Ian Morrison

It’s complicated. Health care that is. American health care may be the most complex, technologically advanced and administratively intricate of any health system in the world. The rise of complexity of health care is driven by a number of interrelated factors:

Clinical Complexity

Clinical complexity is increasing at an exponential rate driven by continuous advancements in science and technology. In particular, the exciting progress in customized, genomic medicine creates more targeted clinical interventions but also increases the complexity of care. Every year more than a million articles are published in medicine and related disciplines, and experts estimate that scientific knowledge doubles every nine years.

At a recent University of California–San Francisco conference for hospitalists that I spoke at, my host and friend Dr. Bob Wachter invited me to stay after my little talk to hear a real doctor lecture on recent advances in the treatment of complex cardiac patients in the intensive care unit who have experienced heart failure. Of course I understood none of it.

The visiting Stanford professor giving the lecture reviewed the science and gave periodic pop quizzes challenging the group with clinical vignettes. As I recall, in many cases, a majority of attendees got the answers wrong, not because they weren’t smart, but because the amount of knowledge that any one human can store has become unknowable.

I asked the good Dr. Wachter if that was pretty typical, and he reminded me that this was just one of the hundreds (if not thousands) of diagnoses that a hospitalist may have to treat, each with its own emerging science, new therapies and new evidence. It seemed to me impossible to keep up without sophisticated support from information technology. It would be hard to make it all simple.

Yet, much effort is being made to standardize clinical processes and provide sophisticated decision support to aid clinicians with this rising scientific complexity. It may seem like an uphill battle, but it is an important counterbalance to the rising tide of clinical complexity driven by scientific advances.

 

Older, Sicker Patients with Co-Morbidities

Not only is there increasing scientific complexity, but patients are older and sicker with more comorbidities. It is interesting to compare the United States with other countries. In surveys conducted by the Commonwealth Fund, patients are asked how many conditions they suffer from. A full 68 percent of American elderly patients claim to have two or more chronic conditions while only a third of British elderly patients responded that way.

(It is hard for me to believe that Americans are actually more unhealthy than the British. I grew up in Glasgow where the local delicacy was deep-fried Mars bars and where pie, beans and chips is known affectionately as the Glasgow salad. So it is incomprehensible to me that Americans could actually be that much sicker. More likely it reflects the great quote from my old mentor Bob Evans that “good health is a state of incomplete diagnosis.” In the United States we actually find out about how many illnesses we have, while in the United Kingdom they don’t bother finding out and they just live longer.)

Nevertheless, whether rising morbidity is real or imagined or discovered through more thorough and complete diagnosis, the typical American hospital is experiencing rising levels of acuity and complexity of the patients who are being admitted for inpatient care. Obviously this is partly a result of the least severe cases being handled now in the ambulatory environment. But the fact remains that inpatient care is becoming increasingly complicated from a clinical perspective.

This is further amplified by the move toward sub-specialization in medicine and the expanding base of science. As a result, in all medical specialties care is becoming more complex.

 

Coverage Complexity

Obamacare was a good thing for the nation’s uninsured. Twenty million people got covered, half through Medicaid expansion and half through exchanges. Most of those folks are low income and they cycle in and out of eligibility for Medicaid and exchange subsidies as life happens: They get a job, they lose a job; they marry, they divorce. A full 40 percent of exchange enrollees churn in a year, about 25 percent in Medicaid. Similar rates of churn exist in the small group and individual market because of the considerable volatility in employment and economic circumstances. Tying health insurance coverage to employment and income is asking for volatility and complexity.

Medicare is more stable. Once you turn 65 you are in it forever, because you are unlikely to ever turn 63 again.

 

Administrative complexity

It is well known that America health care spends considerably more on administrative costs than any other country. This shows up in multiple ways. Comparisons with other countries on the net cost of insurance reveal that America spends approximately 7 percent to 10 percent of all health expenditures, while countries with single payer systems or (just simpler payer systems) spend 2 percent to 3 percent.

The complexity of payment systems and the administrative burden of regulatory oversight can be seen when comparing administrative costs of hospitals with other countries, the United States has the highest administrative costs of countries studied at 25.3 percent with Canada and Scotland the lowest at 12.4 percent and 11.6 percent respectively. (By the way, this is where Donald Trump got his idea that Canada and Scotland had great health care. He saw this finding on a show.)

 

Multiple Payers

The primary underlying cause of administrative complexity is the multiple payers in American health care both public and private. Medicare, Medicaid, TRICARE, Department of Defense, Veterans Administration, and state and local governments, along with a myriad of insurers in the private sector, all have different programs with multiple insurance offerings. Many countries, such as the UK and Australia, have a mix of public and private sector components to the payment stream; some, like the Netherlands and Switzerland, have multiple competing insurers, with higher administrative costs as a result. But no other country has the intricately involved set of financial relationships to deliver money to health care that we have in the United States.

(Some years ago, Humphrey Taylor and I published a similar blog on this increasing complexity on the eve of Obamacare implementation. It has become even more complex than we forewarned.)

 

Multiple Methods of Payment

Not only do we have multiple payers, but the methods of payment are many and complex and are becoming more so. While capitation may seem like a simple and pure form of payment, it is a tiny sliver of American health care financing. Most of the health care system is paid on the basis of what I call fee for service with tricks (simple FFS with small inducements at the margin to encourage quality, outcome or customer responsiveness). Whether it be bundles or value-based payment or risk adjustment or severity-based payments, all the new models add complexity. Don’t get me wrong — I’m in favor of the move away from unfettered fee for service toward paying for value — but it probably doesn’t make the health care system any simpler.

The Medicare Access and CHIP Reauthorization Act of 2015 is a perfect example of this well-intentioned trend having unintended consequences of increasing administrative complexity. In recent surveys of physicians conducted by Deloitte and by my colleagues at Nielsen, the vast majority of physicians had either never heard of MACRA or didn’t really know what it was. MACRA affects how most doctors are paid by Medicare, which is kinda important, given old people often use the health care system, no? Many doctors have thrown up their hands and thrown in the towel. In the Nielsen survey of physicians, the top response of what MACRA would do to physicians was to drive them toward being employees of health systems.

 

Organizational Complexity of Accountable Care

The accountable care organization movement has galvanized many providers of all types to explore new organizational arrangements under the rubric of accountable care. Leavitt Partners estimated recently that 28.3 million people are covered by an accountable care arrangement, either public or private.

While the impact of ACOs on costs and quality are under some debate, the most authoritative academic studies show modest costs savings and minor effects on quality, but after administrative costs are factored in, it seems much ado about nothing. What is undeniable is that these new arrangements make the system more complicated for providers and patients.

 

Risk and Population Health

To cap it off, some brave health systems (maybe as many as 20 percent) are taking insurance risk by offering policies in the market to individuals and groups, contracting directly with employers, or taking Medicare Advantage patients. Population health management is similarly well intentioned but makes the work of health care systems much more complex.

So, while risk and population health may all work out well (if these health systems can actually pull it off), it makes life more complicated.

 

Consumer-Directed Health Care

Rising deductibles and co-payments over the last two decades have fulfilled the dream of many economists who long advocated for patients to have more skin in the game. Well, they got their wish. Nearly half of Americans with employment-based insurance have a deductible of $1,000 or more, and 29 percent have a deductible of $2,000 or more. And here’s the kicker: Most of the bottom half of the income distribution (households with incomes less than $53,000 per year) can’t come up with those deductibles because they live paycheck to paycheck. So for them, paying for health care is not only complicated (involving loans, credit card debt or pharmaceutical patient assistance programs), it’s also downright painful.

There is little or no meaningful transparency on cost and quality that is actionable by real consumers. Providers challenge the validity of measures on hospital and physician performance, while consumers rarely use the information to select providers and default to convenience, proximity and the recommendations of their physicians when making choices. It’s all too complicated, and consumers have inadequate information at the time of choosing.

 

Revenue Cycle Management

All this administrative and clinical complexity explains why revenue cycle management is the hot new thing. There is money in complexity. At the big industry trade shows there are acres of revenue cycle management vendors. I have gone out on a limb to forecast that within five years the revenue of the revenue cycle management industry will finally exceed the entire revenue of the health care system in a health financial management equivalent of the Rapture.

 

Impact on Costs, Quality, Access and Provider Morale

All this complexity is taking its toll. It drives up the total costs of health care as more and more administrative responsibility is added to providers and payers alike. It impedes quality and access by increasing the time and financial burden on patients and providers. And it undermines provider morale. In recent surveys by Mayo and Nielsen, a majority of physicians report they are suffering from burnout, suicide rates are at all time highs in the medical profession, and there is a widespread improvement fatigue among physicians that I have written about in this column before (http://www.hhnmag.com/articles/3507-what-to-do-about-improvement-fatigue).

 

Signs of Simplicity

Forget health care for a moment and think about other service experiences in your life. How much time do you spend on your phone? Is it the vehicle for your life? Is it your primary gateway to your family, friends, travel reservations, recipes, dates and data?

How simple is it to use?

The complexity of health care is being judged against a backdrop of other service industries that seem to effortlessly deliver service in a way that is simple and easy to use. And it is not just smartphone-enabled apps.

Think Southwest Airlines. It flies the same planes on all routes so crews are interchangeable. Southwest keeps it simple: no bag fees, no tricks. And they still give you peanuts.

Or think Netflix. It knows what you like and makes it easy to binge watch House of Cards without leaving your couch.

Or Amazon. It will get you absolutely anything on your front door step within a day or two. Maybe an hour or two when they get the drone thing down.

Or Uber. You press a button and a Stanford graduate student picks you up in his Prius in three minutes and you don’t have to tip him or fumble for cash.

These businesses are backed by enormously complex technology and logistics. They use sophisticated algorithms to customize the user experience. It is immensely difficult to design and execute these services, but to the customer it appears simple.

We need to learn from them. And we can find signs of simplicity in health care:

Kaiser Permanente. Kaiser delivers health care and acts as an insurer. While it is experiencing all the complexity described here, it has simplicity in its business model. It accepts pre-payment and it organizes care delivery to minimize unnecessary use of expensive resources like hospitals. It uses a pure and simple model that aligns incentives. It has also maximized use of digital delivery models with over half of all patient encounters at Kaiser occurring digitally whether through tele-health, portals, e-mail or secure clinical messaging. Kaiser members are fiercely loyal. While Kaiser has had to abandon first dollar coverage and embrace consumer cost-sharing to be market relevant, it still strives to make the consumer experience simple and easy to understand.

Covered California. California is an active purchaser state and it has used that power to simplify and standardize offerings on the exchange. In 2016 Covered California narrowed down the available options at the silver level to eight options in Los Angeles; this is in contrast with Seattle where a bewildering 50 options were available, or New York with 46.

Concierge medicine. A private equity investor (himself a physician) explained to me recently that the only group of happy doctors he has run into in the last year was a group of concierge doctors, who have converted to a fixed monthly fee for membership for their patients. They drastically reduce their panel size with the subscription making up the bulk of their income. Most of their patients are on Medicare and many of the doctors bill Medicare in addition, but they are not dependent on it. Not all doctors can be concierge doctors because there are not enough rich people to go around. But some can. And many of the more affluent patients value the enhanced connection and connectivity to caregivers and are willing to pay a subscription for the service. One Medical offers a similar experience targeting affluent, tech-savvy millennials.

Book MD. Book MD has targeted self-insured employers and provides a customized bundled payment platform for “shoppable services” such as mammography. It has negotiated a preferred rate and in return provides prompt payment to providers; it has also engineered its consumer facing app and integrated it with participating providers’ scheduling systems to provide same-day access to services. Users like Disney have seen dramatic results in improving busy executives’ adherence to screening guidelines such as mammography. It’s simple, convenient and fast.

These signs of simplicity teach us a few principles.

It’s complex to be simple. The user experience may be simple and easy but there is immense complexity behind the scenes. It’s hard work and requires sophisticated technology.

We need win-wins for providers and consumers. Simple, successful services make life better for consumers and make economic sense for the vendor. Successful business models are simple and aligned.

Software and algorithms, not bricks and mortar. To date, health care innovation has been too much about buildings and big clinical iron. Simple health care will depend increasingly on software and algorithms.

Put the user at the center. Great service businesses design simple solutions from the perspective of the user. As we strive to improve the patient experience we need to make it simple for the user. Too often, even with good intentions, we make it more complicated.