| 20 May 2016
Dear Interested Reader,
What Is This Letter About?
During the discussion of persuasion and compulsion in healthcare in last week’s letter, I imprudently promised that this week’s letter would be about the difficulties accepting the changes that are in process in healthcare--from the perspective of behavioral economics. Since the publication of To Err is Human (1999) and Crossing the Quality Chasm (2001), there has been a crescendo of effort to get us all to focus on improving the quality of care. After Massachusetts passed Chapter 58 (Romneycare) in 2006 it became clear that expanded access would increase healthcare costs, and policy makers began to talk about improving quality while simultaneously lowering costs. The focus on healthcare economics has never been greater. Physicians and hospitals fear financial losses and many patients are experiencing what for them is an unsustainable increase in out of pocket costs despite subsidies through the ACA. What is next?
The IHI published the Triple Aim in 2007 as efforts intensified to persuade all of us to focus on improving the health of the community with better care for everyone at a cost we can sustain. Between the articulation of the Triple Aim and the passage of the ACA efforts to lower costs and improve quality were essentially voluntary. Experts and leaders espoused rational reasons for change but they were often ignored and the rate of adoption of the Triple Aim has been glacial. Everybody says it is a good idea, but few are actually making the changes that would promote success of the cost objectives of the Triple Aim. Since 2014 when the ACA was essentially fully implemented, the efforts to improve quality and limit costs have transitioned from persuasion to more and more compulsion. With the passage of MACRE there is a shift from efforts to persuade us with quality bonuses and rational arguments to compelling “nudges” to accept more risk and the responsibility to improve costs and improve quality for a population.
The authors of Crossing the Quality Chasm based much of their optimism and attempts at “persuasion” on the ideas and mechanics of complex adaptive systems. The “nudges” that are shaping up to be a collaborative effort from insurers and CMS may well be engineered by people who are very familiar with the intersection of government policy and behavioral economics as discussed by Cass Sunstein and Richard Thaler (an acknowledged pioneer of behavioral economics) in their book Nudge: Improving Decisions about Health, Wealth, and Happiness (2008). As one might forecast from the book, today’s offerings or “compulsions” appear to be designed to push us into a future that will be dramatically different from the status quo that is still pretty comfortable for many patients and a majority of doctors, hospitals and health systems. The designers of the current “nudges” in healthcare finance seem to have an effective understanding of the principles of behavioral economics. Do providers and patients have an equal understanding of the mysteries of this new science?
The discussion of “persuasion and compulsion” last week forced me to think beyond my usual discussion of “adaptive change” to an attempt at a more complete understanding of the origins of the current anger and angst in healthcare. I felt that there was benefit in trying to see if considering some of the insights of behavioral economics that seem to be part of these new programs would be beneficial. So I wrote:
There are human reasons that make it very hard to change the status quo, even when “the platform is burning”. Next week I hope to explore loss avoidance, the endowment effect, and prospect theory as they pertain to risk and the shift from volume to value. It will be a real stretch for a novice in the nuances of behavioral economics.
For several years I have had an amateur’s interest in Behavioral Economics. Much of what I have read seems like a special economic edition of the Darwin Awards. The books by Dan Ariely, who was a professor at MIT and is now at Duke, are particularly entertaining and informative. I have already mentioned Thaler and Sunstein. Their work as well as that of Ariely has been heavily influenced by Nobel Prize winning psychologist/economist, Daniel Kahneman. Indeed, Sunstein and Thaler have worked with Kahneman. Kahneman’s 2011 classic, Thinking, Fast and Slow is a compelling read and nicely covers the theories that seem to be the core of future payment strategy. This week’s letter is an attempt to align Kahneman’s descriptions of loss avoidance, risk aversion, prospect theory, and endowment with the difficult choices/decisions that patients, healthcare professionals and healthcare organizations are being compelled to make now and will need to make with increasing frequency in the future. I hope that by the end of the letter you will see the connections.
There has been a new post on Strategyhealthcare.com since Tuesday. My posts continue to appear weekly and I hope that soon there will also be posts from others who have something to say. You are invited to make a move from Interested Reader to Contributor. Whether you do submit a post to me for consideration or not, I hope that you will visit the site regularly and tell your friends and colleagues that strategyhealthcare.com is where they can sign up for this Friday letter.
Choices: Understanding Risk, Loss, Persuasion and Compulsion in Healthcare
My wife had a simple mantra that she repeated each time our boys left the house to go out with their friends. She would say, “Make good choices!”. Her inference was that there was loss associated with bad choices. Never before have patients, families, doctors, other healthcare professionals and medical organizations had more important choices to make than now. Like the circumstances that potentially surrounded the choices that our boys would have in the outside world away from their home, the choices offered to the participants in the grand drama of healthcare reform all have potential losses and are associated with more risks than ever before. Understanding our feelings and the way our flawed decision making can negatively influence the choices we make and the future we enjoy is a challenge for all of us. It would seem prudent for us to understand how we commonly make errors when we are asked to make a choice in the context of the potential gains and losses in an environment of uncertainty.
In healthcare reform no one is just a spectator or gets a bye from the necessity to participate by making choices. There are difficult choices for patients who must make decisions about the trade offs between costs, benefit packages, and coverage and who they will have access to see. These choices get harder for them as they must assume more and more of the cost of their care if they are to maintain their own personal status quo. Doctors must make choices not only about what treatments to employ but also make economic choices about whether or not they will be self employed or become salaried in a system. If self employed, they must decide whether or not to accept patients from Medicare or Medicaid and which contracts to accept from insurers. Since the passage of MACRA doctors, hospitals and health systems must add complex choices about what path they will follow into the future of value based reimbursement. Organizations must decide whether to prepare to participate in alternative payment models (APMs) or default to the merit based incentives (MIPs) option for their income from Medicare. Plain fee for service will be a certain loss. All healthcare organizations operate in an uncertain environment where the defining politics and regulations can change quickly.
Commercial insurers and CMS alike are pushing doctors and healthcare organizations to chose to accept more risk. Both CMS and commercial insurers are also pushing them to understand more about population health. There are choices and decisions to be made about how to respond to these demands and onerous externalities. The sum of all the forces that will bear on how all these decisions will be made will add up to the future of healthcare. The emotion that heightens the tension behind all of these choices is the fear of the losses associated with making bad choices.
We all have powerful aversions to risk, potential loss and all things that move us from the comfortable set point of the status quo. We highly prize what we have (endowment) and are not easily persuaded to trade it in on what someone, whom we do not fully trust, tells us will be better. Only two groups naturally embrace movement from the status quo. The first group are those for whom the status quo is already an unacceptable loss. The second group is composed of those few souls (agents of reform and persuasion) who are troubled profoundly by what they have been given and that others do not have, or who see the potential for ultimate loss for everyone when the metastable systems of the current inequities eventually collapse. The disadvantaged have nothing to lose. The advantaged, whose empathy for the disadvantaged or fear for the doom in the future, lose the joy of their advantage as they witness the pain of others or imagine what lies ahead for a society that embraces or justifies persistent inequity.
If you trace the history of healthcare “reform” and the desire for universal access to good care as far back as Europe in the late nineteenth century or to the early twentieth century social reformers of the progressive era like Teddy Roosevelt, it is easy to see that it has been a process of continuous negotiation. The “set point” of the negotiation is always the status quo and gains for those without care have been perceived as potential losses by those who have care or provide care. Major bargaining chips that are no longer sustainable, played by those negotiating for the underserved, has been to promise no decrement in income or restriction in business opportunity for those in the status quo who provide care and no increase in expense, loss of choice, or loss of preferred access to those who receive care that they like from their current experience with the status quo. I am sure that you can remember the promises that the President honestly and naively made back in 2009 and 2010 when he told an anxious public not to worry, if they liked their current care they could keep it.
No losses was also the reality in the negotiation with the AMA when Medicare was passed in 1965 and it was certainly the reality with big Pharma when Medicare part D was passed. No losses was again the promise that was heard with all vested interests when the ACA was passed. The giveaways to big pharma, providers and especially to insurers that were necessary to pass the ACA are well documented in Steven Brill’s controversial book America's Bitter Pill: Money, Politics, Backroom Deals, and the Fight to Fix Our Broken Healthcare System. His conclusion is that in the deal everybody got something at the cost that collectively we can not afford. We kicked the can of cost forward by making choice our choice. We tried to change the status quo by not changing the status quo much with the unrealistic generalized delusion that everyone could have more without much effort and no real trade offs. We said that the future would be financed by better quality and savings from better preventative care, innovation and competition. A few years into the experiment costs continue to rise, especially for patients and taxpayers and employers haven’t gotten any relief either.
Insurers and CMS have been struggling for years to find ways to “buy back” the choice enshrined in Medicare and most employer sponsored health insurance. A partial answer in Medicare has been Medicare Advantage which offers a deal with either the potential for more money for providers or for more benefits for patients in exchange for restrictions on choice. Limited networks that are less expensive are another attempt to “buy back choice” that present institutions and patients with apparently attractive contracts and lower costs in turn for less choice and staying in a restricted network. The combination of health spending accounts associated with a choice between networks with varying costs and access has been another action utilized to shift risk to consumers and maintain choice.
These “buybacks” have all been alternative manifestations of choice and as such are forms of gentle “persuasion”. Persuasion has been the driver of change until now. Persuasion, whether in the form of the “deals” described or the exhortations of the concerned, people like me and those with whom I am emotionally aligned, who preach the benefits of reform, has produced some progress when attached to aligned legislation and regulatory changes. For over twenty years now organizations like IHI and the IOM, as well as CMS and many specialty societies, have been trying to persuade all of healthcare to improve quality, safety and patient satisfaction while lowering costs.
“Persuasion” alone increased awareness and yielded some benefit. Persuasion plus incentives were enshrined as “pay for performance” and further improved the yield on measured quality but did nothing to lower the cost of care. Persuasion plus a little regulation has produced some progress in access but has not produced much improvement or only temporary improvement in cost as pointed out by Marcia Angell in her recent opinion article in the Boston Globe. Medicare for all as advocated by Bernie Sanders and Dr. Angell is still a “bridge too far” for those comfortably ensconced in the status quo. Dr Angell even has technical problems with Hillary Clinton’s “Medicare for More”.
It seems highly likely to me that what I have described adds up to more attempts to move us from where we are toward the Triple Aim at the glacial pace of incremental steps through serial negotiations. As my Interested Reader described a few weeks ago about the power of the status quo, “...[there are] usually very powerful forces behind any status quo”. He points to history to make his point. He continued by saying that history suggests that if there is change, it is usually a function of compulsion and not persuasion. Compulsion is a more certain source of change, but it also creates anger and resistance.
As we move to more overt compulsion because of the staggering costs that continue to accumulate, the choices associated with those steps will be more limited and the choice not to participate will be associated with more losses, real and potential. For those who are “deciders”, now it is not a threat but just a reality that the “choices” for the future will be wrapped in less velvet “persuasion”. The hard edge off “compulsion” will be more obvious to see shining through the range of options from which we will be offered an opportunity to choose.
For physicians and organizations “choice” is becoming more and more like the definition of a dilemma, a choice between unacceptable alternatives. “Choice” has morphed from accepting pay for performance or not, to a choice between less pay for performance and more risk for not performing against a combination of economic and quality measures. Until now nothing has been a greater bargaining chip than the value of “choice” in medical contracting. For patients “choice” is already costing them more. Choice for consumers has been increasingly expensive and the price will continue to rise in the form of larger copays and deductibles. The “flipside” or consequence of widespread choice may be the reason for the acceleration of healthcare costs. Choice without economic consequences also explains much of why healthcare has not followed the rules of a traditional marketplace.
About fifteen years ago it dawned on me that the complexity of healthcare required its leaders to understand much more than the science of medicine or just be masters of business competencies like contracting, marketing and finance. It seemed that a healthcare leader who understood the forces that affect the choices we make would have a better chance of negotiating a path through a complex future. Traditional business competencies may be all that is needed in a world where the cost of care can increase at multiples of the yearly growth in the GDP, but I anticipated that such an easy world would be quickly behind us and unlikely to return.
I was intrigued by the possibility that behavioral economics could offer us explanations for realities that are otherwise hard to understand. It was a good time to be developing an interest in behavioral economics and the other “softer competencies of leadership”. Writers like Ariely, Thaler, Sunstein and Daniel Pink had a lot to teach us. Daniel Pink was reading my subconscious and expressing my hope that thinking unconventionally was would prove to be the optimal path through the difficult choices or rather how thinking conventionally would lead to the wrong choices and actions. He said what I did not yet have the language to express when he published A Whole New Mind:Why Right-Brainers Will Rule the Future.
I have had an amateur’s interest in Behavioral Economics. After enjoying the work and creative writing of Dan Ariely whose books had interesting titles like Predictably Irrational and The Upside of Irrationality, I eventually moved on to the heavyweight book that became available for general consumption in 2011 by the Nobel Prize winning Daniel Kahneman. Now rereading his classic, Thinking, Fast and Slow, it occurs to me that especially in Part IV: Choices, he is speaking directly to us in healthcare today. His descriptions of loss avoidance, risk aversion, prospect theory, and endowment align directly with the difficult choices / decisions that patients, healthcare professionals and healthcare organizations are being compelled to make now and will need to make with increasing frequency in the future. His focus on affect as a determinant of choice is powerful. You might enjoy a YouTube conversation recorded between Sunstein and Kahneman at the Harvard Kennedy School in 2014.
Before diving deeper into Kahneman, let me return to one of the “slides” that I use frequently when I am asked to speak about what we quaintly call “healthcare reform”. |
| | The major point that I try to make with this slide, which I owe to Jack Silversin and Mary Jane Kornacki at Amicus Consulting, is that the change that is underway in healthcare is not fun like learning how to use your new smartphone and is even much harder than an Epic installation. That’s pretty hard as you know if you ever lived through one or as you discovered from Partners Healthcare’s perspective, if you clicked on the last link.
I have always felt that the biggest issue is giving up a domain, the status quo, where you are an expert and having to move to a new operating system where you are an inexperienced “Newbie”. Most people will not spontaneously make such a choice. Said in another way, by mid career most of us are very comfortable on the long upper plateau of our professional learning curve. Healthcare reform asks us to give up this comfortable position which is working just fine for us, thank you, and move to the foot of a new learning curve where we will be clumsy and inefficient for sometime to come, all for the greater good.
A stress or sacrifice like moving to a second curve is a real loss and the feelings of denial and anger followed by resistance/depression before bargaining and acceptance generally follow the five step grieving process described by Kubler-Ross. The sense of loss is compounded by the fact that a focus on money and other business issues that we lump under the rubric of “efficient-effective” seem at odds with clinical values that we tell ourselves have not had to change much, other than an upgrade by giants like Osler, since the days of Hippocrates.
The next slide which I show in my talk (I have shown it to you recently in these notes), emphasizes not only the move to the base of the new “learning curve” (remember the need to learn is fatiguing and part of the sense of loss associated with adaptive change) but it also demonstrates the “compulsion” that is driving the movement.
|
| | Fee for service reimbursement is going away. It will be replaced by value based reimbursement which is a euphemism for more performance risk and much less certainty about revenue. There are attempts by zealots for change, like me and others who are committed to healthcare reform, to make this new state look like an opportunity. As I mentioned in my piece about Br’er Rabbit, I do view it as an opportunity, but for most healthcare professionals it is mostly uncertainty, risk and loss.
Kahneman and his colleagues focus on the fact that we want “sure things”. The sure thing of a lower monthly payment of a “bronze” plan may be great as a way of avoiding an immediate monthly financial loss for a healthy young person but an irrational gamble for a person who is a diabetic or has recurrent issues in behavioral health. Accepting an upside only contract as a group practice may feel comfortable as a way of “getting our toe in the water” but in fact may be a disastrous delay in developing the infrastructure and experience to manage risk and be able to profit from accepting a budget for the care of a population.
Kahneman and his colleague Amos Tversky are the originators of “prospect theory”. MACRA is nothing but raw prospect theory on steroids. If you followed the link you know that: “Prospect theory ...describes the way people choose between probabilistic alternatives that involve risk, where the probabilities of outcomes are known”. In healthcare the situation may be even more difficult because the outcomes are uncertain. An extension of prospect theory is the “framing effect”. MACRA is also an example of this cognitive bias. The framing effect says that we react to a choice based on how it is presented as a potential gain or loss. We often accept what we believe to be a survivable loss even when we are offered an acceptable risk for an upside gain that can be diminished by experience and competence. Most of us like to be presented a sure thing compared to a risk. We accept risk when unacceptable losses are the alternative. I think this is the most obvious place where we see the “nudge” in MACRA. You can choose to stay with FFS where you are comfortable but losses compared to current revenue are certain.
Kahneman emphasizes that the “set point” or status quo determines how we react to our choices. We also like what we have and emotionally tend to see more value in what we have than actually exists. Perhaps it is the “endowment effect” that explains our attachment to our current management practices, familiar bricks and mortar and comfortable but inefficient workflows rather than seeing opportunity in new operating systems and tools for an innovative future. You do not choose what you do not see.
I am not going to be able to make you into a behavioral economist within the limits of this weekly letter. I do hope that I have laid the groundwork for the thesis that those who understand behavioral economics better than I do are playing a role in designing the continuing efforts to lower the cost of care and move us toward a better future by shaping the choices that are available. Perhaps I can persuade you to look at how you consider the choices that you are offered as an individual or as part of an organization. Like my wife, instructed our boys, your future is dependant on making good decisions. The options may not really be what they appear to be when you make a snap judgement. Thinking differently with a slow deliberate approach to our options while considering our biases may be the formula for success on the second curve in the era of compulsion.
How ‘bout Those Sox
Last weekend’s games were amazing! I was really charged up as the Sox went into their brief road trip to Kansas City. By the end of the afternoon game on Wednesday I was pretty disappointed despite the fact that JB Jr. did extend his remarkable hitting streak with his last time at bat in the ninth inning. Losing 3-2 always feels like an opportunity missed when an 8-4 loss is just a bad day. Fortunately Bradley extended his hit streak to 24 with another dinger in the nightcap. He and his buddies are resilient and will come home for tonight’s game with the Cleveland Indians after avoiding the sweep and a case of the Kansas City blues.
It was about as stressful a week as a retired guy can have as I was presented with a sudden change in the support options for the production of this letter and strategyhealthcare.com. Over the course of less than 24 hours I experienced the range of emotions from “this project may be over” to realizing just how great it is to be blessed with family and friends that you can call on when things suddenly shift and something that you never expected to happen does.
When I am feeling stressed and blue I either take a walk or head out onto the water. One of my continuing pleasures is observing the loons on our little lake. Most evenings this time of year you will find me pedaling around the lake in my kayak casting my fly here and there looking for a fish. Some evenings I find a fish on my journey, some nights I don’t, but every evening the loons are there for me to enjoy. The only thing the camera did not capture in this week’s header about the beauty of the loon is the intense redness of the iris of their eyes. I love to see them dive and try to guess where they might come up in a minute or two. They cover a lot of territory on those dives and may come up more than fifty yards from where they go down. I think that like my loons I was fortunate to come up far away from where I went down this week.
Let’s look forward to enjoying spring this weekend even if it does rain like the weatherman is predicting.
|
| Don’t forget to stay in touch and consider becoming an “Interested Contributor” and...
Be well, Gene
|
| | | | | |
