Conceptualizing “over-treatment” waste: Don’t deny health economics

A Health Policy Brief published in Health Affairs on December 13, 2012 referenced an analysis published last April in JAMA regarding waste in health care.  In this analysis, Don Berwick (one of my health care heroes) and Andrew Hackbarth (from RAND) estimated that waste in health care consumed between $476 billion and $992 billion of the $2.6 trillion annual health care expenditures in the US.  That’s 18-37% waste.  They divided this estimate into 5 categories of waste.  Their mid-point estimates are as follows:

Berwick and Hackbarth estimates of waste in health care - JAMA 2011

They consider “failures in care delivery” to include failures to execute preventive services or safety best practices, resulting in avoidable adverse events that require expensive remediation.  By “failures of care coordination,” they mean care that is fragmented, such as poorly planned transitions of care, resulting in avoidable hospital readmissions.  They categorize as “overtreatment” care ordered by providers that ignored scientific evidence, were motivated to increase income or to avoid medical malpractice liability, or out of convenience or habit.  They considered “administrative complexity” to be spending resulting from “inefficient or flawed rules” of insurance companies, government agencies or accreditation organizations.  They estimated the magnitude of administrative complexity by comparing administrative expense in the US to that in Canada’s single payer system.  They considered “pricing failures” to be prices that are greater than those which are justified by cost of production plus a “reasonable profit,” presumably due to the absence of price transparency or market competition.  Finally, they considered “fraud and abuse” to be the cost of fake medical bills and the additional inspections and regulations to catch such wrongdoing.

Underestimating Over-treatment

These estimates are generally in alignment with other attempts to categorize and assess the magnitude of waste in health care.  But, I think Berwick and Hackbarth’s estimates of “overtreatment” are probably far too low.  That’s because they, like so many other health care leaders, are so reluctant to address the issue of cost-effectiveness.  Obviously, the definition of over-treatment depends on one’s philosophy for determining what treatments are necessary in the first place.  Everyone would agree that a service that does more harm than good for the patient is not necessary.  Most would agree that a service that a competent, informed patient does not want is not necessary.  Some argue that, if there is no evidence that a treatment is effective, it should not be considered necessary, while others argue that even unproven treatments should be considered necessary if the patients wants it.   Berwick and Hackbarth are ambiguous about their application of this last category.

But, the big disagreement occurs when evaluating treatments for which there is evidence that the treatment offers some benefit, but the magnitude of the benefit is small in relation to the cost of the treatment.  This is a question about cost-effectiveness.  It is at the heart of medical economics.  In my experience, most health care leaders and an even higher proportion of political leaders choose to deny the principles of medical economics and the concept of cost-effectiveness.  They describe attempts to apply those principles as “rationing” — a term which has taken on a sinister, greedy meaning, rather than connoting the sincere application of rational thought to the allocation of limited resources.   Berwick and Hackbarth implicitly take that view.  They are unwilling to define over-treatment based on cost-ineffectiveness.

The analysis I want to see

For years, I’ve been looking for an analysis that attempted to estimate the magnitude of waste from over-treatment based on the principles of health economics.  The diagram below illustrates the hypothetical results of the type of analysis I’d like to see.

Diagram re Conceptualizing Overtreatment

 In this diagram, the horizontal axis represents the total cost of health care to a population.  I don’t want to see the entire US health care system.  What is more relevant is the population served by an Accountable Care Organization or an HMO.  To create such a diagram, we would first need to break down health care cost into a large number of specific treatment scenarios.  Each of these scenarios would specify a particular treatment (or diagnostic test) with enough clinical context to permit an assessment of the likely health and economic outcomes.  For each scenario, each of the possible health outcomes would be assigned a probability, a duration, and a quality of life factor.  My multiplying the duration by the quality of life factor, we could calculate the “quality-adjusted life years” (or “QALY”) for the outcome.  Then, by taking the probability-weighted average of all the possible health states for the scenario, and then dividing the result by the cost, we could calculate the “cost-effectiveness ratio” for the scenario, measured in “$/QALY.”   Then, we would sort all the treatment scenarios by the cost-effectiveness ratios, with the treatment scenarios with the most favorable health economic characteristics on the left.

Some of the scenarios will generate net savings, such as for certain preventive services where the cost of the avoided disease is greater than the initial cost of the preventive service.  These are clearly cost-effective.  On the other end of the spectrum are scenarios that offer net harm to the patient, such as when adverse side-effects are worse than the benefits of the treatment.  These are clearly cost-ineffective.  In the middle of these extremes are scenarios where there is a positive net benefit to the patient and a positive net cost borne by the population.

If a person rejects the principles of health economics, they would consider all of these middle scenarios to be “necessary” or “appropriate” regardless of how small the benefits or how large the costs.  But, among those who accept the principles of health economics, some of these scenarios could be judged to be cost-effective and others to be cost-ineffective.  Such judgments would presumably reveal some threshold cost-effectiveness ratio that generally separated the scenarios into cost-effective and cost-ineffective.  Since different people have different values, their judgments could reveal different cost-effectiveness thresholds.  If we had many people making these judgments, we could find a range of cost-effectiveness ratios that were considered to be reasonable by 90% of the people.    Applying this range to all the treatment scenarios, one could find a group of scenarios that were considered wasteful by most, and another group of scenarios that were considered wasteful only by some.

Variations on this theme have been used throughout the world for decades by various practice guidelines developers, healthcare policy analysts, health services researchers and health economists.  It is complex and time-consuming.  As I’ve discussed before, it is also controversial in the United States.

Right now, in the US, we all recognize that health care costs are too high.  We’re all focusing on merging providers into larger organizations, installing computer software, and exploring new reimbursement arrangements to address the problem.  But, I’m convinced that over-treatment with cost-ineffective services is a major source of waste.  We will inevitably get back to the core issue of having to figure out which treatment scenarios are wasteful.  We will inevitably have to overcome our denial of health economics and our irrational fear of rational allocation.

 

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Time for change in education

I spend most of my time thinking about how to improve a broken health care system, and how to leverage information technology to enable improved health care processes.  But, our educational system is also broken.  And, information technology can also enable improvements in education processes.

In a New York Times op-ed this week, David Brooks describes the “tsumani” of change coming to the field of higher education, as web-based distance-learning approaches are embraced by top tier universities and threaten to disrupt the traditional campus-centric approach. Although some of the respondents defended the humanism of face-to-face education, most acknowledged the need for change, and embraced the concept of leveraging the internet to enable a more effective system. I think this trend is long overdue.

I am grateful for the education that I received from the University of Notre Dame and the University of Chicago.  As years have passed, I have come to appreciate the value of that education more, not less.  But, to be honest, there is a lot of room for improvement.  Far too much of the traditional college education process takes place in large lecture halls in which a fraction of the enrolled students attend lectures and take notes for many others who don’t find it sufficiently valuable to show up.  At the front of the lecture hall is a person who was selected and promoted for his or her ability to pump out research papers to be published in journals that often have little editorial rigor, a small actual readership and questionable impact.   Too often, the lecturer was not selected or promoted for being a talented lecturer.  And, since true talent at lecturing is rare, even good local lecturers are unlikely to be as good as the top lecturers around the world.  Because many classes are large, the tests often are quite mechanical, thereby creating a system of incentives in which the students focus on mechanical learning — regurgitating a fact base, rather than developing latent talents, honing skills and acquiring insights.  Then, students participate in labs or discussion seminars led by graduate students that were not selected for their ability to lead discussions.  Furthermore, as shown in the graph below prepared by Mark Perry,  our system of higher education has been growing more and more expensive, putting it out of reach for more people.

I don’t think the problem is with the educators.  As with doctors, educators do heroic, creative things to achieve the best outcomes they can. Rather, the problem is with the system.  As taught by one of my health care heroes, Don Berwick, “every system is designed perfectly to achieve exactly the results it gets.”

I am hopeful that web-based education will disrupt this old system, driving up effectiveness and driving cost way down, thereby increasing access.   I am encouraged by the high quality level of such resources as Khan Academy, an absolutely fantastic collection of interesting free lectures taught by amazingly talented lecturers.  Schools use these lectures to turn the classroom “upside down,” pushing the lecture portion of their teaching to homework hours, leaving the in-school time for students to work together and receive individual and small group coaching from the teachers to address any remaining confusion about the subject material and provide experiences that deepen learning.

But, I think the transformation will go beyond just shifting classes from physical to virtual classrooms.  I think it might lead to a system in which many more people get involved in teaching, mentoring, and coaching, and in which people can continue their education and development throughout their lives.  Our traditional process for higher education ends quite abruptly at graduation, with ongoing contact between educational institutions and their alumni focused more on fund-raising than continuing education.  And, our approach to human resource development in the workplace tends to go through periods of fad and famine.  The fads sometimes seem to be initiated by new leaders who want to demonstrate something about their leadership style, rather than a sincere and persistent effort to develop people over time.

But, when I was  in medical school going through a general surgery rotation, the department chair repeatedly implored his students to subscribe to a few medical journals to begin to build their own libraries and get familiar with the community of people that contribute to those journals.  He wanted us to become engaged in lifelong learning and to become members of those communities.  Of course, we looked at him like he had three heads — as if we could afford to spend hundreds of dollars on journal subscriptions and spend time reading them when we had tests to study for.  But, he was right in ways I did not appreciate for years.  In my professional life, when I have had the opportunity to mentor others, I have always found it rewarding and beneficial to my own learning.  When I have had the opportunity to be mentored and coached by others, I have always valued the experience.  And, when I have taken the time to read and write about advancing the field, I have felt a satisfying sense of belonging and camaraderie within our professional community.

I look forward to an educational system that blurs the boundaries between the campus experience, professional continuing education, human resource development and professional networking.  Imagine a pre-graduation higher education process that places far more emphasis on establishing ingrained habits for lifelong learning and creating durable learning networks that can morph over time as the learner moves through different industries and grows to higher levels of responsibility and leadership. Imagine university faculty continuing to check in on their students over many years.  Imagine social networking tools that go beyond just connecting people with similar interests to creating a vehicle for mentoring and teaching, perhaps with capabilities for testing and assessment, educational and career goal setting, and  financial or non-financial rewards for faculty.

Forward looking health care organizations are already pursuing some of these changes. For example, the Henry Ford Medical Group has established new processes and web-based tools to integrate continuing education, assessment and evaluation, credentialing, and professional networking for residents, fellows and senior staff physicians, facilitating and incentivizing lifelong learning and professional development.  These developments make me hopeful that our educational system is about to dramatically improve, and that the benefits will spill over into our health care system.

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