The F Words of Health Care

Vassily Kandinsky, 1923

Fragmentation, Fee-for-service and Futile care are the trifecta of what is supposedly ailing our health care system, or non-system, as it is fashionably described nowadays. Modern health care has reached its crisis point not due to hordes of people keeling over and dying in the streets, as they did during historical health care crises brought on by plagues and famine, but due to exploding costs of delivering decent care to all people. Since the issue now is mostly financial, health care as a discipline is attracting the interests of those who practice the dismal science of Economics. Over the last two centuries, economists have successfully addressed the F words in other industries with spectacular results in developed countries, so why not apply lessons learned to health care?

The obvious reason to treat economists with suspicion in health care is the quintessential argument that people are not widgets, but there is another problem. Most tried-and-true solutions for increasing availability and quality while lowering costs of products are not accounting for the other explosion occurring as we speak – the Internet. How can this assertion be true when we are in the midst of a government sponsored spending spree to computerize medical records and adopt Health Information Technology (HIT)? Apparently, even those who lead and define the HIT revolution are reluctant (or unable) to grasp its full implication, thus they are consistently underestimating the power of the Internet to serve the individual, and as a result are hedging their bets on technology with classic industrial models from days gone by.

In a 2008 Health Affairs article, Dr. Donald Berwick has defined what has become the official goal of policy making for the Secretary of Health and Human Services. Better known as the Triple Aim, the goals are to create better health, provide better care and lower costs of care. If you look at health care as just another industry, the Triple Aim translates into a better product with a better process at a lower cost. Well, when put this way, the solution is pretty obvious and it has been obvious for over two centuries. We must address the F words: eliminate Fragmentation by aggregating independent artisans in one physical location, stop paying Fee-for-service (piecework) and pay salaries instead, and most important, eliminate Futile work by standardizing the process. In short, apply the industrial revolution to health care and realize the economies of scale that brought prosperity and happiness to the developed world. Except that for some strange reason, this solution doesn’t quite work in health care.

Case in point: Federally Qualified Health Centers (FQHC). FQHCs started out in the early 1960s as community run clinics to provide medical care to the poor. By the mid-nineties, and with the best of intentions, the Federal government and the Centers for Medicare & Medicaid Services (CMS), created funding grants and reimbursement methods to support these clinics. Today there are thousands of FQHCs of different types, operating in health care shortage areas and providing team-based comprehensive care including preventative care, basic primary care, behavioral care, dental care, lab and pharmacy services, mostly to Medicaid beneficiaries and the uninsured, but also to small numbers of Medicare and privately insured patients. FQHCs must use mid-levels to provide and coordinate care and must report on quality measures. In return, FQHCs receive millions of dollars in grants for building and improvements, have access to cost effective workforce, can obtain free malpractice protection, are tax exempt and are paid more than double what a private practice is paid for Medicaid services. By all accounts, FQHC are addressing the triple Fs of health care rather well, but how are they doing against the Triple Aim objectives?

Studies are mixed regarding quality of care provided by FQHCs, and patients cared for by FQHC are largely sicker than those seen in private practice. Interestingly enough, neither Medicare, nor privately insured patients are flocking to FQHCs, in spite of the financial advantages offered, particularly to Medicare patients, and in spite of the spiffy state of the art facilities. This may, or may not be, an indicator for perceived quality of care. How about lowering costs? Do FQHCs provide care at a lower cost than, say, an independent solo private practice? Adding direct reimbursement rates, grants, tax breaks and other benefits, FQHCs visits cost more than twice the amount paid by Medicaid to private practices, which cannot compete with FQHCs and all but disappeared from areas where FQHCs operate. What would have been the results if twenty years ago CMS would have decided to increase Medicaid fees and pay for uninsured visits to independent practices, instead of exclusively backing the creation and operations of a separate but equal clinic system for the poor? We may never know for sure.

FQHCs are only a small example* of why economies of scale are not easily achieved in health care. Large hospital organizations and even fully integrated health systems, which may be providing better care (or not) seem equally incapable of reducing costs in spite of attacking all three Fs, or seeming to do so, and there are two reasons for this failure: a) larger health care facilities have disproportionately larger overhead costs and b) large systems are better equipped to charge more for services, which renders their efficiency efforts less urgent. And this is not a matter of opinion. CMS acknowledges this built-in inefficiency as evident in the physician fee schedule which pays an additional “facility fee” for services provided in hospital owned outpatient clinics, presumably to cover the extra overhead. Surprisingly, CMS is consistently creating incentives and regulations to accelerate provider consolidation into these big inefficient and expensive systems. The only possible explanation would be that CMS is betting that elimination of the last two Fs (Fee-for-service and Futile care) will be easier in a consolidated environment and the gains will ultimately exceed the losses from doing away with independent practice (Fragmentation). What about information technology? Well, it is supposed to help with process standardization, data collection and performance measurements, similar to what computers do in every other industry.

We have all seen the infomercials for high-tech hospitals, where a bunch of doctors are seated around a conference room table, each holding a laptop or tablet, presumably discussing patients in a team environment. There is something very wrong with these pictures. First, it costs us a fortune to have all these physicians in one room. Second, there is almost no added utility for them to be using computers instead of passing around a piece of paper, and computers are expensive. Third, there is no patient in the room. Now let’s imagine a different picture: a primary care physician sitting in his office, with a patient next to him, both interacting with a computer on which a Skype conference is taking place with an oncologist sitting in his own office thirty miles away, a surgeon in a hospital lounge in the city and perhaps a radiologist half a continent away. Everybody on the call has access to the same electronic medical record, appointments can be made in real time, literature can be consulted and shared, prescriptions can be changed and a common care plan agreed upon by all and understood by all can be created and by using intelligent predictive analytics tools various options can be explored. Perhaps a family member in a different country is conferenced in and perhaps the patient is at home or in a break room at work. Perhaps there’s an electronic sign-up sheet for the oncologist, if the patient wants to ask something else later and have a physician friend in New Zealand listen in. And with one click on a PayPal button all doctors are paid for their time.

In this Internet age, manufacturing style physical consolidation is not only unnecessary, it is cost prohibitive. Modern lifestyles and modern medicine have created a need for doctors and patients to collaborate and the Internet is providing the means to accomplish such collaboration without having to physically gather everybody under one expensive roof. There is no need to obliterate the operational efficiencies of private practice and replace it with the bloated bureaucracy of large institutions, and there is no need to dispense with long lasting doctor-patient relationships in favor of computerized care coordination, and there is absolutely no need to substitute a bunch of numbers in a computer for a real patient. The Internet is decentralizing and individualizing everything from politics to manufacturing. Health care is, and always has been, decentralized, individualized and based on the local patient-doctor dyad. The resemblance is striking. We either embrace the fully aligned collaborative nature of the Internet to achieve better health, better care at lower costs, or engage in a doomed effort to impose an unnatural centralized command and control structure in health care just because it worked well for nineteen century steel manufacturing and because policy makers don’t truly understand the magnitude of the connectivity revolution.

* According to the Kaiser Family Foundation FQHCs had about $12.7 Billion in revenues in 2010, 75% of which came from Federal and State agencies. They served almost 19.5 million patients with over 77 million encounters. Simple math yields a cost of approximately $165 per encounter.

The Pin Factory EHR

In 1776 Adam Smith explained to posterity how specialization increases productivity using the now famous example of a pin factory. While one master pin maker could turn out anywhere between 1 and 20 pins each day, going through all the steps involved in making pins all by himself, a specialized army of laborers, each fulfilling one step in the pin making process, could increase productivity more than two hundred fold and turn out almost 5000 pins per person per day. This would have the triple benefit of enriching the factory owner, creating jobs and making pins both affordable and widely available for consumers. What happened to the master pin maker, who used to make a very nice living when pins were expensive and hard to come by? He would most likely be employed in the factory to supervise the smooth flow and quality of the new pin mass production system. He would make sure that each laborer works at a speed appropriate for feeding the next laborer in line and he would probably sample a few pins here and there to make sure they are as sharp and sturdy as the ones he used to make in the olden days. When the master pin maker passes away a new supervisor would be hired, most likely one that has never made an entire pin before, but instead has a much better understanding of the production process. The profession of pin coordinator has been born.

Although Adam Smith put forward the notion of specialized labor, Henry Ford is customarily credited with the invention of the modern assembly line. Interestingly, Ford is attributing his invention to the observation of Chicago’s meat packing industry. It seems that while no two cows are identical, the butchering of animal life lends itself rather well to disassembly line methodology. Today, manufacturing assembly lines use human labor where it is cheap and in abundant supply, and are staffed with robotic machinery where human labor is expensive and/or scarce. In all cases the process is orchestrated and controlled by sophisticated computer software. This is why we are all able to purchase a car, chat on our cell phones and enjoy perpetually fresh slices of white bread in plastic bags, amongst many other wonderful things, which were once only available to the wealthy few.

Modern medical care is increasingly out of reach of most people. It is expensive, and adequate resources are scarce in many areas. Medical care also varies widely in quality, and the costs of production are anybody’s best guess, depending on geography, time of year and even workers vacation and education schedules. This is very much the same as making pins in the eighteen century. In all fairness, some specialization of labor has already occurred in medicine, but there is no coherent method of placing each worker in his/her station of the continuum of care, and there is no standard process by which workers hand off work from station to station. According to experts, this lack of orderly processing, along with the absence of quality control, is creating a terrible waste of resources and a flurry of defects in the finished products. If the advanced methodologies of modern day manufacturing are working so well for everything from cars to pins to cows, wouldn’t it make sense that we should at least try them in medicine?

Fortunately, we already have several pieces of the puzzle in the works. As mentioned above, we do have a certain degree of specialization in medical practice. We also have hospitals, which could function very much like factories, but as Clayton Christensen observes, most have no well-defined assembly lines. And then, of course, we still have the independent small shops that take piece-work home and operate without any standardized quality control. We also have the beginnings of computerized control systems in the form of Electronic Health Records (EHRs), which, according to John Halamka, are quickly moving from just bookkeeping software to dynamic coordination of processes, complete with encyclopedic knowledge of medicine and a good measure of artificial intelligence to devise and “enforce automated care plans”. 

The only thing left to do is to lay out proper assembly lines, and we don’t really need to think outside the box too much, because manufacturing has solutions for this dilemma as well. In modern industry, there are practically no factories that start out with raw materials and end up with a finished product. Instead, some factories concentrate on producing parts and others are built to receive parts and assemble them into useful products. Exact specifications for each part, to be followed by production lines and relied upon by assembly lines, make this geographically dispersed process possible. In health care, the primary care homes will serve as production centers, where people are constantly measured, tracked, tested and evaluated, so when they are finally shipped to a hospital for a procedure, the hospital knows immediately which assembly line to place them on and the omniscient EHR will control the most minute detail in the process, from medication dosing to incision size and implantable device brand and model, thus reducing both errors and costs. Once the hospital’s work is done, patients are released back to evaluation and management in production centers, and here is where the cyclical nature of health care differs from a typical manufacturing process, and this is why it is extremely important that EHRs be interconnected and preferably Cloud based to achieve a high degree of omnipresence.

Yes, there are many more details to be worked out, like emergencies, accidents and the exact specifications that an EHR should contain on each type of person. We will have to establish quality feedback loops between hospitals and primary care centers to continuously refine processes for both entity types, so basically the EHR will need to be able to adapt to, and learn from, new information, in a manner similar to IBM’s Watson software. Since people are not pins or even cars, the tolerance levels (allowed deviation from specs) will be high initially, so line workers will need to be highly skilled as well. In all likelihood physicians will be working those lines for the foreseeable future. As the learning control system improves, portions of work would be offloaded to less skilled resources and eventually to machines, and more significantly, entire tasks could be packaged into deterministic protocols and pushed out from expensive hospitals to the less skilled primary care production centers, which will further push the most trivial tasks to consumer owned devices.

Obviously, EHRs will prove to be the heart, brain and circulatory system, of the health care industry. As we speak, EHRs are increasingly being tasked with care coordination activities (not to be confused with continuity of care, or longitudinal care), which are the precursor to the industrial line controller. Folks wondering why they should use EHRs that are not ready for prime time, should understand that we have to have an EHR in every practice, so that the system can have visibility into current processes to learn, adapt, grow and devise new methods of providing care. After all, you cannot control that which you cannot see. 

If you think this is all farfetched and disastrous, please find a senior citizen that lived through the Great Depression and ask her what she thinks about dinner being prepared moths in advance in computer controlled industrial vats, thousands of miles away from home, pumped full of preserving chemicals, freeze dried, shrink wrapped and delivered by airplane to a football field size department store, with minimal human intervention, ending up in a small irradiation chamber in your home before it hits your dining table (or couch). Yet we all buy the stuff and feed it to our kids with no apologies, because it is cheaper, faster and more convenient than tenderly preparing beef stroganoff and baking pot pie at home, after work, every day. And neither grandma nor you can even fathom the handcrafting of pins by master artisans. Is health care really that much different?

2011 EHR Adoption Rates

On Wednesday, November 30, the Centers for Disease Control and Prevention (CDC) released the results of its yearly survey on Electronic Health Records (EHR) adoption for office-based physicians. No surprises. Generally speaking, the majority of physicians in ambulatory practice are now using an EHR, and over half of surveyed doctors say that they intend to seek Meaningful Use incentives. The report is also presenting results broken down by State, so you can learn what folks are doing in your immediate vicinity. The more instructive exercise is to compare last year’s survey results [Fig. 1] to this year’s estimated EHR adoption numbers [Fig. 2].

Figure 1: Percentage of office-based based physicians with EHR - 2010

Figure 2: Percentage of office-based physicians with EHR - 2011

The most immediate observation is that 6.2% of physicians have adopted an EHR in 2011, thus returning to EHR growth rates preceding the 2009 -2010 slowdown, which was largely due to the confusion created by Meaningful Use regulations. The next observation is that the percentage of docs that have at least a basic EHR has gone up by 8.9% in 2011. A basic EHR is one that has “patient history and demographics, patient problem list, physician clinical notes, comprehensive list of patient's medications and allergies, computerized orders for prescriptions, and ability to view laboratory and imaging results electronically”. Although the survey instrument in 2011 did ask about more advanced functionality, and is practically identical to the 2010 instrument, the CDC did not publish a separate number for those with fully functional systems in 2011. Although I cannot be certain, I would assume that most of the growth in 2011 was fueled by Certified EHRs, which by definition should be fully functional. So if I had to guess, and I hope CDC will release the numbers so I don’t have to, I would estimate that in 2011 we have at least 20% of physicians using fully functional systems, which is roughly double what we had in 2010.

Another interesting trend that has been holding since around 2007 is that about a quarter of office-based doctors have some type of bare bones software in their office and they are not upgrading to even a basic EHR. Considering that over half of those surveyed intend to apply for Meaningful Use incentives, this trend is bound to change in 2012.  Some of these folks may have purchased a fully featured EHR, but chose to either not turn features on or chose not to keep up with upgrades to newer versions. For ambulatory EHR vendors these numbers translate into a market opportunity ranging from 50% of the market to a full 80% of ambulatory physicians.

It would be very beneficial if CDC released the complete data set from this survey (anonymised, of course), so we could gain a better understanding of EHR adoption patterns by practice type, size and location. Although it is widely acknowledged that larger practices and employed physicians are further along the curve, the rich details provided by the survey instrument should help both vendors and various organizations engaged in efforts to spur technology adoption, better target their work, and it could also illuminate any disparities which may affect quality of care for vulnerable populations and physicians who serve them.

In summary, the new CDC survey is showing a stable growth in technology use by office-based physicians, modestly improved by government initiatives over the last two years, and well positioned to further improve in 2012 and beyond.