Unbiased Analysis of Today's Healthcare Issues

Regulatory Tsunami?

Written By: Jason Shafrin - Oct• 22•14

Medicare is working hard to make sure that doctors are efficiently providing high-quality care. Programs such as the Physician Quality Reporting System (PRQS) and the Value-Based Payment Modifier all are aimed to improve quality and lower cost.

The downside of such programs, however, is that the impose reporting burdens on physicians. For instance, Medicare can adjust a physician’s base payment rate based on:

  • Whether or not they are able to electronically prescribe medication
  • whether or not they fulfill “meaningful use” criteria of electronic medical records
  • the PQRS quality reporting system
  • The value-based payment modifier

Each of these systems overlaps and are phased in over time making it difficult for physicians to track how what their specific payment rate will be.  The AMA states:

The tsunami of rules and policies surrounding the penalties are in a constant state of flux due to scheduled phase-ins and annual changes in regulatory requirements.  In fact, the rules have become so complex that no one, often including the staff in charge of implementing them, can fully understand and interpret them.

In addition, CMS is moving from an ICD-9 system to an ICD-10 coding system, causing the number of codes available to increase from about 13,000 today to about 68,000 codes after the transition.

Payers must balance the desire to monitor provider quality without overburdening physicians with excess regulations and reporting requirements. Finding the correct balance between physicians, CMS’s, and patient desires is a delicate task.


Written By: Jason Shafrin - Oct• 21•14

PwC just released a report on wearable technology. Some findings from the health field include:

More than 80% of consumers said an important benefit of wearable technology is its potential to make health care more convenient.

Consumers have not yet embraced wearable health technology in large numbers, but they’re interested. More than 80 percent of consumers said an important benefit of wearable technology is its potential to make health care more convenient. Companies hoping to exploit this nascent interest will have to create affordable products offering greater value for both users and their healthcare partners.

While employers and health company executives expect wearables to provide valuable insights, few consumers are interested in using wearables to share health data with friends and family, and, citing concerns about privacy, consumers trust their personal physicians most with their health data. Therefore, companies should ensure privacy policies are crystal clear…Consumers will want to see those high [privacy] standards applied to health wearables data, especially as they become integrated into electronic medical records.

Keeping the consumer engaged beyond the first few weeks of use is an important part of any wearable strategy. Companies should consider novelty, rewards, incentives and truly actionable insights the user experience.

In Pontiac, Michigan, St. Joseph Mercy Oakland hospital has been running a pilot program on Visensia, a patient vital-sign monitoring system that analyzes data streams to produce care recommendations for clinicians. In the first four years mortality rates fell 35%, according
to Crain’s Detroit Business. Length of patient stay fell half a day.12

In general, consumers are concerned about cost, privacy and the ease of use of the technology. Fitness bands (Fitbit, Fuel band) are currently attracting the most attention from consumers. CNET has recommendations on the best of wearable tech, which extends beyond the health field.

The cost of Informal Elder Care

Written By: Jason Shafrin - Oct• 20•14

Many adults spend significant time caring for sick, elderly parents.  What is the cost of providing this informal care?  Would it be better to have family members outsource the care to formal caregivers?

A paper by Chari, Engberg, Ray and Mehrotra (2014) attempt to answer this question.  They use data from the  American Time Use Survey (ATUS), a time motion survey that tracks how individuals spend their day.  The opportunity cost of care is calculated s the product of the time spent providing care for an elderly parent and their wage.  For non-working adults, wages are imputed based on age, education, race and number of children.  To address the sample selection bias in the wage regression, a Heckman correction in which the propensity of working (the inverse mills ratio) is included as one of the regressors in the wage equation.

The authors compare the cost of informal care with the cost of unskilled care ($7.25, the federal minimum wage) and skilled care ($21, the wage of a home health aide).  Using this approach, the authors estimate that Americans spent 30 billion hours annually caring for elderly relatives.  The total annual opportunity cost of informal care was $522 billion.  The authors estimate the cost of replacing this care with unskilled workers is $221 billion, but the cost of replacing informal care with skilled workers (i.e., home health aides) is $642 billion.

The authors summarize their results as follows:

We find that informal care is mainly provided by working-age adults, who consequently bear most of the economic burden in terms of opportunity costs. Our findings underscore the importance of workplace flexibility policies being considered by a number of states that provide paid time off from work for caregivers, as well as programs such as Medicaid’s Cash and Counseling program that allows family caregivers to be paid for their assistance. Our estimates indicate that, in the aggregate, although the economic value of informal caregiving is substantially greater than what it would cost to replace this care with paid unskilled care, informal caregiving remains more economical than paid skilled care, suggesting that if the beneficiaries enrolled in Cash and Counseling programs prefer to receive care from family members, this may result in cost savings to Medicaid relative to a situation in which the care is provided by skilled replacements.

It is unclear whether informal caregivers provide superior or inferior care to formal caregivers. Elderly parents likely appreciate being cared for by people they know and adult caregivers may know the preferences of their parents much better. On the other hand, formal care givers–especially skilled caregivers–can draw on their experience caring for a variety of adults and could provide higher quality care. Thus, while this paper focuses on cost, much of the decision for using formal versus informal care will depend on the quality informal caregivers can provide and the preferences of adults and their elderly parents.


Do travel bans work?

Written By: Jason Shafrin - Oct• 19•14

According to Vox, the answer is ‘no’.  The reason isn’t because travel bans don’t work in theory; it is because in practice travel bans  are never perfectly enforceable and thus may cause more harm than they help.

But there’s a very clear problem with using a travel ban to stop Ebola: it renders useless the two best methods we have for stopping Ebola. Determined people will find ways to cross borders anyway, and if they don’t go through airports or they lie about where they came from, health officials can’t track their movements.

The article uses some examples of other travel bans.

Temporary flight bans and decreases in air travel following 9/11 provided a natural experiment in the impact of travel on seasonal influenza. Researchers found the reduced movement of people didn’t stop the flu; it only delayed it by a couple of weeks and led to a prolonged flu season. So the researchers didn’t find that restricting air travel prevented flu spread; only that it delayed it.

A paper from Brookings finds similar results.

Travel bans clearly are harmful to the short-run economy and are harmful in the long-run as well unless they prevent the spread of disease. Further, travel bans also prohibit aid from going to the areas most in need.

Friday Links

Written By: Jason Shafrin - Oct• 16•14

Cancer Care Myths

Written By: Jason Shafrin - Oct• 15•14

Below are excerpts from a recent Health Affairs paper by Goldman and Philipson (2014):

  • Myth #1: The War on Cancer has been a failure.  Survival rates for all cancers increased by almost four years during the period 19882000.
  • Myth 2: Detection, Not Treatment, Accounts For Most Of The Survival Gains.  During 19882000 almost 80 percent of the aforementioned survival gains were attributable to improvements in treatment, with the remaining 20 percent attributable to better detection.
  • Myth 3: Treatment Costs Are Unsustainable. …the focus should be on the price of health, not the price of health care services. [For example], HAART, which was introduced in the 1990s, dramatically increased longevity for HIV-positive patients, although at a significant financial cost to these patients…Ultimately, more than 93 percent of the benefits of developing the new treatment accrued to patients in the form of longer lives, rather than to manufacturers.
  • Myth 4: Cancer Treatment At The End Of Life Is Of Low Value.  One study estimated that patients with metastatic disease value treatment at levels twenty-three times higher than the cost of the therapy…coverage decisions based solely on median survival will neglect the great social value for a minority who live long after the trial ends.
  • Myth 5: Supportive Care is Overused.  Supportive care enables the administration of more aggressive chemotherapy regimens by avoiding or managing the debilitating effects of the toxicity.


CoR #219

Written By: Jason Shafrin - Oct• 15•14

Russell Hutchinson hosts the latest edition of the Cavalcade of Risk.  You can find a terrific collection of risk-related posts including topics such as how to measure nurse value added, worker’s comp premiums, and the commercialization of drones. I would like to call out in particular Hank Stern’s article examining whether or not your health insurance plan will cover Ebola-related expenses.

Leadership Rules

Written By: Jason Shafrin - Oct• 14•14

From a book on economics, complexity theory and economics, below are some good guidelines for managers and leaders developed by the Prussian army:

  1. A commanding officer should always give an order for an outcome, never for an action.  This leads the person receiving the order to reflect on and interpret it with all his prior knowledge and in its relevant context.
  2. The subordinate officer receiving the order was expected to report back to the commanding officer how it was going to be executed, institutionalizing a feedback loop and ensuring that there would be no misunderstandings or any missing information from the top.
  3. Officers were fully expected to deviate from orders from time to time, when they saw that this would be a more sensible course of action.  After all why have highly educated officers, if they are not allowed to exercise their own judgment? “Obedience is a principle, but the man stands above the principle” said Von Moltke in 1870, the Prussian general who designed the system.

The 2014 Nobel Prize in Economics goes to…

Written By: Jason Shafrin - Oct• 13•14

Jean Tirole. The full scientific background is here.  Marginal Revolution has a number of posts or you can check out Wonk Blog.  Digitopoly discusses how Tirole is like Louis Pasteur.  Vox has a nice overview of Tirole’s work as well and an example from newspapers…

Newspapers, for example, are one area the Nobel Committee points to that illustrates this. They often give information away at a discount as a loss-leader to gain market share and increase advertising revenue. While a government might consider that illegal “predatory pricing” in some other context, such an approach doesn’t make sense in a press context.

Vox also has another example on platform markets, including a description why Google’s search technology is free.   An excerpt from the press release is below.

Many industries are dominated by a small number of large firms or a single monopoly. Left unregulated, such markets often produce socially undesirable results – prices higher than those motivated by costs, or unproductive firms that survive by blocking the entry of new and more productive ones.

From the mid-1980s and onwards, Jean Tirole has breathed new life into research on such market failures. His analysis of firms with market power provides a unified theory with a strong bearing on central policy questions: how should the government deal with mergers or cartels, and how should it regulate monopolies?

Before Tirole, researchers and policymakers sought general principles for all industries. They advocated simple policy rules, such as capping prices for monopolists and prohibiting cooperation between competitors, while permitting cooperation between firms with different positions in the value chain. Tirole showed theoretically that such rules may work well in certain conditions, but do more harm than good in others. Price caps can provide dominant firms with strong motives to reduce costs – a good thing for society – but may also permit excessive profits – a bad thing for society. Cooperation on price setting within a market is usually harmful, but cooperation regarding patent pools can benefit everyone. The merger of a firm and its supplier may encourage innovation, but may also distort competition.

The best regulation or competition policy should therefore be carefully adapted to every industry’s specific conditions. In a series of articles and books, Jean Tirole has presented a general framework for designing such policies and applied it to a number of industries, ranging from telecommunications to banking. Drawing on these new insights, governments can better encourage powerful firms to become more productive and, at the same time, prevent them from harming competitors and customers.

Residency Hour Restrictions and Patient Outcomes

Written By: Jason Shafrin - Oct• 12•14

Residency has been a right of passage for physicians. Long 36-hour shifts mix with the excitement of new learning. However, recent regulations have now capped residency weekly hours at 80. Although patient medical care in the short-run may improve (because physicians are less tired), in the long run, are physicians exposed to as wide a variety of cases as before? Consider the following sentiment from Chris Sonnenday, a former fourth year resident:

You might expect that, as residents, we’d stand up and rejoice that these regulations have been passed. But I’ll tell you, if you’re the chief resident on the GI service and a case comes up that you may have one or two opportunities during your entire residency to do … well, many of us have to be dragged kicking and screaming out of the hospital.

More important than the doctor’s feelings about residency requirements, how did the hours restrictions affect long-run patient quality of care? This is the question Jena, Schoemaker and Bhattacharya (2014) attempt to answer in their recent Health Affairs paper.

…we studied whether hospital mortality and patients’ length-of-stay varied according to the number of years a physician was exposed to the 2003 duty-hour regulations during his or her residency. We examined this database of practicing Florida physicians, using a difference-in-differences analysis that compared trends in outcomes of junior physicians (those with one-year post-residency experience) pre- and post-2003 to a control group of senior physicians (those with ten or more years of post-residency experience) who were not exposed to these reforms during their residency. We found that the duty-hour reforms did not adversely affect hospital mortality and length-of-stay of patients cared for by new attending physicians who were partly or fully exposed to reduced duty hours during their own residency.