Perverse Incentives

HOW’S YOUR DRIVING?

Find out with a free five-minute test of your vision and reflexes. Then consider buying DriveSharp to improve your ability. It’s “clinically proven to help drivers see more, react faster, and cut crash risk by up to 50%.” If everyone in the world buys it, two things will happen. The roads will become safer; and, as a tiny stakeholder, I will become rich beyond imagining. Here is Walt Mossberg’s review in yesterday’s Wall Street Journal.

HOW’S YOUR HEALTH CARE?

France spends 11% of its GDP on health care and ranks #1 worldwide. We spend 18% and rank #39. The 7% difference – their 11% to our 18% – saps our prosperity and handicaps our global competitiveness.

Here’s one estimate of our system’s “top money wasters” – beginning with overtesting. (Note that one of the things the President wants is national research into “what works,” so we learn to waste less money on unhelpful testing.)

Tom Anthony: “This New Scientist video disects healthcare spending and its results. The incentives of our system are all wrong.”

☞ Yes. This must-see six-minute video makes our handicap vivid . . . and reaches much the same conclusion as Atul Gawande’s New Yorker article linked to Friday – too much “entrepreneurial medicine.”

Dr. Richard Feinberg: “Dr. Gawande’s article is fantastic, one of the best I have seen . . . getting the big picture and so much of the detail right about healthcare costs. I just love the part where he shows how spending time with the patient and collaboration among physicians improves the quality of outcome at a lower price. Looking at the picture from a patient perspective, there is a ton of research showing that doctor-patient communication is the most important variable in patient satisfaction (excluding cost). Healthcare must create incentives (reimbursement, quality outcome rewards, etc.) for providers to spend more time talking to patients, not less. Current reformers have a tremendous opportunity at hand if they can embrace such policy.”

And speaking of perverse incentives:

“HOW AMERICAN HEALTH CARE KILLED MY FATHER”

Not my father (that was tobacco), my friend David Goldhill’s father. I read this in manuscript and now see it featured in The Atlantic. Exceptionally smart and provocative. A small taste to whet your interest:

About a week after my father’s death, The New Yorker ran an article by Atul Gawande profiling the efforts of Dr. Peter Pronovost to reduce the incidence of fatal hospital-borne infections. Pronovost’s solution? A simple checklist of ICU protocols governing physician hand-washing and other basic sterilization procedures. Hospitals implementing Pronovost’s checklist had enjoyed almost instantaneous success, reducing hospital-infection rates by two-thirds within the first three months of its adoption. But many physicians rejected the checklist as an unnecessary and belittling bureaucratic intrusion, and many hospital executives were reluctant to push it on them. The story chronicled Pronovost’s travels around the country as he struggled to persuade hospitals to embrace his reform.

It was a heroic story, but to me, it was also deeply unsettling. How was it possible that Pronovost needed to beg hospitals to adopt an essentially cost-free idea that saved so many lives? Here’s an industry that loudly protests the high cost of liability insurance and the injustice of our tort system and yet needs extensive lobbying to embrace a simple technique to save up to 100,000 people.

And what about us—the patients? How does a nation that might close down a business for a single illness from a suspicious hamburger tolerate the carnage inflicted by our hospitals? And not just those 100,000 deaths. In April, a Wall Street Journal story suggested that blood clots following surgery or illness, the leading cause of preventable hospital deaths in the U.S., may kill nearly 200,000 patients per year. How did Americans learn to accept hundreds of thousands of deaths from minor medical mistakes as an inevitability?

. . . How can a facility featuring state-of-the-art diagnostic equipment use less-sophisticated information technology than my local sushi bar? How can the ICU stress the importance of sterility when its trash is picked up once daily, and only after flowing onto the floor of a patient’s room? Considering the importance of a patient’s frame of mind to recovery, why are the rooms so cheerless and uncomfortable? In whose interest is the bizarre scheduling of hospital shifts, so that a five-week stay brings an endless string of new personnel assigned to a patient’s care? Why, in other words, has this technologically advanced hospital missed out on the revolution in quality control and customer service that has swept all other consumer-facing industries in the past two generations?

I’m a businessman, and in no sense a health-care expert. But the persistence of bad industry practices—from long lines at the doctor’s office to ever-rising prices to astonishing numbers of preventable deaths—seems beyond all normal logic, and must have an underlying cause. There needs to be a business reason why an industry, year in and year out, would be able to get away with poor customer service, unaffordable prices, and uneven results—a reason my father and so many others are unnecessarily killed.

. . . my dad’s doctors weren’t incompetent—on the contrary, his hospital physicians were smart, thoughtful, and hard-working. Nor is he dead because of indifferent nursing—without exception, his nurses were dedicated and compassionate. Nor from financial limitations—he was a Medicare patient, and the issue of expense was never once raised. There were no greedy pharmaceutical companies, evil health insurers, or other popular villains in his particular tragedy.

Indeed, I suspect that our collective search for villains—for someone to blame—has distracted us and our political leaders from addressing the fundamental causes of our nation’s health-care crisis. All of the actors in health care—from doctors to insurers to pharmaceutical companies—work in a heavily regulated, massively subsidized industry full of structural distortions. They all want to serve patients well. But they also all behave rationally in response to the economic incentives those distortions create. Accidentally, but relentlessly, America has built a health-care system with incentives that inexorably generate terrible and perverse results.

☞ David basically wants to put the consumer back in charge, with government insurance for catastrophic care and setting safety standards. I’m not sure that would work, or that such a radical change would be possible even if it could. But if you can find the time, you will find his thoughts compelling.