did get the better of the encounter as he emerged apparently well-briefed from the non-cone of silence).  As I watched, I remarked to my wife that it seemed interesting that the candidates were put through their paces to answer the questions of social conservatives, who represent (I thought) only about 25% of Americans. I wondered aloud, whether both candidates would also agree to be grilled on an agenda that represented the interests of other 25% slices of America, for example the uninsured and underinsured who together make up a quarter of America, or the just under 25% of Americans who are people of color, or the 25% lowest income, or indeed the 25% of Americans who make more than $100,000 per year.   Then I got it.  These 25% slices are exactly what this election is about, and when I did a little homework 25% is a number that crops up a lot.

First, of all let me say I was wrong about social conservatives making up 25% of the population.   While self described born-again Christians make up 36% of the adult population, social conservatives by some analysis make up only 13% of registered voters.  A recent Pew poll found that on the political identity question 49% describe themselves as conservative (17% as very conservative) and 20% liberal (with only 6% saying they are very liberal).  So on balance America is a moderate to conservative country and much more religious than most.  While more than a third of Americans go to church once a week or more less than 10% of Brits and even less of most Europeans are that pious.

Anyway, I digress, I got fixated on this notion of 25% as a magic number and did a little research on the Electoral College, Stat Abstract, the Harris and Pew Polls, and of course the magic of Google. (Just type in 25 percent and you can share my journey).  Here’s what I found:

On the election

  • 25% of electoral college votes are in hard core Democratic states (California, New York, the Washingtons (State and DC) and New England.
  • 25% of electoral college states are in the combined Old and New swing states ( Old swing states:  Pennsylvania, Florida, Michigan, and Ohio;  New swing states:  Colorado, Virginia, Minnesota, Nevada, Oregon and New Mexico)
  • 25% of delegates to the Democratic Convention are Union members (even though only 12% of Americans are in unions).
  • 25% of voters approve of President Bush’s handling of the economy.

On healthcare:

  • 25% of Americans are uninsured or underinsured.
  • 25% of teen girls have an STD.
  • 25% of people in Ohio have a collection agency after them for a medical bill that is unpaid (nationally only 16% Phew!)
  • 25% of Hispanics lack a regular care provider.
  • 25% of doctors believe it is OK to tax people making over $200,000 per annum more to pay for health care (58% of the public believe that).
  • 25% of Chinese are overweight or obese, while 66% of Americans are overweight  or  obese (We didn’t beat them in the Gold Medal count but we beat them on that one!)
  • 25% of pediatric ER visits could be conducted on-line.
  • 25% of Americans have been injured at work at some time.

On other election issues, first, the Economy:

  • 25% of home sales in the last 12 months were at a loss
  • 25% of workers are putting aside savings for possible job loss
  • 25% of bridges need repair
  • 25% is the percentage of the federal budget that Americans believe is spent on foreign aid (the actual amount is less than 1%).

Second, Energy and Environment:

  • 25% of the World’s undiscovered oil is in the Arctic, according to the US Geological Survey
  • 25% of US energy needs could come form renewable energy by 2025, according to RAND, but it would require a major effort, yet only……
  • 25% of Americans view climate change as the world’s biggest environmental threat
  • 25% of the world’s 625 primate species face extinction
  • 25% of the world’s remaining forest is in Canada (and they have oil, eh?)

Finally, amuse your friends at cocktail parties with these key facts:

  • 25% of European households shun landlines for mobile phones
  • And not unimportantly, E-Bay owns 25% of Craigs List

What does it all mean?  This election will be very close.  Given the unpopular  Bush Presidency and the sour economy, it should be a slam dunk for the Democrats but it will be a tough slog to overcome the existing political geography of the US that seems to favor Electoral College dominance by Republican candidates.  The winner will be the person who pieces together the various 25 percents to fashion a majority.  Whoever, is elected will have a very full plate of issues including ongoing commitments in Iraq and Afghanistan that we have not touched on here.

Healthcare is intricately tied to the economic vulnerability of a worried middle class, that was over-leveraged and ill-prepared for a bad economy, declining house values, and rising gas and medical bills, much less the prospect of paying for retirement and post retirement health costs.   This is a healthcare system where many are left behind and even more are worried that the system may not be there for them even if they play by the rules.

The next president will inherit a world more globalized, inter-connected, on-line and wireless, at a time when existing 19th and 20th century infrastructure (including healthcare infrastructure) is in great need of repair, renewal, and replacement.

Bringing healthcare to the front of the national agenda will be a tough sell against a backdrop of national security, economic, energy and budgetary challenges that all scream for attention.  Let us hope that this not another example of the American paradox, namely, the time the middle class feels vulnerable enough to associate itself with the underserved in favor of universal health care is precisely the time we have no money to deal with it.

Ian Morrison is an author, consultant and futurist based in Menlo Park, Calif. He is also a regular contributor to H&HN OnLine.

Explanation of Benefits

Tuesday, September 9th, 2008

Every health insurance companies send out these great little missives called Explanation of Benefits  (EOBs).  They are hilarious, they are the mother of all oxymorons, because they don’t explain anything, and beneath all the obfuscation, you find out there are no benefits.  While some enlightened insurers like Humana and Aetna have started to put them on the web (so you can be confused on-line as opposed to by snail mail) most of the health plan communication to its members centers on these great little letters you get in the mail.   The EOBs come on flimsy paper and look suspiciously like a bill from one of those phony publishing companies.  Then you open it and in big bold writing it says: “THIS IS NOT A BILL” so why are you sending it?  Then you read on, this is not a bill, it’s a pre-bill, you are going to get a bill, this is just not it, quite yet.  But it does help to get a little story in spreadsheet form as to why your health insurance is not covering your health care services.  Oh by the way, you get this a long time after you have had the service they are talking about in the EOB.  Beautiful.

My family gets lots of these letters and because we are dealing with several insurers we get to sample the quality of communication of health plans and their members.  The EOB is just part of the way health insurers communicate with their members. Utilization management sends out great little form letters too.  My wife got one last week that said the diagnostic service she had on June 17 was deemed medically necessary, but it went on, (in bold) THIS CERTIFICATION IS BASED ON THE INFORMATION PROVIDED, AND IS OF MEDICAL NECESSITY ONLY AND IS NOT A GUARANTEE THAT HEALTH BENEFITS WILL BE PAID.  The letter was sent on June 18th.

Another exchange between my wife and the customer service department of a major national insurer, yielded the following insanity.  My wife wanted to move her regular source of care from one group practice to another in our local area.  She asked two very simple questions of the health plan: “ who is available and what would be the cost?”  After going through several layers of supervisors, she was told: “We can’t tell you that, it’s a secret”.   Basically, to give away cost to an enrollee in a high-deductible plan is to give away discounts and negotiated rates.  It’s a secret.  I told this story to a group of benefit managers of the largest employers, and one benefit manager jokingly agreed in frustration:  “They told us it was a secret too.”

The point is this.  We are now a decade in to the so-called consumer market, yet health insurers are still wedded to convoluted, bureaucratic communication that obfuscates their responsibilities and simply leaves the consumer with the financial Gotcha (after the care is long since consumed and forgotten), when the provider finally tracks the patient down for the “amount you owe” known affectionately as patient responsibility. The absolute worst Gotcha is recision of benefits, where the health insurers wriggle of out any financial responsibility on legal technicalities when patients have racked up big bills for lengthy illnesses.  They may have a legal case but do they have a moral case?

There are two major implications of the EOB morass.  First is that health insurers and providers alike have a long way to go in creating true transparency on cost and quality.  To have truly informed consumer decision-making requires that providers and insurers coordinate their communication to clearly tell the patient what it will cost patients at the time the patient has to make the decision to have the service or not.  The health care system fails miserably on this simplest of all market tests:  you know the price before you buy.

New models like Carol (a web-based market maker who enlists providers and plans in a consumer-friendly comparison shopping environment) hold some promise, but their penetration is infinitesimal, and there is really no reason for providers and plans to want to make it easier for consumers, when the Gotcha model is so spectacularly effective in obfuscating how much things really cost.

The second big implication is at the policy level.  Health insurers have had a great run financially over the last five years.  They remain incredibly unpopular with the American public in national surveys of trust in health care.  They have shown a willingness to make important concessions in the policy-making process with regard to expansion of coverage for all Americans at both the state and national level.  This is not the “Harry and Louise” crowd of the 1990s health reform debate.  Nevertheless, health insurers run the real risk of being targets of punitive regulation in a strongly Democratic  new congress.  If national health reform stumbles next year under the weight of a weak economy and political infighting over who pays for coverage expansion, don’t rule out health insurance reform.  Insurers may get guaranteed issuance, rate setting, medical-loss requirements, prohibitions on recision, marketing constraints, Medicare Advantage cuts, and a whole host of state regulation (where the real powers to regulate currently lie).  Part of the reason they may be in the crosshairs is that they are not seen by providers or patients as adding much value.  We don’t want single payer government run health care, but we don’t like the private sector pluralism much either.  Health insurers may be asked to explain their own benefit to society, and they better have a good answer.

Mandated Competition

Tuesday, July 1st, 2008

Americans hate mandates. Mandates to cover specific diseases and conditions drive health insurance costs up. Mandates to provide open access to Emergency Rooms sink geographically undesirable hospitals. Mandates to collect, collate, and communicate data create burdensome administrative chores. Now we are going to add more mandates in healthcare. We are now talking about millions of Americans, even all of us, being mandated to buy health insurance. We are also talking about insurers being mandated to offer insurance and not have the freedom to walk away from risks they don’t like.

But while many healthcare folks hate mandates there are also a lot of mandates they really like. Doctors of all stripes like the mandates that you have to be a doctor or a certain type of “ologist” to do certain procedures and tasks and access the income streams associated with it. Hospitals like the mandate that they are the place where certain procedures can be done. Employers like the mandate that because of ERISA they can’t be mandated by states to do things. Sweet.

We have to put up with other mandates in our lives, like income tax, parking tickets, bridge tolls, paying admission to ball games, and so on. We are not mandated to vote like the Australians, (maybe we should be, then look out).

Coverage Mandates. Let’s be clear: there is no such thing as voluntary universal coverage anywhere in the world. By the same token, while many countries including Japan, Germany and Holland have mandated insurance that achieves almost complete universal coverage, similar schemes in America would not yield anything close to universal coverage. Why? Because we would cheat. We have to have car insurance and many of us don’t. We have to have children in order to claim children as dependents on our income tax, but until some smart aleck at the IRS started asking for the social security numbers of the kids, more than seven million non-existent kids were claimed as dependents. We all listen to NPR and we never pledge. So even liberals cheat. That doesn’t mean that mandates in healthcare might not make a lot of sense, we have to worry about enforcing them in a nation of cheaters. Part of the reason cheaters cheat when it comes to car insurance and possibly health insurance is that the cheaters can’t afford it or the consequences of not having insurance are less dire than buying it. As Judge Harry Low, former California Health Insurance Commissioner once famously said, “You don’t need insurance, unless you have assets to protect.” I would favor phased-in mandates, for individuals starting with kids and applying to all Americans over time, with instant enrollment and subsidy for the lowest income families. But I also favor employer mandates, starting with the largest and moving down to all employers over time. Eventually we will meet in the German middle where healthcare is paid by a payroll tax (half employer paid, half employee paid) with a ceiling on total payment close to our current FICA ceiling on income, because we upper income folk don’t like progressive taxation.

Issuance Mandates. Health insurers should not just pick and choose worthy risks. There are precedents internationally for risk adjustment factors that even out the adverse selection effects on insurers (see my column on Australia). Cream skimming by insurers that leaves vulnerable families destitute, is more of a crime than inadequately adjusted adverse selection experienced by a multi-billion insurer.

Provider Mandates. At a recent meeting of the World Healthcare Congress, a New Zealand doctor was asked how that country achieved virtually universal adoption of electronic health records by that nation’s primary care doctors compare to approximately 20% of primary care doctors in the US. In his wonderfully quiet and clipped New Zealand accent he said: “The government won’t pay you unless you have one.” Brilliant. Now, I am sympathetic to the economic plight of American primary care doctors who now earn approximately half of the pay of their British brethren. So here’s my idea: tell doctors that they can’t bill Medicare unless they have an electronic medical record by 2010 and give them a tax credit to put one in. While we are at it we should have mandatory public reporting of standardized costs and quality metrics by all providers.

Patient Mandates. We slothful consumer should not get off the hook. Everyone should be mandated to complete a Health Risk Appraisal before enrolling in any health insurance plan. No HRA, no coverage. Our co-payment should rise if we are not in compliance with our treatment plan. And we should all be mandated to submit to arbitration before we get to sue our health plan, our doctor, or our employer over health issues.

Then let’s have it in a good old fashioned market, competing head to head on the basis of cost, quality and value. And let’s not whine about it.

Ian Morrison is an author, consultant and futurist based in Menlo Park, Calif. He is also a regular contributor to H&HN OnLine.

Clinical Reengineering

Wednesday, May 7th, 2008

It’s easy to get overwhelmed by the health care problem. At the system level, we struggle to cover all Americans, but we are daunted by the costs of system expansion, concerned about uneven quality and safety, and challenged by a shortage of trained professionals. It’s easy to become depressed. Yet there is cause for hope. Across the country, individuals, organizations and institutions are stepping up to make change happen at the grassroots level – one clinical care process at a time.

Historically, health care has paid inadequate attention to the language and practice of reengineering. In the late 1980s and early 1990s, every major industry in America embarked on a journey (which continues to this day) to improve quality and reduce costs. These industries paid systematic attention to business processes, information technology that rationalizes and streamlines those processes, and process improvement. All of this in the name of serving the customer, and making it happen better, faster, cheaper.

Health care is perhaps 20 years behind most industries on this journey. Admittedly, health care is complex, deals with matters of life and death, and has unusual organizational characteristics (such as the fact that some of the most important decision-makers don’t work for the organization). Yet we can’t excuse ourselves in health care from the need to reengineer.

The good news is that we are recognizing the problem, we have advocates and experts who are gaining momentum, and there are success stories on the ground.

Recognizing the Problem

Clinical care is becoming more complex. Patients get older, fatter and crankier every year. The majority of Medicare patients (some 55 percent) have five or more chronic conditions, leading one group of medical residents in the Carolinas to dub the typical patient as HONDAS (hypertensive, obese, noncompliant, diabetic, alcoholic and/or all systems failing). The growth in numbers of multiple comorbid patients puts additional strain on the system. It increases the complexity of intervention; adds to the challenge of lifting, transporting and assisting patients; and heightens the stress nurses and other caregivers face in dealing with complex care regimens.

At the same time, we have an aging workforce and aging physical plants that were designed for a different era. The physical environment can impair efforts to improve care processes, and an increasing body of evidence from the Center for Health Design and elsewhere points to the fact that improved physical layout can have a positive impact on care processes and outcomes.

The rise of transparency has been a positive force in encouraging clinical improvement. But the downside is that the burden of measurement increasingly falls on caregivers at the bedside. Whether it is pay-for-performance systems, patient safety initiatives, outcomes measurement or patient classification systems tied to mandatory staffing ratios, all of these put an additional data collection burden on front-line caregivers. Unfortunately, most electronic medical record systems, even when they exist, do not spontaneously capture all the required data for these new measures of clinical performance.

Trying to improve clinical care by simply throwing more resources at the problem does not seem to be a sustainable solution. (This is the micro version of the “fallacy of excellence” issue I wrote about in a previous column.)

Gaining Momentum

Path-breaking organizations such as the Institute for Healthcare Improvement (IHI) have long recognized the need to help health care transform at the clinical process level. Most recently through the 100,000 Lives Campaign and its sequel the 5 Million Lives Campaign, IHI has rallied the field to improve in the name of patient safety and quality.

At the same time, we are seeing new evidence of how big the gap is between current practice and what might be possible in a better-designed care system. The ambitious time and motion study led by Ann Hendrich of Ascension Health and Marilyn Chow of Kaiser Permanente used multiple, sophisticated tracking tools to monitor the real behavior of nurses on typical med-surg floors. Their early results, and more yet to be published, found that nurses spend a relatively small part of their time (less than a third) in direct patient care. The rest of their time was spent in documentation tasks and “hunting and gathering” activities where they had to chase down equipment and supplies. These insights provide new evidence for the importance of redesigning clinical care processes to eliminate waste motion and to deliver improved patient care.

Keys to Success

As I travel around the country, I see growing interest in and commitment to clinical reengineering. Here are some observations about what’s working well and why.

Importance of leadership. In almost every case of constructive change I have come across, leaders have placed an enormously high priority on clinical process improvement. Some leaders are leading this charge from a patient safety perspective, some from a quality and outcome perspective, and some more from a value perspective. But in all cases leaders are committed to redesigning care processes so they are safer and more reliable, they deliver higher quality care and they eliminate unnecessary costs.

A willingness to look outside. Jeff Thomson, CEO of Gundersen-Lutheran in Wisconsin, is committed to clinical redesign as a physician CEO of a large and nationally acclaimed health system. Interestingly, he has hired system engineering experts from outside health care to work on the redesign. Similarly, Gary Kaplan, another physician CEO who is at Virginia-Mason in Seattle, is a believer in lean manufacturing. He has made regular site visits and immersion experiences in Japan’s lean manufacturing culture, taking along his senior managers and board members to learn from outside health care.

Celebration of victory. While measurement may place a burden on front-line caregivers, it can also reward through demonstrable results. Most folk working in health care are genuinely committed to improving care, and most of them, particularly physicians, respond well to data-driven feedback. There is nothing more empowering than knowing you are doing a better job for patients every day.

Investing in clinical reengineers. Enlightened organizations are investing in specialized resources dedicated to improving care processes. For example, the Mayo Clinic has specialized staff designing new clinical processes in conjunction with front-line staff and creating working simulations of these process redesigns in specialized experimental space. But we need to take this idea much further and create armies of nurses, physicians, respiratory therapists, laboratory technologists and other professionals who are cross-trained in systems disciplines. It is only when the front-line people are given the knowledge and skill to transform their work that we will have clinical processes that are effective and efficient for patients and caregivers alike.

Ian Morrison is an author, consultant and futurist based in Menlo Park, Calif. He is also a regular contributor to H&HN OnLine. This article 1st appeared on May 4, 2008 in HHN Magazine online site.

The New American Compromise

Saturday, May 3rd, 2008

In the 1980s and 1990s, an American compromise called managed competition was the dominant force behind health reform. Born from the ideas of Alain Enthoven at Stanford University, the theory laid out a path where consumers picked plans when they were well and lived with the consequences of their decision when they were sick. Integrated delivery systems organized in an HMO model competed for business on the basis of cost and quality, and cost-conscious consumers had real incentives to select low-cost plans; otherwise, they paid hundreds of dollars a month for more expensive (and usually broader choice) alternatives.

Managed competition was the basis for health reform initiatives in California in the 1980s and was really the intellectual foundation for all health reform efforts in the 1990s, including the ill-fated Clinton health plan. Managed competition worked best in a framework of universal coverage. Everyone was to be in a plan, and plan sponsors (such as employers or government) as well as individual consumers would have a marketplace of choices at the plan level or the integrated delivery system level. Kaiser-like entities would then compete on a value basis within a framework of universal coverage. I always kind of liked the idea because it reconciled issues of cost, quality and access, and I felt it was a genuinely American compromise between top-down control and consumer choice.

Shared Sacrifice

There is a “new American compromise” being forged. Emerging from the Romney and Schwarzenegger political aberrations (popular Republican governors in strongly Democratic states), the new American compromise makes universal coverage the primary goal. It is to be achieved through shared sacrifice in payment by business, government, individual households and even, in some cases, payment by special groups like smokers, doctors and hospitals.

The new compromise is forged from a belief that health care is both a right and an obligation: You have a right to expect access to health care but you have an obligation to pay your share of the tab. The compromise is a form of what I have called strategic incrementalism (incrementalism is going from one bad idea to another bad idea; strategic incrementalism takes steady steps toward a broader vision). The new compromise builds on existing public and private health insurance programs, it lets you keep what you have if you like it, it requires you to pay something for coverage if you have none, and it limits the behavior of health insurers in the marketplace.

The Massachusetts plan, Schwarzenegger’s California proposal and the plans of all the Democratic presidential candidates are close variants of this new compromise. Republican candidates as of this writing (in the early stages of 2008) have shown little interest in embracing universal coverage through shared sacrifice, preferring instead a combination of tax credits and deregulation of insurance markets to stimulate competition. Still, while none of them has embraced the new compromise (or said much about health care in his campaigning), whoever emerges as the candidate on the Republican side will be forced to talk about health care as the general election heats up. Why? Because, after the economy, health care is the dominant domestic issue for Democrats and Independents, which is in sharp contrast to the Republican ranking of health care as an issue (behind the economy, immigration and taxes).

A Real Debate

You could argue that the stars seem aligned for a victory for health reform, based on the new compromise, that leads to universal coverage, first in some landmark states like Massachusetts and California and then perhaps emulated through national policy. (I have always argued that Americans will not buy a car they haven’t driven. So they will want to see the new compromise working before they sign off on it.) But it is plausible to expect a real debate about health reform that may actually lead to political change and in turn to legislation.

However, there are a few things to watch for:

God is in the details. While the new compromise has been embraced by politicians on either side, there can be large and important differences in the details such as which groups of newly covered are added at what rate and to what maximum level. Is universal coverage the goal or is it simply significant coverage expansion (“universal coverage for some” was how an old colleague put it)? Similarly, while there is unanimity among Democrats about rolling back tax cuts for the rich to pay for health reform (and other things), unsurprisingly this view is not held by Republicans. Perhaps the most meaningful detail over which there is disagreement is in the degree of regulation or deregulation of the health insurance industry. Democrats are much more likely to tighten the rules on issuance, underwriting, and availability and funding of public versus private choices.

Political victory does not always mean legislation. It is one thing to speechify, to campaign and to win an election with health care reform as a plank in your platform. It is quite another to get laws passed and enacted that make massive change in one-sixth of the U.S. economy. Every lobbyist and their dog is itching to get into the middle of this next round of change making.

Affordability. Here is my big concern. We may succeed in getting everyone an insurance card, but to reach that laudable goal we may be ignoring the need to transform a delivery system to make it better, faster and cheaper than the system we have now. Giving people a card doesn’t solve the fundamental cost problem, and there seems little in the candidates’ proposals that will do much about the cost problem. We will have more people covered and we will pay significantly more to achieve it. Without adequate cost controls we may be digging our children an even bigger fiscal black hole than the one they are already facing.

Health reform should happen – it could happen. But if it addresses only coverage expansion and ignores the issues of affordability, quality and sustainability, we will have missed an opportunity to transform health care to deliver much higher performance for decades to come.

Ian Morrison is an author, consultant and futurist based in Menlo Park, Calif. He is also a regular contributor to H&HN OnLine. This article 1st appeared on March 4, 2008 in HHN Magazine online site.

The Fallacy of Excellence

Tuesday, January 1st, 2008

“We have the best doctors and hospitals, and we have the best health care system in the world,” I heard a Republican candidate for president say the other day. It rolled off his tongue very smoothly. The audience applauded, nodding quietly in assent. (I couldn’t see them well enough – the camera was on him – but it felt like they were nodding.)

The candidate’s statement struck me for two reasons. First, you don’t hear it much these days. Almost everyone from CEOs to presidential hopefuls to policy wonkettes seems to think health care is broken, or in deep crisis. So when John McCain said it, it was kind of a nice retro moment, back to a time when almost everyone in America agreed with the three-step statement: best doctors, best hospitals, best health care system.

Second, what struck me was the fact that the audience applauded and nodded in agreement (in my mind’s eye). In my rattling around American health care I see this all the time, among lay audiences, hospital board members and a lot of business people. I have come to call it the “fallacy of excellence.”

Only as Good as the System

There is a common perception that quality of inputs equals quality of performance and outcomes. Health care delivery has become mind-bogglingly complicated, but we still like to cling to the simple, reassuring notion that if we have really well-trained doctors and nurses, and we put them in nice new sparkling buildings and provide them with lots of new technology, we will always deliver excellent care. I don’t believe that. While having well-trained staff and good facilities may be necessary conditions, they are far from sufficient.

The health care glitterati agree that it takes a “system” to deliver safe, reliable, high-quality, cost-effective care, from the very top level of policy to the micro-organization of care. The general public knows only too well the downside of a lack of systemness: from the 47 million uninsured, to the lack of coordination of caregivers, to the absence of a medical home. The public may know the system doesn’t work, but it seems to me they still cling to the notion that more is better, that good doctors and hospitals guarantee good quality, and (maybe by inference) that higher costs and prices are associated with excellence in outcomes.

I see this in the eyes of lay board members at hospital retreats. I hear it in the questions from general audiences. And I see it in folks whose eyes glaze over in disbelief that cost and quality may be correlated inversely (namely, that high cost is associated with poor quality, an assertion that has increasing evidence behind it from the Dartmouth Atlas of Health Care to the Premier pay-for-performance experiments with the Centers for Medicare & Medicaid Services).

If the public, doctors and hospital trustees are aligned in the fallacy of excellence, that behavior may foreshadow a rocky road for some important policy initiatives, such as:

Pay-for-performance (P4P) initiatives that reward efficiency. Increasingly the P4P movement will incorporate so-called efficiency measures into its programs. This reinforces the notion that high-quality care can also be of lower cost.

High-performance networks. Similarly, patients will be asked to believe that lower-cost performers are also higher quality as they are directed to so-called high-performing providers that are low-cost and high-quality.

Center for comparative effectiveness. Increasingly, there are calls from health policy groups (including America’s Health Insurance Plans and the Committee for Economic Development) for the creation of a national independent center to evaluate the cost-effectiveness of new medical technologies and provide side-by-side analysis of the effectiveness of new technologies against existing therapies.

Changing the Mind-Set

In my humble opinion, there needs to be a national campaign to educate the public (and maybe even the doctors and hospital trustees) that more is not better, that outcomes cannot be guaranteed by excellence of inputs, and that it takes a system at both the macro and micro levels to deliver good health care.

The Institute of Medicine has done a brilliant job of documenting the value of systemness in its path-breaking reports. But we need to popularize the message and educate the public that systems of care matter. Otherwise, the fallacy of excellence will dominate the public discourse on health care – from presidential campaign debates to hospital board retreats – and we will continue to spend more and get less than we should.

Ian Morrison is an author, consultant and futurist based in Menlo Park, Calif. This article 1st appeared on January 8, 2008 in HHN Magazine online site.