Category Archives: Health care

Surfing the Data Tsunami

You can either ride the wave...

You can either ride the wave…

by James A. Bacon

Data Crush is coming, and it gives us a once-in-a-lifetime opportunity to transform aging and decrepit institutions, designed for the mid-20th century. As futurist Chris Surdak argues in the previous post, the “digital trinity” — mobile computing, social media and advanced analytics — is sweeping all before it. Digital-driven innovation is outpacing the ability of our ossified structure of government, laws and regulation to keep up. Insofar as antiquated institutions are failing us, this is a good thing. But Surdak, an evangelist for the digital future, warns that every silver cloud has a dark lining.

Either you're riding the wave, or you're crushed by it.

…or be crushed by it.

Insurance companies have the capacity to collect, store and analyze unprecedented volumes of data. At present, they utilize their own data to advance limited aims such as negotiating rates with hospitals and configuring networks of low-cost providers. Soon they will supplement internal data with social media and other sources to gain insights into sociological and behaviorial  dimensions of healthcare, and then with masses of data from fitness trackers such as FitBit and Jawbone that record pulse, blood pressure, and blood chemistry metrics like glucose levels. While these technologies raise privacy concerns aplenty, consumers seem more than willing to barter away their rights in exchange for the benefits provided by these technologies. By the time politicians and lobbyists begin to grapple with these issues, Surdak argues, entire industries will be disintermediated and transformed.

Virginia can either ride the wave or let it wash over us. We can either anticipate the data crush and seek to guide it in socially positive ways, or we can accept whatever comes.

Right now Virginia’s political system is locked in a 20th-century, zero-sum debate over how to allocate the costs of health care — should Virginia expand Medicaid? Should we scrap the Certificate of Public Need regulatory process for hospitals? Almost no one is thinking about how to make the system work more efficiently to drive down costs and improve incomes in a way that would benefit everyone. (When I say “almost no one,” I have to acknowledge exceptions like Del. John O’Bannon, R-Henrico, a prime mover behind Virginia’s all-payer database, and former Virginia Secretary of Technology Aneesh Chopra, co-founder of Hunch Analytics, which applies Big Data to the educational and health care sectors.)

To my knowledge, no other state is taking the lead in thinking about the public policy implications of the Data Crush. No other state is trying to visualize the future, much less to grapple with the legal and ethical issues created by the tidal wave, much less how to ride the wave and re-shape first the insurance industry and then, leveraging the power of insurance, the health delivery system. Remember, despite the intrusion of the Affordable Care Act into the health insurance marketplace, private health insurance is still regulated by the states. Virginia still controls its destiny for private insurance.

Yes, the health care system is mired in the quicksand of subsidies, cross-subsidies and over-regulation that makes it hopelessly wasteful and unresponsive. But the Data Crush is inexorable. The potential exists to create powerful win-win-win social outcomes. Let us take advantage of this opportunity if we can.

How the Digital Trinity is Transforming Health Insurance

surdakby Christopher Surdak, JD

In his recent post, “The Politics of Big Data,” my friend and colleague Jim Bacon asked some pertinent questions regarding how our government, and our society at-large, can put data to use for the common good. In a fairly short discourse Jim hit on a range of explosive topics, from privacy, data sovereignty, property rights, Universal Service, government regulation and legislation, universal health care, Obamacare and Medicare/Medicaid, predictive analytics and preventative medicine, and more. Each of these could fill a book in their own right; I should know, as I’m working on those books right now!

Of all of the issues raised by this discussion, the one that immediately came to mind was that of the use of our individual data to support the effective delivery of healthcare. As I have written and spoken of extensively in the recent past, healthcare stands to be the industry most disrupted by the application of Big Data in the coming decade. (Indeed, I’m keynoting a discussion on exactly this disruption at the American Health Information Management Association information governance conference this week.) In no other industry is so much valuable information put to so little use, for so little gain, at so much cost, thereby leading to suffering, the waste of human life, and the ineffective expenditure of so much treasure.

Why is this so? Why is our health system so sickly when compared to that of other countries? Why does healthcare seem to extract so little value from information, when compared to other industries? Is it from too much government regulation, or too little? Is it from the influence of commercial special interests such as the payers, or the professional special interests of practitioners, such as the AMA? Is it because our technologies cannot meet our needs, or is it because we are not prepared to accept the implications of those technologies? I would argue that all of these factors are at play in this discussion; that all of the ranting that accompanied Jim’s post were all equally spot on, and all completely off the mark.

All of these positions are equally accurate, and equally pointless in the real world. Whether healthcare providers put patient data to work for the common good or their own good is irrelevant; it will be put to work in any event, with significant unintended and extremely disruptive consequences. Whether special interests or patients will benefit from the use of data is not open to question. The answer is: both will. Whether or not our privacy will be sacrificed or not is also a pointless question; of course it will. And finally, whether or not we will willingly give up our privacy in order to gain these benefits from our data is a further pointless question; we already have.

Disruption in Insurance: The Canary in the Coal Mine for Healthcare

The best example I can give of what WILL happen in healthcare over the next decade, equally in Virginia as with the other 49 states, can be seen in what is rapidly taking over the insurance industry across the country. Insurance is an old-school, highly-regulated, data- and money-intensive industry. Insurers have both access to massive amounts of very private information on all of us, and intense motivation for putting that data to use. The potential for profit, and hence abuse, is exceedingly large.

But, the motivation for using our data isn’t necessarily nefarious. Insurers look at each of us to determine our risk profiles so that they can both make money (that is, remain solvent so their checks to benefactors or debt holders don’t bounce) and provide coverage to all segments of the population at affordable prices (or at least the perception of affordability).

The regulatory framework that governs the insurance industry is well over a century old. It is state-based, state-enforced, and is designed to provide universal coverage to people from all walks of life. If you drive a twenty-year-old pickup truck, you probably pay proportionately less than someone who drives a new European sports sedan. If you’re a 60-year-old who smokes a pack a day and loves Miller Time, you’re likely to pay more for your life insurance than a 24-year-old jogger and yoga nut. Our regulatory framework has been designed to try to make insurance available and fair for all, and to ensure that insurers remain profitable, but not excessively-so.

Despite all of this, insurance is going through a fundamental, massively disruptive, and permanent transformation right before our eyes. This transformation is being driven by what I call the Digital Trinity of mobility, social media and advanced analytics. These three technologies trends are completely transforming how we live, work, play, and interact with our world, and they are causing enormous unintended consequences across our entire society. These changes are comprehensive, and old-school, hard-line, heavily regulated industries such as insurance are the MOST likely to be disrupted, rather than the least likely.

To see these disruptions consider this. Car insurers have deployed smartphone apps that allow them to track the driving behaviors of their customers in real-time, turn by turn. These apps keep track of how fast you accelerate, how hard you brake, how fast you drive down the residential streets of your neighborhood, and whether or not you text or talk while driving. These apps create huge amounts of extremely sensitive data, they are massively invasive of your privacy, they provide an enormous source of information for discriminating against you in setting your insurance rates; and they are massively popular.

If I told you three years ago that car insurance companies soon would be tracking all of this information on the drivers that they cover, you might think I was crazy. If I then told you that customers would sign up for such apps by the tens or hundreds of thousands, in order to gain a discount in their rates, you’d probably think I was certifiable. Americans are voluntarily giving up extremely intimate details on their behavior, surrendering their Constitutionally inalienable rights, and opening themselves up to all manner of government and commercial scrutiny in order to save 15% on their car insurance? Yes they are, in droves. You may think this sounds crazy, and you’d be right.

Yet, this is exactly what is going on right now. Innovators such as Progressive Insurance started these behavior-tracking apps, providing discounts to drivers who demonstrate good behaviors. These apps have been so successful, that now all insurers are scrambling to deploy similar apps with similar capabilities, while they still have time. Continue reading

Virginia Hospital Profits Surged 11% in 2014

hospital_profitsSpeaking of government-coddled industries…. Virginia’s hospitals increased annual profits 10.7% in 2014 compared to the year before, according to the most recent data compiled by the Virginia Health Information data and reported by the Thomas Jefferson Institute for Public Policy (TJI).

“Hospitals campaign for Medicaid expansion, and want to maintain the state’s control over how hospitals and doctors can invest in new equipment and additional patient beds under the current Certificate of Public Need (COPN) law, saying their financial situation is so precarious that they need these programs to survive,” said Michael Thompson, president of the TJI. “But the financial numbers from the hospitals themselves seem to tell a different story.”

Bacon’s bottom line: I don’t begrudge strong profits — profits are necessary for a functioning market-based economy. But these are monopoly/oligopoly profits. I do begrudge monopoly profits gained by throttling the competition. Like the higher ed system (see previous post), Virginia’s hospital sector has prospered through rent seeking.

There are two ways to go from here. One is to increase the government role as mediator between hospitals, patients and health care funders in divvying up the revenue pie — a zero-sum game. The other is to evolve toward a market system based upon competition, productivity and innovation that drives down costs and improves outcomes — a winning formula for all.

If General Assembly Republicans want to thwart Medicaid expansion next year — as they rightly should, on fiscal grounds — they need to paint a vision for a market-based health care system. I’ve seen baby steps in that direction like the All-Payer Claims Database. But we’ve got a long way to go. Where’s the vision? Do Republicans offer more than, “Repeal Obamacare,” and “Just say no to Medicaid expansion?”

To win the war of ideas, you…. need ideas. The Dems have bad ideas. But bad ideas trump zero ideas. C’mon, Republicans, up your game.

Update: The Virginia Hospital and Healthcare Association has responded to the TJI report. While the overall industry remains profitable, states the VHHA, many local hospitals, mostly rural, are unprofitable. Among rural providers 17 of 37 operated in the red in 2013. Meanwhile,”the financial  challenges that produce negative operating margins are real and worsening.” See the full response here.

The Politics of Big Data

big_databy James A. Bacon

Yesterday I blogged about the All-Payer Claims Database, which has the potential to provide unprecedented insight into medical outcomes and charges in Virginia. By consolidating medical claims data for hundreds of millions of health claims, the database will enable employers, insurers and hospitals to conduct analytical studies that were impossible previously.

There is a lot of maneuvering behind the scenes regarding the database, as I have learned from an informed source whom I will not quote because we were chatting informally and he might have thought we were off the record.

Participation in the database is voluntary, so it took years of coaxing and wrangling to persuade Virginia’s private insurance companies to relinquish their data. Anthem Blue Cross-Blue Shield, the state’s largest insurer, is the most ambivalent about the project. With more than one million Virginia customers, its database is big enough that it can go solo with the kind of analysis people envision for the statewide database. That ability confers it a significant competitive advantage over its smaller rivals. If Anthem dropped out, the value of the statewide database would diminish significantly. Accordingly, the General Assembly may consider legislation in 2016 to make participation mandatory.

That raises an interesting philosophical question: Is it justifiable for state government to mandate the sharing of outcomes data? In an era in which data confers tremendous marketplace power, any such mandate would penalize Anthem. The insurer could advance a plausible argument that a requisitioning of its data would amount to an uncompensated seizure of valuable property — property far more valuable than its office buildings, computer networks and other tangible assets.

But Anthem’s right to protect its property from government seizure conflicts with the public good that can be achieved through the sharing of data. The bigger and more comprehensive the database, the greater the benefits to public health that can be achieved by mining it.

Politicians comfortable with the exercise of state power will have no moral or philosophical compunction about extracting the data from Anthem against its wishes. But what of conservatives and libertarians who respect private property and distrust the arbitrary exercise of government power? Should we insist that any sharing be voluntary? Or should we compel Anthem to share?

I think there is a case to be made for mandated data sharing on conservative/ libertarian grounds that it can drive market-based reforms of Virginia’s health system. Health care in America is not a market-based system, it is a corporatist system negotiated between the federal government, hospitals, insurers, physicians and pharmaceutical companies. Prices are opaque to the patient-consumer. Accountability is so diffused throughout the system as to be meaningless. Making price and quality data available to the public, formatted in such a way that the public can understand it and act upon it, is essential to creating a market-based system.

But price and quality data are only part of the picture. Virginia has other state-level barriers to a market-based system, including the Certificate of Public Need (COPN), which restricts competition, and state-imposed insurance mandates, which force insurers to offer expensive plans with broad benefits. Price transparency cannot by itself drive the transformation to a competitive, market-based system. But as part of a bundle of reforms including the repeal of COPN and insurance mandates, data sharing could bring about a net gain in freedom, competitiveness and prosperity that would appeal to the conservative conscience.

Can Things Get Any Worse? How about Declining Life Expectancy for Middle-Aged Whites?

oxycontinby James A. Bacon

Forgive me for bragging, but if I don’t pat my own back, no one else will do it for me. The latest dismal trend highlighted in the nation’s newspapers, a rising death rate among white, middle-aged Americans, is one that I saw coming five years ago when I wrote “Boomergeddon.” (Technically, I predicted a rising death rate for all Americans, not just white Americans. But trust me, other racial/ethnic groups will follow.)

In a “startling” reversal, reports the Wall Street Journal, worsening substance abuse, mental health and chronic diseases are offsetting positive drivers of midlife mortality such as declining rates of lung cancer. A new study by the Proceedings of the National Academy of Sciences said that the once-inexorable decline in mortality rates among American 45- to 54-year-old whites began reversing in the late 1990s in defiance of trends in other advanced countries and the progress made by American blacks and Hispanics. The uptick was especially notable for less educated whites, but it was visible among better educated whites as well.

The fiscal implications are worrisome. Writes the WSJ: “The authors warned that by the time white people in this age group are eligible for Medicare they could be in worse health than the current elderly generation. That means they could require more expensive care.”

That’s precisely what I worried about in “Boomergeddon.” Everyone knew and appreciated in 2010 when I wrote the book that the population was rapidly aging, and that the massive Baby Boomer cohort was about to swamp the Social Security-Medicare safety net. Largely unappreciated then, by many metrics Boomers’ health was worse than that of their elders — largely because of lifestyle choices. The incidence of obesity and diabetes was increasing among middle-aged Boomers compared to previous generations, but so was Hepatitus C,  substance abuse, and sexually transmitted diseases including HIV/AIDS. I called it the “sex, drugs and rocky road ice cream” phenomenon.

As I wrote then, “The medical costs arising from [Boomers’] life-long self-indulgence — if it feels good, do it! — will be significantly higher than they were for those who came before them.”

The 45- to 55-year-old cohort belongs to Generation X for the most part, not the Boomers, but the outlook for them is looking equally grim. Not only are Americans failing to attain the living standards of their parents, they’re not even living longer.

Virginia Health Sector Embraces Big Data

Michael Lundberg, head of Virginia Health Information, oversees the all-payer claims database. The database represents the culmination of years of work using data to create transparency and accountability to Virginia's health care sector.

Michael Lundberg, head of Virginia Health Information, oversees the all-payer claims database. Photo credit: Virginia Business.

At long last Virginia has a consolidated medical claims database that insurers and employers can access to help improve health outcomes. The state’s All-Payer Claims Database consolidates “hundreds of millions” of paid claims from 2011 to 2015 into a single database. As Bob Burke writes in Virginia Business magazine:

Self-insured businesses can study the outcome of the health care their employees are getting and figure out what works and what doesn’t work. Accountable care organizations — which can be groups of doctors, hospitals or other health-care providers — can measure the health outcomes for the population they are treating.

Hospital departments at the regional and state level can evaluate the needs of specific population groups, and insurers can evaluate the effectiveness of treatments and the costs.

Other potential uses of the database: Finding out how many name-brand drugs are being prescribed versus generic drugs; revealing how often physicians are prescribing opioid pain killers and which parts of the state have higher rates of opioid abuse.

The creation of a unified database of medical claims has been years in the making. It hasn’t been easy getting buy-in from all the state’s major insurers as well as the state agency that administers Medicaid. (Apparently missing from the database is Medicare.) All-payer databases began catching on about a dozen years ago, according to Burke. About 30 states either have established the databases or have expressed a “strong interest” in doing so.

There aren’t many positive stories coming out of the health care policy arena, but this is one of them. Virginia insurers, hospitals, physicians and public health administrators have an opportunity to utilize big data to improve health outcomes in the state… and just in the nick of time, as I’ll get to in my next post.


The Virginia Way

talkEva Teig Hardy, former Virginia health secretary, on the endless debate over Certificate of Public Need regulations of Virginia hospitals, as quoted in the Richmond Times-Dispatch:

I think we need to go somewhere with this. Otherwise we are making changes that are just very superficial to the process but not to the substance of COPN. Changes like this have been talked about (since) I was secretary 30 years ago. We talked about this 15 years ago. We talked about it 10 years ago. We haven’t moved.

How Inflated Are Hospital Charity Care Numbers?

Inflated numbers?

Inflated numbers?

Bart Hinkle, an editorial writer at the Richmond Times-Dispatch, has long crusaded against “baroque and opaque” pricing in the hospital industry, a fundamental flaw in the health care system that makes it difficult for patients to exercise consumer choice.

Now Hinkle is taking aim at the accounting conventions by which hospitals calculate how much charity care they provide. In a Sunday column, he notes that there is no common standard for determining a number. When hospitals report how much they cover in uncompensated care for indigent patients, Peter Boswell, who oversees hospital licensing in Virginia, told Hinkle, “Nobody is checking behind them. We take their word for it.”

And as William Hazel, Virginia’s Secretary of Health and Human Resources said, how hospitals arrive at charity care figures is “mystical to me.”

Some hospitals tally up the cost they incur in treating indigent patients, writes Hinkle. Others report “gross revenue foregone,” a number that reflects not how much a procedure cost but how much the hospital would have charged — an inflated number before insurance discounts. In other words, it’s a fictitious figure.

Why does this matter? Because Virginia hospitals cite the large burden of uncompensated care as reason for expanding the Medicaid system in Virginia under the provisions of the Affordable Care Act. Before the act, the federal government provided a partial offset — some $163 million in 2015 — to Virginia hospitals that treated a disproportionate number of charity cases. The feds are cutting back that payment now on the assumption that state health insurance exchanges and expanded Medicaid coverage would provide coverage for formerly indigent patients. Virginia has a health insurance exchange, but not the expanded Medicaid.

Bacon’s bottom line: With the exception of a few rural hospitals, Virginia hospitals are highly profitable — adn that includes the not-for-profits. Before we can take industry claims seriously about the debilitating impact of charity care, we should have some faith in their numbers. At a minimum citizens should demand (a) a common definition that applies to all hospitals, (b) a number that reflects actual costs, not inflated gross revenues, and (c) a transparent reporting of those numbers. Only then we can start to have an intelligent discussion.


Fresh Thinking on the End of Life

hospiceby John C. Blair, II

Twenty-first century public policy debates tend to devolve into a binary argument between those who favor the choices of individuals amalgamated into a “market” versus those who favor a state intervention to add a dash of “equality” into outcomes.

However, Atul Gawande’s Being Mortal touches on an issue that frustrates all political persuasions.  The current end-of-life care choices and care delivery options frustrate nearly every American family. It is difficult to find an American in their sixties or older who does not implore, “Please don’t let me end up in a nursing home.” Whether it’s the smells, the food, the drab interior, the loss of autonomy, or fear of institutions, nursing homes are almost universally disdained throughout the nation.

Being Mortal addresses the question: How did we end up with a society in which so many end up with a nursing home as their final destination?  Gawande’s tome traces the history of American end-of-life scenarios from the literal poorhouse to the hospital to the current nursing home paradigm.

Gawande makes a convincing argument that the nursing home “default” is a product of viewing this period of life through a medical lens rather than incorporating other perspectives. Gawande, a Boston surgeon, writes, “Medicine’s focus is narrow. Medical professionals concentrate on repair of health, not sustenance of the soul.” Thus, values such as autonomy or stoicism are lost in the pursuit of “safety” and “preserving and repairing health.” We end up seeing medical professionals trying to extend “existence” at the cost of what many consider empty and meaningless lives.

Gawande details the tragic consequences that this narrow medical focus can have for individuals, families, and societies as individuals pursue one in a million medical surgeries rather than focusing on the quality of their remaining life. He points to a study that found that forty percent of oncologists offer treatments that they believe are unlikely to work.

Gawande offers some suggestions on how end-of-life care options can become more holistic and loosen the grip of a purely medical perspective on these choices.

One suggestion is to allow and train physicians to practice “interpretive” medicine rather than “informative” or “paternal” medicine. Paternal medicine is when physicians communicate with patients aiming to ensure that patients receive what the doctor believes is best for them. Informative medicine is when a physician simply gives patients facts and figures and leaves the decision up to the patient. Interpretive medicine has physicians ask patients, “What is most important to you? What are your worries?” When the physician determines the patient’s priorities, he or she then maps out a program to best achieve those priorities.

Another suggestion is to better promote hospice care as an option to patients and their families. Gawande recounts his own positive experience with hospice treating his cancer-stricken father. Hospice can provide a much better quality of life than the safety-focused nursing home.

Gawande also points to a community-focused solution to “avoid the nursing home option” in Ohio. Athens Village was a group of a hundred people who banded together to pay four hundred dollars a year. This money went to hire a handyman to take care of each member’s household. Additionally, a director was hired who coordinated volunteers to cook food and check up on the members. A nurse agency provided discounted nursing aid costs. Churches and civic organizations provided a van transportation service and meals-on-wheels. This community allowed its members to remain in their homes and maintain autonomy rather than reside in nursing homes.

Being Mortal offers a lot of food for thought for Virginia policymakers. As the Commonwealth’s population ages, lawmakers and bureaucrats are likely to face more families asking, “What can we do to avoid the nursing home?” Perhaps it would be in the state’s best interest if the General Assembly provided funding for the state’s medical schools to instruct physicians in “interpretive” medicine for end-of-life conversations with patients. Another option would be to see if any legal or regulatory burdens exist that would prevent the formation of a community such as Athens Village.

John C. Blair, II is an attorney who resides in Albemarle County.  

Why Must Hundreds of Richmond Children Seek Medical Care Outside Richmond?

VCU Children's Pavilion -- no substitute for an, independent, free-standing children's hospital.

VCU Children’s Pavilion — no substitute for an, independent, free-standing children’s hospital.

by James A. Bacon

An excellent article in Style Weekly asks an important question: “Hundreds of local children have illnesses that send them beyond Richmond to seek pediatric care. Why can’t we treat them here?”

The answer: Because the Richmond region is one of the few in the country not to have a dedicated, free-standing children’s hospital. And why doesn’t Richmond have a children’s hospital? Well, you’ll have to read the article, written by former Bacon’s Rebellion contributor Peter Galuszka, to find out. While Peter refrains from tarring and feathering the Virginia Commonwealth University Medical Center, evidence in his article points to VCU’s desire to hang on to its own pediatric business as a major obstacle.

As it happens, I’ve been poking around the edges of this story, which I may or may not have time to pursue. One angle among many that are worth investigating would be to document just how many families must seek medical treatment outside Richmond because specialized pediatric services are not available locally.

I recently chatted with two prominent pediatricians. They cited a report that said about 750 children each year seek medical attention outside the Richmond area, in Virginia, Maryland and Pennsylvania. That doesn’t include many hundreds of others who seek care, say, at Duke University in North Carolina, or any number of other hospitals around the country.

The problem is that Richmond divides the pediatric practice between three hospital systems: VCU, Bon Secours and HCA. A children’s hospital, advocates say, would create a volume and scale of operation that none of those institutions can achieve on their own. A higher volume would enable a children’s hospital to recruit more pediatric specialists to Richmond. Instead of seeking care outside the region, with all the added costs of travel, overnight stays and time off from work that entails, many families could find that treatment available here in town. There will always be some rarefied specialties that the local medical marketplace can’t support, but a children’s hospital would alleviate the problem to a significant degree.

VCU President countered that logic with vague statements regarding the continued instability and uncertainty in the health care industry and the argument that “collaborative care” was a better approach than a stand-alone hospital. What do they mean by collaborative care? Who knows? Writes Galuszka: “Rao and [Bon Secours CEO Toni] Ardabell declined interviews to elaborate on their positions.”