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Debt, Data and Deciders

This piece was originally featured in the Colorado Medical Society’s February 2014 edition of Colorado Medicine as part I in a series on “Turning healthcare into a functional market system.”

The landscape in American health care is changing, and it's affecting us here in Colorado. For anyone who still doubts that health and health care in Colorado will be different in the future, here are a few facts from a recent article in JAMA:

  • In 2000, 53 percent of physicians practiced independently and 18 percent were hospital-affiliated. In 2010, the proportions had almost completely reversed: 23 percent independents, 48 percent hospital-affiliated. The macro trends favor further vertical and horizontal integration, for reasons I’ll go into later in this piece.
  • The trend toward consolidation affected many health care sectors in the last decade, including insurers, pharmacies and office-based physicians. The proportion of office-based physicians practicing in groups of six or larger rose from a third to nearly half.
  • Nearly three-quarters (72 percent) of physicians today practice on an EHR, as do nearly seven hospitals out of eight (87 percent), as of 2012. Contrast that with earlier in the last decade when less than half of both groups were on an EHR.

The big question is: Why is this happening? And how should physicians in general adapt?

At CIVHC we talk about three major trends in American health care: debt, data and deciders. These tsunamis of change are affecting every aspect of American life, not just health care. Let’s look at each of them.

Debt

Debt is at every level of our society today. The Baby Boomer generation was raised in an environment that could count on future growth to bail them out of unreasonable debt obligations. Big mortgage? Don’t worry, you’ll get raises later on that will make it affordable. Student loans? No problem, good jobs available upon graduation.

But then the Great Recession hit, and now the Big Reset is taking place. People in my daughters’ generation are working at Starbucks while looking for work in the field of their choice, often to no avail. We’ve gone through a series of asset bubbles, from technology to banking to housing. Credit, which fueled the illusion of Infinite Growth That Hides All Sins, is only now starting to become available again, this time on more disciplined terms.

Debt, and particularly debt that prevents further borrowing, drives a search for value. As long as you think you have infinite resources, you care little about value, or more specifically, you are insensitive to the cost of things in order to get the benefits you want.

But once we perceive resources to be limited, it’s a whole different ballgame. We are suddenly looking at price tags and ratings by other consumers like ourselves. I notice this difference when I travel. If someone else is paying my expenses, I tend not to shop for my hotel, but to stay at the conference hotel for convenience. If I am paying with my own money (which I perceive correctly to be limited), I go to TripAdvisor and try to find a lower price for a similar hotel, close to the meeting. I carefully read about the pros and cons of that particular hotel, to predict whether I’ll like it.

What does this have to do with health care? Before, nothing; now, everything. Because of insurance, we acted like the traveler with the expense account. We didn’t have to pay more to stay in the conference hotel, someone else did. We didn’t comparison shop for medical services, because it didn’t make a difference to us financially. We didn’t experience costs (much), only benefits. So why wouldn’t we metaphorically try to stay at the Ritz vs. La Quinta? If we stayed at La Quinta, we’d be saving money for someone we don’t like (the insurance company) and in doing so, worry that we shorted ourselves. Who does that?

I like to joke that being out of money has an amazing clarifying effect on thinking, but there is truth in that. And being out of money on so many levels is clarifying our thinking about health care costs. It’s making us ask for the first time: What are we actually getting for $2.7 trillion, and 17 percent of our economy? And it is our debt – personally, corporately and nationally – that is compelling us to do so.

Data

Remember what I did when shopping with my own money for a hotel? I went to TripAdvisor. Why? Sociologic studies show that the aggregated opinions of others in the same situation more strongly predict my satisfaction with a product or experience than I can alone. But that’s only possible because I can read their ratings and opinions online. In essence, massive computing power has allowed people to compile data about many experiences they have daily, and to make choices about those that involve giving other people money. This brings me to a guy named Gordon Moore.

Moore was an engineer at a company called Fairchild Semiconductor, a strange name in the 1950s when people were just discovering uses for transistors. He figured out something cool working there, and it was this: Moore’s job involved making microchips, and cramming more and more transistors onto chips as fast as he could. He noted that he could double the number of transistors on a chip about every 18 months, effectively halving the cost of computing power. This became Moore’s Law, and the exponential trend he noted then continues today, half a century later. Moore also went on to found another little company with a funny name: Intel.

Why should you care? Think about how you picked a hotel in a strange city before TripAdvisor. You asked around at work, or got a recommendation from your spouse’s cousin who lived there 10 years ago. Pretty hit or miss. But now, with TripAdvisor, finding a hotel in your price range that people love is a snap. Technology, and in particular, Moore’s Law, makes this information cheap, nearly free in fact, and cheaper every year from now until forever. Data makes shopping effectively really, really cheap. This brings me to deciders.

Deciders

Okay, now the average American family of four is deeply in debt, with no additional help from their employers or governments coming any time soon, and massive and growing amounts of data available to them on their smartphones. Their employers are providing health plans to them that have $10,000 deductibles, so they’re spending their own money for anything beyond preventive care. Some health plans have reference pricing as a feature, in which when the plan does pay, it only pays the lowest price offered by a good quality provider, and the patients (you) get to pay the difference between that amount and what the provider charges.

Remember TripAdvisor? Some companies are starting to do the same thing in health care. Sometimes employers are giving their employees subscriptions to these companies so the best value in knee replacement shows up on their smartphone when they click the search button. So what will the average consumer think? “I’m spending a lot of my own dollars and I have access to information to choose the best bang for the buck. While I still worry about making good choices, I can read online what people just like me think of the doctor and hospital I’m about to choose. Hey, remember when I used to have to ask my spouse’s cousin who he chose when he had the same operation 10 years ago? That was so 20th century.”

There’s more to this story, but these three trends – debt, data and deciders – are bringing to health care what already existed in most other sectors of our economy: functional markets. Markets are places where consumers can compare prices and benefits, and choose for themselves where to spend their money. And for arcane reasons, they’re just now catching on in health care because of these three forces.

Consumers these days don’t buy products so much as experiences – complete experiences where they can. That means they don’t like buying the parts of the car and assembling the pieces themselves; they like buying the fully assembled car off the lot, and expect to be able to drive it without a lot of training. So the thought they’d have to pay for and assemble a surgeon, a hospital, a rehab center, physical therapist, etc. and manage them because they don’t really talk to one another seems arcane. Separate bills for what seems like the same thing? That’s not how people will shop for this stuff in the future.

Implications

Now let’s discuss how this plays out for you. Despite a massive trend over the last half century toward equating specialization and segmentation with expertise, consumers are increasingly going to recognize that this segmentation makes them buy pistons and catalytic converters separately, and hope the parts fit together in a way that makes the car run in a predictable way. Because teams that communicate and coordinate action well can create coherence for patients and consumers, they have a definite advantage over the random chance that all the players in a care plan will do the right thing at the right time in the right way. At the beginning of this article, I pointed out a growing trend toward doctors working for hospitals. This is because hospitals believe they need to control every phase of a patient’s experience to be successful in the future. They believe this because people who buy their stuff are starting to tell them that. While for many physicians this is anathema, and there is no rule that says hospitals have to be in control of the combined enterprise, there is no question in my mind that any entity that can actually create whole, coherent and successful experiences for patients at a competitive price will be winners in the next decade. I hope those entities are provider-led, but the hard truth is that value-driven consumers with good information will buy the better car at the better price, no matter who built it.

At CIVHC we are helping people put their teams together, measure their performance and then improve it in order to sell a higher-value experience. Currently my colleagues there are helping people construct bundles of care; increasing discharge reliability and thereby reducing readmissions; creating reports out of the All Payer Claims Database to inform providers of the cost and the quality of the experiences they create for patients; and implementing many other things that we hope will enable providers to create greater value. As a result, this process will be good for everyone, except those who insist that delivering care in a disorganized way is the best we can do.

This model is the choice before you. You can either continue to contend that disorganized care is best, or you can acknowledge that you and others will do a much better job for people as teams that communicate well. You can continue to see only your piece of someone’s care, or you can try to understand how you fit into that patient’s total experience, from their perspective. You can also continue to imagine that our state spends money from someone else’s infinite health care expense account, or you can acknowledge that the money is limited, and we need to find ever-increasing value to make health care sustainable again.

At CIVHC we hope that Colorado’s physicians will choose to find their place in teams dedicated to better clinical and financial outcomes for patients; to understand their own performance though others’ eyes; and to work in those teams to deliver value for people who have not a dime more to spend on care, and who increasingly know what they’re getting when they check into the health care system.

About the Author: Dr. Jay Want is CIVHC's Chief Medical Officer. Contact him at jwant@civhc.org.

(1) The Anatomy of Health Care in the United States, JAMA, 2013; 310(18):1947-1963.
 

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